ADVANCING GLOBAL STRATEGIES
TO ACCELERATE GROWTH
Colgate-Palmolive Company n 2018 Annual Report
2/18/19 10:57 AM
2018 AT A GLANCE
#1
Market Share
In Toothpaste
Worldwide
$15.5B
Worldwide
Net Sales
56
Consecutive
Years Of Dividend
Increases
$3.1B
Operating
Cash Flow
$2.8B
Cash Returned
To Shareholders
Through Dividends And
Share Repurchases
Barron’s
100
Most Sustainable
Companies
Net Sales By
Geographic Region
22% North America
23% Latin America
16% Europe
18% Asia Pacific
6% Africa/Eurasia
15% Hill’s Pet Nutrition
Net Sales By
Market Maturity
52% Developed Markets
48% Emerging Markets
1B
Children Reached Through
Colgate’s Bright Smiles,
Bright Futures Oral Health
Education Program
DEAR COLGATE SHAREHOLDERS
Faced with difficult macro-
economic conditions, foreign
exchange volatility and
slower category growth in key
markets around the world,
2018 was a challenging year.
Net sales increased 0.5% from
2017 and organic sales, or
net sales excluding foreign
exchange, acquisitions and
divestments, grew 0.5%.
Pleasingly, net income and
diluted earnings per share
both increased in 2018.*
We maintained our strong balance sheet and cash flow,
which led the Board of Directors to authorize a 5% increase
in the quarterly cash dividend, effective in the second quar-
ter of 2018. This was our 56th consecutive year of dividend
increases and our 123rd consecutive year paying a dividend.
Our market shares remain strong around the world and
our global leadership in toothpaste continued in 2018 with
our global share at 42.0% for the year.
As reflected in the title of this year’s annual report,
Advancing Global Strategies To Accelerate Growth, 2018
Ian Cook
Chairman and CEO
was a year of moving forward
with clearly defined strate-
gies to accelerate growth in a
rapidly changing global mar-
ketplace. As we exited 2018,
we indeed saw an acceleration
of organic sales growth in the
fourth quarter and we have
strong plans in place to con-
tinue this momentum in 2019.
We remain sharply focused
on our key priorities—driving
organic sales growth, max-
imizing productivity across
the income statement, effective deployment of cash flow
and leading to win in order to drive sustainable, profitable
growth worldwide over the long term.
Noel Wallace
President and COO
Driving Organic Sales Growth
An important component of driving organic sales growth is
our commitment to sustained advertising support behind
purpose-driven brands, those that give people not just
something to buy, but something to buy into and to connect
with on an emotional level. For example, the Colgate brand
✔ Sensitivity
✔ Antibacterial
✔ Enhanced
Flavors
✔ Odor
Neutralization
✔ Stronger
Enamel
✔ Plaque
✔ Gingivitis
✔ Cavities
✔ Tartar
✔ Breath
✔ Whitening
Advancing Our Core Toothpaste Portfolio With
Breakthrough Technology
Introduced at the Greater New York Dental Convention
in November, new Colgate TotalSF toothpaste
represents the next generation of multi-benefit
toothpaste. Beyond its existing benefits, the
breakthrough new formula provides sensitivity
protection across all variants, instant neutralization
of odors associated with bad breath, new enamel
benefits and enhanced flavors.
*The Company’s results are discussed compared to 2017 and excluding charges related to the Global Growth and Efficiency Program and U.S. tax reform
in both periods and a benefit from a foreign tax matter in 2018. A complete reconciliation between reported results (GAAP) and results excluding these
items (non-GAAP), including a description of such items, is available on Colgate’s website and on page 8 of this report.
2018 Annual Report | 1
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care problems, providing whole mouth health with all of
the same existing benefits plus four new ones: sensitiv-
ity protection across all variants, instant neutralization of
odors associated with bad breath, new enamel benefits
and enhanced flavors. We are reinventing the multi-benefit
category with this introduction.
Another core business being relaunched in 2019 is our
Hill’s Science Diet pet food. The Science Diet relaunch
includes upgraded recipes and improved kibble shapes
along with redesigned package graphics that provide
pet parents with an improved shopping experience and a
greater understanding of Hill’s brand purpose and product
benefits.
We are also innovating across the rapidly growing nat-
urals segments, both in oral care and personal care. We are
in 78 markets with a premium oral care offering and have
recently launched a charcoal variant across various geogra-
phies that is off to a strong start. In personal care, our Sanex
Zero% shower gels and deodorants continue to grow in
Western Europe, and Palmolive Natureza Secreta bar soaps
and shower gels are gaining share in Mexico.
Beyond launching premium-priced innovations, pric-
ing is another key part of our growth strategy. Pricing was
challenging in 2018 due to intensified competitive activity
in certain markets and less inflation in emerging markets,
which has historically provided support for pricing. We
remain committed to taking pricing in 2019 through both
traditional price increases and other strategic actions. As
always, we will continue to use pricing as a tool to offset
higher costs as raw material prices and currencies fluctuate.
Fully capitalizing on growth in e-commerce, which was
up 30% in 2018 and now represents 5% of global sales, is
another key priority. We have a clearly defined e-commerce
strategy linking digital marketing, customer service and
logistics, analytics and customer development. We are
focused on building global excellence in the key areas of
search, digital engagement, analytics and package design.
We are using e-commerce to expand our portfolio into
new markets. For example, we introduced our Switzerland-
heritage elmex oral care brand in China, where consumers
hold such products in high regard for quality and
performance. Available exclusively online in this market,
elmex toothpaste reached a 1.2% market share in Colgate’s
flagship store on the Tmall website in 2018.
Additionally, in 2018, we invested in an online contact
lens company, Hubble, and are partnering with them to
leverage their expertise in the direct-to-consumer retail
channel.
Maximizing Productivity Across The Income Statement
As we near the end of our Global Growth and Efficiency
Program, we continue to work to maximize its impact. At
the same time, we are working aggressively to achieve
Partnering With Vets to Provide Hill’s To Home
Convenience For Pet Parents
Hill’s Prescription Diet pet food is only available with
a veterinarian’s recommendation and is primarily
sold through veterinary clinics. To make this valuable
product more accessible and convenient, Hill’s created
an innovative Hill’s To Home e-commerce service in the
U.S. so vets can offer free home delivery, subscription
discounts and, importantly, continued engagement to
ensure ongoing care.
purpose is, “Everyone deserves a future they can smile
about.”
Our global community health initiative, Bright Smiles,
Bright Futures, not only provides free dental screenings and
oral health education, it serves the additional purpose in
many markets of introducing and encouraging the healthy
practice of brushing teeth daily. In 2018, this program
achieved a new milestone of reaching one billion children
since its inception in 1991, and our next goal is to reach 1.3
billion children by 2020. We are increasing our investment
behind consumption-building activities, and have found
that the return on that investment is three times the return
on traditional media spending.
Importantly, we are sharply focused on premiumiz-
ing our portfolio through innovation, which includes not
just launching new products but also upgrading existing
ones. In January 2019, we relaunched Colgate Total tooth-
paste with new breakthrough technology, 10 years in the
making and protected by numerous patents around the
world. New Colgate Total protects against an array of oral
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efficiencies and cost-savings in all areas of our business
through our ongoing funding-the-growth initiatives,
which generate funds for investment and help offset cost
increases.
For example, in Mexico, we installed a new fully
automated production line for liquid cleaners that does
everything from blow-molding the bottle, to labeling it
to filling it, all on one line. As a result, we have increased
production speed by 44% with cost savings of 32%.
We are also using advanced data analytics to identify
opportunities that drive efficiencies for growth. One new
analytics tool helping to optimize our product portfolio
identifies those SKUs that generate the most sales per point
of distribution and those SKUs that are less efficient.
Effective Deployment Of Cash Flow
Colgate has a long history of consistently strong operating
cash flow. Our first priority for deploying this cash is on
capital expenditures that drive growth and productivity. For
example, we have recently invested in high speed tooth-
paste tube filling equipment in all of our strategic oral care
manufacturing sites, now filling at a rate of 750 tubes per
minute versus 450 tubes per minute 10 years ago.
Secondly, we look for ways to augment our growth
through smart acquisitions that can expand our categories,
Innovation Driving Market Share Growth
In Mexico, new Fabuloso Complete multi-benefit liquid
cleaner added 3.0 market share points in 2018,
strengthening the brand’s market-leading position in
the category.
improve our market positions and add capabilities. We are
very pleased with the performance of our past acquisitions.
Sanex in Europe and Tom’s of Maine in the U.S. both con-
tinue to grow market share. In January 2018, we purchased
PCA Skin and Elta MD, two fast-growing professional skin
care brands. Growth of these businesses is strong, and we
have been able to leverage their well-developed e-com-
merce distribution capabilities.
Thirdly, we have a long history of returning value to
shareholders through dividends and share repurchases.
Leading To Win
Our Company’s culture is built on our long-standing
values of Caring, Continuous Improvement and Global
Teamwork. These values are also at the heart of our strong
leadership development programs, which are helping
to develop the next generation of highly capable, well-
prepared Colgate leaders. Together, we are building a future
to smile about for the well-being of future generations
through our sustainability strategy centered around People,
Performance and Planet. Here again, we have very clearly
defined areas of focus. For example, a key Performance
initiative includes a specific commitment to make 100% of
our packaging recyclable by the end of 2025.
Good governance is an ongoing commitment shared
by our Board of Directors, our management and all Colgate
people. Our Board is very engaged with the strategy and
operations of the company and is kept up to date on
progress and performance on a regular basis. We continue
to refresh our Board, bringing in several new members with
experience in finance, e-commerce, international operations
and public health over the past several years.
Outlook
Looking to 2019, while uncertainty in global markets and
category growth worldwide remain challenging, we are
planning for a year of growth with increased investment
behind our brands, higher pricing and strong innovation,
led by the relaunches of Colgate Total and Hill’s Science Diet
and our continued focus on naturals. We also remain deeply
committed to increasing productivity and acting with speed
and agility to drive sustained profitable growth worldwide
over the long term.
As we move ahead together, we wish to thank all
Colgate people worldwide for their personal commitment
to achieving our goals with the highest ethical standards,
and express appreciation for the support of our consumers,
customers, suppliers, shareholders and Board of Directors.
Ian Cook
Chairman and CEO
Noel Wallace
President and COO
2018 Annual Report | 3
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COLGATE’S GLOBAL BRANDS
Oral Care
47%
of Net Sales
Home Care
18%
of Net Sales
Personal Care
20%
of Net Sales
Pet Nutrition
15%
of Net Sales
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SUSTAINABILITY COMMITMENT
Colgate is pleased to report excellent progress in 2018 on the Company’s 2015 to 2020 Sustainability Strategy
commitment. The Company was named to both the 2018 Dow Jones Sustainability World and North America Indices,
and was recognized as a U.S. EPA ENERGY STAR 2018 Partner of the Year for the 8th year in a row. In addition to the
highlights below, more about Colgate’s Sustainability Strategy progress is available in the Sustainability section of
Colgate’s website at www.colgatepalmolive.com.
People
Performance
1B
children reached in over
80 countries by Colgate’s
Bright Smiles, Bright Futures
oral health education
program since 1991.
In 2018, Colgate’s
operations recorded
the lowest number of
recordable accidents in our
Company’s history.
Since 2002, The Hill’s Food,
Shelter & Love program has
provided more than
$290
million worth of pet food
to over 1,000 pet shelters and
helped more than 10 million
pets find their forever homes.
Colgate has made
great strides in our commitment
to improving the sustainability
profile of our products
and has eliminated the use of
triclocarban and
chromium pigments.
Through cross-functional
collaboration across the Colgate
world, we continue to make
progress and, in 2018, improved
the sustainability profile in nearly
90 %
of new products.*
In 2018, through our partnership
with TerraCycle, more than 48,000
locations engaged in recycling,
helping us divert nearly
9 million pieces of oral care
waste from landfills.
Colgate joined the Ellen MacArthur
Foundation’s New Plastics
Economy initiative, reflecting
the Company’s commitment to
100% recyclability of
packaging across all our product
categories and our target to
achieve 25% recycled content in
all plastic packaging by 2025.
Colgate supports
The Recycling Partnership,
a group working to
improve the recycling
infrastructure in the U.S., and
signed the EPA’s America
Recycles Day pledge.
Colgate continues to be an active
participant in SmartLabel, an
initiative co-created by the Grocery
Manufacturers Association,
the Food Marketing Institute,
manufacturers and retailers. This
digital platform was developed
to meet consumers’ desire to
know what is in the products they
purchase, utilize and consume.
Planet
Colgate’s contributions to Water For
People’s Everyone Forever program
helped them to reach more than
450
thousand people since 2013 with
water, sanitation systems and/or
health and hygiene education.
As of 2018, a total of
7
Colgate manufacturing facilities
achieved GBCI TRUE
Zero Waste certification.
Colgate’s Save Water
Campaign continues to increase
consumer awareness through
messaging on our packaging,
online and in stores. According to
a global consumer survey, the
impact of this campaign on
consumer behavior has resulted
in an estimated reduction of
53 billion gallons of water.
Since 2011,
70ENERGY STAR Challenge
for Industry Awards have
been achieved by Colgate
manufacturing sites.
Colgate works with our
North American mint
suppliers and growers to
monitor and reduce
water use on mint farms.
Colgate purchased
220thousand MWh of
renewable energy credits
from Kansas wind farms.
*The performance results are based on representative products from the product portfolio evaluated against our goals in packaging, formula
and social impact to characterize likely improvement in the sustainability profile, based on review of quantitative and qualitative data.
2018 Annual Report | 5
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BOARD OF DIRECTORS
7
10
6
4
8
1
9
3
11
5
2
1. Ian Cook
Chairman and Chief Executive Officer
of Colgate-Palmolive Company
5. Helene D. Gayle, Independent Director
President and Chief Executive Officer
of The Chicago Community Trust
Elected director in 2007 and Chairman
Elected director in 2010. Age 63
in 2009. Age 66
2. Charles A. Bancroft, Independent Director
Chief Financial Officer and Executive Vice
President, Global Business Operations of
Bristol-Myers Squibb Company
Elected director in 2017. Age 59
3. John P. Bilbrey, Independent Director
Former Chairman, President and Chief Executive
Officer of The Hershey Company
Elected director in 2015. Age 62
4. John T. Cahill, Independent Director
Vice Chairman of The Kraft Heinz Company
Elected director in 2005. Age 61
6. Ellen M. Hancock, Independent Director,
Retiring
Former President of Jazz Technologies, Inc.
(formerly Acquicor Technology)
Elected director in 1988. Age 75
7. C. Martin Harris, Independent Director
Associate Vice President of the Health
Enterprise and Chief Business Officer
of the Dell Medical School at The University
of Texas at Austin
Elected director in 2016. Age 62
8. Lorrie M. Norrington, Independent Director
Operating Partner of Lead Edge Capital LLC
Elected director in 2015. Age 59
9. Michael B. Polk, Independent Director
President and Chief Executive
Officer of Newell Brands Inc.
Elected director in 2014. Age 58
10. Stephen I. Sadove, Independent Director
Founding Partner of JW Levin
Management Partners LLC
Elected director in 2007. Age 67
11. Welcome,
Lisa M. Edwards, Independent Director
Executive Vice President, Strategic
Business Operations, Customer and Partner
Engagement of Salesforce.com, Inc.
Elected director in 2019. Age 51
EXECUTIVE TEAM
1. Ian Cook
Chairman and Chief Executive Officer
2. Noel Wallace
President and Chief Operating Officer
3. P. Justin Skala
Executive Vice President,
Chief Growth & Strategy Officer
4. Henning Jakobsen
Chief Financial Officer
5. Jennifer M. Daniels
Chief Legal Officer and Secretary
6. Dennis Hickey, Retired
Vice Chairman
3
5
1
2
6
4
Biographical information for the above directors and executives is available on Colgate’s website at www.colgatepalmolive.com.
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Philip Durocher
VP & GM, Colgate-
Northern Europe
*John Faucher
SVP, Investor Relations
N. Jay Jayaraman
VP, Global R&D
Eugene Kelly
VP, Global Diversity
& Inclusion
Kimberly Faulkner
VP, Colgate-Latin America
Iain Kielty
VP, Colgate-Asia Pacific
MANAGEMENT TEAM
Issam Bachaalani
VP & GM, Colgate-
India & South Asia
Daniel Bagley
VP, Global R&D
Dave Baloga
VP, Hill’s Pet Nutrition
Don Beatty
VP, Hill’s Pet Nutrition
Angel Dario Belalcazar
VP, Global R&D
*Joseph M. Bertolini
VP, Global Finance
Jose Borrell
VP, Hill’s Pet Nutrition
Yves Briantais
VP, Colgate-Europe
*Peter Brons-Poulsen
President & CEO,
Hill’s Pet Nutrition
Marsha Butler
VP, Global Oral Care
Scott Cain
VP, Global Finance
Burc Cankat
VP & GM, Colgate-
North Africa/Middle
East & Turkey
*Jean-Luc Fischer
President, Colgate-
Africa/Eurasia
Betsy Fishbone
VP, Global Legal
Laura Flavin
VP, Global Human Resources
Nadine Flynn
VP, Global Legal
David Foster
VP, Global Information
Technology
Diana Geofroy
VP, Colgate-Mexico
Corrado Giaquinto
VP & GM, Colgate-
Malaysia Group
Derek Gordon
VP & GM, Global Toothbrush
Taylor Gordy
Chief Customer Officer
Maria Paula Capuzzo
VP & GM, Colgate-Brazil
Peter Graylin
VP, Global Legal
Rosario Carlino
VP & GM, Colgate-
East Africa
Maria Elisa Carvajal
VP, Global Marketing
Communications
Martin J. Collins
VP, Hill’s Pet Nutrition
*Michael A. Corbo
Chief Supply Chain Officer
*Mike Crowe
Chief Information Officer
Rich Cuprys
VP, Global R&D
Paula Davis
VP & Chief
Communications Officer
*Mukul Deoras
President, Colgate-
Asia Pacific
Catherine Dillane
VP, Colgate-Latin America
Julie Dillon
VP & GM, Colgate-
South Pacific
Valerie Haliburton
VP, Global Ethics
& Compliance
Elise Halvorson
VP, Enterprise Risk
Management
*Suzan F. Harrison
President,
Global Oral Care
John Hazlin
VP & GM, Global
Personal & Home Care
Raymond Ho
VP, Colgate-Asia Pacific
Robert Hofmann
VP, Colgate-Europe
& Africa/Eurasia
Henry Hu
VP, Colgate-Asia Pacific
Nina Huffman
VP, Global Legal
Traci Hughes-Velez
VP, Colgate-Europe
*John J. Huston
SVP, Chief of Staff
Kristine Hutchinson
VP, Global Legal
Brian King
VP, Colgate-U.S. Company
Charalabos Klados
VP, Global Legal
Raj Kohli
VP, Global R&D
*John Kooyman
Chief Marketing Officer
Wojciech Krol
VP & GM, Colgate-
Central Europe East
*Al Lee
Chief Ethics &
Compliance Officer
Adriana Leite
VP & GM, Colgate-
Southern Cone
Stephane Lionnet
VP, Chief Business
Services Officer
Javier Llinas
VP, Global Information
Technology
Moira Loten
VP, Global Oral Care
Gregory Malcolm
VP, Corporate Audit
*Daniel B. Marsili
Chief Human
Resources Officer
Cesar Martinez
VP, Colgate-Africa/Eurasia
Pablo Mascolo
VP, Colgate-Latin America
Sally Massey
VP, Global Human Resources
Paul McGarry
VP, Global Information
Technology
Thomas Mintel
VP, Global R&D
Pascal Montilus
VP, Colgate-North America
Anne-Marie Motte
VP & GM, Colgate-
North America
Francisco Muñoz
VP & GM, Colgate-
Central America
Josue M. Muñoz
VP, Global Supply Chain
*Vinod Nambiar
Division President
Eddie Niem
VP & GM, Hawley & Hazel
Jesper Nordengaard
VP & GM, Hill’s Pet
Nutrition-U.S.
Godfrey Nthunzi
VP, Colgate-
Africa/Eurasia
Edward Oblon
VP, Hill’s Pet Nutrition
*Elaine Paik
VP & Corporate Treasurer
Nancy Pak
VP & GM, Tom’s of Maine
*Prabha Parameswaran
President, Colgate-Europe
Terrell Partee
VP, Global R&D
Hector Pedraza
VP & GM, Colgate-Andina
Brent Peterson
VP, Global Human Resources
Spencer Pingel
VP, Global Marketing
Massimo Poli
VP & GM, Colgate-Mexico
Warren Pruitt
VP, Global Supply Chain
Ram Raghavan
VP, Colgate-Asia Pacific
Riccardo Ricci
VP & GM, Colgate-
Southern Europe
Lauren Richardson
Chief Procurement Officer
Michele Ross
VP, Hill’s Pet Nutrition
Paolo Rossetto
VP, Colgate-Europe
Debashish Roy
VP, Colgate-Africa/Eurasia
Maria Ryan
Chief Dental Officer
Bernal Saborio
VP & GM, Colgate-
Caribbean
Arvind Sachdev
VP & GM, Colgate-
Philippines
Ivan Sandoval
VP, Global Legal
David Scharf
VP, Hill’s Pet Nutrition
Dany Schmidt
VP & GM, Colgate-
Central Europe West
Sara Scrittore
VP, Hill’s Pet Nutrition
Mori Seguchi
VP & GM, Hill’s Pet
Nutrition-Japan
Alain Semeneri
VP & GM, Hill’s Pet Nutrition-
Europe & Russia
Jose Fernando Serrano
VP, Colgate-Latin America
Andrew Shepard
VP & GM, Colgate-
Western Europe
*Philip Shotts
VP & Controller
Luciano Sieber
VP, Colgate-Europe
& Africa/Eurasia
Lynne Tapper
VP, Global Human Resources
Orlando Tenorio
VP & GM, Colgate-
South Africa
Richard Thorogood
VP, Global Insights
Linda Topping
VP, Global Supply Chain
Ann Tracy
VP, Global Supply Chain
*Panagiotis Tsourapas
President, Colgate-
Latin America
Bill Van de Graaf
VP, Colgate-North America
*Patricia Verduin
Chief Technology Officer
Mauro Watanabe
VP, Colgate-Asia Pacific
Cliff Wilkins
VP, Global Legal
Dan Wish
VP, Global Marketing
Alan Wolpert
VP & GM, Colgate-Eurasia
Winnie Wong
VP & GM, Colgate-
Greater China
Ruben Young
VP & GM, Colgate-
Greater Indo-China
*Juan Pablo Zamorano
President, Colgate-
North America
*Corporate Officer
2018 Annual Report | 7
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RECONCILIATION OF
NON-GAAP FINANCIAL MEASURES
The following is provided to supplement certain financial measures discussed in the letter to shareholders both as reported
(GAAP) and excluding the impact of certain items (non-GAAP) as shown below. Investors and analysts use these financial
measures in assessing the Company’s business performance, and management believes that presenting these financial
measures on a non-GAAP basis provides them with useful supplemental information to enhance their understanding of
the Company’s underlying business performance and trends. These non-GAAP financial measures also enhance the ability
to compare period-to-period financial results. The Company uses these financial measures internally in its budgeting
process, to evaluate segment and overall operating performance and as factors in determining compensation. While the
Company believes that these financial measures are useful in evaluating the Company’s underlying business performance
and trends, this information should be considered as supplemental in nature and is not meant to be considered in isolation
or as a substitute for the related financial information prepared in accordance with GAAP. In addition, these non-GAAP
financial measures may not be the same as similar measures presented by other companies. This report also discusses
organic sales growth, which is net sales growth excluding the impact of foreign exchange, acquisitions and divestments.
For a reconciliation of organic sales growth to net sales growth for full year 2018, see page 42 of the Company’s Annual
Report on Form 10-K.
(Dollars in Millions Except Per Share Amounts)
2018
As Reported (GAAP)
Global Growth and Efficiency Program (1)
Tax Matters (2)
U.S. Tax Reform (3)
Excluding Items (Non-GAAP)
2017
As Reported (GAAP)
Global Growth and Efficiency Program (1)
U.S. Tax Reform (3)
Excluding Items (Non-GAAP)
2016
As Reported (GAAP)
Global Growth and Efficiency Program (1)
Mexico Land Sale (4)
Litigation Matter (5)
Tax Matters (2)
Excluding Items (Non-GAAP)
Gross Profit
Margin
Operating
Profit (6)
Net
Income
Diluted
EPS
59.4%
0.2%
–
–
59.6%
60.0%
0.5%
–
60.5%
60.0%
0.3%
–
–
–
60.3%
$3,694
152
–
–
$3,846
$3,707
313
–
$4,020
$3,955
216
(97)
17
–
$4,091
$2,400
125
(15)
80
$2,590
$2,024
246
275
$2,545
$2,441
168
(63)
11
(35)
$2,522
$2.75
0.15
(0.02)
0.09
$2.97
$2.28
0.28
0.31
$2.87
$2.72
0.19
(0.07)
0.01
(0.04)
$2.81
(1) Represents charges related to the Global Growth and Efficiency Program that began in the fourth quarter of 2012.
(2) Represents income tax benefits related to tax matters.
(3) Represents charges related to U.S. tax reform.
(4) Represents a gain on the sale of land in Mexico.
(5) Represents charges related to a litigation matter.
(6) Operating profit has been restated to reflect the Company’s adoption of ASU No. 2017-07, “Compensation-Retirement Benefits (Topic 715): Improving
the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost,” on a retrospective basis, as required, effective January 1,
2018. Refer to the Company’s website for reconciliations to previously reported amounts for years 2017 and 2016.
8 | Colgate-Palmolive Company
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended December 31, 2018
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from to .
Commission File Number 1-644
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation or organization)
300 Park Avenue, New York, New York
(Address of principal executive offices)
13-1815595
(I.R.S. Employer Identification No.)
10022
(Zip Code)
Registrant’s telephone number, including area code 212-310-2000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Name of each exchange on which registered
Common Stock, $1.00 par value
Floating Rate Notes due 2019
New York Stock Exchange
New York Stock Exchange
No
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes
No
No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be
submitted pursuant to Rule 405 of Regulation S-T (§232.405) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes
No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405) is not contained
herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a
smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”,
“smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Non-accelerated filer
Accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition
period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange
Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
The aggregate market value of Colgate-Palmolive Company Common Stock held by non-affiliates as of June 30, 2018 (the last
No
business day of its most recently completed second quarter) was approximately $56.0 billion.
There were 861,676,494 shares of Colgate-Palmolive Company Common Stock outstanding as of January 31, 2019.
Documents
Portions of Proxy Statement for the 2019 Annual Meeting of Stockholders
Form 10-K Reference
Part III, Items 10 through 14
DOCUMENTS INCORPORATED BY REFERENCE:
Colgate-Palmolive Company
Table of Contents
Part I
Business
Item 1.
Item 1A. Risk Factors
Item 1B.
Item 2.
Item 3.
Item 4.
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
Part II
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Part III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Part IV
Item 15.
Item 16.
Signatures
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
Certain Relationships and Related Transactions and Director Independence
Principal Accountant Fees and Services
Exhibits and Financial Statement Schedules
Form 10-K Summary
Page
1
4
14
15
16
18
19
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20
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62
ITEM 1.
BUSINESS
(a) General Development of the Business
PART I
Colgate-Palmolive Company (together with its subsidiaries, the “Company” or “Colgate”) is a leading consumer
products company whose products are marketed in over 200 countries and territories throughout the world. Colgate was
founded in 1806 and incorporated under the laws of the State of Delaware in 1923.
For recent business developments and other information, refer to the information set forth under the captions
“Management’s Discussion and Analysis of Financial Condition and Results of Operations–Executive Overview,” “–
Outlook,” “–Results of Operations,” “–Restructuring and Related Implementation Charges” and “– Liquidity and Capital
Resources” in Part II, Item 7 of this report.
(c) Narrative Description of the Business
The Company operates in two product segments: Oral, Personal and Home Care; and Pet Nutrition. Colgate is a leader
in Oral Care with global leadership in the toothpaste and manual toothbrush categories throughout many parts of the world
according to market share data. Colgate’s Oral Care products include Colgate Total, Colgate Maximum Cavity Protection,
Colgate Triple Action, Darlie Double Action, Colgate Max Fresh, Colgate Optic White, Colgate Whitening and Colgate
Max White toothpastes, Colgate 360°, Colgate Extra Clean and Colgate Slim Soft manual toothbrushes and Colgate Plax,
meridol and Colgate Total mouthwashes. Colgate’s Oral Care business also includes pharmaceutical products for dentists
and other oral health professionals.
Colgate is a leader in many product categories of the Personal Care market with global leadership in liquid hand soap,
which it sells under the Softsoap, Palmolive and Protex brands. Colgate’s Personal Care products also include Palmolive,
Protex and Irish Spring bar soaps, Palmolive, Sanex and Softsoap brand shower gels, Speed Stick, Lady Speed Stick,
Sanex deodorants and antiperspirants, Elta MD and PCA Skin professional skin care products and Palmolive and Caprice
shampoos and conditioners.
Colgate manufactures and markets a wide array of products for the Home Care market, including Palmolive and Ajax
dishwashing liquids and Fabuloso, Murphy’s Oil Soap and Ajax household cleaners. Colgate is a market leader in fabric
conditioners with leading brands, including Suavitel in Latin America, Soupline in Europe and Cuddly in the South Pacific
according to market share data.
Sales of Oral, Personal and Home Care products accounted for 47%, 20% and 18%, respectively, of the Company’s
total worldwide Net sales in 2018. Geographically, Oral Care is a significant part of the Company’s business in Asia
Pacific, comprising approximately 82% of Net sales in that region for 2018.
Colgate, through its Hill’s Pet Nutrition segment (“Hill’s” or “Pet Nutrition”), is a world leader in specialty pet
nutrition products for dogs and cats with products marketed in over 80 countries and territories worldwide. Hill’s markets
pet foods primarily under two brands. Hill’s Science Diet, which is called Hill’s Science Plan in Europe, is a range of
products for everyday nutritional needs. Hill’s Prescription Diet is a range of therapeutic products to help nutritionally
manage disease conditions in dogs and cats. Sales of Pet Nutrition products accounted for 15% of the Company’s total
worldwide Net sales in 2018.
For more information regarding the Company’s worldwide Net sales by product category, refer to Note 1, Nature of
Operations and Note 14, Segment Information to the Consolidated Financial Statements.
For additional information regarding market share data, see “Market Share Information” in Part II, Item 7 of this
report.
1
Distribution; Raw Materials; Competition; Trademarks and Patents
The Company’s Oral, Personal and Home Care products are sold to a variety of traditional and e-commerce retailers,
wholesalers and distributors worldwide. Pet Nutrition products are sold by authorized pet supply retailers, veterinarians and
e-commerce retailers. The Company’s sales to Wal-Mart, Inc. and its affiliates represent approximately 11% of the
Company’s Net sales in 2018. No other customer represents more than 10% of the Company’s Net sales. The Company
supports its products with advertising, promotion and other marketing (including digital) to build awareness and trial of the
Company’s products. The Company’s products are marketed by a direct sales force at individual operating subsidiaries or
business units, and by distributors or brokers.
The majority of raw and packaging materials used in the Company’s products is purchased from other companies and
are available from several sources. No single raw or packaging material represents, and no single supplier provides, a
significant portion of the Company’s total material requirements. For certain materials, however, new suppliers may have
to be qualified under industry, governmental and Colgate standards, which can require additional investment and take some
period of time. Raw and packaging material commodities such as resins, pulp, essential oils, tropical oils, tallow, poultry,
corn and soybeans are subject to market price variations. For further information regarding the impact of changes in
commodity prices, see Item 1A, “Risk Factors - Volatility in material and other costs could adversely impact our
profitability” and Item 7, “Management’s Discussion and Analysis of Financial Condition and results of Operations.”
The Company’s products are sold in a highly competitive global marketplace which has experienced increased trade
concentration, the rapid growth of e-commerce, the integration of traditional and digital operations at key retailers and the
growing presence of large-format retailers and discounters. Products similar to those produced and sold by the Company
are available from multinational and local competitors in the U.S. and overseas. Certain of the Company’s competitors are
larger and have greater resources than the Company. In certain geographies, particularly in the emerging markets, the
Company also faces strong local competitors, who may be more agile and have better local consumer insights than the
Company. Private label brands sold by retailers are also a source of competition for certain of the Company’s products.
The retail landscape in many of the Company’s markets continues to be impacted by the rapid growth of e-commerce
retailers, changing consumer preferences (as consumers increasingly shop online) and the emergence of alternative retail
channels, such as subscription services and direct-to-customer businesses. The Company faces competition in several
aspects of its business, including pricing, promotional activities, new product introductions and expansion into new
geographies and channels. Product quality, innovation, brand recognition, marketing capability and acceptance of new
products largely determine success in the Company’s operating segments.
The Company considers trademarks to be of material importance to its business. The Company follows a practice of
seeking trademark protection in the U.S. and throughout the world where the Company’s products are sold. Principal global
and regional trademarks include Colgate, Palmolive, elmex, Tom’s of Maine, Sorriso, Speed Stick, Lady Speed Stick,
Softsoap, Irish Spring, Protex, Sanex, Elta MD, PCA Skin, Ajax, Axion, Fabuloso, Soupline and Suavitel, as well as Hill’s
Science Diet and Hill’s Prescription Diet. The Company’s rights in these trademarks endure for as long as they are used
and/or registered. Although the Company actively develops and maintains a portfolio of patents, no single patent is
considered significant to the business as a whole.
Environmental Matters
The Company has programs that are designed to ensure that its operations and facilities meet or exceed standards
established by applicable environmental rules and regulations. Capital expenditures for environmental control facilities
totaled approximately $43 million for 2018. For future years, expenditures are currently expected to be of a similar
magnitude. For additional information regarding environmental matters refer to Note 13, Commitments and Contingencies,
to the Consolidated Financial Statements.
2
Employees
As of December 31, 2018, the Company employed approximately 34,500 employees.
Executive Officers of the Registrant
The following is a list of executive officers as of February 21, 2019:
Name
Ian Cook
Dennis J. Hickey
Henning I. Jakobsen
Noel R. Wallace
P. Justin Skala
John J. Huston
Daniel B. Marsili
Patricia Verduin
Jennifer M. Daniels
Philip G. Shotts
John W. Kooyman
Age
66
70
58
54
59
64
58
59
55
64
54
Date First Elected
Officer
1996
1998
2017
2009
2008
2002
2005
2011
2014
2018
2019
Present Title
Chairman of the Board
and Chief Executive Officer
Vice Chairman
Chief Financial Officer
President and Chief Operating Officer
Executive Vice President
Chief Growth and Strategy Officer
Senior Vice President, Chief of Staff
Chief Human Resources Officer
Chief Technology Officer
Chief Legal Officer and Secretary
Vice President and Controller
Chief Marketing Officer
Each of the executive officers listed above has served the registrant or its subsidiaries in various executive capacities
for the past five years with the exception of Jennifer M. Daniels, who joined the Company in 2014 as Chief Legal Officer
and Secretary. Prior to joining the Company, Ms. Daniels was Senior Vice President, General Counsel and Secretary of
NCR Corporation, which she joined in 2010.
Under the Company’s By-Laws, the officers of the corporation hold office until their respective successors are chosen
and qualified or until they have resigned, retired or been removed by the affirmative vote of a majority of the Board of
Directors of the Company (the “Board”). There are no family relationships between any of the executive officers, and there
is no arrangement or understanding between any executive officer and any other person pursuant to which the executive
officer was elected.
(e) Available Information
The Company’s website address is www.colgatepalmolive.com. The information contained on the Company’s website
is not included as a part of, or incorporated by reference into, this Annual Report on Form 10-K. The Company makes
available, free of charge, on its website its Annual Reports on Form 10-K, its Quarterly Reports on Form 10-Q, its
interactive data files posted pursuant to Rule 405 of Regulation S-T, its Current Reports on Form 8-K and amendments to
such reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the “Exchange
Act”) as soon as reasonably practicable after the Company has electronically filed such material with, or furnished it to, the
United States Securities and Exchange Commission (the “SEC”). Also available on the Company’s website are the
Company’s Code of Conduct and Board Guidelines on Significant Corporate Governance Issues, the charters of the
Committees of the Board, Specialized Disclosure Reports on Form SD, reports under Section 16 of the Exchange Act of
transactions in Company stock by directors and executive officers and its proxy statements.
3
ITEM 1A. RISK FACTORS
In addition to the risks described elsewhere in this report, set forth below is a summary of the material risks to an
investment in our securities. These risks are not the only ones we face. Additional risks not presently known to us or that
we currently deem immaterial may also have an adverse effect on us. If any of these risks actually occur, our business,
results of operations, cash flows and financial condition could be materially and adversely impacted, which might cause the
value of our securities to decline.
We face risks associated with significant international operations, including exposure to foreign currency
fluctuations.
We operate on a global basis serving consumers in more than 200 countries and territories with approximately 70% of
our Net sales originating in markets outside the U.S. While geographic diversity helps to reduce our exposure to risks in
any one country or part of the world, it also means that we are subject to the full range of risks associated with significant
international operations, including, but not limited to:
changes in exchange rates for foreign currencies, which may reduce the U.S. dollar value of revenues, profits and
cash flows from non-U.S. markets or increase our supply costs, as measured in U.S. dollars, in those markets;
exchange controls and other limits on our ability to import or export raw materials or finished product or to
repatriate earnings from overseas;
political or economic instability, geopolitical events, environmental events, natural disasters, social or labor unrest
or changing macroeconomic conditions in our markets, including as a result of volatile commodity prices,
including the price of oil;
lack of well-established, reliable and/or impartial legal systems in certain countries where we operate and
difficulties in enforcing contractual, intellectual property or other legal rights;
foreign ownership and investment restrictions and the potential for nationalization or expropriation of property or
other resources; and
changes to trade policies and agreements and other foreign or domestic legal and regulatory requirements,
including those resulting in potentially adverse tax consequences or the imposition of onerous trade restrictions
and/or tariffs, sanctions, price controls, labor laws, travel or immigration restrictions, profit controls or other
government controls.
All of the foregoing risks could have a significant impact on our ability to sell our products on a competitive basis in
international markets and may adversely affect our business, results of operations, cash flows and financial condition. In
addition, a number of these risks may adversely impact consumer confidence and consumption, which could reduce sales
volumes of our products or result in a shift in our product mix from higher margin to lower margin product offerings.
In addition, the United Kingdom’s decision to leave the European Union (“Brexit”) has created legal and economic
uncertainty. If no deal is reached between the United Kingdom and the European Union by March 29, 2019, we could
experience disruptions to trade and the free movement of goods to and from the United Kingdom and increased foreign
exchange volatility with respect to the British pound though we do not believe Brexit will have a material impact on our
business, result of operations, cash flows or financial condition.
In an effort to minimize the impact on earnings of foreign currency rate movements, we engage in a combination of
selling price increases, where permitted, sourcing strategies, cost-containment measures and selective hedging of foreign
currency transactions. However, the impact of these measures may not fully offset any negative impact of foreign currency
rate movements on our business, results of operations, cash flows and financial condition.
4
Significant competition in our industry could adversely affect our business.
We face vigorous competition worldwide, including from strong local competitors and from other large, multinational
companies, some of which may have greater resources than we do. In addition, the substantial growth in e-commerce has
encouraged the entry of new competitors and business models.
