Colgate Palmolive Earnings 2021-03-31

Balance Sheet	Income Statement	Cash Flow
Assets, Equity	Rev, G Profit, Net Income	Ops, Inv, Fin

cl-20210331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

___________________________

FORM 10-Q

_________________________

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021


☐			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

COLGATE-PALMOLIVE COMPANY

(Exact name of registrant as specified in its charter)


Delaware			13-1815595
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

300 Park Avenue

New York,

New York

10022

(Address of principal executive offices)

(Zip Code)

(212) 310-2000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $1.00 par value

New York Stock Exchange

0.000% Notes due 2021

CL21A

New York Stock Exchange

0.500% Notes due 2026

CL26

New York Stock Exchange

1.375% Notes due 2034

CL34

New York Stock Exchange

0.875% Notes due 2039

CL39

New York Stock Exchange

NO CHANGES

(Former name, former address and former fiscal year, if changed since last report)

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 ☐

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 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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 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	☒	Accelerated filer	☐
Non-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 ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

Class

Shares Outstanding

Date

Common stock, $1.00 par value

845,968,780

March 31, 2021

PART I. FINANCIAL INFORMATION

COLGATE-PALMOLIVE COMPANY

Condensed Consolidated Statements of Income

(Dollars in Millions Except Per Share Amounts)

(Unaudited)


	Three Months Ended
	March 31,
	2021		2020
Net sales	$	4,344	$	4,097
Cost of sales	1,707		1,632
Gross profit	2,637		2,465
Selling, general and administrative expenses	1,605		1,473
Other (income) expense, net	28		40
Operating profit	1,004		952
Non-service related postretirement costs	18		21
Interest (income) expense, net	29		36
Income before income taxes	957		895
Provision for income taxes	229		147
Net income including noncontrolling interests	728		748
Less: Net income attributable to noncontrolling interests	47		33
Net income attributable to Colgate-Palmolive Company	$	681	$	715

Earnings per common share, basic	$	0.80	$	0.83

Earnings per common share, diluted	$	0.80	$	0.83

See Notes to Condensed Consolidated Financial Statements.

COLGATE-PALMOLIVE COMPANY

Condensed Consolidated Statements of Comprehensive Income

(Dollars in Millions)

(Unaudited)


	Three Months Ended
	March 31,
	2021		2020
Net income including noncontrolling interests	$	728	$	748
Other comprehensive income (loss), net of tax:
Cumulative translation adjustments	(158)		(355)
Retirement plans and other retiree benefit adjustments	2		16
Gains (losses) on cash flow hedges	43		18
Total Other comprehensive income (loss), net of tax	(113)		(321)
Total Comprehensive income including noncontrolling interests	615		427
Less: Net income attributable to noncontrolling interests	47		33
Less: Cumulative translation adjustments attributable to noncontrolling interests	(3)		(16)
Total Comprehensive income attributable to noncontrolling interests	44		17
Total Comprehensive income attributable to Colgate-Palmolive Company	$	571	$	410

See Notes to Condensed Consolidated Financial Statements.

COLGATE-PALMOLIVE COMPANY

Condensed Consolidated Balance Sheets

(Dollars in Millions)

(Unaudited)


