ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Executive Overview

Business Organization

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

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

Operationally, we are organized along geographic lines with management teams having responsibility for the business and financial results in each region. We compete in more than 200 countries and territories worldwide with established businesses in all regions contributing to our sales and profitability. Approximately 70% of our Net sales are generated from markets outside the U.S., with approximately 45% of our Net sales coming from emerging markets (which consist of Latin America, Asia (excluding Japan), Africa/Eurasia and Central Europe). This geographic diversity and balance help to reduce our exposure to business and other risks in any one country or part of the world.

The Oral, Personal and Home Care product segment is managed geographically in five reportable operating segments: North America, Latin America, Europe, Asia Pacific and Africa/Eurasia, all of which sell primarily to a variety of traditional and eCommerce retailers, wholesalers and distributors. Through Hill’s Pet Nutrition, we also compete on a worldwide basis in the pet nutrition market, selling products principally through authorized pet supply retailers, veterinarians and eCommerce retailers. We also sell certain of our products direct-to-consumer. We are engaged in manufacturing and sourcing of products and materials on a global scale and have major manufacturing facilities, warehousing facilities and distribution centers in every region around the world.

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

(Dollars in Millions Except Per Share Amounts)

COVID-19

The COVID-19 pandemic and government steps to reduce the spread and address the impact of COVID-19 have had and continue to have a profound impact on the way people live, work, interact and shop and have significantly impacted and continue to impact economic activity around the world. We have a well-established Crisis Management Team (“CMT”) process, and the CMT, together with our senior management team and Colgate people around the world, continue to respond to and manage the challenges presented by COVID-19.

During the COVID-19 pandemic, many of the communities in which we manufacture, market and sell our products experienced and in some cases continue to experience “stay at home” orders, travel or movement restrictions and other government actions to reduce the spread and address the impact of COVID-19, and have implemented varying policies to address the pandemic, resume economic activity and vaccinate their populations. The situation continues to be uncertain and varies by geography, as the impact of COVID-19 remains significant in many countries throughout the world, including Brazil, China, India, Mexico, Thailand, the U.S. and Vietnam, where we have substantial manufacturing facilities. Because the vast majority of our products (such as oral care products, soaps and other personal hygiene products, home cleaners and pet food) have been deemed essential for the health and well-being of people and their pets, we have, in most instances, been able to continue operating our business, although not always at full capacity.

The health, safety and well-being of our employees and their families has been and remains our first priority. While we have reopened most of our offices, in some instances on a limited and voluntary basis, many of our office-based employees globally continue to work from home. We have implemented additional health and safety measures consistent with government recommendations and/or requirements to help ensure employee safety in our offices, production facilities, warehouses and technology centers, often at additional cost. These measures may include: health and temperature screening, social distancing and personal protective equipment protocols, hand washing, contact tracing, enhanced cleaning procedures, respiratory hygiene, education and, in some instances, testing and/or vaccination requirements. In addition, during the COVID-19 pandemic, we have seen increased instances of absenteeism and, in some cases, we have experienced some limited production facility closures and related supply chain disruptions. Furthermore, some of our suppliers, customers, distributors, logistics providers and service providers have experienced disruptions to their businesses.

We saw a significant increase in demand across many of our categories, such as liquid hand soap, dish liquid, bar soap and cleaners, during 2020 as a result of the COVID-19 pandemic, driven by consumer pantry-loading and increased consumption of our products. While consumer demand for most of these categories declined year-over-year in 2021, most still remained above historical levels, and we believe that some of this increase in consumption is sustainable in light of changes in consumer behavior related to COVID-19. Across our business, changes in consumer demand for our products vary by product category, channel and geography depending on, among other things, the severity of the COVID-19 outbreak, the availability of our products at retailers and supply chain disruptions. At the same time, during the COVID-19 pandemic, we have experienced disruptions in certain channels, including travel retail. We also continue to see changes in the purchasing patterns of our consumers, including the nature and/or frequency of visits by consumers to retailers and dental, veterinary and skin health professionals and a shift in many markets to purchasing our products online.

COVID-19 and government steps to reduce the spread and address the impact of COVID-19 have impacted and may continue to impact our consumers’ ability to purchase and our ability to manufacture and distribute our products. While we believe that, in the long-term, consumer demand for the products in our categories will continue to be strong, uncertainties continue surrounding the COVID-19 pandemic. These uncertainties include: the impact of the timing and scale of changes to travel and movement restrictions in certain geographies, the availability and widespread distribution and use of COVID-19 vaccines, the emergence and spread of COVID-19 variants, the timing and impact of consumer pantry-loading and destocking activity in certain markets, product demand trends and the impact of COVID-19 on the global economy, including as a result of inflation, and supply chain disruptions. COVID-19 has also disrupted our retail customers, contract manufacturers, logistics providers and other third parties; their ability to address COVID-19 and maintain their operations at full capacity has impacted and may continue to impact sales of and consumer access to our products. We expect the ongoing economic impact and health concerns associated with COVID-19 to continue to impact consumer behavior, shopping patterns and consumption preferences during 2022.

While we currently expect to be able to continue operating our business as described above and we intend to continue to work with government authorities and to follow the necessary protocols to maintain the health and safety of our employees and third parties, uncertainty resulting from COVID-19 could result in an unforeseen additional disruption to our business, including our global supply chain and retailer network, and/or require us to incur additional operational costs.

For more information about the anticipated COVID-19 impact, see “Outlook” below.

(Dollars in Millions Except Per Share Amounts)

Business Strategy

To achieve our business and financial objectives, we are focused on driving organic sales growth and long-term profitable growth through innovation on our core businesses; leveraging faster growth in adjacent categories; expanding in high-growth channels and markets and delivering margin expansion through operating leverage and efficiency. We are also seeking to maximize the impact of our ESG programs and leading in the development of human capital, including our sustainability and social impact and DE&I strategies, which we are working to integrate across our organization. We are strengthening our capabilities in areas such as innovation, digital, eCommerce and data and analytics enabling us to be more responsive in today’s rapidly changing world. In particular, we believe our digital transformation is of paramount importance to our success going forward. We continue to invest behind our brands, including through advertising, and to develop initiatives to build strong relationships with consumers, dental, veterinary and skin health professionals and traditional and eCommerce retailers. We also continue to broaden our eCommerce offerings, including direct-to-consumer and subscription services. We continue to believe that growth opportunities are greater in those areas of the world in which economic development and rising consumer incomes expand the size and number of markets for our products.

We are also changing the way we work to drive growth and how we approach innovation with focus, empowerment, experimentation and digitization to respond to the dynamic retail landscape and the evolving preferences of our customers and consumers. The retail landscape, the ease of new entrants into the market in many of our categories and the evolving preferences of our customers and consumers demand that we work differently and faster in an agile, authentic and culturally relevant manner to drive innovation.

The investments needed to drive growth are supported through continuous, Company-wide initiatives to lower costs and increase effective asset utilization. Through these initiatives, which are referred to as our funding-the-growth initiatives, we seek to become even more effective and efficient throughout our businesses. These initiatives are designed to reduce costs associated with direct materials, indirect expenses, distribution and logistics and advertising and promotional materials, among other things, and encompass a wide range of projects, examples of which include raw material substitution, reduction of packaging materials, consolidating suppliers to leverage volumes and increasing manufacturing efficiency through SKU reductions and formulation simplification. We also continue to prioritize our investments in high growth segments within our Oral Care, Personal Care and Pet Nutrition businesses, including by expanding our portfolio in premium skin health.

On January 27, 2022, the Board approved a targeted productivity program (the “2022 Global Productivity Initiative”). The program is intended to reallocate resources towards our strategic priorities and faster growth businesses, drive efficiencies in our operations and streamline our supply chain to reduce structural costs. Implementation of the 2022 Global Productivity Initiative, which is expected to be substantially completed by December 31, 2022, is projected to result in cumulative pre-tax charges, once all phases are approved and implemented, totaling between $200 and $240, which are currently estimated to be comprised of the following: employee-related costs, including severance, pension and other termination benefits (80%); asset-related costs, primarily accelerated depreciation and asset write-downs (10%); and other charges (10%), which include contract termination costs, consisting primarily of implementation-related charges resulting directly from exit activities and the implementation of new strategies. It is estimated that approximately 90% of the charges will result in cash expenditures. For more information regarding the 2022 Global Productivity Initiative, see “Restructuring and Related Implementation Charges” below.

Significant Items Impacting Comparability

In the fourth quarter of 2021, we recorded a non-cash charge of $571 pretax ($518 aftertax) to adjust the carrying values of goodwill and indefinite-lived intangible related to the Filorga skin health business. The impairment was due primarily to the impact of the COVID-19 pandemic on the Filorga business as a result of government restrictions and reduced consumer mobility, which negatively impacted consumption in the duty-free, travel retail and pharmacy channels. See Note 5, Goodwill and Other Intangible Assets to the Consolidated Financial Statements for further information.

In 1990, our Canadian subsidiary (“CP Canada”), issued C$145 of Canadian dollar-denominated unsecured unsubordinated 12.85% guaranteed notes due October 4, 2030 (the “Canada notes”). In the third quarter of 2021, CP Canada redeemed the Canada notes and recorded a loss on the early extinguishment of debt of $75 pretax ($55 aftertax), which is included in Interest (income) expense, net in the Consolidated Statements of Income, representing the difference between the redemption price and the carrying amount of the debt extinguished.

(Dollars in Millions Except Per Share Amounts)

In 2019, we received a favorable judgment regarding certain value-added tax previously paid in Brazil. As a result of this favorable judgment, during the fourth quarter of 2019, we filed an application with the Brazilian government to recover value-added tax previously paid and recorded a benefit. In May 2021, the Brazilian Supreme Court issued a clarifying ruling allowing a higher deduction of state value-added tax when determining the taxable base. In light of this ruling, we recorded an additional benefit of $26 pretax ($20 aftertax) in the year ended December 31, 2021.

The Global Growth and Efficiency Program, a multi-year restructuring program, 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. During the year ended December 31, 2020, we adjusted the accrual balances related to certain projects approved prior to the conclusion of the Global Growth and Efficiency Program to reflect our revised estimate of remaining liabilities, which resulted in a reduction of $16 ($13 aftertax) to restructuring accruals. For more information regarding the Global Growth and Efficiency Program, see Note 4, Restructuring and Related Implementation Charges to the Consolidated Financial Statements.

The provision for income taxes for the year ended December 31, 2020 includes $71 of income tax benefits, 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 described more fully in “Results of Operations-Income Taxes,” below, both items were previously recorded in connection with the charge recorded in 2017 and revised in 2018 related to the Tax Cuts and Jobs Act (the “TCJA”).

On January 31, 2020, we acquired Hello Products LLC (“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 our strategy to focus on high growth segments within our Oral Care, Personal Care and Pet Nutrition businesses. See Note 3, Acquisitions to the Consolidated Financial Statements for additional information.

Outlook

Looking forward, we expect global macroeconomic, political and market conditions to remain challenging, especially due to COVID-19. During the year ended December 31, 2021, all of our divisions experienced significantly higher raw and packaging material costs. We also incurred increased logistics costs due to volume and capacity constraints in the shipping and logistics industry and higher eCommerce demand. We expect this difficult cost environment to continue in 2022.

