Edgar Filing: COLGATE PALMOLIVE CO

Document

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)



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

For the fiscal year ended December 31, 2016



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

For the transition period from to .

Commission File Number 1-644

(Exact name of registrant as specified in its charter)



DELAWARE	13-1815595
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
300 Park Avenue, New York, New York	10022
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code 212-310-2000

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



Title of each class	Name of each exchange on which registered
Common Stock, $1.00 par value	New York Stock Exchange
Floating Rate Notes due 2019	New York Stock Exchange

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer x	Accelerated filer ¨
Non-accelerated filer ¨ (Do not check if a smaller reporting company)	Smaller reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

The aggregate market value of Colgate-Palmolive Company Common Stock held by non-affiliates as of June 30, 2016 (the last business day of its most recently completed second quarter) was approximately $65.1 billion.

There were 882,856,721 shares of Colgate-Palmolive Company Common Stock outstanding as of January 31, 2017.



DOCUMENTS INCORPORATED BY REFERENCE:
Documents	Form 10-K Reference
Portions of Proxy Statement for the 2017 Annual Meeting of Stockholders	Part III, Items 10 through 14

Colgate-Palmolive Company

Table of Contents



Part I		Page

Item 1.	Business	1
Item 1A.	Risk Factors	4
Item 1B.	Unresolved Staff Comments	11
Item 2.	Properties	12
Item 3.	Legal Proceedings	13
Item 4.	Mine Safety Disclosures	16

Part II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	17
Item 6.	Selected Financial Data	17
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	50
Item 8.	Financial Statements and Supplementary Data	50
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	51
Item 9A.	Controls and Procedures	51
Item 9B.	Other Information	51

Part III
Item 10.	Directors, Executive Officers and Corporate Governance	52
Item 11.	Executive Compensation	52
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	53
Item 13.	Certain Relationships and Related Transactions and Director Independence	53
Item 14.	Principal Accountant Fees and Services	53

Part IV
Item 15.	Exhibits and Financial Statement Schedules	54
Item 16.	Form 10-K Summary	54

Signatures		55

PART I

ITEM 1. BUSINESS

(a) General Development of the Business

Colgate-Palmolive Company (together with its subsidiaries, the “Company” or “Colgate”) is a leading consumer products company whose products are marketed in over 200 countries and territories throughout the world. Colgate was founded in 1806 and incorporated under the laws of the State of Delaware in 1923.

For recent business developments and other information, refer to the information set forth under the captions “Management’s Discussion and Analysis of Financial Condition and Results of Operations–Executive Overview and Outlook,” “–Results of Operations,” “–Restructuring and Related Implementation Charges” and “Liquidity and Capital Resources” in Part II, Item 7 of this report.

(b) Financial Information about Segments

Worldwide Net sales and Operating profit by business segment and geographic region during the last three years appear under the caption “Results of Operations” in Part II, Item 7 of this report and in Note 15, Segment Information to the Consolidated Financial Statements.

The Company operates in two product segments: Oral, Personal and Home Care; and Pet Nutrition. Colgate is a global leader in Oral Care with the leading toothpaste and manual toothbrush brands throughout many parts of the world according to market share data. Colgate’s Oral Care products include Colgate Total, Colgate Sensitive Pro-Relief, Colgate Max Fresh, Colgate Maximum Cavity Protection plus Sugar Acid Neutralizer, Colgate Optic White and Colgate Luminous White toothpastes, Colgate 360° and Colgate Slim Soft manual toothbrushes and Colgate Optic White, Colgate Total and Colgate Plax mouthwashes. Colgate’s Oral Care business also includes pharmaceutical products for dentists and other oral health professionals.

Colgate is a leader in many product categories of the Personal Care market with global leadership in liquid hand soap, which it sells under the Palmolive, Protex and Softsoap brands. Colgate’s Personal Care products also include Palmolive, Sanex and Softsoap brand shower gels, Palmolive, Irish Spring and Protex bar soaps and Speed Stick, Lady Speed Stick and Sanex deodorants and antiperspirants. Colgate is the market leader in liquid hand soap in the U.S. with its line of Softsoap brand products according to market share data. Colgate’s Personal Care business outside the U.S. also includes Palmolive and Caprice shampoos and conditioners.

Colgate manufactures and markets a wide array of products for the Home Care market, including Palmolive and Ajax dishwashing liquids, Fabuloso and Ajax household cleaners and Murphy’s Oil Soap. Colgate is a market leader in fabric softeners with leading brands including Suavitel in Latin America, Soupline in Europe and Cuddly in the South Pacific according to market share data.

Sales of Oral, Personal and Home Care products accounted for 47%, 20% and 18%, respectively, of the Company’s total worldwide Net sales in 2016. Geographically, Oral Care is a significant part of the Company’s business in Asia Pacific, comprising approximately 81% of Net sales in that region for 2016.

Colgate, through its Hill’s Pet Nutrition segment (“Hill’s”), is a world leader in specialty pet nutrition products for dogs and cats with products marketed in over 80 countries worldwide. Hill’s markets pet foods primarily under three brands: Hill’s Science Diet, a range of products for everyday nutritional needs; Hill’s Prescription Diet, a range of therapeutic products to help nutritionally manage disease conditions in dogs and cats; and Hill’s Ideal Balance, a range of products with natural ingredients. Sales of Pet Nutrition products accounted for 15% of the Company’s total worldwide Net sales in 2016.

For more information regarding the Company’s worldwide Net sales by product category, refer to Note 1, Nature of Operations and Note 15, Segment Information to the Consolidated Financial Statements.

For additional information regarding market share data, see “Market Share Information” in Part II, Item 7 of this report.

Research and Development

Strong research and development capabilities and alliances enable Colgate to support its many brands with technologically sophisticated products to meet consumers’ oral, personal and home care and pet nutrition needs. The Company’s spending related to research and development activities was $289 million in 2016, $274 million in 2015 and $277 million in 2014.

Distribution; Raw Materials; Competition; Trademarks and Patents

The Company’s Oral, Personal and Home Care products are marketed by a direct sales force at individual operating subsidiaries or business units, and by distributors or brokers. Pet Nutrition products are sold by authorized pet supply retailers and veterinarians. The Company’s products are also sold online through various e-commerce platforms and retailers. The Company’s sales to Wal-Mart Stores, Inc. and its affiliates represent approximately 11% of the Company’s Net sales in 2016. No other customer represents more than 10% of the Company’s Net sales.

The majority of raw and packaging materials used in the Company’s products are purchased from other companies and are available from several sources. No single raw or packaging material represents, and no single supplier provides, a significant portion of the Company’s total material requirements. For certain materials, however, new suppliers may have to be qualified under industry, governmental and Colgate standards, which can require additional investment and take some period of time. Raw and packaging material commodities such as resins, pulp, essential oils, tropical oils, tallow, poultry, corn and soybeans are subject to market price variations.

The Company’s products are sold in a highly competitive global marketplace which has experienced increased trade concentration and the growing presence of e-commerce retailers, large-format retailers and discounters. Products similar to those produced and sold by the Company are available from multinational and local competitors in the U.S. and overseas. Certain of the Company’s competitors are larger and have greater resources than the Company. In certain geographies, particularly in the emerging markets, the Company also faces strong local competitors, who may be more agile and have better local consumer insights than the Company. In addition, private label brands sold by retail trade chains are a source of competition for certain of the Company’s product lines. Product quality, innovation, brand recognition, marketing capability and acceptance of new products largely determine success in the Company’s operating segments.

Trademarks are considered to be of material importance to the Company’s business. The Company follows a practice of seeking trademark protection in the U.S. and throughout the world where the Company’s products are sold. Principal global and regional trademarks include Colgate, Palmolive, Speed Stick, Lady Speed Stick, Softsoap, Irish Spring, Protex, Sorriso, Kolynos, elmex, Tom’s of Maine, Sanex, Ajax, Axion, Fabuloso, Soupline and Suavitel, as well as Hill’s Science Diet, Hill’s Prescription Diet and Hill’s Ideal Balance. The Company’s rights in these trademarks endure for as long as they are used and/or registered. Although the Company actively develops and maintains a portfolio of patents, no single patent is considered significant to the business as a whole.

Environmental Matters

The Company has programs that are designed to ensure that its operations and facilities meet or exceed standards established by applicable environmental rules and regulations. Capital expenditures for environmental control facilities totaled $60 million for 2016. For future years, expenditures are currently expected to be of a similar magnitude. For additional information regarding environmental matters refer to Note 13, Commitments and Contingencies to the Consolidated Financial Statements.

Employees

As of December 31, 2016, the Company employed approximately 36,700 employees.

Executive Officers of the Registrant

The following is a list of executive officers as of February 23, 2017:



Name	Age	Date First Elected Officer	Present Title
Ian Cook	64	1996	Chairman of the Board
			President and Chief Executive Officer
Franck J. Moison	63	2002	Vice Chairman
Dennis J. Hickey	68	1998	Chief Financial Officer
Jennifer M. Daniels	53	2014	Chief Legal Officer and Secretary
P. Justin Skala	57	2008	Chief Operating Officer,
			North America, Europe, Africa/Eurasia
			and Global Sustainability
Noel R. Wallace	52	2009	Chief Operating Officer,
			Global Innovation and Growth
			and Hill’s Pet Nutrition
Victoria L. Dolan	57	2011	Chief Transformation Officer
			and Corporate Controller
John J. Huston	62	2002	Senior Vice President
			Chief of Staff
Delia H. Thompson	67	2002	Chief Investor Relations Officer
Daniel B. Marsili	56	2005	Chief Human Resources Officer
Patricia Verduin	57	2011	Chief Technology Officer
Mukul Deoras	53	2015	Chief Marketing Officer

Each of the executive officers listed above has served the registrant or its subsidiaries in various executive capacities for the past five years with the exception of Jennifer M. Daniels, who joined the Company in 2014 as Chief Legal Officer and Secretary. Ms. Daniels joined the Company from NCR Corporation where she was Senior Vice President, General Counsel and Secretary. Prior to joining NCR Corporation in 2010, Ms. Daniels was Vice President, General Counsel and Secretary of Barnes & Noble, Inc., which she joined in 2007.

Under the Company’s By-Laws, the officers of the corporation hold office until their respective successors are chosen and qualified or until they have resigned, retired or been removed by the affirmative vote of a majority of the Board of Directors of the Company (the “Board”). There are no family relationships between any of the executive officers, and there is no arrangement or understanding between any executive officer and any other person pursuant to which the executive officer was elected.

(d) Financial Information about Geographic Areas

For financial data by geographic region, refer to the information set forth under the caption “Results of Operations” in Part II, Item 7, of this report and in Note 15, Segment Information to the Consolidated Financial Statements. For a discussion of risks associated with our international operations, see Item 1A “Risk Factors.”

(e) Available Information

The Company’s website address is www.colgatepalmolive.com. The information contained on the Company’s website is not included as a part of, or incorporated by reference into, this Annual Report on Form 10-K. The Company makes available, free of charge, on its website its annual reports on Form 10-K, its quarterly reports on Form 10-Q, its interactive data files posted pursuant to Rule 405 of Regulation S-T, its current reports on Form 8-K and amendments to such reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) as soon as reasonably practicable after the Company has electronically filed such material with, or furnished it to, the United States Securities and Exchange Commission (the “SEC”). Also available on the Company’s website are the Company’s Code of Conduct and Board Guidelines on Significant Corporate Governance Issues, the charters of the Committees of the Board, Form SD and the related Conflict Minerals Disclosure and Report, reports under Section 16 of the Exchange Act of transactions in Company stock by directors and officers and its proxy statements.

ITEM 1A. RISK FACTORS

In addition to the risks described elsewhere in this report, set forth below is a summary of the material risks to an investment in our securities. These risks are not the only ones we face. Additional risks not presently known to us or that we currently deem immaterial may also have an adverse effect on us. If any of these risks actually occur, our business, results of operations, cash flows and financial condition could be materially and adversely impacted, which might cause the value of our securities to decline.

We face risks associated with significant international operations, including exposure to foreign currency fluctuations.

We operate on a global basis with approximately 75% of our Net sales originating in markets outside the U.S. While geographic diversity helps to reduce our exposure to risks in any one country or part of the world, it also means that we are subject to the full range of risks associated with significant international operations, including, but not limited to:


▪	changes in exchange rates for foreign currencies, which may reduce the U.S. dollar value of revenues, profits and cash flows from non-U.S. markets or increase our supply costs, as measured in U.S. dollars, in those markets,


▪	exchange controls and other limits on our ability to import or export raw materials or finished product or to repatriate earnings from overseas,


▪	political or economic instability, social or labor unrest or changing macroeconomic conditions in our markets, including as a result of volatile commodity prices, including the price of oil,


▪	lack of well-established or reliable legal systems in certain countries where we operate,


▪	foreign ownership restrictions and the potential for nationalization or expropriation of property or other resources, and


▪	other foreign or domestic legal and regulatory requirements, including those resulting in potentially adverse tax consequences or the imposition of onerous trade restrictions and/or tariffs, price controls, labor laws, travel or immigration restrictions, profit controls or other government controls.

These risks could have a significant impact on our ability to sell our products on a competitive basis in international markets and may adversely affect our business, results of operations, cash flows and financial condition.

In an effort to minimize the impact on earnings of foreign currency rate movements, we engage in a combination of selling price increases, where permitted, sourcing strategies, cost-containment measures and selective hedging of foreign currency transactions. However, these measures may not succeed in offsetting any negative impact of foreign currency rate movements on our business and results of operations.

Significant competition in our industry could adversely affect our business.

We face vigorous competition worldwide, including from strong local competitors and from other large, multinational companies, some of which may have greater resources than we do. We face this competition in several aspects of our business, including, but not limited to, the pricing of products, promotional activities, new product introductions and expansion into new geographies. Such competition also extends to administrative and legal challenges of product claims and advertising. Our ability to compete also depends on the strength of our brands and on our ability to enforce and defend our intellectual property, including patent, trademark, copyright, trade secret and trade dress rights against infringement and legal challenges by competitors.

We may be unable to anticipate the timing and scale of such initiatives or challenges by competitors or to successfully respond to them, which could harm our business. In addition, the cost of responding to such initiatives and challenges, including management time, out-of-pocket expenses and price reductions, may affect our performance in the relevant period. A failure to compete effectively could adversely affect our business, results of operations, cash flows and financial condition.