	March 31, 2021		December 31, 2020
Assets
Current Assets
Cash and cash equivalents	$	995	$	888
Receivables (net of allowances of $89 and $89, respectively)	1,402		1,264
Inventories	1,676		1,673
Other current assets	490		513
Total current assets	4,563		4,338
Property, plant and equipment:
Cost	8,637		8,751
Less: Accumulated depreciation	(5,028)		(5,035)
	3,609		3,716
Goodwill	3,701		3,824
Other intangible assets, net	2,787		2,894
Deferred income taxes	201		291
Other assets	940		857
Total assets	$	15,801	$	15,920
Liabilities and Shareholders’ Equity
Current Liabilities
Notes and loans payable	$	254	$	258
Current portion of long-term debt	9		9
Accounts payable	1,306		1,393
Accrued income taxes	422		403
Other accruals	2,548		2,341
Total current liabilities	4,539		4,404
Long-term debt	7,570		7,334
Deferred income taxes	415		426
Other liabilities	2,614		2,655
Total liabilities	15,138		14,819
Shareholders’ Equity
Common stock	1,466		1,466
Additional paid-in capital	3,011		2,969
Retained earnings	23,624		23,699
Accumulated other comprehensive income (loss)	(4,455)		(4,345)
Unearned compensation	—		(1)
Treasury stock, at cost	(23,384)		(23,045)
Total Colgate-Palmolive Company shareholders’ equity	262		743
Noncontrolling interests	401		358
Total equity	663		1,101
Total liabilities and equity	$	15,801	$	15,920

See Notes to Condensed Consolidated Financial Statements.

COLGATE-PALMOLIVE COMPANY

Condensed Consolidated Statements of Cash Flows

(Dollars in Millions)

(Unaudited)


	Three Months Ended
	March 31,
	2021		2020
Operating Activities
Net income including noncontrolling interests	$	728	$	748
Adjustments to reconcile net income including noncontrolling interests to net cash provided by operations:
Depreciation and amortization	137		133
Restructuring and termination benefits, net of cash	(13)		(30)
Stock-based compensation expense	38		16
Deferred income taxes	6		(99)

Cash effects of changes in:
Receivables	(170)		(211)
Inventories	(40)		29
Accounts payable and other accruals	(75)		220
Other non-current assets and liabilities	(13)		(38)
Net cash provided by (used in) operations	598		768
Investing Activities
Capital expenditures	(107)		(82)
Purchases of marketable securities and investments	(29)		(42)
Proceeds from sale of marketable securities and investments	—		16
Payment for acquisitions, net of cash acquired	—		(351)
Other investing activities	(6)		—
Net cash provided by (used in) investing activities	(142)		(459)
Financing Activities
Short-term borrowing (repayment) less than 90 days, net	365		17

Proceeds from issuance of debt	25		—
Dividends paid	(376)		(373)
Purchases of treasury shares	(372)		(220)
Proceeds from exercise of stock options	30		297
Other financing activities	(6)		(29)
Net cash provided by (used in) financing activities	(334)		(308)
Effect of exchange rate changes on Cash and cash equivalents	(15)		(30)
Net increase (decrease) in Cash and cash equivalents	107		(29)
Cash and cash equivalents at beginning of the period	888		883
Cash and cash equivalents at end of the period	$	995	$	854
Supplemental Cash Flow Information
Income taxes paid	$	227	$	128

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, 2021
	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, 2020	$	1,466	$	2,969	$	(1)	$	(23,045)	$	23,699	$	(4,345)	$	358
Net income	—		—		—		—		681		—		47
Other comprehensive income (loss), net of tax	—		—		—		—		—		(110)		(3)
Dividends ($0.89 per share)*	—		—		—		—		(756)		—		—
Stock-based compensation expense	—		38		—		—		—		—		—
Shares issued for stock options	—		13		—		22		—		—		—
Shares issued for restricted stock units	—		(11)		—		11		—		—		—
Treasury stock acquired	—		—		—		(372)		—		—		—

Other	—		2		1		—		—		—		(1)
Balance, March 31, 2021	$	1,466	$	3,011	$	—	$	(23,384)	$	23,624	$	(4,455)	$	401


Three Months Ended March 31, 2020
	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, 2019	$	1,466	$	2,488	$	(2)	$	(22,063)	$	22,501	$	(4,273)	$	441
Net income	—		—		—		—		715		—		33
Other comprehensive income (loss), net of tax	—		—		—		—		—		(305)		(16)
Dividends ($0.87 per share)*	—		—		—		—		(738)		—		(4)
Stock-based compensation expense	—		16		—		—		—		—		—
Shares issued for stock options	—		133		—		164		—		—		—
Shares issued for restricted stock units	—		(15)		—		15		—		—		—
Treasury stock acquired	—		—		—		(220)		—		—		—
Other	—		1		1		—		3		—		—
Balance, March 31, 2020	$	1,466	$	2,623	$	(1)	$	(22,104)	$	22,481	$	(4,578)	$	454

