Quarterly Report (10-q)

Date : 11/01/2019 @ 1:26PM
Source : Edgar (US Regulatory)
Stock : Colgate Palmolive Co (CL)
Quote : 68.045  -0.555 (-0.81%) @ 8:44PM

Quarterly Report (10-q)

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cl:Dividend iso4217:EUR xbrli:shares xbrli:pure cl:appeal cl:country_and_territory cl:segment cl:company


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 September 30, 2019
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from________ to________ .
Commission File Number: 1-644
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
 
CL
 
New York Stock Exchange
0.500% Notes due 2026
 
CL 26
 
New York Stock Exchange
1.375% Notes due 2034
 
CL 34
 
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
 
857,044,220
 
September 30, 2019





PART I.    FINANCIAL INFORMATION


COLGATE-PALMOLIVE COMPANY
Condensed Consolidated Statements of Income
(Dollars in Millions Except Per Share Amounts)
(Unaudited)
 
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2019
 
2018
 
2019
 
2018
Net sales
$
3,928

 
$
3,845

 
$
11,678

 
$
11,733

Cost of sales
1,612

 
1,576

 
4,767

 
4,755

Gross profit
2,316

 
2,269

 
6,911

 
6,978

Selling, general and administrative expenses
1,429

 
1,369

 
4,163

 
4,061

Other (income) expense, net
31

 
26

 
125

 
114

Operating profit
856

 
874

 
2,623

 
2,803

Non-service related postretirement costs
27

 
18

 
79

 
65

Interest (income) expense, net
35

 
36

 
113

 
106

Income before income taxes
794

 
820

 
2,431

 
2,632

Provision for income taxes
167

 
258

 
586

 
717

Net income including noncontrolling interests
627

 
562

 
1,845

 
1,915

Less: Net income attributable to noncontrolling interests
49

 
39

 
121

 
121

Net income attributable to Colgate-Palmolive Company
$
578

 
$
523

 
$
1,724

 
$
1,794

 
 
 
 
 
 
 
 
Earnings per common share, basic
$
0.67

 
$
0.60

 
$
2.00

 
$
2.06

 
 
 
 
 
 
 
 
Earnings per common share, diluted
$
0.67

 
$
0.60

 
$
2.00

 
$
2.05







See Notes to Condensed Consolidated Financial Statements.

2





COLGATE-PALMOLIVE COMPANY
Condensed Consolidated Statements of Comprehensive Income
(Dollars in Millions)
(Unaudited)
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2019
 
2018
 
2019
 
2018
Net income including noncontrolling interests
$
627

 
$
562

 
$
1,845

 
$
1,915

Other comprehensive income (loss), net of tax:
 
 
 
 
 
 
 
Cumulative translation adjustments
(111
)
 
(49
)
 
(60
)
 
(247
)
Retirement plans and other retiree benefit adjustments
5

 
31

 
30

 
59

     Gains (losses) on cash flow hedges
4

 
(1
)
 
(3
)
 
9

Total Other comprehensive income (loss), net of tax
(102
)
 
(19
)
 
(33
)
 
(179
)
Total Comprehensive income including noncontrolling interests
525

 
543

 
1,812

 
1,736

Less: Net income attributable to noncontrolling interests
49

 
39

 
121

 
121

Less: Cumulative translation adjustments attributable to noncontrolling interests
(6
)
 
(11
)
 
(6
)
 
(25
)
Total Comprehensive income attributable to noncontrolling interests
43

 
28

 
115

 
96

Total Comprehensive income attributable to Colgate-Palmolive Company
$
482

 
$
515

 
$
1,697

 
$
1,640



See Notes to Condensed Consolidated Financial Statements.

3



COLGATE-PALMOLIVE COMPANY
Condensed Consolidated Balance Sheets
(Dollars in Millions)
(Unaudited)
 
September 30,
2019
 
December 31,
2018
Assets
 
 
 
Current Assets
 
 
 
Cash and cash equivalents
$
948

 
$
726

Receivables (net of allowances of $86 and $82, respectively)
1,495

 
1,400

Inventories
1,371

 
1,250

Other current assets
535

 
417

Total current assets
4,349

 
3,793

Property, plant and equipment:
 

 
 

Cost
8,389

 
8,336

Less: Accumulated depreciation
(4,700
)
 
(4,455
)
 
3,689

 
3,881

Goodwill
3,532

 
2,530

Other intangible assets, net
2,535

 
1,637

Deferred income taxes
165

 
152

Other assets
756

 
168

Total assets
$
15,026

 
$
12,161

Liabilities and Shareholders’ Equity
 

 
 

Current Liabilities
 

 
 

Notes and loans payable
$
503

 
$
12

Current portion of long-term debt
2

 

Accounts payable
1,188

 
1,222

Accrued income taxes
246

 
411

Other accruals
2,292

 
1,696

Total current liabilities
4,231

 
3,341

Long-term debt
7,646

 
6,354

Deferred income taxes
587

 
235

Other liabilities
2,388

 
2,034

Total liabilities
14,852

 
11,964

Shareholders’ Equity
 

 
 

Common stock
1,466

 
1,466

Additional paid-in capital
2,466

 
2,204

Retained earnings
21,860

 
21,615

Accumulated other comprehensive income (loss)
(4,215
)
 
(4,188
)
Unearned compensation
(1
)
 
(3
)
Treasury stock, at cost
(21,900
)
 
(21,196
)
Total Colgate-Palmolive Company shareholders’ equity
(324
)
 
(102
)
Noncontrolling interests
498

 
299

Total equity
174

 
197

Total liabilities and equity
$
15,026

 
$
12,161




See Notes to Condensed Consolidated Financial Statements.