Our business is subject to legal and regulatory risks in the U.S. and abroad.

Our business is subject to extensive legal and regulatory requirements in the U.S. and abroad. Such legal and regulatory requirements apply to most aspects of our products, including their development, ingredients, manufacture, packaging, labeling, storage, transportation, distribution, export, import, advertising and sale. U.S. federal authorities, including the U.S. Food and Drug Administration (the “FDA”), the Federal Trade Commission, the Consumer Product Safety Commission and the Environmental Protection Agency, regulate different aspects of our business, along with parallel authorities at the state and local levels and comparable authorities overseas. Also, our selling practices are regulated by competition law authorities in the U.S. and abroad.

New or more stringent legal or regulatory requirements, or more restrictive interpretations of existing requirements, could adversely impact our business, results of operations, cash flows and financial condition. For example, from time to time, various regulatory authorities in Europe, the U.S. and other countries request or conduct reviews of the use of various ingredients in consumer products. Triclosan, an ingredient used by us primarily in Colgate Total toothpaste, is an example of an ingredient that has undergone reviews by various regulatory authorities worldwide, and Colgate Total toothpaste in the U.S. is subject to the FDA’s rigorous New Drug Application (“NDA”) process for safety and efficacy. In September 2016, the FDA issued a Final Rule on ingredients permitted in antibacterial consumer soaps in the U.S., which will restrict the use of 19 active ingredients, including triclosan and triclocarban, as of September 2017. The FDA ruling will impact our antibacterial bar soap sold in Puerto Rico, which contains triclocarban. Some states and municipalities in the U.S. have proposed, and Minnesota has passed, legislation banning the sale of certain products containing triclosan. The Minnesota legislation does not cover Colgate Total toothpaste. In November 2016, Environment and Climate Change Canada (“ECCC”), the federal environmental authority in Canada, finalized its review of the potential human and environmental risks of triclosan, concluding that triclosan is not entering the environment in a quantity or concentration or under conditions that constitute or may constitute a danger in Canada to human life or health and that triclosan is not bioaccumulative or persistent under Canadian standards, but that triclosan could be entering the environment at levels that could potentially cause harm to some aquatic organisms. The Canadian government will now work with stakeholders to ensure triclosan remains at safe levels for the environment, and we will participate in this process. Triclosan is currently being evaluated under the European Union’s Regulation for the Registration, Evaluation, Authorization and Restriction of Chemicals (“REACH”), which evaluation process is expected to take multiple years to complete.

A decision by a regulatory or governmental authority that triclosan, or any other of our ingredients, should not be used in certain consumer products or should otherwise be newly regulated, could adversely impact our business, as could negative reactions by our consumers, trade customers or non-governmental organizations to our use of such ingredients. Additionally, an inability to develop new or reformulated products containing alternative ingredients or to obtain regulatory approval of such products on a timely basis could likewise adversely affect our business.

Because of our extensive international operations, we could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act (the “FCPA”) and similar worldwide anti-bribery laws. The FCPA and similar worldwide anti-bribery laws generally prohibit companies and their intermediaries from making improper payments to government officials or other third parties for the purpose of obtaining or retaining business. While our policies mandate compliance with these anti-bribery laws, we cannot provide assurance that our internal control policies and procedures will always protect us from reckless or criminal acts committed by our employees, joint-venture partners or agents. Violations of these laws, or allegations of such violations, could disrupt our business and adversely affect our reputation and our business, results of operations, cash flows and financial condition.

While it is our policy and practice to comply with all legal and regulatory requirements applicable to our business, a finding that we are in violation of, or out of compliance with, applicable laws or regulations could subject us to civil remedies, including fines, damages, injunctions or product recalls, or criminal sanctions, any of which could adversely affect our business, results of operations, cash flows and financial condition. Even if a claim is unsuccessful, is without merit or is not fully pursued, the negative publicity surrounding such assertions regarding our products, processes or business practices could adversely affect our reputation and brand image. For information regarding our legal and regulatory matters, see Item 3 “Legal Proceedings” and Note 13, Commitments and Contingencies to the Consolidated Financial Statements.

Increasing dependence on key retailers in developed markets, changes in the policies of our retail trade customers and the emergence of new sales channels may adversely affect our business.

Our products are sold in a highly competitive global marketplace which has experienced increased trade concentration and the growing presence of large-format retailers and discounters. With the growing trend toward retail trade consolidation, we are increasingly dependent on key retailers, and some of these retailers, including large-format retailers, may have greater bargaining strength than we do. They may use this leverage to demand higher trade discounts, allowances or slotting fees, which could lead to reduced sales or profitability. The loss of a key customer or a significant reduction in sales to a key customer could adversely affect our business, results of operations, cash flows and financial condition. For additional information regarding our customers, see “Distribution; Raw Materials; Competition; Trademarks and Patents” in Item 1 “Business.”

We may also be negatively affected by changes in the policies or practices of our retail trade customers, such as inventory de-stocking, limitations on access to shelf space, delisting of our products, environmental or sustainability initiatives and other conditions. For example, a determination by a key retailer that any of our ingredients should not be used in certain consumer products could adversely impact our business, results of operations, cash flows and financial condition. In addition, private label products sold by retail trade chains, which are typically sold at lower prices than branded products, are a source of competition for certain of our product lines, including liquid hand soaps and shower gels. The emergence of new sales channels for our products, such as e-commerce, may affect consumer preferences and market dynamics and could also adversely impact our business, results of operations, cash flows and financial condition.

The growth of our business depends on the successful identification, development and launch of innovative new products.

Our growth depends on the continued success of existing products, as well as the successful launch of innovative new products and line extensions. Our ability to launch new products and line extensions and to sustain existing products is affected by whether we can successfully:


▪	identify, develop and fund technological innovations,


▪	obtain and maintain necessary patent and trademark protection and avoid infringing intellectual property rights of others,


▪	obtain approvals and registrations of regulated products, including from the FDA and other regulatory bodies in the U.S. and abroad, and


▪	anticipate and respond to consumer needs and preferences.

The identification, development and introduction of innovative new products and line extensions involve considerable costs, and any new product or line extension may not generate sufficient customer and consumer interest and sales to become a profitable product or to cover the costs of its development and promotion. Our ability to achieve a successful launch of a new product or line extension could also be adversely affected by preemptive actions taken by competitors in response to the launch, such as increased promotional activities and advertising.

The failure to develop and launch successful new products could hinder the growth of our business and any delay in the development or launch of a new product could result in us not being the first to market, which could compromise our competitive position and adversely affect our business, results of operations, cash flows and financial condition.

If, in the course of identifying or developing new products, we are found to have infringed the trademark, trade secret, copyright, patent or other intellectual property rights of others, directly or indirectly, through the use of third-party ideas or technologies, such a finding could adversely affect our ability to develop innovative new products and adversely affect our business, results of operations, cash flows and financial condition. Even if we are not found to infringe a third party’s intellectual property rights, claims of infringement could adversely affect us, including by increasing costs and by delaying the launch of new products.

We may not realize the benefits that we expect from our 2012 Restructuring Program.

In the fourth quarter of 2012, we commenced a Global Growth and Efficiency Program for sustained growth, which was expanded in 2014 and 2015 (the “2012 Restructuring Program”). The 2012 Restructuring Program’s initiatives are expected to help us ensure sustained solid worldwide growth in unit volume, organic sales and earnings per share and enhance our global leadership positions in our core businesses. While we are four years into the implementation of the 2012 Restructuring Program and many of the initiatives under the program have been successfully implemented or are nearing completion, the successful implementation of the remainder of the program presents significant organizational challenges and in some cases may require successful negotiations with third parties. As a result, we may not be able to realize all of the remaining anticipated benefits from the 2012 Restructuring Program. Events and circumstances, such as financial or strategic difficulties, delays and unexpected costs may occur that could result in our not realizing all of the remaining anticipated benefits or our not realizing such benefits on our expected timetable. In addition, changes in foreign exchange rates or in tax, labor or immigration laws may result in our not achieving the remaining anticipated cost savings as measured in U.S. dollars. If we are unable to realize the remaining anticipated savings of the 2012 Restructuring Program, our ability to fund other initiatives and enhance profitability may be adversely affected. Any failure to implement the 2012 Restructuring Program in accordance with our expectations could adversely affect our business, results of operations, cash flows and financial condition. For additional information regarding the 2012 Restructuring Program, refer to Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Executive Overview and Outlook” and “– Restructuring and Related Implementation Charges.”

There is no guarantee that our ongoing efforts to reduce costs will be successful.

We develop investments needed to support growth through our continuous, Company-wide initiatives to lower costs and increase effective asset utilization, which we refer to as our funding-the-growth initiatives. These initiatives are designed to reduce costs associated with direct materials, indirect expenses, distribution and logistics, and advertising and promotional materials, among other things. The achievement of our funding-the-growth targets depends on our ability to successfully identify and realize additional savings opportunities. Events and circumstances, such as financial or strategic difficulties, delays and unexpected costs may occur that could result in our not realizing all of the anticipated benefits or our not realizing the anticipated benefits on our expected timetable. If we are unable to realize the anticipated savings of our funding-the-growth initiatives, our ability to fund other initiatives and achieve our profitability goals may be adversely affected. Any failure to implement our funding-the-growth initiatives in accordance with our expectations could adversely affect our business, results of operations, cash flows and financial condition. For additional information regarding our funding-the-growth initiatives, refer to Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Executive Overview and Outlook.”

Damage to our reputation could have an adverse effect on our business.

Maintaining our strong reputation with consumers and our trade partners globally is critical to selling our branded products. Accordingly, we devote significant time and resources to programs designed to protect and preserve our reputation, such as our Ethics and Compliance, Sustainability, Brand Protection and Product Safety, Regulatory and Quality initiatives. Adverse publicity about us, our brands, our supply chain or our ingredients regarding health concerns, legal or regulatory proceedings, environmental impacts (including packaging, energy and water use and waste management) or other sustainability or policy issues, whether or not deserved, could jeopardize our reputation. In addition, negative posts or comments about us on any social media website, whether true or untrue, could harm our reputation. The success of our brands could also suffer if our marketing initiatives do not have the desired impact on a brand's image or its ability to attract consumers.

Additionally, due to the scale and scope of our business, we must rely on relationships with third parties, including our suppliers, distributors, contractors, joint venture partners and other external business partners, for certain functions. While we have policies and procedures for managing these relationships, they inherently involve a lesser degree of control over business operations, governance and compliance, thereby potentially increasing our reputational and legal risk.

In addition, third parties sell counterfeit versions of our products, which are inferior or may pose safety risks. As a result, consumers of our brands could confuse our products with these counterfeit products, which could cause them to refrain from purchasing our brands in the future and in turn could impair our brand equity and adversely affect our business, results of operations, cash flows and financial condition.

Damage to our reputation or loss of consumer confidence in our products for these or any other reasons could adversely affect our business, results of operations, cash flows and financial condition, as well as require resources to rebuild our reputation.

Volatility in material and other costs could adversely impact our profitability.

Raw and packaging material commodities such as resins, pulp, essential oils, tropical oils, tallow, poultry, corn and soybeans are subject to wide price variations. Increases in the costs and availability of these commodities and the costs of energy, transportation and other necessary services may adversely affect our profit margins if we are unable to pass along such higher costs in the form of price increases or otherwise achieve cost efficiencies, such as in manufacturing and distribution.

Legal claims and proceedings could adversely impact our business.

From time to time, we may be subject to legal claims and proceedings, including disputes relating to intellectual property, contracts, product liability, marketing, advertising, foreign exchange controls, antitrust and trade regulation, as well as labor and employment, privacy, environmental and tax matters and consumer class actions. Regardless of their merit, these claims can require significant time and expense to investigate and defend. Since litigation is inherently uncertain, there is no guarantee that we will be successful in defending ourselves against such claims or proceedings, or that our assessment of the materiality of these matters, including any reserves taken in connection therewith, will be consistent with the ultimate outcome of such matters. In addition, if one of our products, or a raw material contained in our products, is perceived or found to be defective or unsafe, we may need to recall some of our products. Whether or not a legal claim or proceeding is successful, or a recall is required, such assertions could have an adverse effect on our business, results of operations, cash flows and financial condition, and the negative publicity surrounding them could harm our reputation and brand image. See Item 3 “Legal Proceedings” and Note 13, Commitments and Contingencies to the Consolidated Financial Statements for additional information on certain of our legal claims and proceedings.

Disruption in our global supply chain or key office facilities could adversely impact our business.

We are engaged in manufacturing and sourcing of products and materials on a global scale. Our operations and those of our suppliers could be disrupted by a number of factors, including, but not limited to:


▪	environmental events,


▪	strikes and other labor disputes,


▪	disruptions in logistics,


▪	loss or impairment of key manufacturing sites,


▪	loss of key suppliers,


▪	supplier capacity constraints,


▪	raw material and product quality or safety issues,


▪	industrial accidents or other occupational health and safety issues,


▪	the impact on our suppliers of tighter credit or capital markets, and


▪	natural disasters, including climatic events and earthquakes, acts of war or terrorism and other external factors over which we have no control.

In addition, we purchase certain key raw and packaging materials from single-source suppliers or a limited number of suppliers and new suppliers may have to be qualified under industry, governmental and Colgate standards, which can require additional investment and take a significant period of time.

While we believe that the supplies of raw materials needed to manufacture our products are adequate and have business continuity and contingency plans in place for key manufacturing sites and the supply of raw and packaging materials, significant disruption of manufacturing or sourcing of products or materials for any of the above reasons could interrupt product supply and, if not remedied, have an adverse impact on our business, results of operations, cash flows and financial condition.

In addition, as a result of our clustering of single-country subsidiaries into regional commercial hubs and our implementation of a global shared service organizational model, certain of our functions, such as marketing, finance and accounting, and customer service and logistics, have become more concentrated in key office facilities. A significant disruption to any of our key office facilities for any reason, including natural disasters, acts of war or terrorism, could adversely affect our business, results of operations, cash flows and financial condition.

A cyber-security incident, data breach or a failure of a key information technology system could adversely impact our business or reputation.