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

We have been negatively affected by changes in the policies and practices of our trade customers in key markets, such as inventory de-stocking, fulfillment requirements, limitations on access to shelf space, delisting of our products and certain environmental, sustainability, supply chain and packaging standards or initiatives. In addition, the retail landscape in many of our markets continues to evolve as a result of the rapid growth of eCommerce, changing consumer preferences (as consumers increasingly shop online and via mobile and social applications) and the increased presence of alternative retail channels, such as subscription services and direct-to-consumer businesses. These trends have been magnified due to COVID-19 in many of our geographies and we plan to continue to invest behind our digital and analytics capabilities and higher growth businesses, such as eCommerce. This rapid growth in eCommerce and the emergence of alternative retail channels have created and may continue to create pricing pressures and/or adversely affect our relationships with our key retailers.

In addition, given that approximately 70% of our Net sales originate in markets outside the U.S., we have experienced and will likely continue to experience volatile foreign currency fluctuations. As discussed above, we have also experienced higher raw and packaging material and logistics costs. While we have taken, and will continue to take, measures to mitigate the effect of these conditions, such as the 2022 Global Productivity Initiative and our funding the growth and revenue growth management initiatives, including additional pricing, in the current environment, it may become increasingly difficult to implement certain of these mitigation strategies. Should these conditions persist, they could adversely affect our future results.

(Dollars in Millions Except Per Share Amounts)

As discussed above, we continue to closely monitor the impact of COVID-19 on our business. During 2020 as a result of the COVID-19 pandemic, we saw a significant increase in demand across many of our categories, such as liquid hand soap, dish liquid, bar soap and cleaners. While consumer demand for most of these categories declined year-over-year in 2021, most remained above historical levels. We believe that some of this increased consumption is sustainable due to consumer behavior changes related to COVID-19. We expect increased volatility across all of our categories, and it is therefore difficult to predict category growth rates in the near term. COVID-19 has also disrupted our retail customers, contract manufacturers, logistics providers and other third parties; their ability to address COVID-19 and maintain their operations at full capacity has impacted and may continue to impact sales of and consumer access to our products. While we have taken, and will continue to take, measures to mitigate the effects of COVID-19, we cannot estimate with certainty the full extent of COVID-19’s impact on our business, results of operations, cash flows and/or financial condition. For more information about factors that could impact our business, including due to COVID-19, see “Risk Factors” in Part I, Item 1A of this Annual Report.

In summary, we believe that we are well prepared to meet the challenges ahead due to our strong financial condition, broad based experience operating in challenging environments, resilient global supply chain and focused business strategy. Our strategy is based on driving organic sales growth and long-term profitable growth through innovation within our core businesses, leveraging faster growth in adjacent categories, expanding in high-growth channels and markets and delivering margin expansion through operating leverage and efficiency. We are also seeking to maximize the impact of our environmental, social and governance programs and leading in the development of human capital, including our sustainability and social impact and DE&I strategies. Our commitment to these priorities, the strength of our brands, the breadth of our global footprint and a commitment to driving efficiency in cash generation should position us well to manage through the challenges presented by COVID-19 and increase shareholder value over time.

(Dollars in Millions Except Per Share Amounts)

Results of Operations

This section of this Annual Report on Form 10-K generally discusses 2021 and 2020 items and year-to-year comparisons between 2021 and 2020. Discussions of 2019 items and year-to-year comparisons between 2020 and 2019 that are not included in this Annual Report on Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

Net Sales

Worldwide Net sales were $17,421 in 2021, up 6.0% from 2020, due to volume growth of 1.0%, net selling price increases of 3.5%, and positive foreign exchange of 1.5%. Organic sales (Net sales excluding, as applicable, the impact of foreign exchange, acquisitions and divestments), a non-GAAP financial measure as discussed below, increased 4.5% in 2021.

Net sales in the Oral, Personal and Home Care product segment were $14,110 in 2021, up 4.0% from 2020, due to net selling price increases of 2.5% and positive foreign exchange of 1.5%, while volume was flat. Organic sales in the Oral, Personal and Home Care product segment increased 2.5% in 2021.

The increase in organic sales in 2021 versus 2020 was due to an increase in Oral Care organic sales, partially offset by a decrease in Personal Care organic sales. The increase in Oral Care was primarily due to organic sales growth in the toothpaste, manual toothbrush and mouthwash categories. The decrease in Personal Care was primarily due to organic sales declines in the liquid hand soap and bar soap categories.

The Company’s share of the global toothpaste market was 39.4% for full year 2021, down 0.3 share points from full year 2020, and its share of the global manual toothbrush market was 30.9% for full year 2021, up 0.1 share points from full year 2020. Full year 2021 market shares in toothpaste were up in Europe and Africa/Eurasia and down in North America, Latin America and Asia Pacific versus full year 2020. In the manual toothbrush category, full year 2021 market shares were up in Latin America, Europe and Africa/Eurasia and down in North America and Asia Pacific versus full year 2020. For additional information regarding the Company’s use of market share data and limitations of such data, see “Market Share Information” below.

Net sales for Hill’s Pet Nutrition were $3,311 in 2021, an increase of 15.0% from 2020, driven by volume growth of 8.0%, net selling price increases of 5.5% and positive foreign exchange of 1.5%. Organic sales for Hill’s Pet Nutrition increased 13.5% in 2021.

The increase in organic sales in 2021 versus 2020 was primarily due to increases in organic sales in the Science Diet and Prescription Diet categories.

(Dollars in Millions Except Per Share Amounts)

Gross Profit/Margin

Worldwide Gross profit increased 4% to $10,375 in 2021 from $10,017 in 2020. Gross profit in 2020 included acquisition-related costs. Excluding acquisition-related costs in 2020, Gross profit increased to $10,375 in 2021 from $10,021 in 2020, reflecting an increase of $565 resulting from higher Net sales and a decrease of $211 resulting from lower Gross profit margin.

Worldwide Gross profit margin decreased to 59.6% in 2021 from 60.8% in 2020. This decrease in Gross profit margin was primarily due to higher raw and packaging material costs (450 bps), partially offset by cost savings from the Company’s funding-the-growth initiatives (210 bps) and higher pricing (120 bps).

Acquisition-related costs — 4

(Dollars in Millions Except Per Share Amounts)

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased 6% to $6,407 in 2021 from $6,019 in 2020. Selling, general and administrative expenses in 2020 included benefits resulting from the Global Growth and Efficiency Program. Excluding benefits resulting from the Global Growth and Efficiency Program, Selling, general and administrative expenses increased to $6,407 in 2021 from $6,022 in 2020, reflecting higher overhead expenses of $312 and increased advertising investment of $73.

Selling, general and administrative expenses as a percentage of Net sales increased to 36.8% in 2021 from 36.5% in 2020. Excluding benefits resulting from the Global Growth and Efficiency Program, Selling, general and administrative expenses as a percentage of Net sales increased by 20 bps to 36.8% in 2021 as compared to 36.6% in 2020. This increase was due to higher overhead expenses (50 bps), driven by higher logistics costs, partially offset by decreased advertising investment (30 bps), both as a percentage of Net sales. In 2021, advertising investment decreased as a percentage of Net sales to 11.6% from 11.9% in 2020, while it increased in absolute terms by 3.7% to $2,021 as compared with $1,948 in 2020.

Selling, general and administrative expenses, GAAP $ 6,407 $ 6,019

Global Growth and Efficiency Program — 3

Selling, general and administrative expenses, non-GAAP $ 6,407 $ 6,022

Global Growth and Efficiency Program — % 0.1 %

(Dollars in Millions Except Per Share Amounts)

Other (Income) Expense, Net

Other (income) expense, net was $65 and $113 in 2021 and 2020, respectively. Other (income) expense, net in 2021 included a benefit related to a value-added tax matter in Brazil. Other (income) expense, net in 2020 included benefits resulting from the Global Growth and Efficiency Program and acquisition-related costs.

Other (income) expense, net, GAAP $ 65 $ 113

Global Growth and Efficiency Program — 13

Acquisition-related costs — (2)

Value-added tax matter in Brazil 26 —

Other (income) expense, net, non-GAAP $ 91 $ 124

Excluding the items described above in both periods, as applicable, Other (income) expense, net was $91 in 2021 and $124 in 2020, comprised of the following:

Amortization of intangible assets $ 89 $ 88

Equity income (12) (12)

Write-off of certain investments and fixed assets 10 —

Total Other (income) expense, net $ 91 $ 124

Goodwill & Indefinite-Lived Intangible Impairment Charges

The Company made revisions to the internal forecasts relating to its Filorga reporting unit during the fourth quarter of 2021 due primarily to the impact of the COVID-19 pandemic on the Filorga skin health business as a result of government restrictions and reduced consumer mobility, which negatively impacted consumption in the duty-free, travel retail and pharmacy channels. The Company concluded that the changes in circumstances in this reporting unit triggered the need for an interim impairment review of its indefinite-lived trademark and goodwill and, accordingly, performed an interim impairment test for the trademark as of December 31, 2021. The Company concluded that the carrying value of the trademark exceeded its estimated fair value, and recorded an impairment charge of $204, reducing the carrying value to approximately $588. After adjusting the carrying value of the trademark, the Company completed a quantitative impairment test for goodwill and recorded a goodwill impairment charge of $367 in the Filorga reporting unit, reducing the carrying value of goodwill to approximately $577. The Company continues to believe in the strength of the Filorga brand and is confident about its growth opportunities. See Note 5, Goodwill and Other Intangible Assets to the Consolidated Financial Statements for further information.

(Dollars in Millions Except Per Share Amounts)

Operating Profit

Operating profit decreased 14% to $3,332 in 2021 from $3,885 in 2020. In 2021, Operating profit included a benefit related to a value-added tax matter in Brazil, and goodwill and indefinite-lived intangible impairment charges related to the Filorga reporting unit. In 2020, Operating profit included benefits resulting from the Global Growth and Efficiency Program and acquisition-related costs. Excluding these items in both periods, as applicable, Operating profit was flat in 2021.

Operating profit margin was 19.1% in 2021, a decrease of 450 bps compared with 23.6% in 2020. Excluding the items described above in both periods, as applicable, Operating profit margin was 22.3% in 2021, a decrease of 120 bps from 23.5% in 2020. This decrease in Operating profit in 2021 was primarily due to a decrease in Gross profit (120 bps), as a percentage of Net sales.

Global Growth and Efficiency Program — (16)

Acquisition-related costs — 6

Value-added tax matter in Brazil (26) —

Goodwill and indefinite-lived intangible impairment charges 571 —

Operating profit, non-GAAP $ 3,877 $ 3,875 — %

Operating profit margin, GAAP 19.1 % 23.6 % (450)

Global Growth and Efficiency Program — (0.1) %

Acquisition-related costs — —

Value-added tax matter in Brazil (0.2) % —

Goodwill and indefinite-lived intangible impairment charges 3.4 % —

Operating profit margin, non-GAAP 22.3 % 23.5 % (120)

Non-Service Related Postretirement Costs

Non-service related postretirement costs were $70 in 2021 compared to $74 in 2020.

(Dollars in Millions Except Per Share Amounts)

Interest (Income) Expense, Net

Interest (income) expense, net was $175 in 2021 compared with $164 in 2020. In 2021 and 2020, Interest (income) expense, net included losses on the early extinguishment of debt. Excluding the losses on the early extinguishment of debt, in both periods, Interest (income) expense, net was $100 in 2021 compared to $141 in 2020, primarily due to lower average interest rates on debt.