We face competition in several aspects of our business, including pricing, promotional activities, new product
introductions and expansion into new geographies and channels. Some of our competitors may spend more aggressively on
or have more effective advertising and promotional activities than we do, introduce competing products more quickly and/
or respond more effectively to changing consumer preferences and business and economic conditions. Such competition
also extends to administrative and legal challenges of product claims and advertising. Our ability to compete also depends
on the strength of our brands and on our ability to enforce and defend our intellectual property, including patent, trademark,
copyright, trade secret and trade dress rights against infringement and legal challenges by competitors.
We may be unable to anticipate the timing and scale of such initiatives or challenges by competitors or to successfully
respond to them, which could harm our business. In addition, the cost of responding to such initiatives and challenges,
including management time, out-of-pocket expenses and price reductions, may affect our performance in the relevant
period. A failure to compete effectively could adversely affect our business, results of operations, cash flows and financial
condition.
Increasing dependence on key retailers in developed markets, changes in the policies of our retail trade customers,
the emergence of alternative retail channels and the rapidly changing retail landscape may adversely affect our
business.
Our products are sold in a highly competitive global marketplace which has experienced increased trade concentration
and the growing presence of large-format retailers, discounters and e-commerce retailers. With the growing trend toward
retail trade consolidation, the rapid growth of e-commerce and the integration of traditional and digital operations at key
retailers, we are increasingly dependent on certain retailers, and some of these retailers, may have greater bargaining
strength than we do. They may use this leverage to demand higher trade discounts, allowances or slotting fees, which could
lead to reduced sales or profitability. The loss of a key customer or a significant reduction in sales to a key customer could
adversely affect our business, results of operations, cash flows and financial condition. For additional information
regarding our customers, see “Distribution; Raw Materials; Competition; Trademarks and Patents” in Item 1 “Business.”
We also have been and may continue to be negatively affected by changes in the policies or practices of our retail trade
customers, such as inventory de-stocking, limitations on access to shelf space, delisting of our products, environmental or
sustainability initiatives and other conditions. For example, a determination by a key retailer that any of our ingredients
should not be used in certain consumer products could adversely impact our business, results of operations, cash flows and
financial condition. In addition, “private label” products sold by retail customers, which are typically sold at lower prices
than branded products, are a source of competition for certain of our products.
In addition, the retail landscape in many of our markets continues to be impacted by the rapid growth of e-commerce
retailers, changing consumer preferences (as consumers increasingly shop online) and the emergence of alternative retail
channels, such as subscription services and direct-to-customer businesses. The rapid growth in e-commerce and emergence
of alternative retail channels may create pricing pressures and/or adversely affect our relationships with our key retailers.
If we are not successful in adapting or effectively reacting to changes in consumer preferences and market dynamics and/or
expanding sales through e-commerce retailers and other alternative retail channels, our business, results of operations, cash
flows and financial condition could be adversely affected.
5
Our business is subject to legal and regulatory risks in the U.S. and abroad.
Our business is subject to extensive legal and regulatory requirements in the U.S. and abroad. Such legal and
regulatory requirements apply to most aspects of our products, including their development, ingredients, manufacture,
packaging, labeling, storage, transportation, distribution, export, import, advertising, sale and environmental impact. U.S.
federal authorities, including the U.S. Food and Drug Administration (the “FDA”), the Federal Trade Commission, the
Consumer Product Safety Commission and the Environmental Protection Agency, regulate different aspects of our
business, along with parallel authorities at the state and local levels and comparable authorities overseas. In addition, our
selling practices are regulated by competition law authorities in the U.S. and abroad.
New or more stringent legal or regulatory requirements, or more restrictive interpretations of existing requirements,
could adversely impact our business, results of operations, cash flows and financial condition. For example, from time to
time, various regulatory authorities in Europe, the U.S. and other countries review the use of various ingredients in
consumer products. Triclosan, an ingredient that was used by us in the manufacture of Colgate Total toothpaste until the
first quarter of 2019, is an example of an ingredient that has undergone and is undergoing reviews by various regulatory
authorities worldwide, both by itself and in the context of its use in specific products or types of products. A decision by a
regulatory or governmental authority that any of our ingredients, should not be used in certain consumer products or should
otherwise be newly regulated, could adversely impact our business and reputation, as could negative reactions by our
consumers, trade customers or non-governmental organizations to our current or prior use of such ingredients. Additionally,
an inability to develop new or reformulated products containing alternative ingredients or to obtain regulatory approval of
such products on a timely basis could likewise adversely affect our business.
Because of our extensive international operations, we could be adversely affected by violations of worldwide anti-
bribery laws, including those that prohibit companies and their intermediaries from making improper payments to
government officials or other third parties for the purpose of obtaining or retaining business, such as the U.S. Foreign
Corrupt Practices Act (the “FCPA”), and laws that prohibit commercial bribery. While our policies mandate compliance
with these anti-bribery laws, we cannot provide assurance that our internal control policies and procedures will always
protect us from reckless or criminal acts committed by our employees, joint-venture partners or agents. Violations of these
laws, or allegations of such violations, could disrupt our business and adversely affect our reputation and our business,
results of operations, cash flows and financial condition.
While it is our policy and practice to comply with all legal and regulatory requirements applicable to our business, a
finding that we are in violation of, or out of compliance with, applicable laws or regulations could subject us to civil
remedies, including fines, damages, injunctions or product recalls, or criminal sanctions, any of which could adversely
affect our business, results of operations, cash flows and financial condition. Even if a claim is unsuccessful, is without
merit or is not fully pursued, the negative publicity surrounding such assertions regarding our products, processes or
business practices could adversely affect our reputation and brand image. For information regarding our legal and
regulatory matters, see Item 3 “Legal Proceedings” and Note 13, Commitments and Contingencies to the Consolidated
Financial Statements.
6
The growth of our business depends on the successful identification, development and launch of innovative new
products.
Our growth depends on the continued success of existing products, as well as the successful launch of innovative new
products and line extensions. Our ability to launch new products and line extensions and to sustain existing products is
affected by whether we can successfully:
identify, develop and fund technological innovations;
obtain and maintain necessary intellectual property protection and avoid infringing intellectual property rights of
others;
obtain approvals and registrations of regulated products, including from the FDA and other regulatory bodies in
the U.S. and abroad; and
anticipate and respond to consumer needs and preferences.
The identification, development and introduction of innovative new products and line extensions involve considerable
costs and effort, and any new product or line extension may not generate sufficient customer and consumer interest and
sales to become a profitable product or to cover the costs of its development and promotion. Our ability to achieve a
successful launch of a new product or line extension could also be adversely affected by preemptive actions taken by
competitors in response to the launch, such as increased promotional activities and advertising.
The failure to develop and launch successful new products could hinder the growth of our business and any delay in
the development or launch of a new product could result in us not being the first to market, which could compromise our
competitive position and adversely affect our business, results of operations, cash flows and financial condition.
If, in the course of identifying or developing new products, we are found to have infringed the trademark, trade secret,
copyright, patent or other intellectual property rights of others, directly or indirectly, through the use of third-party ideas or
technologies, such a finding could adversely affect our ability to develop innovative new products and adversely affect our
business, results of operations, cash flows and financial condition. Even if we are not found to infringe a third party’s
intellectual property rights, claims of infringement could adversely affect us, including by increasing costs and by delaying
the launch of new products.
7
Damage to our reputation could have an adverse effect on our business.
Maintaining our strong reputation with consumers and our trade partners globally is critical to selling our branded
products. Accordingly, we devote significant time and resources to programs designed to protect and preserve our
reputation, such as our Ethics and Compliance, Sustainability, Brand Protection and Product Safety, Regulatory and Quality
initiatives. Negative publicity about us, our brands, our products, our supply chain, our ingredients or our employees,
whether or not deserved, could jeopardize our reputation. Such negative publicity could relate to, among other things,
health concerns, threatened or pending litigation or regulatory proceedings, environmental impacts (including packaging,
energy and water use and waste management) or other sustainability or policy issues. In addition, widespread use of digital
and social media by consumers has greatly increased the accessibility of information and the speed of its dissemination.
Negative publicity, posts or comments on social media about us, our brands, our products or our employees, whether true
or untrue, could damage our brands and our reputation. The success of our brands could also suffer if our marketing
initiatives do not have the desired impact on a brand’s image or its ability to attract consumers.
Additionally, due to the scale and scope of our business, we must rely on relationships with third parties, including our
suppliers, distributors, contractors, joint venture partners and other external business partners, for certain functions. While
we have policies and procedures for managing these relationships, they inherently involve a lesser degree of control over
business operations, governance and compliance, thereby potentially increasing our reputational and legal risk.
In addition, third parties sell counterfeit versions of our products, which are inferior or may pose safety risks. As a
result, consumers of our brands could confuse our products with these counterfeit products, which could cause them to
refrain from purchasing our brands in the future and in turn could impair our brand equity and adversely affect our
business, results of operations, cash flows and financial condition.
Damage to our reputation or loss of consumer confidence in our products for these or any other reasons could
adversely affect our business, results of operations, cash flows and financial condition, as well as require resources to
rebuild our reputation.
There is no guarantee that our ongoing efforts to reduce costs will be successful.
One way that we generate funds needed to support the growth of our business is through our continuous, Company-
wide initiatives to lower costs and increase effective asset utilization, which we refer to as our funding-the-growth
initiatives. These initiatives are designed to reduce costs associated with direct materials, indirect expenses, distribution
and logistics, and advertising and promotional materials, among other things. The achievement of our funding-the-growth
goals depends on our ability to successfully identify and realize additional savings opportunities. Events and
circumstances, such as financial or strategic difficulties, delays and unexpected costs may occur that could result in our not
realizing any or all of the anticipated benefits or our not realizing the anticipated benefits on our expected timetable. If we
are unable to realize the anticipated savings of our funding-the-growth initiatives, our ability to fund other initiatives and
achieve our profitability goals may be adversely affected. Any failure to implement our funding-the-growth initiatives in
accordance with our expectations could adversely affect our business, results of operations, cash flows and financial
condition. For additional information regarding our funding-the-growth initiatives, refer to Part II, Item 7 “Management’s
Discussion and Analysis of Financial Condition and Results of Operations – Executive Overview.”
8
Volatility in material and other costs could adversely impact our profitability.
Raw and packaging material commodities such as resins, pulp, essential oils, tropical oils, tallow, poultry, corn and
soybeans are subject to market price variations. Increases in the costs and/or a reduction in the availability of commodities,
energy and transportation and other necessary services have affected and may continue to adversely affect our profit
margins. If commodity and other cost increases continue in the future and we are unable to pass along such higher costs in
the form of price increases, achieve cost efficiencies, such as in manufacturing and distribution, or otherwise manage the
exposure through sourcing strategies, ongoing productivity initiatives and the limited use of commodity hedging contracts,
our business, results of operations, cash flows and financial condition could be adversely impacted. In addition, even if we
are able to increase the prices of our products in response to commodity and other cost increases, we may not be able to
sustain the price increases. Also, sustained price increases may lead to declines in volume as competitors may not adjust
their prices or consumers may decide not to pay the higher prices, which could lead to sales declines and loss of market
share and could adversely affect our business, results of operations, cash flows and financial condition. See “Disruption in
our global supply chain or key office facilities could adversely impact our business” below for additional information.
Our success depends upon our ability to attract and retain key employees and the succession of senior management.
Our success largely depends on the performance of our management team and other key employees. If we are unable
to attract and retain talented, highly qualified senior management and other key people, our business, results of operations,
cash flows and financial condition could be adversely affected. In addition, if we do not successfully implement our
succession plans for senior management, including our Chief Executive Officer, our business, results of operations, cash
flows and financial condition may be adversely affected. While we follow a disciplined, ongoing succession planning
process and have succession plans in place for senior management and other key executives, these do not guarantee that the
services of qualified senior executives will continue to be available to us at particular moments in time.
Legal claims and proceedings could adversely impact our business.
As a global company serving consumers in more than 200 countries and territories, we may be subject to a wide
variety of legal claims and proceedings, including disputes relating to intellectual property, contracts, product liability,
marketing, advertising, foreign exchange controls, antitrust and trade regulation, as well as labor and employment, pension,
data privacy and security, environmental and tax matters and consumer class actions. Regardless of their merit, these
claims can require significant time and expense to investigate and defend. Since litigation is inherently uncertain, there is
no guarantee that we will be successful in defending ourselves against such claims or proceedings, or that our assessment
of the materiality of these matters, including any reserves taken in connection therewith, will be consistent with the
ultimate outcome of such matters. In addition, if one of our products, or an ingredient contained in our products, is
perceived or found to be defective or unsafe, we may need to recall or reformulate some of our products. Whether or not a
legal claim or proceeding is successful, or a recall or reformulation is required, such assertions could have an adverse effect
on our business, results of operations, cash flows and financial condition, and the negative publicity surrounding them
could harm our reputation and brand image. The resolution of, or increase in the reserves taken in connection with, one or
more of these matters in any reporting period could have a material adverse effect on our business, results of operations,
cash flows and financial condition for that period. See Item 3 “Legal Proceedings” and Note 13, Commitments and
Contingencies to the Consolidated Financial Statements for additional information on certain of our legal claims and
proceedings.
9
Disruption in our global supply chain or key office facilities could adversely impact our business.
We are engaged in manufacturing and sourcing of products and materials on a global scale. Our operations and those
of our suppliers could be disrupted by a number of factors, including, but not limited to:
environmental events;
strikes and other labor disputes;
disruptions in logistics;
loss or impairment of key manufacturing sites;
loss of key suppliers;
supplier capacity constraints;
raw material and product quality or safety issues;
industrial accidents or other occupational health and safety issues;
the impact on our suppliers of tighter credit or capital markets; and
natural disasters, including climatic events (including any potential effect of climate change) and earthquakes, acts
of war or terrorism, political unrest, fires or explosions and other external factors over which we have no control.
In addition, we purchase certain key raw and packaging materials from single-source suppliers or a limited number of
suppliers and new suppliers may have to be qualified under industry, governmental and Colgate standards, which can
require additional investment and take a significant period of time.
While we believe that the supplies of raw materials needed to manufacture our products are adequate and have
business continuity and contingency plans in place for key manufacturing sites and the supply of raw and packaging
materials, significant disruption of manufacturing or sourcing of products or materials for any reason, including any of the
above reasons, could interrupt product supply and, if not remedied, have an adverse impact on our business, results of
operations, cash flows and financial condition.
In addition, as a result of our global shared service organizational model, certain of our functions, such as marketing,
finance and accounting, customer service and logistics, and human resources, are concentrated in key office facilities. A
significant disruption to any of our key office facilities for any reason, including natural disasters, acts of war or terrorism,
could adversely affect our business, results of operations, cash flows and financial condition.
10
A cyber-security incident, data breach or a failure of a key information technology system could adversely impact
our business.
We rely extensively on information technology systems (“IT Systems”), including some which are managed, hosted,
provided and/or used by third parties, including cloud-based service providers, and their vendors, in order to conduct our
business. Our uses of these systems include, but are not limited to:
communicating within our company and with other parties, including our customers and consumers;
ordering and managing materials from suppliers;
converting materials to finished products;
receiving and processing orders from and shipping products to our customers and consumers;
marketing products to consumers;
collecting, storing transferring and/or processing customer, consumer, employee, vendor, investor and other
stakeholder information and personal data, including such data from residents of the European Union who are
covered by the General Data Protection Regulation and residents of the State of California who will be covered by
the California Consumer Privacy Act of 2018, which goes into effect on January 1, 2020;
processing transactions, including but not limited to employee payroll, employee and retiree benefits and
payments to customers and vendors;
hosting, processing and sharing confidential and proprietary research, intellectual property, business plans and
financial information;
summarizing and reporting results of operations, including financial reporting;
managing our banking and other cash liquidity systems and platforms;
complying with legal, regulatory and tax requirements;
providing data security; and
handling other processes involved in managing our business.
Although we have a broad array of information security measures in place, our IT Systems, including those of third-
party service providers with whom we have contracted, have been, and will likely continue to be, subject to computer
viruses or other malicious codes, unauthorized access attempts, phishing and other cyber-attacks. Cyber-attacks and other
cyber incidents are occurring more frequently, are constantly evolving in nature, are becoming more sophisticated and are
being made by groups, individuals and nation states with a wide range of expertise and motives. Such cyber-attacks and
cyber incidents can take many forms, including cyber extortion, social engineering, password theft or introduction of
viruses or malware, such as ransomware through phishing emails. We cannot guarantee that our security efforts will
prevent breaches or breakdowns of our, or our third-party service providers’, IT Systems since the techniques used in these
attacks change frequently and may be difficult to detect for periods of time. In addition, although we have policies and
procedures in place to ensure that all personal information collected by us or our third-party service providers is securely
maintained, data breaches due to human error or intentional or unintentional conduct have occurred and likely will continue
to occur. Although we have seen no material impact on our business operations from the cyber-security attacks and data
breaches we have experienced to date, if we suffer a loss or disclosure of confidential business or stakeholder information
as a result of a breach of our IT Systems, including those of third-party service providers with whom we have contracted,
we may suffer reputational, competitive and/or business harm, incur significant costs and be subject to government
investigations, litigation, fines and/or damages, which may adversely impact our business, results of operations, cash flows
and financial condition.
11
Furthermore, while we have disaster recovery and business continuity plans in place, if our IT Systems are damaged,
breached or cease to function properly for any reason, including the poor performance of, failure of or cyber-attack on
third-party service providers, catastrophic events, power outages, cyber-security breaches, network outages, failed upgrades
or other similar events and, if the disaster recovery and business continuity plans do not effectively resolve such issues on a
timely basis, we may suffer interruptions in our ability to manage or conduct business as well as reputational harm, and
may be subject to governmental investigations and litigation, any of which may adversely impact our business, results of
operations, cash flows and financial condition.
Uncertain global economic conditions and disruptions in the credit markets may adversely affect our business.
Uncertain global economic conditions could adversely affect our business. Unfavorable global economic conditions,
such as a recession, economic slowdown and/or reduced category growth rates, could negatively impact our business and
could result in declining revenues, profitability and cash flows. Although we continue to devote significant resources to
support our brands and market our products at multiple price points, during periods of economic uncertainty consumers
may reduce consumption or switch to “private label” or economy brands, which could reduce sales volumes of our
products or result in a shift in our product mix from higher margin to lower margin product offerings. Additionally, our
retailers may be impacted and they may increase pressure on our selling prices or increase promotional activity for lower-
priced or value offerings as they seek to maintain sales volumes and margins.
While we currently generate significant cash flows from ongoing operations and have access to global credit markets
through our various financing activities, a disruption in the credit markets, interest rate increases or changes to our credit
ratings could negatively impact the availability or cost of funding. Reduced access to credit or increased costs could
adversely affect our liquidity and capital resources or significantly increase our cost of capital. In addition, if any financial
institutions that hold our cash or other investments or that are parties to our undrawn revolving credit facility supporting
our commercial paper program or other financing arrangements, such as interest rate, foreign exchange or commodity
hedging instruments, were to declare bankruptcy or become insolvent, they may be unable to perform under their
agreements with us. This could leave us with reduced borrowing capacity or unhedged against certain interest rate, foreign
currency or commodity price exposures. In addition, tighter credit markets may lead to business disruptions for certain of
our suppliers, contract manufacturers or trade customers which could, in turn, adversely impact our business, results of
operations, cash flows and financial condition.
We may not realize the benefits that we expect from our Global Growth and Efficiency Program.
Our restructuring program, which we refer to as the “Global Growth and Efficiency Program,” commenced in the
fourth quarter of 2012 and runs through December 31, 2019. The Global Growth and Efficiency Program’s initiatives are
expected to help us ensure sustained solid worldwide growth in unit volume, organic sales, operating profit and earnings
per share and enhance our global leadership positions in our core businesses. While implementation of the Global Growth
and Efficiency Program remains on track and is in its final year and most of the initiatives under the program have been
successfully implemented or are nearing completion, the successful implementation of the remainder of the program may
present significant organizational challenges and, in some cases, may require successful negotiations with third parties. As
a result, we may not be able to realize all of the remaining anticipated benefits from the Global Growth and Efficiency
Program. Events and circumstances, such as financial or strategic difficulties, delays and unexpected costs may occur that
could result in our not realizing all of the remaining anticipated benefits or our not realizing such benefits on our expected
timetable. In addition, changes in foreign exchange rates or in tax, labor or immigration laws may result in our not
achieving the remaining anticipated cost savings as measured in U.S. dollars. If we are unable to realize the remaining
anticipated savings of the Global Growth and Efficiency Program, our ability to fund other initiatives and enhance
profitability may be adversely affected. Any failure to implement the Global Growth and Efficiency Program in accordance
with our expectations could adversely affect our business, results of operations, cash flows and financial condition. For
additional information regarding the Global Growth and Efficiency Program, refer to Part II, Item 7 “Management’s
Discussion and Analysis of Financial Condition and Results of Operations – Significant Items Impacting Comparability”
and “– Restructuring and Related Implementation Charges.”
12
We have pursued and may continue to pursue acquisitions and divestitures, which could adversely impact our
business.
We have pursued and may continue to pursue acquisitions of brands, businesses or technologies from third parties.
Acquisitions and their pursuit involve numerous potential risks, including, among other things:
realizing the full extent of the expected benefits or synergies as a result of a transaction, within the anticipated
time frame, or at all;
successfully integrating the operations, technologies, services, products and systems of the acquired brands or
businesses in an effective, timely and cost-efficient manner;
receiving necessary consents, clearances and approvals in connection with a transaction;
diverting management’s attention from other business priorities;
successfully operating in new lines of business or markets;
retaining key employees, partners, suppliers and customers of the acquired business;
conforming standards, controls, procedures and policies of the acquired business with our own;
developing or launching products with acquired technologies; and
other unanticipated problems or liabilities.
Moreover, acquisitions could result in substantial additional debt, exposure to contingent liabilities, such as litigation
or earn-out obligations, the potential impairment of goodwill or other intangible assets, or transaction costs. Any of these
risks, should they materialize, could adversely impact our business, results of operations, cash flows and financial
condition.
We also may periodically divest brands or businesses. These divestitures may adversely impact our business, results of
operations, cash flows and financial condition if we are unable to offset the dilutive impacts from the loss of revenue
associated with the divested brands or businesses, or otherwise achieve the anticipated benefits or cost savings from the
divestitures. In addition, businesses under consideration for, or otherwise subject to, divestiture may be adversely impacted
prior to the divestiture, which could negatively impact our business, results of operations, cash flows and financial
condition.
13
Tax matters, including changes in tax rates, disagreements with taxing authorities and imposition of new taxes could
negatively impact our business.
We are subject to taxes in the U.S. and in the foreign jurisdictions where we do business. Due to economic and
political conditions, tax rates in the U.S. and various foreign jurisdictions have been and may be subject to significant
change. Changes in the mix of our earnings from countries with differing statutory tax rates, changes in the valuation of
deferred tax assets and liabilities, changes in tax laws, including how existing tax laws are interpreted or enforced, or
contemplated changes in long-standing tax principles, if finalized and adopted, could adversely impact our future effective
tax rate and business, results of operations, cash flows and financial condition. For example, longstanding international tax
norms that determine each country’s jurisdiction to tax cross-border international trade are evolving as a result of the Base
Erosion and Profit Shifting reporting requirements (“BEPS”) recommended by the G8, G20 and Organization for
Economic Cooperation and Development. In connection with BEPS, companies are required to disclose more information
to tax authorities on operations around the world, which may lead to greater audit scrutiny of profits earned in countries
outside of the U.S. As these and other tax laws and related regulations change, our business, results of operations, cash
flows and financial condition could be materially impacted. For more information regarding U.S. tax reform, see Note 11,
Income Taxes to the Condensed Consolidated Financial Statements.
Furthermore, we are subject to regular reviews, examinations and audits by the Internal Revenue Service and other
taxing authorities with respect to taxes inside and outside of the U.S. Although we believe our tax positions are reasonable,
if a taxing authority disagrees with the positions we have taken, we could face additional tax liabilities, including interest
and penalties, in excess of reserves. The payment of such additional amounts upon final adjudication of any disputes could
adversely impact our business, results of operations, cash flows and financial condition.
Climate change may have an adverse impact on our business and results of operations.
It has been reported that carbon dioxide and other greenhouse gases in the atmosphere have an adverse impact on
global temperatures, weather patterns and the frequency and severity of extreme weather and natural disasters. The
predicted effects of climate change may also exacerbate challenges regarding the availability and quality of water. In
addition, concern over climate change may result in new or additional legal and regulatory requirements to reduce or
mitigate the effects of climate change on the environment. Despite our sustainability efforts, any failure to achieve our
sustainability goals to reduce our impact on the environment or the perception (whether or not valid) that we have failed to
act responsibly with respect to the environment or to effectively respond to new or additional legal or regulatory
requirements regarding climate change could result in adverse publicity and adversely affect our business and reputation.
There is also increased focus, including by governmental and non-governmental organizations, investors, customers,
consumers and other stakeholders on these and other sustainability matters, including deforestation and the use of plastic,
energy and water. Our reputation could be damaged if we do not (or are perceived not to) act responsibly with respect to
sustainability matters, which could adversely affect our business, results of operations, cash flows and financial condition.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
14
ITEM 2.
PROPERTIES
The Company owns or leases approximately 320 properties, which include manufacturing, distribution, research and
office facilities worldwide. Our corporate headquarters is located in leased property at 300 Park Avenue, New York, New
York.
In the U.S., the Company operates in approximately 60 properties, of which 13 are owned. Major U.S. manufacturing
and warehousing facilities used by the Oral, Personal and Home Care product segment of our business are located in
Greenwood, South Carolina; Morristown, Tennessee; and Cambridge, Ohio. The Pet Nutrition segment has major
manufacturing and warehousing facilities in Bowling Green, Kentucky; Emporia, Kansas; Richmond, Indiana and Topeka,
Kansas. The primary research center for Oral and Personal Care products is located in Piscataway, New Jersey, the primary
research center for Home Care products is located in Mexico and the primary research center for Pet Nutrition products is
located in Topeka, Kansas. Our global data center is also located in Piscataway, New Jersey.
Overseas, the Company operates in approximately 260 properties, of which 60 are owned, in over 80 countries. Major
overseas manufacturing and warehousing facilities used by the Oral, Personal and Home Care product segment of our
business are located in Australia, Brazil, China, Colombia, France, Greece, Guatemala, India, Italy, Mexico, Poland, South
Africa, Thailand, Turkey, Venezuela and Vietnam. The Pet Nutrition segment has major manufacturing and warehousing
facilities in the Czech Republic and the Netherlands.
In addition to company-owned or leased properties described above, the Company also utilizes a network of
warehouses and distribution centers that are owned or leased by logistics service providers, co-packers, contract
manufacturers.
The Company has shared business service centers in India, Mexico and Poland, which are located in leased properties.
All of the facilities we operate are well maintained and adequate for the purpose for which they are intended.
15
ITEM 3.
LEGAL PROCEEDINGS
As a global company serving consumers in more than 200 countries and territories, the Company is routinely subject
to a wide variety of legal proceedings. These include disputes relating to intellectual property, contracts, product liability,
marketing, advertising, foreign exchange controls, antitrust and trade regulation, as well as labor and employment, pension,
data privacy and security, environmental and tax matters, and consumer class actions. Management proactively reviews and
monitors the Company’s exposure to, and the impact of, environmental matters. The Company is party to various
environmental matters and, as such, may be responsible for all or a portion of the cleanup, restoration and post-closure
monitoring of several sites.
The Company establishes accruals for loss contingencies when it has determined that a loss is probable and that the
amount of loss, or range of loss, can be reasonably estimated. Any such accruals are adjusted thereafter as appropriate to
reflect changes in circumstances.
The Company also determines estimates of reasonably possible losses or ranges of reasonably possible losses in excess
of related accrued liabilities, if any, when it has determined that a loss is reasonably possible and it is able to determine
such estimates. For those matters disclosed below for which the amount of any potential losses can be reasonably
estimated, the Company currently estimates that the aggregate range of reasonably possible losses in excess of any accrued
liabilities is $0 to approximately $225 million (based on current exchange rates). The estimates included in this amount are
based on the Company’s analysis of currently available information and, as new information is obtained, these estimates
may change. Due to the inherent subjectivity of the assessments and the unpredictability of outcomes of legal proceedings,
any amounts accrued or included in this aggregate amount may not represent the ultimate loss to the Company. Thus, the
Company’s exposure and ultimate losses may be higher or lower, and possibly significantly so, than the amounts accrued
or the range disclosed above.
Based on current knowledge, management does not believe that the ultimate resolution of loss contingencies arising
from the matters discussed herein will have a material effect on the Company’s consolidated financial position or its
ongoing results of operations or cash flows. However, in light of the inherent uncertainties noted above, an adverse
outcome in one or more matters could be material to the Company’s results of operations or cash flows for any particular
quarter or year.
Brazilian Matters
There are certain tax and civil proceedings outstanding, as described below, related to the Company’s 1995 acquisition
of the Kolynos oral care business from Wyeth (the “Seller”).
The Brazilian internal revenue authority has disallowed interest deductions and foreign exchange losses taken by the
Company’s Brazilian subsidiary for certain years in connection with the financing of the Kolynos acquisition. The tax
assessments with interest, penalties and any court-mandated fees, at the current exchange rate, are approximately $151
million. This amount includes additional assessments received from the Brazilian internal revenue authority in April 2016
relating to net operating loss carryforwards used by the Company’s Brazilian subsidiary to offset taxable income that had
also been deducted from the authority’s original assessments. The Company has been disputing the disallowances by
appealing the assessments since October 2001. Appeals are currently pending at the administrative level. In the event the
Company is ultimately unsuccessful in its administrative appeals, further appeals are available within the Brazilian federal
courts.
In September 2015, the Company lost one of its appeals at the administrative level and filed a lawsuit in Brazilian
federal court. In February 2017, the Company lost an additional administrative appeal and filed a lawsuit in Brazilian
federal court. Although there can be no assurances, management believes, based on the opinion of its Brazilian legal
counsel, that the disallowances are without merit and that the Company should ultimately prevail. The Company is
challenging these disallowances vigorously.
16
In July 2002, the Brazilian Federal Public Attorney filed a civil action against the federal government of Brazil,
Laboratorios Wyeth-Whitehall Ltda. (the Brazilian subsidiary of the Seller) and the Company, as represented by its
Brazilian subsidiary, in the 6th. Lower Federal Court in the City of São Paulo, seeking to annul an April 2000 decision by
the Brazilian Board of Tax Appeals that found in favor of the Seller’s Brazilian subsidiary on the issue of whether it had
incurred taxable capital gains as a result of the divestiture of Kolynos. The action seeks to make the Company’s Brazilian
subsidiary jointly and severally liable for any tax due from the Seller’s Brazilian subsidiary. The case has been pending
since 2002, and the Lower Federal Court has not issued a decision. Although there can be no assurances, management
believes, based on the opinion of its Brazilian legal counsel, that the Company should ultimately prevail in this action. The
Company is challenging this action vigorously.
In December 2005, the Brazilian internal revenue authority issued to the Company’s Brazilian subsidiary a tax
assessment with interest, penalties and any court-mandated fees of approximately $65 million, at the current exchange rate,
based on a claim that certain purchases of U.S. Treasury bills by the subsidiary and their subsequent disposition during the
period 2000 to 2001 were subject to a tax on foreign exchange transactions. The Company had been disputing the
assessment within the internal revenue authority’s administrative appeals process. However, in November 2015, the
Superior Chamber of Administrative Tax Appeals denied the Company’s final administrative appeal and the Company has
filed a lawsuit in the Brazilian federal court. In the event the Company is unsuccessful in this lawsuit, further appeals are
available within the Brazilian federal courts. Although there can be no assurances, management believes, based on the
opinion of its Brazilian legal counsel, that the tax assessment is without merit and that the Company should ultimately
prevail. The Company is challenging this assessment vigorously.
Competition Matters
Certain of the Company’s subsidiaries have historically been subject to investigations, and, in some cases, fines, by
governmental authorities in a number of countries related to alleged competition law violations. Substantially all of these
matters also involved other consumer goods companies and/or retail customers. The Company’s policy is to comply with
antitrust and competition laws and, if a violation of any such laws is found, to take appropriate remedial action and to
cooperate fully with any related governmental inquiry. The status of pending competition law matters as of December 31,
2018 is set forth below.
In December 2014, the French competition law authority found that 13 consumer goods companies, including
the Company’s French subsidiary, exchanged competitively sensitive information related to the French home
care and personal care sectors, for which the Company’s French subsidiary was fined $57 million. In addition,
as a result of the Company’s acquisition of the Sanex personal care business in 2011 from Unilever N.V. and
Unilever PLC (together with Unilever N.V., “Unilever”) pursuant to a Business and Share Sale and Purchase
Agreement (the “Sale and Purchase Agreement”), the French competition law authority found that the
Company’s French subsidiary, along with Hillshire Brands Company (formerly Sara Lee Corporation (“Sara
Lee”)), were jointly and severally liable for fines of $25 million assessed against Sara Lee’s French
subsidiary. The Company is indemnified for these fines by Unilever pursuant to the Sale and Purchase
Agreement. The fines were confirmed by the Court of Appeal in October 2016. The Company is appealing the
decision of the Court of Appeal on behalf of the Company and Sara Lee in the French Supreme Court.
In July 2014, the Greek competition law authority issued a statement of objections alleging a restriction of
parallel imports into Greece. The Company responded to this statement of objections. In July 2017, the
Company received the decision from the Greek competition law authority in which the Company was fined
$11 million. The Company is appealing the decision to the Greek courts.
17
Talcum Powder Matters
The Company has been named as a defendant in civil actions alleging that certain talcum powder products that were
sold prior to 1996 were contaminated with asbestos. Most of these actions involve a number of co-defendants from a
variety of different industries, including suppliers of asbestos and manufacturers of products that, unlike the Company’s
products, were designed to contain asbestos. As of December 31, 2018, there were 239 individual cases pending against the
Company in state and federal courts throughout the United States, as compared to 193 cases as of December 31, 2017.
During the year ended December 31, 2018, 132 new cases were filed and 86 cases were resolved by voluntary dismissal,
judgment in the Company’s favor or settlement. The value of settlements in the years presented was not material, either
individually or in the aggregate, to each such period’s results of operations.
The Company believes that a significant portion of its costs incurred in defending and resolving these claims will be
covered by insurance policies issued by several primary, excess and umbrella insurance carriers, subject to deductibles,
exclusions, retentions and policy limits.
While the Company and its legal counsel believe that these cases are without merit and intend to challenge them
vigorously, there can be no assurances regarding the ultimate resolution of these matters. Since the amount of any potential
losses from these cases currently cannot be reasonably estimated, the range of reasonably possible losses in excess of
accrued liabilities disclosed above does not include any amount relating to these cases.
ERISA Matter
In June 2016, a putative class action claiming that residual annuity payments made to certain participants in the
Colgate-Palmolive Company Employees’ Retirement Income Plan (the “Plan”) did not comply with the Employee
Retirement Income Security Act was filed against the Plan, the Company and certain individuals in the United States
District Court for the Southern District of New York. This action has been certified as a class action. The relief sought
includes recalculation of benefits, pre- and post-judgment interest and attorneys’ fees. The Company is contesting this
action vigorously. Since the amount of any potential loss from this case currently cannot be reasonably estimated, the range
of reasonably possible losses in excess of accrued liabilities disclosed above does not include any amount relating to the
case.
ITEM 4. MINE SAFETY DISCLOSURES
Not Applicable.
18
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
For information regarding the market for the Company’s common stock, including stock price performance graphs,
refer to “Market Information” included in Part IV, Item 15 of this report. For information regarding the number of common
shareholders of record, refer to “Historical Financial Summary” included in Part IV, Item 15 of this report. For information
regarding the securities authorized for issuance under our equity compensation plans, refer to “Security Ownership of
Certain Beneficial Owners and Management and Related Stockholder Matters” included in Part III, Item 12 of this report.
Issuer Purchases of Equity Securities
On June 18, 2018, the Company’s Board of Directors (the “Board”) authorized the repurchase of shares of the
Company’s common stock having an aggregate purchase price of up to $5 billion under a new share repurchase program
(the “2018 Program”), which replaced the previous program approved by the Board in 2015 (the “2015 Program”). The
Board also has authorized share repurchases on an ongoing basis to fulfill certain requirements of the Company’s
compensation and benefit programs. The shares are repurchased from time to time in open market or privately negotiated
transactions at the Company’s discretion, subject to market conditions, customary blackout periods and other factors.
The following table shows the stock repurchase activity for each of the three months in the quarter ended
December 31, 2018:
Month
October 1 through 31, 2018
November 1 through 30, 2018
December 1 through 31, 2018
Total
Total Number of
Shares Purchased(1)
828,129
1,748,795
2,027,730
4,604,654
$
$
$
$
Average Price
Paid per Share
62.72
61.87
61.87
62.02
Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs(2)
Approximate
Dollar Value of
Shares That May
Yet be Purchased
Under the Plans
or Programs(3)
(in millions)
776,159
1,748,427
1,994,781
4,519,367
4,658
4,550
4,427
_______
(1)
Includes share repurchases under the 2018 Program and those associated with certain employee elections under the Company’s compensation and
benefit programs.
(2)
(3)
The difference between the total number of shares purchased and the total number of shares purchased as part of publicly announced plans or
programs is 85,287 shares, which represents shares deemed surrendered to the Company to satisfy certain employee elections under the
Company’s compensation and benefit programs.
Includes approximate dollar value of shares that were available to be purchased under the publicly announced plans or programs that were in
effect as of December 31, 2018.
ITEM 6.
SELECTED FINANCIAL DATA
Refer to the information set forth under the caption “Historical Financial Summary” included in Part IV, Item 15 of
this report.
19
(Dollars in Millions Except Per Share Amounts)
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Executive Overview
Colgate-Palmolive Company (together with its subsidiaries, the “Company” or “Colgate”) seeks to deliver strong,
consistent business results and superior shareholder returns by providing consumers globally with products that make their
lives healthier and more enjoyable.
To this end, the Company is tightly focused on two product segments: Oral, Personal and Home Care; and Pet
Nutrition. Within these segments, the Company follows a closely defined business strategy to grow our key product
categories and increase our overall market share. Within the categories in which the Company competes, the Company
prioritizes its efforts based on their capacity to maximize the use of the organization’s core competencies and strong global
equities and to deliver sustainable long-term growth.
Operationally, the Company is organized along geographic lines with management teams having responsibility for the
business and financial results in each region. The Company competes in more than 200 countries and territories worldwide
with established businesses in all regions contributing to the Company’s sales and profitability. Approximately 70% of the
Company’s Net sales are generated from markets outside the U.S., with approximately 50% of the Company’s Net sales
coming from emerging markets (which consist of Latin America, Asia (excluding Japan), Africa/Eurasia and Central
Europe). This geographic diversity and balance help to reduce the Company’s exposure to business and other risks in any
one country or part of the world.
The Oral, Personal and Home Care product segment is managed geographically in five reportable operating segments:
North America, Latin America, Europe, Asia Pacific and Africa/Eurasia, all of which sell to a variety of traditional and e-
commerce retailers, wholesalers and distributors. The Company, through Hill’s Pet Nutrition, also competes on a
worldwide basis in the pet nutrition market, selling its products principally through authorized pet supply retailers,
veterinarians and e-commerce retailers.
On an ongoing basis, management focuses on a variety of key indicators to monitor business health and performance.
These indicators include market share, net sales (including volume, pricing and foreign exchange components), organic
sales growth (net sales growth excluding, as applicable, the impact of foreign exchange, acquisitions, and divestments), a
non-GAAP financial measure, and gross profit margin, operating profit, net income and earnings per share, in each case, on
a GAAP and non-GAAP basis, as well as measures used to optimize the management of working capital, capital
expenditures, cash flow and return on capital. The monitoring of these indicators and the Company’s Code of Conduct and
corporate governance practices help to maintain business health and strong internal controls. For additional information
regarding non-GAAP financial measures, see “Non-GAAP Financial Measures” below.