(1) Accumulated other comprehensive income (loss) includes cumulative translation losses of $3,313 at March 31, 2021 ($3,467 at March 31, 2020) and $3,158 at December 31, 2020 ($3,128 at December 31, 2019), respectively, and unrecognized retirement plan and other retiree benefits costs of $1,176 at March 31, 2021 ($1,122 at March 31, 2020) and $1,178 at December 31, 2020 ($1,138 at December 31, 2019), respectively.

* Two dividends were declared in each of the first quarters of 2021 and 2020.

See Notes to Condensed Consolidated Financial Statements.

COLGATE-PALMOLIVE COMPANY

Notes to Condensed Consolidated Financial Statements

(Dollars in Millions Except Share and Per Share Amounts)

(Unaudited)

1. Basis of Presentation

The Condensed Consolidated Financial Statements reflect all normal recurring adjustments which, in management’s opinion, are necessary for a fair statement of the results for interim periods. Results of operations for interim periods may not be representative of results to be expected for a full year. Colgate-Palmolive Company (together with its subsidiaries, the “Company” or “Colgate”) reclassifies certain prior year amounts, as applicable, to conform to the current year presentation.

For a complete set of financial statement notes, including the Company’s significant accounting policies, refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, filed with the Securities and Exchange Commission (the “SEC”).

2. Use of Estimates

Provisions for certain expenses, including income taxes, advertising and consumer promotion, are based on full year assumptions and are included in the accompanying Condensed Consolidated Financial Statements in proportion with estimated annual tax rates, the passage of time or estimated annual sales, as applicable.

3. Recent Accounting Pronouncements

In January 2021, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2021-01, “Reference Rate Reform (Topic 848): Scope.” This ASU clarifies that certain optional expedients and exceptions in Topic 848 apply to derivatives that are affected by the discounting transition due to reference rate reform. This guidance was effective upon issuance and can be applied prospectively for contract modifications and hedging relationships through December 31, 2022. The Company is currently evaluating the impact of the new guidance and does not expect this standard to have a material impact on the Company’s Consolidated Financial Statements.

In October 2020, the FASB issued ASU No. 2020-10, “Codification Improvements.” This ASU improves the consistency of the codification topics by including all disclosure guidance in the appropriate disclosure section and also clarifies the application of various provisions in the codification. This guidance was effective for the Company beginning on January 1, 2021 and did not have a material impact on the Company’s Consolidated Financial Statements.

In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” The ASU provides optional expedients and exceptions for applying generally accepted accounting principles (“GAAP”) to contracts, hedging relationships and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. This guidance was effective upon issuance and can be applied prospectively for contract modifications and hedging relationships through December 31, 2022. The Company is currently evaluating the impact of the new guidance and does not expect this standard to have a material impact on the Company’s Consolidated Financial Statements.

In January 2020, the FASB issued ASU No. 2020-01, “Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)-Clarifying the Interactions between Topic 321, Topic 323, and Topic 815.” The guidance provides clarification of the interaction of rules for equity securities, the equity method of accounting and forward contracts and purchase options on certain types of securities. This guidance was effective for the Company beginning on January 1, 2021 and did not have a material impact on the Company’s Consolidated Financial Statements.

In December 2019, the FASB issued ASU No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” This ASU simplifies the accounting for income taxes by removing certain exceptions to the general principles in ASC 740 and also clarifies and amends existing guidance to improve consistent application. This guidance was effective for the Company beginning on January 1, 2021 and did not have a material impact on the Company’s Consolidated Financial Statements.