Interest (income) expense, GAAP $ 175 $ 164

Loss on early extinguishment of debt (75) (23)

Interest (income) expense, non-GAAP $ 100 $ 141

(Dollars in Millions Except Per Share Amounts)

Income Taxes

The effective income tax rate was 24.3% in 2021 and 21.6% in 2020. As reflected in the table below, the non-GAAP effective income tax rate was 22.0% in 2021 and 23.6% in 2020.

Goodwill and indefinite-lived intangible impairment charges 571 53 (2.1) %

Loss on early extinguishment of debt 75 20 (0.3) %

Value-added tax matter in Brazil (26) (6) 0.1 %

Global Growth and Efficiency Program (16) (3) —

Subsidiary and operating structure initiatives — 71 2.0 %

Acquisition-related costs 6 2 —

Loss on early extinguishment of debt 23 5 —

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(1) The income tax effect on non-GAAP items is calculated based upon the tax laws and statutory income tax rates applicable in the tax jurisdiction(s) of the underlying non-GAAP adjustment.

(2) The impact of non-GAAP items on the Company’s effective tax rate represents the difference in the effective tax rate calculated with and without the non-GAAP adjustment on Income before income taxes and Provision for income taxes.

The provision for income taxes for 2020 includes $71 of income tax benefits, 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 described more fully below, both items were previously recorded in connection with the charge recorded by the Company in 2017 and revised in 2018 related to 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 will be due on the remittance by certain subsidiaries of earnings previously deemed reinvested and, accordingly, reversed $45 of previously recorded foreign withholding taxes in the first quarter of 2020.

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, reversed the previously recorded valuation allowance of $26 in the first quarter of 2020.

The effective income tax rate in all years benefited from tax planning associated with the Company’s global business initiatives.

(Dollars in Millions Except Per Share Amounts)

Net income attributable to Colgate-Palmolive Company and Earnings per share

Net income attributable to Colgate-Palmolive Company of $2,166, or $2.55 per share on a diluted basis, in 2021 decreased from $2,695, or $3.14 per share on a diluted basis, in 2020. In 2021, Net income attributable to Colgate-Palmolive Company included aftertax goodwill and indefinite-lived intangible impairment charges, an aftertax benefit related to a value-added tax matter in Brazil and an aftertax loss on the early extinguishment of debt. In 2020, Net income attributable to Colgate-Palmolive Company included aftertax benefits resulting from the Global Growth and Efficiency Program, aftertax acquisition-related costs, a tax benefit related to subsidiary and operating structure initiatives and an aftertax loss on the early extinguishment of debt.

Excluding the items described above in both periods, as applicable, Net income attributable to Colgate-Palmolive Company increased 3% to $2,719 in 2021 from $2,633 in 2020, and Earnings per common share on a diluted basis increased 5% to $3.21 in 2021 from $3.06 in 2020.

Value-added tax matter in Brazil (26) (6) (20) — (20) (0.02)

Global Growth and Efficiency Program (16) (3) (13) — (13) (0.02)

Subsidiary and operating structure initiatives — 71 (71) — (71) (0.08)

Acquisition-related costs 6 2 4 — 4 —

Loss on early extinguishment of debt 23 5 18 — 18 0.02

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(1) The income tax effect on non-GAAP items is calculated based upon the tax laws and statutory income tax rates applicable in the tax jurisdiction(s) of the underlying non-GAAP adjustment.

(2) The impact of non-GAAP adjustments on diluted earnings per share may not necessarily equal the difference between “GAAP” and “non-GAAP” as a result of rounding.

(Dollars in Millions Except Per Share Amounts)

Segment Results

The Company markets its products in over 200 countries and territories throughout the world in two product segments: Oral, Personal and Home Care; and Pet Nutrition. The Company evaluates segment performance based on several factors, including Operating profit. The Company uses Operating profit as a measure of the operating segment performance because it excludes the impact of corporate-driven decisions related to interest expense and income taxes.

Oral, Personal and Home Care

North America

Net sales in North America decreased 1.0% in 2021 to $3,694, driven by volume declines of 4.0%, partially offset by net selling price increases of 2.0% and positive foreign exchange of 1.0%. Organic sales in North America decreased 2.0% in 2021. The organic sales decline was largely driven by the United States.

The decrease in organic sales in North America in 2021 versus 2020 was primarily due to decreases in Personal Care and Home Care organic sales. The decrease in Personal Care was primarily due to organic sales declines in the liquid hand soap and bar soap categories. The decrease in Home Care was primarily due to organic sales declines in the hand dish category, partially offset by organic sales growth in the liquid cleaner category.

Operating profit in North America decreased 24% in 2021 to $754, or 600 bps to 20.4% as a percentage of Net sales. This decrease in Operating profit as a percentage of Net sales was primarily due to a decrease in Gross profit (330 bps) and an increase in Selling, general and administrative expenses (300 bps), both as a percentage of Net sales. This decrease in Gross profit was primarily due to higher raw and packaging material costs (600 bps), partially offset by cost savings from the Company’s funding-the-growth initiatives (190 bps) and higher pricing. This increase in Selling, general and administrative expenses was due to higher overhead expenses (290 bps), primarily driven by higher logistics costs, and increased advertising investment (10 bps).

(Dollars in Millions Except Per Share Amounts)

Latin America

Net sales in Latin America increased 7.0% in 2021 to $3,663, as volume growth of 1.0% and net selling price increases of 7.0% were partially offset by negative foreign exchange of 1.0%. Organic sales in Latin America increased 8.0% in 2021. Organic sales growth was led by Brazil, Mexico, Argentina and Colombia.

The increase in organic sales in Latin America in 2021 versus 2020 was due to increases in Oral Care, Personal Care and Home Care organic sales. The increase in Oral Care was primarily due to organic sales growth in the toothpaste, manual toothbrush and mouthwash categories. The increase in Personal Care was primarily due to organic sales growth in the bar soap and underarm protection categories. The increase in Home Care was primarily due to organic sales growth in the fabric softener and liquid cleaner categories.

Operating profit in Latin America increased 4% in 2021 to $1,012, while as a percentage of Net sales it decreased 90 bps to 27.6%. This decrease in Operating profit as a percentage of Net sales was due to a decrease in Gross profit (150 bps), partially offset by a decrease in Selling, general and administrative expenses (20 bps) and a decrease in Other (income) expense, net (40 bps), all as a percentage of Net sales. This decrease in Gross profit was primarily due to higher raw and packaging material costs (740 bps), which were partially offset by cost savings from the Company’s funding-the-growth initiatives (330 bps) and higher pricing. This decrease in Selling, general and administrative expenses was due to decreased advertising investment (70 bps), partially offset by higher overhead expenses (50 bps), primarily driven by higher logistics costs. The decrease in Other (income) expense, net was primarily due to a value added tax refund.

(Dollars in Millions Except Per Share Amounts)

Europe

Net sales in Europe increased 3.5% in 2021 to $2,841, as Net selling prices were flat and positive foreign exchange of 4.0% was partially offset by volume declines of 0.5%. Organic sales in Europe decreased 0.5% in 2021. Organic sales declines were driven by the Filorga duty-free business and Germany, partially offset by organic sales growth in Poland.

The decrease in organic sales in Europe in 2021 versus 2020 was due to decreases in Personal Care and Home Care organic sales, partially offset by an increase in Oral Care organic sales. The decrease in Personal Care was primarily due to organic sales declines in the liquid hand soap, body wash, skin health and bar soap categories. The decrease in Home Care was primarily due to organic sales declines in the bleach and hand dish categories, partially offset by organic sales growth in the fabric softener category. The increase in Oral Care was primarily due to organic sales growth in the toothpaste, prescription dental and manual toothbrush categories.

Operating profit in Europe increased 5% in 2021 to $682, or 30 bps to 24.0% as a percentage of Net sales. This increase in Operating profit as a percentage of Net sales was primarily due to a decrease in Selling, general and administrative expenses (110 bps), partially offset by a decrease in Gross profit (100 bps), both as a percentage of Net sales. This decrease in Gross profit was primarily due to higher raw and packaging material costs (330 bps), partially offset by cost savings from the Company’s funding-the-growth initiatives (220 bps). This decrease in Selling, general and administrative expenses was largely due to decreased advertising investment (100 bps).

(Dollars in Millions Except Per Share Amounts)

Asia Pacific

Net sales in Asia Pacific increased 6.0% in 2021 to $2,867, driven by volume growth of 3.0% and positive foreign exchange of 3.0%, while net selling prices were flat. Organic sales in Asia Pacific increased 3.0% in 2021. Organic sales growth was led by India and the Greater China region.

The increase in organic sales in 2021 versus 2020 was primarily due to an increase in Oral Care organic sales. The increase in Oral Care was driven by organic sales growth in the toothpaste, manual toothbrush and mouthwash categories.

Operating profit in Asia Pacific increased 9% in 2021 to $844, or 80 bps to 29.4% of Net sales. This increase in Operating profit as a percentage of Net sales was due primarily to an increase in Gross profit (50 bps) and a decrease in Other (income) expense, net (40 bps), both as a percentage of Net sales. This increase in Gross profit was primarily due to cost savings from the Company’s funding-the-growth initiatives (230 bps), mix (20 bps) and other, partially offset by higher raw and packaging material costs (230 bps). The decrease in Other (income) expense, net was primarily due to a gain on an investment.

(Dollars in Millions Except Per Share Amounts)

Africa/Eurasia

Net sales in Africa/Eurasia increased 6.5% in 2021 to $1,045, as volume growth of 1.0% and net selling price increases of 6.0% were partially offset by negative foreign exchange of 0.5%. Organic sales in Africa/Eurasia increased 7.0% in 2021. Organic sales growth was led by Turkiye, Nigeria and South Africa.

The increase in organic sales in 2021 versus 2020 was primarily due to an increase in Oral Care organic sales. The increase in Oral Care was primarily due to organic sales growth in the toothpaste and manual toothbrush categories.

Operating profit in Africa/Eurasia decreased 1% in 2021 to $203, or 160 bps to 19.4% of Net sales. This decrease in Operating profit as a percentage of Net sales was primarily due to a decrease in Gross profit (170 bps), partially offset by a decrease in Selling, general and administrative expenses (60 bps), both as a percentage of Net sales. This decrease in Gross profit was primarily due to higher raw and packaging material costs (590 bps), partially offset by higher pricing and cost savings from the Company’s funding-the-growth initiatives (190 bps). This decrease in Selling, general and administrative expenses was due to decreased advertising investment (140 bps), partially offset by higher overhead expenses (80 bps), primarily driven by higher logistics costs.

(Dollars in Millions Except Per Share Amounts)

Hill’s Pet Nutrition

Net sales for Hill’s Pet Nutrition increased 15.0% in 2021 to $3,311, driven by volume growth of 8.0%, net selling price increases of 5.5% and positive foreign exchange of 1.5%. Organic sales in Hill’s Pet Nutrition increased 13.5% in 2021. Organic sales growth was led by the United States and Europe.

The increase in organic sales in 2021 versus 2020 was due to organic sales growth in the Science Diet and Prescription Diet categories.

