COLGATE PALMOLIVE CO - Quarter Report: 2024 March (Form 10-Q)

Other financing activities() Net cash provided by (used in) financing activities()()Effect of exchange rate changes on Cash and cash equivalents()()Net increase (decrease) in Cash and cash equivalents Cash and cash equivalents at beginning of the period Cash and cash equivalents at end of the period$ $ Supplemental Cash Flow Information Income taxes paid$ $ Interest paid$ $

See Notes to Condensed Consolidated Financial Statements.

COLGATE-PALMOLIVE COMPANY

Condensed Consolidated Statements of Changes in Shareholders’ Equity

(Dollars in Millions)

(Unaudited)

Three Months Ended March 31, 2024

Colgate-Palmolive Company Shareholders’ Equity

Common
Stock

Additional
Paid-in
Capital

Unearned
Compensation

Treasury
Stock

Retained
Earnings

Accumulated

Other

Comprehensive

Income (Loss)(1)

Noncontrolling
Interests

Balance, December 31, 2023

()

Net income

—

Other comprehensive income (loss), net of tax

—

()

Dividends ($ per share)*

—

()

—

Stock-based compensation expense

—

Shares issued for stock options

—

Shares issued for restricted stock units

—

()

—

Treasury stock acquired

—

()

—

Other

—

()

—

Balance, March 31, 2024

()

Three Months Ended March 31, 2023

Colgate-Palmolive Company Shareholders’ Equity

Common
Stock

Additional
Paid-in
Capital

Unearned
Compensation

Treasury
Stock

Retained
Earnings

Accumulated

Other

Comprehensive

Income (Loss)(1)

Noncontrolling
Interests

Balance, December 31, 2022

()

Net income

—

Other comprehensive income (loss), net of tax

—

()

Dividends ($ per share)*

—

()

—

Stock-based compensation expense

—

Shares issued for stock options

—

Shares issued for restricted stock units

—

()

—

Treasury stock acquired

—

()

—

Asset Impairments

Other

Total

$ $ $ $ Charges Cash Payments () ()()Charges against assets Foreign exchange

Balance at March 31, 2024

$ $ $ $ $ Tax amounts()()Retirement Plan and other retiree benefit adjustments, net of tax Cash flow hedges: Unrealized gains (losses) on cash flow hedges

Reclassification of (gains) losses into net earnings on cash flow hedges(2)

()Gains (losses) on cash flow hedges, pre-tax Tax amounts ()Gains (losses) on cash flow hedges, net of tax Total Other comprehensive income (loss), net of tax$()$

(1) These components of Other comprehensive income (loss) are included in the computation of total pension cost. See Note 8, Retirement Plans and Other Retiree Benefits for additional details.

(2) These (gains) losses are reclassified into Cost of sales. See Note 11, Fair Value Measurements and Financial Instruments for additional details.

There were no tax impacts on Other comprehensive income (loss) (“OCI”) attributable to Noncontrolling interests.

COLGATE-PALMOLIVE COMPANY

Notes to Condensed Consolidated Financial Statements (continued)

(Dollars in Millions Except Share and Per Share Amounts)

(Unaudited)

$ $ $ $ $ Interest cost Expected return on plan assets()()()() Amortization of actuarial loss (gain) ()()Net periodic benefit cost$ $ $ $ $ $ Other postretirement charges ERISA litigation matter

)$ Total gain (loss) on fair value hedges $()$

COLGATE-PALMOLIVE COMPANY

Notes to Condensed Consolidated Financial Statements (continued)

(Dollars in Millions Except Share and Per Share Amounts)

(Unaudited)

$()Cost of Sales$()$ Commodity contracts()()Cost of Sales() Forward Starting Swaps () Interest (income) expense, net Total gain (loss) on cash flow hedges $ $ $()$

$()Foreign currency debt ()Total gain (loss) on net investment hedges$ $()

12.

COLGATE-PALMOLIVE COMPANY

Notes to Condensed Consolidated Financial Statements (continued)

(Dollars in Millions Except Share and Per Share Amounts)

(Unaudited)

13.

% for the first quarter of 2024 as compared to % for the first quarter of 2023. The quarterly provision for income taxes is determined based on the Company’s estimated full year effective income tax rate adjusted by the amount of tax attributable to infrequent or unusual items that are separately recognized on a discrete basis in the income tax provision in the quarter in which they occur. The Company’s current estimate of its full year effective income tax rate before discrete period items is %, as compared to % in the comparable period of 2023.

In the third quarter of 2023, the Internal Revenue Service (the “IRS”) issued a notice giving taxpayers temporary relief from the effects of certain U.S. tax regulations that were issued in December 2021, which place greater restrictions on foreign taxes that are creditable against U.S. taxes on foreign-source income. This notice allowed taxpayers to defer the application of these new regulations through the end of 2023. In December 2023, the IRS issued further guidance modifying this temporary relief period to the date that a notice or other guidance withdrawing or modifying the temporary relief is issued. The Company will recognize the impact, if any, in the period in which the temporary relief is withdrawn or modified.