COLGATE-PALMOLIVE COMPANY

Notes to Condensed Consolidated Financial Statements (continued)

(Dollars in Millions Except Share and Per Share Amounts)

(Unaudited)

4. Acquisitions

Hello Products LLC (“hello”)

On January 31, 2020, the Company acquired hello, an oral care business, for cash consideration of $351. The acquisition was financed with a combination of debt and cash. This acquisition is part of the Company’s strategy to focus on high growth segments within its Oral Care, Personal Care and Pet Nutrition businesses.

The total purchase price consideration of $351 was allocated to the net assets acquired based on their respective estimated fair values as follows:


Receivables	$	11
Inventories	13
Other assets and liabilities, net	(4)
Other intangible assets	160

Goodwill	171
Fair value of net assets acquired	$	351

Other intangible assets acquired include trademarks, valued at $115, which are considered to have a finite useful life of 25 years, and customer relationships, valued at $45, which are considered to have a finite useful life of 17 years. Goodwill of $171 was allocated to the North America segment. The Company expects that goodwill will be deductible for tax purposes.

Pro forma results of operations have not been presented as the impact on the Company’s Condensed Consolidated Financial Statements is not material.

COLGATE-PALMOLIVE COMPANY

Notes to Condensed Consolidated Financial Statements (continued)

(Dollars in Millions Except Share and Per Share Amounts)

(Unaudited)

5. Restructuring and Related Implementation Charges

The Company’s restructuring program (the “Global Growth and Efficiency Program”), which commenced in the fourth quarter of 2012, concluded on December 31, 2019. Initiatives under the Global Growth and Efficiency Program 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. Substantially all initiatives under the Global Growth and Efficiency Program had been implemented as of December 31, 2019 and no new restructuring projects were approved for implementation subsequent to the conclusion of the Global Growth and Efficiency Program.

During the three months ended March 31, 2021 and March 31, 2020, the Company made cash payments of $13 and $30, respectively, related to projects approved prior to the conclusion of the Global Growth and Efficiency Program.

The accrual balance at March 31, 2021 and December 31, 2020 was $19 and $31, respectively.

COLGATE-PALMOLIVE COMPANY

Notes to Condensed Consolidated Financial Statements (continued)

(Dollars in Millions Except Share and Per Share Amounts)

(Unaudited)

6. Inventories

Inventories by major class are as follows:


	March 31, 2021		December 31, 2020
Raw materials and supplies	$	463	$	454
Work-in-process	48		45
Finished goods	1,264		1,256
Total Inventories, net	$	1,775	$	1,755
Non-current inventory, net	$	(99)	$	(82)
Current Inventories, net	$	1,676	$	1,673

7. Earnings Per Share

For the three months ended March 31, 2021 and 2020, earnings per share were as follows:


	Three Months Ended
	March 31, 2021					March 31, 2020
	Net income attributable to Colgate-Palmolive Company		Shares (millions)	Per Share		Net income attributable to Colgate-Palmolive Company		Shares (millions)	Per Share
Basic EPS	$	681	848.6	$	0.80	$	715	856.9	$	0.83
Stock options and restricted stock units			2.8					1.5
Diluted EPS	$	681	851.4	$	0.80	$	715	858.4	$	0.83

For the three months ended March 31, 2021 and 2020, the average number of stock options and restricted stock units that were anti-dilutive and not included in diluted earnings per share calculations were 2,721,084 and 20,965,110, respectively.

COLGATE-PALMOLIVE COMPANY

Notes to Condensed Consolidated Financial Statements (continued)

(Dollars in Millions Except Share and Per Share Amounts)

(Unaudited)

8. Other Comprehensive Income (Loss)

Additions to and reclassifications out of Accumulated other comprehensive income (loss) attributable to the Company for the three months ended March 31, 2021 and 2020 were as follows:


