UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549FORM 10-Q(Mark One)QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIESEXCHANGE ACT OF 1934For the quarterly period ended March 31,2024ORTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIESEXCHANGE ACT OF 1934For the transition period fromtoCommission file number 001-14905BERKSHIRE HATHAWAY INC.(Exact name of registrant as specified in its charter)Delaware47-0813844(State or other jurisdiction of incorporation or organization)(I.R.S.Employer Identification Number)3555 Farnam Street,Omaha,Nebraska 68131(Address of principal executive office)(Zip Code)(402)346-1400(Registrants telephone number,including area code)(Former name,former address and former fiscal year,if changed since last report)Securities registered pursuant to Section 12(b)of the Act:Title of each class Trading SymbolsName of each exchange on which registeredClass A Common StockClass B Common Stock0.000%Senior Notes due 20251.125%Senior Notes due 20272.150%Senior Notes due 20281.500%Senior Notes due 20302.000%Senior Notes due 20341.625%Senior Notes due 20352.375%Senior Notes due 20390.500%Senior Notes due 20412.625%Senior Notes due 2059BRK.ABRK.BBRK25BRK27BRK28BRK30BRK34BRK35BRK39BRK41BRK59New York Stock ExchangeNew York Stock ExchangeNew York Stock ExchangeNew York Stock ExchangeNew York Stock ExchangeNew York Stock ExchangeNew York Stock ExchangeNew York Stock ExchangeNew York Stock ExchangeNew York Stock ExchangeNew York Stock ExchangeIndicate by check mark whether the Registrant(1)has filed all reports required to be filed by Section 13 or 15(d)of the Securities Exchange Act of 1934 during the preceding 12 months(or for such shorter period that the registrant was required to file such reports),and(2)has been subject to such filing requirements for the past 90 days.Yes No Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T(232.405 of this chapter)during the preceding 12 months(or for such shorter period that the registrant was required to submit such files).Yes No Indicate by check mark whether the Registrant is a large accelerated filer,an accelerated filer,a non-accelerated filer,smaller reporting company,or an emerging growth company.See the definitions of“large accelerated filer,”“accelerated filer,”“smaller reporting company,”and“emerging growth company”in Rule 12b-2 of the Exchange Act.Large accelerated filer Accelerated filerNon-accelerated filerSmaller reporting companyEmerging growth companyIf an emerging growth company,indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a)of the Exchange Act.Indicate by check mark whether the Registrant is a shell company(as defined in Rule 12b-2 of the Exchange Act).Yes No Number of shares of common stock outstanding as of April 19,2024:Class A 562,539Class B 1,311,384,8831BERKSHIRE HATHAWAY INC.Page No.Part I Financial Information Item 1.Financial Statements Consolidated Balance SheetsMarch 31,2024 and December 31,20232 Consolidated Statements of EarningsFirst Quarter 2024 and 20234 Consolidated Statements of Comprehensive IncomeFirst Quarter 2024 and 20235 Consolidated Statements of Changes in Shareholders EquityFirst Quarter 2024 and 20235 Consolidated Statements of Cash FlowsFirst Quarter 2024 and 20236 Notes to Consolidated Financial Statements7Item 2.Managements Discussion and Analysis of Financial Condition and Results of Operations28Item 3.Quantitative and Qualitative Disclosures About Market Risk46Item 4.Controls and Procedures46Part II Other Information 46Item 1.Legal Proceedings46Item 1A.Risk Factors46Item 2.Unregistered Sales of Equity Securities and Use of Proceeds and Issuer Repurchases of Equity Securities47Item 3.Defaults Upon Senior Securities47Item 4.Mine Safety Disclosures47Item 5.Other Information47Item 6.Exhibits48Signature 48 2Part I Financial InformationItem 1.Financial StatementsBERKSHIRE HATHAWAY INC.and SubsidiariesCONSOLIDATED BALANCE SHEETS(dollars in millions)March 31,2024December 31,2023(Unaudited)ASSETSInsurance and Other:Cash and cash equivalents*$28,891$33,672Short-term investments in U.S.Treasury Bills153,444129,619Investments in fixed maturity securities17,16723,758Investments in equity securities335,864353,842Equity method investments29,58529,066Loans and finance receivables25,43524,681Other receivables46,77244,174Inventories23,67024,159Property,plant and equipment22,05822,030Equipment held for lease17,15416,947Goodwill50,81350,868Other intangible assets29,04529,327Deferred charges-retroactive reinsurance9,3189,495Other20,39819,568 809,614811,206Railroad,Utilities and Energy:Cash and cash equivalents*6,6584,350Receivables6,0637,086Property,plant and equipment178,288177,616Goodwill33,73633,758Regulatory assets5,5705,565Other30,10630,397 260,421258,772$1,070,035$1,069,978*Includes U.S.Treasury Bills with maturities of three months or less when purchased of$4.0 billion at March 31,2024 and$4.8 billion at December 31,2023.See accompanying Notes to Consolidated Financial Statements3BERKSHIRE HATHAWAY INC.and SubsidiariesCONSOLIDATED BALANCE SHEETS(dollars in millions)March 31,2024December 31,2023(Unaudited)LIABILITIES AND SHAREHOLDERS EQUITYInsurance and Other:Unpaid losses and loss adjustment expenses$111,482$111,082Unpaid losses and loss adjustment expenses-retroactive reinsurance contracts34,24534,647Unearned premiums31,97530,507Life,annuity and health insurance benefits17,98720,213Other policyholder liabilities10,66211,545Accounts payable,accruals and other liabilities31,58332,402Aircraft repurchase liabilities and unearned lease revenues8,3758,253Notes payable and other borrowings40,72342,692 287,032291,341Railroad,Utilities and Energy:Accounts payable,accruals and other liabilities20,64922,461Regulatory liabilities6,8876,818Notes payable and other borrowings82,03185,579 109,567114,858Income taxes,principally deferred95,65193,009Total liabilities492,250499,208Redeemable noncontrolling interests3,261Shareholders equity:Common stock88Capital in excess of par value34,98234,480Accumulated other comprehensive income(4,050)(3,763)Retained earnings619,925607,350Treasury stock,at cost(79,375)(76,802)Berkshire Hathaway shareholders equity571,490561,273Noncontrolling interests6,2956,236Total shareholders equity577,785567,509$1,070,035$1,069,978See accompanying Notes to Consolidated Financial Statements 4BERKSHIRE HATHAWAY INC.and SubsidiariesCONSOLIDATED STATEMENTS OF EARNINGS(dollars in millions except per share amounts)(Unaudited)First Quarter20242023Revenues:Insurance and Other:Insurance premiums earned$21,474$19,796Sales and service revenues37,47238,388Leasing revenues2,2222,044Interest,dividend and other investment income4,3053,229 65,47363,457Railroad,Utilities and Energy:Freight rail transportation revenues5,6376,001Utility and energy operating revenues17,69014,917Service revenues and other income1,0691,018 24,39621,936Total revenues89,86985,393Investment gains(losses)1,87634,758Costs and expenses:Insurance and Other:Insurance losses and loss adjustment expenses13,44814,221Life,annuity and health benefits945785Insurance underwriting expenses3,7533,587Cost of sales and services29,39530,319Cost of leasing1,6911,477Selling,general and administrative expenses4,7735,602Interest expense316328 54,32156,319Railroad,Utilities and Energy:Freight rail transportation expenses3,9384,161Utilities and energy cost of sales and other expenses16,26813,846Other expenses1,005871Interest expense1,000890 22,21119,768Total costs and expenses76,53276,087Earnings before income taxes and equity method earnings15,21344,064Equity method earnings493688Earnings before income taxes15,70644,752Income tax expense2,8748,995Net earnings12,83235,757Earnings attributable to noncontrolling interests130253Net earnings attributable to Berkshire Hathaway shareholders$12,702$35,504Net earnings per average equivalent Class A share$8,825$24,377Net earnings per average equivalent Class B share*$5.88$16.25Average equivalent Class A shares outstanding1,439,3701,456,438Average equivalent Class B shares outstanding2,159,055,1342,184,657,109*Net earnings per average equivalent Class B share outstanding are equal to one-fifteen-hundredth of the equivalent Class A amount.See Note 19.See accompanying Notes to Consolidated Financial Statements 5BERKSHIRE HATHAWAY INC.and SubsidiariesCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(dollars in millions)(Unaudited)First Quarter20242023Net earnings$12,832$35,757Other comprehensive income:Unrealized gains(losses)on investments(35)247Applicable income taxes6(53)Foreign currency translation(539)249Applicable income taxes6Long-duration insurance contract discount rate changes351(367)Applicable income taxes(67)76Defined benefit pension plans650Applicable income taxes(2)(6)Other,net(30)(120)Other comprehensive income,net(310)82Comprehensive income12,52235,839Comprehensive income attributable to noncontrolling interests107259Comprehensive income attributable to Berkshire Hathaway shareholders$12,415$35,580CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY(dollars in millions)(Unaudited)Berkshire Hathaway shareholders equityCommon stockand capital inexcess of parvalueAccumulatedothercomprehensiveincomeRetainedearningsTreasurystockNon-controllinginterestsTotalFor the first quarter of 2024Balance at December 31,2023$34,488$(3,763)$607,350$(76,802)$6,236$567,509Net earnings12,70213012,832Adoption of ASU 2023-02(127)(127)Other comprehensive income,net(287)(23)(310)Acquisitions of common stock(2,573)(2,573)Transactions with noncontrolling interests and other502(48)454Balance at March 31,2024$34,990$(4,050)$619,925$(79,375)$6,295$577,785For the first quarter of 2023Balance at December 31,2022$35,175$(5,052)$511,127$(67,826)$8,257$481,681Net earnings35,50425335,757Other comprehensive income,net76682Acquisitions of common stock(4,439)(4,439)Transactions with noncontrolling interests and other(11)7(4)Balance at March 31,2023$35,164$(4,976)$546,631$(72,265)$8,523$513,077See accompanying Notes to Consolidated Financial Statements6BERKSHIRE HATHAWAY INC.and SubsidiariesCONSOLIDATED STATEMENTS OF CASH FLOWS(dollars in millions)(Unaudited)First Quarter20242023Cash flows from operating activities:Net earnings$12,832$35,757Adjustments to reconcile net earnings(loss)to operating cash flows:Investment(gains)losses(1,876)(34,758)Depreciation and amortization3,1683,051Other(2,863)(1,293)Changes in operating assets and liabilities:Unpaid losses and loss adjustment expenses11722Deferred charges-retroactive reinsurance177172Unearned premiums1,4941,686Receivables and originated loans469(922)Inventories516(15)Other assets(415)(987)Other liabilities(5,486)(2,649)Income taxes2,4338,629Net cash flows from operating activities10,5668,693Cash flows from investing activities:Purchases of equity securities(2,691)(2,873)Sales of equity securities19,97213,283Purchases of U.S.Treasury Bills and fixed maturity securities(103,167)(45,515)Sales of U.S.Treasury Bills and fixed maturity securities7,45212,982Redemptions and maturities of U.S.Treasury Bills and fixed maturity securities80,11425,364Acquisitions of businesses,net of cash acquired(327)(7,629)Purchases of property,plant and equipment and equipment held for lease(4,393)(3,713)Other(163)182Net cash flows from investing activities(3,203)(7,919)Cash flows from financing activities:Proceeds from borrowings of insurance and other businessesRepayments of borrowings of insurance and other businesses(1,142)(4,946)Proceeds from borrowings of railroad,utilities and energy businesses5,084Repayments of borrowings of railroad,utilities and energy businesses(5,906)(1,244)Changes in short-term borrowings,net(2,612)1,098Acquisitions of treasury stock(2,562)(4,450)Other,principally transactions with noncontrolling interests(2,664)(380)Net cash flows from financing activities(9,802)(9,922)Effects of foreign currency exchange rate changes(44)47Increase(decrease)in cash and cash equivalents and restricted cash(2,483)(9,101)Cash and cash equivalents and restricted cash at the beginning of the year*38,64336,399Cash and cash equivalents and restricted cash at the end of the first quarter*$36,160$27,298*Cash and cash equivalents and restricted cash are comprised of:Beginning of the yearInsurance and Other$33,672$32,260Railroad,Utilities and Energy4,3503,551Restricted cash included in other assets621588$38,643$36,399End of the first quarterInsurance and Other$28,891$23,805Railroad,Utilities and Energy6,6582,942Restricted cash included in other assets611551$36,160$27,298See accompanying Notes to Consolidated Financial Statements 7BERKSHIRE HATHAWAY INC.and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTSMarch 31,2024Note 1.General The accompanying unaudited Consolidated Financial Statements include the accounts of Berkshire Hathaway Inc.(“Berkshire”or“Company”)consolidated with the accounts of all its subsidiaries and affiliates in which Berkshire holds controlling financial interests as of the financial statement date.In these notes,the terms“us,”“we”or“our”refer to Berkshire and its consolidated subsidiaries.Reference is made to Berkshires most recently issued Annual Report on Form 10-K(“Annual Report”),which includes information necessary or useful to understanding Berkshires businesses and financial statement presentations.Our significant accounting policies and practices were presented as Note 1 to the Consolidated Financial Statements included in the Annual Report.Financial information in this Quarterly Report reflects all adjustments that are,in the opinion of management,necessary to a fair statement of results for the interim periods in accordance with accounting principles generally accepted in the United States(“GAAP”).For several reasons,our results for interim periods are not normally indicative of results to be expected for the year.The timing and magnitude of catastrophe losses incurred by insurance subsidiaries and the estimation error inherent to the process of determining liabilities for unpaid losses of insurance subsidiaries can be more significant to results of interim periods than to results for a full year.Given the size of our equity security investment portfolio,changes in market prices and the related changes in unrealized gains and losses on equity securities will produce significant volatility in our interim and annual earnings.In addition,gains and losses from the periodic revaluation of certain assets and liabilities denominated in foreign currencies and asset impairment charges may cause significant variations in periodic net earnings.Significant estimates are used in the preparation of our Consolidated Financial Statements,including those associated with evaluations of certain long-lived assets,goodwill and other intangible assets for impairment,expected credit losses on amounts owed to us and the estimations of certain losses assumed under insurance and reinsurance contracts.These estimates may be subject to significant adjustments in future periods due to ongoing macroeconomic and geopolitical events,as well as changes in industry or company-specific factors or events.Note 2.New accounting pronouncements In March 2023,the Financial Accounting Standards Board(“FASB”)issued Accounting Standards Update 2023-02,“Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method”(“ASU 2023-02”).ASU 2023-02 permits reporting entities to elect to account for tax equity investments from which the income tax credits are received using the proportional amortization method at the program level if certain conditions are met.We elected to apply the proportional accounting method to eligible affordable housing tax credit investments using the modified retrospective method.We recorded a charge to retained earnings of$127 million,representing the cumulative effect of applying the proportional method to these investments as of January 1,2024.In November 2023,the FASB issued Accounting Standards Update 2023-07,“Improvements to Reportable Segment Disclosures”(“ASU 2023-07”),which requires disclosures of significant expenses by segment and interim disclosure of items that were previously required only on an annual basis.ASU 2023-07 is to be applied on a retrospective basis and is effective for our 2024 annual Consolidated Financial Statements and interim periods beginning in 2025.In December 2023,the FASB issued Accounting Standards Update 2023-09,“Improvements to Income Tax Disclosures”(“ASU 2023-09”),which provides for additional income tax rate reconciliation and income taxes paid disclosures.ASU 2023-09 may be adopted on a prospective or retrospective basis and is effective for fiscal years beginning after December 15,2024,with early adoption permitted.On March 6,2024,the U.S.Securities Exchange Commission(“SEC”)issued Release No.33-11275 and No.34-99678“The Enhancement and Standardization of Climate-Related Disclosures for Investors”(“Climate Disclosure Rules”).Among its provisions,the Climate Disclosure Rules will require certain disclosures related to severe weather events and other natural conditions,and other disclosures about climate-related risks that materially impacted or are reasonably likely to materially impact the business strategy,results of operations or financial condition of the registrant.The Climate Disclosure Rules are currently effective for large-accelerated SEC filers in annual reports for years beginning on or after January 1,2025.However,on April 4,2024,the SEC stayed implementation of the Climate Disclosure Rules,pending the completion of judicial review.We are evaluating the impacts ASUs 2023-07 and 2023-09 and the Climate Disclosure Rules will have on disclosures in our Consolidated Financial Statements.8Notes to Consolidated Financial Statements Note 3.Significant business acquisitions Our long-held acquisition strategy is to acquire businesses that have consistent earning power,good returns on equity and able and honest management.Financial results attributable to business acquisitions are included in our Consolidated Financial Statements beginning on their respective acquisition dates.On January 31,2023,we acquired an additional 41.4%interest in Pilot Travel Centers,LLC(“Pilot”)for approximately$8.2 billion.The acquisition increased our interest to 80%,representing a controlling interest in Pilot for financial reporting purposes as of that date.Accordingly,we began consolidating Pilots financial statements in our Consolidated Financial Statements on February 1,2023.Prior to that date,we accounted for our 38.6%interest in Pilot under the equity method.Pilot operates more than 650 travel center and 75 fuel-only locations across 44 U.S.states and five Canadian provinces,primarily under the names Pilot or Flying J,as well as large wholesale fuel and fuel marketing businesses in the U.S.Pilot also sells diesel fuel at other locations in the U.S.and Canada through various arrangements with third party travel centers and operates a water disposal business in the oil fields sector.Since Pilots most significant business activities involve purchasing and selling fuel(energy)on a wholesale and retail basis,and other energy-related businesses,we include Pilot within the railroad,utilities and energy sections of our Consolidated Balance Sheets and Consolidated Statements of Earnings.In applying the acquisition method of accounting,we remeasured our previously held 38.6%investment in Pilot to fair value as of the acquisition date.We recognized a one-time,non-cash remeasurement gain of approximately$3.0 billion in the first quarter of 2023,representing the excess of the fair value of that interest over the carrying value under the equity method.In January 2024,we acquired the remaining noncontrolling interests in Pilot for$2.6 billion,increasing our ownership of Pilot to 100%.The acquisition of a noncontrolling interest represents an equity transaction and we recorded an increase of$517 million to capital in excess of par for the excess of the carrying value of the noncontrolling interest acquired over the consideration paid,net of deferred income tax liabilities arising from the transaction.A summary of the values of Pilots assets acquired,liabilities assumed and redeemable noncontrolling interests as of January 31,2023 follows(in millions).Assets acquiredLiabilities assumed and noncontrolling interestsProperty,plant and equipment$8,015 Notes payable$5,876Goodwill*6,605 Other liabilities4,918Other intangible assets6,853Other assets7,047 Liabilities assumed10,794 Noncontrolling interests,predominantly redeemable3,361Assets acquired$28,520 Liabilities assumed and noncontrolling interests$14,155Net assets$14,365*Goodwill from this acquisition is expected to be deductible for income tax purposes.Note 4.Investments in fixed maturity securities Investments in fixed maturity securities are summarized as follows(in millions).AmortizedCostUnrealizedGainsUnrealizedLossesFairValueMarch 31,2024U.S.Treasury,U.S.government corporations and agencies$4,517$3$(17)$4,503Foreign governments11,02039(62)10,997Corporate bonds1,210224(5)1,429Other22219(3)238$16,969$285$(87)$17,167December 31,2023U.S.Treasury,U.S.government corporations and agencies$10,308$14$(53)$10,269Foreign governments11,78858(41)11,805Corporate bonds1,212241(4)1,449Other21721(3)235$23,525$334$(101)$23,7589Notes to Consolidated Financial StatementsNote 4.Investments in fixed maturity securities As of March 31,2024,approximately 95%of our foreign government holdings were rated AA or higher by at least one of the major rating agencies.The amortized cost and estimated fair value of fixed maturity securities at March 31,2024 are summarized below by contractual maturity dates(in millions).Actual maturities may differ from contractual maturities due to prepayment rights held by issuers.Due in oneyear or lessDue after one year throughfive yearsDue after five years throughten yearsDue afterten yearsMortgage-backedsecuritiesTotalAmortized cost$12,218$3,869$600$135$147$16,969Fair value12,1773,88979814415917,167Note 5.Investments in equity securities Investments in equity securities are summarized as follows(in millions).Cost BasisNet Unrealized GainsFair ValueMarch 31,2024*Banks,insurance and finance$28,513$64,299$92,812Consumer products29,214134,364163,578Commercial,industrial and other46,02633,44879,474$103,753$232,111$335,864*Approximately 75%of the aggregate fair value was concentrated in five companies(American Express Company$34.5 billion;Apple Inc.$135.4 billion;Bank of America Corporation$39.2 billion;The Coca-Cola Company$24.5 billion and Chevron Corporation$19.4 billion).Cost BasisNet Unrealized GainsFair ValueDecember 31,2023*Banks,insurance and finance$27,136$51,176$78,312Consumer products34,248166,895201,143Commercial,industrial and other48,03226,35574,387$109,416$244,426$353,842*Approximately 79%of the aggregate fair value was concentrated in five companies(American Express Company$28.4 billion;Apple Inc.$174.3 billion;Bank of America Corporation$34.8 billion;The Coca-Cola Company$23.6 billion and Chevron Corporation$18.8 billion).In 2019,we invested$10 billion in non-voting Cumulative Perpetual Preferred Stock of Occidental Petroleum Corporation(“Occidental”)and in Occidental common stock warrants.During 2022,we began acquiring common stock of Occidental.Our aggregate voting interest in Occidental common stock exceeded 20%on August 4,2022,and we adopted the equity method as of that date.See Note 6.Our investments in the Occidental preferred stock and Occidental common stock warrants are recorded at fair value within Commercial,industrial and other in the tables above.Such investments are not in-substance common stock under GAAP and are not eligible for the equity method.The Occidental preferred stock accrues dividends at 8%per annum and is redeemable at the option of Occidental commencing in 2029 at a redemption price equal to 105%of the liquidation value,plus any accumulated and unpaid dividends.As of March 31,2024,our investment in Occidental preferred stock had an aggregate liquidation value of approximately$8.5 billion,which reflected mandatory redemptions by Occidental during 2023 of approximately$1.5 billion.The Occidental common stock warrants allow us to purchase up to 83.86 million shares of Occidental common stock at an exercise price of$59.62 per share.The warrants are exercisable in whole or in part until one year after the date the preferred stock is fully redeemed.10Notes to Consolidated Financial StatementsNote 5.Investments in equity securitiesOn March 31,2024,we owned 151.6 million shares of American Express Company(“American Express”)common stock representing 21.1%of its outstanding common stock.Since 1995,we have been party to an agreement with American Express whereby we agreed to vote a significant portion of our shares in accordance with the recommendations of the American Express Board of Directors.We have also agreed to passivity commitments as requested by the Board of Governors of the Federal Reserve System,which collectively,in our judgment,restrict our ability to exercise significant influence over the operating and financial policies of American Express.Accordingly,we do not use the equity method with respect to our investment in American Express common stock,and we continue to record our investment at fair value.Note 6.Equity method investments Berkshire and its subsidiaries hold investments in certain businesses that are accounted for pursuant to the equity method.Currently,the most significant of these are our investments in the common stock of The Kraft Heinz Company(“Kraft Heinz”)and Occidental.As of March 31,2024,we owned 26.8%of the outstanding Kraft Heinz common stock and 28.2%of the outstanding Occidental common stock,which excluded the potential effect of the exercise of the Occidental common stock warrants.Kraft Heinz manufactures and markets food and beverage products,including condiments and sauces,cheese and dairy,meals,meats,refreshment beverages,coffee and other grocery products.Occidental is an international energy company,whose activities include oil and natural gas exploration,development and production and chemicals manufacturing businesses.Occidentals financial information is not available in time for concurrent reporting in our Consolidated Financial Statements.Therefore,we report the equity method effects for Occidental on a one-quarter lag.Kraft Heinz and Occidental common stocks are publicly traded.The fair values and our carrying values of these investments are included in the following table(in millions).Carrying ValueFair ValueMarch 31,2024December 31,2023March 31,2024December 31,2023Kraft Heinz$13,274$13,230$12,009$12,035Occidental15,87315,41016,11914,552Other438426$29,585$29,066As of March 31,2024,the excess of our carrying value over the fair value of our investment in Kraft Heinz was 9.5%of the carrying value.We evaluated this investment for other-than-temporary impairment as of March 31,2024,and based on the prevailing facts and circumstances,concluded the recognition of an impairment charge in earnings was not required.We also own a 50%interest in Berkadia Commercial Mortgage LLC(“Berkadia”),which is accounted for under the equity method and is included in other in the preceding table.Jefferies Financial Group Inc.