Colgate-Palmolive (CL) 11-KAnnual report of employee stock purchases

The Colgate-Palmolive Company Employees Savings and Investment Plan (the “Plan”) is a defined contribution plan sponsored by Colgate-Palmolive Company (the “Company”). The Plan is subject to the reporting and disclosure requirements, participation and vesting standards, and fiduciary responsibility provisions of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). The Plan is also an employee stock ownership plan (“ESOP”). State Street Global Advisors (the “ESOP Trustee”), a division of State Street Bank & Trust Company, is the trustee of Funds D and E (the “ESOP Shares Trust”). The Bank of New York Mellon is the trustee of the remaining funds (which are contained within the Colgate-Palmolive Savings & Investment Plans Master Trust (the “Master Trust”)), and the custodian of the Plan. The recordkeeper of the Plan is Alight Solutions LLC.

Except as noted below, the Plan offers programs which include an employer match, a success sharing program, a retirement contribution program, a bonus savings account program, an income savings account program and a retiree insurance program. The provisions below, applicable to the Plan participants, provide only general information. Participants should refer to the Plan document for a more complete description of the Plan’s provisions.

Employees eligible to participate in the Plan must meet certain minimum hourly service requirements and be at least 18 years old. Employees are eligible upon hire to participate in the Plan.

As of December 31, 2021, the Plan maintained the funds listed above with the exception of the StateStreet Funds. The plan also offered the Vanguard Wellington Fund, Vanguard Institutional Index Fund and Vanguard Extended Market Index Fund.

During 2000, the ESOP entered into a loan agreement with the Company under which the benefits for the ESOP may be extended through December 2035. Repayments of principal and interest are funded through future contributions and dividends on stock held by ESOP Fund D, both paid by the Company to the ESOP. In addition, the Company guaranteed minimum funding of $130,000, on a present value basis, in excess of debt service requirements.

As of December 31, 2022 and 2021, the ESOP had outstanding loans from the Company of $253 and $363, respectively, bearing an average interest rate of 5.7% per year. During 2022, the Company did not make any contributions to the ESOP.

 

Dividends on stock held by ESOP Fund D are paid to the ESOP and, together with cash contributions from the Company, (a) are used by the ESOP to repay principal and interest on the long-term notes, (b) are credited to participant accounts, or (c) prior to July 1, 2021, were used to fund basic and additional basic retirement contributions.

A portion of the ESOP Fund D shares are released periodically for allocation to participants based on the ratio of debt service for the period to total debt service over the remaining scheduled life of all ESOP debt. As of December 31, 2022, 8,857,750 common shares (valued at $697,902) were released and allocated to participant accounts and 559,942 common shares (valued at $44,118) were available for future release and allocation to participant accounts. As of December 31, 2021, 9,559,255 common shares (valued at $815,787) were released and allocated to participant accounts and 731,412 common shares (valued at $62,419) were available for future release and allocation to participant accounts. The released ESOP shares are allocated to fund the employer portion of the various Plan programs described below.

Under the Savings Program, employees generally can contribute to the Plan between 1% and 25% of their eligible earnings as defined in the Plan document, which include base salary, overtime, commissions, and eligible bonuses. Eligible employees are automatically enrolled 45 days after their hire date (or first eligibility date) to contribute 6% of eligible earnings to the Plan unless they affirmatively elect not to participate or to contribute at a different rate. The contribution rate for automatically enrolled participants automatically increases by 1% each year until the contribution rate reaches 10%. The contribution rate for participants automatically enrolled prior to January 1, 2023 was 3% of eligible compensation and the automatic increase was 1% per year until the contribution rate reached a maximum of 6%. For purposes of participant contributions, eligible earnings for global expatriates include base salary only. Prior to January 1, 2022, participant contributions were based on recognized earnings (the greater of total compensation paid during the previous calendar year minus items such as reimbursement of moving expenses and special awards, or regular salary as of the most recent January 1, plus commissions and bonuses paid in the prior year). Employee contributions for “highly compensated employees”, as defined by the Internal Revenue Code of 1986, as amended (“IRC”), are limited to less than 25% of eligible earnings. Participants may generally begin, suspend or resume contributions, change their contribution rate and change the allocation of their contributions between before-tax and after-tax earnings on a daily basis. Plan participants are always fully vested in their contributions and related investment earnings. Under the IRC, the maximum allowable pre-tax contribution for participants was $20.5 for 2022. Participants who are expected to reach or are over the age of 50 during the Plan year and have made the maximum before-tax contribution are eligible to make additional catch-up contributions. Under the IRC, the maximum allowable catch-up contribution was $6.5 for 2022 on a pre-tax basis.