	2021				2020
	Pretax		Net of Tax		Pretax		Net of Tax
Cumulative translation adjustments	$	(99)	$	(155)	$	(320)	$	(339)
Retirement plans and other retiree benefits:
Net actuarial gain (loss) and prior service costs arising during the period	(19)		(14)		2		1
Amortization of net actuarial loss, transition and prior service costs (1)	22		16		17		15
Retirement plans and other retiree benefits adjustments	3		2		19		16
Cash flow hedges:
Unrealized gains (losses) on cash flow hedges	53		41		25		20
Reclassification of (gains) losses into net earnings on cash flow hedges (2)	3		2		(3)		(2)
Gains (losses) on cash flow hedges	56		43		22		18
Total Other comprehensive income (loss)	$	(40)	$	(110)	$	(279)	$	(305)

(1) These components of Other comprehensive income (loss) are included in the computation of total pension cost. See Note 9, Retirement Plans and Other Retiree Benefits for additional details.

(2) These (gains) losses are reclassified into Cost of sales. See Note 13, Fair Value Measurements and Financial Instruments for additional details.

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

9. Retirement Plans and Other Retiree Benefits

Components of Net periodic benefit cost for the three months ended March 31, 2021 and 2020 were as follows:


	Three Months Ended March 31, 2021
	Pension Benefits								Other Retiree Benefits
	United States				International

	2021		2020		2021		2020		2021		2020
Service cost	$	—	$	—	$	4	$	4	$	6	$	6
Interest cost	15		19		5		5		9		11
Expected return on plan assets	(27)		(27)		(6)		(4)		—		—
Amortization of actuarial loss (gain)	13		11		3		1		6		5
Net periodic benefit cost	$	1	$	3	$	6	$	6	$	21	$	22

For the three months ended March 31, 2021 and 2020, the Company made no voluntary contributions to its U.S. postretirement plans.

COLGATE-PALMOLIVE COMPANY

Notes to Condensed Consolidated Financial Statements (continued)

(Dollars in Millions Except Share and Per Share Amounts)

(Unaudited)

10. Income Taxes

The provision for income taxes for the quarter ended March 31, 2020 includes $71 of income tax benefits recorded on a discrete period basis of which $45 relates to previously recorded foreign withholding taxes and $26 relates to a previously recorded valuation allowance against a deferred tax asset. As more fully described below, both items were previously recorded in connection with the charge recorded by the Company in 2017 and revised in 2018 related to the Tax Cuts and Jobs Acts (the “TCJA”).

As part of the previously recorded charge for the TCJA, the Company had provided for foreign withholding taxes expected to be paid on the remittance of earnings from certain overseas subsidiaries no longer deemed indefinitely reinvested. As a result of a reorganization of the ownership structure of certain foreign subsidiaries, the Company determined that no withholding taxes would be due on the remittance by certain subsidiaries of earnings previously deemed reinvested and, accordingly, in the first quarter of 2020, reversed $45 of previously recorded foreign withholding taxes.

Also as part of the previously recorded charge for the TCJA, the Company provided a valuation allowance against a deferred tax asset related to foreign tax credit carry-forwards that the Company did not expect to be able to use due to changes made by the TCJA. As a result of a new operating structure implemented within one of the Company’s divisions, the Company believes the use of these foreign tax credit carry-forwards will not be limited in the future and, accordingly, in the first quarter of 2020, reversed the previously recorded valuation allowance of $26.

11. Contingencies

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 $400 (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.

COLGATE-PALMOLIVE COMPANY

Notes to Condensed Consolidated Financial Statements (continued)

(Dollars in Millions Except Share and Per Share Amounts)

(Unaudited)

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 $103. 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.

In each of September 2015, February 2017, June 2018, April 2019 and September 2020, the Company lost an administrative appeal and subsequently filed an appeal in Brazilian federal court. Currently, there are five appeals pending in the 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 $45, 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.

COLGATE-PALMOLIVE COMPANY

Notes to Condensed Consolidated Financial Statements (continued)

(Dollars in Millions Except Share and Per Share Amounts)

(Unaudited)

Competition Matter

Certain of the Company’s subsidiaries were historically subject to actions 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 as of March 31, 2021 of such competition law matters pending against the Company during the three months ended March 31, 2021 is set forth below.