(“Jefferies”)owns the other 50%interest.Berkadia engages in mortgage banking,investment sales and servicing of commercial/multi-family real estate loans.Berkadias commercial paper borrowing capacity(currently limited to$1.5 billion)is supported by a surety policy issued by a Berkshire insurance subsidiary.Jefferies is obligated to indemnify us for one-half of any losses incurred under the policy.As of March 31,2024,the carrying values of our investments in Kraft Heinz and Berkadia approximated our share of shareowners equity of each of these entities.The carrying value of our investment in Occidental common stock exceeded our share of its shareholders equity as of December 31,2023 by approximately$9.7 billion.Based upon the limited information available to us,we concluded the excess represents goodwill.Our earnings and distributions received from equity method investments are summarized in the following table(in millions).As previously described,on February 1,2023,we ceased accounting for Pilot under the equity method.Equity method earnings attributable to Pilot were$105 million for the month ending January 31,2023.The earnings we recorded in the first quarter of 2024 and 2023 for Occidental represented our share of its earnings for the fourth quarter of 2023 and 2022,respectively.Equity in EarningsDistributions ReceivedFirst QuarterFirst Quarter2024202320242023Kraft Heinz$215$222$130$130Occidental2633704125Other15964$493$688$175$15511Notes to Consolidated Financial Statements Note 6.Equity method investments Summarized consolidated financial information of Kraft Heinz follows(in millions).March 30,2024December 30,2023Assets$90,309$90,339Liabilities40,62140,617First Quarter20242023Sales$6,411$6,489Net earnings attributable to Kraft Heinz common shareholders801836Summarized consolidated financial information of Occidental follows(in millions).December 31,2023September 30,2023Assets$74,008$71,287Liabilities43,65942,515Quarter ending December 31,2023Quarter ending December 31,2022Total revenues and other income$7,529$8,326Net earnings attributable to Occidental common shareholders1,0291,727Note 7.Investment gains(losses)Investment gains(losses)in the first quarter of 2024 and 2023 are summarized as follows(in millions).First Quarter20242023Investment gains(losses):Equity securities:Change in unrealized investment gains(losses)during the period on securities held at the end of the period$3,982$31,317Investment gains(losses)on securities sold during the period(2,104)370 1,87831,687Fixed maturity securities:Gross realized gains13124Gross realized losses(12)(52)Other(3)2,999$1,876$34,758Equity securities gains and losses include unrealized gains and losses from changes in fair values during the period on equity securities we still own,as well as gains and losses on securities we sold during the period.Our proceeds from sales of equity securities were approximately$20.0 billion in the first quarter of 2024 and$13.3 billion in 2023.In the preceding table,investment gains and losses on equity securities sold during the period represent the difference between the sales proceeds and the fair value of the equity securities sold at the beginning of the applicable period or,if later,the acquisition date.Taxable gains and losses on equity securities sold are generally the difference between the proceeds from sales and cost.Our sales of equity securities produced taxable gains in the first quarter of$14.2 billion in 2024 and$2.2 billion in 2023.Other investment gains in the first quarter of 2023 included a non-cash gain of approximately$3.0 billion from the remeasurement of our pre-existing 38.6%interest in Pilot through the application of acquisition accounting under GAAP.12Notes to Consolidated Financial Statements Note 8.Loans and finance receivables Loans and finance receivables are summarized as follows(in millions).March 31,2024December 31,2023Loans and finance receivables before allowances and discounts$27,082$26,289Allowances for credit losses(973)(950)Unamortized acquisition discounts and points(674)(658)$25,435$24,681Loans and finance receivables are principally manufactured home loans,and to a lesser extent,commercial loans and site-built home loans.Reconciliations of the allowance for credit losses on loans and finance receivables for the first quarter of 2024 and 2023 follow(in millions).First Quarter20242023Balance at the beginning of the year$950$856Provision for credit losses3937Charge-offs,net of recoveries(16)(17)Balance at March 31$973$876As of March 31,2024,substantially all manufactured and site-built home loans were evaluated collectively for impairment,and we considered approximately 97%of these loans to be current as to payment status.A summary of performing and non-performing home loans before discounts and allowances by year of loan origination as of March 31,2024 follows(in millions).Origination Year 20242023202220212020PriorTotalPerforming$1,971$5,432$3,892$3,258$2,523$8,980$26,056Non-performing21013161260113$1,973$5,442$3,905$3,274$2,535$9,040$26,169We are also a lender under commercial loan agreements.These loans had an aggregate carrying value of approximately$810 million at March 31,2024 and$850 million at December 31,2023.These loans are generally secured by real estate properties or by other assets and are individually evaluated for expected credit losses.Note 9.Other receivables Other receivables are comprised of the following(in millions).March 31,2024December 31,2023Insurance and other:Insurance premiums receivable$19,695$19,052Reinsurance recoverables5,4217,060Trade receivables15,26314,449Other7,0484,269Allowances for credit losses(655)(656)$46,772$44,174Railroad,utilities and energy:Trade receivables$5,378$6,034Other8511,228Allowances for credit losses(166)(176)$6,063$7,086Aggregate provisions for credit losses in the first quarter with respect to receivables in the preceding table were$107 million in 2024 and$151 million in 2023.Charge-offs,net of recoveries,in the first quarter were$116 million in 2024 and$149 million in 2023.13Notes to Consolidated Financial Statements Note 10.InventoriesInventories of our insurance and other businesses are comprised of the following(in millions).March 31,2024December 31,2023Raw materials$5,831$6,026Work in process and other3,3273,345Finished manufactured goods5,0624,969Goods acquired for resale9,4509,819$23,670$24,159Inventories,materials and supplies of our railroad,utilities and energy businesses are included in other assets and were approximately$4.1 billion at March 31,2024 and$4.2 billion as of December 31,2023.Note 11.Property,plant and equipment A summary of property,plant and equipment of our insurance and other businesses follows(in millions).March 31,2024December 31,2023Land,buildings and improvements$15,157$15,058Machinery and equipment28,24728,010Furniture,fixtures and other5,5735,566 48,97748,634Accumulated depreciation(26,919)(26,604)$22,058$22,030A summary of property,plant and equipment of our railroad and utilities and energy businesses follows(in millions).The utility generation,transmission and distribution systems and interstate natural gas pipeline assets are owned by regulated public utility and natural gas pipeline subsidiaries.March 31,2024December 31,2023Railroad:Land,track structure and other roadway$72,194$71,692Locomotives,freight cars and other equipment16,38316,256Construction in progress1,6521,715 90,22989,663Accumulated depreciation(19,963)(19,464)70,26670,199Utilities and energy:Utility generation,transmission and distribution systems96,67596,195Interstate natural gas pipeline assets19,35719,226Independent power plants and other14,83014,781Land,buildings and improvements4,6024,540Machinery,equipment and other3,9283,855Construction in progress10,1939,551 149,585148,148Accumulated depreciation(41,563)(40,731)108,022107,417$178,288$177,616Depreciation expense for the first three months of 2024 and 2023 is summarized below(in millions).First Quarter20242023Insurance and other$614$575Railroad,utilities and energy1,7781,739$2,392$2,31414Notes to Consolidated Financial Statements Note 12.Equipment held for lease Equipment held for lease includes railcars,aircraft and other equipment,including over-the-road trailers,intermodal tank containers,cranes,storage units and furniture.Equipment held for lease is summarized below(in millions).March 31,2024December 31,2023Railcars$10,073$10,031Aircraft12,93912,537Other5,6125,576 28,62428,144Accumulated depreciation(11,470)(11,197)$17,154$16,947Depreciation expense for equipment held for lease in the first quarter was$341 million in 2024 and$308 million in 2023.Fixed and variable operating lease revenues for the first quarter of 2024 and 2023 are summarized below(in millions).First Quarter20242023Fixed lease revenue$1,552$1,417Variable lease revenue670627$2,222$2,044Note 13.Goodwill and other intangible assets Reconciliations of the changes in the carrying value of goodwill for the first three months of 2024 and for the year ended December 31,2023 follow(in millions).March 31,2024December 31,2023Balance at the beginning of the year$84,626$78,119Business acquisitions17,347Other,including acquisition period remeasurements and foreign currency translation(78)(840)Balance at the end of the period*$84,549$84,626*Net of accumulated goodwill impairments of$11.1 billion as of March 31,2024 and December 31,2023.Other intangible assets are summarized below(in millions).March 31,2024December 31,2023GrosscarryingamountAccumulatedamortizationNetcarryingvalueGrosscarryingamountAccumulatedamortizationNetcarryingvalueInsurance and other:Customer relationships$28,287$8,051$20,236$28,305$7,901$20,404Trademarks and trade names5,6248504,7745,6198464,773Patents and technology5,2794,1961,0835,2384,1091,129Other4,8031,8512,9524,8261,8053,021$43,993$14,948$29,045$43,988$14,661$29,327Railroad,utilities and energy:Customer relationships and contracts$4,092$855$3,237$4,092$791$3,301Trademarks and trade names3,5921263,4663,592983,494Other1,1821811,0011,1741561,018$8,866$1,162$7,704$8,858$1,045$7,813Other intangible assets of the railroad,utilities and energy businesses are included in other assets.Intangible asset amortization expense in the first quarter was$435 million in 2024 and$429 million in 2023.Intangible assets with indefinite lives were$18.9 billion as of March 31,2024 and December 31,2023 and primarily related to certain customer relationships and trademarks and trade names.15Notes to Consolidated Financial Statements Note 14.Unpaid losses and loss adjustment expenses Reconciliations of the changes in unpaid losses and loss adjustment expenses(“claim liabilities”),excluding liabilities under retroactive reinsurance contracts(see Note 15),for each of the three-month periods ended March 31,2024 and 2023 follow(in millions).20242023Balance at the beginning of the year:Gross liabilities$111,082$107,472Reinsurance recoverable on unpaid losses(4,893)(5,025)Net liabilities106,189102,447Incurred losses and loss adjustment expenses:Current accident year13,85414,776Prior accident years(634)(740)Total13,22014,036Paid losses and loss adjustment expenses:Current accident year(3,663)(3,841)Prior accident years(8,979)(9,747)Total(12,642)(13,588)Foreign currency effect(76)93Balance at March 31:Net liabilities106,691102,988Reinsurance recoverable on unpaid losses4,7914,969Gross liabilities$111,482$107,957Our claim liabilities under property and casualty insurance and reinsurance contracts are based upon estimates of the ultimate claim costs associated with claim occurrences as of the balance sheet date and include estimates for incurred-but-not-reported(“IBNR”)claims.Incurred losses and loss adjustment expenses related to insured events occurring in the current year(“current accident year”)and events occurring in all prior years(“prior accident years”).Incurred and paid losses and loss adjustment expenses are net of reinsurance recoveries.We recorded net reductions of estimated ultimate liabilities for prior accident years of$634 million in the first quarter of 2024 and$740 million in 2023,which produced corresponding reductions in incurred losses and loss adjustment expenses in those periods.These reductions,as percentages of the net liabilities at the beginning of each year,were 0.6%in 2024 and 0.7%in 2023.We reduced estimated ultimate liabilities for prior accident years of primary insurance businesses in the first quarter by$248 million in 2024 and$379 million in 2023,which primarily related to private passenger auto and medical professional liability claims.In the first quarter,estimated ultimate liabilities for prior accident years of property and casualty reinsurance businesses were reduced$386 million in 2024 and$361 million in 2023.The reduction in 2024 derived from both property and casualty claims.16Notes to Consolidated Financial Statements Note 15.Retroactive reinsurance contracts Retroactive reinsurance policies provide indemnification of losses and loss adjustment expenses of short-duration insurance contracts with respect to underlying loss events that occurred prior to the contract inception date,which may include significant levels of asbestos,environmental and other mass tort claims.Retroactive reinsurance contracts are generally subject to aggregate policy limits and thus,our exposure to such claims under these contracts is likewise limited.Reconciliations of the changes in estimated liabilities for retroactive reinsurance unpaid losses and loss adjustment expenses for each of the three-month periods ended March 31,2024 and 2023 follow(in millions).20242023Balance at the beginning of the year$34,647$35,415Incurred losses and loss adjustment expensesCurrent contract year51Prior contract years14Total5114Paid losses and loss adjustment expenses(408)(372)Foreign currency effect(45)6Balance at March 31$34,245$35,063 Incurred losses and loss adjustment expenses$51$14Deferred charge amortization and adjustments177171Incurred losses and loss adjustment expenses included in the Consolidated Statements of Earnings$228$185In the preceding table,the classification of incurred losses and loss adjustment expenses is based on the inception dates of the contracts,which reflect when our exposure to losses began.Incurred losses and loss adjustment expenses in the Consolidated Statements of Earnings include changes in estimated liabilities and related deferred charge asset amortization and adjustments arising from the changes in estimated timing and amount of future loss payments.Unamortized deferred charges on retroactive reinsurance contracts were$9.3 billion at March 31,2024 and$9.5 billion at December 31,2023.Note 16.Long-duration insurance contractsA summary of our long-duration life,annuity and health insurance benefits liabilities as of March 31,2024 and 2023,disaggregated for our two primary product categories,periodic payment annuities and life and health insurance,follows.Other liabilities include incurred-but-not reported claims and claims in the course of settlement.Amounts are in millions.March 31,20242023Periodic payment annuity$10,749$11,174Life and health4,2595,633Other2,9793,130$17,987$19,93717Notes to Consolidated Financial Statements Note 16.Long-duration insurance contractsReconciliations of periodic payment annuity and life and health insurance benefits liabilities for the first quarter of 2024 and 2023 follow(in millions).The information reflects the changes in discounted present values of expected future policy benefits and expected future net premiums before reinsurance ceded.Net premiums represent the portion of expected gross premiums that are required to provide for future policy benefits and variable expenses.Periodic payment annuityLife and health2024202320242023Expected future policy benefits:Balance at the beginning of the year$11,212$10,640$52,665$52,008Balance at the beginning of the year-original discount rates11,68111,54965,87163,584Effect of cash flow assumption changes(34)(1)Effect of actual versus expected experience21(12,870)(519)Change in benefits,net(115)(116)(449)(747)Interest accrual136133284425Foreign currency effect219(389)47Balance at March 31-original discount rates11,70611,58652,41362,789Effect of changes in discount rate assumptions(957)(412)(11,627)(12,169)Balance at March 31$10,749$11,174$40,786$50,620Expected future net premiums:Balance at the beginning of the year$46,916$46,129Balance at the beginning of the year-original discount rates58,73156,535Effect of cash flow assumption changes(25)2Effect of actual versus expected experience(11,278)(413)Change in premiums,net(407)(660)Interest accrual251371Foreign currency effect(358)47Balance at March 31-original discount rates46,91455,882Effect of changes in discount rate assumptions(10,387)(10,895)Balance at March 31$36,527$44,987Liabilities for future policy benefits:Balance at March 31$10,749$11,174$4,259$5,633Reinsurance recoverables(50)(1,565)Balance at March 31,net of reinsurance recoverables$10,749$11,174$4,209$4,068Liabilities for future life and health policy benefits and reinsurance recoverables declined in the first quarter of 2024,primarily attributable to the commutations of certain life reinsurance contracts.The impacts of contract commutations on expected future policy benefits and future net premiums were reflected in effects of actual versus expected experience.18Notes to Consolidated Financial Statements Note 16.Long-duration insurance contracts Other information relating to our long-duration insurance liabilities as of March 31,2024 and 2023 follows(dollars in millions).Periodic payment annuityLife and health2024202320242023Undiscounted expected future gross premiums$95,514$107,831Discounted expected future gross premiums56,58564,421Undiscounted expected future benefits30,95331,24486,800102,881Weighted average discount rate5.4%5.0%4.9%4.9%Weighted average accretion rate4.8%4.8%2.7%3.2%Weighted average duration17 years18 years13 years14 yearsGross premiums earned and interest expense before reinsurance ceded for the first quarter of 2024 and 2023 were as follows(in millions).Gross premiumsInterest expense2024202320242023Periodic payment annuity$136$133Life and health9441,0043354Note 17.Notes payable and other borrowings Notes payable and other borrowings of our insurance and other businesses are summarized below(dollars in millions).The weighted average interest rates and maturity date ranges are based on borrowings as of March 31,2024.WeightedAverageInterest RateMarch 31,2024December 31,2023Insurance and other:Berkshire Hathaway Inc.(“Berkshire”):U.S.Dollar denominated due 2025-20473.6%$3,742$3,740Euro denominated due 2025-20411.1%4,9296,145Japanese Yen denominated due 2024-20600.8%8,2918,896Berkshire Hathaway Finance Corporation(“BHFC”):U.S.Dollar denominated due 2027-20523.6,46514,463Great Britain Pound denominated due 2039-20592.5%2,1732,191Euro denominated due 2030-20341.8%1,3441,374Other subsidiary borrowings due 2024-20514.5%4,6494,696Subsidiary short-term borrowings7.2%1,1301,187$40,723$42,69219Notes to Consolidated Financial Statements Note 17.Notes payable and other borrowings Berkshire parent company borrowings consist of senior unsecured debt.In the first quarter of 2024,Berkshire repaid approximately$1.1 billion of maturing senior notes.In April 2024,Berkshire issued 263.3 billion(approximately$1.7 billion)of senior notes with interest rates ranging from 0.974%to 2.498%and maturity dates ranging from 2027 to 2054.Borrowings of BHFC,a wholly owned finance subsidiary of Berkshire,consist of senior unsecured notes used to fund manufactured housing loans originated or acquired and equipment held for lease of certain subsidiaries.BHFC borrowings are fully and unconditionally guaranteed by Berkshire.Berkshire also guarantees certain debt of other subsidiaries,aggregating approximately$2.7 billion at March 31,2024.Generally,Berkshires guarantee of a subsidiarys debt obligation is an absolute,unconditional and irrevocable guarantee for the full and prompt payment when due of all payment obligations.The carrying values of Berkshire and BHFC non-U.S.Dollar denominated senior notes(5.85 billion,1.75 billion and 1,259 billion par at March 31,2024)reflect the applicable exchange rates as of each balance sheet date.The effects of changes in foreign currency exchange rates during the period are recorded in earnings as a component of selling,general and administrative expenses.Changes in the exchange rates produced pre-tax gains of$781 million in the first quarter of 2024 and pre-tax losses of$26 million in the first quarter of 2023.Notes payable and other borrowings of our railroad,utilities and energy businesses are summarized below(dollars in millions).The weighted average interest rates and maturity date ranges are based on borrowings as of March 31,2024.WeightedAverageInterest RateMarch 31,2024December 31,2023Railroad,utilities and energy:Berkshire Hathaway Energy Company(“BHE”)and subsidiaries:BHE senior unsecured debt due 2025-20534.4%$13,103$13,101Subsidiary and other debt due 2024-20644.6C,92439,072Short-term borrowings5.9%1,5284,148Pilot Travel Centers(“Pilot”)and subsidiaries5,776Burlington Northern Santa Fe(“BNSF”)and subsidiaries due 2024-20974.6#,47623,482$82,031$85,579BHE subsidiary debt represents amounts issued pursuant to separate financing agreements.Substantially all of the assets of certain BHE subsidiaries are,or may be,pledged or encumbered to support or otherwise secure such debt.These borrowing arrangements generally contain various covenants,including covenants which pertain to leverage ratios,interest coverage ratios and/or debt service coverage ratios.In the first quarter of 2024,BHE subsidiaries issued$5.1 billion of term debt with a weighted average interest rate of 5.4%and maturity dates ranging from 2029 to 2055.During the first quarter of 2024,BHE and its subsidiaries repaid short-term borrowings of approximately$2.6 billion.As of December 31,2023,Pilots borrowings primarily represented secured syndicated loans.In March,2024,certain Berkshire insurance subsidiaries loaned$5.7 billion to Pilot,which Pilot used to prepay its then outstanding third-party borrowings.BNSFs borrowings are primarily senior unsecured debentures.As of March 31,2024,BHE,BNSF and their subsidiaries were in compliance with all applicable debt covenants.Berkshire does not guarantee any debt,borrowings or lines of credit of BHE,BNSF or their subsidiaries.Unused lines of credit and commercial paper capacity to support operations and provide additional liquidity for our subsidiaries were approximately$9.9 billion at March 31,2024,of which approximately$8.7 billion related to BHE and its subsidiaries.20Notes to Consolidated Financial Statements Note 18.Fair value measurements Our financial assets and liabilities are summarized below,with fair values shown according to the fair value hierarchy(in millions).The carrying values of cash and cash equivalents,U.S.Treasury Bills,other receivables and accounts payable,accruals and other liabilities are considered to be reasonable estimates of or otherwise approximate the fair values.CarryingValueFair ValueLevel 1Level 2Level 3March 31,2024Investments in fixed maturity securities:U.S.Treasury,U.S.government corporations and agencies$4,503$4,503$4,469$34$Foreign governments10,99710,99710,748249Corporate bonds1,4291,429851578Other238238238Investments in equity securities335,864335,864325,1821010,672Investments in Kraft Heinz&Occidental common stock29,14728,12828,128Loans and finance receivables25,43524,98189824,083Derivative contract assets(1)2382383818317Derivative contract liabilities(1)2952954150141Notes payable and other borrowings:Insurance and other40,72336,69336,66825Railroad,utilities and energy82,03175,92175,921December 31,2023Investments in fixed maturity securities:U.S.Treasury,U.S.government corporations and agencies$10,269$10,269$10,234$35$Foreign governments11,80511,80511,559246Corporate bonds1,4491,449860589Other235235235Investments in equity securities353,842353,842343,3581010,474Investments in Kraft Heinz&Occidental common stock28,64026,58726,587Loans and finance receivables24,68124,19089223,298Derivative contract assets(1)3343343928213Derivative contract liabilities(1)213213711195Notes payable and other borrowings:Insurance and other42,69239,18439,15331Railroad,utilities and energy85,57981,03681,036(1)Assets are included in other assets and liabilities are included in accounts payable,accruals and other liabilities.The fair values of substantially all of our financial instruments were measured using market or income approaches.The hierarchy for measuring fair value consists of Levels 1 through 3,which are described below.Level 1 Inputs represent unadjusted quoted prices for identical assets or liabilities exchanged in active markets.Level 2 Inputs include directly or indirectly observable inputs(other than Level 1 inputs)such as quoted prices for similar assets or liabilities exchanged in active or inactive markets;quoted prices for identical assets or liabilities exchanged in inactive markets;other inputs that may be considered in fair value determinations of the assets or liabilities,such as interest rates and yield curves,volatilities,prepayment speeds,loss severities,credit risks and default rates;and inputs that are derived principally from or corroborated by observable market data by correlation or other means.Pricing evaluations generally reflect discounted expected future cash flows,which incorporate yield curves for instruments with similar characteristics,such as credit ratings,estimated durations and yields for other instruments of the issuer or entities in the same industry sector.21Notes to Consolidated Financial Statements Note 18.Fair value measurements Level 3 Inputs include unobservable inputs