Operating profit in Hill’s Pet Nutrition increased 14% in 2021 to $901, while as a percentage of Net sales it decreased 30 bps to 27.2%. This decrease in Operating profit as a percentage of Net sales was due to a decrease in Gross profit (40 bps) and an increase in Selling, general and administrative expenses (30 bps), partially offset by a decrease in Other (income) expense, net (40 bps), all as a percentage of Net sales. This decrease in Gross profit was primarily due to higher raw and packaging material costs (300 bps), partially offset by higher pricing and cost savings from the Company’s funding-the-growth initiatives (100 bps). This increase in Selling, general and administrative expenses was due to increased advertising investment (110 bps), partially offset by lower overhead expenses (80 bps). This decrease in Other (income) expense, net was primarily due to the portion of costs incurred in 2020 in connection with the voluntary recall of selected canned dog food products due to potentially elevated levels of Vitamin D resulting from a supplier error for which Hill’s was not indemnified.

(Dollars in Millions Except Per Share Amounts)

Corporate

Corporate operations include Corporate overhead costs, research and development costs, stock-based compensation expense related to stock options and restricted stock unit awards, restructuring and related implementation costs and gains and losses on sales of non-core product lines. The components of Operating profit (loss) for the Corporate segment are presented as follows:

Global Growth and Efficiency Program $ — $ 16

Acquisition-related costs — (6)

Value-added tax matter in Brazil 26 —

Goodwill and indefinite-lived intangible impairment charges (571) —

Corporate overhead costs and other, net (519) (512)

Total Corporate Operating profit (loss) $ (1,064) $ (502)

(Dollars in Millions Except Per Share Amounts)

Restructuring and Related Implementation Charges

Global Productivity Initiative

On January 27, 2022, the Board approved the 2022 Global Productivity Initiative. The program is intended to reallocate resources towards the Company’s strategic priorities and faster growth businesses, drive efficiencies in the Company’s operations and streamline the Company’s supply chain to reduce structural costs.

Implementation of the Global Productivity Initiative, which is expected to be substantially completed by December 31, 2022, is projected to result in cumulative pre-tax charges, once all phases are approved and implemented, totaling between $200 and $240, which are currently estimated to be comprised of the following: employee-related costs, including severance, pension and other termination benefits (80%); asset-related costs, primarily accelerated depreciation and asset write-downs (10%); and other charges (10%), which include contract termination costs, consisting primarily of implementation-related charges resulting directly from exit activities and the implementation of new strategies. It is estimated that approximately 90% of the charges will result in cash expenditures. Annualized pre-tax savings are projected to be in the range of $90 to $110.

(Dollars in Millions Except Per Share Amounts)

Non-GAAP Financial Measures

This Annual Report on Form 10-K discusses certain financial measures on both a GAAP and a non-GAAP basis. The Company uses the non-GAAP financial measures described below internally in its budgeting process, to evaluate segment and overall operating performance and as a factor in determining compensation. The Company believes that these non-GAAP financial measures are useful in evaluating the Company’s underlying business performance and trends; however, this information should be considered as supplemental in nature and is not meant to be considered in isolation or as a substitute for the related financial information prepared in accordance with GAAP. In addition, these non-GAAP financial measures may not be the same as similar measures presented by other companies.

Net sales growth (GAAP) and organic sales growth (Net sales growth excluding the impact of foreign exchange, acquisitions and divestments) (non-GAAP) are discussed in this Annual Report on Form 10-K. Management believes the organic sales growth measure provides investors and analysts with useful supplemental information regarding the Company’s underlying sales trends by presenting sales growth excluding, the external factor of foreign exchange, as well as the impact of acquisitions and divestments, as applicable. A reconciliation of organic sales growth to Net sales growth for the years ended December 31, 2021 and 2020 is provided below.

Worldwide Gross profit, Gross profit margin, Selling, general and administrative expenses, Selling, general and administrative expenses as a percentage of Net sales, Other (income) expense, net, Operating profit, Operating profit margin, Interest (income) expense, net, effective income tax rate, Net income attributable to Colgate-Palmolive Company and Earnings per share on a diluted basis are discussed in this Annual Report on Form 10-K both on a GAAP basis and excluding, as applicable, goodwill and indefinite-lived intangible impairment charges, a benefit related to a value-added tax matter in Brazil, the benefits resulting from the Global Growth and Efficiency Program, a benefit related to a reorganization of the ownership structure of certain foreign subsidiaries and a new operating structure implemented within one of the Company’s divisions, acquisition-related costs and losses on the early extinguishment of debt. These non-GAAP financial measures exclude items that, either by their nature or amount, management would not expect to occur as part of the Company’s normal business on a regular basis, such as restructuring charges, charges for certain litigation and tax matters, gains and losses from certain acquisitions, divestitures and certain unusual, non-recurring items. Investors and analysts use these financial measures in assessing the Company’s business performance, and management believes that presenting these financial measures on a non-GAAP basis provides them with useful supplemental information to enhance their understanding of the Company’s underlying business performance and trends. These non-GAAP financial measures also enhance the ability to compare period-to-period financial results. A reconciliation of each of these non-GAAP financial measures to the most directly comparable GAAP financial measures for the years ended December 31, 2021 and 2020 is presented within the applicable section of Results of Operations.

(Dollars in Millions Except Per Share Amounts)

The following tables provide a quantitative reconciliation of Net sales growth to organic sales growth for the years ended December 31, 2021 and 2020 versus the prior year:

Oral, Personal and Home Care

North America (1.0)% 1.0% —% (2.0)%

Latin America 7.0% (1.0)% —% 8.0%

Africa/Eurasia 6.5% (0.5)% —% 7.0%

Total Oral, Personal and Home Care 4.0% 1.5% —% 2.5%

Total Company 6.0% 1.5% —% 4.5%

Oral, Personal and Home Care

North America 9.5% —% 1.5% 8.0%

Latin America (5.0)% (14.0)% —% 9.0%

Asia Pacific (0.5)% (1.0)% —% 0.5%

Africa/Eurasia —% (8.5)% 1.0% 7.5%

Total Oral, Personal and Home Care 3.0% (5.0)% 2.0% 6.0%

Market Share Information

Management uses market share information as a key indicator to monitor business health and performance. References to market share in this Annual Report on Form 10-K are based on a combination of consumption and market share data provided by third-party vendors, primarily Nielsen, and internal estimates. All market share references represent the percentage of the dollar value of sales of our products, relative to all product sales in the category in the countries in which the Company competes and purchases data (excluding Venezuela from all periods).

Market share data is subject to limitations on the availability of up-to-date information. In particular, market share data is currently not generally available for certain retail channels, such as eCommerce or certain discounters. The Company measures year-to-date market shares from January 1 of the relevant year through the most recent period for which market share data is available, which typically reflects a lag time of one or two months. The Company believes that the third-party vendors we use to provide data are reliable, but we have not verified the accuracy or completeness of the data or any assumptions underlying the data. In certain limited circumstances, the COVID-19 pandemic has impacted the ability of our third-party vendors to provide the Company with reliable updated market share data. In addition, market share information calculated by the Company may be different from market share information calculated by other companies due to differences in category definitions, the use of data from different countries, internal estimates and other factors.

(Dollars in Millions Except Per Share Amounts)

Liquidity and Capital Resources

The Company expects cash flow from operations and debt issuances will be sufficient to meet foreseeable business operating and recurring cash needs (including for debt service, dividends, capital expenditures, share repurchases and acquisitions). The Company believes its strong cash generation and financial position should continue to allow it broad access to global credit and capital markets.

Cash Flow

Net cash provided by operations decreased to $3,325 in 2021 as compared to $3,719 in 2020, primarily due to changes in working capital. The Company’s working capital as a percentage of Net sales was (2.7)% in 2021 and (4.4)% in 2020. This change in working capital as a percentage of Net sales is primarily due to lower accrued liabilities, partially offset by higher accounts payable and higher prepaid expenses. The Company defines working capital as the difference between current assets (excluding Cash and cash equivalents and marketable securities, the latter of which is reported in Other current assets) and current liabilities (excluding short-term debt).

Investing activities used $592 of cash in 2021 compared to $779 during 2020. Investing activities in 2020 included the acquisition of hello for cash consideration of $351 as part of the Company’s continued strategy to focus on the high growth segments within its Oral Care, Personal Care and Pet Nutrition businesses. This acquisition was financed with a combination of debt and cash.

Capital expenditures in the year ended December 31, 2021 were $567, an increase from $410 in 2020. Capital expenditures increased in 2021 primarily due to capacity expansion of manufacturing facilities and sustainability projects. Capital expenditures for 2022 are expected to be approximately 4.0% of Net sales. The Company continues to focus its capital spending on projects that are expected to yield high aftertax returns.

Financing activities used $2,774 of cash during 2021 compared to $2,919 during 2020. The decrease in cash used was primarily due to a decrease in net payments on debt, partially offset by higher share repurchases, net in 2021 as compared to 2020.

In 2020, as a result of the incremental debt related to recent acquisitions, net of proceeds from the exercise of stock options, the Company moderated its share repurchases, net. In addition, due to the initial uncertainties resulting from the COVID-19 pandemic and our intent to preserve cash, the Company discontinued all share repurchases other than those pursuant to equity plans during the second quarter of 2020. The Company resumed its share repurchases, at a moderated level, net in the third quarter of 2020. Share repurchases, net returned to historical levels in 2021.

Long-term debt, including the current portion, decreased to $7,206 as of December 31, 2021, as compared to $7,343 as of December 31, 2020, and total debt decreased to $7,245 as of December 31, 2021 as compared to $7,601 as of December 31, 2020. The Company’s debt issuances and redemptions support the Company’s capital structure objectives of funding its business and growth initiatives while minimizing its risk-adjusted cost of capital.

During the fourth quarter of 2021, the Company issued €500 of eight-year notes at a fixed coupon rate of 0.300% (the “Sustainability Bond”). The debt issuance was under the Company’s shelf registration statement. An amount equal to the net proceeds of the Sustainability Bond will be used to finance or refinance, in part or in full, new and existing projects and programs with distinct environmental or social benefits pursuant to the Company’s Sustainable Financing Framework.

During the fourth quarter of 2021, the Company redeemed prior to maturity all of its outstanding 0.000% notes due 2021 with a principal amount of €500, originally issued on November 12, 2019. The redemption was financed with commercial paper borrowings. The redemption price was equal to the carrying amount of the debt extinguished.

In 1990, the Company’s Canadian subsidiary (“CP Canada”), issued C$145 of Canadian dollar-denominated unsecured unsubordinated 12.85% guaranteed notes due October 4, 2030 (the “Canada notes”). During the third quarter of 2021, CP Canada redeemed the Canada notes and recorded a loss on the early extinguishment of debt of $75, which is included in Interest (income) expense, net in the Consolidated Statements of Income, representing the difference between the redemption price and the carrying amount of the debt extinguished.

(Dollars in Millions Except Per Share Amounts)

During the fourth quarter of 2020, the Company redeemed prior to maturity all of its outstanding 2.450% notes due 2021 with a principal amount of $300, originally issued on November 8, 2011, and all of its outstanding 2.300% notes due 2022 with a principal amount of $500, originally issued on May 3, 2012. These redemptions were financed with commercial paper borrowings and cash. The Company recorded a loss on this early extinguishment of debt of $23, which is included in Interest (income) expense, net in the Consolidated Statements of Income, representing the difference between the redemption price and the carrying amount of the debt extinguished.

At December 31, 2021, the Company had access to unused domestic and foreign lines of credit of $3,457 (including under the facility discussed below) and could also issue long-term debt pursuant to an effective shelf registration statement. In August 2021, the Company entered into a new $3,000 five-year revolving credit facility with a syndicate of banks for a five-year term expiring August 2026, which replaced, on substantially similar terms, the Company’s $2,650 revolving credit facility that was scheduled to expire in November 2024. Commitment fees related to the credit facility were not material. The Company’s $1,500 364-day credit facility with a syndicate of banks expired in August 2021 and was not renewed.