▪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 appealed the decision to the Greek courts. In April 2019, the Greek courts affirmed the judgment against the Company’s Greek subsidiary, but reduced the fine to $10.5 and dismissed the case against Colgate-Palmolive Company. The Company’s Greek subsidiary and the Greek competition authority have appealed the decision to the Greek Supreme Court.

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 March 31, 2021, there were 147 individual cases pending against the Company in state and federal courts throughout the United States, as compared to 137 cases as of December 31, 2020. During the three months ended March 31, 2021, 14 new cases were filed and three cases were resolved by voluntary dismissal. In addition, during the three months ended March 31, 2021, the Company won an appeal in one case that, in 2019, resulted in a jury verdict in favor of the Company and, since all of the plaintiff’s appeals have been exhausted, the case is now closed. There were no settlements of pending cases in the three months ended March 31, 2021.

A significant portion of the Company’s costs incurred in defending and resolving these claims has been, and the Company believes a portion of such costs will continue to be, covered by insurance policies issued by several primary, excess and umbrella insurance carriers, subject to deductibles, exclusions, retentions, policy limits and insurance carrier insolvencies.

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. With the exception of one case where the Company received an adverse jury verdict in the second quarter of 2019 that the Company has appealed, the range of reasonably possible losses in excess of accrued liabilities disclosed above does not include any amount relating to these cases because the amount of any possible losses from such cases currently cannot be reasonably estimated.

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 (the “Company Defendants”) in the United States District Court for the Southern District of New York (the “Court”). The relief sought includes recalculation of benefits, pre- and post-judgment interest and attorneys’ fees. This action was certified as a class action in July 2017. In July 2020, the Court granted in part and denied in part the Company Defendants’ motion for summary judgment and dismissed certain claims on consent of the parties. In August 2020, the Court granted the plaintiffs’ motion for summary judgment on the remaining claims. The Company and the Plan are contesting this action vigorously and, in September 2020, appealed to the United States Court of Appeals for the Second Circuit.

COLGATE-PALMOLIVE COMPANY

Notes to Condensed Consolidated Financial Statements (continued)

(Dollars in Millions Except Share and Per Share Amounts)

(Unaudited)

12. 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.

The accounting policies of the operating segments are generally the same as those described in Note 2, Summary of Significant Accounting Policies to the Company’s Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. Intercompany sales have been eliminated. Corporate operations include costs related to stock options and restricted stock units, research and development costs, Corporate overhead costs 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.

Net sales by segment were as follows:


	Three Months Ended
	March 31,
	2021		2020
Net sales
Oral, Personal and Home Care
North America	$	923	$	929
Latin America	907		889
Europe	717		675
Asia Pacific	739		633
Africa/Eurasia	272		252
Total Oral, Personal and Home Care	3,558		3,378
Pet Nutrition	786		719
Total Net sales	$	4,344	$	4,097

Approximately 70% of the Company’s Net sales are generated from markets outside the U.S., with approximately 45% of the Company’s Net sales coming from emerging markets (which consist of Latin America, Asia (excluding Japan), Africa/Eurasia and Central Europe).

COLGATE-PALMOLIVE COMPANY

Notes to Condensed Consolidated Financial Statements (continued)

(Dollars in Millions Except Share and Per Share Amounts)

(Unaudited)

The Company’s Net sales of Oral, Personal and Home Care and Pet Nutrition products accounted for the following percentages of the Company’s Net sales:


	Three Months Ended
	March 31,
	2021		2020
Net sales
Oral Care	45	%	44	%
Personal Care	19	%	20	%
Home Care	18	%	18	%
Pet Nutrition	18	%	18	%
Total Net sales	100	%	100	%

Operating profit by segment was as follows:


	Three Months Ended
	March 31,
	2021		2020
Operating profit
Oral, Personal and Home Care
North America	$	202	$	258
Latin America	272		248
Europe	180		154
Asia Pacific	224		161
Africa/Eurasia	54		56
Total Oral, Personal and Home Care	932		877
Pet Nutrition	215		203
Corporate	(143)		(128)
Total Operating profit	$	1,004	$	952

For the three months ended March 31, 2020, Corporate Operating profit (loss) included acquisition-related costs of $6.