used in the measurement of assets and liabilities.Management is required to use its own assumptions regarding unobservable inputs because there is little,if any,market activity in the assets or liabilities and it may be unable to corroborate the related observable inputs.Unobservable inputs require management to make certain projections and assumptions about the information that would be used by market participants in valuing assets or liabilities.Reconciliations of significant assets and liabilities measured and carried at fair value on a recurring basis with the use of significant unobservable inputs(Level 3)for the three months ended March 31,2024 and 2023 follow(in millions).Balance atJanuary 1Gains(losses)in earningsAcquisitions(dispositions)Transfers out of Level 3Balance at March 31Investments in equity securities:2024$10,468$199$10,667202312,169(54)(521)11,594Quantitative information as of March 31,2024 for the significant assets and liabilities measured and carried at fair value on a recurring basis with the use of significant unobservable inputs(Level 3)follows(dollars in millions).FairValuePrincipal ValuationTechniquesUnobservableInputsWeightedAverageInvestments in equity securities:Preferred stock$8,609Discounted cash flowExpected duration6 years Discounts for liquidity and subordination372 bpsCommon stock warrants2,058Warrant pricing modelExpected duration6 years Volatility41%Investments in equity securities in the preceding table include our investments in certain preferred stock and common stock warrants that do not have readily determinable market values as defined under GAAP.These investments are private placements with contractual terms that restrict transfers and currently prevent us from economically hedging our investments.We applied discounted cash flow techniques in valuing the preferred stock and we made assumptions regarding the expected duration of the investment and the effects of subordination in liquidation.In valuing the common stock warrants,we used a warrant valuation model.While most of the inputs to the warrant model are observable,we made assumptions regarding the expected duration and volatility.Note 19.Common stock Changes in Berkshires issued,treasury and outstanding common stock during the first quarter of 2024 are shown in the table below.In addition to our common stock,1,000,000 shares of preferred stock are authorized,but none are issued.Class A,$5 Par Value(1,650,000 shares authorized)Class B,$0.0033 Par Value(3,225,000,000 shares authorized)IssuedTreasuryOutstandingIssuedTreasuryOutstandingBalance at December 31,2023639,328(71,553)567,7751,528,152,352(217,590,844)1,310,561,508Conversions of Class A to Class B common stock(400)(400)600,000600,000Treasury stock acquired(4,232)(4,232)Balance at March 31,2024638,928(75,785)563,1431,528,752,352(217,590,844)1,311,161,508Each Class A common share is entitled to one vote per share.Class B common stock possesses dividend and distribution rights equal to one-fifteen-hundredth(1/1,500)of such rights of Class A common stock.Each Class B common share possesses voting rights equal to one-ten-thousandth(1/10,000)of the voting rights of a Class A share.Unless otherwise required under Delaware General Corporation Law,Class A and Class B common shares vote as a single class.Each share of Class A common stock is convertible,at the option of the holder,into 1,500 shares of Class B common stock.Class B common stock is not convertible into Class A common stock.On an equivalent Class A common stock basis,there were 1,437,251 shares outstanding as of March 31,2024 and 1,441,483 shares outstanding as of December 31,2023.22Notes to Consolidated Financial Statements Note 19.Common stock Since we have two classes of common stock,we provide earnings per share data on the Consolidated Statements of Earnings for average equivalent Class A shares outstanding and average equivalent Class B shares outstanding.Class B shares are economically equivalent to one-fifteen-hundredth(1/1,500)of a Class A share.Average equivalent Class A shares outstanding represents average Class A shares outstanding plus one-fifteen-hundredth(1/1,500)of the average Class B shares outstanding.Average equivalent Class B shares outstanding represents average Class B shares outstanding plus 1,500 times the average Class A shares outstanding.Berkshires common stock repurchase program permits Berkshire to repurchase its shares any time that Warren Buffett,Berkshires Chairman of the Board and Chief Executive Officer,believes that the repurchase price is below Berkshires intrinsic value,conservatively determined.The program continues to allow share repurchases in the open market or through privately negotiated transactions and does not specify a maximum number of shares to be repurchased.However,repurchases will not be made if they would reduce the value of Berkshires consolidated cash,cash equivalents and U.S.Treasury Bill holdings below$30 billion.The repurchase program does not obligate Berkshire to repurchase any specific dollar amount or number of Class A or Class B shares and there is no expiration date to the program.Note 20.Income taxes Our consolidated effective income tax rates were 18.3%in the first quarter of 2024 compared to 20.1%in the first quarter of 2023.Our effective income tax rate normally reflects recurring benefits from dividends-received deductions applicable to investments in certain equity securities and production tax credits related to wind-powered electricity generation placed in service in the U.S.Our periodic effective income tax rate will also vary due to the changes in mix of pre-tax earnings,including realized and unrealized investment gains or losses with respect to our investments in equity securities,the amount of non-deductible goodwill impairment charges and other expenses and the underlying income tax rates applicable in the various taxing jurisdictions,and enacted changes thereto.On August 16,2022,the Inflation Reduction Act of 2022(“the 2022 Act”)was signed into law.The 2022 Act contains numerous provisions,including a 15%corporate alternative minimum income tax(“CAMT”)on“adjusted financial statement income”,expanded tax credits for clean energy incentives and a 1%excise tax on corporate stock repurchases.The provisions of the 2022 Act are effective for tax years beginning after December 31,2022.The extent to which the Company incurs CAMT will depend on the facts and circumstances of the given tax year.We do not expect to incur a CAMT liability in 2024.The Internal Revenue Service and the U.S.Department of Treasury may release additional guidance in the future.We will continue to evaluate the impact of the 2022 Act as more guidance becomes available.The Organization for Economic Co-operation and Development has issued Pillar Two model rules introducing a new global minimum tax of 15%intended to be effective on January 1,2024.While the U.S.has not yet adopted the Pillar Two rules,various other governments around the world are enacting legislation.As currently designed,Pillar Two will ultimately apply to our worldwide operations.Considering we do not have material operations in jurisdictions with income tax rates lower than the Pillar Two minimum,these rules are not expected to materially increase our global tax costs.There remains uncertainty as to the final Pillar Two model rules.We will continue to monitor U.S.and global legislative action related to Pillar Two for potential impacts.Note 21.Accumulated other comprehensive income A summary of the net changes in after-tax accumulated other comprehensive income attributable to Berkshire Hathaway shareholders for the three months ending March 31,2024 and 2023 follows(in millions).Unrealizedgains(losses)on investmentsForeign currency translationLong-duration insurance contractsDefined benefit pension plansOtherTotalFirst quarter of 2024Balance at the beginning of the year$190$(5,393)$1,353$(97)$184$(3,763)Other comprehensive income(29)(523)2843(22)(287)Balance at the end of the period$161$(5,916)$1,637$(94)$162$(4,050)First quarter of 2023 Balance at the beginning of the year$(187)$(6,142)$1,541$(552)$288$(5,052)Other comprehensive income194244(291)44(115)76Balance at the end of the period$7$(5,898)$1,250$(508)$173$(4,976)23Notes to Consolidated Financial Statements Note 22.Supplemental cash flow information A summary of supplemental cash flow information follows(in millions).First Quarter20242023Cash paid during the period for:Income taxes$339$312Interest:Insurance and other434491Railroad,utilities and energy926799Non-cash investing and financing activities:Liabilities assumed in connection with business acquisitions610,747Note 23.Contingencies and commitments We are parties in a variety of legal actions that routinely arise out of the normal course of business,including legal actions seeking to establish liability directly through insurance contracts or indirectly through reinsurance contracts issued by Berkshire subsidiaries.Plaintiffs occasionally seek punitive or exemplary damages.We do not believe that such normal and routine litigation will have a material effect on our financial condition or results of operations.PacifiCorp,a wholly owned subsidiary of Berkshires 92%owned subsidiary,Berkshire Hathaway Energy Company(“BHE”),operates as a regulated electric utility in Oregon and other Western states.In September 2020,a severe weather event resulting in high winds,low humidity and warm temperatures,contributed to several major wildfires(the“2020 Wildfires”),which resulted in real and personal property and natural resource damage,personal injuries and loss of life and widespread power outages in Oregon and Northern California.These wildfires spread across certain parts of PacifiCorps service territory and surrounding areas across multiple counties in Oregon and California,including Siskiyou County,California;Jackson County,Oregon;Douglas County,Oregon;Marion County,Oregon;Lincoln County,Oregon;and Klamath County,Oregon,burning over 500,000 acres in aggregate.Third-party reports for these wildfires indicate over 2,000 structures destroyed,including residences;several structures damaged;multiple individuals injured;and several fatalities.On July 29,2022,a wildfire began in the Oak Knoll Ranger District of the Klamath National Forest in Siskiyou County,California located in PacifiCorps service territory(the“2022 Wildfire”).Third-party reports indicate that the 2022 Wildfire resulted in 11 structures damaged,185 structures destroyed,12 injuries and four fatalities and consumed 60,000 acres in aggregate.The 2020 Wildfires and 2022 Wildfire,together,are referred to as the“Wildfires”.Investigations into the cause and origin of each of the Wildfires are complex and ongoing and have been or are being conducted by various entities,including the U.S.Forest Service,the California Public Utilities Commission,the Oregon Department of Forestry,the Oregon Department of Justice,PacifiCorp and various experts engaged by PacifiCorp.As of the date of this filing,a significant number of complaints and demands alleging similar claims related to the 2020 Wildfires have been filed in Oregon and California,including a class action complaint in Oregon for which certain jury verdicts were issued as described below.The plaintiffs seek damages for economic losses,noneconomic losses,including mental suffering,emotional distress,personal injury and loss of life,punitive damages,other damages and attorneys fees.Several insurance carriers have filed subrogation complaints in Oregon and California with allegations similar to those made in the aforementioned complaints.Additionally,the U.S.and Oregon Departments of Justice have informed PacifiCorp that they are contemplating filing actions against PacifiCorp in connection with certain of the Oregon 2020 Wildfires.PacifiCorp is actively cooperating with the U.S.and Oregon Departments of Justice on resolving these alleged claims through alternative dispute resolution.As of March 31,2024,amounts sought in the complaints and demands filed in Oregon and in certain demands in California approximated$7 billion,excluding any doubling or trebling of damages included in the complaints and those settled.Generally,the complaints filed in California do not specify damages sought and are not included in this amount.Multiple complaints have also been filed in California on behalf of plaintiffs related to the 2022 Wildfire.The plaintiffs seek damages for economic losses,noneconomic losses,including mental suffering,emotional distress,personal injury and loss of life,punitive damages,other damages and attorneys fees,but the amount of damages sought is not specified.Final determinations of liability will only be made following the completion of comprehensive investigations,litigation and similar processes.In April 2024,a complaint in the James case described below was filed by 1,000 individual class members seeking$5 billion in economic and$25 billion in noneconomic damages before doubling of economic damages and punitive damages included in the complaint.24Notes to Consolidated Financial Statements Note 23.Contingencies and commitmentsIn September 2020,a class action complaint against PacifiCorp was filed captioned Jeanyne James et al.v.PacifiCorp et al.,in Multnomah County Circuit Court,Oregon(the“James case”).In June 2023,a jury issued its verdict for the 17 named plaintiffs in the James case finding PacifiCorp liable to the 17 individual plaintiffs and to the class with respect to the four 2020 Wildfires named in the complaint.The jury awarded the 17 named plaintiffs$90 million of damages,including$4 million of economic and property damages,$68 million of noneconomic damages and$18 million of punitive damages based on a 0.25 multiplier of the economic and noneconomic damages.In April 2024,a complaint against PacifiCorp naming 1,000 individual class members was filed in Multnomah County Circuit Court,Oregon,referencing James as the lead case.The April 2024 James complaint makes damages only allegations seeking economic,noneconomic and punitive damages,as well as doubling of economic damages.PacifiCorp believes the magnitude of damages sought by the class members in the April 2024 James complaint to be of remote likelihood of being awarded based on the amounts awarded in the jury verdicts described below that are being appealed.In September 2023,the Multnomah County Circuit Court ordered trial dates for three damages phase trials described below wherein plaintiffs in each of the three damages phase trials would present evidence regarding their damages.In January 2024,the Multnomah County Circuit Court entered a limited judgment and money award for the June 2023 James case verdict.The limited judgment awards$92 million of damages based on the amounts awarded by the jury,as well as doubling of the economic damages and offsetting of any insurance proceeds received by plaintiffs.The limited judgment created a lien against PacifiCorp,attaching a debt for the money awards.PacifiCorp posted a supersedeas bond,which stays any effort to seek payment of the judgment pending final resolution of any appeals.Under ORS 82.010,interest at a rate of 9%per annum will accrue on the judgment commencing at the date the judgment was entered until the entire money award is paid,amended or reversed by an appellate court.In January 2024,PacifiCorp filed a notice of appeal associated with the June 2023 verdict in the James case,including whether the case can proceed as a class action,and filed a motion to stay further damages phase trials.On February 14,2024,the Oregon Court of Appeals denied PacifiCorps request to stay the damages phase trials.On February 13,2024,the 17 named plaintiffs filed a notice of cross-appeal as to the January 2024 limited judgment and money award.The appeals process and further actions could take several years.In January 2024,the jury for the first James case damages phase trial awarded nine plaintiffs$62 million of damages,including$6 million of economic damages and$56 million of noneconomic damages.After the January 2024 jury verdict,the Multnomah County Circuit Court doubled the economic damages to$12 million and added$16 million of punitive damages using the 0.25 multiplier determined by the jury for the June 2023 James case verdict bringing the total damages awarded to$84 million.PacifiCorp requested that the Multnomah County Circuit Court judge offset the damage awards by deducting insurance proceeds received by any of the nine plaintiffs,and on March 25,2024,the Multnomah County Circuit Court granted in large part the offset request.In April 2024,the Multnomah County Circuit Court entered a limited judgment and money award for the January 2024 James verdict.The limited judgment awards$80 million of damages based on the amounts awarded by the jury and offsetting insurance proceeds received by plaintiffs.The limited judgment created a lien against PacifiCorp,attaching a debt for the money awards.In April 2024,PacifiCorp posted a supersedeas bond,which stays any effort to seek payment of the judgment pending final resolution of any appeals.PacifiCorp amended its January 2024 appeal of the June 2023 James verdict to include the January 2024 jury verdict.In March 2024,the jury for the second James case damages phase trial awarded ten plaintiffs$42 million of damages,including$12 million of doubled economic damages,$23 million of noneconomic damages and$7 million of punitive damages using the 0.25 multiplier determined by the jury for the June 2023 James case verdict.PacifiCorp has requested that the Multnomah County Circuit Court judge offset the damage awards by deducting insurance proceeds received by any of the ten plaintiffs.PacifiCorp intends to appeal the jurys damage awards associated with the March 2024 jury verdict once judgment is entered.In March 2024,settlement was reached with five commercial timber plaintiffs in the James case,and the jury trial scheduled for April 2024 was cancelled.A provision for a loss contingency is recorded when it is probable a liability has been incurred and the amount of loss can be reasonably estimated.PacifiCorp evaluates the related range of reasonably estimated losses and records a loss based on its best estimate within that range or the lower end of the range if there is no better estimate.Estimated probable losses associated with the Wildfires were based on the information available to the date of this filing,including(i)ongoing cause and origin investigations;(ii)ongoing settlement and mediation discussions;(iii)other litigation matters and upcoming legal proceedings;and(iv)the status of the James case.Wildfire estimated losses include estimates for fire suppression costs,real and personal property damages,natural resource damages and noneconomic damages such as personal injury damages and loss of life damages that are considered probable of being incurred and that it is able to reasonably estimate at this time,and which is subject to change as additional relevant information becomes available.25Notes to Consolidated Financial Statements Note 23.Contingencies and commitments Through March 31,2024,PacifiCorp recorded cumulative estimated pre-tax probable Wildfire losses,before expected related insurance recoveries,of approximately$2.4 billion,of which approximately$700 million was paid in settlements,leaving an unpaid estimated liability of approximately$1.7 billion as of March 31,2024.These losses were accrued prior to 2024 and included$400 million accrued in the first quarter of 2023,which were included in energy operating expenses in the Consolidated Statements of Earnings.PacifiCorp paid an additional$52 million after March 31,2024 and has reached additional settlement agreements associated with the 2020 Wildfires totaling$23 million that have not yet been paid.As a result of these settlements,various trials have been cancelled.It is reasonably possible PacifiCorp will incur significant additional Wildfire losses beyond the amounts currently accrued;however,it is currently unable to reasonably estimate the range of possible additional losses that could be incurred due to the number of properties and parties involved,including claimants in the class to the James case,the variation in those types of properties and the ultimate outcome of legal actions.HomeServices of America,Inc.(“HomeServices”),a wholly owned subsidiary of BHE,is currently defending against several antitrust cases,all in federal district courts.In each case,plaintiffs claim HomeServices and certain of its subsidiaries conspired with co-defendants to artificially inflate real estate commissions by following and enforcing multiple listing service(“MLS”)rules that require listing agents to offer a commission split to cooperating agents in order for the property to appear on the MLS(“Cooperative Compensation Rule”).None of the complaints specify damages sought.However,two cases also allege Texas state law deceptive trade practices claims,for which plaintiffs have provided written notice of the damages sought totaling approximately$9 billion by separate notice as required by Texas law.In one of these cases,Burnett(formerly Sitzer)et al.v.HomeServices of America,Inc.et al.(the“Burnett case”),a jury trial commenced on October 16,2023,and the jury returned a verdict for the plaintiffs on October 31,2023,finding that the named defendants participated in a conspiracy to follow and enforce the Cooperative Compensation Rule,which conspiracy had the purpose or effect of raising,inflating,or stabilizing broker commission rates paid by home sellers.The jury further found that the class plaintiffs had proved damages in the amount of$1.8 billion.Joint and several liability applies for the co-defendants.Federal law authorizes trebling of damages and the award of pre-judgment interest and attorney fees.To date,all co-defendants have reached settlements with the plaintiffs,with several co-defendants having hearing dates for final approval of their settlement agreements by the court.In April 2024,HomeServices agreed to terms with the plaintiffs to settle all claims asserted against HomeServices in the Burnett case as part of a proposed nationwide class settlement.The final settlement agreement,which includes scheduled payments over the next four years aggregating$250 million,has yet to be filed with the court and is ultimately subject to court approval.If the settlement is not approved by the court,HomeServices intends to vigorously appeal on multiple grounds the jurys findings and damage award in the Burnett case,including whether the case can proceed as a class action.The appeals process and further actions could take several years.Berkshire and certain of its subsidiaries are also involved in other kinds of legal actions,some of which assert or may assert claims or seek to impose fines and penalties.We currently believe that liabilities that may arise as a result of such other pending legal actions will not have a material effect on our consolidated financial condition or results of operations.26Notes to Consolidated Financial Statements Note 24.Revenues from contracts with customers The following table summarizes customer contract revenues disaggregated by reportable segment and the source of the revenue for the first quarter of 2024 and 2023(in millions).Revenues from Pilot in 2023 are for the two months ending March 31,2023.Other revenues,which are not considered to be revenues from contracts with customers under GAAP,are primarily insurance premiums earned,interest,dividend and other investment income and leasing revenues.ManufacturingMcLaneServiceandRetailingBNSFBerkshireHathawayEnergyPilotInsurance,Corporateand otherTotalThree months ending March 31,2024Manufactured products:Industrial and commercial$7,210$52$7,262Building4,6744,674Consumer4,1934,193Grocery and convenience store distribution7,6027,602Food and beverage distribution4,4364,436Auto sales2,5522,552Other retail and wholesale distribution8193,7686145,201Service3772211,3775,618806648,463Electricity,natural gas and fuel5,12911,77916,908Total17,27312,2597,7495,6185,93512,45761,291Other revenues1,238411,923193303724,99028,578$18,511$12,300$9,672$5,637$6,265$12,494$24,990$89,869Three months ending March 31,2023Manufactured products:Industrial and commercial$7,229$65$7,294Building4,7584,758Consumer4,0354,035Grocery and convenience store distribution7,7937,793Food and beverage distribution4,7624,762Auto sales2,5652,565Other retail and wholesale distribution7994,2304225,451Service3542841,3265,985811218,781Electricity,natural gas and fuel5,2919,01514,306Total17,17512,8398,1865,9856,1029,45859,745Other revenues1,090421,716163373822,40925,648$18,265$12,881$9,902$6,001$6,439$9,496$22,409$85,393A summary of the transaction price allocated to the significant unsatisfied remaining performance obligations related to contracts with expected durations exceeding one year as of March 31,2024 and the timing of when the performance obligations are expected to be satisfied follows(in millions).Less than12 monthsGreater than12 monthsTotalElectricity,natural gas and fuel$3,017$19,752$22,769Other sales and service contracts3,2055,2238,42827Notes to Consolidated Financial Statements Note 25.Business segment data Our operating businesses include a large and diverse group of insurance,freight rail transportation,utilities and energy,manufacturing,service and retailing businesses.We organize our reportable business segments in a manner that reflects how management views those business activities.Certain businesses are grouped together for segment reporting based upon similar products or product lines and marketing,selling and distribution characteristics,even though those business units are operated under separate local management.We acquired control of Pilot on January 31,2023.In this presentation,revenues and pre-tax earnings of the Pilot segment in 2023 are for the two months ending March 31.Prior to January 31,2023,our earnings from Pilot were determined under the equity method and were included in earnings from non-controlled businesses.Revenues and earnings before income taxes by segment for the first quarter of 2024 and 2023 were as follows(in millions).First Quarter20242023Revenues of Operating BusinessesInsurance:Underwriting:GEICO$10,234$9,626Berkshire Hathaway Primary Group4,5413,961Berkshire Hathaway Reinsurance Group6,6996,209Investment income3,1642,392Total