Employees may direct the investment of participant contributions to any of the Plan’s investment funds, other than Funds D and E, and may change how these contributions will be invested when allocated on a daily basis. Participants may, on a

daily basis, diversify / transfer their participant account balances among any of the investment funds in the Plan, although participants cannot make transfers into Funds D and E.

The Company and wholly-owned subsidiaries to which the Plan has been extended, make matching contributions of 50% to 75% of employee contributions up to 6% of eligible earnings, depending on years of service and collective bargaining agreements. Company matching contributions are invested in the same manner as employee elections for investment of their participant contributions. Contributions made are diversifiable, on a daily basis, immediately upon allocation, among any of the investment funds in the Plan, although participants cannot make transfers into Funds D and E. Participants are 50% vested in their Company matching contribution accounts after two years of service and fully vested after three years of service or, if while active, they reach age 55, become permanently disabled, or die, or in the event of Plan termination.

The Plan permits incoming rollovers of before-tax money from Section 403(b) plans and governmental Section 457 plans, as well as both before-tax and after-tax money from other companies’ qualified plans. Participants may direct the investment of an incoming rollover to any of the Plan’s investment funds, other than Funds D and E. Participants may, on a daily basis, diversify / transfer their rollover balances among any of the investment funds in the Plan, although participants cannot make transfers into Funds D and E.

All eligible employees generally receive Basic Retirement Contributions (“BRCs”) and Additional Basic Retirement Contributions (“ABRCs”) of 4% to 15% of eligible earnings depending on years of service and prior eligibility status in the Company’s Employees’ Retirement Income Plan. Unless provided for by a collective bargaining agreement, employees of Hill’s Pet Nutrition, Inc. who are covered by such agreement(s) are not eligible for these Company retirement contributions. Effective as of January 1, 2020, executive employees will no longer receive ABRCs in the Plan.

Company retirement contributions are allocated to the Plan’s investment funds in the same manner as employee elections for investment of their own contributions. Participants are 50% vested in their account after two years of service and fully vested after three years of service, or if while active, they reach age 55, become permanently disabled, or die, or in the event of Plan termination.

 

The Success Sharing Program is designed to enable the Company to share its financial success with employees. Under the Success Sharing Program, a Success Sharing Account (“SSA”) has been established within the Plan for each eligible employee. As the Company meets or exceeds annual financial targets, shares of common stock are allocated to employee accounts according to a predetermined formula. This program is generally available to all employees in the United States who are participants in the Plan and are on the payroll from at least June 30 through the last day of the year. If the individual is eligible but was not employed for the entire year, the allocation will be prorated. Employees are at all times fully vested in the value of their SSA. Any allocation is initially credited to Fund D. Participants may, on a daily basis, immediately upon allocation, diversify their SSA among any of the Plan’s investment funds, although participants cannot make transfers into Funds D and E.

Each participant account may be credited with the types of allocations described above as well as allocations of fund earnings or losses, and expenses. Participant accounts may include allocations made under previous Plan programs such as the Bonus Savings Account Program, Income Savings Account Program, and Retiree Insurance Program. Depending on fund elections, certain participant investment accounts are also charged with monthly investment service fees. The benefit to which a participant is entitled is the benefit that can be provided from the participant’s vested account. In addition to the vesting requirements described above, allocations to the Retiree Insurance Program are subject to the same vesting

requirements as Company Matching contributions, and participants are at all times fully vested in the Bonus and Income Savings Account Programs.

Participating employees can receive a distribution from the Plan due to retirement, permanent disability, termination or death. Unvested balances will be forfeited in the event of termination. In service withdrawals are available as specified by the Plan. Participants who have terminated employment and reached age 72 (age 70½, if the participant attained age 70½ prior to 2020) are required to take certain minimum required distributions in accordance with the terms of the Plan and applicable law.

After the earlier of the distribution of the terminated participant’s vested account balances or the fifth anniversary of the participant’s termination, nonvested account balances become available to the Company to reduce future Company contributions and/or to pay for administrative expenses incurred by the Plan. The forfeiture balance as of December 31, 2022 and 2021 totaled $76 and $59, respectively. During 2022, the Company used $901 of forfeitures to reduce Company contributions.