COLGATE-PALMOLIVE COMPANY

Notes to Condensed Consolidated Financial Statements (continued)

(Dollars in Millions Except Share and Per Share Amounts)

(Unaudited)

13. 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.

The Company’s derivative instruments include interest rate swap contracts, forward-starting interest rate swaps, foreign currency contracts and commodity contracts. The Company utilizes interest rate swap contracts to manage its targeted mix of fixed and floating rate debt, and these swaps are valued using observable benchmark rates (Level 2 valuation). The Company utilizes forward-starting interest rate swaps to mitigate the risk of variability in interest rate for future debt issuances and these swaps are valued using observable benchmark rates (Level 2 valuation). The Company utilizes foreign currency contracts, including forward and swap contracts, option contracts, 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. These contracts are valued using observable market rates (Level 2 valuation). Commodity futures contracts are utilized to hedge the purchases of raw materials used in production. These contracts are measured using quoted commodity exchange prices (Level 1 valuation). The duration of foreign currency and commodity contracts generally does not exceed 12 months.

The following table summarizes the fair value of the Company’s derivative instruments and other financial instruments which are carried at fair value in the Company’s Consolidated Balance Sheets at March 31, 2021 and December 31, 2020:


	Assets					Liabilities
	Account	Fair Value				Account	Fair Value
Designated derivative instruments		March 31, 2021		December 31, 2020			March 31, 2021		December 31, 2020

Interest rate swap contracts	Other assets	$	11	$	14	Other liabilities	$	—	$	—

Forward-starting interest rate swaps	Other assets	51		5		Other liabilities	—		—
Foreign currency contracts	Other current assets	13		7		Other accruals	55		93

Commodity contracts	Other current assets	2		3		Other accruals	—		—
Total designated		$	77	$	29		$	55	$	93

Other financial instruments
Marketable securities	Other current assets	$	62	$	37
Total other financial instruments		$	62	$	37

COLGATE-PALMOLIVE COMPANY

Notes to Condensed Consolidated Financial Statements (continued)

(Dollars in Millions Except Share and Per Share Amounts)

(Unaudited)

The carrying amount of cash, cash equivalents, marketable securities, accounts receivable and short-term debt approximated fair value as of March 31, 2021 and December 31, 2020. The estimated fair value of the Company’s long-term debt, including the current portion, as of March 31, 2021 and December 31, 2020, was $8,097 and $8,175, respectively, and the related carrying value was $7,579 and $7,343, 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).

The following amounts were recorded on the Condensed Consolidated Balance Sheet related to the cumulative basis adjustment for fair value hedges as of:


	March 31, 2021		December 31, 2020
Long-term debt:
Carrying amount of hedged item	$	411	$	413
Cumulative hedging adjustment included in the carrying amount	11		14

The following tables present the notional values as of:


	March 31, 2021
	Foreign Currency Contracts		Foreign Currency Debt		Interest Rate Swaps		Forward-Starting Interest Rate Swaps		Commodity Contracts		Total
Fair Value Hedges	$	527	$	—	$	400	$	—	$	—	$	927
Cash Flow Hedges	825		—		—		600		19		1,444
Net Investment Hedges	604		4,164		—		—		—		4,768


	December 31, 2020
	Foreign Currency Contracts		Foreign Currency Debt		Interest Rate Swaps		Forward-Starting Interest Rate Swaps		Commodity Contracts		Total
Fair Value Hedges	$	589	$	—	$	400	$	—	$	—	$	989
Cash Flow Hedges	854		—		—		300		17		1,171
Net Investment Hedges