We rely extensively on information technology systems (“IT Systems”), including some which are managed, hosted, provided and/or used by third parties and their vendors, in order to conduct our business. Our uses of these systems include, but are not limited to:


▪	communicating within the Company and with other parties, including our customers and consumers,


▪	ordering and managing materials from suppliers,


▪	converting materials to finished products,


▪	receiving and processing orders from and shipping products to our customers,


▪	marketing products to consumers,


▪	collecting and storing customer, consumer, employee, investor and other stakeholder information and personal data,


▪	processing transactions, including but not limited to employee payroll, employee and retiree benefits and payments to customers and vendors,


▪	hosting, processing and sharing confidential and proprietary research, business plans and financial information,


▪	complying with legal, regulatory and tax requirements,


▪	providing data security, and


▪	handling other processes involved in managing our business.

Although we have a broad array of information security measures in place, our IT Systems, including those of third-party service providers with whom we have contracted, have been, and will likely continue to be, subject to computer viruses or other malicious codes, unauthorized access attempts, phishing and other cyber-attacks. We cannot guarantee that our security efforts will prevent breaches or breakdowns of our, or our third-party service providers’, IT Systems since the techniques used in these attacks change frequently and may be difficult to detect for periods of time. In addition, although we have policies and procedures in place to ensure that all personal information collected by the Company or its third-party service providers is securely maintained, data breaches due to human error or intentional or unintentional conduct have occurred and likely will continue to occur. Although we have seen no material impact on our business operations from the cyber-security attacks and data breaches we have experienced to date, if we suffer a loss or disclosure of confidential business or stakeholder information as a result of a breach of our IT Systems, including those of third-party service providers with whom we have contracted, we may suffer reputational, competitive and/or business harm, incur significant costs and be subject to government investigations, civil litigation, fines and/or damages, which may adversely impact our business, results of operations, cash flows and financial condition.

Furthermore, while we have disaster recovery and business continuity plans in place, if our IT Systems are damaged, breached or cease to function properly for any reason, including the poor performance of, failure of or cyber-attack on third-party service providers, catastrophic events, power outages, cyber-security breaches, network outages, failed upgrades or other similar events and, if the disaster recovery and business continuity plans do not effectively resolve such issues on a timely basis, we may suffer interruptions in our ability to manage or conduct business, as well as reputational harm and litigation, which may adversely impact our business, results of operations, cash flows and financial condition.

Uncertain global economic conditions and disruptions in the credit markets may adversely affect our business.

Uncertain global economic conditions could adversely affect our business. Recent global economic trends pose challenges to our business and could result in declining revenues, profitability and cash flows. Although we continue to devote significant resources to support our brands and market our products at multiple price points, during periods of economic uncertainty consumers may reduce consumption or switch to economy brands, which could reduce sales volumes of our products or result in a shift in our product mix from higher margin to lower margin product offerings. Additionally, retailers may increase pressure on our selling prices or increase promotional activity for lower-priced or value offerings as they seek to maintain sales volumes and margins.

While we currently generate significant cash flows from ongoing operations and have access to global credit markets through our various financing activities, a disruption in the credit markets could negatively impact the availability or cost of funding. Reduced access to credit or increased costs could adversely affect our liquidity and capital resources or significantly increase our cost of capital. In addition, if any financial institutions that hold our cash or other investments or that are parties to our revolving credit facilities supporting our commercial paper program or other financing arrangements, such as interest rate or foreign exchange hedging instruments, were to declare bankruptcy or become insolvent, they may be unable to perform under their agreements with us. This could leave us with reduced borrowing capacity or unhedged against certain interest rate, foreign currency or commodity price exposures. In addition, tighter credit markets may lead to business disruptions for certain of our suppliers, contract manufacturers or trade customers which could, in turn, adversely impact our business, results of operations, cash flows and financial condition.

Our success depends upon our ability to attract and retain key employees and the succession of senior management.

Our success largely depends on the performance of our management team and other key employees. If we are unable to attract and retain talented, highly qualified senior management and other key people, our business, results of operations, cash flows and financial condition could be adversely affected. In addition, if we are unable to effectively provide for the succession of senior management, including our Chief Executive Officer, our business, results of operations, cash flows and financial condition may be adversely affected. While we follow a disciplined, ongoing succession planning process and have succession plans in place for senior management and other key executives, these do not guarantee that the services of qualified senior executives will continue to be available to us at particular moments in time.

We may pursue acquisitions and divestitures, which could adversely impact our results.

We may pursue acquisitions of brands, businesses or technologies from third parties. Acquisitions involve numerous risks, including difficulties in the integration of the operations, technologies, services and products of acquired brands or businesses, the development or launch of products with acquired technologies, the estimation of and assumption of liabilities and contingencies, personnel turnover and the diversion of management’s attention from other business priorities, which may adversely impact our business, results of operations, cash flows and financial condition. In addition, we may be unable to achieve any anticipated benefits or cost savings from acquisitions in the time frame we anticipate, or at all.

Moreover, our pursuit of acquisitions could result in substantial additional debt, exposure to contingent liabilities, such as litigation (including for infringement of intellectual property) or earn-out obligations, the potential impairment of goodwill or other intangible assets, or transaction costs, all of which may adversely impact our business, results of operations, cash flows and financial condition.

We also may periodically divest brands or businesses. These divestitures may adversely impact our results of operations if we are unable to offset the dilutive impacts from the loss of revenue associated with the divested brands or businesses, or otherwise achieve the anticipated benefits or cost savings from the divestitures. In addition, businesses under consideration for, or otherwise subject to, divestiture may be adversely impacted prior to the divestiture, which could negatively impact our results of operations.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

The Company owns or leases approximately 330 properties which include manufacturing, distribution, research and office facilities worldwide. Our corporate headquarters is located in leased property at 300 Park Avenue, New York, New York.

In the U.S., the Company operates approximately 70 properties, of which 15 are owned. Major U.S. manufacturing and warehousing facilities used by the Oral, Personal and Home Care product segment of our business are located in Greenwood, South Carolina; Morristown, Tennessee; and Cambridge, Ohio. The Pet Nutrition segment has major manufacturing and warehousing facilities in Bowling Green, Kentucky; Topeka, Kansas; Emporia, Kansas; and Richmond, Indiana. The primary research center for Oral, Personal and Home Care products is located in Piscataway, New Jersey, and the primary research center for Pet Nutrition products is located in Topeka, Kansas. Our global data center is also located in Piscataway, New Jersey.

Overseas, the Company operates approximately 260 properties, of which 74 are owned, in over 80 countries. Major overseas manufacturing and warehousing facilities used by the Oral, Personal and Home Care product segment of our business are located in Australia, Brazil, China, Colombia, France, Greece, India, Italy, Mexico, Poland, South Africa, Thailand, Turkey, Venezuela and Vietnam. The Pet Nutrition segment has major manufacturing and warehousing facilities in the Czech Republic and the Netherlands.

The Company has shared business service centers in Mexico, Poland and India, which are located in leased properties.

All of the facilities we operate are well maintained and adequate for the purpose for which they are intended.

ITEM 3. LEGAL PROCEEDINGS

As a global company serving consumers in more than 200 countries and territories, the Company is routinely subject to a wide variety of legal proceedings. These include disputes relating to intellectual property, contracts, product liability, marketing, advertising, foreign exchange controls, antitrust and trade regulation, as well as labor and employment, privacy, environmental and tax matters, and consumer class actions. Management proactively reviews and monitors the Company’s exposure to, and the impact of, environmental matters. The Company is party to various environmental matters and, as such, may be responsible for all or a portion of the cleanup, restoration and post-closure monitoring of several sites.

The Company establishes accruals for loss contingencies when it has determined that a loss is probable and that the amount of loss, or range of loss, can be reasonably estimated. Any such accruals are adjusted thereafter as appropriate to reflect changes in circumstances.

The Company also determines estimates of reasonably possible losses or ranges of reasonably possible losses in excess of related accrued liabilities, if any, when it has determined that a loss is reasonably possible and it is able to determine such estimates. For those matters disclosed below, the Company currently estimates that the aggregate range of reasonably possible losses in excess of any accrued liabilities is $0 to approximately $225 million (based on current exchange rates). The estimates included in this amount are based on the Company’s analysis of currently available information and, as new information is obtained, these estimates may change. Due to the inherent subjectivity of the assessments and the unpredictability of outcomes of legal proceedings, any amounts accrued or included in this aggregate amount may not represent the ultimate loss to the Company. Thus, the Company’s exposure and ultimate losses may be higher or lower, and possibly significantly so, than the amounts accrued or the range disclosed above.

Based on current knowledge, management does not believe that the ultimate resolution of loss contingencies arising from the matters discussed herein will have a material effect on the Company’s consolidated financial position or its ongoing results of operations or cash flows. However, in light of the inherent uncertainties noted above, an adverse outcome in one or more matters could be material to the Company’s results of operations or cash flows for any particular quarter or year.

Brazilian Matters

There are certain tax and civil proceedings outstanding, as described below, related to the Company’s 1995 acquisition of the Kolynos oral care business from Wyeth (the “Seller”).

The Brazilian internal revenue authority has disallowed interest deductions and foreign exchange losses taken by the Company’s Brazilian subsidiary for certain years in connection with the financing of the Kolynos acquisition. The tax assessments with interest, at the current exchange rate, are approximately $143 million. This amount includes additional assessments received from the Brazilian internal revenue authority in April 2016 relating to net operating loss carryforwards used by the Company’s Brazilian subsidiary to offset taxable income that had also been deducted from the authority’s original assessments. The Company has been disputing the disallowances by appealing the assessments since October 2001. Numerous appeals are currently pending at the administrative level. In the event the Company is ultimately unsuccessful in its administrative appeals, further appeals are available within the Brazilian federal courts.

In September 2015, the Company lost one of its appeals at the administrative level, and has filed a lawsuit in Brazilian federal court. In February 2017, the Company lost an additional administrative appeal, and plans to file a similar federal court action. Although there can be no assurances, management believes, based on the opinion of its Brazilian legal counsel, that the disallowances are without merit and that the Company should ultimately prevail. The Company is challenging these assessments vigorously.

In July 2002, the Brazilian Federal Public Attorney filed a civil action against the federal government of Brazil, Laboratorios Wyeth-Whitehall Ltda. (the Brazilian subsidiary of the Seller) and the Company, as represented by its Brazilian subsidiary, in the 6th. Lower Federal Court in the City of São Paulo, seeking to annul an April 2000 decision by the Brazilian Board of Tax Appeals that found in favor of the Seller’s Brazilian subsidiary on the issue of whether it had incurred taxable capital gains as a result of the divestiture of Kolynos. The action seeks to make the Company’s Brazilian subsidiary jointly and severally liable for any tax due from the Seller’s Brazilian subsidiary. The case has been pending since 2002, and the Lower Federal Court has not issued a decision. Although there can be no assurances, management believes, based on the opinion of its Brazilian legal counsel, that the Company should ultimately prevail in this action. The Company is challenging this action vigorously.

In December 2005, the Brazilian internal revenue authority issued to the Company’s Brazilian subsidiary a tax assessment with interest and penalties of approximately $59 million, at the current exchange rate, based on a claim that certain purchases of U.S. Treasury bills by the subsidiary and their subsequent disposition during the period 2000 to 2001 were subject to a tax on foreign exchange transactions. The Company had been disputing the assessment within the internal revenue authority’s administrative appeals process. However, in November 2015, the Superior Chamber of Administrative Tax Appeals denied the Company’s final administrative appeal and the Company has filed a lawsuit in Brazilian federal court. In the event the Company is unsuccessful in this filing, further appeals are available within the Brazilian federal courts. Although there can be no assurances, management believes, based on the opinion of its Brazilian legal counsel, that the tax assessment is without merit and that the Company should ultimately prevail. The Company is challenging this assessment vigorously.

Competition Matters

Certain of the Company’s subsidiaries have been subject to investigations, and, in some cases, fines, by governmental authorities in a number of countries related to alleged competition law violations. Substantially all of these matters also have involved other consumer goods companies and/or retail customers. These investigations often continue for several years and can result in substantial fines for violations that are found, as well as associated private actions for damages. While the Company cannot predict the final financial impact of pending competition law matters, as these matters may change, the Company evaluates developments in these matters quarterly and accrues liabilities as and when appropriate. The Company’s policy is to comply with antitrust and competition laws and, if a violation of any such laws is found, to take appropriate remedial action and to cooperate fully with any related governmental inquiry. The status of the competition law matters that were pending in 2016 is set forth below.

European Competition Matters

▪

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


▪	In July 2014, the Greek competition law authority issued a statement of objections alleging a restriction of parallel imports into Greece. The Company has responded to this statement of objections.


▪	In December 2009, the Swiss competition law authority imposed a fine of $6 million on the Company’s GABA subsidiary for alleged violations of restrictions on parallel imports into Switzerland, which the Company appealed. In January 2014, this appeal was denied. The Company had appealed before the Swiss Supreme Court, but its appeal was denied in June 2016.


▪	In December 2010, the Italian competition law authority found that 16 consumer goods companies, including the Company’s Italian subsidiary, exchanged competitively sensitive information in the cosmetics sector, for which the Company’s Italian subsidiary was fined $3 million. The Company had appealed the fine in the Italian courts, but has decided not to further pursue its appeal.

Australian Competition Matter

In December 2013, the Australian competition law authority instituted civil proceedings in the Sydney registry of the Federal Court of Australia alleging that three consumer goods companies, including the Company’s Australian subsidiary, a retailer and a former employee of the Company’s Australian subsidiary violated the Australian competition law by coordinating the launching and pricing of ultra-concentrated laundry detergents. In 2015, the Company recognized a charge of $14 million in connection with this matter. In March 2016, the Company and the Australian competition law authority reached an agreement to settle these proceedings for a total of $14 million, which includes a fine and cost reimbursement to the competition law authority. The former employee of the Company also reached an agreement to settle. The settlement agreements were approved by the court in May 2016.

Talcum Powder Matters

The Company has been named as a defendant in civil actions alleging that certain talcum powder products that were sold prior to 1996 were contaminated with asbestos. Most of these actions involve a number of co-defendants from a variety of different industries, including suppliers of asbestos and manufacturers of products that, unlike the Company’s products, were designed to contain asbestos. As of December 31, 2016, there were 115 individual cases pending against the Company in state and federal courts throughout the United States and a number of the pending cases are expected to go to trial in 2017. The Company believes that a significant portion of its costs incurred in defending and resolving these claims will be covered by insurance policies issued by several primary and excess insurance carriers, subject to deductibles, exclusions, retentions and policy limits.