4




COLGATE-PALMOLIVE COMPANY
Condensed Consolidated Statements of Cash Flows
(Dollars in Millions)
(Unaudited)
 
Nine Months Ended
 
September 30,
 
2019
 
2018
Operating Activities
 
 
 
Net income including noncontrolling interests
$
1,845

 
$
1,915

Adjustments to reconcile net income including noncontrolling interests to net cash provided by operations:
 

 
 

Depreciation and amortization
386

 
385

Restructuring and termination benefits, net of cash
11

 
(20
)
Stock-based compensation expense
83

 
97

Charge for U.S. tax reform

 
80

Deferred income taxes
79

 
78

Voluntary benefit plan contributions
(113
)
 
(67
)
Cash effects of changes in:
 
 
 
Receivables
(65
)
 
(196
)
Inventories
(69
)
 
(36
)
Accounts payable and other accruals
(52
)
 
13

Other non-current assets and liabilities
58

 
(55
)
Net cash provided by operations
2,163


2,194

Investing Activities
 

 
 

Capital expenditures
(226
)
 
(321
)
Purchases of marketable securities and investments
(152
)
 
(159
)
Proceeds from sale of marketable securities and investments
14

 
28

Payment for acquisitions, net of cash acquired
(1,711
)
 
(728
)
Other

 
6

Net cash used in investing activities
(2,075
)
 
(1,174
)
Financing Activities
 

 
 

Principal payments on debt
(4,184
)
 
(5,478
)
Proceeds from issuance of debt
6,008

 
5,536

Dividends paid
(1,140
)
 
(1,122
)
Purchases of treasury shares
(1,024
)
 
(956
)
Proceeds from exercise of stock options
490

 
319

Net cash provided by (used in) financing activities
150

 
(1,701
)
Effect of exchange rate changes on Cash and cash equivalents
(16
)
 
(13
)
Net increase (decrease) in Cash and cash equivalents
222

 
(694
)
Cash and cash equivalents at beginning of the period
726

 
1,535

Cash and cash equivalents at end of the period
$
948

 
$
841

Supplemental Cash Flow Information
 

 
 

Income taxes paid
$
669

 
$
655


See Notes to Condensed Consolidated Financial Statements.

5




COLGATE-PALMOLIVE COMPANY
Condensed Consolidated Statements of Changes in Shareholders Equity
(Dollars in Millions)
(Unaudited)
Three Months Ended September 30, 2019
 
Colgate-Palmolive Company Shareholders’ Equity
 
Noncontrolling
Interests
 
Common
Stock
 
Additional
Paid-in
Capital
 
Unearned
Compensation
 
Treasury
Stock
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income (Loss)(1)
 
 
Balance, June 30, 2019
$
1,466

 
$
2,338

 
$
(3
)
 
$
(21,682
)
 
$
21,653

 
$
(4,119
)
 
$
337

Net income
 
 
 
 
 
 
 
 
578

 
 
 
49

Other comprehensive income (loss), net of tax
 
 
 
 
 
 
 
 
 
 
(96
)
 
(6
)
Dividends ($0.43)/per share)
 
 
 
 
 
 
 
 
(370
)
 
 
 
(2
)
Stock-based compensation expense
 
 
49

 
 
 
 
 
 
 
 
 
 
Shares issued for stock options
 
 
93

 
 
 
128

 
 
 
 
 
 
Shares issued for restricted stock units
 
 
(14
)
 
 
 
14

 
 
 
 
 
 
Treasury stock acquired
 
 
 
 
 
 
(360
)
 
 
 
 
 
 
Noncontrolling interests assumed through acquisition
 
 
 
 
 
 
 
 
 
 
 
 
120

Other
 
 
 
 
2

 


 
(1
)
 
 
 
 
Balance, September 30, 2019
$
1,466

 
$
2,466

 
$
(1
)
 
$
(21,900
)
 
$
21,860

 
$
(4,215
)
 
$
498


Three Months Ended September 30, 2018
 
Colgate-Palmolive Company Shareholders’ Equity
 
Noncontrolling
Interests
 
Common
Stock
 
Additional
Paid-in
Capital
 
Unearned
Compensation
 
Treasury
Stock
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income (Loss)(1)
 
 
Balance, June 30, 2018
$
1,466

 
$
2,081

 
$

 
$
(20,757
)
 
$
20,851

 
$
(4,164
)
 
$
334

Net income
 

 
 

 
 

 
 

 
523

 
 
 
39

Other comprehensive income (loss), net of tax
 

 
 

 
 

 
 

 
 
 
(8
)
 
(11
)
Dividends ($0.42)/per share)
 

 
 

 
 

 
 

 
(365
)
 
 

 


Stock-based compensation expense
 

 
50

 
 

 
 

 
 

 
 

 
 

Shares issued for stock options
 

 
69

 
 

 
84

 
 

 
 

 
 

Shares issued for restricted stock units
 
 
(17
)
 
 
 
17

 
 
 
 
 
 
Treasury stock acquired
 

 
 

 
 

 
(260
)
 
 

 
 

 
 

Other
 

 


 
1

 
 
 
(1
)
 
 
 
 
Balance, September 30, 2018
$
1,466

 
$
2,183

 
$
1

 
$
(20,916
)
 
$
21,008

 
$
(4,172
)
 
$
362


(1) Accumulated other comprehensive income (loss) includes cumulative translation losses of $3,209 at September 30, 2019 ($3,159 at September 30, 2018) and $3,104 at June 30, 2019 ($3,121 at June 30, 2018), respectively, and unrecognized retirement plan and other retiree benefits costs of $1,008 at September 30, 2019 ($1,017 at September 30, 2018) and $1,013 at June 30, 2019 ($1,048 at June 30, 2018), respectively.




See Notes to Condensed Consolidated Financial Statements.