To achieve its business and financial objectives, the Company focuses the organization on initiatives to drive and fund
growth. The Company seeks to capture significant opportunities for growth by identifying and meeting consumer needs
within its core categories, through its focus on innovation and the deployment of valuable consumer and shopper insights
in the development of successful new products regionally, which can then be rolled out on a global basis. To enhance these
efforts, the Company has developed key initiatives to build strong relationships with consumers, dental, veterinary and skin
care professionals and traditional and e-commerce retailers. In addition, the Company has enhanced its digital marketing
capabilities and intends to broaden its e-commerce offerings, including direct-to-consumer and subscription services.
Growth opportunities are greater in those areas of the world in which economic development and rising consumer incomes
expand the size and number of markets for the Company’s products.
The investments needed to support growth are developed through continuous, Company-wide initiatives to lower costs
and increase effective asset utilization. Through these initiatives, which are referred to as the Company’s funding-the-
growth initiatives, the Company seeks to become even more effective and efficient throughout its businesses. These
initiatives are designed to reduce costs associated with direct materials, indirect expenses, distribution and logistics, and
advertising and promotional materials, among other things, and encompass a wide range of projects, examples of which
include raw material substitution, reduction of packaging materials, consolidating suppliers to leverage volumes and
increasing manufacturing efficiency through SKU reductions and formulation simplification. The Company also continues
to prioritize its investments toward its higher margin businesses, specifically Oral Care, Personal Care and Pet Nutrition.
20
(Dollars in Millions Except Per Share Amounts)
Significant Items Impacting Comparability
In January 2018, the Company acquired all of the outstanding equity interests of Physicians Care Alliance, LLC
(“PCA Skin”) and Elta MD Holdings, Inc. (“Elta MD”), professional skin care businesses, for aggregate cash consideration
of approximately $730. With these acquisitions, the Company entered the professional skin care category, which
complements its existing global personal care businesses. See Note 3, Acquisitions and Divestitures to the Consolidated
Financial Statements for additional information.
On December 22, 2017, the Tax Cuts and Jobs Act (the “TCJA” or “U.S. tax reform”) was enacted, which, among
other things, lowered the U.S. corporate income tax rate to 21% from 35% and established a modified territorial system
requiring a mandatory deemed repatriation tax on undistributed earnings of foreign subsidiaries. Beginning in 2018, the
TCJA also requires a minimum tax on certain future earnings generated by foreign subsidiaries while providing for future
tax-free repatriation of such earnings through a 100% dividends-received deduction.
As a result of the enactment of the TCJA, in the fourth quarter of 2017, the Company recorded a provisional charge of
$275 based on its initial analysis of the TCJA using information and estimates available as of February 15, 2018, the date
on which the Company filed its Annual Report on Form 10-K for the year ended December 31, 2017. During 2018, the
Company finalized its assessment of the impact of the TCJA and recognized an additional tax expense of $80 reflecting the
impact of transition tax guidance issued by the U.S. Treasury and the update of certain estimates and calculations based on
information available through the end of 2018. Any further guidance issued after December 31, 2018 may have an impact
to the Company’s Provision for income tax in the period such guidance is effective. Refer to “Results of Operations–
Income Taxes” below for additional details.
In September 2016, the Company’s Mexican subsidiary completed the sale to the United States of America of the
Mexico City site on which its commercial operations, technology center and soap production facility were previously
located and received $60 as the third and final installment of the sale price. The total sale price (including the third
installment and the previously received first and second installments) was $120. The Company recognized a pretax gain of
$97 ($63 aftertax) in the third quarter of 2016, net of costs primarily related to site preparation.
Effective December 31, 2015, the Company concluded it no longer met the accounting criteria for consolidation of its
Venezuelan subsidiary (“CP Venezuela”) and began accounting for CP Venezuela using the cost method of accounting.
Since January 1, 2016, under the cost method of accounting, the Company no longer includes the local operating results of
CP Venezuela in its Consolidated Financial Statements and includes income relating to CP Venezuela only to the extent it
receives cash for sales of inventory to CP Venezuela or for dividends or royalties remitted by CP Venezuela, all of which
have been immaterial. Although CP Venezuela’s local operating results are no longer included in the Company’s
Consolidated Financial Statements for accounting purposes, under current tax rules, the Company is required to continue
including CP Venezuela in its consolidated U.S. federal income tax return. In the first quarter of 2016, Provision for
income taxes included a $210 U.S. income tax benefit principally related to changes in Venezuela’s foreign exchange
regime implemented in March 2016. See Note 11, Income Taxes to the Consolidated Financial Statements for additional
details.
The Company’s restructuring program known as the “Global Growth and Efficiency Program” runs through
December 31, 2019. The program’s initiatives are expected to help the Company ensure sustained solid worldwide growth
in unit volume, organic sales, operating profit and earnings per share and to enhance its global leadership positions in its
core businesses. Implementation of the Global Growth and Efficiency Program remains on track and is in its final year.
The initiatives under the Global Growth and Efficiency Program are focused on the following areas:
Expanding Commercial Hubs
Extending Shared Business Services and Streamlining Global Functions
Optimizing Global Supply Chain and Facilities
Savings, substantially all of which are expected to increase future cash flows, are projected to be in the range of $590
to $635 pretax ($550 to $575 aftertax) annually, once all projects are approved and implemented. Cumulative pretax
charges resulting from the Global Growth and Efficiency Program, once all phases are approved and implemented, are
estimated to be in the range of $1,820 to $1,870 ($1,350 to $1,380 aftertax).
21
(Dollars in Millions Except Per Share Amounts)
In 2018, 2017 and 2016, the Company incurred aftertax costs of $125, $246 and $168, respectively, resulting from the
Global Growth and Efficiency Program. For more information regarding the Global Growth and Efficiency Program, see
“Restructuring and Related Implementation Charges” below and Note 4, Restructuring and Related Implementation
Charges to the Consolidated Financial Statements.
Effective January 1, 2018, as required by the Financial Accounting Standards Board (“FASB”), the Company adopted
Accounting Standard Update (“ASU”) No. 2017-07, “Compensation-Retirement Benefits (Topic 715): Improving the
Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost,” on a retrospective basis. As a
result, for all periods presented, only the service related component of pension and other postretirement benefit costs is
included in Operating profit. The non-service related components (interest cost, expected return on assets and amortization
of actuarial gains and losses) are included in a new line item, “Non-service related postretirement costs,” which is below
Operating profit. Adoption of this standard had no effect on Net income attributable to Colgate-Palmolive Company,
Earnings per common share or Cash flow. See Note 2, Summary of Significant Accounting Policies to the Consolidated
Financial Statements for additional information.
As a result of adopting ASU No. 2016-09 “Compensation–Stock Compensation (Topic 718): Improvements to
Employee Share-Based Payment Accounting,” effective January 1, 2017, the Company recognizes excess tax benefits from
stock-based compensation (resulting from an increase in the fair value of an award from the grant date to the vesting or
exercise date, as applicable) in the Provision for income taxes as a discrete item. Prior to January 1, 2017, excess tax
benefits from stock-based compensation were recognized in equity.
Outlook
Looking forward, the Company expects global macroeconomic and market conditions to remain challenging. While
the Company has recently seen improvement in category growth rates, the Company expects category growth rates to
remain below prior historical levels. While the global marketplace in which the Company operates has always been highly
competitive, the Company continues to experience heightened competitive activity in certain markets from strong local
competitors and from other large multinational companies, some of which have greater resources than the Company does.
Such activities have included more aggressive product claims and marketing challenges, as well as increased promotional
spending and geographic expansion. The Company has also been negatively affected by changes in the policies or practices
of its retail trade customers in key markets, such as inventory de-stocking, limitations on access to shelf space or delisting
of the Company’s products. In addition, the retail landscape in many of the Company’s markets continues to be impacted
by the rapid growth of e-commerce retailers, changing consumer preferences (as consumers increasingly shop online) and
the emergence of alternative retail channels, such as subscription services and direct-to-consumer businesses. This rapid
growth in e-commerce and emergence of alternative retail channels may create pricing pressures and/or adversely affect the
Company’s relationships with its key retailers. In addition, given that approximately 70% of the Company’s Net sales
originate in markets outside the U.S., the Company has experienced and may continue to experience volatile foreign
currency fluctuations and high raw and packaging material costs. While the Company has taken, and will continue to take,
measures to mitigate the effect of these conditions, should they persist, they could adversely affect the Company’s future
results.
In summary, the Company believes it is well prepared to meet the challenges ahead due to its strong financial
condition, experience operating in challenging environments and continued focus on the Company’s key priorities:
growing sales through engaging with consumers, developing world-class innovation and working with retail partners;
driving efficiency on every line of the income statement to increase margins; generating strong cash flow performance and
utilizing that cash effectively to enhance total shareholder return; and leading to win by staying true to the Company’s
culture and focusing on its stakeholders. The Company’s commitment to these priorities, together with the strength of the
Company’s global brands, its broad international presence in both developed and emerging markets and cost-saving
initiatives, such as the Company’s funding-the-growth initiatives and the Global Growth and Efficiency Program, should
position the Company well to increase shareholder value over the long term.
22
(Dollars in Millions Except Per Share Amounts)
Results of Operations
Net Sales
Worldwide Net sales were $15,544 in 2018, up 0.5% from 2017, as volume growth of 1.0% and net selling price
increases of 0.5% were partially offset by negative foreign exchange of 1.0%. The Company’s professional skin care
acquisitions increased volume by 1.0%. Organic sales (Net sales excluding, as applicable, the impact of foreign exchange,
acquisitions and divestments), a non-GAAP financial measure as discussed below, increased 0.5% in 2018.
Net sales in the Oral, Personal and Home Care product segment were $13,156 in 2018, even with 2017, as volume
growth of 1.0% and net selling price increases of 0.5% were offset by negative foreign exchange of 1.5%. The Company’s
professional skin care acquisitions increased volume by 1.5%. Organic sales in the Oral, Personal and Home Care product
segment in 2018 were even with 2017.
Organic sales in 2018 were even with 2017 as increases in Oral Care and Home Care organic sales were offset by a
decline in Personal Care organic sales. The increase in Oral Care organic sales was primarily due to organic sales growth in
the toothpaste category. The increase in the Home Care organic sales was primarily due to organic sales growth in the
liquid cleaners and fabric softener categories. The decrease in Personal Care organic sales was due to declines in organic
sales in the bar soap and underarm protection categories, which were partially offset by organic sales growth in the shower
gel category.
The Company’s share of the global toothpaste market was 42.0% for full year 2018, down 1.3 share points from full
year 2017, and its share of the global manual toothbrush market was 32.3% for full year 2018, down 0.7 share points from
full year 2017. Full year 2018 market shares in toothpaste were down in North America, Latin America, Europe, Asia
Pacific and Africa/Eurasia versus full year 2017. In the manual toothbrush category, full year 2018 market shares were up
in North America and Africa/Eurasia and down in Latin America, Europe and Asia Pacific versus full year 2017. For
additional information regarding the Company’s use of market share data and limitations on such data, see “Market Share
Information” below.
Net sales for Hill’s Pet Nutrition were $2,388 in 2018, an increase of 4.0% from 2017, driven by volume growth of
1.5%, net selling price increases of 2.0% and positive foreign exchange of 0.5%. Organic sales for Hill’s Pet Nutrition
increased 3.5% in 2018.
The increase in organic sales in 2018 versus 2017 was due to increases in organic sales in the Prescription Diet and
Advanced Nutrition categories, partially offset by a decline in organic sales in the Naturals category.
Worldwide Net sales were $15,454 in 2017, up 1.5% from 2016, driven by volume growth of 0.5%, net selling price
increases of 0.5% and positive foreign exchange of 0.5%. Organic sales increased 1.0% in 2017.
23
(Dollars in Millions Except Per Share Amounts)
Gross Profit/Margin
Worldwide Gross profit decreased 1% to $9,231 in 2018 from $9,280 in 2017. Gross profit in both periods included
charges related to the Global Growth and Efficiency Program. Excluding these charges in both periods, Gross profit
decreased to $9,262 in 2018 from $9,355 in 2017, reflecting a decrease of $147 resulting from lower Gross profit margin,
partially offset by an increase of $54 resulting from higher Net sales.
Worldwide Gross profit margin decreased to 59.4% in 2018 from 60.0% in 2017. Excluding charges related to the
Global Growth and Efficiency Program in both periods, Gross profit margin decreased by 90 basis points (bps) to 59.6% in
2018, from 60.5% in 2017. This decrease in Gross profit margin was primarily due to higher raw and packaging material
costs (340 bps), partially offset by cost savings from the Company’s funding-the-growth initiatives (200 bps) and higher
pricing (40 bps).
Worldwide Gross profit increased 2% to $9,280 in 2017 from $9,123 in 2016. Gross profit in both periods included
charges related to the Global Growth and Efficiency Program. Excluding these charges in both periods, Gross profit
increased to $9,355 in 2017 from $9,169 in 2016, reflecting an increase of $156 resulting from higher Net sales and an
increase of $30 resulting from higher Gross profit margin.
Worldwide Gross profit margin was 60.0% in 2017, even with 2016. Excluding charges related to the Global Growth
and Efficiency Program in both periods, Gross profit margin increased by 20 bps to 60.5% in 2017, from 60.3% in 2016.
This increase in Gross profit margin was primarily driven by cost savings from the Company’s funding-the-growth
initiatives and the Global Growth and Efficiency Program (200 bps) and higher pricing (20 bps), partially offset by higher
raw and packaging material costs (190 bps).
Gross profit, GAAP
Global Growth and Efficiency Program
Gross profit, non-GAAP
2018
2017
2016
$
$
9,231
31
9,262
$
$
9,280
75
9,355
$
$
9,123
46
9,169
Gross profit margin, GAAP
Global Growth and Efficiency Program
Gross profit margin, non-GAAP
2018
2017
59.4%
0.2
59.6%
60.0%
0.5
60.5%
Basis Point
Change
2016
Basis Point
Change
(60)
(90)
60.0%
0.3
60.3%
—
20
24
(Dollars in Millions Except Per Share Amounts)
Selling, General and Administrative Expenses
Selling, general and administrative expenses decreased to $5,389 in 2018 from $5,400 in 2017. Selling, general and
administrative expenses in both periods included charges related to the Global Growth and Efficiency Program. Excluding
these charges in both periods, Selling, general and administrative expenses increased to $5,356 in 2018 from $5,314 in
2017, reflecting higher overhead expenses of $25 and increased advertising investment of $17.
Selling, general and administrative expenses as a percentage of Net sales decreased to 34.7% in 2018 from 34.9% in
2017. Excluding charges related to the Global Growth and Efficiency Program in both periods, Selling, general and
administrative expenses as a percentage of Net sales were 34.5% in 2018, an increase of 10 bps as compared to 2017. This
increase as a percentage of Net sales in 2018 was due to higher overhead expenses (10 bps), primarily driven by increased
logistics costs. In 2018, advertising investment increased 1% to $1,590 as compared with $1,573 in 2017, while as a
percentage of Net sales it was 10.2%, even with 2017.
Selling, general and administrative expenses increased 5% to $5,400 in 2017 from $5,143 in 2016. Selling, general and
administrative expenses in both periods included charges related to the Global Growth and Efficiency Program. Excluding
these charges in both periods, Selling, general and administrative expenses increased to $5,314 in 2017 from $5,066 in
2016, reflecting increased advertising investment of $145 and higher overhead expenses of $103.
Selling, general and administrative expenses as a percentage of Net sales increased to 34.9% in 2017 from 33.8% in
2016. Excluding charges related to the Global Growth and Efficiency Program in both periods, Selling, general and
administrative expenses as a percentage of Net sales were 34.4%, an increase of 110 bps as compared to 2016. This
increase in 2017 was driven by increased advertising investment (80 bps) and higher overhead expenses (30 bps), both as a
percentage of Net sales. In 2017, advertising investment increased 10.2% to $1,573 as compared with $1,428 in 2016, and
increased as a percentage of Net sales to 10.2% from 9.4% in 2016.
Selling, general and administrative expenses, GAAP
Global Growth and Efficiency Program
Selling, general and administrative expenses, non-GAAP
2018
2017
2016
$
$
5,389
(33)
5,356
$
$
5,400
(86)
5,314
$
$
5,143
(77)
5,066
Selling, general and administrative expenses as
a percentage of Net sales, GAAP
Global Growth and Efficiency Program
Selling, general and administrative expenses as
a percentage of Net sales, non-GAAP
2018
2017
Basis Point
Change
2016
Basis Point
Change
34.7%
(0.2)
34.9%
(0.5)
(20)
33.8%
(0.5)
110
34.5%
34.4%
10
33.3%
110
25
(Dollars in Millions Except Per Share Amounts)
Other (Income) Expense, Net
Other (income) expense, net was $148, $173 and $25 in 2018, 2017 and 2016, respectively. The components of Other
(income) expense, net are presented below:
Other (income) expense, net
Global Growth and Efficiency Program
Amortization of intangible assets
Gain on sale of land in Mexico
Charges for a litigation matter
Equity income
Other, net
Total Other (income) expense, net
2018
2017
2016
$
$
88
59
—
—
(10)
11
148
$
$
152
35
—
—
(11)
(3)
173
$
$
93
33
(97)
17
(10)
(11)
25
Other (income) expense, net was $148 in 2018 as compared to $173 in 2017. Other (income) expense, net in both
periods included charges related to the Global Growth and Efficiency Program.
Other (income) expense, net was $173 in 2017 as compared to $25 in 2016. Other (income) expense, net in both
periods included charges related to the Global Growth and Efficiency Program. Other (income) expense, net in 2016 also
included a gain on the sale of land in Mexico and charges for a litigation matter.
Excluding the items described above in all periods, as applicable, Other (income) expense, net was $60 in 2018, $21 in
2017 and $12 in 2016.
Other (income) expense, net, GAAP
Global Growth and Efficiency Program
Gain on sale of land in Mexico
Charges for a litigation matter
Other (income) expense, net, non-GAAP
2018
2017
2016
$
$
148
(88)
—
—
60
$
$
173
(152)
—
—
21
$
$
25
(93)
97
(17)
12
26
(Dollars in Millions Except Per Share Amounts)
Operating Profit
Operating profit decreased to $3,694 in 2018 from $3,707 in 2017. Operating profit decreased 6% to $3,707 in 2017
from $3,955 in 2016.
In 2018, 2017 and 2016, Operating profit included charges related to the Global Growth and Efficiency Program. In
2016, Operating profit also included charges for a litigation matter and a gain on sale of land in Mexico. Excluding these
items in all periods, as applicable, Operating profit in 2018 decreased 4% compared to 2017, primarily due to a decrease in
Gross profit and an increase in Selling, general and administrative expenses, and Operating profit in 2017 decreased 2%
compared to 2016, primarily due to an increase in Selling, general and administrative expenses which was partially offset
by higher Gross profit.
Operating profit margin was 23.8% in 2018, compared with 24.0% in 2017 and 26.0% in 2016. Excluding charges
related to the Global Growth and Efficiency Program in 2018 and 2017, Operating profit margin decreased 130 bps to
24.7% in 2018 compared to 26.0% in 2017. This decrease in Operating profit in 2018 is primarily due to a decrease in
Gross profit (90 bps) and an increase in Selling, general and administrative expenses (10 bps), both as a percentage of Net
sales. Excluding the items described above in 2017 and 2016, as applicable, Operating profit margin decreased 90 bps in
2017 compared to 2016, due to an increase in Selling, general and administrative expenses (110 bps), partially offset by an
increase in Gross profit (20 bps), both as a percentage of Net sales.
2018
2017
% Change
2016
% Change
Operating profit, GAAP
$
3,694
$
3,707
— % $
3,955
(6)%
Global Growth and Efficiency Program
Gain on sale of land in Mexico
Charges for a litigation matter
Operating profit, non-GAAP
152
—
—
3,846
$
313
—
—
4,020
$
216
(97)
17
4,091
(4)% $
(2)%
Operating profit margin, GAAP
Global Growth and Efficiency Program
Gain on sale of land in Mexico
Charges for a litigation matter
2018
2017
Basis Point
Change
2016
Basis Point
Change
23.8%
24.0%
(20)
26.0%
(200)
0.9
—
—
2.0
—
—
1.4
(0.6)
0.1
Operating profit margin, non-GAAP
24.7%
26.0%
(130)
26.9%
(90)
Non-Service Related Postretirement Costs
Non-service related postretirement costs were $87 in 2018 compared with $118 in 2017 and $118 in 2016. Non-service
related postretirement costs included charges resulting from the Global Growth and Efficiency Program. Excluding these
charges, Non-service related postretirement costs were $78 in 2018 compared to $98 in 2017 and $106 in 2016. The
decreases in Non-service related postretirement costs in 2018 as compared to 2017 and 2017 as compared to 2016 were
primarily due to decreases in interest costs.
Non-service related postretirement costs, GAAP
Global Growth and Efficiency Program
Non-service related postretirement costs, non-GAAP
Interest (Income) Expense, Net
2018
2017
2016
$
$
87
(9)
78
$
$
118
(20)
98
$
$
118
(12)
106
Interest (income) expense, net was $143 in 2018 compared with $102 in 2017 and $99 in 2016. The increase in Interest
(income) expense, net in 2018 as compared to 2017 and 2017 as compared to 2016 was primarily due to higher average
interest rates on debt.
27
(Dollars in Millions Except Per Share Amounts)
Income Taxes
The effective income tax rate in 2018, 2017 and 2016 was 26.2%, 37.7% and 30.8%, respectively. As reflected in the
table below, the non-GAAP effective income tax rate was 24.2% in 2018, 29.5% in 2017 and 31.3% in 2016. The decrease
in the non-GAAP effective income tax rate in 2018 as compared to 2017 is primarily due to the enactment of the TCJA, as
discussed in more detail below. The decrease in the non-GAAP effective income tax rate in 2017 as compared to 2016 is
primarily due to the inclusion of excess tax benefits from stock-based compensation in the Provision for income taxes, as
discussed in more detail below.
As Reported GAAP
Global Growth and Efficiency Program
Benefit from a foreign tax matter
U.S. tax reform
Non-GAAP
As Reported GAAP
Global Growth and Efficiency Program
U.S. tax reform
Non-GAAP
As Reported GAAP
Global Growth and Efficiency Program
Gain on sale of land in Mexico
Benefits from tax matters
Charges for a litigation matter
Non-GAAP
2018
Income Before
Income Taxes
Provision For
Income Taxes(1)
Effective Income
Tax Rate(2)
$
$
$
$
$
$
3,464
$
161
—
—
3,625
$
906
37
15
(80)
878
2017
26.2%
(0.1)
0.4
(2.3)
24.2%
Income Before
Income Taxes
Provision For
Income Taxes(1)
Effective Income
Tax Rate(2)
3,487
$
333
—
3,820
$
1,313
87
(275)
1,125
2016
37.7%
(1.0)
(7.2)
29.5%
Income Before
Income Taxes
Provision For
Income Taxes(1)
Effective Income
Tax Rate(2)
3,738
$
1,152
228
(97)
—
17
59
(34)
35
6
3,886
$
1,218
30.8%
(0.3)
(0.1)
0.9
—
31.3%
_______
(1)
The income tax effect on non-GAAP items is calculated based upon the tax laws and statutory income tax rates applicable in the tax jurisdiction(s)
of the underlying non-GAAP adjustment.
(2)
The impact of non-GAAP items on the Company’s effective tax rate represents the difference in the effective tax rate calculated with and without the
non-GAAP adjustment on Income before income taxes and Provision for income taxes.
28
(Dollars in Millions Except Per Share Amounts)
On December 22, 2017, the TCJA was enacted, which, among other things, lowered the U.S. corporate income tax rate
to 21% from 35% and established a modified territorial system requiring a mandatory deemed repatriation tax on
undistributed earnings of foreign subsidiaries. Beginning in 2018, the TCJA also requires a minimum tax on certain
earnings generated by foreign subsidiaries while providing for tax-free repatriation of such earnings through a 100%
dividends-received deduction. The Company’s effective income tax rate in 2017 included a provisional charge of $275,
recorded in the fourth quarter of 2017, based on its initial analysis of the TCJA using information and estimates available as
of February 15, 2018, the date on which the Company filed its Annual Report on Form 10-K for the year ended December
31, 2017. During 2018, the Company finalized its assessment of the impact of the TCJA and recognized an additional tax
expense of $80 reflecting the impact of transition tax guidance issued by the U.S. Treasury and the update of certain
estimates and calculations based on information available through the end of 2018. Any further guidance issued after
December 31, 2018 may have an impact to the Company’s Provision for income tax in the period such guidance is
effective.
The effective income tax rate in 2018 and 2017 also included $12 and $47, respectively, of stock compensation excess
tax benefits in the Provision for income taxes as a result of the adoption of ASU No. 2016-09, “Compensation–Stock
Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting” effective January 1, 2017.
See Note 11, Income Taxes to the Consolidated Financial Statements, for additional details.
The effective income tax rate in 2016 included a $210 U.S. income tax benefit principally related to changes in
Venezuela’s foreign exchange regime implemented in March 2016. In order to fully utilize the $210 tax benefit in 2016, the
Company repatriated an incremental $1,500 of earnings of foreign subsidiaries it previously considered indefinitely
reinvested outside of the U.S., and accordingly, recorded a tax charge of $210.
The Company had taken a tax position in a foreign jurisdiction since 2002 that was challenged by the local tax
authorities. In 2016, the Supreme Court in the foreign jurisdiction decided the matter in the Company’s favor for the years
2002 through 2005. Also in 2016, the Administrative Court in the foreign jurisdiction decided the matter in the Company’s
favor for the years 2008 through 2011 by acknowledging the Supreme Court’s ruling for the years 2002 through 2005,
which eliminated the possibility of future appeals. As a result, the Company recorded a tax benefit of $30, including
interest, in 2016.
In March 2018, the lower courts ruled in the Company’s favor for the years 2006, 2007 and 2012 through 2014. The
deadline for the local tax authorities to appeal has now passed, and the Company considers all outstanding disputes on this
matter resolved. As a result, the Company recorded an additional tax benefit of $15, including interest.
The effective income tax rate in all years benefited from tax planning associated with the Company’s global business
initiatives.
The Company expects its effective income tax rate in 2019 to be in the range of 25.5% to 26.5% both on a GAAP basis
and excluding charges related to the Global Growth and Efficiency Program.
Net Income attributable to Colgate-Palmolive Company and Earnings per share, diluted
Net income attributable to Colgate-Palmolive Company was $2,400, or $2.75 per share on a diluted basis, in 2018
compared to $2,024, or $2.28 per share on a diluted basis, in 2017 and $2,441, or $2.72 per share on a diluted basis, in
2016. In 2018, 2017 and 2016, Net income attributable to Colgate-Palmolive Company included aftertax charges related to
the Global Growth and Efficiency Program. In 2018 and 2017, Net income attributable to Colgate-Palmolive Company
also included charges related to U.S. tax reform. In 2018, Net income attributable to Colgate-Palmolive Company also
included a benefit from a foreign tax matter. In 2016, Net income attributable to Colgate-Palmolive Company also included
charges for a litigation matter, a gain on sale of land in Mexico and benefits from tax matters.
29
(Dollars in Millions Except Per Share Amounts)
Excluding the items described above in all years, as applicable, Net income attributable to Colgate-Palmolive
Company increased 2% to $2,590 in 2018 and Earnings per share, diluted increased 3% to $2.97, and Net income
attributable to Colgate-Palmolive Company increased 1% to $2,545 in 2017, as compared to $2,522 in 2016, and Earnings
per share, diluted increased 2% to $2.87 in 2017 from $2.81 in 2016.
As Reported GAAP
Global Growth and Efficiency
Program
Benefit from a foreign tax matter
U.S. tax reform
Non-GAAP
Income
Before
Income
Taxes
$ 3,464
161
—
—
$ 3,625
Provision
For
Income
Taxes(1)
906
$
37
15
(80)
878
$
$
$
2018
Net Income
Including
Noncontrolling
Interests
Less: Income
Attributable To
Noncontrolling
Interests
Net Income
Attributable to
Colgate-
Palmolive
Company
2,558
$
158
$
2,400
Diluted
Earnings
Per
Share(2)
2.75
$
124
(15)
80
2,747
$
2017
(1)
—
—
157
$
125
(15)
80
2,590
$
0.15
(0.02)
0.09
2.97
Income Before
Income Taxes
Provision For
Income
Taxes(1)
Net Income
Including
Noncontrolling
Interests
Net Income
Attributable to
Colgate-
Palmolive
Company
As Reported GAAP
Global Growth and Efficiency
Program
U.S. tax reform
Non-GAAP
$
$
3,487
$
1,313
$
2,174
$
333
—
3,820
$
87
(275)
1,125
$
246
275
2,695
$
2,024
246
275
2,545
As Reported GAAP
Global Growth and Efficiency
Program
Gain on sale of land in Mexico
Benefits from tax matters
Charges for a litigation matter
Non-GAAP
Income
Before
Income
Taxes
$ 3,738
Provision
For
Income
Taxes(1)
1,152
$
228
(97)
—
17
$ 3,886
$
59
(34)
35
6
1,218
$
$
2016
Net Income
Including
Noncontrolling
Interests
Less: Income
Attributable To
Noncontrolling
Interests
Net Income
Attributable to
Colgate-
Palmolive
Company
2,586
$
145
$
2,441
169
(63)
(35)
11
2,668
$
1
—
—
—
146
$
168
(63)
(35)
11
2,522
$
0.19
(0.07)
(0.04)
0.01
2.81
Diluted
Earnings
Per
Share(2)
2.28
$
0.28
0.31
2.87
$
Diluted
Earnings
Per
Share(2)
2.72
$
_______
(1)
The income tax effect on non-GAAP items is calculated based upon the tax laws and statutory income tax rates applicable in the tax jurisdiction(s)
of the underlying non-GAAP adjustment.
(2)
The impact of non-GAAP adjustments on Diluted earnings per share may not necessarily equal the difference between “GAAP” and “non-GAAP”
as a result of rounding.
30
(Dollars in Millions Except Per Share Amounts)
Segment Results
The Company markets its products in over 200 countries and territories throughout the world in two product segments:
Oral, Personal and Home Care; and Pet Nutrition. The Company evaluates segment performance based on several factors,
including Operating profit. The Company uses Operating profit as a measure of the operating segment performance
because it excludes the impact of corporate-driven decisions related to interest expense and income taxes.
Oral, Personal and Home Care
North America
Net sales
Operating profit
% of Net sales
2018
2017
$
$
$
$
3,348
1,037
31.0%
3,117
1,043
33.5%
% Change
7.5 %
(1) %
(250) bps
$
$
2016
3,183
1,087
34.2%
% Change
(2.0) %
(4) %
(70) bps
Net sales in North America increased 7.5% in 2018 to $3,348, driven by volume growth of 6.5% and net selling price
increases of 1.0%, while foreign exchange was flat. The Company’s professional skin care acquisitions increased volume
by 5.0%. Organic sales in North America increased 2.5% in 2018.
The increase in organic sales in North America in 2018 versus 2017 was due to increases in Oral Care, Personal Care
and Home Care organic sales. The increase in Oral Care was due to organic sales growth in the toothpaste and toothbrush
categories. The increase in Personal Care was primarily due to organic sales growth in the liquid hand soap category. The
increase in Home Care was due to organic sales growth in the liquid cleaner and fabric softener categories.
Net sales in North America decreased 2.0% in 2017 to $3,117, driven by net selling price decreases of 2.0%, while
volume and foreign exchange were flat. Organic sales in North America decreased 2.0% in 2017.
Operating profit in North America decreased 1% in 2018 to $1,037, or 250 bps to 31.0% of Net sales. This decrease in
Operating profit as a percentage of Net sales was due to a decrease in Gross profit (40 bps), an increase in Selling, general
and administrative expenses (120 bps) and an increase in Other (income) expense, net (90 bps), all as a percentage of Net
sales. This decrease in Gross profit was primarily due to higher raw and packaging material costs (220 bps), which were
partially offset by cost savings from the Company’s funding-the-growth initiatives (160 bps). This increase in Selling,
general and administrative expenses was due to higher overhead expenses (140 bps), primarily driven by increased
logistics costs, which were partially offset by decreased advertising investment (20 bps). This increase in Other (income)
expense, net was primarily due to the amortization of intangible assets resulting from the professional skin care
acquisitions.
Operating profit in North America decreased 4% in 2017 to $1,043, or 70 bps to 33.5% of Net sales. This decrease in
Operating profit as a percentage of Net sales was primarily due to a decrease in Gross profit (40 bps) and an increase in
Selling, general and administrative expenses (60 bps), both as a percentage of Net sales. This decrease in Gross profit was
primarily driven by higher raw and packaging material costs (160 bps) and lower pricing due to increased in-store
promotional activities, which were partially offset by cost savings from the Company’s funding-the-growth initiatives and
the Global Growth and Efficiency Program (220 bps). This increase in Selling, general and administrative expenses was
due to increased advertising investment (60 bps).
31
(Dollars in Millions Except Per Share Amounts)
Latin America
Net sales
Operating profit
% of Net sales
2018
2017
$
$
$
$
3,605
995
27.6%
3,887
1,171
30.1%
% Change
(7.5) %
(15) %
(250) bps
$
$
2016
% Change
6.5 %
3 %
3,650
1,139
31.2% (110) bps
Net sales in Latin America decreased 7.5% in 2018 to $3,605. Volume declines of 2.5% and negative foreign exchange
of 6.5% were partially offset by net selling price increases of 1.5%. Volume declines in Brazil, Central America and
Argentina were partially offset by volume gains in Greater Caribbean. Organic sales in Latin America decreased 1.0% in
2018.
The decrease in organic sales in Latin America in 2018 versus 2017 was driven by declines in Oral Care and Personal
Care organic sales, partially offset by an increase in Home Care organic sales. The decline in Oral Care was due to a
decline in organic sales in the toothpaste category, partially offset by organic sales growth in the manual toothbrush
category. The decline in Personal Care was primarily due to a decline in organic sales in the bar soap category. The increase
in Home Care was due to organic sales growth in the liquid cleaner, hand dish and fabric softener categories.
Net sales in Latin America increased 6.5% in 2017 to $3,887, driven by volume growth of 2.5%, net selling price
increases of 3.0% and positive foreign exchange of 1.0%. Volume gains were led by Brazil, the Southern Cone and the
Andean Region. Organic sales in Latin America increased 5.5% in 2017.
Operating profit in Latin America decreased 15% in 2018 to $995, or 250 bps to 27.6% of Net sales. This decrease in
Operating profit as a percentage of Net sales was primarily due to a decrease in Gross profit (220 bps) and an increase in
Selling, general and administrative expenses (20 bps), both as a percentage of Net sales. This decrease in Gross profit was
due to higher raw and packaging material costs (470 bps), which included foreign exchange transaction costs, which were
partially offset by cost savings from the Company’s funding-the-growth initiatives (250 bps). This increase in Selling,
general and administrative expenses was due to higher overhead expenses (40 bps), primarily driven by increased logistics
costs, which were partially offset by decreased advertising investment (20 bps).
Operating profit in Latin America increased 3% in 2017 to $1,171, while as a percentage of Net sales it decreased 110
bps to 30.1% of Net sales. This decrease in Operating profit as a percentage of Net sales was primarily due to an increase in
Selling, general and administrative expenses (180 bps), partially offset by an increase in Gross profit (40 bps), both as a
percentage of Net sales. This increase in Gross profit was mainly driven by cost savings from the Company’s funding-the-
growth initiatives (170 bps) and higher pricing, which were partially offset by higher raw and packaging material costs
(260 bps). This increase in Selling, general and administrative expenses was due to increased advertising investment (120
bps) and higher overhead expenses (60 bps).
Effective July 1, 2018, Argentina was designated as a hyper-inflationary economy under GAAP. Consequently, the
functional currency for the Company’s Argentinian subsidiary is the U.S. dollar and the impact of Argentinian currency
fluctuations has been and will be recorded in income. However, this designation has not had and is not expected to have a
material impact on the Company’s Consolidated Financial Statements.
32
(Dollars in Millions Except Per Share Amounts)
Europe
Net sales
Operating profit
% of Net sales
2018
2017
$
$
$
$
2,502
634
25.3%
2,394
605
25.3%
% Change
4.5 %
5 %
— bps
$
$
2016
2,342
586
25.0%
% Change
2.0 %
3 %
30 bps
Net sales in Europe increased 4.5% in 2018 to $2,502, as volume growth of 2.5% and positive foreign exchange of
4.0% were partially offset by net selling price decreases of 2.0%. Volume gains were led by France, the United Kingdom
and Italy. Organic sales in Europe increased 0.5% in 2018.
The increase in organic sales in Europe in 2018 versus 2017 was primarily due to an increase in Oral Care organic
sales. The increase in Oral Care was driven by organic sales growth in the toothpaste category, partially offset by a decline
in organic sales in the manual toothbrush category.
Net sales in Europe increased 2.0% in 2017 to $2,394, as volume growth of 2.0% and positive foreign exchange of
1.0% were partially offset by net selling price decreases of 1.0%. Volume gains were led by France, the Netherlands, Spain
and Poland. Organic sales in Europe increased 1.0% in 2017.
Operating profit in Europe increased 5% in 2018 to $634, while as a percentage of Net sales it was 25.3%, even with
2017. Operating profit was even with 2017 as a decrease in Gross profit (20 bps) and an increase in Selling, general and
administrative expenses (10 bps) were offset by a decrease in Other (income) expense, net (30 bps), all as a percentage of
Net sales. This decrease in Gross profit was primarily due to higher raw and packaging material costs (180 bps) and lower
pricing, which were partially offset by cost savings from the Company’s funding-the-growth initiatives (200 bps). This
increase in Selling, general and administrative expenses was due to increased advertising investment (60 bps), which was
partially offset by lower overhead expenses (50 bps).
Operating profit in Europe increased 3% in 2017 to $605, or 30 bps to 25.3% of Net sales. This increase in Operating
profit as a percentage of Net sales was primarily due to an increase in Gross profit (30 bps) and a decrease in Selling,
general and administrative expenses (20 bps), both as a percentage of Net sales. This increase in Gross profit was primarily
due to cost savings from the Company’s funding-the-growth initiatives and the Global Growth and Efficiency Program
(230 bps) and category sales mix, which were partially offset by higher raw and packaging material costs (230 bps), which
included foreign exchange transaction costs, and lower pricing due to increased in-store promotional activities. This
decrease in Selling, general and administrative expenses was due to lower overhead expenses (70 bps), which were
partially offset by increased advertising investment (50 bps).
33
(Dollars in Millions Except Per Share Amounts)
Asia Pacific
Net sales
Operating profit
% of Net sales
2018
2017
$
$
$
$
2,734
777
28.4%
2,781
842
30.3%
% Change
(1.5) %
(8) %
(190) bps
$
$
2016
% Change
(0.5) %
(5) %
2,796
888
31.8% (150) bps
Net sales in Asia Pacific decreased 1.5% in 2018 to $2,734, as a result of volume declines of 1.5%, while net selling
prices and foreign exchange were flat. Volume declines in the Greater China region and Thailand were partially offset by
volume gains in India and the Philippines. Organic sales in Asia Pacific declined 1.5% in 2018.
The decrease in organic sales in 2018 versus 2017 was due to a decrease in Oral Care and Personal Care organic sales.