The Company has ongoing federal, state and international income tax audits in various jurisdictions and evaluates uncertain tax positions that may be challenged by local tax authorities and not fully sustained. All U.S. federal income tax returns through December 31, 2013 have been audited by the IRS and there are limited matters which the Company plans to appeal for years 2010 through 2013. One such matter relates to the IRS assessment of taxes on the Company by imputing income on certain activities within one of our international operations, which is also under audit for the years 2014 through 2018. There were U.S. Tax Court rulings during 2023 in favor of the IRS against unrelated third parties on similar matters. Despite the U.S. Tax Court rulings, the Company continues to believe that the tax assessment against the Company is without merit. While there can be no assurances, the Company believes this matter will ultimately be decided in favor of the Company. The amount of tax plus interest for the years 2010 through 2018 is estimated to be approximately $, which is not included in the Company’s uncertain tax positions.

On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was enacted, which among other things, implements a 15% minimum tax on book income of certain large corporations effective for years beginning after December 31, 2022. Based on the Company’s analysis, as well as guidance published by the IRS, the IRA, and in particular the 15% minimum tax, did not have an impact on the Company’s Consolidated Financial Statements. The Company will continue to evaluate the potential impact of this law as additional guidance and clarification becomes available.

Additionally, on December 15, 2022, the 27 member states of the European Union (“EU”) reached an agreement on a minimum level of taxation for certain large corporations to pay a minimum corporate tax rate of 15% in every jurisdiction in which they operate. This agreement, which is known as the Minimum Tax Directive (part of the “Pillar II Model Rules”), was supposed to be transposed into the laws of all EU member states by December 31, 2023. Most member states complied, while some were granted extensions of time. In addition, many other jurisdictions outside the EU have also committed to implement this Directive while others have implemented a similar minimum tax regime consistent with the policy of the Pillar II Model Rules. This Directive does not have a material impact on the Company's Consolidated Financial Statements.

COLGATE-PALMOLIVE COMPANY

Management’s Discussion and Analysis of Financial

Condition and Results of Operations

(Dollars in Millions Except Per Share Amounts)

Executive Overview

Business Organization

Colgate-Palmolive Company (together with its subsidiaries, “we,” “us,” “our,” the “Company” or “Colgate”) is a caring, innovative growth company reimagining a healthier future for all people, their pets and our planet. We seek to deliver sustainable, profitable growth and superior shareholder returns, as well as to provide Colgate people with an innovative and inclusive work environment. We do this by developing and selling science-led products globally that make people’s and their pets’ lives healthier and more enjoyable and by embracing our sustainability and social impact and diversity, equity and inclusion (“DE&I”) strategies across our organization.

We are tightly focused on two product segments: Oral, Personal and Home Care; and Pet Nutrition. Within these segments, we follow a closely defined business strategy to grow our key product categories and increase our overall market share. Within the categories in which we compete, we prioritize our efforts based on their capacity to maximize the use of the organization’s core competencies and strong global equities and to deliver sustainable, profitable long-term growth.

Operationally, we are organized along geographic lines with management teams having responsibility for the business and financial results in each region. We compete in more than 200 countries and territories worldwide with established businesses in all regions contributing to our sales and profitability. Approximately two-thirds of our Net sales are generated from markets outside the U.S., with approximately 45% of our 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 our 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 primarily to a variety of traditional and eCommerce retailers, wholesalers, distributors, dentists and, in some segments, skin health professionals. Through Hill’s Pet Nutrition, we also compete on a worldwide basis in the pet nutrition market, selling products principally through authorized pet supply retailers, veterinarians and eCommerce retailers. We also sell certain of our products direct-to-consumer. We are engaged in manufacturing and sourcing of products and materials on a global scale and have major manufacturing facilities, warehousing facilities and distribution centers in every region around the world.

On an ongoing basis, management focuses on a variety of key indicators to monitor business health and performance. These indicators include net sales (including volume, pricing and foreign exchange components), organic sales growth (net sales growth excluding the impact of foreign exchange, acquisitions and divestments), a non-GAAP financial measure, and gross profit margin, selling, general and administrative expenses, 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. In addition, we review market share and other data to assess how our brands are performing within their categories on a global and regional basis. The monitoring of these indicators and our Code of Conduct and corporate governance practices help to maintain business health and strong internal controls. For additional information regarding non-GAAP financial measures and the Company’s use of market share data and the limitations of such data, see “Non-GAAP Financial Measures” and “Market Share Information” below.