insurance24,63822,188BNSF5,6606,019BHE6,2776,451Pilot12,5039,508Manufacturing18,52918,289McLane12,47513,059Service and retailing9,7039,931 89,78585,445Reconciliation to consolidated amountCorporate,eliminations and other84(52)$89,869$85,393First Quarter20242023Earnings Before Income Taxes of Operating BusinessesInsurance:Underwriting:GEICO$1,928$703Berkshire Hathaway Primary Group486268Berkshire Hathaway Reinsurance Group912231Investment income3,1522,385Total insurance6,4783,587BNSF1,5191,649BHE432223Pilot70136Manufacturing2,9142,611McLane165113Service and retailing9081,221 12,4869,540Reconciliation to consolidated amountInvestment gains(losses)1,87634,758Interest expense,not allocated to segments(96)(114)Non-controlled businesses493688Corporate,eliminations and other947(120)$15,706$44,75228Item 2.Managements Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Net earnings attributable to Berkshire Hathaway shareholders for each of the three-month periods ended March 31,2024 and 2023 are disaggregated in the table that follows.Amounts are after deducting income taxes and exclude earnings attributable to noncontrolling interests(in millions).First Quarter20242023Insurance underwriting$2,598$911Insurance investment income2,5981,969BNSF1,1431,247Berkshire Hathaway Energy(“BHE”)717416Pilot Travel Centers(“Pilot”)6783Manufacturing,service and retailing3,0212,982Non-controlled businesses*405568Investment gains1,48027,439Other673(111)Net earnings attributable to Berkshire Hathaway shareholders$12,702$35,504*Includes certain businesses in which Berkshire had between a 20%and 50%ownership interest.Through our subsidiaries,we engage in numerous diverse business activities.We manage our operating businesses on an unusually decentralized basis.There are few centralized or integrated business functions.Our senior corporate management team participates in and is ultimately responsible for significant capital allocation decisions,investment activities and the selection of the Chief Executive to head each of the operating businesses.The business segment data(Note 25 to the accompanying Consolidated Financial Statements and Note 26 to the Consolidated Financial Statements included in Form 10-K for the year ended December 31,2023)should be read in conjunction with this discussion.Our periodic operating results may be affected in future periods due to ongoing macroeconomic and geopolitical events,as well as changes in industry or company-specific factors or events.We cannot reliably predict the future economic effects of these factors or events on our businesses.Insurance underwriting after-tax earnings increased$1.7 billion in the first quarter of 2024 compared to 2023.Earnings in 2024 benefited from improved operating results at GEICO.We incurred no losses from significant catastrophe events in the first quarter of 2024 compared to$350 million in the comparable 2023 period.After-tax earnings from insurance investment income in the first quarter increased$629 million in 2024 compared to 2023,primarily attributable to higher interest income from our short-term investments.After-tax earnings of BNSF declined 8.3%in the first quarter of 2024 compared to 2023.The decrease was primarily attributable to unfavorable changes in business mix and lower fuel surcharge revenues,partially offset by lower fuel costs.After-tax earnings of our utilities and energy business increased$301 million in the first quarter of 2024 compared to 2023.The earnings increase reflected higher earnings from the U.S.regulated utilities,natural gas pipeline and other energy businesses,partly offset by lower earnings from the real estate brokerage businesses.As disclosed in Note 3 to the accompanying Consolidated Financial Statements,we increased our ownership in Pilot from 38.6%to 80%on January 31,2023,and further increased our ownership in Pilot to 100%on January 16,2024.We began consolidating Pilots results of operations on February 1,2023.For the month ended January 31,2023,earnings from Pilot on our 38.6%interest were determined under the equity method and were included in earnings from non-controlled businesses in the preceding table.After-tax earnings from our manufacturing,service and retailing businesses increased 1.3%in the first quarter of 2024 compared to 2023.Earnings in 2024 reflected increases at several of our manufacturing businesses,which were substantially offset by lower earnings from our service and retailing businesses.Investment gains predominantly derive from our investments in equity securities and include significant net unrealized gains and losses from market price changes.We believe that investment gains and losses on investments in equity securities,whether realized from dispositions or unrealized from changes in market prices,are generally meaningless in understanding our reported periodic results or evaluating the economic performance of our operating businesses.These gains and losses have caused and will continue to cause significant volatility in our periodic earnings.Investment gains in the first quarter of 2023 also included an after-tax non-cash remeasurement gain of approximately$2.4 billion related to our previously held 38.6%interest in Pilot through the application of the acquisition accounting method.29Item 2.Managements Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Other earnings included after-tax foreign currency exchange rate gains of$597 million in the first quarter of 2024 and after-tax losses of$17 million in the first quarter of 2023 related to the non-U.S.Dollar denominated debt issued by Berkshire and Berkshire Hathaway Finance Corporation(“BHFC”).InsuranceUnderwriting Our management views our insurance business as possessing two distinct activities underwriting and investing.Underwriting decisions are the responsibility of the unit managers,while investing decisions are the responsibility of Berkshires Chairman and CEO,Warren E.Buffett and Berkshires corporate investment managers.Accordingly,we evaluate performance of underwriting operations without any allocation of investment income or investment gains and losses.We consider investment income as an integral component of our aggregate insurance operating results.However,we consider investment gains and losses,whether realized or unrealized,as non-operating.We believe that such gains and losses are not meaningful in understanding the periodic operating results of our insurance businesses.The timing and magnitude of catastrophe losses can produce significant volatility in our periodic underwriting results,particularly with respect to our reinsurance businesses.We currently consider pre-tax incurred losses exceeding$150 million from a current year catastrophic event to be significant.There were no significant catastrophe events in the first quarter of 2024,and in the first quarter of 2023,significant catastrophe events were a cyclone and floods in New Zealand.Changes in estimates for unpaid losses and loss adjustment expenses,including amounts established for occurrences in prior years,can also significantly affect our periodic underwriting results.Our periodic underwriting results may also include foreign currency transaction gains and losses arising from the changes in the valuation of non-U.S.Dollar denominated liabilities of our U.S.-based subsidiaries due to foreign currency exchange rate fluctuations.We provide primary insurance and reinsurance products covering property and casualty risks,as well as life and health risks.Our insurance and reinsurance businesses are GEICO,Berkshire Hathaway Primary Group(“BH Primary”)and Berkshire Hathaway Reinsurance Group(“BHRG”).We strive to produce pre-tax underwriting earnings(defined as premiums earned less insurance losses/benefits incurred and underwriting expenses)over the long term in all business categories,except in BHRGs retroactive reinsurance and periodic payment annuity businesses.Time-value-of-money is an important element in establishing prices for retroactive reinsurance and periodic payment annuity policies.We normally receive premiums at the contract inception date,which are then available for investment.Ultimate claim payments can extend for decades and are expected to exceed premiums,producing underwriting losses over the claim settlement periods,primarily through deferred charge asset amortization and liability discount accretion charges.Underwriting results of our insurance businesses are summarized below(dollars in millions).First Quarter20242023Pre-tax underwriting earnings:GEICO$1,928$703Berkshire Hathaway Primary Group486268Berkshire Hathaway Reinsurance Group912231Pre-tax underwriting earnings3,3261,202Income taxes and noncontrolling interests728291Net underwriting earnings$2,598$911Effective income tax rate21.9$.30Item 2.Managements Discussion and Analysis of Financial Condition and Results of Operations InsuranceUnderwriting GEICO GEICO writes property and casualty policies,primarily private passenger automobile insurance,in all 50 states and the District of Columbia.GEICO markets its policies mainly by direct response methods where most customers apply for coverage directly to the company via the Internet or over the telephone.GEICO also operates an insurance agency that offers primarily homeowners and renters insurance to its auto policyholders.A summary of GEICOs underwriting results follows(dollars in millions).First Quarter20242023Amount%Amount%Premiums written$10,796$10,060Premiums earned$10,234100.0$9,626100.0Losses and loss adjustment expenses7,41472.57,99283.0Underwriting expenses8928.79319.7Total losses and expenses8,30681.28,92392.7Pre-tax underwriting earnings$1,928$703 GEICOs pre-tax underwriting earnings in the first quarter of 2024 reflected higher average premiums per auto policy,lower claims frequencies and improved operating efficiencies compared to 2023,partially offset by a rise in average claims severities in the first quarter of 2024.Premiums written increased$736 million(7.3%)in the first quarter of 2024 compared to 2023,reflecting higher average premiums per auto policy(9.8%)due to rate increases,partially offset by a 6.6crease in policies-in-force over the past year.However,the rate of decline in policies-in-force slowed in the first quarter of 2024,driven by increased new business and higher retention rates.Premiums earned increased$608 million(6.3%)in the first quarter of 2024 compared to 2023.Losses and loss adjustment expenses declined$578 million(7.2%)in the first quarter of 2024 compared to 2023.GEICOs loss ratio(losses and loss adjustment expenses to premiums earned)was 72.5%in the first quarter of 2024,a decrease of 10.5 percentage points compared to 2023.The loss ratio decline reflected the impact of higher average premiums per auto policy and lower claims frequencies,partially offset by increases in average claims severities and less favorable development of prior accident years claims estimates.Claims frequencies in the first quarter of 2024 declined for property damage(two to three percent range)and collision coverages(four to five percent range)versus 2023,with bodily injury coverage down slightly.Average claims severities in the first quarter of 2024 increased for property damage(nine to eleven percent range),collision(four to six percent range)and bodily injury(seven to nine percent range)coverages compared to 2023.Losses and loss adjustment expenses in the first three months included reductions in the ultimate loss estimates for prior accident years claims of$155 million in 2024 and$338 million in 2023.Underwriting expenses declined$39 million(4.2%)in the first quarter of 2024 compared to 2023.GEICOs expense ratio(underwriting expense to premiums earned)was 8.7%in the first quarter of 2024,a decrease of 1.0 percentage point compared to 2023,attributable to improved operating efficiencies and increased operating leverage,partially offset by increased advertising expenses.The earnings from GEICOs insurance agency(third-party commissions,net of operating expenses)are included as a reduction of underwriting expenses.Berkshire Hathaway Primary Group The Berkshire Hathaway Primary Group consists of several independently managed businesses that provide a variety of primarily commercial insurance solutions,including healthcare professional liability,workers compensation,automobile,general liability,property and specialty coverages for small,medium and large clients.BH Primarys insurers include Berkshire Hathaway Specialty Insurance(“BHSI”),RSUI Group Inc.and CapSpecialty,Inc.(“RSUI and CapSpecialty”),Berkshire Hathaway Homestate Companies(“BHHC”),MedPro Group,Berkshire Hathaway GUARD Insurance Companies(“GUARD”),National Indemnity Company(“NICO Primary”),Berkshire Hathaway Direct Insurance Company(“BH Direct”)and U.S.Liability Insurance Company(“USLI”).31Item 2.Managements Discussion and Analysis of Financial Condition and Results of Operations InsuranceUnderwriting Berkshire Hathaway Primary Group A summary of BH Primarys underwriting results follows(dollars in millions).First Quarter20242023Amount%Amount%Premiums written$4,493$4,158Premiums earned$4,541100.0$3,961100.0Losses and loss adjustment expenses2,81261.92,65667.1Underwriting expenses1,24327.41,03726.1Total losses and expenses4,05589.33,69393.2Pre-tax underwriting earnings$486$268Premiums written increased$335 million(8.1%)in the first quarter of 2024 compared to 2023.Increases in premiums written in the first quarter of 2024 were generated by nearly all primary insurance businesses.Premiums earned increased 14.6%in the first quarter of 2024 versus 2023.Losses and loss adjustment expenses increased$156 million(5.9%)in the first quarter of 2024 compared to 2023.The loss ratio decreased 5.2 percentage points in the first quarter of 2024 compared to 2023,reflecting lower incurred losses from significant catastrophes and changes in business mix.Incurred losses from significant catastrophes were approximately$40 million in the first quarter of 2023 versus none in 2024.Incurred losses and loss adjustment expenses also reflected net reductions in estimated ultimate liabilities for prior years loss events in the first quarter of$93 million in 2024 and$41 million in 2023,primarily due to reductions in ultimate medical professional liability and property losses.BH Primary insurers write significant levels of workers compensation,commercial and professional liability insurance and the related claim costs may be subject to high severity and long claim-tails.Ultimate claim liabilities could be greater than anticipated due to a variety of factors,including adverse legal and judicial rulings.Underwriting expenses increased$206 million(19.9%)in the first quarter of 2024 compared to 2023.The increase was primarily attributable to the increase in premiums earned and changes in business mix.Berkshire Hathaway Reinsurance Group The Berkshire Hathaway Reinsurance Group(“BHRG”)offers excess-of-loss and quota-share reinsurance coverages on property and casualty risks to insurers and reinsurers worldwide through several subsidiaries,led by National Indemnity Company(“NICO”),General Reinsurance Corporation,General Reinsurance AG and Transatlantic Reinsurance Company(“TransRe Group”).We also write life and health reinsurance coverages through General Re Life Corporation,General Reinsurance AG and Berkshire Hathaway Life Insurance Company of Nebraska(“BHLN”).We assume property and casualty risks under retroactive reinsurance contracts written through NICO and we write periodic payment annuity contracts through BHLN.A summary of BHRGs premiums and pre-tax underwriting results follows(in millions).First QuarterPremiums earnedPre-tax underwritingearnings(loss)2024202320242023Property/casualty$5,435$5,149$1,008$390Life/health1,2291,060108137Retroactive reinsurance35(147)(195)Periodic payment annuity(151)(164)Variable annuity9463$6,699$6,209$912$23132Item 2.Managements Discussion and Analysis of Financial Condition and Results of Operations InsuranceUnderwriting Berkshire Hathaway Reinsurance Group Property/casualty A summary of property/casualty reinsurance underwriting results follows(dollars in millions).First Quarter20242023Amount%Amount%Premiums written$6,455$6,268Premiums earned$5,435100.0$5,149100.0Losses and loss adjustment expenses2,99355.13,38765.8Underwriting expenses1,43426.41,37226.6Total losses and expenses4,42781.54,75992.4Pre-tax underwriting earnings$1,008$390Premiums written in the first quarter of 2024 increased 3.0%over 2023.The increase reflected net increases in new business and increased participations and retention of business.We write meaningful levels of property business and we generally do not retrocede the risks we assume.Our periodic underwriting earnings are subject to considerable volatility from significant catastrophe loss events.Premiums earned in the first quarter of 2024 increased 5.6%compared to 2023.Losses and loss adjustment expenses decreased$394 million(11.6%)in the first quarter of 2024 versus 2023.The loss ratio declined 10.7 percentage points in the first quarter of 2024 compared to 2023.Losses incurred from significant catastrophes in the first quarter were approximately$400 million in 2023 compared to none in 2024.The reductions in estimated ultimate liabilities for losses occurring in prior accident years in the first quarter were$386 million in 2024 and$361 million in 2023.Underwriting expenses increased$62 million(4.5%)in the first quarter of 2024 compared to 2023.The expense ratio was relatively unchanged in the first quarter of 2024 compared to 2023,reflecting increased foreign currency exchange rate gains related to the remeasurement of certain non-U.S.Dollar denominated liabilities offset by changes in business mix.Underwriting expenses in the first quarter included pre-tax foreign currency exchange gains of$26 million in 2024 and losses of$74 million in 2023.Life/health A summary of our life/health reinsurance underwriting results follows(dollars in millions).First Quarter20242023Amount%Amount%Premiums written$1,231$1,061Premiums earned$1,229100.0$1,060100.0Life and health benefits83367.867864.0Underwriting expenses28823.424523.1Total benefits and expenses1,12191.292387.1Pre-tax underwriting earnings$108$137 Premiums earned in the first quarter of 2024 increased$169 million(15.9%),primarily due to the commutation of several U.S.life contracts in the first quarter of 2023,which reduced premiums earned by$161 million and life benefits and underwriting expenses by$302 million in the 2023 period.Pre-tax underwriting earnings in the first quarter of 2024 declined$29 million.Earnings in the first quarter included gains from life contract commutations of$51 million in 2024 and$141 million in 2023.Earnings in 2024 also reflected lower benefits expense on other U.S.life business.33Item 2.Managements Discussion and Analysis of Financial Condition and Results of Operations InsuranceUnderwriting Berkshire Hathaway Reinsurance Group Retroactive reinsurance Pre-tax underwriting losses from retroactive reinsurance in each period derived from deferred charge amortization,the effects of changes in the estimated timing and amounts of future claim payments and foreign currency exchange gains and losses attributable to non-U.S.Dollar denominated contracts.Before foreign currency exchange effects,pre-tax underwriting losses in the first quarter were$192 million in 2024 and$189 million in 2023.Unpaid losses assumed under retroactive reinsurance contracts were$34.2 billion at March 31,2024,a decline of$402 million since December 31,2023,primarily due to claim payments.Unamortized deferred charges on retroactive reinsurance contracts were$9.3 billion at March 31,2024,a decline of$177 million since December 31,2023.Deferred charge amortization is included in underwriting earnings ove
2024-05-17
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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549Form 10-Q(Mark One)QUARTERLY REPO.
2024-05-16
184页
5星级
UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OFTHE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended March 31,2024or TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OFTHE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _to_ Commission File Number 1-2256Exxon Mobil Corporation(Exact name of registrant as specified in its charter)New Jersey 13-5409005(State or other jurisdiction of incorporation or organization)(I.R.S.Employer Identification Number)22777 Springwoods Village Parkway,Spring,Texas 77389-1425(Address of principal executive offices)(Zip Code)(972)940-6000(Registrants telephone number,including area code)_Securities registered pursuant to Section 12(b)of the Act:Title of Each Class Trading Symbol Name of Each Exchange on Which RegisteredCommon Stock,without par value XOM New York Stock Exchange0.142%Notes due 2024XOM24BNew York Stock Exchange0.524%Notes due 2028XOM28New York Stock Exchange0.835%Notes due 2032XOM32New York Stock Exchange1.408%Notes due 2039XOM39ANew York Stock Exchange 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 forsuch shorter period that the registrant was required to file such reports),and(2)has been subject to such filing requirements for the past 90 days.Yes No Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T(232.405 ofthis chapter)during the preceding 12 months(or for such shorter period that the registrant was required to submit and post such files).Yes No Indicate by check mark whether the registrant is a large accelerated filer,an accelerated filer,a non-accelerated filer,smaller reporting company,or an emerging growth company.See thedefinitions of large accelerated filer,accelerated filer,smaller reporting company,and“emerging growth company”in Rule 12b-2 of the Exchange Act.Large accelerated filerAccelerated filerNon-accelerated filerSmaller reporting company Emerging growth companyIf an emerging growth company,indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standardsprovided pursuant to Section 13(a)of the Exchange Act.Indicate by check mark whether the registrant is a shell company(as defined in Rule 12b-2 of the Exchange Act).Yes No Indicate the number of shares outstanding of each of the issuers classes of common stock,as of the latest practicable date.Class Outstanding as of March 31,2024Common stock,without par value 3,943,006,866EXXON MOBIL CORPORATIONFORM 10-QFOR THE QUARTERLY PERIOD ENDED MARCH 31,2024 TABLE OF CONTENTSPART I.FINANCIAL INFORMATION Item 1.Financial Statements Condensed Consolidated Statement of Income-Three months ended March 31,2024 and 20233 Condensed Consolidated Statement of Comprehensive Income-Three months ended March 31,2024 and 20234 Condensed Consolidated Balance Sheet-As of March 31,2024 and December 31,20235 Condensed Consolidated Statement of Cash Flows-Three months ended March 31,2024 and 20236 Condensed Consolidated Statement of Changes in Equity-Three months ended March 31,2024 and 20237 Notes to Condensed Consolidated Financial Statements8 Item 2.Managements Discussion and Analysis of Financial Condition and Results of Operations17 Item 3.Quantitative and Qualitative Disclosures About Market Risk33 Item 4.Controls and Procedures33 PART II.OTHER INFORMATIONItem 1.Legal Proceedings34 Item 2.Unregistered Sales of Equity Securities and Use of Proceeds34 Item 5.Other Information34Item 6.Exhibits34 Index to Exhibits35 Signature36 2PART I.FINANCIAL INFORMATIONITEM 1.FINANCIAL STATEMENTSCONDENSED CONSOLIDATED STATEMENT OF INCOME(millions of dollars,unless noted)Three Months EndedMarch 31,20242023Revenues and other income Sales and other operating revenue80,411 83,644 Income from equity affiliates1,842 2,381 Other income830 539 Total revenues and other income83,083 86,564 Costs and other deductionsCrude oil and product purchases47,601 46,003 Production and manufacturing expenses9,091 9,436 Selling,general and administrative expenses2,495 2,390 Depreciation and depletion(includes impairments)4,812 4,244 Exploration expenses,including dry holes148 141 Non-service pension and postretirement benefit expense23 167 Interest expense221 159 Other taxes and duties6,323 7,221 Total costs and other deductions70,714 69,761 Income(loss)before income taxes12,369 16,803 Income tax expense(benefit)3,803 4,960 Net income(loss)including noncontrolling interests8,566 11,843 Net income(loss)attributable to noncontrolling interests346 413 Net income(loss)attributable to ExxonMobil8,220 11,430 Earnings(loss)per common share(dollars)2.06 2.79 Earnings(loss)per common share-assuming dilution(dollars)2.06 2.79 The information in the Notes to Condensed Consolidated Financial Statements is an integral part of these statements.3CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME(millions of dollars)Three Months EndedMarch 31,20242023Net income(loss)including noncontrolling interests8,566 11,843 Other comprehensive income(net of income taxes)Foreign exchange translation adjustment(1,267)173 Postretirement benefits reserves adjustment(excluding amortization)(42)19 Amortization and settlement of postretirement benefits reservesadjustment included in net periodic benefit costs9 6 Total other comprehensive income(loss)(1,300)198 Comprehensive income(loss)including noncontrolling interests7,266 12,041 Comprehensive income(loss)attributable to noncontrolling interests226 436 Comprehensive income(loss)attributable to ExxonMobil7,040 11,605 The information in the Notes to Condensed Consolidated Financial Statements is an integral part of these statements.4CONDENSED CONSOLIDATED BALANCE SHEET(millions of dollars,unless noted)March 31,2024December 31,2023ASSETS Current assets Cash and cash equivalents33,320 31,539 Cash and cash equivalents restricted29 29 Notes and accounts receivable net40,366 38,015 InventoriesCrude oil,products and merchandise18,891 20,528 Materials and supplies4,600 4,592 Other current assets2,171 1,906 Total current assets99,377 96,609 Investments,advances and long-term receivables47,608 47,630 Property,plant and equipment net213,723 214,940 Other assets,including intangibles net17,210 17,138 Total Assets377,918 376,317 LIABILITIESCurrent liabilitiesNotes and loans payable8,227 4,090 Accounts payable and accrued liabilities59,531 58,037 Income taxes payable4,163 3,189 Total current liabilities71,921 65,316 Long-term debt32,213 37,483 Postretirement benefits reserves10,475 10,496 Deferred income tax liabilities24,106 24,452 Long-term obligations to equity companies1,909 1,804 Other long-term obligations24,242 24,228 Total Liabilities164,866 