While the Company and its legal counsel believe that these cases are without merit and intend to challenge them vigorously, there can be no assurances regarding the ultimate resolution of these matters. Since the amount of any potential losses from these cases currently cannot be reasonably estimated, the range of reasonably possible losses in excess of accrued liabilities disclosed above does not include any amount relating to these cases.

The Company is a defendant in a lawsuit pending in Utah federal court brought by N8 Medical, Inc. (“N8 Medical”), Brigham Young University (“BYU”) and N8 Pharmaceuticals, Inc. (“N8 Pharma”). The complaint, originally filed in November 2013, alleges breach of contract and other torts arising out of the Company’s evaluation of a technology owned by BYU and licensed, at various times, to Ceragenix Pharmaceuticals, Inc., now in bankruptcy, N8 Medical and N8 Pharma.

In the third quarter of 2016, the court indicated that the claims brought by N8 Pharma would be dismissed in their entirety; N8 Pharma requested that the Court reconsider that decision, but that request was denied. Also in the third quarter of 2016, the Company and BYU agreed to resolve BYU’s claims and in December 2016, the Company and N8 Medical agreed to resolve N8 Medical’s claims. These claims were resolved in an amount that is not material to the Company’s results of operations.

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable.

PART II


ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

For information regarding the market for the Company’s common stock, including quarterly market prices and dividends and stock price performance graphs, refer to “Market and Dividend Information” included in Part IV, Item 15 of this report. For information regarding the number of common shareholders of record, refer to “Historical Financial Summary” included in Part IV, Item 15 of this report. For information regarding the securities authorized for issuance under our equity compensation plans, refer to “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” included in Part III, Item 12 of this report.

Issuer Purchases of Equity Securities

On February 19, 2015, the Company’s Board of Directors (the “Board”) authorized the repurchase of shares of the Company’s common stock having an aggregate purchase price of up to $5 billion under a share repurchase program (the “2015 Program”), which replaced a previously authorized share repurchase program. The Board also has authorized share repurchases on an ongoing basis to fulfill certain requirements of the Company’s compensation and benefit programs. The shares are repurchased from time to time in open market or privately negotiated transactions at the Company’s discretion, subject to market conditions, blackout periods and other factors.

The following table shows the stock repurchase activity for each of the three months in the quarter ended December 31, 2016:



Month	Total Number of Shares Purchased⁽¹⁾	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs⁽²⁾	Approximate Dollar Value of Shares That May Yet be Purchased Under the Plans or Programs⁽³⁾(in millions)
October 1 through 31, 2016	824,946	$	72.28	775,000	2,758
November 1 through 30, 2016	2,694,040	$	67.93	2,693,900	2,575
December 1 through 31, 2016	2,723,435	$	65.88	2,668,707	2,399
Total	6,242,421	$	67.61	6,137,607

_______


⁽¹⁾	Includes share repurchases under the 2015 Program and those associated with certain employee elections under the Company’s compensation and benefit programs.


⁽²⁾	The difference between the total number of shares purchased and the total number of shares purchased as part of publicly announced plans or programs is 104,814 shares, all of which relate to shares deemed surrendered to the Company to satisfy certain employee elections under the Company’s compensation and benefit programs.


⁽³⁾	Includes approximate dollar value of shares that were available to be purchased under the publicly announced plans or programs that were in effect as of December 31, 2016.

ITEM 6. SELECTED FINANCIAL DATA

Refer to the information set forth under the caption “Historical Financial Summary” included in Part IV, Item 15 of this report.

(Dollars in Millions Except Per Share Amounts)


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

Executive Overview and Outlook

Colgate-Palmolive Company (together with its subsidiaries, the “Company” or “Colgate”) seeks to deliver strong, consistent business results and superior shareholder returns by providing consumers globally with products that make their lives healthier and more enjoyable.

To this end, the Company is tightly focused on two product segments: Oral, Personal and Home Care; and Pet Nutrition. Within these segments, the Company follows a closely defined business strategy to develop and increase market leadership positions in key product categories. These product categories are prioritized based on their capacity to maximize the use of the organization’s core competencies and strong global equities and to deliver sustainable long-term growth.

Operationally, the Company is organized along geographic lines with management teams having responsibility for the business and financial results in each region. The Company competes in more than 200 countries and territories worldwide with established businesses in all regions contributing to the Company’s sales and profitability. Approximately 75% of the Company’s Net sales are generated from markets outside the U.S., with approximately 50% of the Company’s Net sales coming from emerging markets (which consist of Latin America, Asia (excluding Japan), Africa/Eurasia and Central Europe). This geographic diversity and balance help to reduce the Company’s exposure to business and other risks in any one country or part of the world.

The Oral, Personal and Home Care product segment is managed geographically in five reportable operating segments: North America, Latin America, Europe, Asia Pacific and Africa/Eurasia, all of which sell to a variety of retail and wholesale customers and distributors. The Company, through Hill’s Pet Nutrition, also competes on a worldwide basis in the pet nutrition market, selling its products principally through authorized pet supply retailers and veterinarians. The Company’s products are also sold online through various e-commerce platforms and retailers.

Through March 31, 2016, the Oral, Personal and Home Care product segment included the North America, Latin America, Europe/South Pacific, Asia and Africa/Eurasia geographic operating segments. As a result of management changes effective April 1, 2016, the Company realigned the geographic structure of its Europe/South Pacific and Asia reportable operating segments within the Oral, Personal and Home Care product segment. Management responsibility for the South Pacific operations was transferred from Europe/South Pacific management to Asia management. Accordingly, commencing with the Company’s financial reporting for the quarter ended June 30, 2016, the results of the South Pacific operations are reported in the Asia Pacific reportable operating segment, which results in a slight modification to the geographic components of the Oral, Personal and Home Care product segment, with no impact on historical Company results overall. The Company has recast its historical geographic segment information to conform to the new reporting structure. These changes have no impact on the Company’s historical consolidated financial position, results of operations or cash flows.

On an ongoing basis, management focuses on a variety of key indicators to monitor business health and performance. These indicators include market share, net sales (including volume, pricing and foreign exchange components), organic sales growth (net sales growth excluding the impact of foreign exchange, acquisitions, divestments and the deconsolidation of the Company’s Venezuelan operations) and gross profit margin, operating profit, net income and earnings per share both on a GAAP and non-GAAP basis, as well as measures used to optimize the management of working capital, capital expenditures, cash flow and return on capital. The monitoring of these indicators and the Company’s Code of Conduct and corporate governance practices help to maintain business health and strong internal controls.

(Dollars in Millions Except Per Share Amounts)

To achieve its business and financial objectives, the Company focuses the organization on initiatives to drive and fund growth. The Company seeks to capture significant opportunities for growth by identifying and meeting consumer needs within its core categories, through its focus on innovation and the deployment of valuable consumer and shopper insights in the development of successful new products regionally, which are then rolled out on a global basis. To enhance these efforts, the Company has developed key initiatives to build strong relationships with consumers, dental and veterinary professionals and retail customers. In addition, the Company has strengthened its capabilities in e-commerce, developing its relationships with online only retailers and its digital marketing capabilities. Growth opportunities are greater in those areas of the world in which economic development and rising consumer incomes expand the size and number of markets for the Company’s products.

The investments needed to support growth are developed through continuous, Company-wide initiatives to lower costs and increase effective asset utilization. Through these initiatives, which are referred to as the Company’s funding-the-growth initiatives, the Company seeks to become even more effective and efficient throughout its businesses. These initiatives are designed to reduce costs associated with direct materials, indirect expenses, distribution and logistics, and advertising and promotional materials, among other things, and encompass a wide range of projects, examples of which include raw material substitution, reduction of packaging materials, consolidating suppliers to leverage volumes and increasing manufacturing efficiency through SKU reductions and formulation simplification. The Company also continues to prioritize its investments toward its higher margin businesses, specifically Oral Care, Personal Care and Pet Nutrition.

In September 2016, the Company’s Mexican subsidiary completed the sale to the United States of America of the Mexico City site on which its commercial operations, technology center and soap production facility were previously located and received $60 as the third and final installment of the sale price. The total sale price (including the third installment and the previously received first and second installments) was $120. The Company recognized a pretax gain of $97 ($63 aftertax gain) in the third quarter of 2016, net of costs primarily related to site preparation.

Effective December 31, 2015, the Company concluded it no longer met the accounting criteria for consolidation of its Venezuelan subsidiary (“CP Venezuela”) and began accounting for CP Venezuela using the cost method of accounting. As such, effective December 31, 2015, the Company’s Consolidated Balance Sheet no longer includes the assets and liabilities of CP Venezuela. As a result of this change in accounting, the Company recorded an aftertax charge of $1,058 ($1,084 pretax) or $1.16 per diluted share in 2015. The charge primarily consists of an impairment of the Company’s investment in CP Venezuela of $952, which includes intercompany receivables from CP Venezuela, and $111 related to the reclassification of cumulative translation losses. Prior periods have not been restated and CP Venezuela’s Net sales, Operating profit and Net income are included in the Company’s Consolidated Statements of Income through December 31, 2015.

Since January 1, 2016, under the cost method of accounting, the Company no longer includes the local operating results of CP Venezuela in its Consolidated Financial Statements and includes income relating to CP Venezuela only to the extent it receives cash for sales of inventory to CP Venezuela or for dividends or royalties remitted by CP Venezuela, all of which have been immaterial. Although CP Venezuela’s local operating results are no longer included in the Company’s Consolidated Financial Statements for accounting purposes, under current tax rules, the Company is required to continue including CP Venezuela in its consolidated U.S. federal income tax return. In the first quarter of 2016, Provision for income taxes included a $210 U.S. income tax benefit principally related to changes in Venezuela’s foreign exchange regime implemented in March 2016. See Note 11, Income Taxes to the Consolidated Financial Statements for additional details.

Prior to the change in accounting, which was effective December 31, 2015, CP Venezuela’s functional currency was the U.S. dollar since Venezuela had been designated hyper-inflationary and, as such, Venezuelan currency fluctuations were reported in income. The Company remeasured the financial statements of CP Venezuela at the end of each month at the rate at which it expected to remit future dividends which, based on the advice of legal counsel, was the SICAD rate (formerly known as the SICAD I rate). During the year ended December 31, 2015, the Company incurred pretax losses of $34 ($22 aftertax or $0.02 per diluted common share) related to the remeasurement of CP Venezuela’s local currency-denominated net monetary assets at the quarter-end SICAD rate for the second and third quarters of 2015. The SICAD rate did not revalue during the fourth quarter of 2015 and was 13.50 bolivares per dollar as of December 31, 2015. The remeasurement losses incurred in the second and third quarters of 2015 are referred to as the “2015 Venezuela Remeasurements.”

(Dollars in Millions Except Per Share Amounts)

During the year ended December 31, 2014, the Company incurred net pretax losses of $327 ($214 aftertax or $0.23 per diluted common share) related to the remeasurement of CP Venezuela’s local currency-denominated net monetary assets at the quarter-end SICAD I rate for each of the first three quarters of 2014 (the “2014 Venezuela Remeasurements”). The SICAD I rate did not revalue during the fourth quarter of 2014 and was 12.00 bolivares per dollar as of December 31, 2014.

Included in the remeasurement losses during 2015 and 2014 were charges related to the devaluation-protected bonds issued by the Venezuelan government and held by CP Venezuela. Because the official exchange rate remained at 6.30 bolivares per dollar, the devaluation-protected bonds did not revalue at the SICAD rate but remained at the official exchange rate, resulting in an impairment in the fair value of the bonds.

In the fourth quarter of 2012, the Company commenced a Global Growth and Efficiency Program (as expanded in 2014 and 2015 as described below, the “2012 Restructuring Program”) for sustained growth. The program’s initiatives are expected to help the Company ensure sustained solid worldwide growth in unit volume, organic sales and earnings per share and enhance its global leadership positions in its core businesses.

On October 23, 2014, the Company’s Board of Directors (the “Board”) approved an expansion of the 2012 Restructuring Program to take advantage of additional savings opportunities. On October 29, 2015, the Board approved the reinvestment of the funds from the sale of the Company’s laundry detergent business in the South Pacific to expand the 2012 Restructuring Program and extend it through December 31, 2017. The Board approved the implementation plan for this expansion on March 10, 2016.

The initiatives under the 2012 Restructuring Program continue to be focused on the following areas:


▪	Expanding Commercial Hubs


▪	Extending Shared Business Services and Streamlining Global Functions


▪	Optimizing Global Supply Chain and Facilities

Cumulative pretax charges resulting from the 2012 Restructuring Program, once all phases are approved and implemented, are estimated to be $1,405 to $1,585 ($1,050 to $1,170 aftertax). Savings from the 2012 Restructuring Program, substantially all of which are expected to increase future cash flows, are projected to be approximately $430 to $495 pretax ($400 to $475 aftertax) annually once all projects are approved and implemented.

In 2016, 2015 and 2014, the Company incurred aftertax costs of $168, $183 and $208, respectively, associated with the 2012 Restructuring Program.

For more information regarding the 2012 Restructuring Program, see “Restructuring and Related Implementation Charges” below.

In August 2015, the Company completed the sale of its laundry detergent business in the South Pacific to Henkel AG & Co. KGaA for an aggregate purchase price of approximately 310 Australian dollars ($221) and recorded a pretax gain of $187 ($120 aftertax or $0.13 per diluted share) in Other (income) expense, net. The gain is net of charges related to the right-sizing of the Company’s South Pacific business, asset write-offs related to the divested laundry detergent business and other costs related to the sale. As discussed above, the funds from the sale were reinvested to expand the 2012 Restructuring Program.

(Dollars in Millions Except Per Share Amounts)

Looking forward, the Company expects global macroeconomic and market conditions to remain highly challenging and category growth rates continuing to be slow. While the global marketplace in which the Company operates has always been highly competitive, the Company continues to experience heightened competitive activity in certain markets from strong local competitors and from other large multinational companies, some of which have greater resources than the Company does. Such activities have included more aggressive product claims and marketing challenges, as well as increased promotional spending and geographic expansion. In addition, the emergence of new sales channels for the Company’s products, such as e-commerce, may affect consumer preferences and market dynamics. Given that approximately 75% of the Company’s Net sales originate in markets outside the U.S., the Company continues to experience volatile foreign currency fluctuations and high raw and packaging material costs, driven by foreign exchange transaction costs. While the Company has taken, and will continue to take, measures to mitigate the effect of these conditions, should they persist, they could adversely affect the Company’s future results.