Domestic and foreign commercial paper outstanding was $1,204 and $1,389 as of December 31, 2021 and December 31, 2020, respectively. The average daily balances outstanding of commercial paper in 2021 and 2020 were $2,052 and $1,050, respectively. The Company classifies commercial paper and certain current maturities of notes payable as long-term debt when it has the intent and ability to refinance such obligations on a long-term basis, including, if necessary, by utilizing its available lines of credit (under the facilities discussed above).

The following is a summary of the Company’s commercial paper and global short-term borrowings as of December 31, 2021 and 2020:

(1) Commercial paper included a current portion of $250, included in Notes and loans payable, as of December 31, 2020.

Certain of the agreements with respect to the Company’s bank borrowings contain financial and other covenants as well as cross-default provisions. Noncompliance with these requirements could ultimately result in the acceleration of amounts owed. The Company is in full compliance with all such requirements and believes the likelihood of noncompliance is remote. Refer to Note 6, Long-Term Debt and Credit Facilities to the Consolidated Financial Statements for further information about the Company’s long-term debt and credit facilities.

Dividend payments in 2021 were $1,679, an increase from $1,654 in 2020. Dividend payments increased to $1.79 per share in 2021 from $1.75 per share in 2020. In the first quarter of 2021, the Company increased the quarterly common stock dividend to $0.45 per share from $0.44 per share, effective in the second quarter of 2021.

The Company repurchases shares of its common stock in the open market and in private transactions to maintain its targeted capital structure and to fulfill certain requirements of its compensation and benefit plans. On June 18, 2018, the Board authorized the repurchase of shares of the Company’s common stock having an aggregate purchase price of up to $5,000 under the 2018 Program. The Board also has authorized share repurchases on an ongoing basis to fulfill certain requirements of the Company’s compensation and benefit programs. The shares are repurchased from time to time in open market or privately negotiated transactions at the Company’s discretion, subject to market conditions, customary blackout periods and other factors.

Aggregate share repurchases in 2021 consisted of approximately 16.4 million common shares under the 2018 Program and 0.3 million common shares to fulfill the requirements of compensation and benefit plans, for a total purchase price of $1,320. Aggregate repurchases in 2020 consisted of approximately 18.2 million common shares under the 2018 Program

(Dollars in Millions Except Per Share Amounts)

and 0.4 million common shares to fulfill the requirements of compensation and benefit plans, for a total purchase price of $1,476. Share repurchases net of proceeds from exercise of stock options were $896 and $602 in 2021 and 2020, respectively.

Cash and cash equivalents decreased $56 during 2021 to $832 at December 31, 2021, compared to $888 at December 31, 2020. Cash and cash equivalents held by the Company’s foreign subsidiaries was $784 and $872, respectively, at December 31, 2021 and 2020.

The following represents the scheduled maturities of the Company’s contractual obligations as of December 31, 2021:

_______

(1)The Company classifies commercial paper and notes maturing within the next 12 months as long-term debt when it has the intent and ability to refinance such obligations on a long-term basis. The amounts in this table exclude such obligations.

(2)Includes the net interest payments on fixed and variable rate debt and associated interest rate swaps. Interest payments associated with floating rate instruments are based on management’s best estimate of projected interest rates for the remaining term of variable rate debt.

(3)The Company had outstanding contractual obligations with suppliers at the end of 2021 for the purchase of raw, packaging and other materials and services in the normal course of business. These purchase obligation amounts represent only those items which are based on agreements that are legally binding and that specify all significant terms including minimum quantity, price and term and do not represent total anticipated purchases.

Long-term liabilities associated with the Company’s postretirement plans are excluded from the table above due to the uncertainty of the timing of these cash disbursements. The amount and timing of cash funding related to these benefit plans will generally depend on local regulatory requirements, various economic assumptions (the most significant of which are detailed in “Critical Accounting Policies and Use of Estimates” below) and voluntary Company contributions. Based on current information, the Company is not required to make a mandatory contribution to its qualified U.S. pension plan in 2021. The Company does not expect to make any voluntary contributions to its U.S. postretirement plans in 2022. In addition, total benefit payments expected to be paid from the Company’s assets to participants in unfunded plans are estimated to be approximately $89 for the year ending December 31, 2022.

Additionally, liabilities for unrecognized income tax benefits are excluded from the table above as the Company is unable to reasonably predict the ultimate amount or timing of a settlement of such liabilities. See Note 11, Income Taxes to the Consolidated Financial Statements for more information.

As more fully described in Note 13, Commitments and Contingencies to the Consolidated Financial Statements, the Company has commitments and contingencies with respect to lawsuits, environmental matters, taxes and other matters arising in the ordinary course of business.

(Dollars in Millions Except Per Share Amounts)

Off-Balance Sheet Arrangements

The Company does not have off-balance sheet financing or unconsolidated special purpose entities.

Managing Foreign Currency, Interest Rate, Commodity Price and Credit Risk Exposure

The Company is exposed to market risk from foreign currency exchange rates, interest rates and commodity price fluctuations. Volatility relating to these exposures is managed on a global basis by utilizing a number of techniques, including working capital management, selling price increases, selective borrowings in local currencies and entering into selective derivative instrument transactions, issued with standard features, in accordance with the Company’s treasury and risk management policies. The Company’s treasury and risk management policies prohibit the use of derivatives for speculative purposes and leveraged derivatives for any purpose.

The sensitivity of our financial instruments to market fluctuations is discussed below. See Note 2, Summary of Significant Accounting Policies and Note 7, Fair Value Measurements and Financial Instruments to the Consolidated Financial Statements for further discussion of derivatives and hedging policies and fair value measurements.

Foreign Exchange Risk

As the Company markets its products in over 200 countries and territories, it is exposed to currency fluctuations related to manufacturing and selling its products in currencies other than the U.S. dollar. The Company manages its foreign currency exposures through a combination of cost-containment measures, sourcing strategies, selling price increases and the hedging of certain costs in an effort to minimize the impact on earnings of foreign currency rate movements. See “Results of Operations” above for a discussion of the foreign exchange impact on Net sales in each operating segment.

The assets and liabilities of foreign subsidiaries are translated into U.S. dollars at year-end exchange rates with resulting translation gains and losses accumulated in a separate component of shareholders’ equity. Income and expense items are translated into U.S. dollars at average rates of exchange prevailing during the year.

The Company primarily utilizes foreign currency contracts, including forward and swap contracts, option contracts, foreign and local currency deposits and local currency borrowings to hedge portions of its exposures relating to foreign currency purchases, assets and liabilities created in the normal course of business and the net investment in certain foreign subsidiaries. The duration of foreign currency contracts generally does not exceed 12 months and the contracts are valued using observable market rates.

The Company’s foreign currency forward contracts that qualify for cash flow hedge accounting resulted in a net unrealized gain of $12 and net unrealized loss of $11 at December 31, 2021 and 2020, respectively. Changes in the fair value of cash flow hedges are recorded in Other comprehensive income (loss) and are reclassified into earnings in the same period or periods during which the underlying hedged transaction is recognized in earnings. At the end of 2021, an unfavorable 10% change in exchange rates would have resulted in a net unrealized loss of $76.

(Dollars in Millions Except Per Share Amounts)

Interest Rate Risk

The Company manages its mix of fixed and floating rate debt against its target with debt issuances and by entering into interest rate swaps in order to mitigate fluctuations in earnings and cash flows that may result from interest rate volatility. The Company utilizes forward-starting interest rate swaps to mitigate the risk of variability in interest rate for future debt issuances. The notional amount, interest payment and maturity date of the swaps generally match the principal, interest payment and maturity date of the related debt, and the swaps are valued using observable benchmark rates.

Based on year-end 2021 variable rate debt levels, a 1% increase in interest rates would have increased Interest (income) expense, net by $14 in 2021.

The Company is assessing the impact of the discontinuation of LIBOR as a benchmark interest rate on its current financial instruments and contractual arrangements, including debt outstanding, and believes it will not be material as the Company does not have significant exposure to LIBOR in either its debt or other financing arrangements. The Company will continue to monitor its exposure in subsequent periods.

Commodity Price Risk

The Company is exposed to price volatility related to raw materials used in production, such as essential oils, resins, tropical oils, pulp, tallow, corn, poultry and soybeans. The Company manages its raw material exposures through a combination of cost containment measures, ongoing productivity initiatives and the limited use of commodity hedging contracts. Futures contracts are used on a limited basis, primarily in the Hill’s Pet Nutrition segment, to manage volatility related to anticipated raw material inventory purchases of certain traded commodities.

The Company’s open commodity derivative contracts that qualify for cash flow hedge accounting resulted in a net unrealized gain of $2 and $3 at December 31, 2021 and 2020, respectively. At the end of 2021, an unfavorable 10% change in commodity futures prices would have resulted in a net unrealized loss of $1.

Credit Risk

The Company is exposed to the risk of credit loss in the event of nonperformance by counterparties to financial instrument contracts; however, nonperformance is considered unlikely and any nonperformance is unlikely to be material as it is the Company’s policy to contract with diverse, credit-worthy counterparties based upon both strong credit ratings and other credit considerations.

Recent Accounting Pronouncements

In November 2021, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2021-10, “Government Assistance (Topic 832).” This ASU requires increased disclosure on an annual basis about transactions with domestic, foreign, local, regional and national governments, including entities related to those governments and intergovernmental organizations, that are accounted for by applying a grant or contribution accounting model by analogy to other accounting guidance. This guidance is effective for the Company beginning on January 1, 2022 and is not expected to have a material impact on the Company’s Consolidated Financial Statements.

In October 2021, the FASB issued ASU No. 2021-08, “Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers.” This ASU requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASU No. 2016-10, “Revenue from Contracts with Customers (Topic 606).” This guidance is effective for the Company beginning on January 1, 2023 and is not expected to have a material impact on the Company’s Consolidated Financial Statements.

In January 2021, the FASB issued 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. This guidance was effective upon issuance for the Company and is not expected to have a material impact on the Company’s Consolidated Financial Statements.

(Dollars in Millions Except Per Share Amounts)

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 of this ASU for contract modifications and hedging relationships on a prospective basis and is not expected 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.

Critical Accounting Policies and Use of Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to use judgment and make estimates. The level of uncertainty in estimates and assumptions increases with the length of time until the underlying transactions are completed. Actual results could ultimately differ from those estimates. The accounting policies that are most critical in the preparation of the Company’s Consolidated Financial Statements are those that are both important to the presentation of the Consolidated Financial Statements and require significant or complex judgments and estimates on the part of management. The Company’s critical accounting policies are reviewed periodically with the Audit Committee of the Board of Directors.

In certain instances, accounting principles generally accepted in the United States of America allow for the selection of alternative accounting methods. The Company’s significant policies that involve the selection of alternative methods are accounting for inventories and shipping and handling costs.

▪The Company accounts for inventories using both the first-in, first-out (“FIFO”) method (75% of inventories) and the last-in, first-out (“LIFO”) method (25% of inventories). There would have been no material impact on reported earnings for 2021 or 2020 had all inventories been accounted for under the FIFO method.