COLGATE-PALMOLIVE COMPANY

Management’s Discussion and Analysis of Financial

Condition and Results of Operations

(Dollars in Millions Except Per Share Amounts)

The War in Ukraine

The war in Ukraine, and the related geopolitical tensions, have had and continue to have a significant impact on our operations in Ukraine and Russia, though it has not been material to our Consolidated Financial Statements. While our ability to do business in Ukraine has been significantly impacted, we remain committed to providing access to our products to people in the region. In Russia, we are importing and selling a reduced portfolio of health and hygiene products for everyday use. We have no manufacturing facilities in Russia and have ceased all capital investments and media activities in Russia. For the three months ended March 31, 2024, our business in the Eurasia region constituted approximately 2% of our consolidated net sales and approximately 3% of our consolidated operating profit. We, however, have experienced, and expect to continue to experience, risks related to the impact of the war in Ukraine, including increases in the costs and, in certain cases, limitations on the availability of certain raw and packaging materials and commodities (including oil and natural gas), supply chain and logistics challenges, import restrictions, foreign currency volatility and reputational concerns. We also have faced and continue to face challenges to our ability to repatriate cash from Russia and find banking partners in Russia and we may face challenges to our ability to protect our assets in Russia. We also continue to monitor the impact of sanctions, export controls and import restrictions imposed in response to the war in Ukraine.

The Israel-Hamas War

The Israel-Hamas war has not had a material impact on our Consolidated Financial Statements. Uncertainties and risks remain as to the duration of the war and its impact on geopolitical relations and stability in North Africa, the Middle East and nearby regions. The war has impacted and may continue to impact, among other things, supply chain and logistics, the availability and price of raw and packaging materials and commodities, such as oil, consumer sentiment and consumption and category growth rates in the region.

For more information about factors that could impact our business, including due to geopolitical conflicts, such as the war in Ukraine and the Israel-Hamas war, refer to Part I, Item 1A “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2023.

COLGATE-PALMOLIVE COMPANY

Management’s Discussion and Analysis of Financial

Condition and Results of Operations

(Dollars in Millions Except Per Share Amounts)

Business Strategy

To achieve our business and financial objectives, we are focused on driving organic sales growth and consistent compounded earnings per share growth through science-led, core and premium innovation, pursuing higher-growth adjacent categories and segments, expanding in faster-growing channels and markets and delivering margin expansion through operating leverage and efficiency. We continue to prioritize our investments in high growth segments within our Oral Care, Personal Care and Pet Nutrition businesses. We are also seeking to lead in the development of human capital and to maximize the impact of our sustainability and social impact and DE&I strategies. We are strengthening and leveraging our capabilities in areas such as innovation, digital, artificial intelligence, eCommerce and data and analytics, enabling us to be more responsive in today’s rapidly changing world. We continue to invest behind our brands, including through advertising, and to develop initiatives to build strong relationships with consumers, dental, veterinary and skin health professionals and traditional and eCommerce retailers. We continue to believe that 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 our products.

The investments needed to drive growth are supported through continuous, Company-wide initiatives to lower costs and increase effective asset utilization. Through these initiatives, which are referred to as our funding-the-growth initiatives, we seek to become even more effective and efficient throughout our 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.

Significant Items Impacting Comparability

During the quarter ended March 31, 2023, we recorded a charge of $267 as a result of a decision of the United States Court of Appeals for the Second Circuit (the “Second Circuit”) affirming a grant of summary judgment to the plaintiffs in a lawsuit under the Employee Retirement Income Security Act seeking the recalculation of benefits and other relief associated with a 2005 residual annuity amendment to the Colgate-Palmolive Company Employees’ Retirement Income Plan (the “Retirement Plan”). The decision resulted in an increase in the obligations of the Retirement Plan, which based on the current funded status of the Retirement Plan will require no immediate cash contribution by the Company. In June 2023, the Company filed a petition for certiorari to the United States Supreme Court requesting permission for an appeal to that court and that petition was denied in October 2023. Also, in June 2023, the plaintiffs filed a motion to enter a revised final judgment in the United States District Court for the Southern District of New York (the “District Court”) to address certain unresolved calculation issues, which the Company opposed. In March 2024, the District Court granted the plaintiffs’ motion and found for the plaintiffs on the unresolved calculation issues. The Company intends to appeal that decision to the Second Circuit. See Note 9, Contingencies to the Condensed Consolidated Financial Statements for additional information.

During the quarter ended March 31, 2023, we announced a voluntary recall of select Fabuloso multi-purpose cleaner products sold in the United States and Canada. The costs associated with the voluntary recall had a $25 impact on our Operating profit in the quarter ended March 31, 2023.