6




COLGATE-PALMOLIVE COMPANY
Condensed Consolidated Statements of Changes in Shareholders Equity
(Dollars in Millions)
(Unaudited)
Nine Months Ended September 30, 2019
 
Colgate-Palmolive Company Shareholders’ Equity
 
Noncontrolling
Interests
 
Common
Stock
 
Additional
Paid-in
Capital
 
Unearned
Compensation
 
Treasury
Stock
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income (Loss)(1)
 
 
Balance, December 31, 2018
$
1,466

 
$
2,204

 
$
(3
)
 
$
(21,196
)
 
$
21,615

 
$
(4,188
)
 
$
299

Net income
 

 
 

 
 

 
 

 
1,724

 
 
 
121

Other comprehensive income (loss), net of tax
 

 
 

 
 

 
 

 
 
 
(27
)
 
(6
)
Dividends ($1.71)/per share)*
 

 
 

 
 

 
 

 
(1,473
)
 
 

 
(36
)
Stock-based compensation expense
 

 
83

 
 

 
 

 
 

 
 

 
 
Shares issued for stock options
 

 
207

 
 

 
290

 
 

 
 

 
 
Shares issued for restricted stock units
 
 
(28
)
 
 
 
28

 
 
 
 
 
 
Treasury stock acquired
 

 
 

 
 

 
(1,024
)
 
 

 
 

 
 

Noncontrolling interests assumed through acquisition
 
 
 
 
 
 
 
 
 
 
 
 
120

Other
 

 


 
2

 
2

 
(6
)
 


 


Balance, September 30, 2019
$
1,466

 
$
2,466

 
$
(1
)
 
$
(21,900
)
 
$
21,860

 
$
(4,215
)
 
$
498


Nine Months Ended September 30, 2018
 
Colgate-Palmolive Company Shareholders’ Equity
 
Noncontrolling
Interests
 
Common
Stock
 
Additional
Paid-in
Capital
 
Unearned
Compensation
 
Treasury
Stock
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income (Loss)(1)
 
 
Balance, December 31, 2017
$
1,466

 
$
1,984

 
$
(5
)
 
$
(20,181
)
 
$
20,531

 
$
(3,855
)
 
$
303

Net income
 

 
 

 
 

 
 

 
1,794

 
 
 
121

Other comprehensive income (loss), net of tax
 

 
 

 
 

 
 

 
 
 
(154
)
 
(25
)
Dividends ($1.66)/per share)*
 

 
 

 
 

 
 

 
(1,450
)
 
 

 
(37
)
Stock-based compensation expense
 

 
97

 
 

 
 

 
 

 
 

 
 

Shares issued for stock options
 

 
133

 
 

 
188

 
 

 
 

 
 

Shares issued for restricted stock units
 
 
(31
)
 
 
 
31

 
 
 
 
 
 
Treasury stock acquired
 

 
 

 
 

 
(956
)
 
 

 
 

 
 

Other
 

 


 
6

 
2

 
133

 
(163
)
(2)
 
Balance, September 30, 2018
$
1,466

 
$
2,183

 
$
1

 
$
(20,916
)
 
$
21,008

 
$
(4,172
)
 
$
362


(1) Accumulated other comprehensive income (loss) includes cumulative translation losses of $3,209 at September 30, 2019 ($3,159 at September 30, 2018) and $3,155 at December 31, 2018 ($2,927 at December 31, 2017), respectively, and unrecognized retirement plan and other retiree benefits costs of $1,008 at September 30, 2019 ($1,017 at September 30, 2018) and $1,038 at December 31, 2018 ($923 at December 31, 2017), respectively.

(2) As a result of the early adoption of ASU 2018-02, the Company reclassified the stranded tax effects in Accumulated other comprehensive income (loss) resulting from the Tax Cuts and Jobs Act (the “TCJA” or “U.S. tax reform”) to Retained earnings. See Note 2, Summary of Accounting Policies in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 for additional information.

* Two dividends were declared in each of the first quarters of 2019 and 2018.

See Notes to Condensed Consolidated Financial Statements.

7


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, 2018, 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 July 2019, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2019-07, “Codification Updates to SEC Sections - Amendments to SEC Paragraphs Pursuant to SEC Final Rule Releases No. 33-10532, Disclosure Update and Simplification, and Nos. 33-10231 and 33-10442, Investment Company Reporting Modernization and Miscellaneous Updates.” ASU 2019-07 clarifies or improves the disclosure and presentation requirements of a variety of codification topics by aligning them with the SEC’s regulations, thereby eliminating redundancies and making the codification easier to apply. This ASU was effective upon issuance and did not have a material impact on the Company’s Consolidated Financial Statements.

In April 2019, the FASB issued ASU No. 2019-04, “Codification Improvements to Financial Instruments-Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Financial Instruments (Topic 825).” This ASU clarifies three topics related to financial instruments accounting. This new guidance is effective for the Company beginning on January 1, 2020, with early adoption permitted. This new guidance is not expected to have a material impact on the Company’s Consolidated Financial Statements.

In October 2018, the FASB issued ASU No. 2018-16, “Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (“SOFR”) Overnight Index Swap (“OIS”) Rate as Benchmark Interest Rate for Hedge Accounting Purposes.” The new guidance permits the use of the OIS rate based on the SOFR as a U.S. benchmark interest rate for hedge accounting purposes under Topic 815. This new guidance was effective for the Company on a prospective basis beginning on January 1, 2019, concurrently with the adoption of ASU 2017-12, and did not have an impact on the Company’s Consolidated Financial Statements.

In August 2018, the FASB issued ASU No. 2018-15, “Intangibles-Goodwill and Other-Internal-Use Software (Topic 350): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract.” This new guidance aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. This new guidance is effective for the Company on a prospective or retrospective basis beginning on January 1, 2020, with early adoption permitted. The Company elected to adopt this guidance early, beginning on January 1, 2019 on a prospective basis. The new guidance did not have a material impact on the Company’s Consolidated Financial Statements.