▪Shipping and handling costs may be reported as either a component of Cost of sales or Selling, general and administrative expenses. The Company accounts for such costs, primarily related to warehousing and outbound freight, as fulfillment costs and reports them in the Consolidated Statements of Income as a component of Selling, general and administrative expenses. Accordingly, the Company’s Gross profit margin is not comparable with the gross profit margin of those companies that include shipping and handling charges in cost of sales. If such costs had been included as a component of Cost of sales, the Company’s Gross profit margin would have been lower by 968 bps in 2021, by 845 bps in 2020, and 810 bps in 2019, with no impact on reported earnings.

The areas of accounting that involve significant or complex judgments and estimates are pensions and other retiree benefit cost assumptions, stock-based compensation, asset impairments, uncertain tax positions, tax valuation allowances, legal and other contingency reserves.

(Dollars in Millions Except Per Share Amounts)

▪In accounting for pension and other postretirement benefit costs, the most significant actuarial assumptions are the discount rate and the expected long-term rate of return on plan assets. The discount rate used to measure the benefit obligation for U.S. defined benefit plans was 2.98% and 2.65% as of December 31, 2021 and 2020, respectively. The discount rate used to measure the benefit obligation for other U.S. postretirement plans was 3.06%, and 2.88% as of December 31, 2021 and 2020, respectively. Discount rates used for the U.S. and international defined benefit and other postretirement plans are based on a yield curve constructed from a portfolio of high-quality bonds whose projected cash flows approximate the projected benefit payments of the plans. The assumed expected long-term rate of return on plan assets for U.S. plans was 5.70% as of December 31, 2021 and 2020. In determining the expected long-term rate of return, the Company considers the nature of the plans’ investments and the historical rate of return.

Average annual rates of return for the U.S. plans for the most recent 1-year, 5-year, 10-year, 15-year and 25-year periods were 3%, 8%, 8%, 6% and 7%, respectively. In addition, the current assumed rate of return for the U.S. plans is based upon the nature of the plans’ investments with a target asset allocation of approximately 76% in fixed income securities, 21% in equity securities and 3% in real estate and other investments. A 1% change in the assumed rate of return on plan assets of the U.S. pension plans would impact future Net income attributable to Colgate-Palmolive Company by approximately $18. A 1% change in the discount rate for the U.S. pension plans and U.S. other retiree benefit plan would impact future Net income attributable to Colgate-Palmolive Company by approximately $2 and $10, respectively. A third assumption is the long-term rate of compensation increase, a change in which would partially offset the impact of a change in either the discount rate or the expected long-term rate of return. This rate was 3.50% as of December 31, 2021, and 2020. Refer to Note 10, Retirement Plans and Other Retiree Benefits to the Consolidated Financial Statements for further discussion of the Company’s pension and other postretirement plans.

▪The assumption requiring the most judgment in accounting for other postretirement benefits (other than the discount rate noted above) is the medical cost trend rate. The Company reviews external data and its own historical trends for health care costs to determine the medical cost trend rate. The assumed rate of increase for the U.S. postretirement benefit plans is 6.00% for 2022, declining to 4.75% by 2026 and remaining at 4.75% for the years thereafter. The effect on the total of service cost and interest costs components of a 1% increase in the assumed long-term medical cost trend rate would decrease Net income attributable to Colgate-Palmolive Company by $11.

▪The Company recognizes the cost of employee services received in exchange for awards of equity instruments, such as stock options and restricted stock units (both performance-based and time-vested), based on the fair value of those awards at the date of grant. The Company uses the Black-Scholes-Merton (“Black-Scholes”) option pricing model to estimate the fair value of stock option awards. The weighted-average estimated fair value of each stock option award granted in the year ended December 31, 2021 was $11.11. The Black-Scholes model uses various assumptions to estimate the fair value of stock option awards. These assumptions include the expected term of stock option awards, expected volatility rate, risk-free interest rate and expected dividend yield. While these assumptions do not require significant judgment, as the significant inputs are determined from historical experience or independent third-party sources, changes in these inputs could result in significant changes in the fair value of stock option awards. A one-year change in expected term would result in a change in fair value of approximately 4%. A 1% change in volatility would change fair value by approximately 6%. The Company uses a Monte-Carlo simulation to determine the fair value of performance-based restricted stock units at the date of grant. The Monte-Carlo simulation model uses substantially the same inputs as the Black-Scholes model.

▪Goodwill and indefinite-life intangible assets, such as the Company’s global brands, are subject to impairment tests at least annually or when events or changes in circumstances indicate an asset may be impaired. In assessing impairment, the Company performs either a quantitative or a qualitative analysis.

(Dollars in Millions Except Per Share Amounts)

Determining the fair value of the Company’s reporting units for goodwill and the fair value of its intangible assets requires significant estimates and judgments by management. When a quantitative analysis is performed, the Company generally uses the income approach, which requires several estimates, including future cash flows consistent with management’s strategic plans, sales growth rates, foreign exchange rates and the selection of royalty rates and a discount rate. Estimating sales growth rates requires significant judgment by management in areas such as future economic conditions, category growth rates, product pricing, consumer tastes and preferences and future expansion expectations. In selecting an appropriate royalty rate, the Company considers recent market transactions for similar brands and products. In determining an appropriate discount rate, the Company considers the current interest rate environment and its estimated cost of capital. Other qualitative factors the Company considers, in addition to those quantitative measures discussed above, include assessments of general macroeconomic conditions, industry-specific considerations and historical financial performance. The Company generally engages a third-party valuation firm to assist it in determining the fair value of intangible assets acquired in business combinations.

In determining the fair value of the Company’s reporting units, fair value is also determined using the market approach, which is generally derived from metrics of comparable publicly traded companies. As multiple valuation methodologies are used, the Company also performs a qualitative analysis comparing the fair value of a reporting unit under each method to assess its reasonableness and ensure consistency of results.

Determining the expected life of a brand requires management judgment and is based on an evaluation of several factors including market share, brand history, future expansion expectations, the level of in-market support anticipated by management, legal or regulatory restrictions and the economic environment in the countries in which the brand is sold.

Except for the Filorga skin health business, as described above, the estimated fair value of the Company’s reporting units substantially exceeds the recorded carrying value. The fair value of the Company’s indefinite-life intangible assets other than Filorga exceeds their recorded carrying value by at least 20%. Therefore, it is not reasonably likely that significant changes in these estimates would occur that would result in an impairment charge related to these assets.

▪The recognition and measurement of uncertain tax positions involves consideration of the amounts and probabilities of various outcomes that could be realized upon ultimate resolution.

▪Tax valuation allowances are established to reduce deferred tax assets, such as tax loss carryforwards, to net realizable value. Factors considered in estimating net realizable value include historical results by tax jurisdiction, carryforward periods, income tax strategies and forecasted taxable income.

(Dollars in Millions Except Per Share Amounts)

▪Legal and other contingency reserves are based on management’s assessment of the risk of potential loss, which includes consultation with outside legal counsel and other advisors. Such assessments are reviewed each period and revised based on current facts and circumstances, if necessary. While it is possible that the Company’s cash flows and results of operations in a particular quarter or year could be materially affected by the impact of such contingencies, based on current knowledge it is the opinion of management that these matters will not have a material effect on the Company’s financial position, or its ongoing results of operations or cash flows. Refer to Note 13, Commitments and Contingencies to the Consolidated Financial Statements for further discussion of the Company’s contingencies.

The Company generates revenue through the sale of well-known consumer products to trade customers under established trading terms. While the recognition of revenue and receivables requires the use of estimates, there is a short time frame (typically less than 60 days) between the shipment of product and cash receipt, thereby reducing the level of uncertainty in these estimates. Refer to Note 2, Summary of Significant Accounting Policies to the Consolidated Financial Statements for further description of the Company’s significant accounting policies.

(Dollars in Millions Except Per Share Amounts)

Cautionary Statement on Forward-Looking Statements

This Annual Report on Form 10-K may contain forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995 or by the SEC in its rules, regulations and releases that set forth anticipated results based on management’s current plans and assumptions. Such statements may relate, for example, to sales or volume growth, net selling price increases, organic sales growth, profit or profit margin levels, earnings per share levels, financial goals, the impact of foreign exchange volatility, the impact of COVID-19, cost-reduction plans (including the 2022 Global Productivity Initiative), tax rates, new product introductions, commercial investment levels, acquisitions, divestitures, share repurchases, or legal or tax proceedings, among other matters. These statements are made on the basis of the Company’s views and assumptions as of this time and the Company undertakes no obligation to update these statements whether as a result of new information, future events or otherwise, except as required by law or by the rules and regulations of the SEC. Moreover, the Company does not, nor does any other person, assume responsibility for the accuracy and completeness of those statements. The Company cautions investors that any such forward-looking statements are not guarantees of future performance and that actual events or results may differ materially from those statements. Actual events or results may differ materially because of factors that affect international businesses and global economic conditions, as well as matters specific to the Company and the markets it serves, including the uncertain economic and political environment in different countries and its effect on consumer spending habits, foreign currency rate fluctuations, exchange controls, sanctions, tariffs, price or profit controls, labor relations, changes in foreign or domestic laws, or regulations or their interpretation, political and fiscal developments, including changes in trade, tax and immigration policies, increased competition and evolving competitive practices (including from the growth of eCommerce and the entry of new competitors and business models), the ability to operate and respond effectively during a pandemic, epidemic or widespread public health concern, including COVID-19, ability to manage disruptions in our global supply chain and/or key office facilities, ability to manage the availability and cost of raw and packaging materials and logistics costs, the ability to maintain or increase selling prices as needed, changes in the policies of retail trade customers, the emergence of alternative retail channels, the growth of eCommerce and the rapidly changing retail landscape (as consumers increasingly shop online and via mobile and social applications), the ability to develop innovative new products, the ability to lower costs, successfully implement the 2022 Global Productivity Initiative and drive growth and instill a growth mindset to drive innovation, the ability to maintain the security of our information technology systems from a cyber-security incident or data breach, the ability to lessen and address the effects of climate change and achieve our sustainability and social impact targets, the ability to complete acquisitions and divestitures as planned, the ability to successfully integrate acquired businesses, the ability to attract and retain key employees and integrate DE&I initiatives across our organization, the uncertainty of the outcome of legal proceedings, whether or not the Company believes they have merit, and the ability to address uncertain or unfavorable global economic conditions, disruptions in the credit markets and tax matters. For information about these and other factors that could impact the Company’s business and cause actual results to differ materially from forward-looking statements, refer to Part I, Item 1A “Risk Factors.”

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

See “Managing Foreign Currency, Interest Rate, Commodity Price and Credit Risk Exposure” in Part II, Item 7.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See “Index to Financial Statements.”

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Company’s management, under the supervision and with the participation of the Company’s Chairman of the Board, President and Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of December 31, 2021 (the “Evaluation”). Based upon the Evaluation, the Company’s Chairman of the Board, President and Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934) are effective.

Management’s Annual Report on Internal Control Over Financial Reporting

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. Management, under the supervision and with the participation of the Company’s Chairman of the Board, President and Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the Company’s internal control over financial reporting based upon the framework in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and concluded that it was effective as of December 31, 2021.

The Company’s independent registered public accounting firm, PricewaterhouseCoopers LLP, has audited the effectiveness of the Company’s internal control over financial reporting as of December 31, 2021, and has expressed an unqualified opinion in their report, which appears under “Index to Financial Statements – Report of Independent Registered Public Accounting Firm.”

Changes in Internal Control Over Financial Reporting

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

Except as noted above, there were no changes in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

None.

ITEM 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Not applicable.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

See “Information about our Executive Officers” in Part I, Item 1 of this report.