Price	73.26	EPS	3
Shares	862	P/E	25
MCap	63,179	P/FCF	29
Net Debt	6,700	EBIT	3,074
TEV	69,879	TEV/EBIT	23
TTM 2019-09-30, in MM, except price, ratios

10-Q	2021-03-31	Filed 2021-04-30
10-K	2020-12-31	Filed 2021-02-18
10-Q	2020-09-30	Filed 2020-10-30
10-Q	2020-06-30	Filed 2020-07-31
10-Q	2020-03-31	Filed 2020-05-01
10-K	2019-12-31	Filed 2020-02-21
10-Q	2019-09-30	Filed 2019-11-01
10-Q	2019-06-30	Filed 2019-07-26
10-Q	2019-03-31	Filed 2019-04-26
10-K	2018-12-31	Filed 2019-02-21
10-Q	2018-09-30	Filed 2018-10-26
10-Q	2018-06-30	Filed 2018-07-27
10-Q	2018-03-31	Filed 2018-04-27
10-K	2017-12-31	Filed 2018-02-15
10-Q	2017-09-30	Filed 2017-10-27
10-Q	2017-06-30	Filed 2017-07-21
10-Q	2017-03-31	Filed 2017-04-28
10-K	2016-12-31	Filed 2017-02-23
10-Q	2016-09-30	Filed 2016-10-27
10-Q	2016-06-30	Filed 2016-07-28
10-Q	2016-03-31	Filed 2016-04-28
10-K	2015-12-31	Filed 2016-02-18
10-Q	2015-09-30	Filed 2015-10-30
10-Q	2015-06-30	Filed 2015-07-30
10-Q	2015-03-31	Filed 2015-04-30
10-K	2014-12-31	Filed 2015-02-19
10-Q	2014-09-30	Filed 2014-10-24
10-Q	2014-06-30	Filed 2014-07-31
10-Q	2014-03-31	Filed 2014-04-25
10-K	2013-12-31	Filed 2014-02-20
10-Q	2013-09-30	Filed 2013-10-24
10-Q	2013-06-30	Filed 2013-07-25
10-Q	2013-03-31	Filed 2013-04-25
10-K	2012-12-31	Filed 2013-02-21
10-Q	2012-09-30	Filed 2012-10-25
10-Q	2012-06-30	Filed 2012-07-26
10-Q	2012-03-31	Filed 2012-04-26
10-K	2011-12-31	Filed 2012-02-23
10-Q	2011-09-30	Filed 2011-10-27
10-Q	2011-06-30	Filed 2011-07-28
10-Q	2011-03-31	Filed 2011-04-28
10-K	2010-12-31	Filed 2011-02-24
10-Q	2010-09-30	Filed 2010-10-28
10-Q	2010-06-30	Filed 2010-07-29
10-Q	2010-03-31	Filed 2010-04-29
10-K	2009-12-31	Filed 2010-02-25

8-K	2020-11-18
8-K	2020-10-30
8-K	2020-10-30
8-K	2020-07-31
8-K	2020-05-14
8-K	2020-05-01
8-K	2020-03-11
8-K	2020-01-31
8-K	2019-11-01
8-K	2019-09-19
8-K	2019-07-26
8-K	2019-07-11
8-K	2019-06-18
8-K	2019-05-10
8-K	2019-04-26
8-K	2019-03-14
8-K	2019-02-26
8-K	2019-02-21
8-K	2019-02-11
8-K	2019-01-25
8-K	2018-10-26
8-K	2018-10-10
8-K	2018-09-13
8-K	2018-07-27
8-K	2018-07-11
8-K	2018-06-18
8-K	2018-05-11
8-K	2018-05-04
8-K	2018-04-27
8-K	2018-03-19
8-K	2018-03-07
8-K	2018-01-26

EX-31.A	exhibit31a_033121xq12021.htm
EX-31.B	exhibit31b_033121xq12021.htm
EX-32	exhibit32_033121xq12021.htm

CL 10Q Quarterly Report

Colgate Palmolive Earnings 2021-03-31