The Company believes it is well prepared to meet the challenges ahead due to its strong financial condition, experience operating in challenging environments and continued focus on the Company’s strategic initiatives: engaging to build our brands; innovation for growth; effectiveness and efficiency; and leading to win. This focus, together with the strength of the Company’s global brands, its broad international presence in both developed and emerging markets and initiatives, such as the 2012 Restructuring Program, should position the Company well to increase shareholder value over the long term.

(Dollars in Millions Except Per Share Amounts)

Results of Operations

Net Sales

Worldwide Net sales were $15,195 in 2016, down 5.0% from 2015, as net selling price increases of 2.5% were more than offset by volume declines of 3.0% and negative foreign exchange of 4.5%. Excluding divested businesses and the impact of the deconsolidation of the Company’s Venezuelan operations, volume increased 1.5%. Organic sales (Net sales excluding the impact of foreign exchange, acquisitions, divestments and the deconsolidation of the Company’s Venezuelan operations), a non-GAAP financial measure as discussed below, increased 4.0% in 2016.

Net sales in the Oral, Personal and Home Care product segment were $12,931 in 2016, down 6.5% from 2015, as net selling price increases of 2.5% were more than offset by volume declines of 4.0% and negative foreign exchange of 5.0%. Excluding divested businesses and the impact of the deconsolidation of the Company’s Venezuelan operations, volume increased 1.5%. Organic sales in the Oral, Personal and Home Care product segment increased 4.0% in 2016.

The increase in organic sales in 2016 versus 2015 was driven by an increase in Oral Care organic sales, with the toothpaste and manual toothbrush categories contributing to growth. Personal Care and Home Care also contributed to organic sales growth due to strong organic sales in the shower gel and the fabric softener categories, respectively.

The Company’s share of the global toothpaste market was 44.0% for full year 2016, down 0.3 share points from full year 2015 and its share of the global manual toothbrush market was 33.1% for full year 2016, down 0.3 share points from full year 2015. Full year 2016 market shares in toothpaste were up in North America and down in Europe and Asia Pacific versus full year 2015. In the manual toothbrush category, full year 2016 market shares were up in North America and Europe and down in Latin America, Asia Pacific and Africa/Eurasia versus full year 2015. For additional information regarding the Company’s use of market share data and limitations on such data, see “Market Share Information” below.

Net sales for Hill’s Pet Nutrition were $2,264 in 2016, an increase of 2.5% from 2015, driven by net selling price increases of 2.5%, while volume and foreign exchange were flat. Organic sales for Hill’s Pet Nutrition increased 2.5% in 2016.

The increase in organic sales in 2016 versus 2015 was due to an increase in organic sales in the Prescription Diet category, partially offset by a decline in organic sales in the Advanced Nutrition and Natural categories.

Worldwide Net sales were $16,034 in 2015, down 7.0% from 2014, as volume growth of 1.5% and net selling price increases of 3.0% were more than offset by negative foreign exchange of 11.5%. Organic sales increased 5.0% in 2015.

(Dollars in Millions Except Per Share Amounts)

Gross Profit/Margin

Worldwide Gross profit decreased 3% to $9,123 in 2016 from $9,399 in 2015. Gross profit in both periods included charges related to the 2012 Restructuring Program. Excluding these items in both periods, Gross profit decreased to $9,169 in 2016 from $9,419 in 2015, reflecting a decrease of $492 resulting from the impact of the deconsolidation of the Company’s Venezuelan operations effective December 31, 2015 and negative foreign exchange, partially offset by growth in organic sales. This decrease in Gross profit was partially offset by an increase of $242 resulting from higher Gross profit margin.

Worldwide Gross profit margin increased to 60.0% in 2016 from 58.6% in 2015. Excluding charges related to the 2012 Restructuring Program in both periods, Gross profit margin increased by 160 basis points (bps) to 60.3% in 2016, from 58.7% in 2015. This increase in Gross profit margin was primarily driven by cost savings from the Company’s funding-the-growth initiatives (190 bps) and the 2012 Restructuring Program (10 bps) and higher pricing (100 bps), partially offset by higher costs (170 bps), which included higher raw and packaging material costs driven by significant foreign exchange transaction costs and the impact of the deconsolidation of the Company’s Venezuelan operations effective December 31, 2015.

Worldwide Gross profit decreased 7% to $9,399 in 2015 from $10,109 in 2014. Gross profit in both periods included charges related to the 2012 Restructuring Program. Gross profit in 2014 also included costs related to the sale of land in Mexico. Excluding these items in both periods, Gross profit decreased to $9,419 in 2015 from $10,142 in 2014, due to lower Net sales ($730), as the growth in organic sales was more than offset by the impact of negative foreign exchange.

Worldwide Gross profit margin increased to 58.6% in 2015 from 58.5% in 2014. Excluding the items described above in both periods, Gross profit margin was 58.7% in 2015, even with 2014, as cost savings from the Company’s funding-the-growth initiatives (220 bps) and the 2012 Restructuring Program (20 bps) and higher pricing (130 bps) were offset by higher costs (370 bps), which included higher raw and packaging material costs, driven by significant foreign exchange transaction costs.



	2016		2015		2014
Gross profit, GAAP	$	9,123	$	9,399	$	10,109
2012 Restructuring Program	46		20		29
Costs related to the sale of land in Mexico	—		—		4
Gross profit, non-GAAP	$	9,169	$	9,419	$	10,142



	2016		2015		Basis Point Change	2014		Basis Point Change
Gross profit margin, GAAP	60.0	%	58.6	%	140	58.5	%	10
2012 Restructuring Program	0.3		0.1			0.2
Gross profit margin, non-GAAP	60.3	%	58.7	%	160	58.7	%	—

(Dollars in Millions Except Per Share Amounts)

Selling, General and Administrative Expenses

Selling, general and administrative expenses decreased 4% to $5,249 in 2016 from $5,464 in 2015. Selling, general and administrative expenses in both periods included charges related to the 2012 Restructuring Program. Excluding these charges in both periods, Selling, general and administrative expenses decreased to $5,172 in 2016 from $5,400 in 2015, reflecting decreased advertising investment of $63 and lower overhead expenses of $165.

Selling, general and administrative expenses as a percentage of Net sales increased to 34.5% in 2016 from 34.1% in 2015. Excluding charges related to the 2012 Restructuring Program in both periods, Selling, general and administrative expenses as a percentage of Net sales were 34.0%, an increase of 30 bps as compared to 2015. This increase in 2016 was driven by increased advertising investment (10 bps) and higher overhead expenses (20 bps), both as a percentage of Net sales. In 2016, advertising investment decreased 4.2% to $1,428 as compared with $1,491 in 2015, while as a percentage of Net sales, it increased to 9.4% from 9.3% in 2015.

Selling, general and administrative expenses decreased 9% to $5,464 in 2015 from $5,982 in 2014. Selling, general and administrative expenses in both periods included charges related to the 2012 Restructuring Program. Excluding these charges, Selling, general and administrative expenses decreased to $5,400 in 2015 from $5,920 in 2014, reflecting decreased advertising investment of $293 and lower overhead expenses of $227.

Selling, general and administrative expenses as a percentage of Net sales decreased to 34.1% in 2015 from 34.6% in 2014. Excluding the charges related to the 2012 Restructuring Program, Selling, general and administrative expenses as a percentage of Net sales were 33.7%, a decrease of 60 bps as compared to 2014. This decrease in 2015 was primarily driven by decreased advertising investment (100 bps), partially offset by higher overhead expenses (40 bps), both as a percentage of Net sales. In 2015, advertising investment decreased 16.4% to $1,491 as compared with $1,784 in 2014, largely reflecting the impact of negative foreign exchange, and decreased as a percentage of Net sales to 9.3% from 10.3% in 2014, in part reflecting a shift from advertising investment to in-store promotional activities.



	2016			2015			2014
Selling, general and administrative expenses, GAAP	$	5,249		$	5,464		$	5,982
2012 Restructuring Program	(77		)	(64		)	(62		)
Selling, general and administrative expenses, non-GAAP	$	5,172		$	5,400		$	5,920



	2016		2015		Basis Point Change	2014		Basis Point Change
Selling, general and administrative expenses as a percentage of Net sales, GAAP	34.5	%	34.1	%	40	34.6	%	(50	)
2012 Restructuring Program	(0.5	)	(0.4	)		(0.3	)
Selling, general and administrative expenses as a percentage of Net sales, non-GAAP	34.0	%	33.7	%	30	34.3	%	(60	)

(Dollars in Millions Except Per Share Amounts)

Other (Income) Expense, Net

Other (income) expense, net was $37, $62 and $570 in 2016, 2015 and 2014, respectively. The components of Other (income) expense, net are presented below:



Other (income) expense, net	2016			2015			2014
2012 Restructuring Program	$	105		$	170		$	195
Amortization of intangible assets	33			33			32
Gain on sale of land in Mexico	(97		)	—			—
Charges for previously disclosed litigation matters	17			14			41
Venezuela remeasurement charges	—			34			327
Gain on sale of South Pacific laundry detergent business	—			(187		)	—
Equity (income)	(10		)	(8		)	(7		)
Other, net	(11		)	6			(18		)
Total Other (income) expense, net	$	37		$	62		$	570

Other (income) expense, net was $37 in 2016 as compared to $62 in 2015. Other (income) expense, net in both periods included charges related to the 2012 Restructuring Program and charges for previously disclosed litigation matters. Other (income) expense, net in 2016 also included a gain on the sale of land in Mexico. In 2015, Other (income) expense, net also included a gain on the sale of the Company’s laundry detergent business in the South Pacific and charges related to the 2015 Venezuela Remeasurements.

Other (income) expense, net was $62 in 2015 as compared to $570 in 2014. In 2014, Other (income) expense, net included charges related to the 2012 Restructuring Program, the 2014 Venezuela Remeasurements and previously disclosed litigation matters.

Excluding the items described above in all periods, as applicable, Other (income) expense, net was $12 in 2016, $31 in 2015 and $7 in 2014.



	2016			2015			2014
Other (income) expense, net, GAAP	$	37		$	62		$	570
2012 Restructuring Program	(105		)	(170		)	(195		)
Gain on sale of land in Mexico	97			—			—
Charges for previously disclosed litigation matters	(17		)	(14		)	(41		)
Venezuela remeasurement charges	—			(34		)	(327		)
Gain on sale of South Pacific laundry detergent business	—			187			—
Other (income) expense, net, non-GAAP	$	12		$	31		$	7

(Dollars in Millions Except Per Share Amounts)

Operating Profit

Operating profit increased 38% to $3,837 in 2016 from $2,789 in 2015. Operating profit decreased 22% to $2,789 in 2015 from $3,557 in 2014.

In 2016, 2015 and 2014, Operating profit included charges related to the 2012 Restructuring Program and previously disclosed litigation matters. In 2016, Operating Profit also included a gain on sale of land in Mexico. In 2015 and 2014, Operating profit included charges related to the 2015 and 2014 Venezuela Remeasurements, respectively. In 2015, Operating profit also included a charge related to the deconsolidation of the Company’s Venezuelan operations and a gain on the sale of the Company’s laundry detergent business in the South Pacific. In 2014, Operating profit also included costs related to the sale of land in Mexico. Excluding these items in all periods, as applicable, Operating profit in 2016 was even with 2015, primarily due to lower Gross profit which was offset by a decrease in Selling, general and administrative expenses. Operating profit decreased 5% in 2015 compared to 2014, primarily due to lower Gross profit, partially offset by a decrease in Selling, general and administrative expenses.

Operating profit margin was 25.3% in 2016, compared with 17.4% in 2015 and 20.6% in 2014. Excluding the items described above in 2016 and 2015 as applicable, Operating profit margin increased 130 bps to 26.2% in 2016 compared to 24.9% in 2015. This increase is primarily due to an increase in Gross profit (160 bps), partially offset by an increase in Selling, general and administrative expenses (30 bps), both as a percentage of Net sales. Excluding the items described above in 2015 and 2014 as applicable, Operating profit margin increased 50 bps in 2015 compared to 2014, primarily due to a decrease in Selling, general and administrative expenses as a percentage of Net sales (60 bps).



	2016			2015			% Change		2014		% Change
Operating profit, GAAP	$	3,837		$	2,789		38	%	$	3,557	(22	)%
2012 Restructuring Program	228			254					286
Gain on sale of land in Mexico	(97		)	—					—
Charges for previously disclosed litigation matters	17			14					41
Venezuela deconsolidation	—			1,084					—
Venezuela remeasurement charges	—			34					327
Gain on sale of South Pacific laundry detergent business	—			(187		)			—
Costs related to the sale of land in Mexico	—			—					4
Operating profit, non-GAAP	$	3,985		$	3,988		—	%	$	4,215	(5	)%



	2016		2015		Basis Point Change	2014		Basis Point Change
Operating profit margin, GAAP	25.3	%	17.4	%	790	20.6	%	(320	)
2012 Restructuring Program	1.5		1.6			1.7
Gain on sale of land in Mexico	(0.7	)	—			—
Charges for previously disclosed litigation matters	0.1		0.1			0.2
Venezuela deconsolidation	—		6.8			—
Venezuela remeasurement charges	—		0.2			1.9
Gain on sale of South Pacific laundry detergent business	—		(1.2	)		—
Costs related to the sale of land in Mexico	—		—			—
Operating profit margin, non-GAAP	26.2	%	24.9	%	130	24.4	%	50

(Dollars in Millions Except Per Share Amounts)

Interest (Income) Expense, Net

Interest (income) expense, net was $99 in 2016 compared with $26 in 2015 and $24 in 2014, primarily due to lower interest income on investments held outside the United States, which reflects the impact of the deconsolidation of the Company’s Venezuelan operations effective December 31, 2015, and higher interest expense as a result of higher average interest rates on debt. The change in Interest (income) expense, net from 2014 to 2015 was primarily due to higher interest expense as a result of higher debt levels.

Income Taxes

The effective income tax rate was 30.8% in 2016, 44.0% in 2015 and 33.8% in 2014. As reflected in the table below, the non-GAAP effective income tax rate was 31.3% in 2016 and 2015 and 31.5% in 2014.