The decrease in Oral Care was due to declines in organic sales in the toothpaste and manual toothbrush categories. The
decrease in Personal Care was primarily due to declines in organic sales in the shampoo and bar soap categories.
Net sales in Asia Pacific decreased 0.5% in 2017 to $2,781, as a result of volume declines of 0.5%, while net selling
prices and foreign exchange were flat. Volume declines in Australia, Thailand and India were partially offset by volume
gains in the Philippines. Organic sales in Asia Pacific declined 0.5% in 2017.
Operating profit in Asia Pacific decreased 8% in 2018 to $777, or 190 bps to 28.4% of Net sales. This decrease in
Operating profit as a percentage of Net sales was primarily due to a decrease in Gross profit (80 bps) and an increase in
Selling, general and administrative expenses (80 bps), both as a percentage of Net sales. This decrease in Gross profit was
primarily due to higher raw and packaging material costs (320 bps), which were partially offset by cost savings from the
Company’s funding-the-growth initiatives (270 bps). This increase in Selling, general and administrative expenses was due
to higher overhead expenses (50 bps) and increased advertising investment (30 bps).
Operating profit in Asia Pacific decreased 5% in 2017 to $842, or 150 bps to 30.3% of Net sales. This decrease in
Operating profit as a percentage of Net sales was primarily due to a decrease in Gross profit (20 bps) and an increase in
Selling, general and administrative expenses (120 bps), both as a percentage of Net sales. This decrease in Gross profit was
primarily due to higher costs (290 bps), primarily driven by raw and packaging material costs, which were partially offset
by cost savings from the Company’s funding-the-growth initiatives (250 bps). This increase in Selling, general and
administrative expenses was due to higher overhead expenses (90 bps) and increased advertising investment (30 bps).
34
(Dollars in Millions Except Per Share Amounts)
Africa/Eurasia
Net sales
Operating profit
% of Net sales
2018
2017
$
$
$
$
967
173
17.9%
983
180
18.3%
% Change
(1.5) %
(4) %
(40) bps
$
$
2016
% Change
2.5 %
(4) %
960
187
19.5% (120) bps
Net sales in Africa/Eurasia decreased 1.5% in 2018 to $967, as volume declines of 1.0% and negative foreign
exchange of 4.0% were partially offset by net selling price increases of 3.5%. Volume declines in Russia, Turkey and South
Africa were partially offset by volume gains in the Gulf States. Organic sales in Africa/Eurasia increased 2.5% in 2018.
The increase in organic sales in 2018 versus 2017 was primarily due to an increase in Oral Care organic sales, partially
offset by a decline in Personal Care organic sales. The increase in Oral Care was due to organic sales growth in the
toothpaste and manual toothbrush categories. The decrease in Personal Care was primarily due to declines in organic sales
in the bar soap and underarm protection categories, partially offset by organic sales growth in the shower gel category.
Net sales in Africa/Eurasia increased 2.5% in 2017 to $983, as net selling price increases of 3.5% and positive foreign
exchange of 3.5% were partially offset by volume declines of 4.5%. Volume declines in the Sub-Saharan Africa region,
Turkey and South Africa were partially offset by volume gains in Russia. Organic sales in Africa/Eurasia declined 1.0% in
2017.
Operating profit in Africa/Eurasia decreased 4% in 2018 to $173, or 40 bps to 17.9% of Net sales. This decrease in
Operating profit as a percentage of Net sales was primarily due to a decrease in Gross Profit (130 bps), partially offset by a
decrease in Selling, general and administrative expenses (70 bps), both as a percentage of Net sales. This decrease in Gross
profit was mainly driven by higher raw and packaging material costs (430 bps), which included foreign exchange
transaction costs, which were partially offset by cost savings from the Company’s funding-the-growth initiatives (110 bps)
and higher pricing. The decrease in Selling, general and administrative expenses was due to lower overhead expenses (50
bps) and decreased advertising investment (20 bps).
Operating profit in Africa/Eurasia decreased 4% in 2017 to $180, or 120 bps to 18.3% of Net sales. This decrease in
Operating profit as a percentage of Net sales was primarily due to an increase in Selling, general and administrative
expenses (260 bps), partially offset by an increase in Gross profit (160 bps), both as a percentage of Net sales. This
increase in Gross profit was mainly driven by cost savings from the Company’s funding-the-growth initiatives (120 bps)
and higher pricing, which were partially offset by higher raw and packaging material costs (100 bps). The increase in
Selling, general and administrative expenses was due to increased advertising investment (310 bps), which was partially
offset by lower overhead expenses (50 bps).
35
(Dollars in Millions Except Per Share Amounts)
Hill’s Pet Nutrition
Net sales
Operating profit
% of Net sales
2018
2017
$
$
$
$
2,388
680
28.5%
2,292
677
29.5%
% Change
4.0 %
— %
(100) bps
$
$
2016
2,264
677
29.9%
% Change
1.0 %
— %
(40) bps
Net sales for Hill’s Pet Nutrition increased 4.0% in 2018 to $2,388, driven by volume growth of 1.5%, net selling price
increases of 2.0% and positive foreign exchange of 0.5%. Volume gains were led by the United States and Australia.
Organic sales in Hill’s Pet Nutrition increased 3.5% in 2018.
The increase in organic sales in 2018 versus 2017 was due to organic sales growth in the Prescription Diet and
Advanced Nutrition categories, partially offset by a decline in organic sales in the Naturals category.
Net sales for Hill’s Pet Nutrition increased 1.0% in 2017 to $2,292, driven by net selling price increases of 1.5% and
positive foreign exchange of 0.5%, partially offset by volume declines of 1.0%. Volume declines in the United States,
Japan and Western and Eastern Europe were partially offset by volume gains in Australia and Latin America. The volume
declines in the United States were attributable to trade disruption, while the volume declines in Japan were attributable to a
continued contraction in the market. Organic sales in Hill’s Pet Nutrition increased 0.5% in 2017.
Operating profit in Hill’s Pet Nutrition increased to $680 in 2018 from $677 in 2017, while as a percentage of Net
sales it decreased 100 bps to 28.5%. This decrease in Operating profit as a percentage of Net sales was due to a decrease in
Gross profit (70 bps) and an increase in Other (income) expense, net (70 bps), partially offset by a decrease in Selling,
general and administrative expenses (40 bps), all as a percentage of Net sales. This decrease in Gross profit was primarily
due to higher raw and packaging material costs (300 bps), partially offset by cost savings from the Company’s funding-the-
growth initiatives (150 bps) and higher pricing. This decrease in Selling, general and administrative expenses was due to
lower overhead expenses (30 bps) and decreased advertising investment (10 bps). This increase in Other (income) expense,
net was primarily due to the expiration of a foreign sales tax benefit.
Operating profit in Hill’s Pet Nutrition was $677 in 2017, even with 2016, while as a percentage of Net sales it
decreased 40 bps to 29.5%. This decrease in Operating profit as a percentage of Net sales was primarily due to an increase
in Selling, general and administrative expenses (90 bps), partially offset by an increase in Gross profit (60 bps), both as a
percentage of Net sales. This increase in Gross profit was primarily due to cost savings from the Company’s funding-the-
growth initiatives (170 bps) and higher pricing, partially offset by higher raw and packaging material costs (110 bps), net of
foreign exchange transaction costs. This increase in Selling, general and administrative expenses was due to increased
advertising investment (60 bps) and higher overhead expenses (30 bps).
36
(Dollars in Millions Except Per Share Amounts)
Corporate
Operating profit (loss)
$
(602) $
(811)
2018
2017
% Change
(26) %
2016
$
(609)
% Change
33 %
Corporate operations include Corporate overhead costs, research and development costs, stock-based compensation
expense related to stock options and restricted stock unit awards, restructuring and related implementation costs and gains
and losses on sales of non-core product lines. The components of Operating profit (loss) for the Corporate segment are
presented as follows:
Global Growth and Efficiency Program
Gain on sale of land in Mexico
Charges for a litigation matter
Corporate overhead costs and other, net
Total Corporate Operating profit (loss)
2018
2017
2016
$
$
(152) $
—
—
(450)
(602) $
(313) $
—
—
(498)
(811) $
(216)
97
(17)
(473)
(609)
Excluding charges related to the Global Growth and Efficiency Program in 2018, 2017 and 2016, charges for a
litigation matter in 2016 and the gain on sale of land in Mexico in 2016, Corporate Operating profit (loss) decreased in
2018 as compared to 2017, driven by lower Corporate overhead costs and other, net, primarily as a result of lower
compensation expense.
Restructuring and Related Implementation Charges
Global Growth and Efficiency Program
In the fourth quarter of 2012, the Company commenced the Global Growth and Efficiency Program. The program was
expanded in 2014 and expanded and extended in each of 2015 and 2017. The program runs through December 31, 2019.
Initiatives under the Global Growth and Efficiency Program are expected to help the Company ensure sustained solid
worldwide growth in unit volume, organic sales, operating profit and earnings per share and to enhance its global
leadership positions in its core businesses, producing significant benefits in the Company’s long-term business
performance. The major objectives of the program include:
Becoming even stronger on the ground through the continued evolution and expansion of proven global and
regional commercial capabilities, which have already been successfully implemented in a number of the
Company’s operations around the world.
Simplifying and standardizing how work gets done by increasing technology-enabled collaboration and
taking advantage of global data and analytic capabilities, leading to smarter and faster decisions.
Reducing structural costs to continue to increase the Company’s gross and operating profit.
Building on Colgate’s current position of strength to enhance its leading market share positions worldwide
and ensure sustained sales and earnings growth.
37
(Dollars in Millions Except Per Share Amounts)
The initiatives under the Global Growth and Efficiency Program continue to be focused on the following areas:
Expanding Commercial Hubs – Building on the success of the hub structure implemented around the world,
streamlining operations in order to drive smarter and faster decision-making, strengthen capabilities available
on the ground and improve cost structure.
Extending Shared Business Services and Streamlining Global Functions – Optimizing the Company’s shared
service organizational model in all regions of the world and continuing to streamline global functions to
improve cost structure.
Optimizing Global Supply Chain and Facilities – Continuing to optimize manufacturing efficiencies, global
warehouse networks and office locations for greater efficiency, lower cost and speed to bring innovation to
market.
Implementation of the Global Growth and Efficiency Program remains on track and is in its final year. Savings,
substantially all of which are expected to increase future cash flows, are projected to be in the range of $590 to $635 pretax
($550 to $575 aftertax) annually, once all projects are approved and implemented. Savings achieved in 2018 were in line
with the Company’s previously disclosed estimate of $90 to $120 pretax ($100 to $125 aftertax). The Company expects
savings in 2019 to be approximately $25 to $55 pretax ($40 to $60 aftertax). Cumulative pretax charges resulting from the
Global Growth and Efficiency Program, once all phases are approved and implemented, are estimated to be in the range of
$1,820 to $1,870 ($1,350 to $1,380 aftertax). The Company anticipates that pretax charges for 2019 will approximate $100
to $150 ($70 to $100 aftertax). It is expected that substantially all charges resulting from the Global Growth and Efficiency
Program will be incurred by December 31, 2019.
The pretax charges resulting from the Global Growth and Efficiency Program are currently estimated to be comprised
of the following categories: Employee-Related Costs, including severance, pension and other termination benefits (45%);
asset-related costs, primarily Incremental Depreciation and Asset Impairments (5%); and Other charges, which include
contract termination costs, consisting primarily of related implementation charges resulting directly from exit activities
(30%) and the implementation of new strategies (20%). Over the course of the Global Growth and Efficiency Program, it is
currently estimated that approximately 80% of the charges will result in cash expenditures.
The Company expects that the cumulative pretax charges, once all projects are approved and implemented, will relate
to initiatives undertaken in North America (15%), Europe (20%), Latin America (5%), Asia Pacific (5%), Africa/Eurasia
(5%), Hill’s Pet Nutrition (10%) and Corporate (40%), which includes substantially all of the costs related to the
implementation of new strategies, noted above, on a global basis. The Company expects that, when it has been fully
implemented, the Global Growth and Efficiency Program will have contributed a net reduction of approximately 4,000 to
4,400 positions from the Company’s global employee workforce.
For the years ended December 31, 2018, 2017 and 2016, restructuring and related implementation charges are
reflected in the Consolidated Statements of Income as follows:
Cost of sales
Selling, general and administrative expenses
Other (income) expense, net
Non-service related postretirement costs
Total Global Growth and Efficiency Program charges, pretax
Total Global Growth and Efficiency Program charges, aftertax
2018
2017
2016
$
$
$
31
33
88
9
161
125
$
$
$
75
86
152
20
333
246
$
$
$
46
77
93
12
228
168
Restructuring and related implementation charges in the preceding table are recorded in the Corporate segment as
these initiatives are predominantly centrally directed and controlled and are not included in internal measures of segment
operating performance.
38
(Dollars in Millions Except Per Share Amounts)
Total charges incurred for the Global Growth and Efficiency Program relate to initiatives undertaken by the following
reportable operating segments:
2018
2017
2016
Program-to-date
Accumulated Charges
North America
Latin America
Europe
Asia Pacific
Africa/Eurasia
Hill’s Pet Nutrition
Corporate
Total
18 %
10 %
(2)%
13 %
5 %
19 %
37 %
100 %
23%
2%
21%
5%
3%
6%
40%
100%
35%
5%
12%
4%
14%
7%
23%
100%
18%
4%
20%
4%
6%
8%
40%
100%
Since the inception of the Global Growth and Efficiency Program in the fourth quarter of 2012, the Company has
incurred cumulative pretax charges of $1,722 ($1,278 aftertax) in connection with the implementation of various projects
as follows:
Employee-Related Costs
Incremental Depreciation
Asset Impairments
Other
Total
Cumulative Charges
as of December 31, 2018
$
$
681
92
52
897
1,722
The majority of costs incurred since inception relate to the following projects: the implementation of the Company’s
overall hubbing strategy; the extension of shared business services and streamlining of global functions; the consolidation
of facilities; the closing of the Morristown, New Jersey personal care facility; the simplification and streamlining of the
Company’s research and development capabilities and oral care supply chain, both in Europe; redesigning the European
commercial organization; restructuring how the Company will provide future retirement benefits to substantially all of the
U.S.-based employees participating in the Company’s defined benefit retirement plan by shifting them to the Company’s
defined contribution plan; and the implementation of a Corporate efficiencies program.
39
(Dollars in Millions Except Per Share Amounts)
The following table summarizes the activity for the restructuring and related implementation charges, in the respective
periods, discussed above and the related accruals:
Employee-Related
Costs
Incremental
Depreciation
Asset
Impairments
Other
Total
Balance at January 1, 2016
Charges
Cash payments
Charges against assets
Foreign exchange
Other
Balance at December 31, 2016
Charges
Cash payments
Charges against assets
Foreign exchange
Other
Balance at December 31, 2017
Charges
Cash payments
Charges against assets
Foreign exchange
Other
Balance at December 31, 2018
$
$
$
$
84
61
(84)
(4)
(1)
—
56
163
(74)
(21)
3
—
127
53
(107)
(9)
(4)
—
60
$
$
$
$
— $
9
—
(9)
—
—
— $
10
—
(10)
—
—
— $
2
—
(2)
—
—
— $
— $
20
—
(20)
—
—
— $
9
—
(9)
—
—
— $
16
—
(16)
—
—
— $
131
138
(153)
—
—
9
125
151
(170)
—
1
—
107
90
(60)
—
—
5
142
$
$
$
$
215
228
(237)
(33)
(1)
9
181
333
(244)
(40)
4
—
234
161
(167)
(27)
(4)
5
202
Employee-Related Costs primarily include severance and other termination benefits and are calculated based on long-
standing benefit practices, local statutory requirements and, in certain cases, voluntary termination arrangements.
Employee-Related Costs also include pension and other retiree benefit enhancements amounting to $9, $21 and $4 for the
years ended December 31, 2018, 2017 and 2016, respectively, which are reflected as Charges against assets within
Employee-Related Costs in the preceding table, as the corresponding balance sheet amounts are reflected as a reduction of
pension assets or an increase in pension and other retiree benefit liabilities (see Note 10, Retirement Plans and Other
Retiree Benefits to the Consolidated Financial Statements).
Incremental Depreciation is recorded to reflect changes in useful lives and estimated residual values for long-lived
assets that will be taken out of service prior to the end of their normal service period. Asset Impairments are recorded to
write down inventories and assets held for sale or disposal to their fair value based on amounts expected to be realized.
Charges against assets within Asset Impairments are net of cash proceeds pertaining to the sale of certain assets.
Other charges consist primarily of charges resulting directly from exit activities and the implementation of new
strategies as a result of the Global Growth and Efficiency Program. These charges for the years ended December 31, 2018,
2017 and 2016 include third-party incremental costs related to the development and implementation of new business and
strategic initiatives of $42, $145 and $116, respectively, and contract termination costs and charges resulting directly from
exit activities of $48, $6 and $21, respectively. These charges were expensed as incurred. Also included in Other charges
for the years ended December 31, 2018, 2017 and 2016 are other exit costs of $0, $0 and $1, respectively, related to the
consolidation of facilities.
40
(Dollars in Millions Except Per Share Amounts)
Non-GAAP Financial Measures
This Annual Report on Form 10-K discusses certain financial measures on both a GAAP and a non-GAAP basis. The
Company uses the non-GAAP financial measures described below internally in its budgeting process, to evaluate segment
and overall operating performance and as a factor in determining compensation. The Company believes that these non-
GAAP financial measures are useful in evaluating the Company’s underlying business performance and trends; however,
this information should be considered as supplemental in nature and is not meant to be considered in isolation or as a
substitute for the related financial information prepared in accordance with GAAP. In addition, these non-GAAP financial
measures may not be the same as similar measures presented by other companies.
Net sales growth (GAAP) and organic sales growth (Net sales growth excluding the impact of foreign exchange,
acquisitions and divestments) (non-GAAP) are discussed in this Annual Report on Form 10-K. Management believes the
organic sales growth measure provides investors and analysts with useful supplemental information regarding the
Company’s underlying sales trends by presenting sales growth excluding, as applicable, the external factor of foreign
exchange, as well as the impact of acquisitions and divestments. A reconciliation of organic sales growth to Net sales
growth for the years ended December 31, 2018 and 2017 is provided below.
Worldwide Gross profit, Gross profit margin, Selling, general and administrative expenses, Selling, general and
administrative expenses as a percentage of Net sales, Other (income) expense, net, Operating profit, Operating profit
margin, Non-service related postretirement costs, effective income tax rate, Net income attributable to Colgate-Palmolive
Company and Earnings per share on a diluted basis are discussed in this Annual Report on Form 10-K both on a GAAP
basis and excluding, as applicable, charges resulting from the Global Growth and Efficiency Program, a benefit from a
foreign tax matter, charges related to U.S. tax reform, a gain on the sale of land in Mexico, benefits from tax matters and
charges for a litigation matter (non-GAAP). These non-GAAP financial measures exclude items that, either by their nature
or amount, management would not expect to occur as part of the Company’s normal business on a regular basis, such as
restructuring charges, charges for certain litigation and tax matters, gains and losses from certain divestitures and certain
unusual, non-recurring items. Investors and analysts use these financial measures in assessing the Company’s business
performance and management believes that presenting these financial measures on a non-GAAP basis provides them with
useful supplemental information to enhance their understanding of the Company’s underlying business performance and
trends. These non-GAAP financial measures also enhance the ability to compare period-to-period financial results. A
reconciliation of each of these non-GAAP financial measures to the most directly comparable GAAP financial measures
for the years ended December 31, 2018, 2017 and 2016 is presented within the applicable section of Results of Operations.
41
(Dollars in Millions Except Per Share Amounts)
The following tables provide a quantitative reconciliation of Net sales growth to organic sales growth for each of the
years ended December 31, 2018 and 2017 versus the prior year:
Year ended December 31, 2018
Oral, Personal and Home Care
North America
Latin America
Europe
Asia Pacific
Africa/Eurasia
Total Oral, Personal and Home Care
Pet Nutrition
Total Company
Year ended December 31, 2017
Oral, Personal and Home Care
North America
Latin America
Europe
Asia Pacific
Africa/Eurasia
Total Oral, Personal and Home Care
Pet Nutrition
Total Company
Market Share Information
Net Sales Growth
(GAAP)
Foreign
Exchange
Impact
Acquisitions and
Divestments
Impact
Organic
Sales Growth
(Non-GAAP)
7.5%
(7.5)%
4.5%
(1.5)%
(1.5)%
—%
4.0%
0.5%
—%
(6.5)%
4.0%
—%
(4.0)%
(1.5)%
0.5%
(1.0)%
5.0%
—%
—%
—%
—%
1.5%
—%
1.0%
2.5%
(1.0)%
0.5%
(1.5)%
2.5%
—%
3.5%
0.5%
Net Sales Growth
(GAAP)
Foreign
Exchange
Impact
Acquisitions and
Divestments
Impact
Organic
Sales Growth
(Non-GAAP)
(2.0)%
6.5%
2.0%
(0.5)%
2.5%
2.0%
1.0%
1.5%
—%
1.0%
1.0%
—%
3.5%
1.0%
0.5%
0.5%
—%
—%
—%
—%
—%
—%
—%
—%
(2.0)%
5.5%
1.0%
(0.5)%
(1.0)%
1.0%
0.5%
1.0%
Management uses market share information as a key indicator to monitor business health and performance. References
to market share in this Annual Report on Form 10-K are based on a combination of consumption and market share data
provided by third-party vendors, primarily Nielsen, and internal estimates. All market share references represent the
percentage of the dollar value of sales of our products, relative to all product sales in the category in the countries in which
the Company competes and purchases data (excluding Venezuela from all periods).
Market share data is subject to limitations on the availability of up-to-date information. The Company measures year-
to-date market shares from January 1 of the relevant year through the most recent period for which market share data is
available, which typically reflects a lag time of one or two months. We believe that the third-party vendors we use to
provide data are reliable, but we have not verified the accuracy or completeness of the data or any assumptions underlying
the data. In addition, market share information calculated by the Company may be different from market share information
calculated by other companies due to differences in category definitions, the use of data from different countries, internal
estimates and other factors.
42
(Dollars in Millions Except Per Share Amounts)
Liquidity and Capital Resources
The Company expects cash flow from operations and debt issuances will be sufficient to meet foreseeable business
operating and recurring cash needs (including for debt service, dividends, capital expenditures, charges resulting from the
Global Growth and Efficiency Program and stock repurchases). The Company believes its strong cash generation and
financial position should continue to allow it broad access to global credit and capital markets.
Cash Flow
Net cash provided by operations was $3,056 in 2018, compared to $3,054 in 2017 and $3,141 in 2016. Net cash
provided by operations for 2018 increased as compared to 2017 primarily due to lower income tax payments, partially
offset by an increase in working capital. The decrease in 2017 as compared to 2016 was primarily due to the timing of
income tax payments.
The Company defines working capital as the difference between current assets (excluding Cash and cash equivalents
and marketable securities, the latter of which is reported in Other current assets) and current liabilities (excluding short-
term debt). The Company continues to be tightly focused on working capital. The Company’s working capital as a
percentage of Net sales was (1.7)% in 2018 as compared to (2.0)% in 2017.
In the fourth quarter of 2012, the Company commenced the Global Growth and Efficiency Program. The program was
expanded in 2014 and expanded and extended in each of 2015 and 2017. The program runs through December 31, 2019.
Implementation of the Global Growth and Efficiency Program remains on track and is in its final year. Including the
most recent expansion, total program charges resulting from the Global Growth and Efficiency Program are estimated to be
in the range of $1,820 to $1,870 ($1,350 to $1,380 aftertax). Approximately 80% of total program charges resulting from
the Global Growth and Efficiency Program are expected to result in cash expenditures. Savings from the Global Growth
and Efficiency Program, substantially all of which are expected to increase future cash flows, are projected to be in the
range of $590 to $635 pretax ($550 to $575 aftertax) annually, once all projects are approved and implemented. Savings
achieved in 2018 were in line with the Company’s previously disclosed estimate of $90 to $120 pretax ($100 to $125
aftertax).
The Company anticipates that pretax charges for 2019 will approximate $100 to $150 ($70 to $100 aftertax). The
Company expects savings in 2019 to amount to approximately $25 to $55 pretax ($40 to $60 aftertax). It is anticipated that
cash requirements for the Global Growth and Efficiency Program will be funded from operating cash flows. Approximately
70% of the restructuring accrual at December 31, 2018 is expected to be paid before year-end 2019.
Investing activities used $1,170 of cash in 2018, compared to $471 and $499 during 2017 and 2016, respectively.
Investing activities in 2018 include the Company’s acquisition of the outstanding equity interests of PCA Skin and Elta
MD, professional skin care businesses, for aggregate cash consideration of approximately $730. Purchases of marketable
securities and investments decreased in 2018 to $169 from $347 in 2017. Proceeds from the sale of marketable securities
and investments decreased in 2018 to $156 from $391 in 2017.
In September 2016, the Company’s Mexican subsidiary completed the sale to the United States of America of the
Mexico City site on which its commercial operations, technology center and soap production facility were previously
located and received $60 as the third and final installment of the sale price. The total sale price (including the third
installment and the previously received first and second installments) was $120. The Company recognized a pretax gain of
$97 ($63 aftertax) in the third quarter of 2016, net of costs primarily related to site preparation.
Capital expenditures in 2018 were $436, a decrease from $553 in 2017 and $593 in 2016. Capital expenditures
decreased in 2018 primarily due to lower spending on manufacturing facilities and capital projects related to the Global
Growth and Efficiency Program. Capital expenditures for 2019 are expected to be approximately 2.5% to 3.0% of Net
sales. The Company continues to focus its capital spending on projects that are expected to yield high aftertax returns.
43
(Dollars in Millions Except Per Share Amounts)
Financing activities used $2,679 of cash during 2018 compared to $2,450 and $2,233 during 2017 and 2016,
respectively. The increase in cash used in 2018 as compared to 2017 was primarily due to higher net payments on debt and
lower proceeds from the exercise of stock options. The increase in cash used in 2017 as compared to 2016 was primarily
due to lower net proceeds from the issuance of debt and higher purchases of treasury shares.
Long-term debt, including the current portion, decreased to $6,354 as of December 31, 2018, as compared to $6,566 as
of December 31, 2017 and total debt decreased to $6,366 as of December 31, 2018 as compared to $6,577 as of
December 31, 2017. The Company’s debt issuances support its capital structure strategy objectives of funding its business
and growth initiatives while minimizing its risk-adjusted cost of capital. During the fourth quarter of 2017, the Company
issued $400 of five-year notes at a fixed rate of 2.25%. During the third quarter of 2017, the Company issued $500 of
thirty-year notes at a fixed rate of 3.70%. The debt issuances in 2017 were under the Company’s shelf registration
statement. Proceeds from the debt issuances in 2017 were used for general corporate purposes, which included the
retirement of commercial paper borrowings.
At December 31, 2018, the Company had access to unused domestic and foreign lines of credit of $3,023 (including
under the facility discussed below) and could also issue medium-term notes pursuant to an effective shelf registration
statement. In November 2018, the Company amended and restated its five-year revolving credit facility, on substantially
similar terms, for a five-year term expiring November 2023 and increasing the facility’s capacity to $2,650. Commitment
fees related to the credit facility are not material.
Domestic and foreign commercial paper outstanding was $534 and $24 as of December 31, 2018 and December 31,
2017, respectively. The average daily balances outstanding of commercial paper in 2018 and 2017 were $1,773 and $1,606,
respectively. The Company classifies commercial paper and certain current maturities of notes payable as long-term debt
when it has the intent and ability to refinance such obligations on a long-term basis, including, if necessary, by utilizing its
line of credit that expires in November 2023.
The following is a summary of the Company’s commercial paper and global short-term borrowings as of
December 31, 2018 and 2017:
2018
2017
Weighted
Average Interest
Rate
5.3%
2.5%
Payable to banks
Commercial paper
Total
Maturities Outstanding
12
$
534
546
2019
2019
$
Weighted Average
Interest Rate
2.8%
1.5%
Maturities Outstanding
11
$
24
35
2018
2018
$
Certain of the agreements with respect to the Company’s bank borrowings contain financial and other covenants as
well as cross-default provisions. Noncompliance with these requirements could ultimately result in the acceleration of
amounts owed. The Company is in full compliance with all such requirements and believes the likelihood of
noncompliance is remote. See Note 6, Long-Term Debt and Credit Facilities to the Consolidated Financial Statements for
further information about the Company’s long-term debt and credit facilities.
Dividend payments in 2018 were $1,591, an increase from $1,529 in 2017 and $1,508 in 2016. Dividend payments
increased to $1.66 per share in 2018 from $1.59 per share in 2017 and $1.55 per share in 2016. In the first quarter of 2018,
the Company’s Board increased the quarterly common stock cash dividend to $0.42 per share from $0.40 per share,
effective in the second quarter of 2018.
The Company repurchases shares of its common stock in the open market and in private transactions to maintain its
targeted capital structure and to fulfill certain requirements of its compensation and benefit plans. On June 18, 2018, the
Board authorized the repurchase of shares of the Company’s common stock having an aggregate purchase price of up to
$5,000 under the 2018 Program, which replaced a previously authorized share repurchase program. The Board also has
authorized share repurchases on an ongoing basis to fulfill certain requirements of the Company’s compensation and
benefit programs. The shares are repurchased from time to time in open market or privately negotiated transactions at the
Company’s discretion, subject to market conditions, customary blackout periods and other factors.
44
(Dollars in Millions Except Per Share Amounts)
Aggregate share repurchases in 2018 consisted of 8.9 million common shares under the 2018 Program, 8.7 million
common shares under the 2015 Program and 1.1 million common shares to fulfill the requirements of compensation and
benefit plans, for a total purchase price of $1,238. Aggregate repurchases in 2017 consisted of 18.3 million common shares
under the 2015 Program and 0.9 million common shares to fulfill the requirements of compensation and benefit plans, for a
total purchase price of $1,399. Aggregate repurchases in 2016 consisted of 18.3 million common shares under the 2015
Program and 1.0 million common shares to fulfill the requirements of compensation and benefit plans, for a total purchase
price of $1,335.
Cash and cash equivalents decreased $809 during 2018 to $726 at December 31, 2018, compared to $1,535 at
December 31, 2017, primarily due to the acquisitions of PCA Skin and Elta MD and reduced levels of debt. Cash and cash
equivalents held by the Company’s foreign subsidiaries was $651 and $1,467, respectively, at December 31, 2018 and
2017.
In 2016, in order to fully utilize a $210 U.S. income tax benefit principally related to changes in Venezuela’s foreign
exchange regime, the Company decided to repatriate $1,500 of earnings of foreign subsidiaries it previously considered
indefinitely reinvested outside of the U.S., and accordingly, recorded a tax charge of $210.
The following represents the scheduled maturities of the Company’s contractual obligations as of December 31, 2018:
Long-term debt including current portion(1)
Net cash interest payments on long-term debt(2)
Leases
Purchase obligations(3)
U.S. tax reform payments
Total
Total
2019
2020
2021
2022
2023
Thereafter
$
4,748
$ — $ 249
$ 298
$ 886
$ 893
$
1,993
666
440
219
148
193
179
—
143
165
151
—
136
123
96
9
121
102
4
25
92
51
2
46
2,422
1,353
32
8
139
$
8,066
$ 520
$ 708
$ 662
$1,138
$1,084
$
3,954
_______
(1) The Company classifies commercial paper and notes maturing within the next 12 months as long-term debt when it has the intent
(2)
and ability to refinance such obligations on a long-term basis. The amounts in this table exclude such obligations.
Includes the net interest payments on fixed and variable rate debt and associated interest rate swaps. Interest payments associated
with floating rate instruments are based on management’s best estimate of projected interest rates for the remaining term of variable
rate debt.
(3) The Company had outstanding contractual obligations with suppliers at the end of 2018 for the purchase of raw, packaging and
other materials and services in the normal course of business. These purchase obligation amounts represent only those items which
are based on agreements that are legally binding and that specify all significant terms including minimum quantity, price and term
and do not represent total anticipated purchases.
Long-term liabilities associated with the Company’s postretirement plans are excluded from the table above due to the
uncertainty of the timing of these cash disbursements. The amount and timing of cash funding related to these benefit plans
will generally depend on local regulatory requirements, various economic assumptions (the most significant of which are
detailed in “Critical Accounting Policies and Use of Estimates” below) and voluntary Company contributions. Based on
current information, the Company is not required to make a mandatory contribution to its qualified U.S. pension plan in
2019. Management’s best estimate of voluntary contributions the Company will make to its U.S. postretirement plans for
the year ending December 31, 2019 is approximately $100. In addition, total benefit payments to be paid to participants for
the year ending December 31, 2019 from the Company’s assets are estimated to be approximately $61.
Additionally, liabilities for unrecognized income tax benefits are excluded from the table above as the Company is
unable to reasonably predict the ultimate amount or timing of a settlement of such liabilities. See Note 11, Income Taxes to
the Consolidated Financial Statements for more information.
As more fully described in Part I, Item 3 “Legal Proceedings” and Note 13, Commitments and Contingencies to the
Consolidated Financial Statements, the Company has commitments and contingencies with respect to lawsuits,
environmental matters, taxes and other matters arising in the ordinary course of business.
45
(Dollars in Millions Except Per Share Amounts)
Off-Balance Sheet Arrangements
The Company does not have off-balance sheet financing or unconsolidated special purpose entities.
Managing Foreign Currency, Interest Rate, Commodity Price and Credit Risk Exposure
The Company is exposed to market risk from foreign currency exchange rates, interest rates and commodity price
fluctuations. Volatility relating to these exposures is managed on a global basis by utilizing a number of techniques,
including working capital management, selling price increases, selective borrowings in local currencies and entering into
selective derivative instrument transactions, issued with standard features, in accordance with the Company’s treasury and
risk management policies. The Company’s treasury and risk management policies prohibit the use of derivatives for
speculative purposes and leveraged derivatives for any purpose.
The sensitivity of our financial instruments to market fluctuations is discussed below. See Note 2, Summary of
Significant Accounting Policies and Note 7, Fair Value Measurements and Financial Instruments to the Consolidated
Financial Statements for further discussion of derivatives and hedging policies and fair value measurements.
Foreign Exchange Risk
As the Company markets its products in over 200 countries and territories, it is exposed to currency fluctuations
related to manufacturing and selling its products in currencies other than the U.S. dollar. The Company manages its foreign
currency exposures through a combination of cost-containment measures, sourcing strategies, selling price increases and
the hedging of certain costs in an effort to minimize the impact on earnings of foreign currency rate movements. See the
“Results of Operations” section above for discussion of the foreign exchange impact on Net sales in each operating
segment.
The assets and liabilities of foreign subsidiaries are translated into U.S. dollars at year-end exchange rates with
resulting translation gains and losses accumulated in a separate component of shareholders’ equity. Income and expense
items are translated into U.S. dollars at average rates of exchange prevailing during the year.
The Company primarily utilizes foreign currency contracts, including forward and swap contracts, option contracts,
foreign and local currency deposits and local currency borrowings to hedge portions of its exposures relating to foreign
currency purchases, assets and liabilities created in the normal course of business and the net investment in certain foreign
subsidiaries. The duration of foreign currency contracts generally does not exceed 12 months and the contracts are valued
using observable market rates.
The Company’s foreign currency forward contracts that qualify for cash flow hedge accounting resulted in a net
unrealized gain of $9 and a net unrealized loss of $9 at December 31, 2018 and 2017, respectively. Changes in the fair
value of cash flow hedges are recorded in Other comprehensive income (loss) and are reclassified into earnings in the same
period or periods during which the underlying hedged transaction is recognized in earnings. At the end of 2018, an
unfavorable 10% change in exchange rates would have resulted in a net unrealized loss of $69.
46
(Dollars in Millions Except Per Share Amounts)
Interest Rate Risk
The Company manages its mix of fixed and floating rate debt against its target with debt issuances and by entering into
interest rate swaps in order to mitigate fluctuations in earnings and cash flows that may result from interest rate volatility.
The notional amount, interest payment and maturity date of the swaps generally match the principal, interest payment and
maturity date of the related debt, and the swaps are valued using observable benchmark rates.
Based on year-end 2018 variable rate debt levels, a 1% increase in interest rates would have increased Interest
(income) expense, net by $19 in 2018.
Commodity Price Risk
The Company is exposed to price volatility related to raw materials used in production, such as resins, pulp, essential
oils, tropical oils, tallow, poultry, corn and soybeans. The Company manages its raw material exposures through a
combination of cost containment measures, ongoing productivity initiatives and the limited use of commodity hedging
contracts. Futures contracts are used on a limited basis, primarily in the Hill’s Pet Nutrition segment, to manage volatility
related to anticipated raw material inventory purchases of certain traded commodities.
At December 31, 2018 and 2017 the Company’s open commodity derivative contracts, which qualify for cash flow
hedge accounting, were not material. At the end of 2018, an unfavorable 10% change in commodity futures prices would
have resulted in a net unrealized loss of $2.
Credit Risk
The Company is exposed to the risk of credit loss in the event of nonperformance by counterparties to financial
instrument contracts; however, nonperformance is considered unlikely and any nonperformance is unlikely to be material
as it is the Company’s policy to contract with diverse, credit-worthy counterparties based upon both strong credit ratings
and other credit considerations.
Recent Accounting Pronouncements
In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)
No. 2018-15, “Intangibles–Goodwill and Other–Internal–Use Software (Topic 350): Customer’s Accounting for
Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract.” This new guidance aligns
the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the
requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. This new guidance
is effective for the Company on a prospective or retrospective basis beginning on January 1, 2020, with early adoption
permitted. The Company elected to adopt this guidance early, beginning on January 1, 2019 on a prospective basis and
does not expect the guidance to have a material impact on the Company’s Consolidated Financial Statements.
In August 2018, the FASB issued ASU No. 2018-14, “Compensation–Retirement Benefits–Defined Benefit Plans–
General (Topic 715): Disclosure Framework–Changes to the Disclosure Requirements for Defined Benefit Plans.” This
new guidance removes certain disclosures that are not considered cost beneficial, clarifies certain required disclosures and
requires certain additional disclosures. This new guidance is effective for the Company on a retrospective basis beginning
in the year ending December 31, 2020, with early adoption permitted. While the Company is currently assessing the impact
of the new guidance, it is not expected to have a material impact on the Company’s Consolidated Financial Statements.
47
(Dollars in Millions Except Per Share Amounts)
In August 2018, the FASB issued ASU No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework -
Changes to the Disclosure Requirements for Fair Value Measurement.” This new guidance removes certain disclosure
requirements related to the fair value hierarchy, modifies existing disclosure requirements related to measurement
uncertainty and adds new disclosure requirements. The new disclosure requirements include disclosing the changes in
unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value
measurements held at the end of the reporting period and the range and weighted average of significant unobservable
inputs used to develop Level 3 fair value measurements. This new guidance is effective for the Company beginning on
January 1, 2020, with early adoption permitted. Certain disclosure requirements in the new guidance will need to be
applied on a retrospective basis and others on a prospective basis. While the Company is currently assessing the impact of
the new guidance, it is not expected to have a material impact on the Company’s Consolidated Financial Statements.
In February 2018, the FASB issued ASU No. 2018-02, “Income Statement–Reporting Comprehensive Income (Topic
220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income” (“ASU 2018-02”), which
permits the reclassification of stranded tax effects resulting from the Tax Cuts and Jobs Act (the “TCJA” or “U.S. tax
reform”) from Accumulated other comprehensive income (loss) to Retained earnings. This new guidance is effective for
the Company beginning on January 1, 2019, with early adoption permitted, and must be applied either in the period of
adoption or retrospectively to periods in which the effects of the TCJA are recognized. The Company elected to adopt this
new guidance early, beginning on January 1, 2018, and reclassified $163 during the first quarter of 2018.