Additional information required by this Item relating to directors, executive officers and corporate governance of the Company is incorporated herein by reference to the Company’s Proxy Statement for its 2022 Annual Meeting of Stockholders (the “2022 Proxy Statement”).

Code of Ethics

The Company’s Code of Conduct promotes the highest ethical standards in all of the Company’s business dealings. The Code of Conduct satisfies the SEC’s requirements for a Code of Ethics for senior financial officers and applies to all Company employees, including the Chairman of the Board, President and Chief Executive Officer, the Chief Financial Officer and the Vice President and Controller, and the Company’s directors. The Code of Conduct is available on the Company’s website at www.colgatepalmolive.com. Any amendment to the Code of Conduct will promptly be posted on the Company’s website. It is the Company’s policy not to grant waivers of the Code of Conduct. In the extremely unlikely event that the Company grants an executive officer a waiver from a provision of the Code of Conduct, the Company will promptly disclose such information by posting it on its website or by using other appropriate means in accordance with SEC rules.

ITEM 11. EXECUTIVE COMPENSATION

The information regarding executive compensation set forth in the 2022 Proxy Statement is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

(a)The information regarding security ownership of certain beneficial owners and management set forth in the 2022 Proxy Statement is incorporated herein by reference.

(b)The Registrant does not know of any arrangements that may at a subsequent date result in a change in control of the Registrant.

(c)Equity compensation plan information as of December 31, 2021:

(a) (b) (c)

_______

(1)Consists of 26,095 options outstanding and 1,916 restricted stock units awarded but not yet vested under the Company’s 2013 Incentive Compensation Plan and the Company’s 2019 Incentive Compensation Plan, respectively, as more fully described in Note 8, Capital Stock and Stock-Based Compensation Plans to the Consolidated Financial Statements.

(2)Includes the weighted-average exercise price of stock options outstanding of $72 and restricted stock units of $76.

(3)Amount includes 26,038 options available for issuance and 10,990 restricted stock units available for issuance under the Company’s 2019 Incentive Compensation Plan.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

The information regarding certain relationships and related transactions and director independence set forth in the 2022 Proxy Statement is incorporated herein by reference.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information regarding auditor fees and services set forth in the 2022 Proxy Statement is incorporated herein by reference.

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)Financial Statements and Financial Statement Schedules

See “Index to Financial Statements.”

(b)Exhibits:

Exhibit No. Description

4 a) Description of Securities of the Registrant**

21 Subsidiaries of the Registrant.**

23 Consent of Independent Registered Public Accounting Firm.**

24 Powers of Attorney.**

__________

* Indicates a management contract or compensatory plan or arrangement.

** Filed herewith.

*** Furnished herewith.

(1) Registrant hereby undertakes to furnish the Commission, upon request, with a copy of any instrument with respect to long-term debt where the total amount of securities authorized thereunder does not exceed 10% of the total assets of the Registrant and its subsidiaries on a consolidated basis.

The exhibits indicated above that are not included with the Form 10-K are available upon request and payment of a reasonable fee approximating the registrant’s cost of providing and mailing the exhibits. Inquiries should be directed to:

Colgate-Palmolive Company

Office of the Secretary (10-K Exhibits)

ITEM 16. FORM 10-K SUMMARY

None.

COLGATE-PALMOLIVE COMPANY

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Colgate-Palmolive Company (Registrant)

Date: February 17, 2022 By /s/ Noel R. Wallace

Noel R. Wallace Chairman of the Board, President andChief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on February 17, 2022, by the following persons on behalf of the registrant and in the capacities indicated.

(a) Principal Executive Officer (d) Directors:

/s/ Noel R. Wallace /s/ Noel R. Wallace

/s/ Stanley J. Sutula III *By: /s/ Jennifer M. Daniels

/s/ Philip G. Shotts

Philip G. ShottsVice President and Controller

Index to Financial Statements

Page

Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm (PCAOB ID 238) 67

Consolidated Balance Sheets as of December 31, 2021 and 2020 72

Notes to Consolidated Financial Statements 75

Financial Statement Schedule

Selected Financial Data

Market Information 123

All other financial statements and schedules not listed have been omitted since the required information is included in the financial statements or the notes thereto or is not applicable or required.

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Colgate-Palmolive Company

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the consolidated financial statements, including the related notes and financial statement schedule, of Colgate-Palmolive Company and its subsidiaries (the “Company”) as listed in the accompanying index (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Annual Report on Internal Control Over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Goodwill and Indefinite-Lived Intangible Asset Impairment Assessments - Filorga

As described in Notes 2 and 5 to the consolidated financial statements, the Company’s consolidated balance of goodwill and indefinite-lived intangible assets was $3.3 billion and $1.6 billion, respectively, as of December 31, 2021. Goodwill and indefinite-lived intangible assets are subject to impairment tests at least annually or when events or changes in circumstances indicate that an asset may be impaired. Given the impact of the COVID-19 pandemic on the Filorga skin health business, during the fourth quarter of 2021, the Company concluded that the changes in circumstances in this reporting unit triggered the need for an interim impairment review of its indefinite-lived trademark and goodwill. Accordingly, the Company performed an interim impairment test for the trademark as of December 31, 2021. The Company concluded that the carrying value of the trademark exceeded its estimated fair value, and recorded an impairment charge of $204 million, reducing the carrying value to approximately $588 million. After adjusting the carrying value of the trademark, the Company completed a quantitative impairment test for goodwill and recorded a goodwill impairment charge of $367 million in the Filorga reporting unit, reducing the carrying value of goodwill to approximately $577 million.The fair value of the Filorga reporting unit and indefinite-lived trademark were determined using an income approach. This method incorporates significant judgments and estimates by management regarding several key inputs, including future cash flows, sales growth rates, discount rate, and the selection of royalty rates, among others.

The principal considerations for our determination that performing procedures relating to the goodwill and indefinite-lived intangible asset impairment assessments of Filorga is a critical audit matter are (i) the significant judgment by management when developing the fair value of the reporting unit and indefinite-lived intangible asset; (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to the sales growth rates and discount rate for the goodwill and indefinite-lived intangible asset, and the royalty rate for the indefinite-lived intangible asset; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s goodwill and indefinite-lived intangible asset impairment assessments, including controls over the valuation of the Filorga reporting unit and indefinite-lived intangible asset. These procedures also included, among others (i) testing management’s process for developing the fair value of the reporting unit and indefinite-lived intangible asset; (ii) evaluating the appropriateness of the income approach; (iii) testing the completeness and accuracy of underlying data used in the income approach; and (iv) evaluating the reasonableness of significant assumptions used by management related to the sales growth rates and discount rate for the goodwill and indefinite-lived intangible asset, and the royalty rate for the indefinite-lived intangible asset. Evaluating management’s significant assumptions related to the sales growth rates and discount rate for the goodwill and indefinite-lived intangible asset and the royalty rate for the indefinite-lived intangible asset involved evaluating whether the significant assumptions used by management were reasonable considering (i) the current and past performance of the reporting unit; (ii) the consistency with external market and industry data, and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit. Professionals with specialized skill and knowledge were used to assist in evaluating the appropriateness of the income approach and the reasonableness of the discount rate and royalty rate significant assumptions.

/s/ PricewaterhouseCoopers LLP

New York, New YorkFebruary 17, 2022

We have served as the Company’s auditor since 2002.

COLGATE-PALMOLIVE COMPANY

Consolidated Statements of Income

For the years ended December 31,

(Dollars in Millions Except Per Share Amounts)

Selling, general and administrative expenses 6,407 6,019 5,575

Goodwill and indefinite-lived intangible impairment charges 571 — —

Non-service related postretirement costs 70 74 108

Net income including noncontrolling interests 2,338 2,860 2,527

Less: Net income attributable to noncontrolling interests 172 165 160

Net income attributable to Colgate-Palmolive Company $ 2,166 $ 2,695 $ 2,367

Earnings per common share, basic $ 2.56 $ 3.15 $ 2.76

Earnings per common share, diluted $ 2.55 $ 3.14 $ 2.75

See Notes to Consolidated Financial Statements.

COLGATE-PALMOLIVE COMPANY

Consolidated Statements of Comprehensive Income

For the years ended December 31,

(Dollars in Millions)

Net income including noncontrolling interests $ 2,338 $ 2,860 $ 2,527

Other comprehensive income (loss), net of tax:

Cumulative translation adjustments (193) (24) 25

Retirement plan and other retiree benefit adjustments 134 (40) (100)

Gains (losses) on cash flow hedges 16 (2) (12)

Total Other comprehensive income (loss), net of tax (43) (66) (87)

Total Comprehensive income including noncontrolling interests 2,295 2,794 2,440

Less: Net income attributable to noncontrolling interests 172 165 160

Total Comprehensive income attributable to noncontrolling interests 170 171 158

See Notes to Consolidated Financial Statements.

COLGATE-PALMOLIVE COMPANY

Consolidated Balance Sheets

As of December 31,

(Dollars in Millions Except Share and Per Share Amounts)

Assets

Current Assets

Cash and cash equivalents $ 832 $ 888

Receivables (net of allowances of $78 and $89, respectively) 1,297 1,264

Property, plant and equipment, net 3,730 3,716

Liabilities and Shareholders’ Equity

Current Liabilities

Notes and loans payable $ 39 $ 258

Current portion of long-term debt 12 9

Commitments and contingent liabilities — —

Shareholders’ Equity

Accumulated other comprehensive income (loss) (4,386) (4,345)

Unearned compensation (1) (1)

Total Colgate-Palmolive Company shareholders’ equity 609 743

Noncontrolling interests 362 358

See Notes to Consolidated Financial Statements.

COLGATE-PALMOLIVE COMPANY

Consolidated Statements of Changes in Shareholders’ Equity

(Dollars in Millions)

Colgate-Palmolive Company Shareholders’ Equity

Other comprehensive income (loss), net of tax (85) (2)

Stock-based compensation expense 100

Shares issued for stock options 210 305

Shares issued for restricted stock awards (29) 29

Noncontrolling interests assumed through acquisition 125

Treasury stock acquired (1,202)

Other comprehensive income (loss), net of tax (72) 6

Stock-based compensation expense 107

Shares issued for stock options 400 462

Shares issued for restricted stock awards (31) 31

Noncontrolling interests acquired (99)

Treasury stock acquired (1,476)

Other comprehensive income (loss), net of tax (41) (2)

Stock-based compensation expense 135

Shares issued for stock options 188 248

Shares issued for restricted stock awards (27) 27

Treasury stock acquired (1,320)

Other 4 — 1 — —

* Two dividends were declared in each of the first quarters of 2021, 2020 and 2019.

See Notes to Consolidated Financial Statements.