On January 27, 2022, the Company’s Board of Directors (the “Board”) approved a targeted productivity program (the “2022 Global Productivity Initiative”). The program is intended to reallocate resources towards our strategic priorities and faster growth businesses, drive efficiencies in our operations and streamline our supply chain to reduce structural costs. Implementation of the 2022 Global Productivity Initiative, which is expected to be substantially completed by mid-year 2024, is estimated to result in cumulative pretax charges, once all phases are approved and implemented, in the range of $200 to $240 ($170 to $200 aftertax). Annualized pretax savings are projected to be in the range of $90 to $110 ($70 to $85 aftertax), once all projects are approved and implemented. Savings achieved since the implementation of the 2022 Global Productivity Initiative were approximately $107 pretax ($84 aftertax). For more information regarding the 2022 Global Productivity Initiative, see “Restructuring and Related Implementation Charges” below.

In the three months ended March 31, 2024 and 2023, we incurred pretax costs of $36 (aftertax costs of $30) and $6 (aftertax costs of $5), respectively, resulting from the 2022 Global Productivity Initiative.

COLGATE-PALMOLIVE COMPANY

Management’s Discussion and Analysis of Financial

Condition and Results of Operations

(Dollars in Millions Except Per Share Amounts)

Outlook

Looking forward, we expect global macroeconomic, political and market conditions to remain challenging, including as a result of inflation, higher interest rates and foreign currency volatility. During the three months ended March 31, 2024, most of our divisions experienced higher raw and packaging material costs. We have taken and are taking additional pricing to try to offset these increases in raw and packaging material costs. This has negatively impacted and may continue to negatively impact consumer demand for our products. Additionally, inflation is impacting the broader economy with consumers around the world facing widespread rising prices as well as higher interest rates resulting from measures to address inflation. Such inflation and higher interest rates may negatively impact consumer consumption or discretionary spending and/or change their purchasing patterns by foregoing purchasing certain of our products or by switching to “private label” or to our lower-priced product offerings. Although we continue to devote significant resources to support our brands and market our products at multiple price points, these changes could reduce demand for and sales volumes of our products or result in a shift in our product mix from higher margin to lower margin product offerings. In light of this challenging environment, we expect continued volatility across all of our categories and it is therefore difficult to predict category growth rates in the near term.

Given that approximately two-thirds of our Net sales originate in markets outside the U.S., we have experienced and will likely continue to experience volatile foreign currency fluctuations, particularly in Argentina and Türkiye, which are considered hyper-inflationary economies. As discussed above, we have also experienced higher raw and packaging material costs. While we have taken, and will continue to take, measures to mitigate the effect of these conditions, such as the 2022 Global Productivity Initiative and our funding-the-growth and revenue growth management initiatives, in the current environment, it may become increasingly difficult to implement certain of these mitigation strategies. Should these conditions persist, they could adversely affect our future results.

While the global marketplace in which we operate has always been highly competitive, we continue to experience heightened competitive activity in certain markets from strong local competitors, from other large multinational companies, some of which have greater resources than we do, and from new entrants into the market in many of our categories. Such activities have included more aggressive product claims and marketing challenges, as well as increased promotional spending and geographic expansion.

We have been negatively affected by changes in the policies and practices of our trade customers in key markets, such as inventory destocking, fulfillment requirements, limitations on access to shelf space, delisting of our products and certain sustainability, supply chain and packaging standards or initiatives. In addition, the retail landscape in many of our markets continues to evolve as a result of the continued growth of eCommerce, changing consumer preferences (as consumers increasingly shop online and via mobile and social applications) and the increased presence of alternative retail channels, such as subscription services and direct-to-consumer businesses. We plan to continue to invest behind our data strategy, digital and analytics capabilities and higher growth businesses. The substantial growth in eCommerce and the emergence of alternative retail channels have created and may continue to create pricing pressures and/or adversely affect our relationships with our key retailers.

We continue to closely monitor the impact of geopolitical events and tensions, such as the war in Ukraine, the Israel-Hamas war and tensions between China and Taiwan and the challenging market conditions discussed above, on our business and the related uncertainties and risks. While we have taken, and will continue to take, measures to mitigate the effects of these events and conditions, we cannot estimate with certainty the full extent of their impact on our business, results of operations, cash flows and/or financial condition. For more information about factors that could impact our business, see “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2023.

We believe that we are well prepared to meet the challenges ahead due to our strong financial condition, experience operating in challenging environments, resilient global supply chain, dedicated and diverse global team and focused business strategy. Our strategy is based on driving organic sales growth and consistent compounded earnings per share growth through science-led, core and premium innovation, pursuing higher-growth adjacent categories and segments, expanding in faster-growing channels and markets and delivering margin expansion through operating leverage and efficiency. We are also seeking to lead in the development of human capital and to maximize our sustainability and social impact and DE&I strategies. Our commitment to these priorities, the strength of our brands, the breadth of our global footprint and a commitment to profitability and driving efficiency in cash generation should position us well to manage through the challenges we face and increase shareholder value over time.