In August 2018, the FASB issued ASU No. 2018-14, “Compensation-Retirement Benefits-Defined Benefit Plans-General (Topic 715): Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans.” This new guidance removes certain disclosures that are not considered cost beneficial, clarifies certain required disclosures and requires certain additional disclosures. This new guidance is effective for the Company on a retrospective basis beginning on January 1, 2020, with early adoption permitted. This new guidance is not expected to have a material impact on the Company’s Consolidated Financial Statements.

8

COLGATE-PALMOLIVE COMPANY
 Notes to Condensed Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
(Unaudited)



In August 2018, the FASB issued ASU No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement.” This new guidance removes certain disclosure requirements related to the fair value hierarchy, modifies existing disclosure requirements related to measurement uncertainty and adds new disclosure requirements. The new disclosure requirements include disclosing the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. This new guidance is effective for the Company beginning on January 1, 2020, with early adoption permitted. Certain disclosure requirements in the new guidance will need to be applied on a retrospective basis and others on a prospective basis. This new guidance is not expected to have a material impact on the Company’s Consolidated Financial Statements.

In August 2017, the FASB issued ASU No. 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities,” amending the eligibility criteria for hedged items and transactions to expand an entity’s ability to hedge nonfinancial and financial risk components. The new guidance eliminates the requirement to separately measure and present hedge ineffectiveness and aligns the presentation of hedge gains and losses with the underlying hedge item. The new guidance also simplifies the hedge documentation and hedge effectiveness assessment requirements. The amended presentation and disclosure requirements must be adopted on a prospective basis, while any amendments to cash flow and net investment hedge relationships that exist on the date of adoption must be applied on a “modified retrospective” basis, meaning a cumulative effect adjustment to the opening balance of retained earnings as of the beginning of the year of adoption. The new guidance was effective for the Company on January 1, 2019 and did not have a material impact on the Company’s Consolidated Financial Statements.

In January 2017, the FASB issued ASU No. 2017-04, “Intangibles–Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment,” eliminating the requirement to calculate implied fair value, essentially eliminating step two from the goodwill impairment test. The new standard requires goodwill impairment to be based upon the results of step one of the impairment test, which is defined as the excess of the carrying value of a reporting unit over its fair value. The impairment charge will be limited to the amount of goodwill allocated to that reporting unit. The standard is effective for the Company on a prospective basis beginning on January 1, 2020, with early adoption permitted. This new guidance is not expected to have an impact on the Company’s Consolidated Financial Statements.

In February 2016, the FASB issued its final standard on lease accounting, ASU No. 2016-02, “Leases (Topic 842),” which superseded Topic 840, “Leases,” which was further modified in ASU No. 2018-10, “Codification Improvements to Topic 842, Leases,” ASU No. 2018-11, “Leases (Topic 842) Targeted Improvements” and ASU No. 2019-01 “Leases (Topic 842) Codification Improvements” to clarify the implementation guidance. The new accounting standard was effective for the Company beginning on January 1, 2019 and required the recognition on the balance sheet of right-of-use assets and lease liabilities for all long-term leases, including operating leases, on the balance sheet. The Company elected the optional transition method and adopted the new guidance on January 1, 2019, on a modified retrospective basis, with no restatement of prior period amounts. As allowed under the new accounting standard, the Company elected to apply practical expedients to carry forward the original lease determinations, lease classifications and accounting of initial direct costs for all asset classes at the time of adoption. The Company also elected not to separate lease components from non-lease components and to exclude short-term leases from its Consolidated Balance Sheet. The Company’s adoption of the new standard resulted in the recognition of right-of-use assets of $458 and liabilities of $574, with no material cumulative effect adjustment to equity as of the date of adoption. In connection with the adoption of this guidance, as required, the Company reclassified certain restructuring reserves incurred in connection with the Global Growth and Efficiency Program (see Note 5, Restructuring and Related Implementation Charges for additional information) and deferred rent liabilities as reductions to lease assets. Adoption of the new standard did not have a material impact on the Company’s Consolidated Statements of Income or Cash Flows. See Note 14, Leases for additional information.

9

COLGATE-PALMOLIVE COMPANY
 Notes to Condensed Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
(Unaudited)


4.
Acquisitions

Acquisition of Laboratoires Filorga Cosmétiques (“Filorga”)

On September 19, 2019 (the “Acquisition Date”), the Company acquired the Filorga skin health business for cash consideration of €1,516 (approximately $1,674), which included interest on the equity purchase price, plus additional consideration of €32 (approximately $38), the majority of which related to repayment of loans from former shareholders of Filorga. Filorga is a premium anti-aging skin health brand focused primarily on facial care. This acquisition is part of the Company’s strategy to focus on its higher-margin oral care, personal care and pet nutrition businesses, including by expanding its portfolio in premium skin health.

The total purchase price consideration of $1,712 has been allocated to the net assets acquired based on their respective preliminary estimated fair values as follows:
 
 
Cash
$
30

Receivables
53

Inventories
72

Other current assets
18

Other intangible assets
946

Goodwill
1,002

Other current liabilities
(67
)
Deferred income taxes
(252
)
Noncontrolling interests
(90
)
Fair value of net assets acquired
$
1,712



Other intangible assets acquired include trademarks of $692, which are considered to have an indefinite useful life, and customer relationships of $254, which have a finite life. Goodwill of $1,002 was allocated to the Europe segment. The Company expects that goodwill will not be deductible for tax purposes.

The preliminary estimates of the fair value of identifiable assets acquired and liabilities assumed are subject to revisions, which may result in adjustments to the preliminary values discussed above. The Company expects to finalize the purchase price allocation no later than the third quarter of 2020.

The results of operations of Filorga for the period from the Acquisition Date through September 30, 2019 were not material to the Company’s Consolidated results of operations and are not included in the Company’s Condensed Consolidated results of operations for the three month period ended September 30, 2019. Filorga’s results of operations will be included in the Company’s Consolidated results of operations for the three month period ended December 31, 2019.