163,779 Commitments and contingencies(Note 3)EQUITYCommon stock without par value(9,000 million shares authorized,8,019 million shares issued)17,971 17,781 Earnings reinvested458,339 453,927 Accumulated other comprehensive income(13,169)(11,989)Common stock held in treasury(4,076 million shares at March 31,2024 and4,048 million shares at December 31,2023)(257,891)(254,917)ExxonMobil share of equity205,250 204,802 Noncontrolling interests7,802 7,736 Total Equity213,052 212,538 Total Liabilities and Equity377,918 376,317 The information in the Notes to Condensed Consolidated Financial Statements is an integral part of these statements.5CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS(millions of dollars)Three Months EndedMarch 31,20242023CASH FLOWS FROM OPERATING ACTIVITIES Net income(loss)including noncontrolling interests8,566 11,843 Depreciation and depletion(includes impairments)4,812 4,244 Changes in operational working capital,excluding cash and debt2,008(302)All other items net(722)556 Net cash provided by operating activities14,664 16,341 CASH FLOWS FROM INVESTING ACTIVITIESAdditions to property,plant and equipment(5,074)(5,412)Proceeds from asset sales and returns of investments703 854 Additional investments and advances(421)(445)Other investing activities including collection of advances215 78 Net cash used in investing activities(4,577)(4,925)CASH FLOWS FROM FINANCING ACTIVITIESAdditions to long-term debt108 20 Reductions in short-term debt(1,106)(126)Additions/(reductions)in debt with three months or less maturity(5)(192)Cash dividends to ExxonMobil shareholders(3,808)(3,738)Cash dividends to noncontrolling interests(166)(115)Changes in noncontrolling interests6(16)Common stock acquired(3,011)(4,340)Net cash used in financing activities(7,982)(8,507)Effects of exchange rate changes on cash(324)102 Increase/(decrease)in cash and cash equivalents1,781 3,011 Cash and cash equivalents at beginning of period31,568 29,665 Cash and cash equivalents at end of period33,349 32,676 SUPPLEMENTAL DISCLOSURESIncome taxes paid2,718 4,404 Cash interest paidIncluded in cash flows from operating activities301 256 Capitalized,included in cash flows from investing activities297 291 Total cash interest paid598 547 Noncash right of use assets recorded in exchange for lease liabilitiesOperating leases351 393 Finance leases 438 The information in the Notes to Condensed Consolidated Financial Statements is an integral part of these statements.6CONDENSED CONSOLIDATED STATEMENT OF CHANGE IN EQUITY ExxonMobil Share of Equity (millions of dollars,unless noted)CommonStockEarningsReinvestedAccumulatedOtherComprehensiveIncomeCommonStock Heldin TreasuryExxonMobilShare ofEquityNon-controllingInterestsTotalEquityBalance as of December 31,202215,752 432,860(13,270)(240,293)195,049 7,424 202,473 Amortization of stock-based awards158 158 158 Other(6)(6)(16)(22)Net income(loss)for the period 11,430 11,430 413 11,843 Dividends-common shares(3,738)(3,738)(115)(3,853)Other comprehensive income(loss)175 175 23 198 Share repurchases,at cost (4,385)(4,385)(4,385)Dispositions 2 2 2 Balance as of March 31,202315,904 440,552(13,095)(244,676)198,685 7,729 206,414 Balance as of December 31,202317,781 453,927(11,989)(254,917)204,802 7,736 212,538 Amortization of stock-based awards197 197 197 Other(7)(7)6(1)Net income(loss)for the period 8,220 8,220 346 8,566 Dividends-common shares(3,808)(3,808)(166)(3,974)Other comprehensive income(loss)(1,180)(1,180)(120)(1,300)Share repurchases,at cost (2,978)(2,978)(2,978)Dispositions 4 4 4 Balance as of March 31,202417,971 458,339(13,169)(257,891)205,250 7,802 213,052 Three Months Ended March 31,2024 Three Months Ended March 31,2023Common Stock Share Activity(millions of shares)IssuedHeld inTreasuryOutstanding IssuedHeld inTreasuryOutstandingBalance as of December 318,019(4,048)3,971 8,019(3,937)4,082 Share repurchases,at cost(28)(28)(39)(39)Dispositions Balance as of March 318,019(4,076)3,943 8,019(3,976)4,043 The information in the Notes to Condensed Consolidated Financial Statements is an integral part of these statements.7NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSNote 1.Basis of Financial Statement PreparationThese unaudited condensed consolidated financial statements should be read in the context of the consolidated financial statements and notes thereto filed with the Securitiesand Exchange Commission in the Corporations 2023 Annual Report on Form 10-K.In the opinion of the Corporation,the information furnished herein reflects all knownaccruals and adjustments necessary for a fair statement of the results for the periods reported herein.All such adjustments are of a normal recurring nature.The Corporations exploration and production activities are accounted for under the successful efforts method.Note 2.Pioneer Natural Resources MergerOn October 11,2023,the Corporation entered into a merger agreement with Pioneer Natural Resources Company(Pioneer),an independent oil and gas exploration andproduction company,in exchange for ExxonMobil common stock.Based on the October 5 closing price for ExxonMobil shares,the fixed exchange rate of 2.3234 per Pioneershare,and Pioneers outstanding net debt,the implied enterprise value of the transaction was approximately$65 billion.We expect that the number of shares issuable inconnection with the transaction to be approximately 545 million.The transaction is expected to close in the second quarter of 2024,subject to regulatory approvals.Pioneer holds over 850,000 net acres in the Midland Basin of West Texas,which consist of proved reserves totaling over 2.4 billion barrels of oil equivalent(as of December31,2023)and over 700 thousand oil-equivalent barrels per day of production for the three months ended December 31,2023.8Note 3.Litigation and Other ContingenciesLitigationA variety of claims have been made against ExxonMobil and certain of its consolidated subsidiaries in a number of pending lawsuits.Management has regular litigationreviews,including updates from corporate and outside counsel,to assess the need for accounting recognition or disclosure of these contingencies.The Corporation accrues anundiscounted liability for those contingencies where the incurrence of a loss is probable and the amount can be reasonably estimated.If a range of amounts can be reasonablyestimated and no amount within the range is a better estimate than any other amount,then the minimum of the range is accrued.The Corporation does not record liabilitieswhen the likelihood that the liability has been incurred is probable but the amount cannot be reasonably estimated or when the liability is believed to be only reasonablypossible or remote.For contingencies where an unfavorable outcome is reasonably possible and which are significant,the Corporation discloses the nature of the contingencyand,where feasible,an estimate of the possible loss.For purposes of our contingency disclosures,“significant”includes material matters,as well as other matters whichmanagement believes should be disclosed.State and local governments and other entities in various jurisdictions across the United States and its territories have filed a number of legal proceedings against several oil andgas companies,including ExxonMobil,requesting unprecedented legal and equitable relief for various alleged injuries purportedly connected to climate change.These lawsuitsassert a variety of novel,untested claims under statutory and common law.Additional such lawsuits may be filed.We believe the legal and factual theories set forth in theseproceedings are meritless and represent an inappropriate attempt to use the court system to usurp the proper role of policymakers in addressing the societal challenges ofclimate change.Local governments in Louisiana have filed unprecedented legal proceedings against a number of oil and gas companies,including ExxonMobil,requesting compensation forthe restoration of coastal marsh erosion in the state.We believe the factual and legal theories set forth in these proceedings are meritless.While the outcome of any litigation can be unpredictable,we believe the likelihood is remote that the ultimate outcomes of these lawsuits will have a material adverse effect onthe Corporations operations,financial condition,or financial statements taken as a whole.We will continue to defend vigorously against these claims.Other ContingenciesThe Corporation and certain of its consolidated subsidiaries were contingently liable at March 31,2024,for guarantees relating to notes,loans and performance under contracts.Where guarantees for environmental remediation and other similar matters do not include a stated cap,the amounts reflect managements estimate of the maximum potentialexposure.Where it is not possible to make a reasonable estimation of the maximum potential amount of future payments,future performance is expected to be either immaterialor have only a remote chance of occurrence.March 31,2024(millions of dollars)Equity CompanyObligations Other Third-PartyObligationsTotalGuarantees Debt-related1,130 146 1,276 Other681 5,820 6,501 Total1,811 5,966 7,777 ExxonMobil shareAdditionally,the Corporation and its affiliates have numerous long-term sales and purchase commitments in their various business activities,all of which are expected to befulfilled with no adverse consequences material to the Corporations operations or financial condition.(1)(1)9Note 4.Other Comprehensive Income InformationExxonMobil Share of Accumulated OtherComprehensive Income(millions of dollars)Cumulative ForeignExchangeTranslationAdjustmentPostretirementBenefits ReservesAdjustmentTotalBalance as of December 31,2022(14,591)1,321(13,270)Current period change excluding amounts reclassified from accumulatedother comprehensive income 157 14 171 Amounts reclassified from accumulated other comprehensive income 4 4 Total change in accumulated other comprehensive income157 18 175 Balance as of March 31,2023(14,434)1,339(13,095)Balance as of December 31,2023(13,056)1,067(11,989)Current period change excluding amounts reclassified from accumulatedother comprehensive income(1,138)(48)(1,186)Amounts reclassified from accumulated other comprehensive income 6 6 Total change in accumulated other comprehensive income(1,138)(42)(1,180)Balance as of March 31,2024(14,194)1,025(13,169)Cumulative Foreign Exchange Translation Adjustment includes net investment hedge gain/(loss)net of taxes of$84 million and$(74)million in 2024 and 2023,respectively.Amounts Reclassified Out of Accumulated OtherComprehensive Income-Before-tax Income/(Expense)(millions of dollars)Three Months EndedMarch 31,20242023Amortization and settlement of postretirement benefits reservesadjustment included in net periodic benefit costs(Statement of Income line:Non-service pension and postretirementbenefit expense)(12)(8)Income Tax(Expense)/Credit ForComponents of Other Comprehensive Income(millions of dollars)Three Months EndedMarch 31,20242023Foreign exchange translation adjustment(75)48 Postretirement benefits reserves adjustment(excluding amortization)4 11 Amortization and settlement of postretirement benefits reservesadjustment included in net periodic benefit costs(3)(2)Total(74)57(1)(1)(1)10Note 5.Earnings Per Share Earnings per common shareThree Months EndedMarch 31,20242023Net income(loss)attributable to ExxonMobil(millions of dollars)8,220 11,430 Weighted-average number of common shares outstanding(millions of shares)3,998 4,102 Earnings(loss)per common share(dollars)2.06 2.79 Dividends paid per common share(dollars)0.95 0.91 Includes restricted shares not vested.Earnings(loss)per common share and earnings(loss)per common share assuming dilution are the same in each period shown.Note 6.Pension and Other Postretirement Benefits (millions of dollars)Three Months EndedMarch 31,20242023Components of net benefit cost Pension Benefits-U.S.Service cost113 120 Interest cost168 166 Expected return on plan assets(181)(133)Amortization of actuarial loss/(gain)21 21 Amortization of prior service cost(8)(7)Net pension enhancement and curtailment/settlement cost3 8 Net benefit cost116 175 Pension Benefits-Non-U.S.Service cost83 82 Interest cost227 234 Expected return on plan assets(261)(174)Amortization of actuarial loss/(gain)25 14 Amortization of prior service cost13 12 Net benefit cost87 168 Other Postretirement BenefitsService cost18 20 Interest cost63 70 Expected return on plan assets(5)(4)Amortization of actuarial loss/(gain)(26)(30)Amortization of prior service cost(16)(10)Net benefit cost34 46 (1)(2)(1)(2)11Note 7.Financial Instruments and DerivativesThe estimated fair value of financial instruments and derivatives at March 31,2024 and December 31,2023,and the related hierarchy level for the fair value measurement wasas follows:March 31,2024 Fair Value (millions of dollars)Level 1Level 2Level 3Total GrossAssets&LiabilitiesEffect ofCounterpartyNettingEffect ofCollateralNettingDifference inCarrying Valueand Fair ValueNetCarryingValueAssets Derivative assets 5,813 1,304 7,117(6,492)(88)537 Advances to/receivables from equitycompanies 2,458 4,657 7,115 498 7,613 Other long-term financial assets 1,372 1,042 2,414 174 2,588 LiabilitiesDerivative liabilities 5,944 1,376 7,320(6,492)(218)610 Long-term debt 25,558 1,378 26,936 3,494 30,430 Long-term obligations to equitycompanies 2,039 2,039 (130)1,909 Other long-term financial liabilities 694 694 48 742 December 31,2023 Fair Value (millions of dollars)Level 1Level 2Level 3Total GrossAssets&LiabilitiesEffect ofCounterpartyNettingEffect ofCollateralNettingDifference inCarrying Valueand Fair ValueNetCarryingValueAssets Derivative assets 4,544 1,731 6,275(5,177)(528)570 Advances to/receivables from equitycompanies 2,517 4,491 7,008 519 7,527 Other long-term financial assets 1,389 944 2,333 202 2,535 LiabilitiesDerivative liabilities 4,056 1,608 5,664(5,177)(40)447 Long-term debt 30,556 2,004 32,560 3,102 35,662 Long-term obligations to equitycompanies 1,896 1,896 (92)1,804 Other long-term financial liabilities 697 697 45 742 Included in the Balance Sheet lines:Notes and accounts receivable-net and Other assets,including intangibles-net.Included in the Balance Sheet line:Investments,advances and long-term receivables.Included in the Balance Sheet lines:Investments,advances and long-term receivables and Other assets,including intangibles-net.Included in the Balance Sheet lines:Accounts payable and accrued liabilities and Other long-term obligations.Excluding finance lease obligations.Advances to/receivables from equity companies and long-term obligations to equity companies are mainly designated as hierarchy level 3inputs.The fair value is calculated by discounting the remaining obligations by a rate consistent with the credit quality and industry of thecompany.Included in the Balance Sheet line:Other long-term obligations.Includes contingent consideration related to a prior year acquisitionwhere fair value is based on expected drilling activities and discount rates.At March 31,2024 and December 31,2023,respectively,the Corporation had$736 million and$800 million of collateral under master netting arrangements not offset againstthe derivatives on the Condensed Consolidated Balance Sheet,primarily related to initial margin requirements.(1)(2)(6)(3)(4)(5)(6)(7)(1)(2)(6)(3)(4)(5)(6)(7)(1)(2)(3)(4)(5)(6)(7)12The Corporation may use non-derivative financial instruments,such as its foreign currency-denominated debt,as hedges of its net investments in certain foreign subsidiaries.Under this method,the change in the carrying value of the financial instruments due to foreign exchange fluctuations is reported in accumulated other comprehensive income.As of March 31,2024,the Corporation has designated$4.9 billion of its Euro-denominated debt and related accrued interest as a net investment hedge of its European business.The net investment hedge is deemed to be perfectly effective.The Corporation had undrawn short-term committed lines of credit of$323 million and undrawn long-term committed lines of credit of$1,914 million as of first quarter 2024.Derivative InstrumentsThe Corporations size,strong capital structure,geographic diversity,and the complementary nature of its business segments reduce the Corporations enterprise-wide risk fromchanges in commodity prices,currency rates and interest rates.In addition,the Corporation uses commodity-based contracts,including derivatives,to manage commodity pricerisk and to generate returns from trading.Commodity contracts held for trading purposes are presented in the Condensed Consolidated Statement of Income on a net basis in theline“Sales and other operating revenue and in the Consolidated Statement of Cash Flows in“Cash Flows from Operating Activities”.The Corporations commodityderivatives are not accounted for under hedge accounting.At times,the Corporation also enters into currency and interest rate derivatives,none of which are material to theCorporations financial position as of March 31,2024 and December 31,2023,or results of operations for the periods ended March 31,2024 and 2023.Credit risk associated with the Corporations derivative position is mitigated by several factors,including the use of derivative clearing exchanges and the quality of andfinancial limits placed on derivative counterparties.The Corporation maintains a system of controls that includes the authorization,reporting,and monitoring of derivativeactivity.The net notional long/(short)position of derivative instruments at March 31,2024 and December 31,2023,was as follows:(millions)March 31,2024December 31,2023Crude oil(barrels)15(7)Petroleum products(barrels)(39)(43)Natural gas(MMBTUs)(577)(560)Realized and unrealized gains/(losses)on derivative instruments that were recognized in the Condensed Consolidated Statement of Income are included in the following lineson a before-tax basis:(millions of dollars)Three Months EndedMarch 31,20242023Sales and other operating revenue(792)651 Crude oil and product purchases3(25)Total(789)626 13Note 8.Disclosures about Segments and Related Information(millions of dollars)Three Months EndedMarch 31,20242023Earnings(Loss)After Income TaxUpstream United States1,054 1,632 Non-U.S.4,606 4,825 Energy ProductsUnited States836 1,910 Non-U.S.540 2,273 Chemical ProductsUnited States504 324 Non-U.S.281 47 Specialty ProductsUnited States404 451 Non-U.S.357 323 Corporate and Financing(362)(355)Corporate total8,220 11,430 Sales and Other Operating RevenueUpstreamUnited States2,190 2,770 Non-U.S.3,526 5,387 Energy ProductsUnited States24,803 24,924 Non-U.S.39,409 39,976 Chemical ProductsUnited States2,194 2,029 Non-U.S.3,646 3,692 Specialty ProductsUnited States1,469 1,568 Non-U.S.3,150 3,289 Corporate and Financing24 9 Corporate total80,411 83,644 Intersegment RevenueUpstreamUnited States5,988 4,956 Non-U.S.9,980 9,399 Energy ProductsUnited States6,558 5,451 Non-U.S.6,752 6,969 Chemical ProductsUnited States1,865 1,788 Non-U.S.1,025 777 Specialty ProductsUnited States655 680 Non-U.S.164 99 Corporate and Financing79 64 14Geographic Sales and Other Operating Revenue (millions of dollars)Three Months EndedMarch 31,20242023United States30,656 31,291 Non-U.S.49,755 52,353 Total80,411 83,644 Significant Non-U.S.revenue sources include:Canada7,055 6,721 United Kingdom5,160 7,011 Singapore4,018 3,731 France3,473 3,484 Australia2,425 2,428 Belgium2,407 2,649 Germany2,347 2,293 Revenue is determined by primary country of operations.Excludes certain sales and other operating revenues in non-U.S.operationswhere attribution to a specific country is not practicable.Revenue from Contracts with CustomersSales and other operating revenue include both revenue within the scope of ASC 606 and outside the scope of ASC 606.Trade receivables in Notes and accounts receivable net reported on the Balance Sheet also includes both receivables within the scope of ASC 606 and those outside the scope of ASC 606.Revenue and receivables outside thescope of ASC 606 primarily relate to physically settled commodity contracts accounted for as derivatives.Contractual terms,credit quality,and type of customer are generallysimilar between those revenues and receivables within the scope of ASC 606 and those outside it.Sales and other operating revenue(millions of dollars)Three Months EndedMarch 31,20242023Revenue from contracts with customers58,419 64,304 Revenue outside the scope of ASC 60621,992 19,340 Total80,411 83,644(1)(1)15Note 9.Divestment ActivitiesThrough March 31,2024,the Corporation realized proceeds of approximately$0.7 billion from its divestment activities with negligible impact on net after-tax earnings.Thisincluded the sale of the Santa Ynez Unit and associated facilities in California,as well as other smaller divestments.In 2023,the Corporation realized proceeds of approximately$4.1 billion and recognized net after-tax earnings of approximately$0.6 billion from its divestment activities.Thisincluded the sale of the Aera Energy joint venture,Esso Thailand Ltd.,the Billings Refinery,certain unconventional assets in the United States,as well as other smallerdivestments.In February 2022,the Corporation signed an agreement with Seplat Energy Offshore Limited for the sale of Mobil Producing Nigeria Unlimited.The agreement is subject tocertain conditions precedent and government approvals.In mid-2022,a Nigerian court issued an order to halt transition activities and enter into arbitration with the NigerianNational Petroleum Company.The closing date and any loss on sale will depend on resolution of these matters.16ITEM 2.MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSOverviewIn the first quarter of 2024 the price of crude oil remained flat relative to fourth quarter 2023 and near the middle of the pre-COVID 10-year range(2010-2019),as marketsremained balanced.More recently,the market for crude has tightened driven by ongoing concerns over conflict in the Middle East.Natural gas prices decreased,moving backtoward the middle of the 10-year range,on high inventory levels and lower demand.Refining margins in the quarter rose to the top of the 10-year range,as demand grew whileturnarounds and global disruptions weighed on supply.Chemical margins remained relatively flat at bottom-of-cycle conditions,as new capacity additions offset demandgrowth.Recent Mergers and AcquisitionsIn October 2023,ExxonMobil announced that it had entered into a definitive merger agreement with Pioneer Natural Resources.The transaction represents an opportunity todeliver leading capital efficiency and cost performance as well as increase production by combining Pioneers large scale,contiguous,high-quality undeveloped Midlandacreage with ExxonMobils Permian resource development approach.In addition to increasing production,we plan to pull forward Pioneers Net Zero ambition by 15 years,from 2050 to 2035.See Note 2.Pioneer Natural Resources Merger of the Condensed Consolidated Financial Statements for additional information.Selected Earnings Factor DefinitionsThe earnings factors have been updated to provide additional visibility into drivers of our business results starting this first quarter of 2024.The company evaluates thesefactors periodically to determine if any enhancements may provide helpful insights to the market.Listed below are descriptions of the earnings factors:Advantaged Volume Growth.Earnings impacts from change in volume/mix from advantaged assets,strategic projects,and high-value products.Advantaged Assets(Advantaged growth projects).Includes Permian,Guyana,Brazil,and LNG.Strategic Projects.Includes(i)the following completed projects:Rotterdam Hydrocracker,Corpus Christi Chemical Complex,Baton Rouge Polypropylene,BeaumontCrude Expansion,Baytown Chemical Expansion,Permian Crude Venture,and the 2022 Baytown advanced recycling facility;and(ii)the following projects still to becompleted:Fawley Hydrofiner,China Chemical Complex,Singapore Resid Upgrade,Strathcona Renewable Diesel,Proxxima Venture,USGC Reconfiguration,additional advanced recycling projects under evaluation worldwide,and additional projects in plan yet to be publicly announced.High-Value Products.Includes performance products and lower-emission fuels.Performance products(performance chemicals,performance lubricants)refers toproducts that provide differentiated performance for multiple applications through enhanced properties versus commodity alternatives and bring significant additionalvalue to customers and end-users.Lower-emission fuels refers to fuels with lower life cycle emissions than conventional transportation fuels for gasoline,diesel andjet transport.Base Volume.Includes all volume/mix factors not included in Advantaged Volume Growth defined above.Structural Cost Savings.After-tax earnings effect of Structural Cost Savings as defined on page 19,including cash operating expenses related to divestments that werepreviously in the volume/mix factor.Expenses.Includes all expenses otherwise not included in other earnings factors.Timing Effects.Timing effects are primarily related to unsettled derivatives(mark-to-market)and other earnings impacts driven by timing differences between the settlement ofderivatives and their offsetting physical commodity realizations(due to LIFO inventory accounting).TM17Earnings(loss)excluding Identified ItemsEarnings(loss)excluding Identified Items(non-GAAP)are earnings(loss)excluding individually significant non-operational events with,typically,an absolute corporate totalearnings impact of at least$250 million in a given quarter.The earnings(loss)impact of an Identified Item for an individual segment in a given quarter may be less than$250million when the item impacts several periods or several segments.Earnings(loss)excluding identified items does include non-operational earnings events or impacts that aregenerally below the$250 million threshold utilized for Identified Items.Management uses these figures to improve comparability of the underlying business across multipleperiods by isolating and removing significant non-operational events from business results.The Corporation believes this view provides investors increased transparency intobusiness results and trends and provides investors with a view of the business as seen through the eyes of management.Earnings(loss)excluding Identified Items is not meantto be viewed in isolation or as a substitute for net income(loss)attributable to ExxonMobil as prepared in accordance with U.S.GAAP.Three Months EndedMarch 31,2024UpstreamEnergy ProductsChemical