COLGATE-PALMOLIVE COMPANY

Management’s Discussion and Analysis of Financial

Condition and Results of Operations

(Dollars in Millions Except Per Share Amounts)

Results of Operations

Three Months

Worldwide Net sales were $5,065 in the first quarter of 2024, up 6.2% from the first quarter of 2023, due to volume growth of 1.3% and net selling price increases of 8.5%, partially offset by negative foreign exchange of 3.6%. Organic sales (Net sales excluding the impact of foreign exchange, acquisitions and divestments), a non-GAAP financial measure, increased 9.8% in the first quarter of 2024. A reconciliation of net sales growth to organic sales growth is provided under “Non-GAAP Financial Measures” below.

Net sales in the Oral, Personal and Home Care product segment were $3,963 in the first quarter of 2024, up 6.8% from the first quarter of 2023, due to volume growth of 2.8% and net selling price increases of 8.6%, partially offset by negative foreign exchange of 4.5%. Organic sales in the Oral, Personal and Home Care product segment increased 11.4% in the first quarter of 2024.

The Company’s share of the global toothpaste market was 41.3% on a year-to-date basis, up 1.0 share points from the year ago period, and its share of the global manual toothbrush market was 31.7% on a year-to-date basis, up 1.4 share points from the year ago period. Year-to-date market shares in toothpaste were up in Latin America, Europe, Asia Pacific and Africa/Eurasia and down in North America versus the comparable 2023 period. In the manual toothbrush category, year-to-date market shares were up in North America and Asia/Pacific, flat in Latin America and Europe and down in Africa/Eurasia versus the comparable 2023 period. For additional information regarding market shares, see “Market Share Information” below.

Net sales in the Hill’s Pet Nutrition segment were $1,102 in the first quarter of 2024, up 3.9% from the first quarter of 2023, due to net selling price increases of 8.2%, partially offset by volume declines of 3.9% and negative foreign exchange of 0.3%. Organic sales in the Hill’s Pet Nutrition segment increased 4.2% in the first quarter of 2024.

COLGATE-PALMOLIVE COMPANY

Management’s Discussion and Analysis of Financial

Condition and Results of Operations

(Dollars in Millions Except Per Share Amounts)

Gross Profit/Margin

Worldwide Gross profit increased to $3,039 in the first quarter of 2024 compared to $2,712 in the first quarter of 2023, reflecting an increase of $168 resulting from higher Net sales and an increase of $159 resulting from higher Gross profit margin.

Worldwide Gross profit margin increased to 60.0% in the first quarter of 2024 from 56.9% in the first quarter of 2023. This increase in Gross profit margin was primarily due to higher pricing (330 bps) and cost savings from the Company’s funding-the-growth initiatives (250 bps), partially offset by significantly higher raw and packaging material costs (270 bps), which included foreign exchange transaction costs.


	Three Months Ended March 31,
	2024		2023
Gross profit	$	3,039	$	2,712


	Three Months Ended March 31,
	2024		2023		Basis Point Change


Gross profit margin	60.0	%	56.9	%	310

COLGATE-PALMOLIVE COMPANY

Management’s Discussion and Analysis of Financial

Condition and Results of Operations

(Dollars in Millions Except Per Share Amounts)

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased 9% to $1,916 in the first quarter of 2024 compared to $1,758 in the first quarter of 2023. Selling, general and administrative expenses in the first quarter of 2024 included charges resulting from the 2022 Global Productivity Initiative. Excluding the charges resulting from the 2022 Global Productivity Initiative in the first quarter of 2024, Selling, general and administrative expenses increased 9% to $1,915 in the first quarter of 2024 compared to $1,758 in the first quarter of 2023, reflecting increased advertising investment of $93 and higher overhead expenses of $64.

Selling, general and administrative expenses as a percentage of Net sales increased by 90 bps to 37.8% in the first quarter of 2024 as compared to 36.9% in the first quarter of 2023. This increase was due to increased advertising investment (120 bps), partially offset by lower overhead expenses (30 bps), both as a percentage of Net sales. In the first quarter of 2024, advertising investment increased as a percentage of Net sales to 13.3% from 12.1% in the first quarter of 2023, or 16% in absolute terms, to $672 as compared with $579 in the first quarter of 2023.


	Three Months Ended March 31,
	2024		2023
Selling, general and administrative expense, GAAP	$	1,916	$	1,758
2022 Global Productivity Initiative	(1)		—
Selling, general and administrative expenses, non-GAAP	$	1,915	$	1,758


	Three Months Ended March 31,
	2024		2023		Basis Point Change



Selling, general and administrative expenses as a percentage of Net sales	37.8	%	36.9	%	90

Other (Income) Expense, Net

Other (income) expense, net was $76 and $45 in the first quarter of 2024 and 2023, respectively. Other (income) expense, net in the first quarter of 2024 included charges resulting from the 2022 Global Productivity Initiative. Other (income) expense, net in the first quarter of 2023 included product recall costs and charges resulting from the 2022 Global Productivity Initiative. Excluding the items described above in both periods, as applicable, Other (income) expense, net was $41 and $15 in the first quarter of 2024 and 2023, respectively.