COLGATE-PALMOLIVE COMPANY

Consolidated Statements of Cash Flows

For the years ended December 31,

(Dollars in Millions)

Operating Activities

Net income including noncontrolling interests $ 2,338 $ 2,860 $ 2,527

Restructuring and termination benefits, net of cash (21) (71) 18

Goodwill and indefinite-lived intangible impairment charges 571 — —

Loss on early extinguishment of debt 75 23 —

Voluntary benefit plan contributions — — (113)

Cash effects of changes in:

Accounts payable and other accruals 14 520 36

Other non-current assets and liabilities (55) (26) 87

Investing Activities

Purchases of marketable securities and investments (141) (143) (184)

Proceeds from sale of marketable securities and investments 141 124 131

Payment for acquisitions, net of cash acquired — (353) (1,711)

Other investing activities (25) 3 —

Net cash used in investing activities (592) (779) (2,099)

Financing Activities

Short-term borrowing (repayment) less than 90 days, net (171) 488 296

Proceeds from issuance of debt 699 — 2,578

Proceeds from exercise of stock options 424 874 498

Purchases of non-controlling interests in subsidiaries — (99) —

Other financing activities (24) 33 15

Net cash used in financing activities (2,774) (2,919) (870)

Effect of exchange rate changes on Cash and cash equivalents (15) (16) (7)

Net (decrease) increase in Cash and cash equivalents (56) 5 157

Cash and cash equivalents at beginning of year 888 883 726

Cash and cash equivalents at end of year $ 832 $ 888 $ 883

Supplemental Cash Flow Information

(1) For the years ended December 31, 2021 and 2020, Principal payments on debt includes cash charges of $75 and $20, respectively, related to the extinguishment of debt prior to maturity. See Note 6, Long-Term Debt and Credit Facilities for additional information.

See Notes to Consolidated Financial Statements.

COLGATE-PALMOLIVE COMPANY

Notes to Consolidated Financial Statements

(Dollars in Millions Except Share and Per Share Amounts)

1. Nature of Operations

The Company manufactures and markets a wide variety of products in the U.S. and around the world in two product segments: Oral, Personal and Home Care; and Pet Nutrition. Oral, Personal and Home Care products include toothpaste, toothbrushes, mouthwash, bar and liquid hand soaps, shower gels, shampoos, conditioners, deodorants and antiperspirants, skin health products, dishwashing detergents, fabric conditioners, household cleaners and other similar items. These products are sold primarily to a variety of traditional and eCommerce retailers, wholesalers and distributors worldwide. Pet Nutrition products include specialty pet nutrition products manufactured and marketed by Hill’s Pet Nutrition. The principal customers for Pet Nutrition products are authorized pet supply retailers, veterinarians and eCommerce retailers. Some of our products are also sold direct-to-consumer. Principal global and regional trademarks include Colgate, Palmolive, elmex, hello, meridol, Sorriso, Tom’s of Maine, EltaMD, Filorga, Irish Spring, Lady Speed Stick, PCA SKIN, Protex, Sanex, Softsoap, Speed Stick, Ajax, Axion, Fabuloso, Murphy, Soupline and Suavitel, as well as Hill’s Science Diet and Hill’s Prescription Diet.

The Company’s principal classes of products accounted for the following percentages of worldwide Net sales for the past three years:

COLGATE-PALMOLIVE COMPANY

Notes to Consolidated Financial Statements (continued)

(Dollars in Millions Except Share and Per Share Amounts)

2. Summary of Significant Accounting Policies

Principles of Consolidation

The Consolidated Financial Statements include the accounts of Colgate-Palmolive Company and its majority-owned or controlled subsidiaries. Intercompany transactions and balances have been eliminated. The Company’s investments in consumer products companies with interests ranging between 20% and 50%, where the Company has significant influence over the investee, are accounted for using the equity method. Net income (loss) from such investments is recorded in Other (income) expense, net in the Consolidated Statements of Income. As of December 31, 2021 and 2020, equity method investments included in Other assets in the Consolidated Balance Sheets were $64 and $56, respectively. Unrelated third parties hold the remaining ownership interests in these investments. Investments with less than a 20% interest are recorded at cost and periodically adjusted based on observable price changes or quoted market prices in active markets, if applicable.

Use of Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to use judgment and make estimates that affect the reported amounts of assets and liabilities and disclosure of contingent gains and losses at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The level of uncertainty in estimates and assumptions increases with the length of time until the underlying transactions are completed. As such, the most significant uncertainty in the Company’s assumptions and estimates involved in preparing the financial statements includes pension and other retiree benefit cost assumptions, stock-based compensation, asset impairments, uncertain tax positions, tax valuation allowances and legal and other contingency reserves. Additionally, the Company uses available market information and other valuation methodologies in assessing the fair value of financial instruments and retirement plan assets. Judgment is required in interpreting market data to develop the estimates of fair value and, accordingly, changes in assumptions or the estimation methodologies may affect the fair value estimates. Actual results could ultimately differ from those estimates.

Revenue Recognition

The Company’s revenue contracts represent a single performance obligation to sell its products to trade customers. Sales are recorded at the time control of the products is transferred to trade customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for the products. Control is the ability of trade customers to “direct the use of” and “obtain” the benefit from our products. In evaluating the timing of the transfer of control of products to trade customers, the Company considers several control indicators, including significant risks and rewards of products, the Company’s right to payment and the legal title of the products. Based on the assessment of control indicators, sales are generally recognized when products are delivered to trade customers.

Net sales reflect the transaction prices for contracts, which include units shipped at selling list prices reduced by variable consideration. Variable consideration includes expected sales returns and the cost of current and continuing promotional programs. Current promotional programs primarily include product listing allowances and co-operative advertising arrangements. Continuing promotional programs are predominantly consumer coupons and volume-based sales incentive arrangements. The cost of promotional programs is estimated using the expected value method considering all reasonably available information, including the Company’s historical experience and its current expectations, and is reflected in the transaction price when sales are recorded. Adjustments to the cost of promotional programs in subsequent periods are generally not material, as the Company’s promotional programs are typically of short duration, thereby reducing the uncertainty inherent in such estimates.

Sales returns are generally accepted at the Company’s discretion and are not material to the Company’s Consolidated Financial Statements. The Company’s contracts with trade customers do not have significant financing components or non-cash consideration and the Company does not have unbilled revenue or significant amounts of prepayments from customers. The Company records Net sales excluding taxes collected on its sales to its trade customers. Shipping and handling activities are accounted for as contract fulfillment costs and classified as Selling, general and administrative expenses.

COLGATE-PALMOLIVE COMPANY

Notes to Consolidated Financial Statements (continued)

(Dollars in Millions Except Share and Per Share Amounts)

Shipping and Handling Costs

Shipping and handling costs are classified as Selling, general and administrative expenses and were $1,687, $1,392 and $1,275 for the years ended December 31, 2021, 2020 and 2019, respectively.

Marketing Costs

The Company markets its products through advertising and other promotional activities. Advertising costs are included in Selling, general and administrative expenses and are expensed as incurred. Certain consumer and trade promotional programs, such as consumer coupons, are recorded as a reduction of sales.

Cash and Cash Equivalents

The Company considers all highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents.

Inventories

The cost of approximately 75% of inventories is determined using the FIFO method, which is stated at the lower of cost or net realizable value. The cost of all other inventories, in the U.S. and Mexico, is determined using the LIFO method, which is stated at the lower of cost or market. Inventories in excess of one year of forecasted sales are classified in the Consolidated Balance Sheets as non-current “Other assets.”

Property, Plant and Equipment

Land, buildings and machinery and equipment are stated at cost. Depreciation is provided, primarily using the straight-line method, over-estimated useful lives ranging from 3 to 15 years for machinery and equipment and up to 40 years for buildings. Depreciation attributable to manufacturing operations is included in Cost of sales. The remaining component of depreciation is included in Selling, general and administrative expenses.

Goodwill and Other Intangibles

Goodwill and indefinite-life intangible assets, such as the Company’s global brands, are subject to impairment tests at least annually or when events or changes in circumstances indicate that an asset may be impaired. Other intangible assets with finite lives, such as local brands and trademarks, customer relationships and non-compete agreements, are amortized over their estimated useful lives, generally ranging from 5 to 40 years. Amortization expense related to intangible assets is included in Other (income) expense, net, which is included in Operating profit.

Income Taxes

The provision for income taxes is determined using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized based upon the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates that will be in effect at the time such differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

The Company uses a comprehensive model to recognize, measure, present and disclose in its financial statements uncertain tax positions that the Company has taken or expects to take on an income tax return. The Company recognizes interest expense and penalties related to unrecognized tax benefits within Provision for income taxes.

COLGATE-PALMOLIVE COMPANY

Notes to Consolidated Financial Statements (continued)

(Dollars in Millions Except Share and Per Share Amounts)

Financial Instruments

Derivative instruments are recorded as assets and liabilities at estimated fair value based on available market information. The Company’s derivative instruments that qualify for hedge accounting are designated as either fair value hedges, cash flow hedges or net investment hedges. For fair value hedges, changes in the fair value of the derivative, as well as the offsetting changes in the fair value of the hedged item, are recognized in earnings each period. For cash flow hedges, changes in the fair value of the derivative are recorded in Other comprehensive income (loss) and are recognized in earnings when the offsetting effect of the hedged item is also recognized in earnings. For hedges of the net investment in foreign subsidiaries, changes in the fair value of the derivative are recorded in Other comprehensive income (loss) to offset the change in the value of the net investment being hedged. Cash flows related to hedges are classified in the same category as the cash flows from the hedged item in the Consolidated Statements of Cash Flows.

The Company may also enter into certain foreign currency and interest rate instruments that economically hedge certain of its risks but do not qualify for hedge accounting. Changes in fair value of these derivative instruments, based on quoted market prices, are recognized in earnings each period. The Company’s derivative instruments and other financial instruments are more fully described in Note 7, Fair Value Measurements and Financial Instruments along with the related fair value measurement considerations.

Stock-Based Compensation

The Company recognizes the cost of employee services received in exchange for awards of equity instruments, such as stock options and restricted stock units (both performance-based and time-vested), based on the fair value of those awards at the date of grant over the requisite service period. The Company uses the Black-Scholes-Merton (“Black-Scholes”) option pricing model to estimate the fair value of stock option awards. In addition to performance conditions, performance-based restricted stock units also include a total shareholder return modifier. Because the total shareholder return modifier is considered a market condition, the Company uses a Monte-Carlo simulation model to determine the fair value of performance-based restricted stock units. The fair value of time-vested restricted stock units is determined based on the closing market price of the Company’s stock at the date of grant. Stock-based compensation plans, related expenses and assumptions used in the Black-Scholes option pricing model are more fully described in Note 8, Capital Stock and Stock-Based Compensation Plans.

Currency Translation

The assets and liabilities of foreign subsidiaries, other than those operating in highly inflationary environments, are translated into U.S. dollars at year-end exchange rates with resulting translation gains and losses accumulated in a separate component of shareholders’ equity. Income and expense items are translated into U.S. dollars at average rates of exchange prevailing during the year.

For subsidiaries operating in highly inflationary environments, local currency-denominated non-monetary assets, including inventories, goodwill and property, plant and equipment, are remeasured at their historical exchange rates, while local currency-denominated monetary assets and liabilities are remeasured at year-end exchange rates. Remeasurement adjustments for these operations are included in Net income attributable to Colgate-Palmolive Company.

COLGATE-PALMOLIVE COMPANY

Notes to Consolidated Financial Statements (continued)

CL US Equity

CL · 10-K · period ended 2021-12-31

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

ITEM 9A. CONTROLS AND PROCEDURES

ITEM 9B. OTHER INFORMATION

ITEM 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

ITEM 11. EXECUTIVE COMPENSATION

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

ITEM 16. FORM 10-K SUMMARY

CL US Equity☆

CL · 10-K · period ended 2021-12-31

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

ITEM 9A. CONTROLS AND PROCEDURES

ITEM 9B. OTHER INFORMATION

ITEM 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

ITEM 11. EXECUTIVE COMPENSATION

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

ITEM 16. FORM 10-K SUMMARY

CL US Equity