ProductsSpecialty ProductsCorporateandFinancingTotal(millions of dollars)U.S.Non-U.S.U.S.Non-U.S.U.S.Non-U.S.U.S.Non-U.S.Earnings(loss)(U.S.GAAP)1,054 4,606 836 540 504 281 404 357(362)8,220 Total Identified Items Earnings(loss)excludingIdentified Items(Non-GAAP)1,054 4,606 836 540 504 281 404 357(362)8,220 Three Months EndedMarch 31,2023UpstreamEnergy ProductsChemical ProductsSpecialty ProductsCorporateandFinancingTotal(millions of dollars)U.S.Non-U.S.U.S.Non-U.S.U.S.Non-U.S.U.S.Non-U.S.Earnings(loss)(U.S.GAAP)1,632 4,825 1,910 2,273 324 47 451 323(355)11,430 Identified ItemsTax-related items(158)(30)(188)Earnings(loss)excludingIdentified Items(Non-GAAP)1,632 4,983 1,910 2,303 324 47 451 323(355)11,618 References in this discussion to Corporate earnings(loss)mean net income(loss)attributable to ExxonMobil(U.S.GAAP)from the Condensed Consolidated Statement ofIncome.Unless otherwise indicated,references to earnings(loss);Upstream,Energy Products,Chemical Products,Specialty Products,and Corporate and Financing earnings(loss);and earnings(loss)per share are ExxonMobils share after excluding amounts attributable to noncontrolling interests.Due to rounding,numbers presented may not add up precisely to the totals indicated.18Structural Cost SavingsStructural Cost Savings describes decreases in cash opex excluding energy and production taxes as a result of operational efficiencies,workforce reductions,divestment-relatedreductions,and other cost-savings measures that are expected to be sustainable compared to 2019 levels.Relative to 2019,estimated cumulative Structural Cost Savings totaled$10.1 billion,which included an additional$0.4 billion in the first three months of 2024.The total change between periods in expenses below will reflect both Structural CostSavings and other changes in spend,including market factors,such as inflation and foreign exchange impacts,as well as changes in activity levels and costs associated withnew operations.Estimates of cumulative annual structural savings may be revised depending on whether cost reductions realized in prior periods are determined to besustainable compared to 2019 levels.Structural Cost Savings are stewarded internally to support managements oversight of spending over time.This measure is useful forinvestors to understand the Corporations efforts to optimize spending through disciplined expense management.Dollars in billions(unless otherwise noted)Twelve MonthsEnded December 31,Three MonthsEnded March 31,2019202320232024Components of Operating CostsFrom ExxonMobils Consolidated Statement of Income(U.S.GAAP)Production and manufacturing expenses36.8 36.9 9.4 9.1 Selling,general and administrative expenses11.4 9.9 2.4 2.5 Depreciation and depletion(includes impairments)19.0 20.6 4.2 4.8 Exploration expenses,including dry holes1.3 0.8 0.1 0.1 Non-service pension and postretirement benefit expense1.2 0.7 0.2 Subtotal69.7 68.9 16.4 16.5 ExxonMobils share of equity company expenses(non-GAAP)9.1 10.5 2.7 2.4 Total Adjusted Operating Costs(non-GAAP)78.8 79.4 19.1 18.9 Total Adjusted Operating Costs(non-GAAP)78.8 79.4 19.1 18.9 Less:Depreciation and depletion(includes impairments)19.0 20.6 4.2 4.8 Non-service pension and postretirement benefit expense1.2 0.7 0.2 Other adjustments(includes equity company depreciationand depletion)3.6 3.7 0.8 0.9 Total Cash Operating Expenses(Cash Opex)(non-GAAP)55.0 54.4 13.9 13.2 Energy and production taxes(non-GAAP)11.0 14.9 4.3 3.4 Total Cash Operating Expenses(Cash Opex)excludingEnergy and Production Taxes(non-GAAP)44.0 39.5 9.6 9.8 Change vs2019Changevs2023EstimatedCumulative vs2019Total Cash Operating Expenses(Cash Opex)excludingEnergy and Production Taxes(non-GAAP)-4.5 0.2Market 3.6 0.1Activity/Other 1.6 0.5Structural Cost Savings-9.7-0.4-10.1Due to rounding,numbers presented may not add up precisely to the totals indicated.19REVIEW OF FIRST QUARTER 2024 RESULTSExxonMobils first-quarter 2024 earnings were$8.2 billion,or$2.06 per share assuming dilution,compared with earnings of$11.4 billion a year earlier.The decrease inearnings was mainly driven by declining industry refining margins and lower natural gas prices.Capital and exploration expenditures were$5.8 billion,down$0.5 billion fromfirst quarter 2023.UPSTREAMUpstream Financial Results(millions of dollars)Three Months EndedMarch 31,20242023Earnings(loss)(U.S.GAAP)United States1,054 1,632 Non-U.S.4,606 4,825 Total5,660 6,457 Identified Items United States Non-U.S.(158)Total(158)Earnings(loss)excluding Identified Items (Non-GAAP)United States1,054 1,632 Non-U.S.4,606 4,983 Total5,660 6,615 Refer to page 18 for definition of Identified Items and earnings(loss)excluding Identified Items.(1)(1)(1)20Upstream First Quarter Earnings Factor Analysis(millions of dollars)Price Price impacts decreased earnings by$820 million,driven by a 32crease in natural gas realizations,partially offset by a 4%increase in liquids realizations.Advantaged Volume Growth Higher volumes from advantaged assets increased earnings by$430 million,mainly driven by Guyana liquids growth.Base Volume Lower base volumes decreased earnings by$400 million,mainly driven by divestments,government-mandated curtailments,and unfavorable entitlementeffects.Structural Cost Savings Increased earnings by$90 million.Expenses Higher expenses,primarily from depreciation,decreased earnings by$160 million.Other Other items decreased earnings by$470 million,reflecting other primarily non-cash impacts from tax and inventory adjustments as well as divestments.Timing Effects Less unfavorable timing effects from derivatives mark-to-market impacts increased earnings by$370 million.Identified Items 1Q 2023$(158)million loss driven by additional European taxes.Refer to page 18 for definition of Identified Items and earnings(loss)excluding Identified Items.(1)(1)21Upstream Operational ResultsThree Months EndedMarch 31,20242023Net production of crude oil,natural gas liquids,bitumen and synthetic oil(thousands of barrels daily)United States816 820 Canada/Other Americas772 670 Europe4 4 Africa224 220 Asia711 749 Australia/Oceania30 32 Worldwide2,557 2,495 Net natural gas production available for sale(millions of cubic feet daily)United States2,241 2,367 Canada/Other Americas94 94 Europe377 548 Africa150 134 Asia3,274 3,597 Australia/Oceania1,226 1,276 Worldwide7,362 8,016 Oil-equivalent production(thousands of oil-equivalent barrels daily)3,784 3,831 Natural gas is converted to an oil-equivalent basis at six million cubic feet per one thousand barrels.(1)(1)22Upstream Additional Information(thousands of barrels daily)Three Months EndedMarch 31Volumes reconciliation(Oil-equivalent production)20233,831Entitlements-Net InterestEntitlements-Price/Spend/Other(41)Government Mandates(17)Divestments(66)Growth/Other7720243,784Natural gas is converted to an oil-equivalent basis at six million cubic feet per one thousand barrels.1Q 2024versus1Q 20231Q 2024 production of 3.8 million oil-equivalent barrels per day decreased 47 thousand oil-equivalent barrels per day from 1Q 2023.Excluding the impacts from entitlements,divestments,and higher government-mandated curtailments,net production grew by 77 thousand oil-equivalentbarrels per day,mainly driven by Guyana.Listed below are descriptions of ExxonMobils volumes reconciliation factors which are provided to facilitate understanding of the terms.Entitlements-Net Interest are changes to ExxonMobils share of production volumes caused by non-operational changes to volume-determining factors.These factors consistof net interest changes specified in Production Sharing Contracts(PSCs),which typically occur when cumulative investment returns or production volumes achieve definedthresholds,changes in equity upon achieving pay-out in partner investment carry situations,equity redeterminations as specified in venture agreements,or as a result of thetermination or expiry of a concession.Once a net interest change has occurred,it typically will not be reversed by subsequent events,such as lower crude oil prices.Entitlements-Price,Spend and Other are changes to ExxonMobils share of production volumes resulting from temporary changes to non-operational volume-determiningfactors.These factors include changes in oil and gas prices or spending levels from one period to another.According to the terms of contractual arrangements or governmentroyalty regimes,price or spending variability can increase or decrease royalty burdens and/or volumes attributable to ExxonMobil.For example,at higher prices,fewer barrelsare required for ExxonMobil to recover its costs.These effects generally vary from period to period with field spending patterns or market prices for oil and natural gas.Suchfactors can also include other temporary changes in net interest as dictated by specific provisions in production agreements.Government Mandates are changes to ExxonMobils sustainable production levels as a result of production limits or sanctions imposed by governments.Divestments are reductions in ExxonMobils production arising from commercial arrangements to fully or partially reduce equity in a field or asset in exchange for financial orother economic consideration.Growth and Other comprise all other operational and non-operational factors not covered by the above definitions that may affect volumes attributable to ExxonMobil.Suchfactors include,but are not limited to,production enhancements from project and work program activities,acquisitions including additions from asset exchanges,downtime,market demand,natural field decline,and any fiscal or commercial terms that do not affect entitlements.(1)(1)23ENERGY PRODUCTSEnergy Products Financial Results(millions of dollars)Three Months EndedMarch 31,20242023Earnings(loss)(U.S.GAAP)United States836 1,910 Non-U.S.540 2,273 Total1,376 4,183 Identified Items United States Non-U.S.(30)Total(30)Earnings(loss)excluding Identified Items (Non-GAAP)United States836 1,910 Non-U.S.540 2,303 Total1,376 4,213 Due to rounding,numbers presented may not add up precisely to the totals indicated.Energy Products First Quarter Earnings Factor Analysis(millions of dollars)Margin Margins decreased earnings by$2,000 million driven by weaker industry refining margins.Advantaged Volume Growth Higher volumes from advantaged assets increased earnings by$140 million,primarily driven by the Beaumont refinery expansion.Base Volume Lower base volumes decreased earnings by$210 million,on divestment of three refining assets(Billings,Sriracha,and Trecate).Structural Cost Savings Increased earnings by$140 million.Expenses Higher expenses decreased earnings by$290 million,on higher scheduled maintenance and turnaround activity.Other All other items increased earnings by$40 million.Timing Effects Unfavorable timing effects from derivatives mark-to-market impacts decreased earnings by$660 million.Identified Items 1Q 2023$(30)million loss related to additional European taxes.Refer to page 18 for definition of Identified Items and earnings(loss)excluding Identified Items.(1)(1)(1)(1)24Energy Products Operational Results(thousands of barrels daily)Three Months EndedMarch 31,20242023Refinery throughputUnited States1,900 1,643 Canada407 417 Europe954 1,189 Asia Pacific402 565 Other180 184 Worldwide3,843 3,998 Energy Products salesUnited States2,576 2,459 Non-U.S.2,656 2,818 Worldwide5,232 5,277 Gasoline,naphthas2,178 2,177 Heating oils,kerosene,diesel1,742 1,770 Aviation fuels339 312 Heavy fuels214 215 Other energy products759 803 Data reported net of purchases/sales contracts with the same counterparty.(1)(1)25CHEMICAL PRODUCTSChemical Products Financial Results(millions of dollars)Three Months EndedMarch 31,20242023Earnings(loss)(U.S.GAAP)United States504 324 Non-U.S.281 47 Total785 371 Earnings(loss)excluding Identified Items (Non-GAAP)United States504 324 Non-U.S.281 47 Total785 371 Refer to page 18 for definition of Identified Items and earnings(loss)excluding Identified Items.Chemical Products First Quarter Earnings Factor Analysis(millions of dollars)Margin Increased North America feed advantage from lower natural gas prices and higher margins from performance chemicals realizations,more than offset industry margindecline,increasing earnings by$200 million.Advantaged Volume Growth Additional high-value product volumes increased earnings by$40 million.Base Volume Higher base volumes increased earnings by$160 million,primarily driven by strong reliability and absence of turnarounds.Structural Cost Savings Increased earnings by$20 million.Expenses Lower turnaround expenses increased earnings by$10 million.Other All other items decreased earnings by$20 million.Chemical Products Operational Results(thousands of metric tons)Three Months EndedMarch 31,20242023Chemical Products sales United States1,847 1,561 Non-U.S.3,207 3,088 Worldwide5,054 4,649 Data reported net of purchases/sales contracts with the same counterparty.(1)(1)(2)(2)26SPECIALTY PRODUCTSSpecialty Products Financial Results(millions of dollars)Three Months EndedMarch 31,20242023Earnings(loss)(U.S.GAAP)United States404 451 Non-U.S.357 323 Total761 774 Earnings(loss)excluding Identified Items (Non-GAAP)United States404 451 Non-U.S.357 323 Total761 774 Refer to page 18 for definition of Identified Items and earnings(loss)excluding Identified Items.Specialty Products First Quarter Earnings Factor Analysis(millions of dollars)Margin Stronger finished lubes margins due to lower feed costs more than offset weaker basestock margins,increasing earnings by$30 million.Base Volume Unfavorable volume/mix effects decreased earnings by$20 million.Structural Cost Savings Increased earnings by$20 million.Expenses Higher expenses decreased earnings by$40 million.Specialty Products Operational Results(thousands of metric tons)Three Months EndedMarch 31,20242023Specialty Products sales United States495 476 Non-U.S.1,464 1,464 Worldwide1,959 1,940 Data reported net of purchases/sales contracts with the same counterparty.(1)(1)(2)(2)27CORPORATE AND FINANCINGCorporate and Financing Financial Results(millions of dollars)Three Months EndedMarch 31,20242023Earnings(loss)(U.S.GAAP)(362)(355)Earnings(loss)excluding Identified Items (Non-GAAP)(362)(355)Refer to page 18 for definition of Identified Items and earnings(loss)excluding Identified Items.Corporate and Financing expenses were$362 million for the first quarter of 2024,$7 million higher than the first quarter of 2023.(1)(1)28LIQUIDITY AND CAPITAL RESOURCES(millions of dollars)Three Months EndedMarch 31,20242023Net cash provided by/(used in)Operating activities14,664 16,341 Investing activities(4,577)(4,925)Financing activities(7,982)(8,507)Effect of exchange rate changes(324)102 Increase/(decrease)in cash and cash equivalents1,781 3,011 Cash and cash equivalents(at end of period)33,349 32,676 Cash flow from operations and asset salesNet cash provided by operating activities(U.S.GAAP)14,664 16,341 Proceeds associated with sales of subsidiaries,property,plant&equipment,and sales and returns of investments703 854 Cash flow from operations and asset sales(Non-GAAP)15,367 17,195 Because of the ongoing nature of our asset management and divestment program,we believe it is useful for investors to consider proceedsassociated with asset sales together with cash provided by operating activities when evaluating cash available for investment in the businessand financing activities,including shareholder distributions.Cash flow from operations and asset sales in the first quarter of 2024 was$15.4 billion,a decrease of$1.8 billion from the comparable 2023 period primarily reflecting lowerearnings.Cash provided by operating activities totaled$14.7 billion for the first three months of 2024,$1.7 billion lower than 2023.Net income including noncontrolling interests was$8.6 billion,a decrease of$3.3 billion from the prior year period.The adjustment for the noncash provision of$4.8 billion for depreciation and depletion was up$0.6 billionfrom 2023.Changes in operational working capital were a contribution of$2.0 billion during the period.All other items net decreased cash flows by$0.7 billion in 2024 versusa contribution of$0.6 billion in 2023.See the Condensed Consolidated Statement of Cash Flows for additional details.Investing activities for the first three months of 2024 used net cash of$4.6 billion,a decrease of$0.3 billion compared to the prior year.Spending for additions to property,plant and equipment of$5.1 billion was$0.3 billion lower than 2023.Proceeds from asset sales were$0.7 billion,a decrease of$0.2 billion compared to the prior year.Netinvestments and advances decreased$0.2 billion from$0.4 billion in 2023.Net cash used in financing activities was$8.0 billion in the first three months of 2024,including$3.0 billion for the purchase of 27.5 million shares of ExxonMobil stock,aspart of the previously announced buyback program.This compares to net cash used in financing activities of$8.5 billion in the prior year.Total debt at the end of the firstquarter of 2024 was$40.4 billion compared to$41.6 billion at year-end 2023.The Corporations debt to total capital ratio was 16.0 percent at the end of the first quarter of 2024compared to 16.4 percent at year-end 2023.The net debt to capital ratio was 3.2 percent at the end of the first quarter,a decrease of 1.3 percentage points from year-end 2023.The Corporations capital allocation priorities are investing in competitively advantaged,high-return projects;maintaining a strong balance sheet;and sharing our success withour shareholders through more consistent share repurchases and a growing dividend.The Corporation distributed a total of$3.8 billion to shareholders in the first three monthsof 2024 through dividends.The Corporation has access to significant capacity of long-term and short-term liquidity.Internally generated funds are expected to cover the majority of financial requirements,supplemented by long-term and short-term debt.The Corporation had undrawn short-term committed lines of credit of$0.3 billion and undrawn long-term committed lines ofcredit of$1.9 billion as of first quarter 2024.The Corporation,as part of its ongoing asset management program,continues to evaluate its mix of assets for potential upgrade.Because of the ongoing nature of this program,dispositions will continue to be made from time to time which will result in either gains or losses.Additionally,the Corporation continues to evaluate opportunities to enhanceits business portfolio through acquisitions of assets or companies,and enters into such transactions from time to time.Key criteria for evaluating acquisitions include strategicfit,cost synergies,potential for future growth,low cost of supply,and attractive valuations.Acquisitions may be made with cash,shares of the Corporations common stock,orboth.Litigation and other contingencies are discussed in Note 3 to the unaudited condensed consolidated financial statements.29Contractual ObligationsThe Corporation and its affiliates have numerous long-term sales and purchase commitments in their various business activities,all of which are expected to be fulfilled with noadverse consequences material to the Corporations operations or financial condition.Through the first quarter of 2024,the Corporation entered into two long-term purchaseagreements with an estimated total obligation of approximately$3.0 billion.TAXES(millions of dollars)Three Months EndedMarch 31,20242023Income taxes3,803 4,960 Effective income tax rate364%Total other taxes and duties 7,160 8,095 Total10,963 13,055 Includes“Other taxes and duties”plus taxes that are included in“Production and manufacturing expenses”and“Selling,general andadministrative expenses”.Total taxes were$11.0 billion for the first quarter of 2024,a decrease of$2.1 billion from 2023.Income tax expense was$3.8 billion compared to$5.0 billion in the prior year.The effective income tax rate,which is calculated based on consolidated company income taxes and Exxonmobils share of equity company income taxes,was 36 percent.Thisincreased from the 34 percent rate in the prior year period due primarily to a change in mix of results in jurisdictions with varying tax rates.Total other taxes and dutiesdecreased by$0.9 billion to$7.2 billion.CAPITAL AND EXPLORATION EXPENDITURES(millions of dollars)Three Months EndedMarch 31,20242023Upstream(including exploration expenses)4,582 4,581 Energy Products527 685 Chemical Products433 831 Specialty Products76 91 Other221 192 Total5,839 6,380 Capital and exploration expenditures in the first quarter of 2024 were$5.8 billion,down 8%from the first quarter of 2023.The Corporation plans to invest in the range of$23billion to$25 billion in 2024.Actual spending could vary depending on the progress of individual projects and property acquisitions.(1)(1)30FORWARD-LOOKING STATEMENTSStatements related to future events;projections;descriptions of strategic,operating,and financial plans and objectives;statements of future ambitions and plans;and otherstatements of future events or conditions,are forward-looking statements.Similarly,discussion of roadmaps or future plans related to carbon capture,transportation andstorage,biofuel,hydrogen,direct air capture,and other future plans to reduce emissions and emission intensity of ExxonMobil,its affiliates,companies it is seeking to acquireand third parties are dependent on future market factors,such as continued technological progress,policy support and timely rule-making and permitting,and representforward-looking statements.Actual future results,including financial and operating performance;potential earnings,cash flow,dividends or shareholder returns,including the timing and amounts of sharerepurchases;total capital expenditures and mix,including allocations of capital to low carbon investments;realization and maintenance of structural cost reductions andefficiency gains,including the ability to offset inflationary pressure;plans to reduce future emissions and emissions intensity,including ambitions to reach Scope 1 and Scope 2net zero from operated assets by 2050,to reach Scope 1 and 2 net zero in Upstream Permian Basin unconventional operated assets by 2030 and in Pioneer assets by 2035,toeliminate routine flaring in-line with World Bank Zero Routine Flaring,and to reach near-zero methane emissions from operated assets and other methane initiatives;meetingExxonMobils divestment and start-up plans,and associated project plans as well as technology advances,including the timing and outcome of projects to capture,transportand store CO2,produce hydrogen,produce biofuels,produce lithium,create new advanced carbon materials,and use plastic waste as a feedstock for advanced recycling;timelygranting of governmental permits and certifications;future debt levels and credit ratings;business and project plans,timing,costs,capacities and profitability;resourcerecoveries and production rates;and planned Denbury and Pioneer integrated benefits could differ materially due to a number of factors.These include global or regional changes in the supply and demand for oil,natural gas,petrochemicals,and feedstocks and other market factors,economic conditions,andseasonal fluctuations that impact prices and differentials for our products;changes in law,regulations,taxes,trade sanctions,or policies,such as government policies supportinglower carbon and new market investment opportunities such as the U.S.Inflation Reduction Act and the ability for projects to qualify for the financial incentives availablethereunder,the punitive European taxes on the oil and gas sector and unequal support for different technological methods of emissions reduction or evolving,ambiguous andunharmonized standards imposed by various jurisdictions related to sustainability and GHG reporting;variable impacts of trading activities on our margins and results eachquarter;actions of competitors and commercial counterparties;the outcome of commercial negotiations,including final agreed terms and conditions;the ability to access debtmarkets on favorable terms or at all;the occurrence,pace,rate of recovery and effects of public health crises,including the response from governments;reservoir performance,including variability and timing factors applicable to unconventional resources;the level and outcome of exploration projects and decisions to invest in future reserves;timelycompletion of development and other construction projects;final management approval of future projects and any changes in the scope,terms,costs or assumptions of suchprojects as approved;the actions of government or other actors against our core business activities and acquisitions,divestitures or financing opportunities;war,civil unrest,attacks against the company or industry,and other geopolitical or security disturbances,including disruption of land or sea transportation routes;expropriations,seizure,orcapacity,insurance,shipping or export limitations imposed by governments or laws;opportunities for potential acquisitions,investments or divestments and satisfaction ofapplicable conditions to closing,including timely regulatory approvals;the capture of efficiencies within and between business lines and the ability to maintain near-term costreductions as ongoing efficiencies;unforeseen technical or operating difficulties and unplanned maintenance;the development and competitiveness of alternative energy andemission reduction technologies;the results of research programs and the ability to bring new technologies to commercial scale on a cost-competitive basis;and other factorsdiscussed under Item 1A.Risk Factors of ExxonMobils 2023 Form 10-K.Forward-looking and other statements regarding environmental and other sustainability efforts and aspirations are not an indication that these statements are material toinvestors or require disclosure in our filing with the SEC.In addition,historical,current,and forward-looking environmental and other sustainability-related statements may bebased on standards for measuring progress that are still developing,internal controls and processes that continue to evolve,and assumptions that are subject to change in thefuture,including future rule-making.Energy demand models are forward-looking by nature and aim to replicate system dynamics of the global energy system,requiring simplifications.The reference to anyscenario in this report,including any potential net-zero scenarios,does not imply ExxonMobil views any particular scenario as likely to occur.In addition,energy demandscenarios require assumptions on a variety of parameters.As such,the outcome of any given scenario using an energy demand model comes with a high degree of uncertainty.Third-party scenarios discussed in this report reflect the modeling assumptions and outputs of their respective authors,not ExxonMobil,and their use by ExxonMobil is not anendorsement by ExxonMobil of their underlying assumptions,likelihood or probability.Investment decisions are made on the basis of ExxonMobils separate planning process.Any use of the modeling of a third-party organization within this report does not constitute or imply an endorsement by ExxonMobil of any or all of the positions or activitiesof such organization.31Actions needed to advance ExxonMobils 2030 greenhouse gas emission-reductions plans are incorporated into its medium-term business plans,which are updated annually.The reference case for planning beyond 2030 is based on ExxonMobils Global Outlook(Outlook)research and publication.The Outlook is reflective of the existing globalpolicy environment and an assumption of increasing policy stringency and technology improvement to 2050.However,the Outlook does not attempt to project the degree ofrequired future policy and technology advancement and deployment for the world,or ExxonMobil,to meet net zero by 2050.As future policies and technology advancementsemerge,they will be incorporated into the Outlook,and ExxonMobils business plans will be updated accordingly.References to projects or opportunities may not reflectinvestment decisions made by ExxonMobil or its affiliates.Individual projects or opportunities may advance based on a number of factors,including availability of supportivepolicy,permitting,technological advancement for cost-effective abatement,insights from the company planning process,and alignment with our partners and otherstakeholders.Capital investment guidance in lower-emission investments is based on our corporate plan;however,actual investment levels will be subject to the availability ofthe opportunity set,public policy support,and focused on returns.The term“project”as used in this report can refer to a variety of different activities and does not necessarily have the same meaning as in any government paymenttransparency reports.32ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKInformation about market risks for the three months ended March 31,2024,does not differ materially from that discussed under Item 7A of the registrants Annual Report onForm 10-K for 2023.ITEM 4.CONTROLS AND PROCEDURESAs indicated in the certifications in Exhibit 31 of this report,the Corporations Chief Executive Officer,Chief Financial Officer and Principal Accounting Officer haveevaluated the Corporations disclosure controls and procedures as of March 31,2024.Based on that evaluation,these officers have concluded that the Corporations disclosurecontrols and procedures are effective in ensuring that information required to be disclosed by the Corporation in the reports that it files or submits under the SecuritiesExchange Act of 1934,as amended,is accumulated and communicated to them in a manner that allows for timely decisions regarding required disclosures and are effective inensuring that such information is recorded,processed,summarized and reported within the time periods specified in the Securities and Exchange Commissions rules andforms.There were no changes during the Corporations last fiscal quarter that materially affected,or are reasonably likely to materially affect,the Corporations internal controlover financial reporting.33PART II.OTHER INFORMATIONITEM 1.LEGAL PROCEEDINGSExxonMobil has elected to use a$1 million threshold for disclosing environmental proceedings.Refer to the relevant portions of Note 3 of this Quarterly Report on Form 10-Q for further information on legal proceedings.As reported in the Corporations Annual Report on Form 10-K for the year ended December 31,2022,on August 4,2022,XTO Energy,Inc.