	Three Months Ended March 31,
	2024		2023
Other (income) expense, net, GAAP	$	76	$	45
2022 Global Productivity Initiative	(35)		(5)
Product recall costs	—		(25)
Other (income) expense, net, non-GAAP	$	41	$	15

COLGATE-PALMOLIVE COMPANY

Management’s Discussion and Analysis of Financial

Condition and Results of Operations

(Dollars in Millions Except Per Share Amounts)

Operating Profit

Operating profit increased 15% to $1,047 in the first quarter of 2024 from $909 in the first quarter of 2023. Operating profit in the first quarter of 2024 included charges resulting from the 2022 Global Productivity Initiative. Operating profit in the first quarter of 2023 included product recall costs and charges resulting from the 2022 Global Productivity Initiative. Excluding the items described above in both periods, as applicable, Operating profit increased 15% to $1,083 in the first quarter of 2024 from $939 in the first quarter of 2023.

Operating profit margin was 20.7% in the first quarter of 2024, an increase of 160 bps compared to 19.1% in the first quarter of 2023. Excluding the items described above in both periods, as applicable, Operating profit margin was 21.4% in the first quarter of 2024, an increase of 170 bps compared to 19.7% in the first quarter of 2023. This increase in Operating profit margin was due to an increase in Gross profit (310 bps), partially offset by an increase in Selling, general and administrative expenses (90 bps) and an increase in Other (income) expense, net (50 bps), all as a percentage of Net sales.


	Three Months Ended March 31,
	2024		2023		% Change
Operating profit, GAAP	$	1,047	$	909	15	%
2022 Global Productivity Initiative	36		5
Product recall costs	—		25



Operating profit, non-GAAP	$	1,083	$	939	15	%


	Three Months Ended March 31,
	2024		2023		Basis Point Change
Operating profit margin, GAAP	20.7	%	19.1	%	160
2022 Global Productivity Initiative	0.7	%	0.1	%
Product recall costs	—	%	0.5	%



0.83

Asset Impairments1 Other17 Total$178

The following table summarizes the activity for the restructuring and related implementation charges discussed above and the related accruals:


	Three Months Ended March 31, 2024
	Employee-Related Costs		Incremental Depreciation		Asset Impairments		Other		Total
Balance at December 31, 2023	$	10	$	—	$	—	$	1	$	11
Charges	34		—		—		2		36
Cash Payments	(5)		—		—		(1)		(6)
Charges against assets	—		—		—		—		—
Foreign exchange	—		—		—		—		—
Balance at March 31, 2024	$	39	$	—	$	—	$	2	$	41

Employee-Related Costs primarily include severance and other termination benefits and are calculated based on long-standing benefit practices, written severance policies, local statutory requirements and, in certain cases, voluntary termination arrangements. Employee-Related Costs also include pension enhancements, 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 liabilities. For the three months ended March 31, 2024, there were no pension enhancements included in Charges against assets within Employee-Related Costs.

COLGATE-PALMOLIVE COMPANY

Management’s Discussion and Analysis of Financial

Condition and Results of Operations

(Dollars in Millions Except Per Share Amounts)

Non-GAAP Financial Measures

This Quarterly Report on Form 10-Q 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 Quarterly Report on Form 10-Q. 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 the external factor of foreign exchange, as well as the impact of acquisitions and divestments, as applicable. A reconciliation of organic sales growth to Net sales growth for the three months ended March 31, 2024 is provided below.

Selling, general and administrative expenses, 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 Quarterly Report on Form 10-Q both on a GAAP basis and excluding, as applicable, charges resulting from the ERISA litigation matter, the 2022 Global Productivity Initiative and product recall costs. 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, acquisition-related costs, gains and losses from certain divestitures and certain other 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 three months ended March 31, 2024 and 2023 is presented within the applicable section of Results of Operations.

The following tables provide a quantitative reconciliation of Net sales growth to organic sales growth for the three months ended March 31, 2024:


Three Months Ended March 31, 2024	Net Sales Growth (GAAP)	Foreign Exchange Impact	Acquisitions and Divestments Impact	Organic Sales Growth (Non-GAAP)
Oral, Personal and Home Care
North America	4.0%	—%	—%	4.0%
Latin America	16.5%	(9.4)%	—%	25.9%
Europe	9.5%	2.3%	—%	7.2%
Asia Pacific	(1.5)%	(3.0)%	—%	1.5%
Africa/Eurasia	(4.5)%	(20.7)%	—%	16.2%
Total Oral, Personal and Home Care	6.8%	(4.5)%	—%	11.4%
Pet Nutrition	3.9%	(0.3)%	—%	4.2%
Total Company	6.2%	(3.6)%	—%	9.8%

Note: Table may not sum due to rounding.