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

Nigeria Joint Venture

On August 15, 2019, the Company acquired a 51% controlling interest in Colgate Tolaram Pte. Ltd., a joint venture which owns the Nigeria-based Hypo Homecare Products Limited, for $31.

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


10

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
 
In the fourth quarter of 2012, the Company commenced a restructuring program (the “Global Growth and Efficiency Program”). The program was expanded in 2014 and expanded and extended in each of 2015 and 2017. To take advantage of additional savings opportunities at the end of the program, on October 31, 2019, the program was expanded. Implementation of the program remains on track and it continues to run through December 31, 2019.

Initiatives under the Global Growth and Efficiency Program continue to fit within the program’s three focus areas of expanding commercial hubs, extending shared business services and streamlining global functions and optimizing the global supply chain and facilities.

As a result of the most recent expansion, cumulative pretax charges resulting from the Global Growth and Efficiency Program, once all phases are approved and implemented, are now estimated to be in the range of $1,865 to $1,875 pretax ($1,385 to $1,395 aftertax) as compared to the previous estimate of $1,820 to $1,870 ($1,350 to $1,380 aftertax). The Company now anticipates that pretax charges for 2019 will be in the range of $145 to $155 pretax ($105 to $115 aftertax) as compared to the previous estimate of $100 to $150 ($70 to $100 aftertax). It is expected that substantially all charges resulting from the Global Growth and Efficiency Program will be incurred by December 31, 2019.

Once all projects are approved and implemented, the pretax charges resulting from the Global Growth and Efficiency Program are expected to be comprised of the following categories: Employee-Related Costs, including severance, pension and other termination benefits (40%); asset-related costs, primarily Incremental Depreciation and Asset Impairments (10%); and Other charges, which include contract termination costs, consisting primarily of related implementation charges resulting directly from exit activities (30%) and the implementation of new strategies (20%). Over the course of the Global Growth and Efficiency Program, it is estimated that approximately 75% of the charges will result in cash expenditures.

The Company expects that the cumulative pretax charges, once all projects are approved and implemented, will relate to initiatives undertaken in North America (15%), Europe (20%), Latin America (5%), Asia Pacific (5%), Africa/Eurasia (5%), Hill’s Pet Nutrition (10%) and Corporate (40%), which includes substantially all of the costs related to the implementation of new strategies, noted above, on a global basis. The Company expects that, when it has been fully implemented, the Global Growth and Efficiency Program will have contributed a net reduction of approximately 4,000 to 4,400 positions from the Company’s global employee workforce.

For the three and nine months ended September 30, 2019 and 2018, restructuring and related implementation charges are reflected in the Condensed Consolidated Statements of Income as follows:
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2019
 
2018
 
2019
 
2018
Cost of sales
$
1

 
$
8

 
$
9

 
$
19

Selling, general and administrative expenses
28

 
9

 
42

 
24

Other (income) expense, net
(3
)
 
8

 
43

 
64

Non-service related postretirement costs
1

 
1

 
4

 
8

Total Global Growth and Efficiency Program charges, pretax
$
27

 
$
26

 
$
98

 
$
115

 
 
 
 
 
 
 
 
Total Global Growth and Efficiency Program charges, aftertax
$
22

 
$
22

 
$
75

 
$
93


Restructuring and related implementation charges in the preceding table are recorded in the Corporate segment as these initiatives are predominantly centrally directed and controlled and are not included in internal measures of segment operating performance.

11

COLGATE-PALMOLIVE COMPANY
 Notes to Condensed Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
(Unaudited)


Total charges incurred for the Global Growth and Efficiency Program relate to initiatives undertaken by the following reportable operating segments:

Three Months Ended

Nine Months Ended

Program-to-date

September 30,

September 30,

Accumulated Charges

2019

2018

2019

2018


North America
1
 %

16
 %

2
 %

17
 %

17
%
Latin America
 %

8
 %

15
 %

11
 %

5
%
Europe
11
 %

(24
)%

4
 %

(4
)%

19
%
Asia Pacific
 %

14
 %

5
 %

4
 %

4
%
Africa/Eurasia
(2
)%

5
 %

(1
)%

5
 %

5
%
Hills Pet Nutrition
2
 %

40
 %

5
 %

25
 %

8
%
Corporate
88
 %

41
 %

70
 %

42
 %

42
%
Total
100
 %
 
100
 %
 
100
 %
 
100
 %
 
100
%


Since the inception of the Global Growth and Efficiency Program in the fourth quarter of 2012, the Company has incurred cumulative pretax charges of $1,820 ($1,353 aftertax) in connection with the implementation of various projects as follows:
 
Cumulative Charges
 
as of September 30, 2019
Employee-Related Costs
$
696

Incremental Depreciation
115

Asset Impairments
58

Other
951

Total
$
1,820



The majority of costs incurred since inception relate to the following projects: the implementation of the Company’s overall hubbing strategy; the consolidation of facilities; the extension of shared business services and streamlining of global functions; the closing of the Morristown, New Jersey personal care facility; the simplification and streamlining of the Company’s research and development capabilities and oral care supply chain, both in Europe; redesigning the European commercial organization; restructuring how the Company will provide future retirement benefits to substantially all of the U.S.-based employees participating in the Company’s defined benefit retirement plan by shifting them to the Company’s defined contribution plan; and the implementation of a Corporate efficiencies program.