(“XTO”)received a letter from theDepartment of Justice(“DOJ”)notifying XTO of the United States Environmental Protection Agencys(“EPA”)request to initiate a potential civil action against XTOregarding the Schnegg well in Powhatan Point,Ohio.The EPA alleged XTO breached its duty under the General Duty Clause of the Clean Air Act for the Schnegg well,andsuch breaches resulted in the 2018 well blowout.Neither a civil action has been filed nor a draft consent decree has been provided by the DOJ.In January 2024,the DOJdemanded$25 million to settle the alleged violations.XTO strongly disagrees with the DOJs position.As reported in the Corporations Annual Report on Form 10-K for the year ended December 31,2022,the State of Texas,acting by and through its Attorney General(“State”),filed a complaint against the Corporation(captioned State of Texas v.Exxon Mobil Corporation)in Travis County District Court,TX,Cause No.D-1-GN-22-006534,foralleged violations of the Texas Clean Air Act at the Baytown Olefins Plant located in Baytown,Texas seeking civil penalties in excess of$1 million,injunctive relief,andrecovery of its fees and costs of litigation.In March 2024,the State of Texas and the Corporation agreed to settle the alleged violations upon payment of$2.2 million to theState of Texas(the“Proposed Settlement”).Once the Proposed Settlement is published in the Federal Register,it will be open to public comment for 30 days before the DistrictCourt may approve it.ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDSIssuer Purchases of Equity Securities for Quarter Ended March 31,2024Total Numberof SharesPurchased AveragePrice Paidper Share Total Number of SharesPurchased as Part ofPublicly Announced Plansor Programs Approximate Dollar Value ofShares that May Yet BePurchased Under theProgram(Billions of dollars)January 20242,729,980$102.692,704,895$17.2February 202411,040,594$103.5511,040,594$16.1March 202413,797,147$110.4813,797,137$14.6Total27,567,721$106.9427,542,626Includes shares withheld from participants in the companys incentive program for personal income taxes.Excludes 1%U.S.excise tax on stock repurchases.Purchases were made under terms intended to qualify for exemption under Rules 10b-18 and 10b5-1.As required by securities lawrestrictions,no repurchases take place during proxy solicitation and voting periods for transactions involving the issuance of ExxonMobilshares.For the Pioneer transaction,this period occurred during the first quarter of 2024.In its 2022 Corporate Plan Update released December 8,2022,the Corporation stated that the company expanded its share repurchaseprogram to up to$50 billion through 2024,including$15 billion of repurchases in 2022 and$17.5 billion in 2023.In its 2023 CorporatePlan Update released December 6,2023,the Corporation stated that after the Pioneer transaction closes,the go-forward share repurchaseprogram pace is expected to increase to$20 billion annually through 2025,assuming reasonable market conditions.During the first quarter,the Corporation did not issue or sell any unregistered equity securities.ITEM 5.OTHER INFORMATIONDuring the three months ended March 31,2024,none of the Companys directors or officers adopted or terminated a“Rule 10b5-1 trading arrangement”or“non-Rule 10b5-1trading arrangement,”as each term is defined in Item 408(a)of Regulation S-K.ITEM 6.EXHIBITSSee Index to Exhibits of this report.(1)(2)(3)(4)(1)(2)(3)(4)34INDEX TO EXHIBITS Exhibit Description 31.1 Certification(pursuant to Securities Exchange Act Rule 13a-14(a)by Chief Executive Officer.31.2 Certification(pursuant to Securities Exchange Act Rule 13a-14(a)by Chief Financial Officer.31.3 Certification(pursuant to Securities Exchange Act Rule 13a-14(a)by Principal Accounting Officer.32.1 Section 1350 Certification(pursuant to Sarbanes-Oxley Section 906)by Chief Executive Officer.32.2 Section 1350 Certification(pursuant to Sarbanes-Oxley Section 906)by Chief Financial Officer.32.3 Section 1350 Certification(pursuant to Sarbanes-Oxley Section 906)by Principal Accounting Officer.101 Interactive Data Files(formatted as Inline XBRL).104 Cover Page Interactive Data File(formatted as Inline XBRL and contained in Exhibit 101).35SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934,the Registrant has duly caused this report to be signed on its behalf by the undersigned,thereunto dulyauthorized.EXXON MOBIL CORPORATION Date:April 29,2024By:/s/LEN M.FOX Len M.Fox Vice President,Controller and Principal Accounting Officer 36EXHIBIT 31.1Certification by Darren W.WoodsPursuant to Securities Exchange Act Rule 13a-14(a)I,Darren W.Woods,certify that:1.I have reviewed this quarterly report on Form 10-Q of Exxon Mobil Corporation;2.Based on my knowledge,this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made,in lightof the circumstances under which such statements were made,not misleading with respect to the period covered by this report;3.Based on my knowledge,the financial statements,and other financial information included in this report,fairly present in all material respects the financial condition,results of operations and cash flows of the registrant as of,and for,the periods presented in this report;4.The registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures(as defined in Exchange Act Rules 13a-15(e)and 15d-15(e)and internal control over financial reporting(as defined in Exchange Act Rules 13a-15(f)and 15d-15(f)for the registrant and have:(a)Designed such disclosure controls and procedures,or caused such disclosure controls and procedures to be designed under our supervision,to ensure that materialinformation relating to the registrant,including its consolidated subsidiaries,is made known to us by others within those entities,particularly during the period inwhich this report is being prepared;(b)Designed such internal control over financial reporting,or caused such internal control over financial reporting to be designed under our supervision,to providereasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generallyaccepted accounting principles;(c)Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosurecontrols and procedures,as of the end of the period covered by this report based on such evaluation;and(d)Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter(theregistrants fourth fiscal quarter in the case of an annual report)that has materially affected,or is reasonably likely to materially affect,the registrants internal controlover financial reporting;and5.The registrants other certifying officers and I have disclosed,based on our most recent evaluation of internal control over financial reporting,to the registrants auditorsand the audit committee of the registrants board of directors(or persons performing the equivalent functions):(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adverselyaffect the registrants ability to record,process,summarize and report financial information;and(b)Any fraud,whether or not material,that involves management or other employees who have a significant role in the registrants internal control over financialreporting.Date:April 29,2024/s/DARREN W.WOODSDarren W.WoodsChief Executive OfficerEXHIBIT 31.2Certification by Kathryn A.MikellsPursuant to Securities Exchange Act Rule 13a-14(a)I,Kathryn A.Mikells,certify that:1.I have reviewed this quarterly report on Form 10-Q of Exxon Mobil Corporation;2.Based on my knowledge,this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made,in lightof the circumstances under which such statements were made,not misleading with respect to the period covered by this report;3.Based on my knowledge,the financial statements,and other financial information included in this report,fairly present in all material respects the financial condition,results of operations and cash flows of the registrant as of,and for,the periods presented in this report;4.The registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures(as defined in Exchange Act Rules 13a-15(e)and 15d-15(e)and internal control over financial reporting(as defined in Exchange Act Rules 13a-15(f)and 15d-15(f)for the registrant and have:(a)Designed such disclosure controls and procedures,or caused such disclosure controls and procedures to be designed under our supervision,to ensure that materialinformation relating to the registrant,including its consolidated subsidiaries,is made known to us by others within those entities,particularly during the period inwhich this report is being prepared;(b)Designed such internal control over financial reporting,or caused such internal control over financial reporting to be designed under our supervision,to providereasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generallyaccepted accounting principles;(c)Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosurecontrols and procedures,as of the end of the period covered by this report based on such evaluation;and(d)Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter(theregistrants fourth fiscal quarter in the case of an annual report)that has materially affected,or is reasonably likely to materially affect,the registrants internal controlover financial reporting;and5.The registrants other certifying officers and I have disclosed,based on our most recent evaluation of internal control over financial reporting,to the registrants auditorsand the audit committee of the registrants board of directors(or persons performing the equivalent functions):(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adverselyaffect the registrants ability to record,process,summarize and report financial information;and(b)Any fraud,whether or not material,that involves management or other employees who have a significant role in the registrants internal control over financialreporting.Date:April 29,2024/s/KATHRYN A.MIKELLSKathryn A.MikellsSenior Vice President and Chief Financial OfficerEXHIBIT 31.3Certification by Len M.FoxPursuant to Securities Exchange Act Rule 13a-14(a)I,Len M.Fox,certify that:1.I have reviewed this quarterly report on Form 10-Q of Exxon Mobil Corporation;2.Based on my knowledge,this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made,in lightof the circumstances under which such statements were made,not misleading with respect to the period covered by this report;3.Based on my knowledge,the financial statements,and other financial information included in this report,fairly present in all material respects the financial condition,results of operations and cash flows of the registrant as of,and for,the periods presented in this report;4.The registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures(as defined in Exchange Act Rules 13a-15(e)and 15d-15(e)and internal control over financial reporting(as defined in Exchange Act Rules 13a-15(f)and 15d-15(f)for the registrant and have:(a)Designed such disclosure controls and procedures,or caused such disclosure controls and procedures to be designed under our supervision,to ensure that materialinformation relating to the registrant,including its consolidated subsidiaries,is made known to us by others within those entities,particularly during the period inwhich this report is being prepared;(b)Designed such internal control over financial reporting,or caused such internal control over financial reporting to be designed under our supervision,to providereasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generallyaccepted accounting principles;(c)Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosurecontrols and procedures,as of the end of the period covered by this report based on such evaluation;and(d)Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter(theregistrants fourth fiscal quarter in the case of an annual report)that has materially affected,or is reasonably likely to materially affect,the registrants internal controlover financial reporting;and5.The registrants other certifying officers and I have disclosed,based on our most recent evaluation of internal control over financial reporting,to the registrants auditorsand the audit committee of the registrants board of directors(or persons performing the equivalent functions):(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adverselyaffect the registrants ability to record,process,summarize and report financial information;and(b)Any fraud,whether or not material,that involves management or other employees who have a significant role in the registrants internal control over financialreporting.Date:April 29,2024/s/LEN M.FOXLen M.FoxVice President and Controller(Principal Accounting Officer)EXHIBIT 32.1Certification of Periodic Financial ReportPursuant to 18 U.S.C.Section 1350For purposes of 18 U.S.C.Section 1350,as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,the undersigned,Darren W.Woods,the chief executive officerof Exxon Mobil Corporation(the“Company”),hereby certifies that,to his knowledge:(i)the Quarterly Report on Form 10-Q of the Company for the quarter ended March 31,2024,as filed with the Securities and Exchange Commission on the date hereof(the“Report”)fully complies with the requirements of section 13(a)or 15(d)of the Securities Exchange Act of 1934;and(ii)the information contained in the Report fairly presents,in all material respects,the financial condition and results of operations of the Company.Date:April 29,2024/s/DARREN W.WOODSDarren W.WoodsChief Executive OfficerA signed original of this written statement required by Section 906 has been provided to Exxon Mobil Corporation and will be retained by Exxon Mobil Corporation andfurnished to the Securities and Exchange Commission or its staff upon request.EXHIBIT 32.2Certification of Periodic Financial ReportPursuant to 18 U.S.C.Section 1350For purposes of 18 U.S.C.Section 1350,as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,the undersigned,Kathryn A.Mikells,the chief financial officerof Exxon Mobil Corporation(the“Company”),hereby certifies that,to her knowledge:(i)the Quarterly Report on Form 10-Q of the Company for the quarter ended March 31,2024,as filed with the Securities and Exchange Commission on the date hereof(the“Report”)fully complies with the requirements of section 13(a)or 15(d)of the Securities Exchange Act of 1934;and(ii)the information contained in the Report fairly presents,in all material respects,the financial condition and results of operations of the Company.Date:April 29,2024/s/KATHRYN A.MIKELLSKathryn A.MikellsSenior Vice President and Chief Financial OfficerA signed original of this written statement required by Section 906 has been provided to Exxon Mobil Corporation and will be retained by Exxon Mobil Corporation andfurnished to the Securities and Exchange Commission or its staff upon request.EXHIBIT 32.3Certification of Periodic Financial ReportPursuant to 18 U.S.C.Section 1350For purposes of 18 U.S.C.Section 1350,as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,the undersigned,Len M.Fox,the principal accounting officerof Exxon Mobil Corporation(the“Company”),hereby certifies that,to his knowledge:(i)the Quarterly Report on Form 10-Q of the Company for the quarter ended March 31,2024,as filed with the Securities and Exchange Commission on the date hereof(the“Report”)fully complies with the requirements of section 13(a)or 15(d)of the Securities Exchange Act of 1934;and(ii)the information contained in the Report fairly presents,in all material respects,the financial condition and results of operations of the Company.Date:April 29,2024/s/LEN M.FOXLen M.FoxVice President and Controller(Principal Accounting Officer)A signed original of this written statement required by Section 906 has been provided to Exxon Mobil Corporation and will be retained by Exxon Mobil Corporation andfurnished to the Securities and Exchange Commission or its staff upon request.
2024-05-16
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Philips delivers first-quarter results in line with 2024 performance improvementplan;Resolves the Respironics personal injury and medical monitoringlitigation in the US for USD 1.1 billionAmsterdam,April 29,2024First-quarter highlightsGroup sales amounted to EUR 4.1 billion,with comparable sales growth of 2.4%Comparable order intake-3.8%,mainly due to ChinaUSD 1.1 billion Respironics litigation settlement reached in the US(provision recognized of EUR 982million)Income from operations EUR-824 million,including above provisionAdjusted EBITA margin of 9.4%of salesFree cash outflow of EUR 336 millionEUR 540 million agreement reached with insurers for Respironics recall-related product liabilityclaimsRoy Jakobs,CEO of Royal Philips:“We started the year in line with our plan,with order intake growth outside China turning positive and strong margin improvement.Supported by key innovation launches and strong focus on our execution priorities,we remain confident in our performanceimprovement plan for 2024.Patient safety and quality is our highest priority,and we have taken important steps in further resolving the consequences of theRespironics recall.The remediation of the sleep therapy devices for patients is almost complete,and the test results to date show theuse of these devices is not expected to result in appreciable harm to health.We do regret the concern that patients may haveexperienced.The approved consent decree and economic loss settlement,and now the resolution of the personal injury and medical monitoringlitigation in the US,are significant milestones and provide further clarity on the way forward for Philips.”Respironics litigationPhilips and plaintiffs leadership have reached an agreement,following a mediation with Judge Diane M.Welsh,to resolve thepersonal injury litigation and the medical monitoring class action to end the uncertainty associated with litigation in the US.Philipsand Philips Respironics do not admit any fault or liability,or that any injuries were caused by Respironics devices.The settlement addresses the claims filed in the US courts and potential claims submitted to the census registry.Under thesettlement,Philips Respironics has agreed to pay a total of USD 1.1 billion.The related payments are expected in 2025 and will befunded from Philips cash flow generation.As a consequence,a EUR 982 million*)provision was recognized in Q1 2024.In April 2024,Philips Respironics signed a consent decree,which was court-approved,and obtained the final court approval for thepreviously announced economic loss settlement in the US,for which a provision was recognized in Q1 2023.Philips also concluded an agreement with insurers to pay Philips EUR 540 million to cover Respironics recall-related product liabilityclaims.This income is expected to be recognized in Q2 2024 and payment is expected during 2024.Quarterly reportQ1 2024*)After converting the USD 1.1 billion amount to euro and discounting for time.Quarterly Report 2024-Q11Following the remediation of the sleep therapy devices and the reassuring test results to date,these important milestones onlitigation,the consent decree and insurance provide Philips with a clear path forward for sustainable value creation.See here formore information on the Respironics litigation.Group and segment performanceGroup comparable sales increased 2.4%,with growth in mature and growth geographies,despite a decline in China.The market inChina continues to be impacted by the industry-wide anti-corruption measures initiated by the government and by subduedconsumer demand.In the first quarter,the government of China announced a subsidy program for hospitals to upgrade agedmedical equipment,which will support gradual improvement of a fundamentally attractive market.Diagnosis&Treatment comparable sales increased 3%,with growth in Image Guided Therapy and Precision Diagnosis,on the backof double-digit growth in Q1 2023.Adjusted EBITA margin was 9.2%,mainly due to normalization of the product mix,as anticipated.Connected Care comparable sales declined 1%,with growth in Enterprise Informatics offset by a decline in Monitoring on the back ofdouble-digit growth in Q1 2023.Adjusted EBITA margin increased to 6.4%.Personal Health comparable sales increased 3%,driven by growth in Personal Care and Mother&Child Care.Adjusted EBITA marginimproved to 15.2%.ProductivityTotal productivity savings of EUR 151 million in the quarter:operating model savings of EUR 55 million,procurement savings of EUR40 million,and other programs savings of EUR 56 million.OutlookPhilips reiterates its confidence in delivering the 2025 plan,acknowledging that uncertainties remain.For the full year 2024,Philipscontinues to expect 3-5%comparable sales growth and an Adjusted EBITA margin of 11-11.5%.The expected free cash flow is now increased to EUR 0.9-1.1 billion in 2024,including the receipt from insurers for the Respironicsproduct liability claims and the remaining payment related to the economic loss settlement.The personal injury and medicalmonitoring litigation settlement payment is expected in 2025.The outlook excludes the potential impact of other previously disclosed Philips Respironics-related legal proceedings,including theinvestigation by the US Department of Justice.Customer,innovation and ESG highlightsPhilips was recognized as a Clarivate Top 100 Global Innovator for the 11thconsecutive year and ranked as a top medical technology patentapplicant at the European Patent Office in 2023.Philips launched the new Azurion image-guided therapy system and advanced informatics to enhance the minimally invasive diagnosisand treatment of stroke and other neurovascular patients.Supporting short-staffed radiology departments,Philips introduced the new AI-enabled CT 5300 designed for more accurate and reliableimaging results using up to 80%lower radiation dose,while enhancing productivity and quality.Philips signed a 10-year agreement with the US Nicklaus Childrens Health System to provide AI-enabled radiology and monitoringsolutions for deeper clinical insights,and improved workflow and productivity.Further expanding the successful OneBlade product range,Philips launched OneBlade Intimate the first shaving product designed to begender-neutral and protect the most sensitive skin.More than 1,100 Philips MR systems with the helium-free operations BlueSeal magnet and AI support have now been installed globally,enabling more productive and sustainable MR imaging operations.Capital allocationIn April 2024,Philips completed the EUR 1.5 billion share buyback program for capital reduction purposes announced on July 26,2021,and in the second quarter intends to cancel the 4.4 million shares acquired this year.See here