Participants who have $1 or more in the Plan may borrow from the total of their fund accounts a minimum of $0.5 up to a maximum equal to the lesser of $50 (subject to certain offsets for prior loans) or 50% of their vested balance, subject to certain exclusions. Generally, participants are allowed to have one ordinary loan and one loan related to the purchase of a principal residence outstanding at any time. The loans are secured by the balance in the participant’s account and bear a fixed rate of interest equal to the prime rate as listed in The Wall Street Journal on the 15th business day of the month immediately prior to the month in which the loan was requested. Principal and interest are paid ratably via payroll deductions. Loan terms range from 1 to 15 years. Loans outstanding at December 31, 2022 had interest rates ranging from 3.3% to 7.0% and maturities through 2037. Loans outstanding at December 31, 2021 had interest rates ranging from 3.3% to 8.3% and maturities through 2036.

Although the Company has not expressed any intent to do so, the Company has the right under the Plan to discontinue its contributions at any time and to terminate the Plan at any time subject to the provisions of ERISA. In the event of termination of the Plan, the Employee Relations Committee of the Company (the “Committee”) shall compute and distribute the value of the accounts of the participants.

On March 27, 2020, in response to COVID-19, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law. The CARES Act permits qualified Plan participants to withdraw penalty-free distributions of up to $100,000 during 2020 (which may be repaid to the Plan within three years of the distribution). The Plan administrator elected to adopt these provisions of the CARES Act and has amended the Plan pursuant to the regulations.

The financial statements of the Plan are prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). 

The preparation of financial statements in conformity with U.S. GAAP requires the Plan administrator to make estimates and assumptions that affect the reported amounts of assets, liabilities, and changes therein, and disclosure of contingent assets and liabilities. Actual results could differ from those estimates.

Participant loans are stated at cost plus accrued interest. Interest income is recorded on an accrual basis. Delinquent loans are reclassified as distributions to participants based upon the terms defined in the Plan document.

Certain investments of the Plan are maintained through the Master Trust. The Plan participates in the Master Trust along with the Colgate-Palmolive Puerto Rico Savings and Investment Plan. The value of the Plan’s interest in the Master Trust is based on the beginning value of the Plan’s interest in the Master Trust plus actual contributions and allocated net investment income (loss) less actual distributions and allocated administrative expenses. The Plan’s allocated share of investment income and loss is based upon each plan’s participation in investment options within the Master Trust. 

Investments maintained by the Master Trust, other than investments in common/collective trust funds and guaranteed investment contracts (“GICs”), are stated at fair value based on quoted market prices or as otherwise determined by the Bank of New York Mellon, the Master Trust custodian. Common/collective trust funds are stated at fair value using the net asset value (“NAV”) per unit in each fund. The NAV is based on the fair value of the underlying investments owned, minus its liabilities, divided by the number of shares outstanding. The liabilities, which are primarily investment management fees due, are included as part of the Plan’s interest in the Master Trust in the Statements of Net Assets Available for Benefits.

Through the Master Trust, the Plan maintains fully benefit-responsive GICs with insurance companies, banks and other financial institutions. The GICs represent investments that have fixed income securities paired with benefit-responsive wrap contracts. Wrap contracts are issued by high-quality financial institutions with primarily the following objectives: to provide a fixed rate of interest for a specified period of time and to enable the fund to pay participant-initiated withdrawals at book value.

Except as more fully discussed below, GICs are accounted for at contract value. 

In certain circumstances, the amount withdrawn from the GICs would be payable at fair value rather than at contract value. These events include termination of the Plan, a material adverse change to the provisions of the Plan, if the Plan elects to withdraw from a contract in order to switch to a different investment provider, or if the terms of a successor plan (in the event of the spin-off or sale of a division) do not meet the contract issuer’s underwriting criteria for issuance of a similar contract. Such circumstances, resulting in the payment of benefits at market value rather than contract value, are not considered probable of occurring in the foreseeable future.

The contract issuer could terminate the contract upon short notice at the fair value of the underlying investments in certain circumstances, including the Plan’s loss of its qualified status, uncorrected material breaches of responsibilities, or material and adverse changes to the provisions of the Plan.

Purchases and sales are recorded on a trade-date basis. Net appreciation or depreciation in fair value of investments includes the Plan’s gains and losses on investments bought and sold as well as held during the year. Dividend income is recorded on the ex-dividend date. The Plan’s interest in the net investment income (loss) of the Master Trust includes the Plan’s share of gains and losses on investments bought and sold as well as held during the year by the Master Trust and its share of interest and dividends earned by the Master Trust and is included in the Statements of Changes in Net Assets Available for Benefits.

The Plan is administered by the Committee for the benefit of the Plan participants and their beneficiaries. Administrative expenses are paid by the Plan.