The following tables summarize the activity for the restructuring and related implementation charges discussed above and the related accruals:
 
 
Three Months Ended September 30, 2019
 
 
Employee-Related
Costs
 
Incremental
Depreciation
 
Asset
Impairments
 
Other
 
Total
Balance at June 30, 2019
 
$
41

 
$

 
$

 
$
86

 
$
127

Charges
 
1

 
13

 

 
13

 
27

Cash payments
 
(11
)
 

 

 
(26
)
 
(37
)
Charges against assets
 
(1
)
 
(13
)
 

 

 
(14
)
Foreign exchange
 
2

 

 

 

 
2

Other
 

 

 

 

 

Balance at September 30, 2019
 
$
32

 
$

 
$

 
$
73

 
$
105


12

COLGATE-PALMOLIVE COMPANY
 Notes to Condensed Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
(Unaudited)


 
 
Nine Months Ended September 30, 2019
 
 
Employee-Related
Costs 
 
Incremental
Depreciation 
 
Asset
Impairments
 
Other
 
Total
Balance at December 31, 2018
 
$
60

 
$

 
$

 
$
142

 
$
202

Charges
 
15

 
23

 
6

 
54

 
98

Cash payments
 
(39
)
 

 

 
(48
)
 
(87
)
Charges against assets
 
(4
)
 
(23
)
 
(6
)
 
(27
)
 
(60
)
Foreign exchange
 

 

 

 

 

Other
 

 

 

 
(48
)
 
(48
)
Balance at September 30, 2019
 
$
32

 
$

 
$

 
$
73

 
$
105



Employee-Related Costs primarily include severance and other termination benefits and are calculated based on long-standing benefit practices, local statutory requirements and, in certain cases, voluntary termination arrangements. Employee-Related Costs also include pension and other retiree benefit enhancements amounting to $1 and $4 for the three and nine months ended September 30, 2019, respectively, which are reflected as Charges against assets within Employee-Related Costs in the preceding tables as the corresponding balance sheet amounts are reflected as a reduction of pension assets or an increase in pension and other retiree benefit liabilities. See Note 9, Retirement Plans and Other Retiree Benefits for additional information.

Incremental Depreciation is recorded to reflect changes in useful lives and estimated residual values for long-lived assets that will be taken out of service prior to the end of their normal service period. Asset Impairments are recorded to write down inventories and assets held for sale or disposal to their fair value based on amounts expected to be realized. Charges against assets within Asset Impairments are net of cash proceeds pertaining to the sale of certain assets.

Other charges consist primarily of charges resulting directly from exit activities and the implementation of new strategies as a result of the Global Growth and Efficiency Program. These charges for the three and nine months ended September 30, 2019 include third-party incremental costs related to the development and implementation of new business and strategic initiatives of $13 and $23, respectively, and contract termination costs and charges resulting directly from exit activities of $0 and $3, respectively. These charges were expensed as incurred. Other charges also included charges for exit costs related to office space consolidation of $0 and $28 for the three and nine months ended September 30, 2019, respectively.

Other decreases to the restructuring accruals reflects the reclassification of restructuring accruals to lease assets as a result of the Company’s adoption of ASU No. 2018-10, “Codification Improvements to Topic 842, Leases,” on January 1, 2019. See Note 3, Recent Accounting Pronouncements and Note 14, Leases for additional information.

6.    Inventories

Inventories by major class are as follows:
 
September 30,
2019
 
December 31,
2018
Raw materials and supplies
$
277

 
$
253

Work-in-process
44

 
37

Finished goods
1,050

 
960

Total Inventories
$
1,371

 
$
1,250




13

COLGATE-PALMOLIVE COMPANY
 Notes to Condensed Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
(Unaudited)


7.    Earnings Per Share

For the three months ended September 30, 2019 and 2018, earnings per share were as follows:

 
Three Months Ended
 
September 30, 2019
 
September 30, 2018
 
Net income attributable to Colgate-Palmolive Company
 
Shares
(millions)
 
Per
Share
 
Net income attributable to Colgate-Palmolive Company
 
Shares
(millions)
 
Per
Share
Basic EPS
$
578

 
858.7

 
$
0.67

 
$
523

 
868.8

 
$
0.60

Stock options and
restricted stock units
 
 
2.5

 
 

 
 

 
2.3

 
 

Diluted EPS
$
578

 
861.2

 
$
0.67

 
$
523

 
871.1

 
$
0.60



For the three months ended September 30, 2019 and 2018, the average number of stock options and restricted stock units that were anti-dilutive and not included in diluted earnings per share calculations were 16,963,201 and 17,373,432, respectively.

For the nine months ended September 30, 2019 and 2018, earnings per share were as follows:

 
Nine Months Ended
 
September 30, 2019
 
September 30, 2018
 
Net income attributable to Colgate-Palmolive Company
 
Shares
(millions)
 
Per
Share
 
Net income attributable to Colgate-Palmolive Company
 
Shares
(millions)
 
Per
Share
Basic EPS
$
1,724

 
860.1

 
$
2.00

 
$
1,794

 
871.9

 
$
2.06

Stock options and
restricted stock units
 
 
2.3

 
 

 
 

 
3.1

 
 

Diluted EPS
$
1,724

 
862.4

 
$
2.00

 
$
1,794

 
875.0

 
$
2.05



For the nine months ended September 30, 2019 and 2018, the average number of stock options and restricted stock units that were anti-dilutive and not included in diluted earnings per share calculations were 18,818,149 and 16,602,521, respectively.

Basic and diluted earnings per share are computed independently for each quarter and any year-to-date period presented. As a result of changes in the number of shares outstanding during the year and rounding, the sum of the quarters earnings per share may not necessarily equal the earnings per share for any year-to-date period.




14

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 September 30, 2019 and 2018 were as follows:
 
 
2019
 
2018
 
 
Pretax
 
Net of Tax
 
Pretax
 
Net of Tax
Cumulative translation adjustments
 
$
(83
)
 
$
(105
)
 
$
(38
)
 
$
(38
)
Retirement plans and other retiree benefits:
 
 
 
 
 
 
 
 
Net actuarial gain (loss) and prior service costs arising during the period
 
(14
)
 
(10
)
 
24

 
18

Amortization of net actuarial loss, transition and prior service costs (1)
 
19

 
15

 
16

 
13

Retirement plans and other retiree benefits adjustments
 
5

 
5

 
40

 
31

Cash flow hedges:
 
 
 
 
 
 
 
 
Unrealized gains (losses) on cash flow hedges
 
6

 
5

 
(2
)
 
(1
)
Reclassification of (gains) losses into net earnings on cash flow hedges (2)
 
(1
)
 
(1
)
 

 

Gains (losses) on cash flow hedges
 
5

 
4

 
(2
)
 
(1
)
Total Other comprehensive income (loss)
 
$
(73
)
 
$
(96
)
 
$

 
$
(8
)

(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.