	2016
	Income Before Income Taxes			Provision For Income Taxes⁽¹⁾			Effective Income Tax Rate ⁽²⁾
As Reported GAAP	$	3,738		$	1,152		30.8	%
2012 Restructuring Program	228			59			(0.3	)
Gain on sale of land in Mexico	(97		)	(34		)	(0.1	)
Benefits from previously disclosed tax matters	—			35			0.9
Charges for a previously disclosed litigation matter	17			6			—
Non-GAAP	$	3,886		$	1,218		31.3	%



	2015
	Income Before Income Taxes			Provision For Income Taxes⁽¹⁾			Effective Income Tax Rate ⁽²⁾
As Reported GAAP	$	2,763		$	1,215		44.0	%
Venezuela deconsolidation ⁽³⁾	1,084			26			(11.7	)
2012 Restructuring Program	254			69			(0.3	)
Venezuela remeasurement charges	34			12			—
Gain on sale of South Pacific laundry detergent business	(187		)	(67		)	(0.2	)
Charge for a previously disclosed litigation matter	14			—			(0.1	)
Charge for a previously disclosed tax matter	—			(15		)	(0.4	)
Non-GAAP	$	3,962		$	1,240		31.3	%



	2014
	Income Before Income Taxes		Provision For Income Taxes⁽¹⁾			Effective Income Tax Rate ⁽²⁾
As Reported GAAP	$	3,533	$	1,194		33.8	%
2012 Restructuring Program	286		78			(0.5	)
Venezuela remeasurement charges	327		113			0.1
Charge for a previously disclosed litigation matter	41		—			(0.3	)
Costs related to the sale of land in Mexico	4		1			—
Charge for a previously disclosed tax matter	—		(66		)	(1.6	)
Non-GAAP	$	4,191	$	1,320		31.5	%

⁽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.

⁽³⁾See Executive Overview and Outlook above and Note 14, Venezuela to the Consolidated Financial Statements.

(Dollars in Millions Except Per Share Amounts)

The effective tax rate in 2016 included a $210 U.S. income tax benefit recognized in the first quarter of 2016 principally related to changes in Venezuela’s foreign exchange regime implemented in March 2016. Although, effective December 31, 2015, the operating results of CP Venezuela are no longer included in the Company’s Consolidated Financial Statements, under current tax rules, the Company is required to continue including CP Venezuela’s results in its consolidated U.S. federal income tax return. See Note 11, Income Taxes and Note 14, Venezuela to the Consolidated Financial Statements. In order to fully recognize the $210 tax benefit in 2016, the Company repatriated an incremental $1,500 of earnings of foreign subsidiaries it previously considered indefinitely reinvested outside of the U.S., and accordingly, recorded a tax charge of $210 during the first quarter of 2016.

In 2014, the Company received a notice of an adverse decision in the foreign court regarding a tax position it has taken since 2002. As a result, as required, the Company reassessed its tax position in light of the decision and concluded it needed to increase its unrecognized tax benefits by $30 and write off a $36 deferred tax asset. In 2015, the Company became aware of several Supreme Court rulings in the foreign jurisdiction disallowing certain tax deductions which had the effect of reversing prior decisions. Since the Company had taken deductions in prior years similar to those now disallowed by the Court, the Company, as required, reassessed its tax position and increased its unrecognized tax benefits by $15.

In 2016, the Supreme Court in the foreign jurisdiction decided the matter in the Company’s favor for the years 2002 through 2005. Also in 2016, the Administrative Court in the foreign jurisdiction decided the matter in the Company’s favor for the years 2008 through 2011 by acknowledging the Supreme Court’s ruling for the years 2002 through 2005, which eliminated the possibility of future appeals. As a result, the Company recorded a tax benefit of $30, including interest. The tax benefit of deductions related to this tax position taken for the years 2006 through 2007 and 2012 through 2014 totals approximately $14 at current exchange rates. These deductions are currently being challenged by the tax authorities in the foreign jurisdiction either in the lower courts or at the administrative level and, if resolved in the Company’s favor, will result in the Company recording additional tax benefits, including interest.

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

Net Income attributable to Colgate-Palmolive Company and Earnings per share, diluted

Net income attributable to Colgate-Palmolive Company was $2,441, or $2.72 per share on a diluted basis, in 2016 compared to $1,384, or $1.52 per share on a diluted basis, in 2015 and $2,180, or $2.36 per share on a diluted basis, in 2014. In 2016, 2015 and 2014, Net income attributable to Colgate-Palmolive Company included aftertax charges related to the 2012 Restructuring Program and charges for previously disclosed litigation matters. In 2016, Net income attributable to Colgate-Palmolive Company also included a gain on sale of land in Mexico and benefits from previously disclosed tax matters. In 2015, Net income attributable to Colgate-Palmolive Company also included a charge related to the deconsolidation of the Company’s Venezuelan operations and a gain on the sale of the Company’s laundry detergent business in the South Pacific. In 2015 and 2014, Net income attributable to Colgate-Palmolive Company included charges related to the 2015 and 2014 Venezuela Remeasurements and previously disclosed tax matters. In 2014, Net income attributable to Colgate-Palmolive Company included costs related to the sale of land in Mexico.

Excluding the items described above in all years, as applicable, Net income attributable to Colgate-Palmolive Company decreased 1% to $2,522 in 2016 and Earnings per share, diluted was even at $2.81, and Net income attributable to Colgate-Palmolive Company decreased 6% to $2,556 in 2015, as compared to $2,712 in 2014, and Earnings per share, diluted decreased 4% to $2.81 in 2015.

(Dollars in Millions Except Per Share Amounts)



	2016
	Income Before Income Taxes			Provision For Income Taxes⁽¹⁾			Net Income Including Noncontrolling Interests			Less: Income Attributable To Noncontrolling Interests		Net Income Attributable To Colgate-Palmolive Company			Diluted Earnings Per Share⁽²⁾
As Reported GAAP	$	3,738		$	1,152		$	2,586		$	145	$	2,441		$	2.72
2012 Restructuring Program	228			59			169			1		168			0.19
Gain on sale of land in Mexico	(97		)	(34		)	(63		)	—		(63		)	(0.07		)
Benefits from previously disclosed tax matters	—			35			(35		)	—		(35		)	(0.04		)
Charge for a previously disclosed litigation matter	17			6			11			—		11			0.01
Non-GAAP	$	3,886		$	1,218		$	2,668		$	146	$	2,522		$	2.81



	2015
	Income Before Income Taxes			Provision For Income Taxes⁽¹⁾			Net Income Including Noncontrolling Interests			Less: Income Attributable To Noncontrolling Interests		Net Income Attributable to Colgate-Palmolive Company			Diluted Earnings Per Share⁽²⁾
As Reported GAAP	$	2,763		$	1,215		$	1,548		$	164	$	1,384		$	1.52
Venezuela deconsolidation	1,084			26			1,058			—		1,058			1.16
2012 Restructuring Program	254			69			185			2		183			0.20
Venezuela remeasurement charges	34			12			22			—		22			0.02
Gain on sale of South Pacific laundry detergent business	(187		)	(67		)	(120		)	—		(120		)	(0.13		)
Charge for a previously disclosed litigation matter	14			—			14			—		14			0.02
Charge for a previously disclosed tax matter	—			(15		)	15			—		15			0.02
Non-GAAP	$	3,962		$	1,240		$	2,722		$	166	$	2,556		$	2.81



	2014
	Income Before Income Taxes		Provision For Income Taxes⁽¹⁾			Net Income Including Noncontrolling Interests		Net Income Attributable to Colgate-Palmolive Company		Diluted Earnings Per Share⁽²⁾
As Reported GAAP	$	3,533	$	1,194		$	2,339	$	2,180	$	2.36
2012 Restructuring Program	286		78			208		208		0.23
Charge for a previously disclosed tax matter	—		(66		)	66		66		0.07
Charge for a previously disclosed litigation matter	41		—			41		41		0.04
Venezuela remeasurement charges	327		113			214		214		0.23
Costs related to the sale of land in Mexico	4		1			3		3		—
Non-GAAP	$	4,191	$	1,320		$	2,871	$	2,712	$	2.93

(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



	2016			2015			% Change		2014			% Change
Net sales	$	3,183		$	3,149		1.0	%	$	3,124		1.0	%
Operating profit	$	1,030		$	974		6	%	$	926		5	%
% of Net sales	32.4		%	30.9		%	150	bps	29.6		%	130	bps

Net sales in North America increased 1.0% in 2016 to $3,183, driven by volume growth of 2.5%, which was partially offset by net selling price decreases of 1.0% and negative foreign exchange of 0.5%. Organic sales in North America increased 1.5% in 2016.

The increase in organic sales in North America in 2016 versus 2015 was driven by Oral Care with strong organic sales in the toothpaste category. Personal Care also contributed to organic sales growth due to strong sales in the shower gel category.

Net sales in North America increased 1.0% in 2015 to $3,149, driven by volume growth of 2.0%, which was partially offset by negative foreign exchange of 1.0%, while net selling prices were flat. Organic sales in North America increased 2.0% in 2015.

Operating profit in North America increased 6% in 2016 to $1,030, or 150 bps to 32.4% of Net sales. This increase in Operating profit as a percentage of Net sales was primarily due to an increase in Gross profit (100 bps) and a decrease in Selling, general and administrative expenses (70 bps), both as a percentage of Net sales. This increase in Gross profit was primarily driven by cost savings from the Company’s funding-the-growth initiatives (190 bps), which were partially offset by higher raw and packaging material costs (70 bps). This decrease in Selling, general and administrative expenses was due to lower overhead expenses (40 bps) and decreased advertising investment (30 bps), in part reflecting a shift from advertising investment to in-store promotional activities.

Operating profit in North America increased 5% in 2015 to $974, or 130 bps to 30.9% of Net sales. This increase in Operating profit as a percentage of Net sales was primarily due to an increase in Gross profit (80 bps) and a decrease in Selling, general and administrative expenses (90 bps), both as a percentage of Net sales. This increase in Gross profit was primarily driven by cost savings from the Company’s funding-the-growth initiatives (200 bps) and the 2012 Restructuring Program (10 bps), which were partially offset by higher costs (140 bps), primarily driven by higher raw and packaging material costs. This decrease in Selling, general and administrative expenses was primarily due to decreased advertising investment (80 bps), in part reflecting a shift from advertising investment to in-store promotional activities.

(Dollars in Millions Except Per Share Amounts)

Latin America



	2016			2015			% Change			2014			% Change
Net sales	$	3,650		$	4,327		(15.5	)	%	$	4,769		(9.5	)	%
Operating profit	$	1,132		$	1,209		(6	)	%	$	1,279		(5	)	%
% of Net sales	31.0		%	27.9		%	310		bps	26.8		%	110		bps

Net sales in Latin America decreased 15.5% in 2016 to $3,650, as net selling price increases of 8.5% were more than offset by volume declines of 14.0% and negative foreign exchange of 10.0%. Excluding the impact of the deconsolidation of the Company’s Venezuelan operations, volume increased 1.5%, led by volume gains in Mexico, partially offset by volume declines in Argentina. Organic sales in Latin America increased 10.0% in 2016.

The increase in organic sales in Latin America in 2016 versus 2015 was due to increases in Oral Care, Personal Care and Home Care organic sales. The increase in Oral Care organic sales was driven by strong organic sales in the toothpaste and manual toothbrush categories. Personal Care organic sales growth was driven by gains in the bar soap, underarm protection and shampoo categories. The increase in Home Care organic sales was due to strong organic sales in the fabric softener and liquid cleaners categories.

Net sales in Latin America decreased 9.5% in 2015 to $4,327, as net selling price increases of 10.5% were more than offset by volume declines of 1.0% and negative foreign exchange of 19.0%. Organic sales in Latin America increased 9.5% in 2015. Volume declines in Venezuela and Brazil were partially offset by volume gains in Mexico, Ecuador and Argentina.

Operating profit in Latin America decreased 6% in 2016 to $1,132, while as a percentage of Net sales it increased 310 bps to 31.0% of Net sales. This increase in Operating profit as a percentage of Net sales was primarily due to an increase in Gross profit (390 bps), partially offset by an increase in Selling, general and administrative expenses (70 bps), both as a percentage of Net sales. This increase in Gross profit was mainly driven by cost savings from the Company’s funding-the-growth initiatives (150 bps) and higher pricing, which were partially offset by higher raw and packaging material costs (100 bps), which included foreign exchange transaction costs and the impact of the deconsolidation of the Company’s Venezuelan operations effective December 31, 2015. This increase in Selling, general and administrative expenses was due to increased advertising investment (90 bps), which was partially offset by lower overhead expenses (20 bps).

Operating profit in Latin America decreased 5% in 2015 to $1,209, while as a percentage of Net sales it increased 110 bps to 27.9% 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 (130 bps), partially offset by a decrease in Gross profit (60 bps), both as a percentage of Net sales. This decrease in Gross profit was primarily due to higher raw and packaging material costs (680 bps), driven by foreign exchange transaction costs, and higher manufacturing costs (60 bps), driven by Venezuela, which were partially offset by cost savings from the Company’s funding-the-growth initiatives (200 bps) and higher pricing. This decrease in Selling, general and administrative expenses was due to decreased advertising investment (130 bps), in part reflecting a shift from advertising investment to in-store promotional activities.

(Dollars in Millions Except Per Share Amounts)

Europe



	2016			2015			% Change			2014			% Change
Net sales	$	2,342		$	2,411		(3.0	)	%	$	2,840		(15.0	)	%
Operating profit	$	579		$	615		(6	)	%	$	712		(14	)	%
% of Net sales	24.7		%	25.5		%	(80	)	bps	25.1		%	40		bps

Net sales in Europe decreased 3.0% in 2016 to $2,342, as volume growth of 2.5% was more than offset by net selling price decreases of 2.5% and negative foreign exchange of 3.0%. Organic sales in Europe were flat in 2016. Volume gains were led by Germany, the United Kingdom and Poland, partially offset by volume declines in France.

Organic sales increases in Oral Care were offset by declines in organic sales in the Personal Care and Home Care categories. The toothpaste and manual toothbrush categories contributed to the increase in Oral Care organic sales. The underarm protection category contributed to the decrease in Personal Care organic sales. The decrease in Home Care organic sales was due to a decline in organic sales in the liquid cleaners and hand dish categories.