In August 2017, the FASB issued ASU No. 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements
to Accounting for Hedging Activities,” amending the eligibility criteria for hedged items and transactions to expand an
entity’s ability to hedge nonfinancial and financial risk components. The new guidance eliminates the requirement to
separately measure and present hedge ineffectiveness and aligns the presentation of hedge gains and losses with the
underlying hedge item. The new guidance also simplifies the hedge documentation and hedge effectiveness assessment
requirements. The new guidance is effective for the Company beginning on January 1, 2019, with early adoption permitted.
The amended presentation and disclosure requirements must be adopted on a prospective basis, while any amendments to
cash flow and net investment hedge relationships that exist on the date of adoption must be applied on a “modified
retrospective” basis, meaning a cumulative effect adjustment to the opening balance of retained earnings as of the
beginning of the year of adoption. The new guidance is not expected to have a material impact on the Company’s
Consolidated Financial Statements.
In October 2018, the FASB issued ASU No. 2018-16, “Derivatives and Hedging (Topic 815): Inclusion of the Secured
Overnight Financing Rate (“SOFR”) Overnight Index Swap (“OIS”) Rate as Benchmark Interest Rate for Hedge
Accounting Purposes.” The new guidance permits use of the OIS rate based on the SOFR as a U.S. benchmark interest rate
for hedge accounting purposes under Topic 815. The new guidance is effective for the Company beginning on January 1,
2019, concurrently with the adoption of ASU 2017-12, with early adoption permitted. The new guidance is required to be
applied on a prospective basis. While the Company is currently assessing the impact of the new guidance, it is not expected
to have a material impact on the Company’s Consolidated Financial Statements.
In May 2017, the FASB issued ASU No. 2017-09, “Compensation–Stock Compensation (Topic 718): Scope of
Modification Accounting,” clarifying when a change to the terms or conditions of a stock-based payment award must be
accounted for as a modification. The new guidance requires modification accounting if the fair value, vesting condition or
the classification of the award is not the same immediately before and after a change to the terms and conditions of the
award. The new guidance was effective for the Company on a prospective basis beginning on January 1, 2018 and did not
impact the Company’s Consolidated Financial Statements, as it is not the Company’s practice to change either the terms or
the conditions of stock-based payment awards once they are granted.
48
(Dollars in Millions Except Per Share Amounts)
In March 2017, the FASB issued ASU No. 2017-07, “Compensation–Retirement Benefits (Topic 715): Improving the
Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost,” changing the presentation of the
net periodic benefit cost on the Statement of Income and limiting the amount of net periodic benefit cost eligible for
capitalization to assets. The new guidance permits only the service cost component of net periodic benefit cost to be
eligible for capitalization. The new guidance also requires entities to present the service cost component of net periodic
benefit cost together with compensation costs arising from services rendered by employees during the period. The non-
service related components of net periodic benefit cost, which include interest, expected return on assets, amortization of
prior service costs and actuarial gains and losses, are required to be presented outside of Operating profit. The line item or
items used to present the other components of net periodic benefit cost must be disclosed in the Notes to the Consolidated
Financial Statements, if not separately described on the Statement of Income. The new presentation requirement was
adopted on a “full retrospective” basis, meaning the standard is applied to all of the periods presented in the financial
statements, while the limitation on capitalization was adopted on a prospective basis. Effective January 1, 2018, as
required, the Company adopted this standard on a retrospective basis. As permitted by the new guidance, the Company
used the amounts disclosed in its pension and other postretirement benefit plan note for the prior comparative periods as
the basis for applying the retrospective presentation requirements. As a result, for all periods presented, only the service
related component of pension and other postretirement benefit costs is included in Operating profit. For the years ended
December 31, 2017 and 2016, the Company reclassified $118 and $118, respectively, of non-service related components of
pension and other postretirement costs, which was previously deducted from Operating profit, to a new line item, “Non-
service related postretirement costs,” which is below Operating profit. Adoption of this standard had no effect on Net
income attributable to Colgate-Palmolive Company, Earnings per common share or Cash flow.
In January 2017, the FASB issued ASU No. 2017-04, “Intangibles–Goodwill and Other (Topic 350): Simplifying the
Test for Goodwill Impairment,” eliminating the requirement to calculate the implied fair value, essentially eliminating step
two from the goodwill impairment test. The new standard requires goodwill impairment to be based upon the results of step
one of the impairment test, which is defined as the excess of the carrying value of a reporting unit over its fair value. The
impairment charge will be limited to the amount of goodwill allocated to that reporting unit. The standard is effective for
the Company on a prospective basis beginning on January 1, 2020, with early adoption permitted. This new guidance is not
expected to have an impact on the Company’s Consolidated Financial Statements.
In January 2017, the FASB issued ASU No. 2017-01, “Business Combinations (Topic 805): Clarifying the Definition
of a Business,” which provides additional guidance on evaluating whether transactions should be accounted for as
acquisitions of assets or businesses. The guidance requires an entity to evaluate if substantially all of the fair value of the
assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets. If this threshold is met,
the new guidance would define this as an asset acquisition; otherwise, the entity then evaluates whether the asset meets the
requirement that a business include, at a minimum, an input and substantive process that together significantly contribute to
the ability to create outputs. The guidance was effective for the Company on a prospective basis beginning on January 1,
2018. This new guidance did not have an impact on the Company’s Consolidated Financial Statements.
In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain
Cash Receipts and Cash Payments,” which clarifies how certain cash receipts and payments are to be presented in the
statement of cash flows. The guidance was effective for the Company on January 1, 2018. This new guidance did not have
an impact on the Company’s Consolidated Financial Statements.
49
(Dollars in Millions Except Per Share Amounts)
In February 2016, the FASB issued its final standard on lease accounting, ASU No. 2016-02, “Leases (Topic 842),”
which superseded Topic 840, “Leases.” The new accounting standard was effective for the Company beginning on January
1, 2019 and required the recognition on the balance sheet of right-of-use assets and lease liabilities for all long-term leases,
including operating leases, and enhanced disclosures about the Company’s leasing arrangements. Substantially all of the
Company’s leases are considered operating leases and, as such, under accounting standards in effect at December 31, 2018,
were not recognized on the Company’s Consolidated Balance Sheets as of December 31, 2018 and 2017. In July 2018, the
FASB issued ASU No. 2018-10, “Codification Improvements to Topic 842, Leases” to clarify the implementation guidance
and ASU No. 2018-11, “Leases (Topic 842) Targeted Improvements.” This updated guidance provided an optional
transition method, which allows for the initial application of the new accounting standard at the adoption date and the
recognition of a cumulative-effect adjustment to the opening balance of retained earnings as of the beginning of the period
of adoption. The Company adopted the new standard beginning on January 1, 2019 and elected the optional transition
method with no restatement of prior period amounts. As allowed under the new accounting standard, the Company elected
to apply practical expedients to carry forward the original lease determinations, lease classifications and accounting of
initial direct costs for all asset classes at the time of adoption. The Company also elected not to separate lease components
from non-lease components and to exclude short-term leases from its Consolidated Balance Sheet. The Company’s
adoption of the new standard is expected to result in the recognition of right-of-use assets of approximately $450 and
liabilities of approximately $575, with no material cumulative effect adjustment to its Consolidated Balance Sheet as of the
date of adoption. Adoption of the new standard will not have a material impact on the Company’s Consolidated Statements
of Income or Cash Flows.
In January 2016, the FASB issued ASU No. 2016-01, “Financial Instruments–Overall (Subtopic 825-10): Recognition
and Measurement of Financial Assets and Financial Liabilities.” The updated guidance enhances the reporting model for
financial instruments, which includes amendments to address aspects of recognition, measurement, presentation and
disclosure. The amendment to the standard was effective for the Company beginning on January 1, 2018 and did not have
an impact on the Company’s Consolidated Financial Statements.
In May 2014, the FASB and the International Accounting Standards Board issued their final converged standard on
revenue recognition. The standard, issued as ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” by
the FASB, provides a comprehensive revenue recognition model for all contracts with customers and supersedes current
revenue recognition guidance. The revenue standard contains principles that an entity will apply to determine the
measurement of revenue and timing of when it is recognized. The underlying principle is that an entity will recognize
revenue to depict the transfer of goods or services to its customers at an amount that the entity expects to be entitled to in
exchange for those goods or services. The new standard also includes enhanced disclosures. During 2016, the FASB issued
several accounting updates (ASU No. 2016-08, 2016-10 and 2016-12) to clarify implementation guidance and correct
unintended application of the guidance. The standard allows for either full retrospective adoption or modified retrospective
adoption. The Company adopted the new standard on January 1, 2018, on a “modified retrospective” basis, which did not
have a material impact on the Company’s Consolidated Financial Statements. As required, the Company recognized the
cumulative effect of initially applying the new revenue standard as an adjustment to the 2018 opening balance of retained
earnings. Results for periods beginning on or after January 1, 2018 are presented under Topic 606, “Revenue from
Contracts with Customers,” while prior period amounts are not adjusted and continue to be reported in accordance with the
prior accounting guidance under Topic 605, “Revenue Recognition.”
Critical Accounting Policies and Use of Estimates
The preparation of financial statements in accordance with accounting principles generally accepted in the United
States of America requires management to use judgment and make estimates. The level of uncertainty in estimates and
assumptions increases with the length of time until the underlying transactions are completed. Actual results could
ultimately differ from those estimates. The accounting policies that are most critical in the preparation of the Company’s
Consolidated Financial Statements are those that are both important to the presentation of the Consolidated Financial
Statements and require significant or complex judgments and estimates on the part of management. The Company’s critical
accounting policies are reviewed periodically with the Audit Committee of the Board of Directors.
50
(Dollars in Millions Except Per Share Amounts)
In certain instances, accounting principles generally accepted in the United States of America allow for the selection of
alternative accounting methods. The Company’s significant policies that involve the selection of alternative methods are
accounting for shipping and handling costs for the years ended December 31, 2017 and 2016 and inventories.
The Company accounts for shipping and handling costs, primarily related to warehousing and outbound freight, as
fulfillment costs and reports such costs in the Consolidated Statements of Income as a component of Selling,
general and administrative expenses.
Prior to ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606),” which the Company adopted
on January 1, 2018, shipping and handling costs could be reported as either a component of Cost of sales or
Selling, general and administrative expenses. Prior to 2018, the Company also reported such costs as a component
of Selling, general and administrative expenses. Accordingly, the Company’s Gross profit margin was not
comparable with the gross profit margin of those companies that include shipping and handling charges in cost of
sales. If such costs had been included in Cost of sales, the Company’s Gross profit margin would have decreased
by 760 bps and 750 bps in 2017 and 2016, respectively, with no impact on reported earnings.
The Company accounts for inventories using both the first-in, first-out (“FIFO”) method (75% of inventories) and
the LIFO method (25% of inventories). There would have been no material impact on reported earnings for 2018,
2017 or 2016 had all inventories been accounted for under the FIFO method.
The areas of accounting that involve significant or complex judgments and estimates are pensions and other retiree
benefit cost assumptions, stock-based compensation, asset impairments, uncertain tax positions, tax valuation allowances,
legal and other contingency reserves.
In pension accounting, the most significant actuarial assumptions are the discount rate and the long-term rate of
return on plan assets. The discount rate used to measure the benefit obligation for U.S. defined benefit plans was
4.38%, 3.73% and 4.27% as of December 31, 2018, 2017 and 2016, respectively. The discount rate used to
measure the benefit obligation for other U.S. postretirement plans was 4.43%, 3.80% and 4.41% as of December
31, 2018, 2017 and 2016, respectively. Discount rates used for the U.S. and international defined benefit and other
postretirement plans are based on a yield curve constructed from a portfolio of high-quality bonds whose
projected cash flows approximate the projected benefit payments of the plans. The assumed long-term rate of
return on plan assets for U.S. plans was 6.60% as of December 31, 2018 and 2017 and 6.80% as of December 31,
2016. In determining the long-term rate of return, the Company considers the nature of the plans’ investments and
the historical rate of return.
Average annual rates of return for the U.S. plans for the most recent 1-year, 5-year, 10-year, 15-year and 25-year
periods were (5)%, 5%, 8%, 6% and 7%, respectively. In addition, the current assumed rate of return for the U.S.
plans is based upon the nature of the plans’ investments with a target asset allocation of approximately 60% in
fixed income securities, 22% in equity securities and 18% in real estate and other investments. A 1% change in the
assumed rate of return on plan assets of the U.S. pension plans would impact future Net income attributable to
Colgate-Palmolive Company by approximately $12. A 1% change in the discount rate for the U.S. pension plans
would impact future Net income attributable to Colgate-Palmolive Company by approximately $3. A third
assumption is the long-term rate of compensation increase, a change in which would partially offset the impact of
a change in either the discount rate or the long-term rate of return. This rate was 3.50% as of December 31, 2018,
2017 and 2016. Refer to Note 10, Retirement Plans and Other Retiree Benefits to the Consolidated Financial
Statements for further discussion of the Company’s pension and other postretirement plans.
The assumption requiring the most judgment in accounting for other postretirement benefits is the medical cost
trend rate. The Company reviews external data and its own historical trends for health care costs to determine the
medical cost trend rate. The assumed rate of increase for the U.S. postretirement benefit plans is 6.00% for 2019,
declining to 4.75% by 2024 and remaining at 4.75% for the years thereafter. The effect on the total of service and
interest cost components of a 1% increase in the assumed long-term medical cost trend rate would decrease Net
income attributable to Colgate-Palmolive Company by $7.
51
(Dollars in Millions Except Per Share Amounts)
The Company recognizes the cost of employee services received in exchange for awards of equity instruments,
such as stock options and restricted stock units, based on the fair value of those awards at the date of grant. The
Company uses the Black-Scholes-Merton (“Black-Scholes”) option pricing model to estimate the fair value of
stock option awards. The weighted-average estimated fair value of each stock option award granted in the year
ended December 31, 2018 was $9.48. The Black-Scholes model uses various assumptions to estimate the fair
value of stock option awards. These assumptions include the expected term of stock option awards, expected
volatility rate, risk-free interest rate and expected dividend yield. While these assumptions do not require
significant judgment, as the significant inputs are determined from historical experience or independent third-
party sources, changes in these inputs could result in significant changes in the fair value of stock option
awards. A one-year change in expected term would result in a change in fair value of approximately 8%. A 1%
change in volatility would change fair value by approximately 5%.
Goodwill and indefinite life intangible assets, such as the Company’s global brands, are subject to impairment
tests at least annually. The Company performs either a quantitative or qualitative assessment to determine the fair
value of its reporting units for goodwill and fair value of its indefinite life intangible assets. The asset impairment
analysis is generally performed using an income method, which requires several estimates, including future cash
flows consistent with management’s strategic plans, sales growth rates, foreign exchange rates and the selection of
a discount rate. For the Company’s goodwill impairment analysis, fair value is also determined using the market
approach, which is generally derived from metrics of comparable publicly traded companies. When multiple
valuation methodologies are used in a reporting unit’s goodwill impairment analysis, the Company performs a
qualitative analysis comparing the fair value of a reporting unit under each method to assess its reasonableness
and ensure consistency of results. Other qualitative factors the Company considers, in addition to those
quantitative measures discussed above, include assessments of general macroeconomic conditions, industry-
specific considerations and historical financial performance.
The estimated fair value of the Company’s intangible assets substantially exceeds the recorded carrying value,
except for the intangible assets acquired in the Sanex acquisition in 2011 and the PCA Skin and Elta MD
acquisitions in 2018, which were recorded at fair value. The estimated fair value of the Company’s reporting units
also substantially exceeds the recorded carrying value. Therefore, it is not reasonably likely that significant
changes in these estimates would occur that would result in an impairment charge related to these assets.
The Company applies the ‘relief from royalty method’ to estimate the fair value of the intangible assets acquired
in the Sanex acquisition (the “Sanex intangible assets”). Under this method, the fair value of an intangible asset is
calculated as the present value of future royalty savings generated as a result of owning the intangible asset. The
key assumptions used in determining the Company’s estimate of the fair value of the Sanex intangible assets
include royalty rates, discount rates and long-term revenue growth rates. Estimating long-term revenue growth
rates requires significant judgment by management in areas such as future economic conditions, product pricing
and consumer tastes and preferences. In determining an appropriate discount rate, the Company considers the
current interest rate environment and its estimated cost of capital. As a result of the analysis, the Company
determined that the fair value of the Sanex intangible assets exceeded their carrying value by more than 10% and
concluded that such excess was reasonable considering the brand’s relatively recent acquisition. Based on this, the
brand’s recent performance and the Company’s future plans for it, the Company does not believe there is a
significant risk of impairment related to the Sanex intangible assets. Given the recent acquisitions of PCA Skin
and Elta MD, the performance of PCA Skin and Elta MD since acquisition and the Company’s future plans for
these brands, the Company does not believe there is a significant risk of impairment related to either PCA Skin’s
and Elta MD’s intangible assets.
Asset impairment analysis related to certain fixed assets in connection with the Global Growth and Efficiency
Program requires management’s best estimate of net realizable values.
52
(Dollars in Millions Except Per Share Amounts)
On December 22, 2017, the TCJA was enacted, which, among other things, lowered the U.S. corporate income tax
rate to 21% from 35% and established a modified territorial system requiring a mandatory deemed repatriation tax
on undistributed earnings of foreign subsidiaries. Beginning in 2018, the TCJA also requires a minimum tax on
certain earnings generated by foreign subsidiaries while providing for tax-free repatriation of such earnings
through a 100% dividends-received deduction.
The Company’s effective income tax rate in 2017 included a provisional charge of $275, recorded in the fourth
quarter of 2017, based on its initial analysis of the TCJA using information and estimates available as of February
15, 2018, the date on which the Company filed its Annual Report on Form 10-K for the year ended December 31,
2017. The provisional charge was comprised of $451 related to the one-time deemed repatriation of accumulated
earnings of foreign subsidiaries and related withholding taxes and $20 related primarily to the remeasurement of
net deferred tax assets as a result of the reduction in the corporate income tax rate, which were offset by $196 of
income taxes which had been previously provided for planned repatriations of undistributed earnings of foreign
subsidiaries. As a result, applicable U.S. and foreign taxes have been provided on substantially all of the
Company’s accumulated earnings of foreign subsidiaries previously considered indefinitely reinvested.
During 2018, the Company finalized its assessment of the impact of the TCJA and recognized an additional tax
expense of $80 reflecting the impact of transition tax guidance issued by the U.S. Treasury and the update of
certain estimates and calculations based on information available through the end of 2018. Any further guidance
issued after December 31, 2018 may have an impact to the Company’s Provision for income tax in the period such
guidance is effective.
The recognition and measurement of uncertain tax positions involves consideration of the amounts and
probabilities of various outcomes that could be realized upon ultimate resolution.
Tax valuation allowances are established to reduce deferred tax assets, such as tax loss carryforwards, to net
realizable value. Factors considered in estimating net realizable value include historical results by tax jurisdiction,
carryforward periods, income tax strategies and forecasted taxable income.
Legal and other contingency reserves are based on management’s assessment of the risk of potential loss, which
includes consultation with outside legal counsel and other advisors. Such assessments are reviewed each period
and revised based on current facts and circumstances, if necessary. While it is possible that the Company’s cash
flows and results of operations in a particular quarter or year could be materially affected by the impact of such
contingencies, based on current knowledge it is the opinion of management that these matters will not have a
material effect on the Company’s financial position, or its ongoing results of operations or cash flows. Refer to
Note 13, Commitments and Contingencies to the Consolidated Financial Statements for further discussion of the
Company’s contingencies.
The Company generates revenue through the sale of well-known consumer products to trade customers under
established trading terms. While the recognition of revenue and receivables requires the use of estimates, there is a short
time frame (typically less than 60 days) between the shipment of product and cash receipt, thereby reducing the level of
uncertainty in these estimates. Refer to Note 2, Summary of Significant Accounting Policies to the Consolidated Financial
Statements for further description of the Company’s significant accounting policies.
53
(Dollars in Millions Except Per Share Amounts)
Cautionary Statement on Forward-Looking Statements
This Annual Report on Form 10-K may contain forward-looking statements as that term is defined in the Private
Securities Litigation Reform Act of 1995 or by the SEC in its rules, regulations and releases that set forth anticipated
results based on management’s current plans and assumptions. Such statements may relate, for example, to sales or volume
growth, net selling price increases, organic sales growth, profit or profit margin growth, earnings per share growth,
financial goals, the impact of foreign exchange volatility, cost-reduction plans including the Global Growth and Efficiency
Program, tax rates, U.S. tax reform, new product introductions, commercial investment levels, acquisitions and
divestitures, or legal or tax proceedings, among other matters. These statements are made on the basis of the Company’s
views and assumptions as of this time and the Company undertakes no obligation to update these statements whether as a
result of new information, future events or otherwise, except as required by law or by the rules and regulations of the SEC.
Moreover, the Company does not, nor does any other person, assume responsibility for the accuracy and completeness of
those statements. The Company cautions investors that any such forward-looking statements are not guarantees of future
performance and that actual events or results may differ materially from those statements. Actual events or results may
differ materially because of factors that affect international businesses and global economic conditions, as well as matters
specific to the Company and the markets it serves, including the uncertain economic environment in different countries and
its effect on consumer spending habits, increased competition and evolving competitive practices, foreign currency rate
fluctuations, exchange controls, price or profit controls, labor relations, changes in foreign or domestic laws, or regulations
or their interpretation, political and fiscal developments, including changes in trade, tax and immigration policies,
disruptions in global supply chain, the availability and cost of raw and packaging materials, the ability to maintain or
increase selling prices as needed, the ability to implement the Global Growth and Efficiency Program as planned or
differences between the actual and the estimated costs or savings under such program, changes in the policies of retail trade
customers, the emergence of new sales channels, the growth of e-commerce and the changing retail landscape, the ability to
continue lowering costs, the ability to complete acquisitions and divestitures as planned, the ability to successfully integrate
acquired businesses, and the uncertainty of the outcome of legal proceedings, whether or not the Company believes they
have merit. For information about these and other factors that could impact the Company’s business and cause actual
results to differ materially from forward-looking statements, refer to Part I, Item 1A “Risk Factors.”
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
See “Managing Foreign Currency, Interest Rate, Commodity Price and Credit Risk Exposure” in Part II, Item 7.
54
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See “Index to Financial Statements.”
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
The Company’s management, under the supervision and with the participation of the Company’s Chairman of the
Board and Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of the design
and operation of the Company’s disclosure controls and procedures as of December 31, 2018 (the “Evaluation”). Based
upon the Evaluation, the Company’s Chairman of the Board and Chief Executive Officer and Chief Financial Officer
concluded that the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange
Act of 1934) are effective.
Management’s Annual Report on Internal Control Over Financial Reporting
The Company’s management is responsible for establishing and maintaining adequate internal control over financial
reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. Management, under the
supervision and with the participation of the Company’s Chairman of the Board and Chief Executive Officer and Chief
Financial Officer, conducted an evaluation of the Company’s internal control over financial reporting based upon the
framework in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the
Treadway Commission and concluded that it is effective as of December 31, 2018.
The Company’s independent registered public accounting firm, PricewaterhouseCoopers LLP, has audited the
effectiveness of the Company’s internal control over financial reporting as of December 31, 2018, and has expressed an
unqualified opinion in their report, which appears under “Index to Financial Statements – Report of Independent
Registered Public Accounting Firm.”
Changes in Internal Control Over Financial Reporting
There were no changes in the Company’s internal control over financial reporting that occurred during the Company’s
most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal
control over financial reporting.
ITEM 9B. OTHER INFORMATION
None.
55
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
See “Executive Officers of the Registrant” in Part I, Item 1 of this report.
PART III
Additional information required by this Item relating to directors, executive officers and corporate governance of the
Company and information regarding compliance with Section 16(a) of the Exchange Act is incorporated herein by
reference to the Company’s Proxy Statement for its 2019 Annual Meeting of Stockholders (the “2019 Proxy Statement”).
Code of Ethics
The Company’s Code of Conduct promotes the highest ethical standards in all of the Company’s business dealings.
The Code of Conduct satisfies the SEC’s requirements for a Code of Ethics for senior financial officers and applies to all
Company employees, including the Chairman and Chief Executive Officer, the Chief Financial Officer and the Vice
President and Controller, and the Company’s directors. The Code of Conduct is available on the Company’s website at
www.colgatepalmolive.com. Any amendment to the Code of Conduct will promptly be posted on the Company’s website.
It is the Company’s policy not to grant waivers of the Code of Conduct. In the extremely unlikely event that the Company
grants an executive officer a waiver from a provision of the Code of Conduct, the Company will promptly disclose such
information by posting it on its website or by using other appropriate means in accordance with SEC rules.
ITEM 11. EXECUTIVE COMPENSATION
The information regarding executive compensation set forth in the 2019 Proxy Statement is incorporated herein by
reference.
56
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
(a) The information regarding security ownership of certain beneficial owners and management set forth in the 2019
Proxy Statement is incorporated herein by reference.
(b) The registrant does not know of any arrangements that may at a subsequent date result in a change in control of
the registrant.
(c) Equity compensation plan information as of December 31, 2018:
(a)
(b)
Number of securities
to be issued upon
exercise of outstanding
options, warrants and
rights
(in thousands)
Weighted-average
exercise price of
outstanding options,
warrants and rights
(c)
Number of securities
remaining available for
future issuance under
equity compensation
plans (excluding
securities reflected in
column (a))
(in thousands)
42,184 (1) $
63.07 (2)
24,790 (3)
Not applicable
42,184
$
Not applicable
63.07
Not applicable
24,790
Plan Category
Equity compensation plans
approved by security holders
Equity compensation plans not
approved by security holders
Total
_______
(1)
Consists of 39,710 options outstanding and 2,474 restricted stock units awarded but not yet vested under the Company’s 2013
Incentive Compensation Plan, as more fully described in Note 8, Capital Stock and Stock-Based Compensation Plans to the
Consolidated Financial Statements.
(2)
(3)
Includes the weighted-average exercise price of stock options outstanding of $67.00 and restricted stock units of $0.00.
Amount includes 15,604 options available for issuance and 9,186 restricted stock units available for issuance under the
Company’s 2013 Incentive Compensation Plan.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE
The information regarding certain relationships and related transactions and director independence set forth in the
2019 Proxy Statement is incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information regarding auditor fees and services set forth in the 2019 Proxy Statement is incorporated herein by
reference.
57
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Financial Statements and Financial Statement Schedules
PART IV
See “Index to Financial Statements.”
(b) Exhibits:
Exhibit No.
Description
3-A
3-B
4
a)
Restated Certificate of Incorporation, as amended. (Registrant hereby incorporates by reference Exhibit 3-
A to its Quarterly Report on Form 10-Q for the quarter ended June 30, 2008, File No. 1-644.)
By-laws, as amended. (Registrant hereby incorporates by reference Exhibit 3.1 to its Current Report on
Form 8-K filed on January 15, 2016, File No. 1-644.)
Indenture, dated as of November 15, 1992, between the Company and The Bank of New York Mellon
(formerly known as The Bank of New York) as Trustee. (Registrant hereby incorporates by reference
Exhibit 4.1 to its Registration Statement on Form S-3 and Post-Effective Amendment No. 1 filed on June
26, 1992, Registration No. 33-48840.)*
b)
Colgate-Palmolive Company Employee Stock Ownership Trust Agreement dated as of June 1, 1989, as
amended. (Registrant hereby incorporates by reference Exhibit 4-B (b) to its Quarterly Report on Form
10-Q for the quarter ended June 30, 2000, File No. 1-644.)
10-A a)
Colgate-Palmolive Company 2013 Incentive Compensation Plan. (Registrant hereby incorporates by
reference Annex B to its 2013 Notice of Annual Meeting and Proxy Statement, File No. 1-644.)
b)
c)
Form of Nonqualified Option Award Agreement used in connection with grants under the 2013 Incentive
Compensation Plan. (Registrant hereby incorporates by reference Exhibit 10-A (b) to its Annual Report
on Form 10-K for the year ended December 31, 2017, File No. 1-644.)
Form of Restricted Stock Unit Award Agreement used in connection with grants under the 2013 Incentive
Compensation Plan. (Registrant hereby incorporates by reference Exhibit 10-A (c) to its Annual Report
on Form 10-K for the year ended December 31, 2017, File No. 1-644.)
10-B a)
Colgate-Palmolive Company Executive Incentive Compensation Plan Trust, as amended. (Registrant
hereby incorporates by reference Exhibit 10-B (b) to its Annual Report on Form 10-K for the year ended
December 31, 1987, File No. 1-644.)
b)
Amendment, dated as of October 29, 2007, to the Colgate-Palmolive Company Executive Incentive
Compensation Plan Trust. (Registrant hereby incorporates by reference Exhibit 10-A (b) to its Quarterly
Report on Form 10-Q for the quarter ended September 30, 2007, File No. 1-644.)
10-C
10-D a)
Colgate-Palmolive Company Supplemental Salaried Employees’ Retirement Plan, amended and restated
as of April 19, 2018. (Registrant hereby incorporates by reference Exhibit 10 to its Quarterly Report on
Form 10-Q for the quarter ended March 31, 2018, File No. 1-644.)
Colgate-Palmolive Company Executive Severance Plan, as amended and restated through September 13,
2018. (Registrant hereby incorporates by reference Exhibit 10-A to its Current Report on Form 8-K filed
on September 18, 2018, File No. 1-644.)
58
Exhibit No.
Description
b)
Colgate-Palmolive Company Executive Severance Plan Trust. (Registrant hereby incorporates by
reference Exhibit 10-E (b) to its Annual Report on Form 10-K for the year ended December 31, 1987, File
No. 1-644.)
10-E
Colgate-Palmolive Company Pension Plan for Outside Directors, as amended and restated. (Registrant
hereby incorporates by reference Exhibit 10-D to its Annual Report on Form 10-K for the year ended
December 31, 1999, File No. 1-644.)
10-F
a)
Colgate-Palmolive Company Restated and Amended Deferred Compensation Plan for Non-Employee
Directors, as amended. (Registrant hereby incorporates by reference Exhibit 10-H to its Annual Report on
Form 10-K for the year ended December 31, 1997, File No. 1-644.)
b)
Amendment, dated as of September 12, 2007, to the Colgate-Palmolive Company Restated and Amended
Deferred Compensation Plan for Non-Employee Directors. (Registrant hereby incorporates by reference
Exhibit 10-F to its Quarterly Report on Form 10-Q for the quarter ended September 30, 2007, File No.
1-644.)
10-G
Colgate-Palmolive Company Deferred Compensation Plan, amended and restated as of September 12,
2007. (Registrant hereby incorporates by reference Exhibit 10-G to its Quarterly Report on Form 10-Q for
the quarter ended September 30, 2007, File No. 1-644.)
10-H
10-I
Colgate-Palmolive Company Above and Beyond Plan – Officer Level. (Registrant hereby incorporates by
reference Exhibit 10-A to its Quarterly Report on Form 10-Q for the quarter ended September 30, 2004,
File No. 1-644.)
Five Year Credit Agreement, dated as of November 2, 2018, by and among Colgate-Palmolive Company,
as Borrower, Citibank, N.A., as Administrative Agent and Arranger, and the Lenders party thereto.**
10-J
a)
Colgate-Palmolive Company Supplemental Savings and Investment Plan, amended and restated as of
September 1, 2010. (Registrant hereby incorporates by reference Exhibit 10-B to its Quarterly Report on
Form 10-Q for the quarter ended September 30, 2010, File No. 1-644.)
b)
Amendment, dated September 27, 2017, to the Colgate-Palmolive Company Supplemental Savings and
Investment Plan (Registrant hereby incorporates by reference Exhibit 10-B to its Quarterly Report on
Form 10-Q for the quarter ended September 30, 2017, File No. 1-644.)
10-K
Form of Indemnification Agreement between Colgate-Palmolive Company and its directors, executive
officers and certain key employees. (Registrant hereby incorporates by reference Exhibit 10-K to its
Annual Report on Form 10-K for the year ended December 31, 2017, File No. 1-644.)
10-L
a)
Colgate-Palmolive Company 2005 Non-Employee Director Stock Option Plan. (Registrant hereby
incorporates by reference Appendix C to its 2005 Notice of Meeting and Proxy Statement.)
b)
c)
d)
Form of Award Agreement used in connection with grants to non-employee directors under the Colgate-
Palmolive Company 2005 Non-Employee Director Stock Option Plan. (Registrant hereby incorporates by
reference Exhibit 10-B to its Current Report on Form 8-K dated May 4, 2005, File No. 1-644.)
Amendment, dated as of September 7, 2006, to the Colgate-Palmolive Company 2005 Non-Employee
Director Stock Option Plan. (Registrant hereby incorporates by reference Exhibit 10-B to its Quarterly
Report on Form 10-Q for the quarter ended September 30, 2006, File No. 1-644.)
Amendment, dated as of December 7, 2006, to the Colgate-Palmolive Company 2005 Non-Employee
Director Stock Option Plan. (Registrant hereby incorporates by reference Exhibit 10-S (d) to its Annual
Report on Form 10-K for the year ended December 31, 2006, File No. 1-644.)
59
Exhibit No.
Description
e)
f)
g)
h)
Amendment, dated as of October 29, 2007, to the Colgate-Palmolive Company 2005 Non-Employee
Director Stock Option Plan. (Registrant hereby incorporates by reference Exhibit 10-J to its Quarterly
Report on Form 10-Q for the quarter ended September 30, 2007, File No. 1-644.)
Amendment, dated as of January 13, 2011, to the Colgate-Palmolive Company 2005 Non-Employee
Director Stock Option Plan. (Registrant hereby incorporates by reference Exhibit 10-B to its Quarterly
Report on Form 10-Q for the quarter ended March 31, 2011, File No. 1-644.)
Amendment, dated as of July 14, 2011, to the Colgate-Palmolive Company 2005 Non-Employee Director
Stock Option Plan. (Registrant hereby incorporates by reference Exhibit 10-A to its Quarterly Report on
Form 10-Q for the quarter ended September 30, 2011, File No. 1-644.)
Amendment, dated as of May 11, 2012, to the Colgate-Palmolive Company 2005 Stock Plan for Non-
Employee Directors. (Registrant hereby incorporates by reference Exhibit 10-A to its Quarterly Report
on Form 10-Q for the quarter ended June 30, 2012, File No. 1-644.)
21
23
24
31-A
31-B
32
101
Subsidiaries of the Registrant.**
Consent of Independent Registered Public Accounting Firm.**
Powers of Attorney.**
Certificate of the Chairman of the Board and Chief Executive Officer of Colgate-Palmolive Company
pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.**
Certificate of the Chief Financial Officer of Colgate-Palmolive Company pursuant to Rule 13a-14(a)
under the Securities Exchange Act of 1934.**
Certificate of the Chairman of the Board and Chief Executive Officer and the Chief Financial Officer of
Colgate-Palmolive Company pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and
18 U.S.C. § 1350.**
The following materials from Colgate-Palmolive Company’s Annual Report on Form 10-K for the year
ended December 31, 2018, formatted in eXtensible Business Reporting Language (XBRL): (i) the
Consolidated Statements of Income, (ii) the Consolidated Balance Sheets, (iii) the Consolidated
Statements of Changes in Shareholders’ Equity, (iv) the Consolidated Statements of Comprehensive
Income, (v) the Consolidated Statements of Cash Flows, (vi) Notes to Consolidated Financial Statements,
and (vii) Financial Statement Schedule.
__________
* Registrant hereby undertakes to furnish the Commission, upon request, with a copy of any instrument with respect to
long-term debt where the total amount of securities authorized thereunder does not exceed 10% of the total assets of
the registrant and its subsidiaries on a consolidated basis.
** Filed herewith.
The exhibits indicated above that are not included with the Form 10-K are available upon request and payment of a
reasonable fee approximating the registrant’s cost of providing and mailing the exhibits. Inquiries should be directed to:
Colgate-Palmolive Company
Office of the Secretary (10-K Exhibits)
300 Park Avenue
New York, NY 10022-7499
60
ITEM 16. FORM 10-K SUMMARY
None.
61
COLGATE-PALMOLIVE COMPANY
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: February 21, 2019
By
/s/ Ian Cook
Colgate-Palmolive Company
(Registrant)
Ian Cook
Chairman of the Board and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on
February 21, 2019, by the following persons on behalf of the registrant and in the capacities indicated.
(a) Principal Executive Officer
(d) Directors:
/s/ Ian Cook
Ian Cook
Chairman of the Board and Chief Executive Officer
/s/ Ian Cook
Ian Cook
Charles A. Bancroft, John P. Bilbrey,
John T. Cahill, Helene D. Gayle,
Ellen M. Hancock, C. Martin Harris,
Lorrie M. Norrington,
Michael B. Polk, Stephen I. Sadove
/s/ Jennifer M. Daniels
Jennifer M. Daniels
As Attorney-in-Fact
(b) Principal Financial Officer
/s/ Henning I. Jakobsen
Henning I. Jakobsen
Chief Financial Officer
(c) Principal Accounting Officer
/s/ Philip G. Shotts
Philip G. Shotts
Vice President and Controller
62
Index to Financial Statements
Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
Consolidated Statements of Income for the years ended December 31, 2018, 2017 and 2016
Consolidated Statements of Comprehensive Income for the years ended December 31, 2018, 2017 and 2016
Consolidated Balance Sheets as of December 31, 2018 and 2017
Consolidated Statements of Changes in Shareholders’ Equity for the years ended December 31, 2018, 2017 and 2016
Consolidated Statements of Cash Flows for the years ended December 31, 2018, 2017 and 2016
Notes to Consolidated Financial Statements
Financial Statement Schedule
Schedule II - Valuation and Qualifying Accounts for the years ended December 31, 2018, 2017 and 2016
Selected Financial Data
Market Information
Historical Financial Summary
Page
64
66
67
68
69
70
71
115
116
117
All other financial statements and schedules not listed have been omitted since the required information is included in
the financial statements or the notes thereto or is not applicable or required.
63
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of
Colgate-Palmolive Company
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the consolidated financial statements, including the related notes and financial statement
schedule, of Colgate-Palmolive Company and its subsidiaries as listed in the accompanying index (collectively
referred to as the “consolidated financial statements”). We also have audited the Company’s internal control over
financial reporting as of December 31, 2018, based on criteria established in Internal Control - Integrated
Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the
financial position of the Company as of December 31, 2018 and December 31, 2017, and the results of its
operations and its cash flows for each of the three years in the period ended December 31, 2018 in conformity
with accounting principles generally accepted in the United States of America. Also in our opinion, the Company
maintained, in all material respects, effective internal control over financial reporting as of December 31, 2018,
based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, for maintaining effective
internal control over financial reporting and for its assessment of the effectiveness of internal control over
financial reporting included in Management’s Annual Report on Internal Control over Financial Reporting,
appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial
statements and on the Company’s internal control over financial reporting based on our audits. We are a public
accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and
are required to be independent with respect to the Company in accordance with the U.S. federal securities laws
and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free
of material misstatement, whether due to error or fraud, and whether effective internal control over financial
reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material
misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures
that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts
and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as well as evaluating the overall presentation of
the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and
testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our
audits also included performing such other procedures as we considered necessary in the circumstances. We
believe that our audits provide a reasonable basis for our opinions.
64
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the
company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
/s/ PricewaterhouseCoopers LLP
New York, New York
February 21, 2019
We have served as the Company’s auditor since 2002.