COLGATE-PALMOLIVE COMPANY

Management’s Discussion and Analysis of Financial

Condition and Results of Operations

(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, share repurchases and acquisitions). 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 decreased 7% to $681 in the first three months of 2024, compared to $735 in the first three months of 2023, primarily due to an increase in receivables, partially offset by higher net income. The Company’s working capital was (2.2%) as a percentage of Net sales as of March 31, 2024 as compared to (0.4%) as of March 31, 2023. 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).

Investing activities used $193 of cash in the first three months of 2024, compared to $264 in the first three months of 2023.

Capital expenditures were $126 in the first three months of 2024 compared to $163 in the first three months of 2023. Capital expenditures for 2024 are expected to be approximately 3.0% of Net sales. The Company continues to focus its capital spending on projects that are expected to yield high aftertax returns.

Financing activities used $361 of cash during the first three months of 2024, compared to $375 used in the first three months of 2023.

Long-term debt, including the current portion, decreased to $8,171 as of March 31, 2024, as compared to $8,239 as of December 31, 2023 and total debt was $8,689 as of March 31, 2024, compared to $8,549 as of December 31, 2023. During the first quarter of 2024, the Company redeemed at maturity $500 of ten-year Medium-Term Notes with a fixed coupon of 3.25%. The redemption was financed with commercial paper borrowings.

In March 2023, the Company issued $500 of three-year Senior Notes at a fixed coupon rate of 4.800%, $500 of five-year Senior Notes at a fixed coupon rate of 4.600% and $500 of ten-year Senior Notes at a fixed coupon rate of 4.600%. The Company’s debt issuances support the Company’s capital structure objectives of funding its business and growth initiatives while minimizing its risk-adjusted cost of capital.

Domestic and foreign commercial paper outstanding was $1,599 and $906 as of March 31, 2024 and December 31, 2023, respectively. The average daily balances outstanding for commercial paper in the first three months of 2024 and 2023 were $1,383 and $2,090, 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 unused lines of credit or by issuing long-term debt pursuant to an effective shelf registration statement.

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. Refer to Note 6, Long Term Debt and Credit Facilities to the Consolidated Financial Statements contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 for further information about the Company’s long-term debt and credit facilities.

In the first quarter of 2024, the Company increased the quarterly common stock dividend to $0.50 per share from $0.48 per share previously, effective in the second quarter of 2024.

Cash and cash equivalents increased $113 during the first three months of 2024 to $1,079 at March 31, 2024, compared to $966 at December 31, 2023, the majority of which ($1,010 and $922, respectively) was held by the Company’s foreign subsidiaries.

For additional information regarding liquidity and capital resources, refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

COLGATE-PALMOLIVE COMPANY

Management’s Discussion and Analysis of Financial

Condition and Results of Operations

(Dollars in Millions Except Per Share Amounts)

Goodwill and Intangible Assets

As of the date of the annual goodwill and indefinite-lived impairment test, the fair value of the Filorga reporting unit and one of the Company’s indefinite-lived trademarks continue to approximate their carrying value.

Given the inherent uncertainties of estimating the future cash flows, the impact of interest rates and inflation on macroeconomic conditions, actual results may differ from management's current estimates which could potentially result in impairment charges in future periods.

COLGATE-PALMOLIVE COMPANY

Management’s Discussion and Analysis of Financial

Condition and Results of Operations

(Dollars in Millions Except Per Share Amounts)

Market Share Information

Management uses market share information as a key indicator to monitor business health and performance. References to market share in this Quarterly Report on Form 10-Q 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. In particular, market share data is currently not generally available for certain retail channels, such as eCommerce or certain discounters. 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. The Company believes 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.

Cautionary Statement on Forward-Looking Statements

This Quarterly Report on Form 10-Q 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 levels, earnings per share levels, financial goals, the impact of foreign exchange, the impact of geopolitical conflicts and tensions, such as the war in Ukraine, the Israel-Hamas war and tensions between China and Taiwan, cost-reduction plans (including the 2022 Global Productivity Initiative), tax rates, interest rates, new product introductions, digital capabilities, commercial investment levels, acquisitions, divestitures, share repurchases 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 macroeconomic and political environment in different countries, including as a result of inflation and rising interest rates, and its effect on consumer confidence and spending, foreign currency rate fluctuations, exchange controls, import restrictions, tariffs, sanctions, 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, increased competition and evolving competitive practices (including from the growth of eCommerce and the entry of new competitors and business models), the ability to operate and respond effectively during a pandemic, epidemic or widespread public health concern, the ability to manage disruptions in our global supply chain and/or key office facilities, the ability to manage the availability and cost of raw and packaging materials and logistics costs, the ability to maintain or increase selling prices as needed, changes in the policies of retail trade customers, the emergence of alternative retail channels, the growth of eCommerce and the rapidly changing retail landscape (as consumers increasingly shop online and through mobile applications), the ability to develop innovative new products, the ability to continue lowering costs and operate in an agile manner, the ability to maintain the security of our information and operational technology systems from a cybersecurity incident or data breach, the ability to address the effects of climate change and achieve our sustainability and social impact goals, the ability to complete acquisitions and divestitures as planned, the ability to successfully integrate acquired businesses, the ability to attract and retain key employees and integrate DE&I initiatives across our organization, the uncertainty of the outcome of legal proceedings, whether or not the Company believes they have merit, and the ability to address uncertain or unfavorable global economic conditions, including inflation, disruptions in the credit markets and tax matters. 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 the Company’s filings with the SEC (including, but not limited to, the information set forth under the captions “Risk Factors” and “Cautionary Statement on Forward-Looking Statements” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 and subsequent filings with the SEC).