Net sales in Europe decreased 15.0% in 2015 to $2,411, as volume growth of 3.0% was more than offset by net selling price decreases of 3.5% and negative foreign exchange of 14.5%. Organic sales in Europe were flat in 2015. Volume gains in France, the United Kingdom and Poland were partially offset by volume declines in Austria.

Operating profit in Europe decreased 6% in 2016 to $579, or 80 bps to 24.7% of Net sales. This decrease in Operating profit as a percentage of Net sales was primarily due to a decrease in Gross profit (100 bps), partially offset by a decrease in Selling, general and administrative expenses (50 bps), both as a percentage of Net sales. This decrease in Gross profit was primarily driven by higher costs (200 bps), primarily due to higher raw and packaging material costs, which included foreign exchange transaction costs, and lower pricing due to increased in-store promotional activities. These decreases in Gross profit were partially offset by cost savings from the Company’s funding-the-growth initiatives (160 bps) and the 2012 Restructuring Program (30 bps). This decrease in Selling, general and administrative expenses was due to decreased advertising investment (100 bps), in part reflecting a shift from advertising investment to in-store promotional activities, which was partially offset by higher overhead expenses (50 bps).

Operating profit in Europe decreased 14% in 2015 to $615, while as a percentage of Net sales it increased 40 bps to 25.5% 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 (60 bps), partially offset by a decrease in Gross Profit (10 bps), both as a percentage of Net sales. This decrease in Gross profit was primarily due to higher raw and packaging material costs (200 bps), driven by foreign exchange transaction costs, and lower pricing due to increased promotional activities, which were partially offset by cost savings from the Company’s funding-the-growth initiatives (230 bps) and the 2012 Restructuring Program (70 bps). This decrease in Selling, general and administrative expenses was due to decreased advertising investment (70 bps), in part reflecting a shift from advertising investment to in-store promotional activities, which was partially offset by higher overhead expenses (10 bps).

(Dollars in Millions Except Per Share Amounts)

Asia Pacific



	2016			2015			% Change			2014			% Change
Net sales	$	2,796		$	2,937		(5.0	)	%	$	3,081		(4.5	)	%
Operating profit	$	887		$	888		—		%	$	901		(1	)	%
% of Net sales	31.7		%	30.2		%	150		bps	29.2		%	100		bps

Net sales in Asia Pacific decreased 5.0% in 2016 to $2,796, driven by volume declines of 1.0% and negative foreign exchange of 4.0%, while net selling prices were flat. Excluding the impact of the divestment of the Company’s laundry detergent business in the South Pacific, volume increased 2.0%, led by volume gains in the Philippines, Australia and the Greater China region. Organic sales in Asia Pacific grew 2.0% in 2016.

The increase in organic sales in 2016 versus 2015 was driven by an increase in Oral Care organic sales with the toothpaste and the manual toothbrush categories contributing to growth. Personal Care and Home Care organic sales also contributed to organic sales growth with gains in the shampoo and fabric softener categories, respectively.

Net sales in Asia Pacific decreased 4.5% in 2015 to $2,937, as volume growth of 2.5% was more than offset by net selling price decreases of 1.0% and negative foreign exchange of 6.0%. Organic sales in Asia Pacific grew 3.0% in 2015. Volume gains were led by the Philippines, India and the Greater China region.

Operating profit in Asia Pacific decreased to $887 in 2016, while as a percentage of Net sales it increased 150 bps to 31.7% of Net sales. This increase in Operating profit as a percentage of Net sales was primarily due to an increase in Gross profit (50 bps) and a decrease in Selling, general and administrative expenses (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 (260 bps) and sales mix, which were partially offset by higher costs (290 bps), primarily driven by raw and packaging material costs, which included foreign exchange transaction costs. This decrease in Selling, general and administrative expenses was due to decreased advertising investment (10 bps), in part reflecting a shift from advertising investment to in-store promotional activities, and lower overhead expenses (30 bps).

Operating profit in Asia Pacific decreased 1% in 2015 to $888, while as a percentage of Net sales, it increased 100 bps to 30.2% of Net sales. This increase in Operating profit as a percentage of Net sales was due to an increase in Gross profit (10 bps) and a decrease in Selling, general and administrative expenses (90 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 (270 bps), which were partially offset by higher costs (250 bps), primarily driven by raw and packaging material costs, which included foreign exchange transaction costs, and lower pricing due to increased promotional activities. This decrease in Selling, general and administrative expenses was due to decreased advertising investment (60 bps), in part reflecting a shift from advertising investment to in-store promotional activities, and lower overhead expenses (30 bps).

Africa/Eurasia



	2016			2015			% Change			2014			% Change
Net sales	$	960		$	998		(4.0	)	%	$	1,208		(17.5	)	%
Operating profit	$	186		$	178		4		%	$	235		(24	)	%
% of Net sales	19.4		%	17.8		%	160		bps	19.5		%	(170	)	bps

Net sales in Africa/Eurasia decreased 4.0% in 2016 to $960, as net selling price increases of 9.5% were more than offset by volume declines of 4.0% and negative foreign exchange of 9.5%. Organic sales in Africa/Eurasia grew 5.5% in 2016. Volume declines in the Sub-Saharan Africa region and South Africa were partially offset by volume gains in the Gulf States.

The increase in organic sales in 2016 versus 2015 was driven by Oral Care with strong sales growth in the toothpaste and the manual toothbrush categories. Personal Care also contributed to organic sales growth with gains in the shower gel and bar soap categories.

(Dollars in Millions Except Per Share Amounts)

Net sales in Africa/Eurasia decreased 17.5% in 2015 to $998, as net selling price increases of 7.5% were more than offset by volume declines of 1.5% and negative foreign exchange of 23.5%. Organic sales in Africa/Eurasia grew 6.0% in 2015. Volume declines in the Central Asia/Caucasus region and Ukraine were partially offset by volume gains in the Sub-Saharan Africa region and South Africa.

Operating profit in Africa/Eurasia increased 4% in 2016 to $186, or 160 bps to 19.4% of Net sales. This increase in Operating profit as a percentage of Net sales was primarily due to an increase in Gross profit (300 bps), partially offset by an increase in Selling, general and administrative expenses (150 bps), both as a percentage of Net sales. This increase in Gross profit was mainly driven by cost savings from the Company’s funding-the-growth initiatives (170 bps) and higher pricing, which were partially offset by higher raw and packaging material costs (350 bps), driven by higher foreign exchange transaction costs. The increase in Selling, general and administrative expenses was due to higher overhead expenses (120 bps) and increased advertising investment (30 bps).

Operating profit in Africa/Eurasia decreased 24% in 2015 to $178, or 170 bps to 17.8% of Net sales. This decrease in Operating profit as a percentage of Net sales was primarily due to a decrease in Gross profit (240 bps), partially offset by a decrease in Selling, general and administrative expenses (120 bps), both as a percentage of Net sales. This decrease in Gross profit was primarily due to higher raw and packaging material costs (790 bps), driven by higher foreign exchange transaction costs, which were partially offset by cost savings from the Company’s funding-the-growth initiatives (260 bps) and higher pricing. The decrease in Selling, general and administrative expenses was due to decreased advertising investment (190 bps), in part reflecting a shift from advertising investment to in-store promotional activities, which was partially offset by higher overhead expenses (70 bps).

Hill’s Pet Nutrition



	2016			2015			% Change		2014			% Change
Net sales	$	2,264		$	2,212		2.5	%	$	2,255		(2.0	)	%
Operating profit	$	653		$	612		7	%	$	592		3		%
% of Net sales	28.8		%	27.7		%	110	bps	26.3		%	140		bps

Net sales for Hill’s Pet Nutrition increased 2.5% in 2016 to $2,264, driven by net selling price increases of 2.5% while volume and foreign exchange were flat. Organic sales in Hill’s Pet Nutrition increased 2.5% in 2016. Volume gains led by Russia, Western Europe, South Africa, Canada and Taiwan were offset by volume declines in the United States and Japan. The volume declines in Japan were attributable to a continued contraction in the market.

Net sales for Hill’s Pet Nutrition decreased 2.0% in 2015 to $2,212, as volume growth of 3.5% and net selling price increases of 2.5% were more than offset by negative foreign exchange of 8.0%. Organic sales in Hill’s Pet Nutrition increased 6.0% in 2015. Volume gains were led by the United States and Taiwan.

Operating profit in Hill’s Pet Nutrition increased 7% in 2016 to $653, or 110 bps to 28.8% of Net sales. This increase in Operating profit as a percentage of Net sales was primarily due to an increase in Gross profit (20 bps), a decrease in Selling, general and administrative expenses (10 bps), and a decrease in Other (income) expense, net (80 bps), all as a percentage of Net sales. This increase in Gross profit was primarily driven by cost savings from the Company’s funding-the-growth initiatives (190 bps) and higher pricing, partially offset by higher costs (270 bps), primarily driven by higher raw and packaging material costs, which included higher foreign exchange transaction costs. This decrease in Selling, general and administrative expenses was primarily due to lower overhead expenses (10 bps). This decrease in Other (income) expense, net was in part due to a foreign sales tax benefit.

(Dollars in Millions Except Per Share Amounts)

Operating profit in Hill’s Pet Nutrition increased 3% in 2015 to $612, or 140 bps to 27.7% of Net sales. This increase in Operating profit as a percentage of Net sales was primarily due to an increase in Gross profit (60 bps) and a decrease in Selling, general and administrative expenses (190 bps), which were partially offset by an increase in Other (income) expense, net (110 bps), all 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 (200 bps) and higher pricing, partially offset by higher costs (220 bps), primarily driven by higher raw and packaging material costs, which included higher foreign exchange transaction costs. This decrease in Selling, general and administrative expenses was primarily due to decreased advertising investment (170 bps). This increase in Other (income) expense, net was primarily due to the expiration of a foreign sales tax exemption.

Corporate



	2016			2015			% Change			2014			% Change
Operating profit (loss)	$	(630	)	$	(1,687	)	(63	)	%	$	(1,088	)	55	%

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:



	2016			2015			2014
2012 Restructuring Program	$	(228	)	$	(254	)	$	(286	)
Gain on sale of land in Mexico	97			—			—
Charges for previously disclosed litigation matters	(17		)	(14		)	(41		)
Venezuela deconsolidation	—			(1,084		)	—
Venezuela remeasurement charges	—			(34		)	(327		)
Costs related to the sale of land in Mexico	—			—			(4		)
Gain on sale of South Pacific laundry detergent business	—			187			—
Corporate overhead costs and other, net	(482		)	(488		)	(430		)
Total Corporate Operating profit (loss)	$	(630	)	$	(1,687	)	$	(1,088	)

(Dollars in Millions Except Per Share Amounts)

Restructuring and Related Implementation Charges

2012 Restructuring Program

In the fourth quarter of 2012, the Company commenced the 2012 Restructuring Program. The program’s initiatives are expected to help Colgate ensure sustained solid worldwide growth in unit volume, organic sales and earnings per share and enhance its global leadership positions in its core businesses.

The 2012 Restructuring Program is expected to produce significant benefits in the Company’s long-term business performance. The major objectives of the program include:


▪	Becoming even stronger on the ground through the continued evolution and expansion of proven global and regional commercial capabilities, which have already been successfully implemented in a number of the Company’s operations around the world.


▪	Simplifying and standardizing how work gets done by increasing technology-enabled collaboration and taking advantage of global data and analytic capabilities, leading to smarter and faster decisions.


▪	Reducing structural costs to continue to increase the Company’s gross and operating profit.


▪	Building on Colgate’s current position of strength to enhance its leading market share positions worldwide and ensure sustained sales and earnings growth.

On October 23, 2014, the Board approved an expansion of the 2012 Restructuring Program to take advantage of additional savings opportunities. On October 29, 2015, the Board approved the reinvestment of the funds from the sale of the Company’s laundry detergent business in the South Pacific to expand the 2012 Restructuring Program and extend it through December 31, 2017. The Board approved the implementation plan for this expansion on March 10, 2016.

The initiatives under the 2012 Restructuring Program continue to be focused on the following areas:


▪	Expanding Commercial Hubs - Building on the success of this structure already implemented in several divisions, continuing to cluster single-country subsidiaries into more efficient regional hubs, in order to drive smarter and faster decision-making, strengthen capabilities available on the ground and improve cost structure.


▪	Extending Shared Business Services and Streamlining Global Functions - Implementing the Company’s shared service organizational model in all regions of the world. While initially focused on finance and accounting, these shared services are now being expanded to additional functional areas to streamline global functions.


▪	Optimizing Global Supply Chain and Facilities - Continuing to optimize manufacturing efficiencies, global warehouse networks and office locations for greater efficiency, lower cost and speed to bring innovation to market.

Cumulative pretax charges resulting from the 2012 Restructuring Program, once all phases are approved and implemented, are estimated to be $1,405 to $1,585 ($1,050 to $1,170 aftertax). The pretax charges resulting from the 2012 Restructuring Program are currently estimated to be comprised of the following categories: Employee-Related Costs, including severance, pension and other termination benefits (50%); asset-related costs, primarily Incremental Depreciation and Asset Impairments (10%); and Other charges, which include contract termination costs, consisting primarily of related implementation charges resulting directly from exit activities (20%) and the implementation of new strategies (20%). Over the course of the 2012 Restructuring Program, it is currently estimated that approximately 75% of the charges will result in cash expenditures. Anticipated pretax charges for 2017 are expected to approximate $180 to $360 ($140 to $260 aftertax). It is expected that substantially all charges resulting from the 2012 Restructuring Program will be incurred by December 31, 2017.

(Dollars in Millions Except Per Share Amounts)

It is expected that the cumulative pretax charges, once all projects are approved and implemented, will relate to initiatives undertaken in North America (15%), Europe (20%), Latin America (5%), Asia Pacific (5%), Africa/Eurasia (5%), Hill’s Pet Nutrition (10%) and Corporate (40%), which includes substantially all of the costs related to the implementation of new strategies, noted above, on a global basis. It is expected that, when it has been fully implemented, the 2012 Restructuring Program will contribute a net reduction of approximately 3,300 to 3,800 positions from the Company’s global employee workforce.

Savings from the 2012 Restructuring Program, substantially all of which are expected to increase future cash flows, are projected to be in the range of $430 to $495 pretax ($400 to $475 aftertax) annually, once all projects are approved and implemented. Savings in 2017 are expected to amount to approximate $40 to $60 pretax ($30 to $50 aftertax).