65
COLGATE-PALMOLIVE COMPANY
Consolidated Statements of Income
For the years ended December 31,
(Dollars in Millions Except Per Share Amounts)
Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Other (income) expense, net
Operating profit
Non-service related postretirement costs
Interest (income) expense, net
Income before income taxes
Provision for income taxes
Net income including noncontrolling interests
Less: Net income attributable to noncontrolling interests
Net income attributable to Colgate-Palmolive Company
Earnings per common share, basic
Earnings per common share, diluted
$
$
$
2018
2017
2016
$
15,544
$
15,454
$
15,195
6,313
9,231
5,389
148
3,694
87
143
3,464
906
2,558
158
2,400
2.76
2.75
$
$
$
6,174
9,280
5,400
173
3,707
118
102
3,487
1,313
2,174
150
2,024
2.30
2.28
$
$
$
6,072
9,123
5,143
25
3,955
118
99
3,738
1,152
2,586
145
2,441
2.74
2.72
See Notes to Consolidated Financial Statements.
66
COLGATE-PALMOLIVE COMPANY
Consolidated Statements of Comprehensive Income
For the years ended December 31,
(Dollars in Millions)
Net income including noncontrolling interests
Other comprehensive income (loss), net of tax:
Cumulative translation adjustments
Retirement plan and other retiree benefit adjustments
Gains (losses) on available-for-sale securities
Gains (losses) on cash flow hedges
Total Other comprehensive income (loss), net of tax
Total Comprehensive income including noncontrolling interests
Less: Net income attributable to noncontrolling interests
Less: Cumulative translation adjustments attributable to
noncontrolling interests
Total Comprehensive income attributable to noncontrolling interests
Total Comprehensive income attributable to Colgate-Palmolive
Company
2018
2017
2016
$
2,558
$
2,174
$
2,586
(237)
38
—
10
(189)
2,369
158
(19)
139
302
54
—
(14)
342
2,516
150
17
167
(137)
(109)
(1)
5
(242)
2,344
145
(12)
133
$
2,230
$
2,349
$
2,211
See Notes to Consolidated Financial Statements.
67
COLGATE-PALMOLIVE COMPANY
Consolidated Balance Sheets
As of December 31,
(Dollars in Millions Except Share and Per Share Amounts)
Assets
Current Assets
Cash and cash equivalents
Receivables (net of allowances of $82 and $77, respectively)
Inventories
Other current assets
Total current assets
Property, plant and equipment, net
Goodwill
Other intangible assets, net
Deferred income taxes
Other assets
Total assets
Liabilities and Shareholders’ Equity
Current Liabilities
Notes and loans payable
Current portion of long-term debt
Accounts payable
Accrued income taxes
Other accruals
Total current liabilities
Long-term debt
Deferred income taxes
Other liabilities
Total liabilities
Commitments and contingent liabilities
Shareholders’ Equity
Common stock, $1 par value (2,000,000,000 shares authorized, 1,465,706,360 shares issued)
Additional paid-in capital
Retained earnings
Accumulated other comprehensive income (loss)
Unearned compensation
Treasury stock, at cost
Total Colgate-Palmolive Company shareholders’ equity
Noncontrolling interests
Total equity
Total liabilities and equity
See Notes to Consolidated Financial Statements.
68
2018
2017
$
726
$
1,400
1,250
417
3,793
3,881
2,530
1,637
152
168
1,535
1,480
1,221
403
4,639
4,072
2,218
1,341
188
218
$
$
12,161
$
12,676
$
12
—
1,222
411
1,696
3,341
6,354
235
2,034
11,964
—
1,466
2,204
21,615
(4,188)
(3)
(21,196)
(102)
299
197
11
—
1,212
354
1,831
3,408
6,566
204
2,255
12,433
—
1,466
1,984
20,531
(3,855)
(5)
(20,181)
(60)
303
243
$
12,161
$
12,676
COLGATE-PALMOLIVE COMPANY
Consolidated Statements of Changes in Shareholders’ Equity
(Dollars in Millions)
Colgate-Palmolive Company Shareholders’ Equity
Common
Stock
Additional
Paid-In
Capital
Unearned
Compensation
Treasury
Stock
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Noncontrolling
Interests
Balance, January 1, 2016
$
1,466
$
1,438
$
(12) $ (18,102) $
18,861
$
(3,950)
$
Net income
Other comprehensive income (loss), net
of tax
Dividends
Stock-based compensation expense
Shares issued for stock options
Shares issued for restricted stock awards
Treasury stock acquired
Other
2,441
(1,380)
(230)
123
128
(60)
62
242
60
(1,335)
—
5
Balance, December 31, 2016
$
1,466
$
1,691
$
(7) $ (19,135) $
19,922
$
(4,180)
$
Net income
Other comprehensive income (loss), net
of tax
Dividends
Stock-based compensation expense
Shares issued for stock options
Shares issued for restricted stock awards
Treasury stock acquired
Other
2,024
(1,405)
325
127
197
(34)
3
313
34
(1,399)
2
6
(10)
Balance, December 31, 2017
$
1,466
$
1,984
$
(5) $ (20,181) $
20,531
$
(3,855)
$
Net income
Other comprehensive income (loss), net
of tax
Dividends
Stock-based compensation expense
Shares issued for stock options
Shares issued for restricted stock awards
Treasury stock acquired
Other
2,400
(1,448)
(170)
109
137
(31)
5
190
31
(1,238)
2
2
132
(163) (1)
255
145
(12)
(128)
260
150
17
(124)
303
158
(19)
(143)
Balance, December 31, 2018
$
1,466
$
2,204
$
(3) $ (21,196) $
21,615
$
(4,188)
$
299
(1) As a result of the early adoption of ASU 2018-02, the Company reclassified the stranded tax effects in Accumulated other comprehensive income (loss)
resulting from the TCJA to Retained earnings. See Note 2, Summary of Significant Accounting Policies for additional information.
See Notes to Consolidated Financial Statements.
69
COLGATE-PALMOLIVE COMPANY
Consolidated Statements of Cash Flows
For the years ended December 31,
(Dollars in Millions)
Operating Activities
Net income including noncontrolling interests
$
2,558
$
2,174
$
2,586
2018
2017
2016
Adjustments to reconcile net income including noncontrolling interests to net cash
provided by operations:
Depreciation and amortization
Restructuring and termination benefits, net of cash
Stock-based compensation expense
Gain on sale of land in Mexico
Charge for U.S. tax reform
Deferred income taxes
Voluntary benefit plan contributions
Cash effects of changes in:
Receivables
Inventories
Accounts payable and other accruals
Other non-current assets and liabilities
Net cash provided by operations
Investing Activities
Capital expenditures
Sale of property and non-core product lines
Purchases of marketable securities and investments
Proceeds from sale of marketable securities and investments
Proceeds from sale of land in Mexico
Payment for acquisitions, net of cash acquired
Other
Net cash used in investing activities
Financing Activities
Principal payments on debt
Proceeds from issuance of debt
Dividends paid
Purchases of treasury shares
Proceeds from exercise of stock options
Net cash used in financing activities
Effect of exchange rate changes on Cash and cash equivalents
Net (decrease) increase in Cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Supplemental Cash Flow Information
Income taxes paid
Interest paid
511
(7)
109
—
80
27
(67)
(79)
(58)
18
(36)
475
91
127
—
275
108
(81)
(15)
(8)
(96)
4
443
(9)
123
(97)
—
56
(53)
(17)
(4)
100
13
3,056
3,054
3,141
(436)
1
(169)
156
—
(728)
6
(1,170)
(7,355)
7,176
(1,591)
(1,238)
329
(2,679)
(16)
(809)
1,535
726
847
194
$
$
$
(553)
44
(347)
391
—
—
(6)
(471)
(4,808)
4,779
(1,529)
(1,399)
507
(2,450)
87
220
1,315
1,535
1,037
150
$
$
$
(593)
—
(336)
378
60
(5)
(3)
(499)
(7,274)
7,438
(1,508)
(1,335)
446
(2,233)
(64)
345
970
1,315
932
162
$
$
$
See Notes to Consolidated Financial Statements.
70
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements
(Dollars in Millions Except Share and Per Share Amounts)
1.
Nature of Operations
The Company manufactures and markets a wide variety of products in the U.S. and around the world in two product
segments: Oral, Personal and Home Care; and Pet Nutrition. Oral, Personal and Home Care products include toothpaste,
toothbrushes and mouthwash, bar and liquid hand soaps, shower gels, shampoos, conditioners, deodorants and
antiperspirants, professional skin care products, dishwashing detergents, fabric conditioners, household cleaners, and other
similar items. These products are sold primarily to a variety of traditional and e-commerce retailers, wholesalers and
distributors worldwide. Pet Nutrition products include specialty pet nutrition products manufactured and marketed by Hill’s
Pet Nutrition. The principal customers for Pet Nutrition products are authorized pet supply retailers, veterinarians and e-
commerce retailers. Principal global and regional trademarks include Colgate, Palmolive, elmex, Tom’s of Maine, Sorriso,
Speed Stick, Lady Speed Stick, Softsoap, Irish Spring, Protex, Sanex, Elta MD, PCA Skin, Ajax, Axion, Fabuloso,
Soupline and Suavitel, as well as Hill’s Science Diet and Hill’s Prescription Diet.
The Company’s principal classes of products accounted for the following percentages of worldwide Net sales for the
past three years:
Oral Care
Personal Care
Home Care
Pet Nutrition
Total
2018
2017
2016
47%
20%
18%
15%
100%
48%
19%
18%
15%
100%
47%
20%
18%
15%
100%
71
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
2.
Summary of Significant Accounting Policies
Principles of Consolidation
The Consolidated Financial Statements include the accounts of Colgate-Palmolive Company and its majority-owned or
controlled subsidiaries. Intercompany transactions and balances have been eliminated. The Company’s investments in
consumer products companies with interests ranging between 20% and 50%, where the Company has significant influence
over the investee, are accounted for using the equity method. Net income (loss) from such investments is recorded in Other
(income) expense, net in the Consolidated Statements of Income. As of December 31, 2018 and 2017, equity method
investments included in Other assets in the Consolidated Balance Sheets were $46 and $42, respectively. Unrelated third
parties hold the remaining ownership interests in these investments. Investments with less than a 20% interest are
accounted for using the cost method.
Use of Estimates
The preparation of financial statements in accordance with accounting principles generally accepted in the United
States of America requires management to use judgment and make estimates that affect the reported amounts of assets and
liabilities and disclosure of contingent gains and losses at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. The level of uncertainty in estimates and assumptions increases with
the length of time until the underlying transactions are completed. As such, the most significant uncertainty in the
Company’s assumptions and estimates involved in preparing the financial statements includes pension and other retiree
benefit cost assumptions, stock-based compensation, asset impairments, uncertain tax positions, tax valuation allowances,
legal and other contingency reserves and charges related to U.S. tax reform (see Note 11, Income Taxes). Additionally, the
Company uses available market information and other valuation methodologies in assessing the fair value of financial
instruments and retirement plan assets. Judgment is required in interpreting market data to develop the estimates of fair
value and, accordingly, changes in assumptions or the estimation methodologies may affect the fair value estimates. Actual
results could ultimately differ from those estimates.
Revenue Recognition
The Company’s revenue contracts represent a single performance obligation to sell its products to trade customers.
Sales are recorded at the time control of the products is transferred to trade customers, in an amount that reflects the
consideration the Company expects to be entitled to in exchange for the products. Control is the ability of trade customers
to direct the “use of” and “obtain” the benefit from our products. In evaluating the timing of the transfer of control of
products to trade customers, the Company considers several control indicators, including significant risks and rewards of
products, the Company’s right to payment and the legal title of the products. Based on the assessment of control indicators,
sales are generally recognized when products are delivered to trade customers.
Net sales reflect the transaction prices for contracts, which include units shipped at selling list prices reduced by
variable consideration. Variable consideration includes expected sales returns and the cost of current and continuing
promotional programs. Current promotional programs primarily include product listing allowances and co-operative
advertising arrangements. Continuing promotional programs are predominantly consumer coupons and volume-based sales
incentive arrangements. The cost of promotional programs is estimated using the expected value method considering all
reasonably available information, including the Company’s historical experience and its current expectations, and is
reflected in the transaction price when sales are recorded. Adjustments to the cost of promotional programs in subsequent
periods are generally not material, as the Company’s promotional programs are typically of short duration, thereby
reducing the uncertainty inherent in such estimates.
Sales returns are generally accepted at the Company’s discretion and are not material to the Company’s Consolidated
Financial Statements. The Company’s contracts with trade customers do not have significant financing components or non-
cash consideration and the Company does not have unbilled revenue or significant amounts of prepayments from
customers. The Company records Net sales excluding taxes collected on its sales to its trade customers. Shipping and
handling activities are accounted for as contract fulfillment costs and classified as Selling, general and administrative
expenses.
72
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
Shipping and Handling Costs
Shipping and handling costs are classified as Selling, general and administrative expenses and were $1,255, $1,183
and $1,140 for the years ended December 31, 2018, 2017 and 2016, respectively.
Marketing Costs
The Company markets its products through advertising and other promotional activities. Advertising costs are included
in Selling, general and administrative expenses and are expensed as incurred. Certain consumer and trade promotional
programs, such as consumer coupons, are recorded as a reduction of sales.
Cash and Cash Equivalents
The Company considers all highly liquid investments with original maturities of three months or less at the time of
purchase to be cash equivalents.
Inventories
The cost of approximately 75% of inventories is determined using the first-in, first-out (“FIFO”) method, which is
stated at the lower of cost or net realizable value. The cost of all other inventories, in the U.S. and Mexico, is determined
using the last-in, first-out (“LIFO”) method, which is stated at the lower of cost or market.
Property, Plant and Equipment
Land, buildings and machinery and equipment are stated at cost. Depreciation is provided, primarily using the straight-
line method, over estimated useful lives ranging from 3 to 15 years for machinery and equipment and up to 40 years for
buildings. Depreciation attributable to manufacturing operations is included in Cost of sales. The remaining component of
depreciation is included in Selling, general and administrative expenses.
Goodwill and Other Intangibles
Goodwill and indefinite life intangible assets, such as the Company’s global brands, are subject to impairment tests at
least annually. These tests were performed and did not result in an impairment charge. Other intangible assets with finite
lives, such as local brands and trademarks, customer relationships and non-compete agreements, are amortized over their
estimated useful lives, generally ranging from 5 to 40 years. Amortization expense related to intangible assets is included in
Other (income) expense, net, which is included in Operating profit.
Income Taxes
The provision for income taxes is determined using the asset and liability method. Under this method, deferred tax
assets and liabilities are recognized based upon the differences between the financial statement and tax bases of assets and
liabilities using enacted tax rates that will be in effect at the time such differences are expected to reverse. Deferred tax
assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some
portion or all of the deferred tax assets will not be realized.
The Company uses a comprehensive model to recognize, measure, present and disclose in its financial statements
uncertain tax positions that the Company has taken or expects to take on an income tax return. The Company recognizes
interest expense and penalties related to unrecognized tax benefits within Provision for income taxes.
73
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
Financial Instruments
Derivative instruments are recorded as assets and liabilities at estimated fair value based on available market
information. The Company’s derivative instruments that qualify for hedge accounting are designated as either fair value
hedges, cash flow hedges or net investment hedges. For fair value hedges, changes in the fair value of the derivative, as
well as the offsetting changes in the fair value of the hedged item, are recognized in earnings each period. For cash flow
hedges, changes in the fair value of the derivative are recorded in Other comprehensive income (loss) and are recognized in
earnings when the offsetting effect of the hedged item is also recognized in earnings. For hedges of the net investment in
foreign subsidiaries, changes in the fair value of the derivative are recorded in Other comprehensive income (loss) to offset
the change in the value of the net investment being hedged. Cash flows related to hedges are classified in the same category
as the cash flows from the hedged item in the Consolidated Statements of Cash Flows.
The Company may also enter into certain foreign currency and interest rate instruments that economically hedge
certain of its risks but do not qualify for hedge accounting. Changes in fair value of these derivative instruments, based on
quoted market prices, are recognized in earnings each period. The Company’s derivative instruments and other financial
instruments are more fully described in Note 7, Fair Value Measurements and Financial Instruments along with the related
fair value measurement considerations.
Stock-Based Compensation
The Company recognizes the cost of employee services received in exchange for awards of equity instruments, such as
stock options and restricted stock units, based on the fair value of those awards at the date of grant over the requisite
service period. The Company uses the Black-Scholes-Merton (“Black-Scholes”) option pricing model to estimate the fair
value of stock option awards. Stock-based compensation plans, related expenses and assumptions used in the Black-
Scholes option pricing model are more fully described in Note 8, Capital Stock and Stock-Based Compensation Plans.
Currency Translation
The assets and liabilities of foreign subsidiaries, other than those operating in highly inflationary environments, are
translated into U.S. dollars at year-end exchange rates with resulting translation gains and losses accumulated in a separate
component of shareholders’ equity. Income and expense items are translated into U.S. dollars at average rates of exchange
prevailing during the year.
For subsidiaries operating in highly inflationary environments, local currency-denominated non-monetary assets,
including inventories, goodwill and property, plant and equipment, are remeasured at their historical exchange rates, while
local currency-denominated monetary assets and liabilities are remeasured at year-end exchange rates. Remeasurement
adjustments for these operations are included in Net income attributable to Colgate-Palmolive Company.
Recent Accounting Pronouncements
In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)
No. 2018-15, “Intangibles–Goodwill and Other–Internal–Use Software (Topic 350): Customer’s Accounting for
Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract.” This new guidance aligns
the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the
requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. This new guidance
is effective for the Company on a prospective or retrospective basis beginning on January 1, 2020, with early adoption
permitted. The Company elected to adopt this guidance early, beginning on January 1, 2019 on a prospective basis and
does not expect the guidance to have a material impact on the Company’s Consolidated Financial Statements.
74
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
In August 2018, the FASB issued ASU No. 2018-14, “Compensation–Retirement Benefits–Defined Benefit Plans–
General (Topic 715): Disclosure Framework–Changes to the Disclosure Requirements for Defined Benefit Plans.” This
new guidance removes certain disclosures that are not considered cost beneficial, clarifies certain required disclosures and
requires certain additional disclosures. This new guidance is effective for the Company on a retrospective basis beginning
in the year ending December 31, 2020, with early adoption permitted. While the Company is currently assessing the impact
of the new guidance, it is not expected to have a material impact on the Company’s Consolidated Financial Statements.
In August 2018, the FASB issued ASU No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework -
Changes to the Disclosure Requirements for Fair Value Measurement.” This new guidance removes certain disclosure
requirements related to the fair value hierarchy, modifies existing disclosure requirements related to measurement
uncertainty and adds new disclosure requirements. The new disclosure requirements include disclosing the changes in
unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value
measurements held at the end of the reporting period and the range and weighted average of significant unobservable
inputs used to develop Level 3 fair value measurements. This new guidance is effective for the Company beginning on
January 1, 2020, with early adoption permitted. Certain disclosure requirements in the new guidance will need to be
applied on a retrospective basis and others on a prospective basis. While the Company is currently assessing the impact of
the new guidance, it is not expected to have a material impact on the Company’s Consolidated Financial Statements.
In February 2018, the FASB issued ASU No. 2018-02, “Income Statement–Reporting Comprehensive Income (Topic
220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income” (“ASU 2018-02”), which
permits the reclassification of stranded tax effects resulting from the Tax Cuts and Jobs Act (the “TCJA” or “U.S. tax
reform”) from Accumulated other comprehensive income (loss) to Retained earnings. This new guidance is effective for
the Company beginning on January 1, 2019, with early adoption permitted, and must be applied either in the period of
adoption or retrospectively to periods in which the effects of the TCJA are recognized. The Company elected to adopt this
new guidance early, beginning on January 1, 2018, and reclassified $163 during the first quarter of 2018.
In August 2017, the FASB issued ASU No. 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements
to Accounting for Hedging Activities,” amending the eligibility criteria for hedged items and transactions to expand an
entity’s ability to hedge nonfinancial and financial risk components. The new guidance eliminates the requirement to
separately measure and present hedge ineffectiveness and aligns the presentation of hedge gains and losses with the
underlying hedge item. The new guidance also simplifies the hedge documentation and hedge effectiveness assessment
requirements. The new guidance is effective for the Company beginning on January 1, 2019, with early adoption permitted.
The amended presentation and disclosure requirements must be adopted on a prospective basis, while any amendments to
cash flow and net investment hedge relationships that exist on the date of adoption must be applied on a “modified
retrospective” basis, meaning a cumulative effect adjustment to the opening balance of retained earnings as of the
beginning of the year of adoption. The new guidance is not expected to have a material impact on the Company’s
Consolidated Financial Statements.
In October 2018, the FASB issued ASU No. 2018-16, “Derivatives and Hedging (Topic 815): Inclusion of the Secured
Overnight Financing Rate (“SOFR”) Overnight Index Swap (“OIS”) Rate as Benchmark Interest Rate for Hedge
Accounting Purposes.” The new guidance permits use of the OIS rate based on the SOFR as a U.S. benchmark interest rate
for hedge accounting purposes under Topic 815. The new guidance is effective for the Company beginning on January 1,
2019, concurrently with the adoption of ASU 2017-12, with early adoption permitted. The new guidance is required to be
applied on a prospective basis. While the Company is currently assessing the impact of the new guidance, it is not expected
to have a material impact on the Company’s Consolidated Financial Statements.
In May 2017, the FASB issued ASU No. 2017-09, “Compensation–Stock Compensation (Topic 718): Scope of
Modification Accounting,” clarifying when a change to the terms or conditions of a stock-based payment award must be
accounted for as a modification. The new guidance requires modification accounting if the fair value, vesting condition or
the classification of the award is not the same immediately before and after a change to the terms and conditions of the
award. The new guidance was effective for the Company on a prospective basis beginning on January 1, 2018 and did not
impact the Company’s Consolidated Financial Statements, as it is not the Company’s practice to change either the terms or
the conditions of stock-based payment awards once they are granted.
75
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
In March 2017, the FASB issued ASU No. 2017-07, “Compensation–Retirement Benefits (Topic 715): Improving the
Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost,” changing the presentation of the
net periodic benefit cost on the Statement of Income and limiting the amount of net periodic benefit cost eligible for
capitalization to assets. The new guidance permits only the service cost component of net periodic benefit cost to be
eligible for capitalization. The new guidance also requires entities to present the service cost component of net periodic
benefit cost together with compensation costs arising from services rendered by employees during the period. The non-
service related components of net periodic benefit cost, which include interest, expected return on assets, amortization of
prior service costs and actuarial gains and losses, are required to be presented outside of Operating profit. The line item or
items used to present the other components of net periodic benefit cost must be disclosed in the Notes to the Consolidated
Financial Statements, if not separately described on the Statement of Income. The new presentation requirement was
adopted on a “full retrospective” basis, meaning the standard is applied to all of the periods presented in the financial
statements, while the limitation on capitalization was adopted on a prospective basis. Effective January 1, 2018, as
required, the Company adopted this standard on a retrospective basis. As permitted by the new guidance, the Company
used the amounts disclosed in its pension and other postretirement benefit plan note for the prior comparative periods as
the basis for applying the retrospective presentation requirements. As a result, for all periods presented, only the service
related component of pension and other postretirement benefit costs is included in Operating profit. For the years ended
December 31, 2017 and 2016, the Company reclassified $118 and $118, respectively, of non-service related components of
pension and other postretirement costs, which was previously deducted from Operating profit, to a new line item, “Non-
service related postretirement costs,” which is below Operating profit. Adoption of this standard had no effect on Net
income attributable to Colgate-Palmolive Company, Earnings per common share or Cash flow.
In January 2017, the FASB issued ASU No. 2017-04, “Intangibles–Goodwill and Other (Topic 350): Simplifying the
Test for Goodwill Impairment,” eliminating the requirement to calculate the implied fair value, essentially eliminating step
two from the goodwill impairment test. The new standard requires goodwill impairment to be based upon the results of step
one of the impairment test, which is defined as the excess of the carrying value of a reporting unit over its fair value. The
impairment charge will be limited to the amount of goodwill allocated to that reporting unit. The standard is effective for
the Company on a prospective basis beginning on January 1, 2020, with early adoption permitted. This new guidance is not
expected to have an impact on the Company’s Consolidated Financial Statements.
In January 2017, the FASB issued ASU No. 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of
a Business,” which provides additional guidance on evaluating whether transactions should be accounted for as
acquisitions of assets or businesses. The guidance requires an entity to evaluate if substantially all of the fair value of the
assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets. If this threshold is met,
the new guidance would define this as an asset acquisition; otherwise, the entity then evaluates whether the asset meets the
requirement that a business include, at a minimum, an input and substantive process that together significantly contribute to
the ability to create outputs. The guidance was effective for the Company on a prospective basis beginning on January 1,
2018. This new guidance did not have an impact on the Company’s Consolidated Financial Statements.
In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain
Cash Receipts and Cash Payments,” which clarifies how certain cash receipts and payments are to be presented in the
statement of cash flows. The guidance was effective for the Company on January 1, 2018. This new guidance did not have
an impact on the Company’s Consolidated Financial Statements.
76
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
In February 2016, the FASB issued its final standard on lease accounting, ASU No. 2016-02, “Leases (Topic 842),”
which superseded Topic 840, “Leases.” The new accounting standard was effective for the Company beginning on January
1, 2019 and required the recognition on the balance sheet of right-of-use assets and lease liabilities for all long-term leases,
including operating leases, and enhanced disclosures about the Company’s leasing arrangements. Substantially all of the
Company’s leases are considered operating leases and, as such, under accounting standards in effect at December 31, 2018,
were not recognized on the Company’s Consolidated Balance Sheets as of December 31, 2018 and 2017. In July 2018, the
FASB issued ASU No. 2018-10, “Codification Improvements to Topic 842, Leases” to clarify the implementation guidance
and ASU No. 2018-11, “Leases (Topic 842) Targeted Improvements.” This updated guidance provided an optional
transition method, which allows for the initial application of the new accounting standard at the adoption date and the
recognition of a cumulative-effect adjustment to the opening balance of retained earnings as of the beginning of the period
of adoption. The Company adopted the new standard beginning on January 1, 2019 and elected the optional transition
method with no restatement of prior period amounts. As allowed under the new accounting standard, the Company elected
to apply practical expedients to carry forward the original lease determinations, lease classifications and accounting of
initial direct costs for all asset classes at the time of adoption. The Company also elected not to separate lease components
from non-lease components and to exclude short-term leases from its Consolidated Balance Sheet. The Company’s
adoption of the new standard is expected to result in the recognition of right-of-use assets of approximately $450 and
liabilities of approximately $575, with no material cumulative effect adjustment to its Consolidated Balance Sheet as of the
date of adoption. Adoption of the new standard will not have a material impact on the Company’s Consolidated Statements
of Income or Cash Flows.
In January 2016, the FASB issued ASU No. 2016-01, “Financial Instruments–Overall (Subtopic 825-10): Recognition
and Measurement of Financial Assets and Financial Liabilities.” The updated guidance enhances the reporting model for
financial instruments, which includes amendments to address aspects of recognition, measurement, presentation and
disclosure. The amendment to the standard was effective for the Company beginning on January 1, 2018 and did not have
an impact on the Company’s Consolidated Financial Statements.
In May 2014, the FASB and the International Accounting Standards Board issued their final converged standard on
revenue recognition. The standard, issued as ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” by
the FASB, provides a comprehensive revenue recognition model for all contracts with customers and supersedes current
revenue recognition guidance. The revenue standard contains principles that an entity will apply to determine the
measurement of revenue and timing of when it is recognized. The underlying principle is that an entity will recognize
revenue to depict the transfer of goods or services to its customers at an amount that the entity expects to be entitled to in
exchange for those goods or services. The new standard also includes enhanced disclosures. During 2016, the FASB issued
several accounting updates (ASU No. 2016-08, 2016-10 and 2016-12) to clarify implementation guidance and correct
unintended application of the guidance. The standard allows for either full retrospective adoption or modified retrospective
adoption. The Company adopted the new standard on January 1, 2018, on a “modified retrospective” basis, which did not
have a material impact on the Company’s Consolidated Financial Statements. As required, the Company recognized the
cumulative effect of initially applying the new revenue standard as an adjustment to the 2018 opening balance of retained
earnings. Results for periods beginning on or after January 1, 2018 are presented under Topic 606, “Revenue from
Contracts with Customers,” while prior period amounts are not adjusted and continue to be reported in accordance with the
prior accounting guidance under Topic 605, “Revenue Recognition.”
Reclassifications
Certain prior year amounts have been reclassified to conform to the current year presentation.
3.
Acquisitions and Divestitures
Acquisitions
In January 2018, the Company acquired all of the outstanding equity interests of Physicians Care Alliance, LLC (“PCA
Skin”) and Elta MD Holdings, Inc. (“Elta MD”), professional skin care businesses, for aggregate cash consideration of
approximately $730. With these acquisitions, the Company entered the professional skin care category, which complements
its existing global personal care businesses and resulted in the recognition of additional goodwill.
77
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
Total purchase price consideration of $730 has been allocated to the net assets acquired based on their respective
estimated fair values as follows:
Recognized amounts of assets acquired and liabilities assumed:
Inventories
Other current assets
Other intangible assets
Goodwill
Other current liabilities
Deferred income taxes
Fair value of net assets acquired
$
$
8
8
369
397
(6)
(46)
730
Other intangible assets acquired primarily include trademarks of $231 with useful lives of 25 years and customer
relationships of $133 with useful lives ranging from 12 to 13 years.
Goodwill of $397 was allocated to the North America segment. The Company expects that approximately 45% of the
goodwill will be deductible for tax purposes.
Pro forma results of operations have not been presented as the impact on the Company’s Consolidated Financial
Statements is not material.
Sale of Land in Mexico
In September 2016, the Company’s Mexican subsidiary completed the sale to the United States of America of the
Mexico City site on which its commercial operations, technology center and soap production facility were previously
located and received $60 as the third and final installment of the sale price. The total sale price (including the third
installment and the previously received first and second installments) was $120. The Company recognized a pretax gain of
$97 ($63 aftertax or $0.07 per diluted share) in the third quarter of 2016, net of costs primarily related to site preparation.
78
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
4.
Restructuring and Related Implementation Charges
In the fourth quarter of 2012, the Company commenced a restructuring program (the “Global Growth and Efficiency
Program”). The program was expanded in 2014 and expanded and extended in each of 2015 and 2017. The program runs
through December 31, 2019.
Initiatives under the Global Growth and Efficiency Program continue to fit within the program’s three focus areas of
expanding commercial hubs, extending shared business services and streamlining global functions and optimizing the
global supply chain and facilities.
Including the most recent expansion, cumulative pretax charges resulting from the Global Growth and Efficiency
Program, once all phases are approved and implemented, are estimated to be in the range of $1,820 to $1,870 ($1,350 to
$1,380 aftertax). The Company anticipates that pretax charges for 2019 will approximate $100 to $150 ($70 to $100
aftertax). It is expected that substantially all charges resulting from the Global Growth and Efficiency Program will be
incurred by December 31, 2019.
The pretax charges resulting from the Global Growth and Efficiency Program are currently estimated to be comprised
of the following categories: Employee-Related Costs, including severance, pension and other termination benefits (45%);
asset-related costs, primarily Incremental Depreciation and Asset Impairments (5%); and Other charges, which include
contract termination costs, consisting primarily of related implementation charges resulting directly from exit activities
(30%) and the implementation of new strategies (20%). Over the course of the Global Growth and Efficiency Program, it is
currently estimated that approximately 80% of the charges will result in cash expenditures.
The Company expects that the cumulative pretax charges, once all projects are approved and implemented, will relate
to initiatives undertaken in North America (15%), Europe (20%), Latin America (5%), Asia Pacific (5%), Africa/Eurasia
(5%), Hill’s Pet Nutrition (10%) and Corporate (40%), which includes substantially all of the costs related to the
implementation of new strategies, noted above, on a global basis. The Company expects that, when it has been fully
implemented, the Global Growth and Efficiency Program will have contributed a net reduction of approximately 4,000 to
4,400 positions from the Company’s global employee workforce.
For the years ended December 31, 2018, 2017 and 2016, restructuring and related implementation charges are
reflected in the Consolidated Statements of Income as follows:
Cost of sales
Selling, general and administrative expenses
Other (income) expense, net
Non-service related postretirement costs
Total Global Growth and Efficiency Program charges, pretax
Total Global Growth and Efficiency Program charges, aftertax
2018
2017
2016
$
$
$
31
33
88
9
161
125
$
$
$
75
86
152
20
333
246
$
$
$
46
77
93
12
228
168
Restructuring and related implementation charges in the preceding table are recorded in the Corporate segment as
these initiatives are predominantly centrally directed and controlled and are not included in internal measures of segment
operating performance.
79
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
Total charges incurred for the Global Growth and Efficiency Program relate to initiatives undertaken by the following
reportable operating segments:
2018
2017
2016
Program-to-date
Accumulated Charges
North America
Latin America
Europe
Asia Pacific
Africa/Eurasia
Hill’s Pet Nutrition
Corporate
Total
18 %
10 %
(2)%
13 %
5 %
19 %
37 %
100 %
23%
2%
21%
5%
3%
6%
40%
100%
35%
5%
12%
4%
14%
7%
23%
100%
18%
4%
20%
4%
6%
8%
40%
100%
Since the inception of the Global Growth and Efficiency Program in the fourth quarter of 2012, the Company has
incurred cumulative pretax charges of $1,722 ($1,278 aftertax) in connection with the implementation of various projects
as follows:
Employee-Related Costs
Incremental Depreciation
Asset Impairments
Other
Total
Cumulative Charges
as of December 31, 2018
$
$
681
92
52
897
1,722
The majority of costs incurred since inception relate to the following projects: the implementation of the Company’s
overall hubbing strategy; the extension of shared business services and streamlining of global functions; the consolidation
of facilities; the closing of the Morristown, New Jersey personal care facility; the simplification and streamlining of the
Company’s research and development capabilities and oral care supply chain, both in Europe; redesigning the European
commercial organization; restructuring how the Company will provide future retirement benefits to substantially all of the
U.S.-based employees participating in the Company’s defined benefit retirement plan by shifting them to the Company’s
defined contribution plan; and the implementation of a Corporate efficiencies program.
80
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
The following table summarizes the activity for the restructuring and related implementation charges, in the
respective periods, discussed above and the related accruals:
Employee-Related
Costs
Incremental
Depreciation
Asset
Impairments
Balance at January 1, 2016
$
Charges
Cash payments
Charges against assets
Foreign exchange
Other
Balance at December 31, 2016
$
Charges
Cash payments
Charges against assets
Foreign exchange
Other
$
$
84
61
(84)
(4)
(1)
—
56
163
(74)
(21)
3
—
Other
131
$
— $
— $
9
—
(9)
—
—
20
—
(20)
—
—
138
(153)
—
—
9
— $
— $
125
$
10
—
(10)
—
—
9
—
(9)
—
—
151
(170)
—
1
—
Balance at December 31, 2017
$
127
$
— $
— $
107
$
Charges
Cash payments
Charges against assets
Foreign exchange
Other
Balance at December 31, 2018
$
53
(107)
(9)
(4)
—
60
2
—
(2)
—
—
16
—
(16)
—
—
90
(60)
—
—
5
$
— $
— $
142
$
Total
215
228
(237)
(33)
(1)
9
181
333
(244)
(40)
4
—
234
161
(167)
(27)
(4)
5
202
Employee-Related Costs primarily include severance and other termination benefits and are calculated based on long-
standing benefit practices, local statutory requirements and, in certain cases, voluntary termination arrangements.
Employee-Related Costs also include pension and other retiree benefit enhancements amounting to $9, $21 and $4 for the
years ended December 31, 2018, 2017 and 2016, respectively, which are reflected as Charges against assets within
Employee-Related Costs in the preceding table as the corresponding balance sheet amounts are reflected as a reduction of
pension assets or an increase in pension and other retiree benefit liabilities (see Note 10, Retirement Plans and Other
Retiree Benefits for additional information).
Incremental Depreciation is recorded to reflect changes in useful lives and estimated residual values for long-lived
assets that will be taken out of service prior to the end of their normal service period. Asset Impairments are recorded to
write down inventories and assets held for sale or disposal to their fair value based on amounts expected to be realized.
Charges against assets within Asset Impairments are net of cash proceeds pertaining to the sale of certain assets.
Other charges consist primarily of charges resulting directly from exit activities and the implementation of new
strategies as a result of the Global Growth and Efficiency Program. These charges for the years ended December 31, 2018,
2017 and 2016 include third-party incremental costs related to the development and implementation of new business and
strategic initiatives of $42, $145 and $116, respectively, and contract termination costs and charges resulting directly from
exit activities of $48, $6 and $21, respectively. These charges were expensed as incurred. Also included in Other charges
for the years ended December 31, 2018, 2017 and 2016 are other exit costs of $0, $0 and $1, respectively, related to the
consolidation of facilities.
81
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
5.
Goodwill and Other Intangible Assets
The net carrying value of Goodwill as of December 31, 2018 and 2017 by segment was as follows:
Oral, Personal and Home Care
North America
Latin America
Europe
Asia Pacific
Africa/Eurasia
Total Oral, Personal and Home Care
Pet Nutrition
Total Goodwill
2018
2017
$
$
733
220
1,302
185
75
2,515
15
2,530
$
$
343
256
1,333
190
81
2,203
15
2,218
The change in the amount of Goodwill during 2018 is primarily due to the acquisitions of PCA Skin and Elta MD (See
Note 3, Acquisitions and Divestitures for further information), which resulted in the recognition of Goodwill in the amount
of $397, and the impact of foreign currency translation.
Other intangible assets as of December 31, 2018 and 2017 were comprised of the following:
2018
2017
Trademarks
Other finite life intangible assets
Indefinite life intangible assets
Total Other intangible assets
Gross
Carrying
Amount
$
$
771
390
967
2,128
$
Accumulated
Amortization
$
Gross
Carrying
Amount
547
249
985
1,781
Net
413
257
967
1,637
$
$
$
Accumulated
Amortization
$
Net
210
146
985
1,341
(337) $
(103)
—
(440) $
(358) $
(133)
—
(491) $
The changes in the net carrying amounts of Other intangible assets during 2018 and 2017 were primarily due to
amortization expense of $59 and $35, respectively, as well as the impact of foreign currency translation. In addition, in
2018, Trademarks included $231 and Other finite life intangible assets included customer relationships of $133 acquired in
connection with the acquisitions of PCA Skin and Elta MD (See Note 3, Acquisitions and Divestitures for further
information). Annual estimated amortization expense for each of the next five years is expected to be approximately $50.
82
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
6.
Long-Term Debt and Credit Facilities
Long-term debt consisted of the following at December 31:
Notes
Commercial paper
Less: Current portion of long-term debt
Total
Weighted
Average
Interest Rate
2.8%
2.5%
Maturities
2019 - 2078
2019
2018
$ 5,820
534
6,354
—
$ 6,354
2017
$ 6,542
24
6,566
—
$ 6,566
The weighted-average interest rate on short-term borrowings included in Notes and loans payable in the Consolidated
Balance Sheets as of December 31, 2018 and 2017 was 5.3% and 2.8%, respectively.
The Company classifies commercial paper and notes maturing within the next twelve months as long-term debt when
it has the intent and ability to refinance such obligations on a long-term basis. Excluding such obligations, scheduled
maturities of long-term debt and capitalized leases outstanding as of December 31, 2018, were as follows:
Years Ended December 31,
2019
2020
2021
2022
2023
Thereafter
$
—
249
298
886
893
2,422
The Company has entered into interest rate swap agreements and foreign exchange contracts related to certain of these
debt instruments. See Note 7, Fair Value Measurements and Financial Instruments for further information about the
Company’s financial instruments.