The Company has obtained a favorable determination from the IRS in a letter dated August 4, 2017 regarding the Plan’s qualified status. The Plan has been amended since the amendments considered under the determination letter. However, the Committee believes that the Plan is designed and is currently being operated in compliance with the applicable requirements of the IRC.

U.S. GAAP requires the Plan administrator to evaluate tax positions taken by the Plan and recognize a tax liability if the plan has taken an uncertain position that more likely than not would not be sustained upon examination by the IRS. The Plan administrator has analyzed the tax positions taken by the Plan, and has concluded that as of December 31, 2022 and 2021, there are no uncertain positions taken or expected to be taken that would require recognition of a liability or disclosure in the financial statements. The Plan is subject to routine audits by taxing jurisdictions; however, there are currently no audits for any tax periods in progress.

The Plan’s investments are part of the Master Trust and the custodian of the Plan is the Bank of New York Mellon. The Master Trust also holds the assets of the Colgate-Palmolive Puerto Rico Savings and Investment Plan. The Plan’s custodian and recordkeeper maintain a separate account for the associated Plan assets and liabilities held within the Master Trust.

As of December 31, 2022 the Master Trust held investments in Colgate-Palmolive Company Common Stock, mutual funds, cash reserve funds, separately managed account funds, GICs and common/collective trust funds. Refer to Note 1, Description of the Plan for additional discussion on the types of investments held within the Master Trust.

The value of the Plan’s interest in the Master Trust is based on the beginning value of the Plan’s interest in the Master Trust plus actual contributions and allocated net investment income (loss) less actual distributions and allocated administrative expenses. The Plan’s allocated share of investment activities is based upon each plan’s participation in investment options within the Master Trust. 

The following table presents the investments and other assets and liabilities of the Master Trust and the Plan’s interest in the Master Trust as of December 31, 2022:

The following table presents net investment income (loss) for the Master Trust for the year ended December 31, 2022:

The Plan’s interest in Colgate-Palmolive Savings & Investment Plans Master Trust's net investment loss for the year ended December 31, 2022 was $394,761.

The Plan uses available market information and other valuation methodologies in assessing the fair value of financial instruments. Judgment is required in interpreting market data to develop the estimates of fair value and, accordingly, changes in assumptions or the estimation methodologies may affect the fair value estimates.

Assets and liabilities carried at fair value are classified as follows:

 

The fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used maximize the use of observable inputs and minimize the use of unobservable inputs.

The valuation methodologies used for Plan assets are as follows:

 

Investments not in the Master Trust, consisting of Colgate-Palmolive Company Common Stock of $754,804 and $893,413 and Cash reserve funds of $1,656 and $1,910 at December 31, 2022 and 2021, respectively, are valued using Level 1 inputs.

At December 31, 2022 and 2021, benefit distributions that have been processed and approved for payment as of such date but not yet paid of $8 and $6, respectively, are not reflected in the financial statements. These amounts are reported as a liability on Form 5500.

The Plan invests in various investment securities. Investment securities are exposed to various risks, such as interest rate, market and credit risks, and also may be impacted by COVID-19, which has caused significant changes in political and economic conditions around the world, including disruptions and volatility in the global capital markets. Due to the level of risk associated with certain investment securities, it is reasonably possible that changes in the value of investment securities may occur in the near term and that such changes could materially affect participant account balances and the amounts reported in the Statements of Net Assets Available for Benefits.

As of December 31, 2022 and 2021, the Plan held shares of common stock of Colgate-Palmolive Company, the Plan Sponsor. Certain investments within the Employee Benefit Temporary Investment FD Fund are shares of funds managed by the Bank of New York Mellon, the trustee of the Plan (except Funds D and E) and the Master Trust. Certain cash reserve funds are shares of funds managed by the Bank of New York Mellon’s affiliate, Dreyfus. As of December 31, 2022, the Plan had $7,746 and $11,789 invested in the Employee Benefit Temporary Investment FD Fund and Dreyfus Government Cash Management Fund, respectively. As of December 31, 2021, the Plan had $8,909 and $11,330 invested in the Employee Benefit Temporary Investment FD Fund and Dreyfus Treasury Prime Fund, respectively. State Street Global Advisors is the trustee of Funds D and E (the “ESOP Shares Trust”). As of December 31, 2022, the Plan had investments in State Street Funds. These transactions qualify as party-in-interest transactions that are allowable under ERISA. Administrative fees paid to Bank of New York Mellon and State Street for the twelve months ended December 31, 2022 were $479 and $32, respectively.