Additions to and reclassifications out of Accumulated other comprehensive income (loss) attributable to the Company for the nine months ended September 30, 2019 and 2018 were as follows:
 
 
2019
 
2018
 
 
Pretax
 
Net of Tax
 
Pretax
 
Net of Tax
Cumulative translation adjustments
 
$
(33
)
 
$
(54
)
 
$
(216
)
 
$
(222
)
Retirement plans and other retiree benefits:
 
 
 
 
 
 
 
 
Net actuarial gain (loss) and prior service costs arising during the period
 
(15
)
 
(11
)
 
24

 
18

Amortization of net actuarial loss, transition and prior service costs (1)
 
54

 
41

 
52

 
41

Retirement plans and other retiree benefits adjustments
 
39

 
30

 
76

 
59

Cash flow hedges:
 
 
 
 
 
 
 
 
Unrealized gains (losses) on cash flow hedges
 
3

 
2

 
4

 
3

Reclassification of (gains) losses into net earnings on cash flow hedges (2)
 
(6
)
 
(5
)
 
8

 
6

Gains (losses) on cash flow hedges
 
(3
)
 
(3
)
 
12

 
9

Total Other comprehensive income (loss)
 
$
3

 
$
(27
)
 
$
(128
)
 
$
(154
)

(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 OCI attributable to Noncontrolling interests.


15

COLGATE-PALMOLIVE COMPANY
 Notes to Condensed Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
(Unaudited)


9.
Retirement Plans and Other Retiree Benefits

Components of Net periodic benefit cost for the three and nine months ended September 30, 2019 and 2018 were as follows:

 
Three Months Ended September 30,
 
Pension Benefits
 
Other Retiree Benefits
 
United States
 
International
 
 
 
 
 
2019
 
2018
 
2019
 
2018
 
2019
 
2018
Service cost
$
1

 
$

 
$
3

 
$
3

 
$
4

 
$
3

Interest cost
22

 
21

 
6

 
5

 
15

 
9

Expected return on plan assets
(29
)
 
(28
)
 
(4
)
 
(5
)
 
(2
)
 
(1
)
Amortization of actuarial loss (gain)
14

 
12

 
1

 
2

 
4

 
2

Net periodic benefit cost
$
8

 
$
5

 
$
6

 
$
5

 
$
21

 
$
13


 
Nine Months Ended September 30,
 
Pension Benefits
 
Other Retiree Benefits
 
United States
 
International
 
 
 
 
 
2019
 
2018
 
2019
 
2018
 
2019
 
2018
Service cost
$
1

 
$
1

 
$
10

 
$
10

 
$
11

 
$
11

Interest cost
68

 
64

 
16

 
16

 
35

 
28

Expected return on plan assets
(78
)
 
(86
)
 
(13
)
 
(16
)
 
(3
)
 
(1
)
Amortization of actuarial loss (gain)
39

 
35

 
6

 
6

 
9

 
11

Net periodic benefit cost
$
30

 
$
14

 
$
19

 
$
16

 
$
52

 
$
49



For the nine months ended September 30, 2019 and 2018, the Company made voluntary contributions to its U.S. postretirement plans of $113 and $67, respectively.


16

COLGATE-PALMOLIVE COMPANY
 Notes to Condensed Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
(Unaudited)


10.
Income Taxes

On December 22, 2017, the Tax Cuts and Jobs Act (the “TCJA” or “U.S. tax reform”) was enacted, which, among other things, lowered the U.S. corporate income tax rate to 21% from 35% and established a modified territorial system requiring a mandatory deemed repatriation tax on undistributed earnings of foreign subsidiaries. Beginning in 2018, the TCJA also requires a minimum tax on certain earnings generated by foreign subsidiaries while providing for tax-free repatriation of such earnings through a 100% dividends-received deduction. The Company’s effective income tax rate in 2017 included a provisional charge of $275, recorded in the fourth quarter of 2017, based on its initial analysis of the TCJA. During 2018, the Company finalized its assessment of the impact of the TCJA and recognized an additional tax expense of $80 reflecting the impact of transition tax guidance issued by the U.S. Treasury and the update of certain estimates and calculations based on information available through the end of 2018. This additional tax expense of $80 was recognized in the third quarter of 2018.

The impact, if any, of further transitional tax guidance that may be issued by the U.S. Treasury would be reflected in the Company’s provision for income tax in the period such guidance is effective.

The provision for income taxes for the nine months ended September 30, 2018 included a benefit of $15 from a foreign tax matter.


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 $200 (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.


17

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 Companys 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 $145. 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. There is one case currently on appeal at the administrative level. In the event the Company is ultimately unsuccessful in this administrative appeal, further appeals are available within the Brazilian federal courts.

In September 2015, the Company lost one of its appeals at the administrative level and filed a lawsuit in Brazilian federal court. In February 2017, the Company lost an additional administrative appeal and filed a lawsuit in Brazilian federal court. In April 2019, the Company lost another administrative appeal and filed a lawsuit in Brazilian federal court. Although there can be no assurances, management believes, based on the opinion of its Brazilian legal counsel, that the disallowances are without merit and that the Company should ultimately prevail. The Company is challenging these disallowances vigorously.
 