The Company’s debt issuances support its capital structure strategy objectives of funding its business and growth
initiatives while minimizing its risk-adjusted cost of capital. During the fourth quarter of 2017, the Company issued $400
of five-year notes at a fixed rate of 2.25%. During the third quarter of 2017, the Company issued $500 of thirty-year notes
at a fixed rate of 3.70%. The debt issuances in 2017 were under the Company’s shelf registration statement. Proceeds from
the debt issuances in 2017 were used for general corporate purposes which included the retirement of commercial paper
borrowings.
At December 31, 2018, the Company had access to unused domestic and foreign lines of credit of $3,023 (including
under the facility discussed below) and could also issue medium-term notes pursuant to an effective shelf registration
statement. In November 2018, the Company amended and restated its five-year revolving credit facility, on substantially
similar terms, for a five-year term expiring November 2023 and increasing the facility’s capacity to $2,650. Commitment
fees related to the credit facility are not material.
Certain agreements with respect to the Company’s bank borrowings contain financial and other covenants as well as
cross-default provisions. Noncompliance with these requirements could ultimately result in the acceleration of amounts
owed. The Company is in full compliance with all such requirements and believes the likelihood of noncompliance is
remote.
83
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
7.
Fair Value Measurements and Financial Instruments
The Company uses available market information and other valuation methodologies in assessing the fair value of
financial instruments. Judgment is required in interpreting market data to develop the estimates of fair value and,
accordingly, changes in assumptions or the estimation methodologies may affect the fair value estimates. The Company is
exposed to the risk of credit loss in the event of nonperformance by counterparties to financial instrument contracts;
however, nonperformance is considered unlikely and any nonperformance is unlikely to be material, as it is the Company’s
policy to contract only with diverse, credit-worthy counterparties based upon both strong credit ratings and other credit
considerations.
The Company is exposed to market risk from foreign currency exchange rates, interest rates and commodity price
fluctuations. Volatility relating to these exposures is managed on a global basis by utilizing a number of techniques,
including working capital management, sourcing strategies, selling price increases, selective borrowings in local currencies
and entering into selective derivative instrument transactions, issued with standard features, in accordance with the
Company’s treasury and risk management policies, which prohibit the use of derivatives for speculative purposes and
leveraged derivatives for any purpose. It is the Company’s policy to enter into derivative instrument contracts with terms
that match the underlying exposure being hedged. Hedge ineffectiveness, if any, is not material for any period
presented. Provided below are details of the Company’s exposures by type of risk and derivative instruments by type of
hedge designation.
Valuation Considerations
Assets and liabilities carried at fair value are classified as follows:
Level 1: Based upon quoted market prices in active markets for identical assets or liabilities.
Level 2: Based upon observable market-based inputs or unobservable inputs that are corroborated by market data.
Level 3: Based upon unobservable inputs reflecting the reporting entity’s own assumptions.
Foreign Exchange Risk
As the Company markets its products in over 200 countries and territories, it is exposed to currency fluctuations
related to manufacturing and selling its products in currencies other than the U.S. dollar. The Company manages its foreign
currency exposures through a combination of cost containment measures, sourcing strategies, selling price increases and
the hedging of certain costs in an effort to minimize the impact on earnings of foreign currency rate movements.
The Company primarily utilizes foreign currency contracts, including forward and swap contracts, option contracts,
foreign and local currency deposits and local currency borrowings to hedge portions of its foreign currency purchases,
assets and liabilities arising in the normal course of business and the net investment in certain foreign subsidiaries. The
duration of foreign currency contracts generally does not exceed 12 months and the contracts are valued using observable
market rates (Level 2 valuation).
Interest Rate Risk
The Company manages its targeted mix of fixed and floating rate debt with debt issuances and by entering into interest
rate swaps in order to mitigate fluctuations in earnings and cash flows that may result from interest rate volatility. The
notional amount, interest payment and maturity date of the swaps generally match the principal, interest payment and
maturity date of the related debt, and the swaps are valued using observable benchmark rates (Level 2 valuation).
84
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
Commodity Price Risk
The Company is exposed to price volatility related to raw materials used in production, such as resins, pulp, essential
oils, tropical oils, tallow, poultry, corn and soybeans. The Company manages its raw material exposures through a
combination of cost containment measures, sourcing strategies, ongoing productivity initiatives and the limited use of
commodity hedging contracts. Futures contracts are used on a limited basis, primarily in the Hill’s Pet Nutrition segment,
to manage volatility related to raw material inventory purchases of certain traded commodities, and these contracts are
measured using quoted commodity exchange prices (Level 1 valuation). The duration of the commodity contracts generally
does not exceed 12 months.
Credit Risk
The Company is exposed to the risk of credit loss in the event of nonperformance by counterparties to financial
instrument contracts; however, nonperformance is considered unlikely and any nonperformance is unlikely to be material
as it is the Company’s policy to contract with diverse, credit-worthy counterparties based upon both strong credit ratings
and other credit considerations.
The following table summarizes the fair value of the Company’s derivative instruments and other financial instruments
at December 31, 2018 and December 31, 2017:
Designated derivative
instruments
Interest rate swap contracts
Assets
Liabilities
Account
Fair Value
Account
Fair Value
12/31/18
12/31/17
12/31/18
12/31/17
Other current
assets
$
— $
— Other accruals
$
1
8
8
21
—
38
$
$
—
7
20
46
—
73
Interest rate swap contracts
Other assets
Foreign currency contracts
Foreign currency contracts
Commodity contracts
Total designated
Other financial instruments
Marketable securities
Total other financial
instruments
Other current
assets
Other assets
Other current
assets
Other current
assets
—
20
—
—
20
10
10
$
$
$
— Other liabilities
25 Other accruals
— Other liabilities
— Other accruals
$
$
$
$
25
14
14
85
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
The carrying amount of cash, cash equivalents, accounts receivable and short-term debt approximated fair value as of
December 31, 2018 and 2017. The estimated fair value of the Company’s long-term debt, including the current portion, as
of December 31, 2018 and 2017, was $6,434 and $6,799, respectively, and the related carrying value was $6,354 and
$6,566, respectively. The estimated fair value of long-term debt was derived principally from quoted prices on the
Company’s outstanding fixed-term notes (Level 2 valuation).
Fair Value Hedges
The Company has designated all interest rate swap contracts and certain foreign currency forward and option contracts
as fair value hedges, for which the gain or loss on the derivative and the offsetting gain or loss on the hedged item are
recognized in current earnings. The impact of foreign currency contracts is primarily recognized in Selling, general and
administrative expenses and the impact of interest rate swap contracts is recognized in Interest (income) expense, net.
Activity related to fair value hedges recorded during each period presented was as follows:
Foreign
Currency
Contracts
2018
Interest
Rate
Swaps
Foreign
Currency
Contracts
Total
2017
Interest
Rate
Swaps
Total
Notional Value at December 31,
$
327
$
Gain (loss) on derivatives
Gain (loss) on hedged items
Cash Flow Hedges
(1)
1
$
900
(2)
2
$ 1,227
(3)
3
$
1,231
(7)
7
1,000
(9)
9
$ 2,231
(16)
16
All of the Company’s commodity contracts and certain foreign currency forward contracts have been designated as
cash flow hedges, for which the effective portion of the gain or loss is reported as a component of Other comprehensive
income (“OCI”) and reclassified into earnings in the same period or periods during which the hedged transaction affects
earnings.
Activity related to cash flow hedges recorded during each period presented was as follows:
2018
Foreign
Currency
Contracts
Commodity
Contracts
Notional Value at December 31,
$
782
$
Gain (loss) recognized in OCI
Gain (loss) reclassified into Cost of sales
10
(4)
14
—
1
2017
Foreign
Currency
Contracts
Commodity
Contracts
Total
702
(25)
(3)
$
— $
—
—
702
(25)
(3)
Total
$
796
$
10
(3)
The net gain (loss) recognized in OCI for both foreign currency contracts and commodity contracts is generally
expected to be recognized in Cost of sales within the next twelve months.
86
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
Net Investment Hedges
The Company has designated certain foreign currency forward and option contracts and certain foreign currency-
denominated debt as net investment hedges, for which the gain or loss on the instrument is reported as a component of
Cumulative translation adjustments within OCI, along with the offsetting gain or loss on the hedged items.
Activity related to net investment hedges recorded during each period presented was as follows:
Foreign
Currency
Contracts
2018
Foreign
Currency
Debt
Foreign
Currency
Contracts
Total
2017
Foreign
Currency
Debt
Total
Notional Value at December 31,
$
482
$
1,396
$ 1,878
$
Gain (loss) on instruments
Gain (loss) on hedged items
33
(33)
93
(93)
126
(126)
$
478
(71)
71
601
(112)
112
$ 1,079
(183)
183
87
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
8.
Capital Stock and Stock-Based Compensation Plans
Preference Stock
The Company has the authority to issue 50,262,150 shares of preference stock.
Stock Repurchases
On June 18, 2018, the Board authorized the repurchase of shares of the Company’s common stock having an aggregate
purchase price of up to $5 billion under a new share repurchase program (the “2018 Program”), which replaced a
previously authorized share repurchase program (the “2015 Program”). The Company commenced repurchases of shares of
the Company’s common stock under the 2018 Program beginning June 19, 2018. The Board also has authorized share
repurchases on an ongoing basis to fulfill certain requirements of the Company’s compensation and benefit programs. The
shares are repurchased from time to time in open market or privately negotiated transactions at the Company’s discretion,
subject to market conditions, customary blackout periods and other factors. The Company repurchased its common stock at
a cost of $1,238 during 2018 under the 2018 Program and 2015 Program.
The Company may use either authorized and unissued shares or treasury shares to meet share requirements resulting
from the exercise of stock options and the vesting of restricted stock unit awards.
A summary of common stock and treasury stock activity for the three years ended December 31, is as follows:
Common
Stock
Outstanding
892,738,518
Treasury
Stock
572,967,842
(19,271,304)
8,536,639
1,105,110
883,108,963
19,271,304
(8,536,639)
(1,105,110)
582,597,397
(19,185,828)
9,670,988
1,106,995
874,701,118
19,185,828
(9,670,988)
(1,106,995)
591,005,242
(18,786,897)
6,040,920
957,651
862,912,792
18,786,897
(6,040,920)
(957,651)
602,793,568
Balance, January 1, 2016
Common stock acquired
Shares issued for stock options
Shares issued for restricted stock units and other
Balance, December 31, 2016
Common stock acquired
Shares issued for stock options
Shares issued for restricted stock units and other
Balance, December 31, 2017
Common stock acquired
Shares issued for stock options
Shares issued for restricted stock units and other
Balance, December 31, 2018
88
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
Stock-Based Compensation
The Company recognizes the cost of employee services received in exchange for awards of equity instruments, such as
stock options and restricted stock units, based on the fair value of those awards at the date of grant. The fair value of
restricted stock units, generally based on market prices, is amortized on a straight-line basis over the requisite service
period. The estimated fair value of stock options on the date of grant is amortized on a straight-line basis over the requisite
service period for each separately vesting portion of the award. Awards to employees eligible for retirement prior to the
award becoming fully vested are recognized as compensation cost from the grant date through the date that the employee
first becomes eligible to retire and is no longer required to provide service to earn the award.
The Company has one incentive compensation plan pursuant to which it issues restricted stock units and stock options
to employees and shares of common stock and stock options to non-employee directors. The Personnel and Organization
Committee of the Board of Directors, which is comprised entirely of independent directors, administers the incentive
compensation plan. The total stock-based compensation expense charged against pretax income for this plan was $109,
$127 and $123 for the years ended December 31, 2018, 2017 and 2016, respectively. The total income tax benefit
recognized on stock-based compensation, excluding excess tax benefits discussed below, was approximately $25, $42 and
$40 for the years ended December 31, 2018, 2017 and 2016, respectively.
Stock-based compensation expense is recorded within Selling, general and administrative expenses in the Corporate
segment as these amounts are not included in internal measures of segment operating performance.
The Company uses the Black-Scholes option pricing model to estimate the fair value of stock option awards. The
weighted-average estimated fair value of stock options granted in the years ended December 31, 2018, 2017 and 2016 was
$9.48, $8.37 and $8.10, respectively. Fair value is estimated using the Black-Scholes option pricing model with the
assumptions summarized in the following table:
Expected term of options
Expected volatility rate
Risk-free interest rate
Expected dividend yield
2018
4.5 years
17.7%
2.8%
2.5%
2017
4.5 years
16.0%
1.8%
2.2%
2016
4.5 years
16.7%
1.2%
2.1%
The weighted-average expected term of options granted each year was determined with reference to historical exercise
and post-vesting cancellation experience, the vesting period of the awards and the contractual term of the awards, among
other factors. Expected volatility incorporates implied share-price volatility derived from exchange traded options on the
Company’s common stock. The risk-free interest rate for the expected term of the option is based on the yield of a zero-
coupon U.S. Treasury bond with a maturity period equal to the option’s expected term.
89
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
Restricted Stock Units
The Company grants restricted stock unit awards, including long-term incentive awards, to officers and other
employees. Under the Company’s long-term incentive plan, awards are granted following a three-year performance period.
Awards vest at the end of the restriction period, which is three years from the date of grant. As of December 31, 2018,
approximately 9,186,000 shares of common stock were available for future restricted stock unit awards.
A summary of restricted stock unit activity during 2018 is presented below:
Restricted stock units as of January 1, 2018
Activity:
Granted
Vested
Forfeited
Restricted stock units as of December 31, 2018
Shares
(in thousands)
2,730
814
(901)
(169)
2,474
Weighted Average
Grant Date Fair Value
Per Award
$
$
70
69
65
70
71
As of December 31, 2018, there was $45 of total unrecognized compensation expense related to unvested restricted
stock unit awards, which will be recognized over a weighted-average period of 2.1 years. The total fair value of restricted
stock units vested during the years ended December 31, 2018, 2017 and 2016 was $55, $66 and $61, respectively.
Stock Options
The Company issues non-qualified stock options to non-employee directors, officers and other employees. Stock
options generally have a contractual term of six years and vest over three years. As of December 31, 2018, 15,604,000
shares of common stock were available for future stock option grants.
A summary of stock option activity during 2018 is presented below:
Options outstanding, January 1, 2018
Granted
Exercised
Forfeited or expired
Options outstanding, December 31, 2018
Options exercisable, December 31, 2018
Shares
(in thousands)
40,979
6,290
(6,669)
(890)
39,710
26,420
$
$
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual Life
(in years)
Intrinsic Value
of Unexercised
In-the-Money
Options
65
68
55
71
67
66
3
3
$
$
1,457
1,457
As of December 31, 2018, there was $38 of total unrecognized compensation expense related to unvested options,
which will be recognized over a weighted-average period of 1.5 years. The total intrinsic value of options exercised during
the years ended December 31, 2018, 2017 and 2016 was $92, $201 and $221, respectively.
90
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
The benefits of tax deductions in excess of grant date fair value resulting from the exercise of stock options and
vesting of restricted stock unit awards for the years ended December 31, 2018, 2017 and 2016 were $12, $47 and $59,
respectively. Through December 31, 2016 these amounts were recognized in equity and were reported as a financing cash
flow. Effective January 1, 2017, as a result of the required adoption of ASU No. 2016-09, excess tax benefits from stock-
based compensation have been recognized in the provision for income taxes as a discrete item in the quarterly period in
which they occur and classified as an operating cash flow. Cash proceeds received from options exercised for the years
ended December 31, 2018, 2017 and 2016 were $329, $507 and $386, respectively.
9.
Employee Stock Ownership Plan
In 1989, the Company expanded its Employee Stock Ownership Plan (“ESOP”) through the introduction of a
leveraged ESOP that funds certain benefits for employees who have met eligibility requirements. As of December 31, 2018
and 2017, there were 15,806,529 and 18,400,412 shares of common stock, respectively, outstanding and issued to the
Company’s ESOP.
During 2000, the ESOP entered into a loan agreement with the Company under which the benefits of the ESOP may be
extended through 2035. As of December 31, 2018, the ESOP had outstanding borrowings from the Company of $3, which
represents unearned compensation shown as a reduction in Shareholders’ equity.
Dividends on stock held by the ESOP are paid to the ESOP trust and, together with cash contributions from the
Company, are (a) used by the ESOP to repay principal and interest, (b) credited to participant accounts or (c) used for
contributions to the Company’s defined contribution plans. Stock is allocated to participants based upon the ratio of the
current year’s debt service to the sum of total outstanding principal and interest payments over the life of the debt. As of
December 31, 2018, 13,237,788 shares of common stock had been released and allocated to participant accounts and
2,568,741 shares of common stock were available for future allocation to participant accounts.
Dividends on the stock used to repay principal and interest or credited to participant accounts are deductible for
income tax purposes and, accordingly, are reflected net of their tax benefit in the Consolidated Statements of Changes in
Shareholders’ Equity.
Annual expense related to the ESOP was $0 in 2018, 2017 and 2016.
The Company paid dividends on the shares held by the ESOP of $29 in 2018, $32 in 2017 and $35 in 2016. The
Company contributed to the ESOP $0 in 2018, 2017 and 2016.
10.
Retirement Plans and Other Retiree Benefits
Retirement Plans
The Company and certain of its U.S. and foreign subsidiaries maintain defined benefit retirement plans. Benefits under
these plans are based primarily on years of service and employees’ earnings.
In the U.S., effective January 1, 2014, the Company provides virtually all future retirement benefits through the
Company’s defined contribution plan. As a result, service after December 31, 2013 is not considered for participants in the
Company’s principal U.S. defined benefit retirement plan. Participants in the Company’s principal U.S. defined benefit
retirement plan whose retirement benefit was determined under the cash balance formula continue to earn interest credits
on their vested balances as of December 31, 2013 but no longer receive pay credits. Participants whose retirement benefit
was determined under the final average earnings formula or career average earnings formula continue to have their accrued
benefit adjusted for pay increases until termination of employment.
91
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
In the Company’s principal U.S. plans and certain funded foreign plans, funds are contributed to trusts in accordance
with regulatory limits to provide for current service and for any unfunded projected benefit obligation over a reasonable
period. The target asset allocation for the Company’s defined benefit plans is as follows:
Asset Category
Equity securities
Fixed income securities
Real estate and other investments
Total
United States
International
22%
60%
18%
100%
37%
43%
20%
100%
At December 31, 2018 the allocation of the Company’s plan assets and the level of valuation input, as applicable, for
each major asset category were as follows:
Level of
Valuation
Input
Level 1
Level 1
Level 1
Level 1
Level 2
Level 2
Cash and cash equivalents
U.S. common stocks
International common stocks
Pooled funds(1)
Fixed income securities(2)
Guaranteed investment contracts(3)
Investments valued using NAV per share(4)
Domestic, developed and emerging markets equity funds
Fixed income funds(5)
Hedge funds(6)
Multi-Asset funds(7)
Real estate funds(8)
Pension Plans
United States
International
Other Retiree
Benefit Plans
$
$
29
75
—
106
865
1
1,076
229
116
56
94
39
534
9
3
4
82
24
51
173
134
173
6
2
22
337
—
510
$
$
1
3
—
4
28
—
36
8
4
2
3
1
18
—
54
Other assets and liabilities, net(9)
Total Investments
(42)
1,568
$
$
92
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
At December 31, 2017 the allocation of the Company’s plan assets and the level of valuation input, as applicable, for
each major asset category were as follows:
Level of
Valuation
Input
Level 1
Level 1
Level 1
Level 1
Level 2
Level 2
Cash and cash equivalents
U.S. common stocks
International common stocks
Pooled funds(1)
Fixed income securities(2)
Guaranteed investment contracts(3)
Investments valued using NAV per share(4)
Domestic, developed and emerging markets equity
funds
Fixed income funds(5)
Hedge funds(6)
Multi-Asset funds(7)
Real estate funds(8)
Pension Plans
United States
International
Other Retiree
Benefit Plans
$
$
21
127
—
138
843
1
1,130
350
122
82
115
38
707
11
4
3
94
24
53
189
189
167
5
3
22
386
—
575
$
$
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Other assets and liabilities, net(9)
Total Investments
(25)
1,812
$
$
_______
(1) Pooled funds primarily invest in U.S. and foreign equity securities, debt and money market securities.
(2) The fixed income securities are traded over the counter and certain of these securities lack daily pricing or liquidity and as such are
classified as Level 2. As of both December 31, 2018 and 2017, approximately 50% of the U.S. pension plan fixed income portfolio
was invested in U.S. treasury or agency securities, with the remainder invested in other government bonds and corporate bonds.
(3) The guaranteed investment contracts (“GICs”) represent contracts with insurance companies measured at the cash surrender value
of each contract. The Level 2 valuation reflects that the cash surrender value is based principally on a referenced pool of investment
funds with active redemption.
(4)
Investments that are measured at fair value using net asset value (“NAV”) per share as a practical expedient have not been classified
in the fair value hierarchy. The NAV is based on the value of the underlying investments owned, minus its liabilities, divided by the
number of shares outstanding. There are no unfunded commitments related to these investments. Redemption notice period
primarily ranges from 0-3 months and redemption frequency windows range from daily to quarterly.
(5) Fixed income funds primarily invest in U.S. government and investment grade corporate bonds.
(6) Consists of investments in underlying hedge fund strategies that are primarily implemented through the use of long and short equity
and fixed income securities and derivative instruments such as futures and options.
(7) Multi-Asset funds primarily invest across a variety of asset classes, including global stocks and bonds, as well as alternative
strategies.
(8) Real estate is valued using the NAV per unit of funds that are invested in real estate property. The investment value of the real estate
property is determined quarterly using independent market appraisals as determined by the investment manager.
(9) This category primarily includes unsettled trades for investments purchased and sold and dividend receivables.
93
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
Equity securities in the U.S. plans include investments in the Company’s common stock representing 5% and 7% of
U.S. plan assets at December 31, 2018 and December 31, 2017, respectively. In 2018 and 2017, the U.S. plans sold
384,004 and 0 shares, respectively, of the Company’s common stock to the Company. No shares of the Company’s stock
were purchased by the U.S. plans in 2018 or 2017. The plans received dividends on the Company’s common stock of $3 in
each of 2018 and 2017.
Other Retiree Benefits
The Company and certain of its subsidiaries provide health care and life insurance benefits for retired employees to the
extent not provided by government-sponsored plans.
The Company uses a December 31 measurement date for its defined benefit and other retiree benefit plans.
Summarized information for the Company’s defined benefit and other retiree benefit plans is as follows:
94
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
Pension Plans
2018
2018
2017
2017
International
United States
Other Retiree
Benefit Plans
2017
2018
Change in Benefit Obligations
Benefit obligations at beginning of year
$ 2,363
$2,298
$ 847
$ 800
$ 960
$
923
Service cost
Interest cost
Participants’ contributions
Acquisitions/plan amendments
Actuarial loss (gain)
Foreign exchange impact
Termination benefits (1)
Curtailments and settlements
Benefit payments
Other
Benefit obligations at end of year
Change in Plan Assets
Fair value of plan assets at beginning of year
Actual return on plan assets
Company contributions
Participants’ contributions
Foreign exchange impact
Settlements and acquisitions
Benefit payments
Other
Fair value of plan assets at end of year
Funded Status
Benefit obligations at end of year
Fair value of plan assets at end of year
Net amount recognized
Amounts Recognized in Balance Sheet
Noncurrent assets
Current liabilities
Noncurrent liabilities
Net amount recognized
Amounts Recognized in Accumulated Other
Comprehensive Income (Loss)
Actuarial loss
Transition/prior service cost
1
86
—
—
(139)
—
9
(4)
(169)
—
1
94
—
—
110
—
24
—
(164)
—
$ 2,147
$2,363
$ 1,812
(101)
30
—
—
(4)
(169)
—
$1,646
225
105
—
—
—
(164)
—
$ 1,568
$1,812
14
21
2
4
(11)
(40)
—
(7)
(42)
(1)
$ 787
$ 575
(16)
27
3
(29)
(7)
(42)
(1)
$ 510
16
22
2
(6)
(11)
72
—
(11)
(36)
(1)
$ 847
16
38
—
—
(88)
(5)
—
—
(45)
—
13
40
—
—
21
3
(3)
—
(37)
—
$ 876
$
960
$ 509
$ — $ —
42
30
2
40
(11)
(36)
(1)
$ 575
(1)
100
—
—
—
(45)
—
—
37
—
—
—
(37)
—
$
54
$ —
$ 2,147
$2,363
$ 787
$ 847
$ 876
$
960
1,568
1,812
510
$ (579) $ (551) $ (277) $ (272) $ (822) $
575
54
—
(960)
$
$ — $ — $
6
(12)
(271)
$ (579) $ (551) $ (277) $ (272) $ (822) $
$ — $ —
(44)
(916)
(960)
22
(13)
(281)
(26)
(553)
(46)
(776)
(24)
(527)
$ 940
$ 911
$ 226
$ 209
1
1
6
1
$ 941
$ 912
$ 232
$ 210
$ 239
(1)
$ 238
$
$
338
(1)
337
Accumulated benefit obligation
$ 2,090
$2,293
$ 731
$ 787
$ — $ —
95
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
Weighted-Average Assumptions Used to Determine Benefit
Obligations
Discount rate
Long-term rate of return on plan assets
Long-term rate of compensation increase
ESOP growth rate
Medical cost trend rate of increase
Pension Plans
2018
2018
2017
2017
International
United States
Other Retiree
Benefit Plans
2017
2018
4.38% 3.73% 2.80% 2.53% 4.43% 3.80%
6.60% 6.60% 4.06% 4.04% 6.60% 6.60%
3.50% 3.50% 2.86% 2.79% 3.50% 3.50%
—% 10.00% 10.00%
—% 6.00% 6.00%
—% —%
—% —%
—%
—%
_________
(1) Represents pension and other retiree benefit enhancements incurred in 2018 and 2017 pursuant to the Global Growth and Efficiency
Program.
The overall investment objective of the plans is to balance risk and return so that obligations to employees are met.
The Company evaluates its long-term rate of return on plan assets on an annual basis. In determining the long-term rate of
return, the Company considers the nature of the plans’ investments and the historical rates of return. The assumed rate of
return as of December 31, 2018 for the U.S. plans was 6.60%. Average annual rates of return for the U.S. plans for the most
recent 1-year, 5-year, 10-year, 15-year and 25-year periods were (5)%, 5%, 8%, 6%, and 7%, respectively. Similar
assessments were performed in determining rates of return on international pension plan assets to arrive at the Company’s
2018 weighted-average rate of return of 4.06%.
The medical cost trend rate of increase assumed in measuring the expected cost of benefits is projected to decrease
from 6.00% in 2019 to 4.75% by 2024, remaining at 4.75% for the years thereafter. Changes in the assumed rate can have a
significant effect on amounts reported. A 1% change in the assumed medical cost trend rate would have the following
approximate effect:
Accumulated postretirement benefit obligation
Total of service and interest cost components
One percentage point
Increase
Decrease
$
$
115
10
(93)
(7)
Expected mortality is a key assumption in the measurement of pension and other postretirement benefit obligations.
For the Company’s U.S. plans, this assumption was updated as of December 31, 2016 in order to reflect the Society of
Actuaries’ updated mortality improvement scale published in October 2016. This resulted in a decrease of 1% and 2% to
the benefit obligations for the Company’s U.S. pension plans and other postretirement benefits, respectively.
96
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
Plans with projected benefit obligations in excess of plan assets and plans with accumulated benefit obligations in
excess of plan assets as of December 31 consisted of the following:
Benefit Obligation Exceeds Fair Value of Plan Assets
Projected benefit obligation
Fair value of plan assets
Accumulated benefit obligation
Fair value of plan assets
Years Ended December 31,
2018
2017
$
$
2,882
2,007
2,689
1,924
2,834
1,992
2,641
1,905
Summarized information regarding the net periodic benefit costs for the Company’s defined benefit and other retiree
benefit plans is as follows:
Pension Plans
2018
2016
2018
2017
United States
2017
International
2016
Other Retiree Benefit Plans
2016
2017
2018
Components of Net Periodic
Benefit Cost
Service cost
Interest cost
Annual ESOP allocation
$
1
86
—
$
1
94
—
$
1
$ 14
$ 16
$ 16
$ 16
$
105
—
21
—
22
—
25
—
Expected return on plan assets
(115)
(111)
(109)
(21)
(22)
(23)
Amortization of transition and
prior service costs (credits)
Amortization of actuarial loss
—
47
—
48
—
41
—
8
—
10
—
8
Net periodic benefit cost
$ 19
$ 32
$ 38
$ 22
$ 26
$ 26
$ 66
Other postretirement charges
9
24
3
2
4
11
—
Total pension cost
$ 28
$ 56
$ 41
$ 24
$ 30
$ 37
$ 66
$
$
38
—
(2)
—
14
13
40
—
—
—
13
66
(3)
63
$ 13
43
—
(1)
—
14
$ 69
1
$ 70
Weighted-Average Assumptions
Used to Determine Net
Periodic Benefit Cost
Discount rate
3.73% 4.27% 4.93% 2.53% 2.59% 3.17% 3.80%
4.41% 4.97%
Long-term rate of return on plan
assets
Long-term rate of compensation
increase
ESOP growth rate
Medical cost trend rate of
increase
6.60% 6.80% 6.80% 4.04% 4.14% 4.62% 6.60%
6.80% 6.80%
3.50% 3.50% 3.50% 2.79% 2.58% 2.78%
—%
—%
—%
—% —% —% —% —% —% 10.00% 10.00% 10.00%
—% —% —% —% —% —% 6.00%
6.33% 6.67%
97
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
Effective January 1, 2018, as required, the Company adopted ASU No. 2017-07, “Compensation-Retirement Benefits
(Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost,” on a
retrospective basis. As a result, for all periods presented, only the service related component of pension and other
postretirement benefit costs is included in Operating profit. The non-service related components (interest cost, expected
return on assets and amortization of actuarial gains and losses) are included in a new line item, “Non-service related
postretirement costs,” which is below Operating profit. Adoption of this standard had no effect on Net income attributable
to Colgate-Palmolive Company, Earnings per common share or Cash flow. See Note 2, Summary of Significant Accounting
Policies to the Consolidated Financial Statements for additional information.
Other postretirement charges in 2018, 2017 and 2016 include pension and other benefit enhancements amounting to
$9, $21 and $4 respectively, incurred pursuant to the Global Growth and Efficiency Program. Other postretirement charges
in 2018 and 2017 also includes charges of $2 and $4, respectively, in part due to retirements under the Global Growth and
Efficiency Program.
The Company made voluntary contributions of $67, $81 and $53 in 2018, 2017 and 2016, respectively, to its U.S.
retirement plans.
The estimated actuarial loss and the estimated transition/prior service cost for defined benefit and other retiree benefit
plans that will be amortized from Accumulated other comprehensive income (loss) into net periodic benefit cost over the
next fiscal year is as follows:
Net actuarial loss
Net transition and prior service cost
Expected Contributions and Benefit Payments
Pension
Plans
$
Other Retiree
Benefit Plans
11
$
—
60
—
Management’s best estimate of voluntary contributions the Company will make to its U.S. postretirement plans for the
year ending December 31, 2019 is approximately $100. Actual funding may differ from current estimates depending on the
variability of the market value of the assets as compared to the obligation and other market or regulatory conditions.
Total benefit payments to be paid to participants for the year ending December 31, 2019 from the Company’s assets
are estimated to be approximately $61. Total benefit payments expected to be paid to participants from plan assets, or
directly from the Company’s assets to participants in unfunded plans, are as follows:
Years Ended December 31,
2019
2020
2021
2022
2023
2024-2028
Pension Plans
United
States
149
146
147
151
151
736
$
International
35
$
35
37
36
40
217
Other
Retiree
Benefit
Plans
$
47
47
48
48
49
256
Total
231
228
232
235
240
1,209
$
98
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
11.
Income Taxes
The components of Income before income taxes are as follows for the years ended December 31:
2018
2017
2016
United States
International
Total Income before income taxes
$
$
1,175
2,289
3,464
The Provision for income taxes consists of the following for the years ended December 31:
United States
International
Total Provision for income taxes
2018
248
658
906
$
$
$
$
$
$
1,072
2,415
3,487
2017
338
975
1,313
$
$
$
$
1,191
2,547
3,738
2016
395
757
1,152
Temporary differences between accounting for financial statement purposes and accounting for tax purposes result in
the current provision for taxes being higher (lower) than the total provision for income taxes as follows:
Goodwill and intangible assets
Property, plant and equipment
Pension and other retiree benefits
Stock-based compensation
Tax credits and tax loss carryforwards
Deferred withholding tax
Other, net
Total deferred tax benefit (provision)
2018
2017
2016
$
$
$
2
(15)
(7)
9
(4)
(100)
62
(53) $
$
135
84
(192)
(28)
(4)
(119)
16
(108) $
18
(3)
—
15
5
—
(106)
(71)
99
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
The difference between the statutory U.S. federal income tax rate and the Company’s global effective tax rate as
reflected in the Consolidated Statements of Income is as follows:
Percentage of Income before income taxes
2018
2017
2016
Tax at United States statutory rate
State income taxes, net of federal benefit
Earnings taxed at other than United States statutory rate
Charge for U.S. tax reform(1)
Excess tax benefits from stock-based compensation(2)
Foreign Tax Credit Carryback(5)
(Benefit) charge for foreign tax matters(3)
(Benefit) from Venezuela remeasurement(4)
Tax charge on incremental repatriation of foreign earnings(4)
Other, net
Effective tax rate
21.0%
1.0
4.5
2.3
(0.3)
(1.7)
(0.4)
—
—
(0.2)
26.2%
35.0%
0.5
(3.4)
7.9
(1.4)
—
—
—
—
(0.9)
37.7%
35.0%
0.5
(2.7)
—
—
—
(0.8)
(5.6)
5.6
(1.2)
30.8%
_________
(1) On December 22, 2017, the TCJA was enacted, which, among other things, lowered the U.S. corporate income tax rate to 21% from 35% and
established a modified territorial system requiring a mandatory deemed repatriation tax on undistributed earnings of foreign subsidiaries. Beginning
in 2018, the TCJA also requires a minimum tax on certain earnings generated by foreign subsidiaries while providing for tax-free repatriation of
such earnings through a 100% dividends-received deduction. The Company’s effective income tax rate in 2017 included a provisional charge
of $275, recorded in the fourth quarter of 2017, based on its initial analysis of the TCJA using information and estimates available as of February 15,
2018, the date on which the Company filed its Annual Report on Form 10-K for the year ended December 31, 2017. During 2018, the Company
finalized its assessment of the impact of the TCJA and recognized an additional tax expense of $80 reflecting the impact of transition tax guidance
issued by the U.S. Treasury and the update of certain estimates and calculations based on information available through the end of 2018. Any further
guidance issued after December 31, 2018 may have an impact to the Company’s Provision for income tax in the period such guidance is effective.
(2) As a result of adopting ASU No. 2016-09 “Compensation–Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment
Accounting,” effective January 1, 2017, the Company recognized excess tax benefits from stock-based compensation of $12 and $47 (resulting from
an increase in the fair value of an award from the grant date to the vesting or exercise date, as applicable) in the Provision for income taxes as a
discrete item during the years ended December 31, 2018 and 2017, respectively. These amounts may not necessarily be indicative of future amounts
that may be recognized as any excess tax benefits from stock-based compensation recognized would be dependent on future stock price, employee
exercise behavior and applicable tax rates. Prior to January 1, 2017, excess tax benefits from stock-based compensation were recognized in equity.
See Note 2, Summary of Significant Accounting Policies - Recent Accounting Pronouncements for additional information.
(3) The benefit from a tax matter in 2016 relates to several Supreme Court and Administrative Court rulings in a foreign jurisdiction allowing certain tax
deductions which had the effect of reversing prior decisions.
(4) The effective tax rate in 2016 included a $210 U.S. income tax benefit principally related to changes in Venezuela’s foreign exchange regime
implemented in March 2016. Although, effective December 31, 2015, the operating results of the Company’s Venezuelan subsidiary (“CP
Venezuela”) are no longer included in the Company’s Consolidated Financial Statements, under current tax rules, the Company is required to
continue including CP Venezuela’s results in its consolidated U.S. federal income tax return. In order to fully utilize the above mentioned $210 tax
benefit in 2016, the Company repatriated an incremental $1,500 of earnings of foreign subsidiaries it previously considered indefinitely reinvested
outside of the U.S., and accordingly, recorded a tax charge of $210.
(5)
In 2018, the Company generated excess foreign taxes associated with its foreign branch operations which are being carried back to 2017. This item
is not expected to be recurring.
100
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
The components of deferred tax assets (liabilities) are as follows at December 31:
Deferred tax liabilities:
Goodwill and intangible assets
Property, plant and equipment
Deferred withholding tax
Other
Total deferred tax liabilities
Deferred tax assets:
Pension and other retiree benefits
Tax credits and tax loss carryforwards
Accrued liabilities
Stock-based compensation
Other
Total deferred tax assets
Valuation Allowance
Net deferred tax assets
Net deferred income taxes
Deferred taxes included within:
Assets:
Deferred income taxes
Liabilities:
Deferred income taxes
Net deferred income taxes
2018
2017
(344) $
(311)
(181)
(75)
(911)
354
89
180
95
164
882
(54) $
$
828
(83) $
(311)
(306)
(119)
(63)
(799)
375
48
197
90
82
792
(9)
783
(16)
2018
2017
152
$
188
(235)
(83) $
(204)
(16)
$
$
$
$
$
$
Applicable U.S. income and foreign withholding taxes have been provided on substantially all of the Company’s
accumulated earnings of foreign subsidiaries.
Net tax benefit of $2 in 2018, net tax benefit of $37 in 2017, and net tax benefit of $85 in 2016 were recorded directly
through equity. The net tax benefit in 2018 predominantly includes current and future tax impacts related to benefit plans.
The amounts in 2017 and 2016 include current and future tax impacts related to employee equity compensation and benefit
plans.
The Company uses a comprehensive model to recognize, measure, present and disclose in its financial statements
uncertain tax positions that the Company has taken or expects to take on an income tax return.
101
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
Unrecognized tax benefits activity for the years ended December 31, 2018, 2017 and 2016 is summarized below:
Unrecognized tax benefits:
Balance, January 1
Increases as a result of tax positions taken during the current year
Decreases of tax positions taken during prior years
Increases of tax positions taken during prior years
Decreases as a result of settlements with taxing authorities and the expiration of
statutes of limitations
Effect of foreign currency rate movements
Balance, December 31
2018
2017
2016
$
$
214
14
(37)
9
(6)
(4)
190
$
$
201
13
(9)
15
(15)
9
214
$
$
186
9
(45)
71
(18)
(2)
201
If all of the unrecognized tax benefits for 2018 above were recognized, approximately $180 would impact the effective
tax rate and would result in a cash outflow of approximately $186. Although it is possible that the amount of unrecognized
benefits with respect to our uncertain tax positions will increase or decrease in the next 12 months, the Company does not
expect material changes.
The Company recognized approximately $1 of interest benefit and approximately $11 and $2 of interest expense
related to the above unrecognized tax benefits within income tax expense in 2018, 2017 and 2016, respectively. The
Company had accrued interest of approximately $27, $28 and $17 as of December 31, 2018, 2017 and 2016, respectively.
The Company and its subsidiaries file U.S. federal income tax returns as well as income tax returns in many state and
foreign jurisdictions. All U.S. federal income tax returns through December 31, 2011 have been audited by the IRS and
there are limited matters which the Company plans to appeal for years 2010 through 2011, the settlement of which is not
expected to have a material adverse effect on the Company’s results of operations, cash flows or financial condition. With a
few exceptions, the Company is no longer subject to U.S. state and local income tax examinations for income tax returns
through December 31, 2013. In addition, the Company has subsidiaries in various foreign jurisdictions that have statutes of
limitations for tax audits generally ranging from three to six years.