For the years ended December 31, 2016, 2015 and 2014, restructuring and related implementation charges are reflected in the Consolidated Statements of Income as follows:



	2016		2015		2014
Cost of sales	$	46	$	20	$	29
Selling, general and administrative expenses	77		64		62
Other (income) expense, net	105		170		195
Total 2012 Restructuring Program charges, pretax	$	228	$	254	$	286

Total 2012 Restructuring Program charges, aftertax	$	168	$	183	$	208

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

Total charges incurred for the 2012 Restructuring Program relate to initiatives undertaken by the following reportable operating segments:



							Program-to-date
	2016		2015		2014		Accumulated Charges
North America	35	%	21	%	11	%	17	%
Latin America	5	%	3	%	4	%	4	%
Europe ⁽¹⁾	12	%	14	%	20	%	22	%
Asia Pacific ⁽¹⁾	4	%	4	%	3	%	3	%
Africa/Eurasia	14	%	5	%	3	%	7	%
Hill’s Pet Nutrition	7	%	5	%	10	%	7	%
Corporate	23	%	48	%	49	%	40	%

⁽¹⁾ The Company has recast its historical geographic segment information to conform to the new reporting structure. See “Executive Overview and Outlook” above for additional details.

(Dollars in Millions Except Per Share Amounts)

Since the inception of the 2012 Restructuring Program in the fourth quarter of 2012, the Company has incurred cumulative pretax charges of $1,228 ($907 aftertax) in connection with the implementation of various projects as follows:



	Cumulative Charges
	as of December 31, 2016
Employee-Related Costs	$	465
Incremental Depreciation	80
Asset Impairments	27
Other	656
Total	$	1,228

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

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



	Employee-Related Costs			Incremental Depreciation			Asset Impairments			Other			Total
Balance at January 1, 2014	$	116		$	—		$	—		$	42		$	158
Charges	73			25			1			187			286
Cash payments	(95		)	—			—			(117		)	(212		)
Charges against assets	(5		)	(25		)	(1		)	—			(31		)
Foreign exchange	(4		)	—			—			(5		)	(9		)
Other	—			—			—			—			—
Balance at December 31, 2014	$	85		$	—		$	—		$	107		$	192
Charges	109			20			5			120			254
Cash payments	(85		)	—			—			(94		)	(179		)
Charges against assets	(17		)	(20		)	(5		)	—			(42		)
Foreign exchange	(8		)	—			—			(2		)	(10		)
Other	—			—			—			—			—
Balance at December 31, 2015	$	84		$	—		$	—		$	131		$	215
Charges	61			9			20			138			228
Cash payments	(84		)	—			—			(153		)	(237		)
Charges against assets	(4		)	(9		)	(20		)	—			(33		)
Foreign exchange	(1		)	—			—			—			(1		)
Other	—			—			—			9			9
Balance at December 31, 2016	$	56		$	—		$	—		$	125		$	181

Employee-Related Costs primarily include severance and other termination benefits and are calculated based on long-standing benefit practices, local statutory requirements and, in certain cases, voluntary termination arrangements. Employee-Related Costs also include pension and other retiree benefit enhancements amounting to $4, $17 and $5 for the years ended December 31, 2016, 2015 and 2014, respectively, which are reflected as Charges against assets within Employee-Related Costs in the preceding table, as the corresponding balance sheet amounts are reflected as a reduction of pension assets or an increase in pension and other retiree benefit liabilities (see Note 10, Retirement Plans and Other Retiree Benefits to the Consolidated Financial Statements).

(Dollars in Millions Except Per Share Amounts)

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

Other charges consist primarily of charges resulting directly from exit activities and the implementation of new strategies as a result of the 2012 Restructuring Program. These charges for the years ended December 31, 2016, 2015 and 2014 include third-party incremental costs related to the development and implementation of new business and strategic initiatives of $116, $65 and $65, respectively, and contract termination costs and charges resulting directly from exit activities of $21, $8 and $40, respectively, directly related to the 2012 Restructuring Program. These charges were expensed as incurred. Also included in Other charges for the years ended December 31, 2016, 2015 and 2014 are other exit costs of $1, $47 and $82, respectively, related to the consolidation of facilities.

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, divestments and the deconsolidation of the Company’s Venezuelan operations) (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, divestments and the deconsolidation of the Company’s Venezuelan operations. A reconciliation of organic sales growth to Net sales growth for the years ended December 31, 2016 and 2015 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, 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, as applicable, excluding charges resulting from the 2012 Restructuring Program, a gain on the sale of land in Mexico, benefits from previously disclosed tax matters, a charge from a previously disclosed tax matter, charges from previously disclosed litigation matters, costs related to the sale of land in Mexico, a gain on the sale of the Company’s South Pacific laundry detergent business, charges related to effective devaluations in Venezuela and a charge for the deconsolidation of the Company’s Venezuelan operations (non-GAAP). These non-GAAP financial measures exclude items that, either by their nature or amount, management would not expect to occur as part of the Company’s normal business on a regular basis, such as restructuring charges, charges for certain litigation and tax matters, gains and losses from certain divestitures and certain unusual, non-recurring items. Investors and analysts use these financial measures in assessing the Company’s business performance, and management believes that presenting these financial measures on a non-GAAP basis provides them with useful supplemental information to enhance their understanding of the Company’s underlying business performance and trends. These non-GAAP financial measures also enhance the ability to compare period-to-period financial results. A reconciliation of each of these non-GAAP financial measures to the most directly comparable GAAP financial measures for the years ended December 31, 2016, 2015 and 2014 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 each of the years ended December 31, 2016 and 2015 versus the prior year:



Year ended December 31, 2016	Net Sales Growth (GAAP)	Foreign Exchange Impact	Acquisitions and Divestments Impact⁽¹⁾	Organic Sales Growth (Non-GAAP)
Oral, Personal and Home Care
North America	1.0%	(0.5)%	—%	1.5%
Latin America	(15.5)%	(10.0)%	(15.5)%	10.0%
Europe	(3.0)%	(3.0)%	—%	—%
Asia Pacific	(5.0)%	(4.0)%	(3.0)%	2.0%
Africa/Eurasia	(4.0)%	(9.5)%	—%	5.5%
Total Oral, Personal and Home Care	(6.5)%	(5.0)%	(5.5)%	4.0%
Pet Nutrition	2.5%	—%	—%	2.5%
Total Company	(5.0)%	(4.5)%	(4.5)%	4.0%



Year ended December 31, 2015	Net Sales Growth (GAAP)	Foreign Exchange Impact	Acquisitions and Divestments Impact ⁽¹⁾	Organic Sales Growth (Non-GAAP)
Oral, Personal and Home Care
North America	1.0%	(1.0)%	—%	2.0%
Latin America	(9.5)%	(19.0)%	—%	9.5%
Europe	(15.0)%	(14.5)%	(0.5)%	—%
Asia Pacific	(4.5)%	(6.0)%	(1.5)%	3.0%
Africa/Eurasia	(17.5)%	(23.5)%	—%	6.0%
Total Oral, Personal and Home Care	(8.0)%	(12.0)%	(0.5)%	4.5%
Pet Nutrition	(2.0)%	(8.0)%	—%	6.0%
Total Company	(7.0)%	(11.5)%	(0.5)%	5.0%

⁽¹⁾ Represents the impact of acquisitions, divestments and the deconsolidation of the Company’s Venezuelan operations, as applicable.

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. The Company measures year-to-date market shares from January 1 of the relevant year through the most recent period for which market share data is available, which typically reflects a lag time of one or two months. We believe that the third-party vendors we use to provide data are reliable, but we have not verified the accuracy or completeness of the data or any assumptions underlying the data. In addition, market share information calculated by the Company may be different from market share information calculated by other companies due to differences in category definitions, the use of data from different countries, internal estimates and other factors.

(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, costs resulting from the 2012 Restructuring Program and stock repurchases). The Company believes its strong cash generation and financial position should continue to allow it broad access to global credit and capital markets.

Cash Flow

Net cash provided by operations was $3,141 in 2016, compared to $2,949 in 2015 and $3,298 in 2014. Net cash provided by operations for 2016 increased due to strong operating earnings and the timing of income tax payments, partially offset by the impact of the deconsolidation of the Company’s Venezuelan operations effective December 31, 2015 and voluntary contributions to employee postretirement plans. The decrease in 2015 as compared to 2014 was due to: a decrease in Operating profit excluding a charge related to the change in accounting for the Company’s Venezuelan operations, charges related to the 2012 Restructuring Program, charges related to the 2015 and 2014 Venezuela Remeasurements, a gain on the sale of the Company’s laundry detergent business in the South Pacific, costs related to the sale of land in Mexico and charges for previously disclosed litigation matters in both periods, as applicable; higher income tax payments; and a payment for a previously disclosed litigation matter.

The Company defines working capital as the difference between current assets (excluding Cash and cash equivalents and marketable securities, the latter of which is reported in Other current assets) and current liabilities (excluding short-term debt). The Company’s working capital as a percentage of Net sales was (2.2)% and 0.5% in 2016 and 2015, respectively. This decrease is primarily due to the Company’s tight focus on working capital and the impact of reclassifying current deferred tax assets to noncurrent deferred tax assets upon the adoption of a new accounting standard.

Approximately 75% of total program charges related to the 2012 Restructuring Program, estimated to be $1,405 to $1,585 pretax ($1,050 to $1,170 aftertax), are expected to result in cash expenditures. Savings from the 2012 Restructuring Program are projected to be in the range of $430 to $495 pretax ($400 to $475 aftertax) annually, once all projects are approved and implemented, substantially all of which are expected to increase future cash flows. The anticipated pretax charges for 2017 are expected to amount to approximately $180 to $360 ($140 to $260 aftertax) and savings in 2017 are expected to approximate $40 to $60 pretax ($30 to $50 aftertax). It is anticipated that cash requirements for the 2012 Restructuring Program will continue to be funded from operating cash flows. Approximately 60% of the restructuring accrual at December 31, 2016 is expected to be paid before year end 2017.

Investing activities used $499 of cash in 2016, compared to $685 and $859 during 2015 and 2014, respectively. Purchases of marketable securities and investments decreased in 2016 to $336 from $742 in 2015, due to the deconsolidation of the Company’s Venezuelan operations, a decrease in bank deposits with original maturities greater than 90 days and a decrease in purchases by the Company’s Argentinian subsidiary of U.S. dollar-linked fixed interest rate government bonds. Proceeds from the sale of marketable securities and investments decreased in 2016 to $378 from $599 in 2015, due to the deconsolidation of the Company’s Venezuelan operations and an increase in proceeds from the redemption of bank deposits with original maturities greater than 90 days, partially offset by higher proceeds from the Company’s Argentinian subsidiary’s investment in U.S. dollar-linked fixed interest rate government bonds.

In August 2015, the Company completed the sale of its laundry detergent business in the South Pacific to Henkel AG & Co. KGaA for an aggregate purchase price of approximately 310 Australian dollars ($221) and recorded a pretax gain of $187 ($120 aftertax or $0.13 per diluted share). The gain is net of charges related to the right-sizing of the Company’s South Pacific business, asset write-offs related to the divested laundry detergent business and other costs related to the sale. As discussed above, the funds from the sale were reinvested to expand the 2012 Restructuring Program.

(Dollars in Millions Except Per Share Amounts)

Capital expenditures in 2016 were $593, a decrease from $691 in 2015 and $757 in 2014. Capital expenditures decreased in 2016 primarily due to lower spending on the 2012 Restructuring Program as it is entering its final stages. The Company continues to focus its capital spending on projects that are expected to yield high aftertax returns. Capital expenditures for 2017 are expected to be approximately 4.0% of Net sales, which remains higher than the historical rate of approximately 3.5% primarily due to the 2012 Restructuring Program.

Financing activities used $2,233 of cash during 2016 compared to $2,276 and $2,170 during 2015 and 2014, respectively. The decrease in cash used in 2016 as compared to 2015 was primarily due to lower purchases of treasury shares and higher proceeds from the exercise of stock options and excess tax benefits, partially offset by lower net proceeds from the issuance of debt. The increase in cash used in 2015 as compared to 2014 was primarily due to higher principal payments on debt, higher dividends paid and higher purchases of treasury shares, which were partially offset by higher proceeds from the issuances of debt.

Long-term debt, including the current portion, decreased to $6,520 as of December 31, 2016, as compared to $6,544 as of December 31, 2015 and total debt decreased to $6,533 as of December 31, 2016 as compared to $6,548 as of December 31, 2015. The Company’s debt issuances support its capital structure strategy objectives of funding its business and growth initiatives while minimizing its risk-adjusted cost of capital. During the third quarter of 2015, the Company issued $600 of thirty-year notes at a fixed rate of 4.00%. During the second quarter of 2015 the Company issued €500 of euro-denominated four-year notes at a variable rate. The debt issuances in 2015 were under the Company’s shelf registration statement. Proceeds from the debt issuances in the second and third quarters of 2015 were used for general corporate purposes, which included the retirement of commercial paper borrowings.

At December 31, 2016, the Company had access to unused domestic and foreign lines of credit of $2,927 (including under the facilities discussed below) and could also issue medium-term notes pursuant to an effective shelf registration statement. In November 2011, the Company entered into a five-year revolving credit facility with a capacity of $1,850 with a syndicate of banks. This facility was extended for an additional year in 2012 and again in 2013. In 2014, the Company entered into an amendment of this facility whereby the facility was extended for an additional year to November 2019 and the capacity of the facility was increased to $2,370. In 2016, the facility was extended for an additional year to November 2020. The Company also has the ability to draw $165 from a revolving credit facility that expires in November 2017. Commitment fees related to the credit facilities are not material.

Domestic and foreign commercial paper outstanding was $295 and $5 as of December 31, 2016 and December 31, 2015, respectively. The average daily balances outstanding for commercial paper in 2016 and 2015 were $1,642 and $1,989, respectively. The Company classifies commercial paper and certain current maturities of notes payable as long-term debt when it has the intent and ability to refinance such obligations on a long-term basis, including, if necessary, by utilizing its line of credit that expires in November 2020.

The following is a summary of the Company’s commercial paper and global short-term borrowings as of December 31, 2016 and 2015:



2016		2015
Weighted Average Interest Rate	Maturities