In July 2002, the Brazilian Federal Public Attorney filed a civil action against the federal government of Brazil, Laboratorios Wyeth-Whitehall Ltda. (the Brazilian subsidiary of the Seller) and the Company, as represented by its Brazilian subsidiary, in the 6th. Lower Federal Court in the City of São Paulo, seeking to annul an April 2000 decision by the Brazilian Board of Tax Appeals that found in favor of the Seller’s Brazilian subsidiary on the issue of whether it had incurred taxable capital gains as a result of the divestiture of Kolynos. The action seeks to make the Company’s Brazilian subsidiary jointly and severally liable for any tax due from the Seller’s Brazilian subsidiary. The case has been pending since 2002, and the Lower Federal Court has not issued a decision. Although there can be no assurances, management believes, based on the opinion of its Brazilian legal counsel, that the Company should ultimately prevail in this action. The Company is challenging this action vigorously.

In December 2005, the Brazilian internal revenue authority issued to the Company’s Brazilian subsidiary a tax assessment with interest, penalties and any court-mandated fees of approximately $61, 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.


18

COLGATE-PALMOLIVE COMPANY
 Notes to Condensed Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
(Unaudited)


Competition Matters

Certain of the Company’s subsidiaries have historically been subject to investigations, and, in some cases, fines, by governmental authorities in a number of countries related to alleged competition law violations. Substantially all of these matters also involved other consumer goods companies and/or retail customers. The Company’s policy is to comply with antitrust and competition laws and, if a violation of any such laws is found, to take appropriate remedial action and to cooperate fully with any related governmental inquiry. The status as of September 30, 2019 of competition law matters pending against the Company during the nine months ended September 30, 2019 is set forth below.

In December 2014, the French competition law authority found that 13 consumer goods companies, including the Company’s French subsidiary, exchanged competitively sensitive information related to the French home care and personal care sectors, for which the Company’s French subsidiary was fined $57. In addition, as a result of the Company’s acquisition of the Sanex personal care business in 2011 from Unilever N.V. and Unilever PLC (together with Unilever N.V., “Unilever,”), pursuant to a Business and Share Sale and Purchase Agreement (the “Sale and Purchase Agreement”), the French competition law authority found that the Company’s French subsidiary, along with Hillshire Brands Company (formerly Sara Lee Corporation (“Sara Lee”)), were jointly and severally liable for fines of $25 assessed against Sara Lee’s French subsidiary. The Company is indemnified for these fines by Unilever pursuant to the Sale and Purchase Agreement. The fines were confirmed by the Court of Appeal in October 2016. The Company appealed the decision of the Court of Appeal on behalf of the Company and Sara Lee in the French Supreme Court. In March 2019, the French Supreme Court denied the Company’s appeal.

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 has 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 September 30, 2019, there were 242 individual cases pending against the Company in state and federal courts throughout the United States, as compared to 237 cases as of June 30, 2019 and 239 cases as of December 31, 2018. During the three months ended September 30, 2019, 26 new cases were filed and 21 cases were resolved by voluntary dismissal, judgment in the Company’s favor or settlement. During the three months ended September 30, 2019, one case resulted in a jury verdict in favor of the Company after a trial, which has been appealed by the plaintiff. During the nine months ended September 30, 2019, 88 new cases were filed and 85 cases were resolved by voluntary dismissal, dismissal by the court, judgment in the Company’s favor or settlement. During the nine months ended September 30, 2019, in addition to the jury verdict in favor of the Company discussed above, which is now pending appeal, one case resulted in an adverse jury verdict after a trial, which the Company is appealing. The value of the settlements and of the adverse jury verdict in, as applicable, the quarter and the year-to-date period presented was not material, either individually or in the aggregate, to each such period’s results of operations.

The Company believes that a significant portion of its costs incurred in defending and resolving these claims will be covered by insurance policies issued by several primary, excess and umbrella insurance carriers, subject to deductibles, exclusions, retentions and policy limits.

While the Company and its legal counsel believe that these cases are without merit and intend to challenge them vigorously, there can be no assurances regarding the ultimate resolution of these matters. With the exception of the case where the Company received an adverse jury verdict, 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.

19

COLGATE-PALMOLIVE COMPANY
 Notes to Condensed Consolidated Financial Statements (continued)
(Dollars in Millions Except Share and Per Share Amounts)
(Unaudited)


ERISA Matter

In June 2016, a putative class action claiming that residual annuity payments made to certain participants in the Colgate-Palmolive Company Employees’ Retirement Income Plan (the “Plan”) did not comply with the Employee Retirement Income Security Act was filed against the Plan, the Company and certain individuals in the United States District Court for the Southern District of New York. This action has been certified as a class action. The relief sought includes recalculation of benefits, pre- and post-judgment interest and attorneys’ fees. The Company is contesting this action vigorously. Since the amount of any potential loss from this case currently cannot be reasonably estimated, the range of reasonably possible losses in excess of accrued liabilities disclosed above does not include any amount relating to the case.

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, 2018. Intercompany sales have been eliminated. Corporate operations include costs related to stock options and restricted stock units, research and development costs, Corporate overhead costs, restructuring and related implementation charges and gains and losses on sales of non-core product lines and assets. The Company reports these items within Corporate operations as they relate to Corporate-based responsibilities and decisions and are not included in the internal measures of segment operating performance used by the Company to measure the underlying performance of the operating segments.

Net sales by segment were as follows:
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2019
 
2018
 
2019
 
2018
Net sales
 
 
 
 
 
 
 
Oral, Personal and Home Care
 
 
 
 
 
 
 
North America
$
869

 
$
858

 
$
2,568

 
$
2,509

Latin America
881

 
856

 
2,700

 
2,718

Europe
607

 
640

 
1,798

 
1,908

Asia Pacific
690

 
673

 
2,035

 
2,106

Africa/Eurasia
248

 
236

 
732

 
734

Total Oral, Personal and Home Care
3,295

 
3,263

 
9,833

 
9,975

Pet Nutrition
633

 
582

 
1,845

 
1,758

Total Net sales
$
3,928

 
$
3,845

 
$
11,678

 
$
11,733



Approximately 70% of the Company’s Net sales are generated from markets outside the U.S., with approximately