The Company has made an accounting policy election to treat Global Intangible Low-Taxed Income taxes as a current
period expense rather than including these amounts in the measurement of deferred taxes.
102
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
12.
Earnings Per Share
For the years ended December 31, 2018, 2017 and 2016, earnings per share were as follows:
2018
2017
2016
Net
income
attributable
to Colgate-
Palmolive
Company
$
2,400
Net
income
attributable
to Colgate-
Palmolive
Company
Shares
(millions)
Per
Share
Net
income
attributable
to Colgate-
Palmolive
Company
Shares
(millions)
Per
Share
Shares
(millions)
Per
Share
870.6
$2.76
$
2,024
881.8
$2.30
$
2,441
891.8
$ 2.74
2.4
6.0
6.6
$
2,400
873.0
$2.75
$
2,024
887.8
$2.28
$
2,441
898.4
$ 2.72
Basic EPS
Stock options
and restricted
stock units
Diluted EPS
Basic earnings per common share is computed by dividing net income available for common stockholders by the
weighted-average number of shares of common stock outstanding for the period.
Diluted earnings per common share is computed using the treasury stock method on the basis of the weighted-average
number of shares of common stock plus the dilutive effect of potential common shares outstanding during the period.
Dilutive potential common shares include outstanding stock options and restricted stock units.
As of December 31, 2018, 2017 and 2016, the average number of stock options that were anti-dilutive and not
included in diluted earnings per share calculations were 18,039,961, 11,056,725 and 3,187,485, respectively. As of
December 31, 2018, 2017 and 2016, the average number of restricted stock units that were anti-dilutive and not included in
diluted earnings per share calculations were 9,529, 91 and 2,693, respectively.
103
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
13.
Commitments and Contingencies
Minimum rental commitments under noncancellable operating leases, primarily for office and warehouse
facilities, are $193 in 2019, $165 in 2020, $123 in 2021, $102 in 2022, $51 in 2023 and $32 thereafter. Rental expense
amounted to $213 in 2018, $211 in 2017 and $204 in 2016. Capital leases included in fixed assets, contingent rentals
and sublease income are not significant. The Company has various contractual commitments to purchase raw,
packaging and other materials totaling approximately $440 at December 31, 2018.
As a global company serving consumers in more than 200 countries and territories, the Company is routinely
subject to a wide variety of legal proceedings. These include disputes relating to intellectual property, contracts,
product liability, marketing, advertising, foreign exchange controls, antitrust and trade regulation, as well as labor and
employment, pension, data privacy and security, environmental and tax matters and consumer class actions.
Management proactively reviews and monitors the Company’s exposure to, and the impact of, environmental matters.
The Company is party to various environmental matters and, as such, may be responsible for all or a portion of the
cleanup, restoration and post-closure monitoring of several sites.
The Company establishes accruals for loss contingencies when it has determined that a loss is probable and that
the amount of loss, or range of loss, can be reasonably estimated. Any such accruals are adjusted thereafter as
appropriate to reflect changes in circumstances.
The Company also determines estimates of reasonably possible losses or ranges of reasonably possible losses in
excess of related accrued liabilities, if any, when it has determined that a loss is reasonably possible and it is able to
determine such estimates. For those matters disclosed below for which the amount of any potential losses can be
reasonably estimated, the Company currently estimates that the aggregate range of reasonably possible losses in excess
of any accrued liabilities is $0 to approximately $225 (based on current exchange rates). The estimates included in this
amount are based on the Company’s analysis of currently available information and, as new information is obtained,
these estimates may change. Due to the inherent subjectivity of the assessments and the unpredictability of outcomes
of legal proceedings, any amounts accrued or included in this aggregate amount may not represent the ultimate loss to
the Company. Thus, the Company’s exposure and ultimate losses may be higher or lower, and possibly significantly
so, than the amounts accrued or the range disclosed above.
Based on current knowledge, management does not believe that the ultimate resolution of loss contingencies
arising from the matters discussed herein will have a material effect on the Company’s consolidated financial position
or its ongoing results of operations or cash flows. However, in light of the inherent uncertainties noted above, an
adverse outcome in one or more matters could be material to the Company’s results of operations or cash flows for any
particular quarter or year.
Brazilian Matters
There are certain tax and civil proceedings outstanding, as described below, related to the Company’s 1995
acquisition of the Kolynos oral care business from Wyeth (the “Seller”).
The Brazilian internal revenue authority has disallowed interest deductions and foreign exchange losses taken by
the Company’s Brazilian subsidiary for certain years in connection with the financing of the Kolynos acquisition. The
tax assessments with interest, penalties and any court-mandated fees, at the current exchange rate, are approximately
$151. This amount includes additional assessments received from the Brazilian internal revenue authority in April
2016 relating to net operating loss carryforwards used by the Company’s Brazilian subsidiary to offset taxable income
that had also been deducted from the authority’s original assessments. The Company has been disputing the
disallowances by appealing the assessments since October 2001. Appeals are currently pending at the administrative
level. In the event the Company is ultimately unsuccessful in its administrative appeals, further appeals are available
within the Brazilian federal courts.
104
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
In September 2015, the Company lost one of its appeals at the administrative level and filed a lawsuit in Brazilian
federal court. In February 2017, the Company lost an additional administrative appeal and filed a lawsuit in Brazilian
federal court. Although there can be no assurances, management believes, based on the opinion of its Brazilian legal
counsel, that the disallowances are without merit and that the Company should ultimately prevail. The Company is
challenging these disallowances vigorously.
In July 2002, the Brazilian Federal Public Attorney filed a civil action against the federal government of Brazil,
Laboratorios Wyeth-Whitehall Ltda. (the Brazilian subsidiary of the Seller) and the Company, as represented by its
Brazilian subsidiary, in the 6th. Lower Federal Court in the City of São Paulo, seeking to annul an April 2000 decision
by the Brazilian Board of Tax Appeals that found in favor of the Seller’s Brazilian subsidiary on the issue of whether it
had incurred taxable capital gains as a result of the divestiture of Kolynos. The action seeks to make the Company’s
Brazilian subsidiary jointly and severally liable for any tax due from the Seller’s Brazilian subsidiary. The case has
been pending since 2002, and the Lower Federal Court has not issued a decision. Although there can be no assurances,
management believes, based on the opinion of its Brazilian legal counsel, that the Company should ultimately prevail
in this action. The Company is challenging this action vigorously.
In December 2005, the Brazilian internal revenue authority issued to the Company’s Brazilian subsidiary a tax
assessment with interest, penalties and any court-mandated fees of approximately $65, at the current exchange rate,
based on a claim that certain purchases of U.S. Treasury bills by the subsidiary and their subsequent disposition during
the period 2000 to 2001 were subject to a tax on foreign exchange transactions. The Company had been disputing the
assessment within the internal revenue authority’s administrative appeals process. However, in November 2015, the
Superior Chamber of Administrative Tax Appeals denied the Company’s final administrative appeal, and the Company
has filed a lawsuit in the Brazilian federal court. In the event the Company is unsuccessful in this lawsuit, further
appeals are available within the Brazilian federal courts. Although there can be no assurances, management believes,
based on the opinion of its Brazilian legal counsel, that the tax assessment is without merit and that the Company
should ultimately prevail. The Company is challenging this assessment vigorously.
Competition Matters
Certain of the Company’s subsidiaries have historically been subject to investigations, and, in some cases, fines,
by governmental authorities in a number of countries related to alleged competition law violations. Substantially all of
these matters also involved other consumer goods companies and/or retail customers. The Company’s policy is to
comply with antitrust and competition laws and, if a violation of any such laws is found, to take appropriate remedial
action and to cooperate fully with any related governmental inquiry. The status of pending competition law matters as
of December 31, 2018 is set forth below.
In December 2014, the French competition law authority found that 13 consumer goods companies,
including the Company’s French subsidiary, exchanged competitively sensitive information related to the
French home care and personal care sectors, for which the Company’s French subsidiary was fined $57.
In addition, as a result of the Company’s acquisition of the Sanex personal care business in 2011 from
Unilever N.V. and Unilever PLC (together with Unilever N.V., “Unilever”) pursuant to a Business and
Share Sale and Purchase Agreement (the “Sale and Purchase Agreement”), the French competition law
authority found that the Company’s French subsidiary, along with Hillshire Brands Company (formerly
Sara Lee Corporation (“Sara Lee”)), were jointly and severally liable for fines of $25 assessed against
Sara Lee’s French subsidiary. The Company is indemnified for these fines by Unilever pursuant to the
Sale and Purchase Agreement. The fines were confirmed by the Court of Appeal in October 2016. The
Company is appealing the decision of the Court of Appeal on behalf of the Company and Sara Lee in the
French Supreme Court.
In July 2014, the Greek competition law authority issued a statement of objections alleging a restriction
of parallel imports into Greece. The Company responded to this statement of objections. In July 2017, the
Company received the decision from the Greek competition law authority in which the Company was
fined $11. The Company is appealing the decision to the Greek courts.
105
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
Talcum Powder Matters
The Company has been named as a defendant in civil actions alleging that certain talcum powder products that
were sold prior to 1996 were contaminated with asbestos. Most of these actions involve a number of co-defendants
from a variety of different industries, including suppliers of asbestos and manufacturers of products that, unlike the
Company’s products, were designed to contain asbestos. As of December 31, 2018, there were 239 individual cases
pending against the Company in state and federal courts throughout the United States, as compared to 193 cases as of
December 31, 2017. During the year ended December 31, 2018, 132 new cases were filed and 86 cases were resolved
by voluntary dismissal, judgment in the Company’s favor or settlement. The value of settlements in the years presented
was not material, either individually or in the aggregate, to each such period’s results of operations.
The Company believes that a significant portion of its costs incurred in defending and resolving these claims will
be covered by insurance policies issued by several primary, excess and umbrella insurance carriers, subject to
deductibles, exclusions, retentions and policy limits.
While the Company and its legal counsel believe that these cases are without merit and intend to challenge them
vigorously, there can be no assurances regarding the ultimate resolution of these matters. Since the amount of any
potential losses from these cases currently cannot be reasonably estimated, the range of reasonably possible losses in
excess of accrued liabilities disclosed above does not include any amount relating to these cases.
ERISA Matter
In June 2016, a putative class action claiming that residual annuity payments made to certain participants in the
Colgate-Palmolive Company Employees’ Retirement Income Plan (the “Plan”) did not comply with the Employee
Retirement Income Security Act was filed against the Plan, the Company and certain individuals in the United States
District Court for the Southern District of New York. This action has been certified as a class action. The relief sought
includes recalculation of benefits, pre- and post-judgment interest and attorneys’ fees. The Company is contesting this
action vigorously. Since the amount of any potential loss from this case currently cannot be reasonably estimated, the
range of reasonably possible losses in excess of accrued liabilities disclosed above does not include any amount
relating to the case.
106
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
14.
Segment Information
The Company operates in two product segments: Oral, Personal and Home Care; and Pet Nutrition.
The operations of the Oral, Personal and Home Care product segment are managed geographically in five reportable
operating segments: North America, Latin America, Europe, Asia Pacific and Africa/Eurasia.
The Company evaluates segment performance based on several factors, including Operating profit. The Company uses
Operating profit as a measure of operating segment performance because it excludes the impact of Corporate-driven
decisions related to interest expense and income taxes.
Effective January 1, 2018, as required, the Company adopted ASU No. 2017-07, “Compensation–Retirement Benefits
(Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost” on a
retrospective basis. To conform to the current year’s presentation, for the twelve months ended December 31, 2017 and
2016, the Company reclassified $118 and $118, respectively, of non-service related components of pension and other
postretirement costs, which was previously deducted from Operating profit, to a new line item, “Non-service related
postretirement costs,” which is below Operating profit. The impact of the reclassification from Operating profit by segment
for the twelve months ended December 31, 2017 is as follows: North America $57, Latin America $9, Europe $6, Asia
Pacific $1, Africa/Eurasia $1, Pet Nutrition $24 and Corporate $20. The impact of the reclassification from Operating profit
by segment for the twelve months ended December 31, 2016 is as follows: North America $57, Latin America $7, Europe
$7, Asia Pacific $1, Africa/Eurasia $1, Pet Nutrition $24 and Corporate $21. The reclassification had no effect on Net
income attributable to Colgate-Palmolive Company, Earnings per common share or Cash flow.
The accounting policies of the operating segments are generally the same as those described in Note 2, Summary of
Significant Accounting Policies. Intercompany sales have been eliminated. Corporate operations include costs related to
stock options and restricted stock units, research and development costs, Corporate overhead costs, restructuring and
related implementation charges and gains and losses on sales of non-core product lines and assets. The Company reports
these items within Corporate operations as they relate to Corporate-based responsibilities and decisions and are not
included in the internal measures of segment operating performance used by the Company to measure the underlying
performance of the operating segments.
Approximately 70% of the Company’s Net sales are generated from markets outside the U.S., with approximately 50%
of the Company’s Net sales coming from emerging markets (which consist of Latin America, Asia (excluding Japan),
Africa/Eurasia and Central Europe). Oral, Personal and Home Care sales to Wal-Mart, Inc. and its affiliates represent
approximately 11% of the Company’s Net sales in 2018. No other customer represents more than 10% of Net sales.
In 2018, 2017 and 2016, Corporate Operating profit included charges of $152, $313 and $216, respectively, resulting
from the Global Growth and Efficiency Program. In 2016, Corporate Operating profit also included charges of $17 for a
litigation matter and a gain of $97 on the sale of land in Mexico.
107
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
Net sales
Oral, Personal and Home Care
North America(1)
Latin America
Europe
Asia Pacific
Africa/Eurasia
Total Oral, Personal and Home Care
Pet Nutrition(2)
Total Net sales
2018
2017
2016
$
3,348
$
3,117
$
3,605
2,502
2,734
967
13,156
2,388
3,887
2,394
2,781
983
13,162
2,292
$
15,544
$
15,454
$
3,183
3,650
2,342
2,796
960
12,931
2,264
15,195
_________
(1)
Net sales in the U.S. for Oral, Personal and Home Care were $3,091, $2,865 and $2,932 in 2018, 2017 and 2016, respectively.
(2)
Net sales in the U.S. for Pet Nutrition were $1,304, $1,246 and $1,243 in 2018, 2017 and 2016, respectively.
2018
2017
2016
Operating profit
Oral, Personal and Home Care
North America
Latin America
Europe
Asia Pacific
Africa/Eurasia
Total Oral, Personal and Home Care
Pet Nutrition
Corporate
Total Operating profit
Capital expenditures
Oral, Personal and Home Care
North America
Latin America
Europe
Asia Pacific
Africa/Eurasia
Total Oral, Personal and Home Care
Pet Nutrition
Corporate
Total Capital expenditures
$
1,037
$
1,043
$
995
634
777
173
3,616
680
(602)
3,694
$
1,171
605
842
180
3,841
677
(811)
3,707
$
$
$
2018
2017
2016
53
$
74
$
131
39
75
11
309
35
92
$
436
$
127
63
125
13
402
33
118
553
$
108
1,087
1,139
586
888
187
3,887
677
(609)
3,955
151
94
51
120
17
433
38
122
593
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
Depreciation and amortization
Oral, Personal and Home Care
North America
Latin America
Europe
Asia Pacific
Africa/Eurasia
Total Oral, Personal and Home Care
Pet Nutrition
Corporate
Total Depreciation and amortization
Identifiable assets
Oral, Personal and Home Care
North America
Latin America
Europe
Asia Pacific
Africa/Eurasia
Total Oral, Personal and Home Care
Pet Nutrition
Corporate(1)
Total Identifiable assets(2)
2018
2017
2016
$
$
$
$
88
82
70
103
8
351
53
107
511
2018
3,310
2,225
2,883
2,148
502
11,068
1,033
60
12,161
$
$
$
$
$
58
82
74
101
8
323
53
99
475
$
54
76
64
96
7
297
53
93
443
2017
2016
2,608
2,423
3,781
2,244
544
11,600
1,026
50
12,676
$
$
2,685
2,314
3,554
2,006
499
11,058
1,009
56
12,123
____________
(1)
In 2018, Corporate identifiable assets primarily consist of derivative instruments (7%) and investments in equity securities
(88%). In 2017, Corporate identifiable assets primarily consist of derivative instruments (5%) and investments in equity securities
(86%). In 2016, Corporate identifiable assets primarily consist of derivative instruments (24%) and investments in equity securities
(68%).
(2) Long-lived assets in the U.S., primarily property, plant and equipment and goodwill and other intangibles represented
approximately one-half of total long-lived assets of $8,259 in 2018 and one-third of total long-lived assets of $7,908 and $7,642 in
2017 and 2016, respectively.
109
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
15.
Supplemental Income Statement Information
Other (income) expense, net
Global Growth and Efficiency Program
Amortization of intangible assets
Gain on sale of land in Mexico
Charges for a litigation matter
Equity income
Other, net
Total Other (income) expense, net
Interest (income) expense, net
Interest incurred
Interest capitalized
Interest income
Total Interest (income) expense, net
Research and development
Advertising
2018
2017
2016
$
$
$
$
88
59
—
—
(10)
11
148
2018
195
(2)
(50)
143
$
$
$
$
152
35
—
—
(11)
(3)
173
$
$
93
33
(97)
17
(10)
(11)
25
2017
2016
156
(3)
(51)
102
$
$
155
(6)
(50)
99
2018
2017
2016
$
$
277
1,590
$
$
285
1,573
$
$
289
1,428
110
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
16.
Supplemental Balance Sheet Information
Inventories by major class are as follows at December 31:
Inventories
Raw materials and supplies
Work-in-process
Finished goods
Total Inventories
2018
2017
$
$
253
$
37
960
267
42
912
1,250
$
1,221
Inventories valued under LIFO amounted to $294 and $289 at December 31, 2018 and 2017, respectively. The excess
of current cost over LIFO cost at the end of each year was $63. The liquidations of LIFO inventory quantities had no
material effect on income in 2018, 2017 and 2016.
Property, plant and equipment, net
Land
Buildings
Manufacturing machinery and equipment
Other equipment
Accumulated depreciation
Total Property, plant and equipment, net
Other accruals
Accrued advertising and coupon redemption
Accrued payroll and employee benefits
Accrued taxes other than income taxes
Restructuring accrual
Pension and other retiree benefits
Accrued interest
Derivatives
Other
Total Other accruals
Other liabilities
Pension and other retiree benefits
Restructuring accrual
Other
Total Other liabilities
111
2018
2017
$
$
$
$
$
$
152
1,604
5,157
1,423
8,336
(4,455)
3,881
2018
486
275
127
148
84
35
9
532
1,696
2018
1,600
54
380
2,034
$
$
$
$
$
$
159
1,655
5,165
1,481
8,460
(4,388)
4,072
2017
510
325
123
181
81
34
20
557
1,831
2017
1,724
53
478
2,255
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
17.
Supplemental Other Comprehensive Income (Loss) Information
Other comprehensive income (loss) components attributable to Colgate-Palmolive Company before tax and net of tax
during the years ended December 31 were as follows:
2018
2017
2016
Pre-tax Net of Tax
Pre-tax Net of Tax
Pre-tax Net of Tax
Cumulative translation adjustments
$
(233) $
(218) $
218 $
285
$
(97) $
(125)
(231)
(152)
63
43
(168)
(109)
(1)
(1)
(1)
(1)
8
(3)
5
(230)
Pension and other benefits:
Net actuarial gain (loss), prior
service costs and settlements
during the period
Amortization of net actuarial loss,
transition and prior service costs(1)
Retirement Plan and other retiree benefit
adjustments
Available-for-sale securities:
Reclassification of (gains) losses
into net earnings on available-
for-sale securities
Gains (losses) on available-for-sale
securities
Cash flow hedges:
Unrealized gains (losses) on cash flow
hedges
(21)
(16)
69
48
—
—
10
54
38
—
—
8
21
71
92
—
—
9
45
54
—
—
(25)
(16)
11
Reclassification of (gains) losses
into net earnings on cash flow
hedges(2)
Gains (losses) on cash flow hedges
Total Other comprehensive income
(loss)
_________
(1) These components of Other comprehensive income (loss) are included in the computation of total pension cost. See Note 10,
2
(14)
3
(22)
(170) $
(259) $
(172) $
(4)
7
288 $
325
10
13
$
3
2
$
Retirement Plans and Other Retiree Benefits for additional details.
(2) These (gains) losses are reclassified into Cost of sales. See Note 7, Fair Value Measurements and Financial Instruments for
additional details.
There were no tax impacts on Other comprehensive income (loss) attributable to Noncontrolling interests.
Accumulated Other Comprehensive Income (Loss)
Accumulated other comprehensive income (loss) is comprised of cumulative foreign currency translation gains and
losses, unrecognized pension and other retiree benefit costs, unrealized gains and losses from derivative instruments
designated as cash flow hedges and unrealized gains and losses on available-for-sale securities. At December 31, 2018 and
2017, Accumulated other comprehensive income (loss) consisted primarily of aftertax unrecognized pension and other
retiree benefit costs of $1,038 and $923, respectively, and cumulative foreign currency translation adjustments of $3,155
and $2,927, respectively. Foreign currency translation adjustments in 2018 primarily reflect losses from the euro and the
Argentine peso. Foreign currency translation adjustments in 2017 primarily reflect gains from the euro.
112
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
18.
Quarterly Financial Data (Unaudited)
2018
Net sales
Gross profit
Net income including noncontrolling
interests
Net income attributable to Colgate-
Palmolive Company
Earnings per common share:
Basic
Diluted
2017
Net sales
Gross profit
Net income including noncontrolling
interests
Net income attributable to Colgate-
Palmolive Company
Earnings per common share:
Total
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
$ 15,544
$
9,231 (1)
2,558 (2)
2,400 (2)
2.76 (2)
2.75 (2)
4,002
2,408 (3)
$
3,886
2,301 (5)
$
3,845
2,269 (7)
$
3,811
2,253 (9)
678 (4)
634 (4)
0.72 (4)
0.72 (4)
675 (6)
637 (6)
0.73 (6)
0.73 (6)
562 (8)
523 (8)
0.60 (8)
0.60 (8)
643 (10)
606 (10)
0.70 (10)
0.70 (10)
$ 15,454
$
9,280 (11)
2,174 (12)
2,024 (12)
3,762
2,269 (13)
$
3,826
2,300 (15)
$
3,974
2,383 (17)
$
3,892
2,328 (19)
611 (14)
570 (14)
560 (16)
524 (16)
650 (18)
607 (18)
353 (20)
323 (20)
Basic
Diluted
2.30 (12)
0.64 (14)
0.59 (16)
0.69 (18)
0.37 (20)
2.28 (12)
0.64 (14)
0.59 (16)
0.68 (18)
0.37 (20)
____________
Note: Basic and diluted earnings per share are computed independently for each quarter and the year-to-date period
presented. Accordingly, the sum of the quarterly earnings per common share may not necessarily equal the earnings
per share for the year-to-date period.
(1) Gross profit for the full year of 2018 includes $31 of charges related to the Global Growth and Efficiency Program.
(2) Net income including noncontrolling interests for the full year of 2018 includes $124 of aftertax charges related to the Global Growth
and Efficiency Program. Net income attributable to Colgate-Palmolive Company and Earnings per common share for the full year of
2018 include $125 of aftertax charges related to the Global Growth and Efficiency Program, an $80 charge related to U.S. tax reform
and a $15 benefit from a foreign tax matter.
(3) Gross profit for the first quarter of 2018 includes $6 of charges related to the Global Growth and Efficiency Program.
(4) Net income including noncontrolling interests, Net income attributable to Colgate-Palmolive Company and Earnings per common
share for the first quarter of 2018 include $20 of aftertax charges related to the Global Growth and Efficiency Program.
(5) Gross profit for the second quarter of 2018 includes $5 of charges related to the Global Growth and Efficiency Program.
(6) Net income including noncontrolling interests for the second quarter of 2018 includes $48 of aftertax charges related to the Global
Growth and Efficiency Program. Net income attributable to Colgate-Palmolive Company and Earnings per common share for the
second quarter of 2018 include $51 of aftertax charges related to the Global Growth and Efficiency Program and a $15 benefit from a
foreign tax matter.
(7) Gross profit for the third quarter of 2018 includes $8 of charges related to the Global Growth and Efficiency Program.
113
COLGATE-PALMOLIVE COMPANY
Notes to Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
(8) Net income including noncontrolling interests, Net income attributable to Colgate-Palmolive Company and Earnings per common
share for the third quarter of 2018 include $22 of aftertax charges related to the Global Growth and Efficiency Program and an $80
charge related to U.S. tax reform.
(9) Gross profit for the fourth quarter of 2018 includes $12 of charges related to the Global Growth and Efficiency Program.
(10) Net income including noncontrolling interests for the fourth quarter of 2018 includes $34 of aftertax charges related to the Global
Growth and Efficiency Program. Net income attributable to Colgate-Palmolive Company and Earnings per common share for the
fourth quarter of 2018 include $32 of aftertax charges related to the Global Growth and Efficiency Program.
(11) Gross profit for the full year of 2017 includes $75 of charges related to the Global Growth and Efficiency Program.
(12) Net income including noncontrolling interests, Net income attributable to Colgate-Palmolive Company and Earnings per common
share for the full year of 2017 include $246 of aftertax charges related to the Global Growth and Efficiency Program and a $275
charge related to U.S. tax reform.
(13) Gross profit for the first quarter of 2017 includes $14 of charges related to the Global Growth and Efficiency Program.
(14) Net income including noncontrolling interests, Net income attributable to Colgate-Palmolive Company and Earnings per common
share for the first quarter of 2017 include $31 of aftertax charges related to the Global Growth and Efficiency Program.
(15) Gross profit for the second quarter of 2017 includes $21 of charges related to the Global Growth and Efficiency Program.
(16) Net income including noncontrolling interests, Net income attributable to Colgate-Palmolive Company and Earnings per common
share for the second quarter of 2017 include $115 of aftertax charges related to the Global Growth and Efficiency Program.
(17) Gross profit for the third quarter of 2017 includes $16 of charges related to the Global Growth and Efficiency Program.
(18) Net income including noncontrolling interests, Net income attributable to Colgate-Palmolive Company and Earnings per common
share for the third quarter of 2017 include $39 of aftertax charges related to the Global Growth and Efficiency Program.
(19) Gross profit for the fourth quarter of 2017 includes $24 of charges related to the Global Growth and Efficiency Program.
(20) Net income including noncontrolling interests, Net income attributable to Colgate-Palmolive Company and Earnings per common
share for the fourth quarter of 2017 include $61 of aftertax charges related to the Global Growth and Efficiency Program and a $275
charge related to U.S. tax reform.
114
COLGATE-PALMOLIVE COMPANY
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(Dollars in Millions)
Additions
Balance at
Beginning
of Period
Charged to
Costs and
Expenses
Other Deductions
Balance at
End of Period
Year Ended December 31, 2018
Allowance for doubtful accounts and estimated
returns
Valuation allowance for deferred tax assets
Year Ended December 31, 2017
Allowance for doubtful accounts and estimated
returns
Valuation allowance for deferred tax assets
Year Ended December 31, 2016
Allowance for doubtful accounts and estimated
returns
Valuation allowance for deferred tax assets
$
$
$
$
$
$
77
9
$
$
15
45
$ — $
$ — $
10
$
— $
73
$
— $
8
9
$ — $
$ — $
4
$
— $
59
$
— $
18
$ — $
— $ — $
4
$
— $
82
54
77
9
73
—
115
COLGATE-PALMOLIVE COMPANY
Market Information
The Company’s common stock is listed on the New York Stock Exchange and its trading symbol is CL.
Stock Price Performance Graphs
The following graphs compare cumulative total shareholder returns on Colgate-Palmolive Company common stock
against the S&P Composite-500 Stock Index and a peer company index for the twenty-year, ten-year and five-year periods
each ended December 31, 2018. The peer company index is comprised of consumer products companies that have both
domestic and international businesses. For 2018, the peer company index consisted of Campbell Soup Company, The
Clorox Company, The Coca-Cola Company, ConAgra Brands, Inc., The Estee Lauder Companies, Inc., General Mills, Inc.,
Johnson & Johnson, Kellogg Company, Kimberly-Clark Corporation, The Kraft Heinz Company, Mondelez International,
Inc., PepsiCo, Inc., The Procter & Gamble Company, Reckitt Benckiser Group plc and Unilever N.V.
These performance graphs do not constitute soliciting material, are not deemed filed with the SEC and are not
incorporated by reference in any of the Company’s filings under the Securities Act of 1933 or the Securities Exchange Act
of 1934, as amended, whether made before or after the date of this Annual Report on Form 10-K and irrespective of any
general incorporation language in any such filing, except to the extent the Company specifically incorporates these
performance graphs by reference therein.
116
COLGATE-PALMOLIVE COMPANY
Historical Financial Summary
For the years ended December 31,
(Dollars in Millions Except Per Share Amounts)
(Unaudited)
Continuing Operations
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
Net sales
$15,544
$15,454
$15,195
$16,034
$17,277
$17,420
$17,085
$16,734
$15,564
$15,327
Results of operations:
Net income
attributable to
Colgate-Palmolive
Company
Earnings per
common share,
basic
Earnings per
common share,
diluted
Depreciation and
2,400 (1)
2,024 (2)
2,441 (3)
1,384 (4)
2,180 (5)
2,241 (6)
2,472 (7)
2,431 (8)
2,203 (9)
2,291
2.76 (1)
2.30 (2)
2.74 (3)
1.53 (4)
2.38 (5)
2.41 (6)
2.60 (7)
2.49 (8)
2.22 (9)
2.26
2.75 (1)
2.28 (2)
2.72 (3)
1.52 (4)
2.36 (5)
2.38 (6)
2.57 (7)
2.47 (8)
2.16 (9)
2.18
amortization expense
511
475
443
449
442
439
425
421
376
351
Financial Position
Current ratio
Property, plant and
equipment, net
Capital expenditures
Total assets
Long-term debt
Colgate-Palmolive
Company
shareholders’ equity
Share and Other
Book value per common
share
Cash dividends declared
and paid per common
share
Closing price
Number of common
shares outstanding
(in millions)
Number of common
shareholders of
record
Number of employees
1.1
1.4
1.3
1.2
1.2
1.1
1.2
1.2
1.0
1.1
3,881
436
12,161
6,354
4,072
553
12,676
6,566
3,840
3,796
593
691
4,080
757
12,123
11,935
13,440
6,520
6,246
5,625
4,083
670
13,968
4,732
3,842
565
13,379
4,911
3,668
537
12,711
4,417
3,693
3,516
550
575
11,163
11,125
2,806
2,812
(102)
(60)
(243)
(299)
1,145
2,305
2,189
2,375
2,675
3,116
0.23
0.28
0.03
(0.04)
1.55
2.79
2.60
2.71
2.95
3.26
1.66
59.52
1.59
75.45
1.55
1.50
65.44
66.62
1.42
69.19
1.33
65.21
1.22
52.27
1.14
46.20
1.02
40.19
0.86
41.08
862.9
874.7
883.1
892.7
906.7
919.9
935.8
960.0
989.8
988.4
21,900
34,500
22,700
35,900
23,600
24,400
25,400
36,700
37,900
37,700
26,900
37,400
27,600
37,700
28,900
38,600
29,900
30,600
39,200
38,100
_________
Note: All per share amounts and numbers of shares outstanding were adjusted for the two-for-one stock split of the Company’s
common stock in 2013.
(1)
Net income attributable to Colgate-Palmolive Company and earnings per common share for the full year of 2018 include $125 of aftertax
charges related to the Global Growth and Efficiency Program, a $15 benefit from a foreign tax matter, and an $80 charge related to U.S.
tax reform.
117
COLGATE-PALMOLIVE COMPANY
Historical Financial Summary
For the years ended December 31,
(Dollars in Millions Except Per Share Amounts)
(Unaudited)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
Net income attributable to Colgate-Palmolive Company and earnings per common share for the full year of 2017 include $246 of aftertax
charges related to the Global Growth and Efficiency Program and a $275 charge related to U.S. tax reform.
Net income attributable to Colgate-Palmolive Company and earnings per common share for the full year of 2016 include $168 of aftertax
charges related to the Global Growth and Efficiency Program, a $63 aftertax gain on the sale of land in Mexico, $11 of aftertax charges
for a litigation matter and $35 of benefits from tax matters.
Net income attributable to Colgate-Palmolive Company and earnings per common share for the full year of 2015 include a $1,058
aftertax charge related to the change in accounting for the Company’s Venezuelan operations, $183 of aftertax charges related to the
Global Growth and Efficiency Program, $22 of aftertax charges related to the remeasurement of CP Venezuela’s local currency-
denominated net monetary assets as a result of effective devaluations, $120 aftertax gain on the sale of the South Pacific laundry
detergent business, a $14 aftertax charge for a litigation matter and a $15 charge for a tax matter.
Net income attributable to Colgate-Palmolive Company and earnings per common share in 2014 include $208 of aftertax charges related
to the Global Growth and Efficiency Program, $214 of aftertax charges related to the remeasurement of CP Venezuela’s local currency-
denominated net monetary assets as a result of effective devaluations, $41 of charges for litigation matters, $3 of aftertax costs related to
the sale of land in Mexico and a $66 charge for a tax matter.
Net income attributable to Colgate-Palmolive Company and earnings per common share in 2013 include $278 of aftertax charges related
to the Global Growth and Efficiency Program, a $111 aftertax charge related to the remeasurement of CP Venezuela’s local currency-
denominated net monetary assets as a result of a devaluation, a $23 charge for a litigation matter and $12 of aftertax costs related to the
sale of land in Mexico.
Net income attributable to Colgate-Palmolive Company and earnings per common share in 2012 include $70 of aftertax charges related
to the Global Growth and Efficiency Program, $18 of aftertax costs related to the sale of land in Mexico and $14 of aftertax costs
associated with various business realignment and other cost-saving initiatives.
Net income attributable to Colgate-Palmolive Company and earnings per common share in 2011 include an aftertax gain of $135 on the
sale of the non-core laundry detergent business in Colombia, offset by $147 of aftertax costs associated with various business
realignment and other cost-saving initiatives, $9 of aftertax costs related to the sale of land in Mexico and a $21 charge for a litigation
matter.
Net income attributable to Colgate-Palmolive Company and earnings per common share in 2010 include a $271 one-time charge related
to the transition to hyperinflationary accounting in Venezuela, $61 of aftertax charges for termination benefits related to overhead
reduction initiatives, a $30 aftertax gain on sales of non-core product lines and a $31 benefit related to the reorganization of an overseas
subsidiary.
118
SHAREHOLDER INFORMATION
Corporate Office
Colgate-Palmolive Company
300 Park Avenue
New York, NY 10022-7499
(212) 310-2000
Stock Exchange
The common stock of Colgate-
Palmolive Company is list-
ed and traded on the New
York Stock Exchange under
the symbol CL.
Transfer Agent and Registrar
Our transfer agent, Computershare,
can assist you with a variety of
shareholder services including
change of address, stock transfers,
questions about dividend checks,
direct deposit of dividends and
Colgate’s Direct Stock Purchase Plan.
Direct Stock Purchase Plan
A Direct Stock Purchase Plan is
available through Computershare,
our transfer agent. The Plan includes
dividend reinvestment options, offers
optional cash investments by check or
automatic monthly payments, as well
as many other features. If you would
like to learn more about the Plan or to
enroll, please contact Computershare:
Computershare
PO Box 505000
Louisville, KY 40233
1-800-756-8700 or (201) 680-6578
Email:
web.queries@computershare.com
Website:
www.computershare.com/investor
Hearing impaired:
TDD 1-800-952-9245
Annual Meeting
Colgate shareholders are invited to
attend our annual meeting. It will be
held on Friday, May 10, 2019, at 10:00
a.m. in the Broadway Ballroom of the
Marriott Marquis Hotel, Sixth Floor,
Broadway at 45th Street, New York,
NY. Even if you plan to attend the
meeting, please vote by proxy. You
may do so by using the telephone, the
internet or your proxy card.
Independent Registered
Public Accounting Firm
PricewaterhouseCoopers LLP
Communications to the
Board of Directors
Colgate shareholders and other
interested parties are encouraged
to communicate directly with the
Company’s independent directors
and committee chairs by sending an
email to directors@colpal.com or by
writing to Directors, c/o Office of the
Chief Legal Officer, Colgate-Palmolive
Company, 300 Park Avenue, 11th
Floor, New York, NY 10022-7499.
Such communications are handled
in accordance with the procedures
described in the Governance section
of the Company’s website at
www.colgatepalmolive.com.
SEC and NYSE Certifications
The certifications of Colgate’s Chief
Executive Officer and Chief Financial
Officer, required under Section
302 of the Sarbanes-Oxley Act of
2002, have been filed as exhibits to
Colgate’s Annual Report on Form
10-K for the year ended December 31,
2018. In addition, in 2018, Colgate’s
Chief Executive Officer submitted
the annual certification to the NYSE
regarding Colgate’s compliance with
the NYSE corporate governance listing
standards.
Forward-Looking Statements
This 2018 Annual Report may contain
forward-looking statements. These
statements are made on the basis of
our views and assumptions as of this
time, and we undertake no obligation
to update these statements. We
caution investors that any such
forward-looking statements are not
guarantees of future performance
and that actual events or results
may differ materially from those
statements. Investors should consult
the Company’s filings with the
Securities and Exchange Commission
(including the information set forth
under the caption “Risk Factors”
in the Company’s Annual Report
on Form 10-K for the year ended
December 31, 2018) for information
about certain factors that could
cause such differences.
Reports
Annual reports, press releases,
company brochures, SEC filings and
other publications are available on
our website at www.colgatepalmolive.
com. Other reports available on
our website include our most
recent Sustainability Report and
Colgate’s policies on Diversity of
Colgate People, Code of Conduct,
Ingredient Safety, No Deforestation,
Environmental, Occupational Health
& Safety and Product Safety Research.
For information about our products
and our Programs and Policies on
Animal Research and Development
of Alternatives, please call
1-800-468-6502.
Investor Relations
1-855-322-3551 or (212) 310-2575
Email:
investor_relations@colpal.com
Institutional Investors:
Call John Faucher at (212) 310-3653
Consumer Affairs
For Oral, Personal and Home Care
1-800-468-6502
For Hill’s Pet Nutrition
1-800-445-5777
Corporate Communications
(212) 310-2551
Media Inquiries
(212) 310-2670
Email:
colgate_palmolive_media_inquiry@
colpal.com
More information about Colgate
and our products is available on
the Company’s website at
www.colgatepalmolive.com.
© 2019 Colgate-Palmolive Company
Design by Robert Webster Inc. (RWI),
www.rwidesign.com
Major Photography by Greg Morris
www.gregmorrisphotographer.com
Printing by Universal Wilde
300 Park Avenue New York, NY 10022-7499
300 Park Avenue New York, NY 10022-7499
South Africa
Colgate-Palmolive Company is a $15.5 billion global company serving people in more than 200
countries and territories with consumer products that make lives healthier and more enjoyable. The
Company focuses on strong global brands in its core businesses—Oral Care, Personal Care, Home Care
and Pet Nutrition. Colgate follows a tightly defined strategy to grow market shares in key categories,
such as toothpaste, toothbrushes, mouthwashes, bar and liquid soaps, deodorants/antiperspirants,
skin care, dishwashing detergents, household cleaners, fabric conditioners and specialty pet food.