COLGATE-PALMOLIVE COMPANY

Management’s Discussion and Analysis of Financial

Condition and Results of Operations

(Dollars in Millions Except Per Share Amounts)

Quantitative and Qualitative Disclosures about Market Risk

There is no material change in the information reported under Part II, Item 7, “Managing Foreign Currency, Interest Rate, Commodity Price and Credit Risk Exposure” contained in our Annual Report on Form 10-K for the year ended December 31, 2023.

COLGATE-PALMOLIVE COMPANY

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, President 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 March 31, 2024 (the “Evaluation”). Based upon the Evaluation, the Company’s Chairman of the Board, President 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.

Changes in Internal Control Over Financial Reporting

The Company is in the process of upgrading its enterprise IT system to SAP S/4 HANA. This change has not had and is not expected to have a material impact on the Company’s internal controls over financial reporting.

Except as noted above, 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.

COLGATE-PALMOLIVE COMPANY

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

For information regarding legal matters, refer to Note 9, Contingencies to the Condensed Consolidated Financial Statements contained in Part I of this Quarterly Report on Form 10-Q, which is incorporated herein by reference.

Item 1A. Risk Factors

There have been no material changes from the risk factors disclosed in “Risk Factors” in Part 1, Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

COLGATE-PALMOLIVE COMPANY

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

On March 10, 2022, 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 “2022 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.

The following table shows the stock repurchase activity for the three months in the quarter ended March 31, 2024:


Month	Total Number of Shares Purchased(1)	Average Price Paid per Share		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)
January 1 through 31, 2024	758,588	$	81.42	758,419	$	2,817
February 1 through 29, 2024	2,672,962	$	84.57	2,517,117	$	2,604
March 1 through 31, 2024	2,833,323	$	88.42	2,830,000	$	2,354
Total	6,264,873	$	85.93	6,105,536

(1) Includes share repurchases under the 2022 Program and those associated with certain employee elections under the Company’s compensation and benefit programs.

(2) 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 159,337 shares, which represents shares deemed surrendered to the Company to satisfy certain employee elections under the Company’s compensation and benefit programs.

(3) 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 March 31, 2024.

COLGATE-PALMOLIVE COMPANY

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information

During the three months ended March 31, 2024, no director or officer of the Company or a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

COLGATE-PALMOLIVE COMPANY

Item 6. Exhibits


Exhibit No.						Description
10-A						Form of Performance Stock Unit Award Agreement for the 2024-2026 Performance Cycle * **

31-A						Certificate of the Chairman of the Board, President and Chief Executive Officer of Colgate-Palmolive Company pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.**

31-B						Certificate of the Chief Financial Officer of Colgate-Palmolive Company pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.**

32						Certificate of the Chairman of the Board, President 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.***

101						The following materials from Colgate-Palmolive Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2024, formatted in Inline eXtensible Business Reporting Language (Inline XBRL): (i) the Condensed Consolidated Statements of Income; (ii) the Condensed Consolidated Statements of Comprehensive Income; (iii) the Condensed Consolidated Balance Sheets; (iv) the Condensed Consolidated Statements of Cash Flows; (v) Condensed Consolidated Statements of Changes in Shareholders’ Equity; and (vi) Notes to Condensed Consolidated Financial Statements.

104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

__________

* Indicates a management contract or compensatory plan.

** Filed herewith.

*** Furnished herewith.

COLGATE-PALMOLIVE COMPANY

SIGNATURES

Pursuant to the requirements 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.


			COLGATE-PALMOLIVE COMPANY
			(Registrant)

			Principal Executive Officer:

April 26, 2024			/s/ Noel R. Wallace
			Noel R. Wallace
			Chairman of the Board, President and Chief Executive Officer

			Principal Financial Officer:

April 26, 2024			/s/ Stanley J. Sutula III
			Stanley J. Sutula III
			Chief Financial Officer

			Principal Accounting Officer:

April 26, 2024			/s/ Gregory O. Malcolm
			Gregory O. Malcolm
			Executive Vice President and Controller

COLGATE PALMOLIVE CO - Quarter Report: 2024 March (Form 10-Q)

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