for more information on the sharebuyback program.Conference call and audio webcastRoy Jakobs,CEO,and Abhijit Bhattacharya,CFO,will host a conference call for investors and analysts at 10:00 am CET today to discussthe first quarter results.A live webcast of the conference call will be available on the Philips Investor Relations website and can beaccessed here.Quarterly Report 2024-Q12Q1 2023Q1 2024Sales4,1674,138Nominal sales growth6%(1)%Comparable sales growth1)6%2%Comparable order intake2)(5)%(4)%Income from operations(583)(824)as a%of sales(14.0)%(19.9)%Financial expenses,net(79)(70)Investments in associates,net of income taxes(16)(1)Income tax(expense)benefit15(105)Income from continuing operations(663)(999)Discontinued operations,net of income taxes(3)1Net income(665)(998)Earnings per common share(EPS)Income from continuing operationsattributable to shareholders3)(in EUR)-diluted(0.72)(1.10)Adjusted income from continuingoperations attributable to shareholders3)(inEUR)-diluted1)0.210.26Net income attributable to shareholders3)(in EUR)-diluted(0.72)(1.10)EBITA1)(510)(751)as a%of sales(12.2)%(18.1)justed EBITA1)359388as a%of sales8.6%9.4justed EBITDA1)575609as a%of sales13.8.7%changeQ1 2023Q1 2024nominalcomparable2)Western Europe8018526%5%North America1,7791,745(2)%0%Other maturegeographies416398(4)%6%Total maturegeographies2,9962,9960%2%Growthgeographies1,1711,142(3)%3%Philips Group4,1674,138(1)%2%Philips performance1)Non-IFRS financial measure.Refer to Reconciliation of non-IFRS information.2)Effective Q1 2024,Philips has revised the order intake policy for the software businesses.Refer to Forward-looking statements and other important information.3)Shareholders refers to shareholders of Koninklijke Philips N.V.Per share and weightedaverage share calculations have been adjusted retrospectively for all periods presented toreflect the issuance of shares for the share dividend in respect of 2022.Comparable sales increased by 2%,driven by growth in theDiagnosis&Treatment and Personal Health segments,partlyoffset by a decline in Connected Care.Adjusted EBITA improved to EUR 388 million and the marginincreased to 9.4%,driven by productivity and pricing actions.Restructuring,acquisition-related and other charges amountedto EUR 1,139 million,compared to EUR 868 million in Q1 2023.Q12024 includes charges of EUR 982 million for the Respironicslitigation provision,EUR 73 million for Respironics field-actionrunning costs and quality actions,and EUR 22 million related tothe Respironics consent decree.Q1 2023 included a Respironicslitigation provision of EUR 575 million.Financial income and expenses resulted in a net expense of EUR70 million,compared to a net expense of EUR 79 million in Q12023.Q1 2024 includes higher interest income on cash balances.Income tax expense increased by EUR 120 million year-on-year,mainly due to the tax effect of the Respironics litigationprovision in Q1 2024.Net income in Q1 2024 decreased compared to Q1 2023,mainlydriven by the Respironics litigation provision and higher taxexpense,partly offset by improved operational performance.1)Sales per geographic area is reported based on country of destination2)Non-IFRS financial measure.Refer to Reconciliation of non-IFRS information.Comparable sales in Mature geographies increased by 2%,withgrowth in Western Europe and Other mature geographies.InGrowth geographies,sales increased by 3%on a comparablebasis,despite a decline in China.Key data in millions of EUR unless otherwise statedSales per geographic area1)in millions of EUR unless otherwise statedQuarterly Report 2024-Q13Q1 2023Q1 2024Beginning cash balance1,1721,869Free cash flow1)117(336)Net cash flows from operating activities202(171)Net capital expenditures(85)(165)Other cash flows from investing activities(104)(10)Treasury shares transactions(95)Changes in debt(22)(27)Other cash flow items(31)18Net cash flows from discontinued operations(4)(17)Ending cash balance1,1281,402December 31,2023March 31,2024Long-term debt7,0356,597Short-term debt6541,140Total debt7,6897,737Cash and cash equivalents1,8691,402Net debt5,8206,335Shareholders equity12,02811,359Non-controlling interests3333Group equity12,06111,392Net debt:group equityratio1)33:6736:641)Non-IFRS financial measure.Refer to Reconciliation of non-IFRS information.Net cash flows from operating activities decreased,mainly dueto payment of accrued liabilities,partly offset by higher cashearnings.Net capital expenditures in Q1 2023 included cash proceeds fromthe sale of real estate.Other cash flows from investing activities in Q1 2023 mainlyincluded a cash payment with respect to foreign-exchangederivative contracts.Treasury shares transactions include share repurchases as part ofthe EUR 1.5 billion share repurchase program for capitalreduction purposes which was announced on July 26,2021,aswell as related withholding tax.Other cash flow items include foreign currency impact on thecash balance.1)Non-IFRS financial measure.Refer to Reconciliation of non-IFRS information.Cash and cash equivalents balance in millions of EURComposition of net debt to group equity1)in millions of EUR unless otherwise statedAmounts may not add up due to rounding.Quarterly Report 2024-Q14Q1 2023Q1 2024Sales2,0102,026Sales growthNominal sales growth16%1%Comparable sales growth1)16%3%Income from operations173146as a%of sales8.6%7.2ITA1)195168as a%of sales9.7%8.3justed EBITA1)261186as a%of sales13.0%9.2justed EBITDA1)309234as a%of sales15.4.5%Q1 2023Q1 2024Sales1,2261,164Sales growthNominal sales growth4%(5)%Comparable sales growth1)3%(1)%Income from operations(717)(1,065)as a%of sales(58.5)%(91.5)ITA1)(672)(1,021)as a%of sales(54.8)%(87.7)justed EBITA1)2174as a%of sales1.7%6.4justed EBITDA1)77134as a%of sales6.3.5%Q1 2023Q1 2024Sales798790Sales growthNominal sales growth(5)%(1)%Comparable sales growth1)(6)%3%Income from operations96116as a%of sales12.0.7ITA1)101120as a%of sales12.7.2justed EBITA1)105120as a%of sales13.2.2justed EBITDA1)128146as a%of sales16.0.5%Performance per segmentDiagnosis&Treatment1)Non-IFRS financial measure.Refer to Reconciliation of non-IFRS information.Comparable sales increased by 3%,on the back of strongdouble-digit growth in Q1 2023,driven by growth in PrecisionDiagnosis and Image Guided Therapy.Comparable sales in Growth geographies showed mid-single-digit growth.Mature geographies recorded low-single-digitgrowth.Adjusted EBITA was EUR 186 million and the margin decreasedto 9.2%,mainly due to normalization of the product mix,and avalue adjustment on current assets.Restructuring,acquisition-related and other charges amountedto EUR 19 million,compared to EUR 66 million in Q1 2023.In Q22024,restructuring,acquisition-related and other charges areexpected to total approximately EUR 20 million.Connected Care1)Non-IFRS financial measure.Refer to Reconciliation of non-IFRS information.Comparable sales declined by 1%,with growth in EnterpriseInformatics offset by a decline in Monitoring on the back ofstrong double-digit growth in Q1 2023.Comparable sales showed low-single-digit growth in Maturegeographies,offset by a double-digit decline in Growthgeographies.Adjusted EBITA improved to EUR 74 million and the marginincreased to 6.4%,mainly driven by productivity measures andmix effects.Restructuring,acquisition-related and other charges were EUR1,095 million,compared to EUR 693 million in Q1 2023.Q1 2024includes charges of EUR 982 million for the Respironics litigationprovision,EUR 73 million for Respironics field-action runningcosts and quality actions,and EUR 22 million related to theRespironics consent decree.Q1 2023 included charges of EUR 575million for the Respironics litigation provision.In Q2 2024,restructuring,acquisition-related and other items are expectedto show a gain of approximately EUR 340 million,includinginsurance income of EUR 540 million related to Respironicsproduct liability claims.This also includes costs in relation to theRespironics consent decree.Personal Health1)Non-IFRS financial measure.Refer to Reconciliation of non-IFRS information.Comparable sales increased by 3%,driven by growth in PersonalCare and Mother&Child Care.Comparable sales in Mature geographies showed mid-single-digit growth,driven by Western Europe.Growth geographieswere flat,mainly due to China.Adjusted EBITA increased to EUR 120 million and the marginimproved to 15.2%,mainly driven by sales growth andproductivity measures.In Q2 2024,restructuring and other charges are expected tototal approximately EUR 15 million.Key data in millions of EUR unless otherwise statedKey data in millions of EUR unless otherwise statedKey data in millions of EUR unless otherwise statedQuarterly Report 2024-Q15Q1 2023Q1 2024Sales132157Income from operations(135)(20)EBITA1)(133)(17)Adjusted EBITA1)of:(28)7IP Royalties5989Innovation(40)(22)Central costs(45)(61)Other(2)1Adjusted EBITDA1)6195Other1)Non-IFRS financial measure.Refer to Reconciliation of non-IFRS information.Sales increased by EUR 25 million,mainly due to phasing ofroyalty income.Adjusted EBITA increased to EUR 7 million,mainly driven byhigher royalty income.Restructuring,acquisition-related and other charges amountedto EUR 24 million,compared to EUR 105 million in Q1 2023,which was mainly related to workforce reduction.In Q2 2024,restructuring and other charges are expected to totalapproximately EUR 5 million.Key data in millions of EURQuarterly Report 2024-Q16Q120232024Sales4,1674,138Cost of sales(2,411)(2,323)Gross margin1,7551,815Selling expenses(1,079)(1,096)General and administrative expenses(158)(136)Research and development expenses(528)(419)Other business income1410Other business expenses(588)(997)Income from operations(583)(824)Financial income1424Financial expenses(93)(94)Investment in associates,net of income taxes(16)(1)Income before taxes(678)(894)Income tax(expense)benefit15(105)Income from continuing operations(663)(999)Discontinued operations,net of income taxes(3)1Net income(665)(998)Attribution of net incomeNet income attributable to shareholders1)(665)(999)Net income attributable to non-controlling interests-Income from continuing operations attributable to shareholders1)(663)(1,000)Earnings per common shareWeighted average number of common shares outstanding(after deduction of treasury shares)during the period(inthousands)2):-basic920,854906,029-diluted920,854906,029Income from continuing operations attributable to shareholders1)(in EUR)2)-basic(0.72)(1.10)-diluted(0.72)(1.10)Net income attributable to shareholders1)(in EUR)2)-basic(0.72)(1.10)-diluted(0.72)(1.10)Condensed consolidated statements of income1)Shareholders refers to shareholders of Koninklijke Philips N.V.2)Per share calculations have been adjusted retrospectively for all periods presented to reflect the issuance of shares for the share dividend in respect of 2022.in millions of EUR unless otherwise statedAmounts may not add up due to rounding.Quarterly Report 2024-Q17Q1 2024nominalgrowthconsolidationchangescurrencyeffectscomparablegrowth2024 versus 2023Diagnosis&Treatment0.8%(0.9)%3.2%3.1%Connected Care(5.0)%1.0%2.6%(1.5)%Personal Health(1.0)%0.0%3.9%2.9%Philips Group(0.7)%0.0%3.1%2.4%Q120232024Net income(665)(998)Discontinued operations,net of income taxes3(1)Income from continuing operations(663)(999)Income from continuing operations attributable to non-controlling interests-Income from continuing operations attributable to shareholders1)(663)(1,000)Adjustments for:Amortization and impairment of acquired intangible assets7472Restructuring costs and acquisition-related charges22451Other items:6441,088Respironics litigation provision575982Respironics field-action running costs5440Respironics consent decree charges22Quality actions33Remaining items1511Net finance income/expenses49Tax impact of adjusted items and tax only adjusting items(91)14Adjusted income from continuing operations attributable to shareholders1)192235Earnings per common share:Income from continuing operations attributable to shareholders1)per common share(in EUR)-diluted(0.72)(1.10)Adjusted income from continuing operations attributable to shareholders1)per common share(in EUR)-diluted0.210.26Reconciliation of non-IFRS informationCertain non-IFRS financial measures are presented when discussing the Philips Groups performance:Comparable sales growthAdjusted income from continuing operations attributable to shareholdersAdjusted income from continuing operations attributable to shareholders per common share(in EUR)-diluted(Adjusted EPS)EBITAAdjusted EBITAAdjusted EBITDAFree cash flowNet debt:group equity ratioFor the definitions of the non-IFRS financial measures listed above,refer to chapter 12.3,Reconciliation of non-IFRS information,ofthe Annual Report 2023 and to the Forward-looking statements and other important information.Comparable order intake is presented when discussing the Philips Groups performance.Effective Q1 2024,Philips has revised theorder intake policy for the software business.Refer to Forward-looking statements and other important information.1)Shareholders refers to shareholders of Koninklijke Philips N.V.Per share and weighted average share calculations have been adjusted retrospectively for all periods presented to reflect theissuance of shares for the share dividend in respect of 2022.Sales growth composition injusted income from continuing operations attributable to shareholders1)in millions of EUR unless otherwise statedAmounts may not add up due to rounding.Quarterly Report 2024-Q18Philips GroupDiagnosis&TreatmentConnected CarePersonalHealthOtherQ1 2024Net income(998)Discontinued operations,net of income taxes(1)Income taxes105Investments in associates,net of income taxes1Financial expenses94Financial income(24)Income from operations(824)146(1,065)116(20)Amortization and impairment of acquired intangible assets72224443EBITA(751)168(1,021)120(17)Restructuring and acquisition-related charges511917-14Other items:1,0881,07810Respironics litigation provision982982Respironics field-action running costs4040Respironics consent decree charges2222Quality actions3333Remaining items11110Adjusted EBITA388186741207Depreciation,amortization and impairment of fixed assetsand other intangible assets22248602688Adding back impairment of fixed assets included inRestructuring and acquisition related charges and Otheritems(1)-Adjusted EBITDA60923413414695Q1 2023Net income(665)Discontinued operations,net of income taxes3Income taxes(15)Investments in associates,net of income taxes16Financial expenses93Financial income(14)Income from operations(583)173(717)96(135)Amortization and impairment of acquired intangible assets74224542EBITA(510)195(672)101(133)Restructuring and acquisition-related charges22465495105Other items:6441644(1)-Respironics litigation provision575575Respironics field-action running costs5454Remaining items15115(1)-Adjusted EBITA35926121105(28)Depreciation,amortization and impairment of fixed assets andother intangible assets238505724108Adding back impairment of fixed assets included inRestructuring and acquisition related charges and Other items(21)(3)-(19)Adjusted EBITDA5753097712861January to March20232024Net cash flows provided by operating activities202(171)Net capital expenditures:(85)(165)Purchase of intangible assets(43)(36)Expenditures on development assets(47)(52)Capital expenditures on property,plant and equipment(72)(82)Proceeds from disposals of property,plant and equipment775Free cash flow117(336)Reconciliation of Net income to Adjusted EBITA and Adjusted EBITDA in millions of EURComposition of free cash flow in millions of EURQuarterly Report 2024-Q1920232024Q1Q2Q3Q4Q1Q2Q3Q4Sales4,1674,4704,4715,0624,138Nominal sales growth6%7%4%(7)%(1)%Comparable sales growth1)6%9%(1)%2%Comparable order intake2)(5)%(8)%(7)%(4)%(4)%Gross margin1,7551,9611,9331,7981,815as a%of sales42.1C.9C.25.5C.9%Selling expenses(1,079)(1,112)(1,114)(1,220)(1,096)as a%of sales(25.9)%(24.9)%(24.9)%(24.1)%(26.5)%G&A expenses(158)(157)(150)(143)(136)as a%of sales(3.8)%(3.5)%(3.4)%(2.8)%(3.3)%R&D expenses(528)(468)(445)(449)(419)as a%of sales(12.7)%(10.5)%(10.0)%(8.9)%(10.1)%Income from operations(583)22122424(824)as a%of sales(14.0)%4.9%5.0%0.5%(19.9)%Net income(665)749038(998)Income from continuingoperations attributable toshareholders3)per commonshare(in EUR)-diluted(0.72)0.080.100.04(1.10)Adjusted income fromcontinuing operationsattributable to shareholders3)per common share(in EUR)-diluted1)0.210.280.330.410.26EBITA1)(510)292295106(751)as a%of sales(12.2)%6.5%6.6%2.1%(18.1)justed EBITA1)359453457653388as a%of sales8.6.1.2.9%9.4justed EBITDA1)575681693896609as a%of sales13.8.2.5.7.7%Philips statistics1)Non-IFRS financial measure.Refer to Reconciliation of non-IFRS information,of this document.2)Effective Q1 2024,Philips has revised the order intake policy for the software businesses.Refer to Forward-looking statements and other important information.3)Shareholders refers to shareholders of Koninklijke Philips N.V.Per share and weighted average share calculations have been adjusted retrospectively for all periods presented to reflect theissuance of shares for the share dividend in respect of 2022.in millions of EUR unless otherwise statedQuarterly Report 2024-Q11020232024January-MarchJanuary-JuneJanuary-SeptemberJanuary-DecemberJanuary-MarchJanuary-JuneJanuary-SeptemberJanuary-DecemberSales4,1678,63613,10718,1694,138Nominal sales growth6%7%6%2%(1)%Comparable sales growth1)6%8%9%6%2%Comparable order intake2)(5)%(7)%(7)%(6)%(4)%Gross margin1,7553,7175,6507,4481,815as a%of sales42.1C.0C.1A.0C.9%Selling expenses(1,079)(2,191)(3,304)(4,524)(1,096)as a%of sales(25.9)%(25.4)%(25.2)%(24.9)%(26.5)%G&A expenses(158)(315)(465)(608)(136)as a%of sales(3.8)%(3.6)%(3.5)%(3.3)%(3.3)%R&D expenses(528)(996)(1,441)(1,890)(419)as a%of sales(12.7)%(11.5)%(11.0)%(10.4)%(10.1)%Income from operations(583)(362)(139)(115)(824)as a%of sales(14.0)%(4.2)%(1.1)%(0.6)%(19.9)%Net income(665)(591)(501)(463)(998)Income from continuingoperations attributable toshareholders3)per commonshare(in EUR)-diluted(0.72)(0.64)(0.54)(0.50)(1.10)Adjusted income fromcontinuing operationsattributable to shareholders3)per common share(in EUR)-diluted1)0.210.500.831.250.26EBITA1)(510)(217)77183(751)as a%of sales(12.2)%(2.5)%0.6%1.0%(18.1)justed EBITA1)3598121,2681,921388as a%of sales8.6%9.4%9.7.6%9.4justed EBITDA1)5751,2561,9492,845609as a%of sales13.8.5.9.7.7%Number of common sharesoutstanding(after deductionof treasury shares)at the endof period(in thousands)881,539920,085915,987906,403904,257Shareholders equity percommon share(in EUR)13.9913.1813.8413.2712.56Net debt:group equity ratio1)36:6437:6336:6433:6736:64Total employees at end ofperiod73,71271,51970,74169,65669,0621)Non-IFRS financial measure.Refer to Reconciliation of non-IFRS information,of this document.2)Effective Q1 2024,Philips has revised the order intake policy for the software businesses.Refer to Forward-looking statements and other important information.3)Shareholders refers to shareholders of Koninklijke Philips N.V.Per share and weighted average share calculations have been adjusted retrospectively for all periods presented to reflect theissuance of shares for the share dividend in respect of 2022.Philips statistics in millions of EUR unless otherwise statedQuarterly Report 2024-Q111Forward-looking statements and other important informationForward-looking statementsThis document and the related oral presentation,includingresponses to questions following the presentation,containcertain forward-looking statements with respect to thefinancial condition,results of operations and business of Philipsand certain of the plans and objectives of Philips with respectto these items.Examples of forward-looking statements includestatements made about our strategy,estimates of sales growth,future Adjusted EBITA*),future restructuring and acquisitionrelated charges and other costs,future developments in Philipsorganic business and the completion of acquisitions anddivestments.Forward-looking statements can be identifiedgenerally as those containing words such as“anticipates”,“assumes”,“believes”,“estimates”,“expects”,“should”,“will”,“will likely result”,“forecast”,“outlook”,“projects”,“may”orsimilar expressions.By their nature,these statements involverisk and uncertainty because they relate to future events andcircumstances and there are many factors that could causeactual results and developments to differ materially from thoseexpressed or implied by these statements.These factors include but are not limited to:Philips ability togain leadership in health informatics in response todevelopments in the health technology industry;Philips abilityto keep pace with the changing health technologyenvironment;macroeconomic and geopolitical changes;integration of acquisitions and their delivery on business plansand value creation expectations;securing and maintainingPhilips intellectual property rights,and unauthorized use ofthird-party intellectual property rights;Philips ability to meetexpectations with respect to ESG-related matters;failure ofproducts and services to meet quality or security standards,adversely affecting patient safety and customer operations;breaches of cybersecurity;challenges in simplifying ourorganization and our ways of working;the resilience of oursupply chain;attracting and retaining personnel;challenges indriving operational excellence and speed in bringinginnovations to market;compliance with regulations andstandards including quality,product safety and(cyber)security;compliance with business conduct rules and regulationsincluding privacy and upcoming ESG disclosure and duediligence requirements;treasury and financing risks;tax risks;reliability of internal controls,financial reporting andmanagement process;global inflation.As a result,Philipsactual future results may differ materially from the plans,goalsand expectations set forth in such forward-looking statements.For a discussion of factors that could cause future results todiffer from such forward-looking statements,see also the Riskmanagement chapter included in the Annual Report 2023.Third-party market share dataStatements regarding market share,contained in thisdocument,including those regarding Philips competitiveposition,are based on outside sources such as specializedresearch institutes,industry and dealer panels in combinationwith management estimates.Where information is not yetavailable to Philips,market share statements may also be basedon estimates and projections prepared by management and/orbased on outside sources of information.Managementsestimates of rankings are based on order intake or sales,depending on the business.Market Abuse RegulationThis press release contains inside information within themeaning of Article 7(1)of the EU Market Abuse Regulation.Use of non-IFRS informationIn presenting and discussing the Philips Groups financialposition,operating results and cash flows,management usescertain non-IFRS financial measures.These non-IFRS financialmeasures should not be viewed in isolation as alternatives tothe equivalent IFRS measure and should be used in conjunctionwith the most directly comparable IFRS measures.Non-IFRSfinancial measures do not have standardized meaning underIFRS and therefore may not be comparable to similar measurespresented by other issuers.A reconciliation of these non-IFRSmeasures to the most directly comparable IFRS measures iscontained in this document.Further information on non-IFRSmeasures can be found in the Annual Report 2023.PresentationAll amounts are in millions of euros unless otherwise stated.Due to rounding,amounts may not add up precisely to totalsprovided.All reported data is unaudited.Financial reporting isin accordance with the accounting policies as stated in theAnnual Report 2023.Prior-period amounts have beenreclassified to conform to the current-period presentation;thisincludes immaterial organizational changes.Effective Q1 2024,Philips has revised the order intake policy toreflect the full contract value for software contracts that startgenerating revenue within an 18-month horizon,instead ofonly the next 18 months to revenue horizon.This change hasbeen implemented to better align with the specific businessmodel of our software businesses,simplify the order intakeprocess,and better align with peers.Prior-period comparableorder intake percentages have been restated accordingly.Thisrevision has not resulted in any material changes to the orderintake percentages for the periods presented.Philips has realigned the composition of its reporting segmentseffective from April 1,2023.The most notable change is theshift of the previous Enterprise Diagnostic Informatics businessfrom the Diagnosis&Treatment segment to the ConnectedCare segment.This business,together with other informaticssolutions in the Connected Care segment,now forms theEnterprise Informatics business.Accordingly,the comparativefigures for the affected segments have been restated.Therestatement has been published on the Philips InvestorRelations website and can be accessed here.Per share calculations have been adjusted retrospectively for allperiods presented to reflect the issuance of shares in thesecond quarter of 20
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Investor PresentationNov 2023Quarterly Updates3HighlightsMINISOStores6,115MINISO Storesin China3,802YoY819QoQ324YoY533QoQ198YoY286QoQ126Our overall performanceonce again reached new heightsMINISO store numbersurpassed 6,000 for the first timeRevenue3,791YoY 36.7%QoQ 16.6%Gross margin41.8 22Q3 35.7 23Q2 39.8%in RMB millionMINISO Storesin overseas2,313Adj net profit642.0YoY 53.8%QoQ 12.4%in RMB millionHistorical HighGross profit1,584YoY 60.2%QoQ 22.2%in RMB millionHistorical High4MINISO China:High Quality GrowthGMV per store of the first 10 months of CY2023 in line with expectation at the year beginningCompared with 2019 85%Compared with 2021 100%GMVper storeYoY 22%GMVper storeYoY 11%Average ordernumberYoY 17%Average transaction valueYoY 3%Sep Quarter of 2023Offline store GMVYoY41%Oct of 2023Offline store GMVYoY40%5MINISO China:Daily Sales per Store Trend on a Weekly Basis QTD6.25-7.017.02-7.087.09-7.157.16-7.227.23-7.297.30-8.058.06-8.128.13-8.198.20-8.268.27-9.029.03-9.099.10-9.169.17-9.239.24-9.3010.01-10.0710.08-10.1410.15-10.2110.22-10.2810.29-11.04 11.05-11.11202320196MINISO Overseas Continued to Grow at a High Speedin RMB millionSep Quarter2022Jun Quarter2023Sep Quarter2023YoYQoQRevenue9201,1151,29541%-Distributor markets606(66%)609(55%)703(54%)16%-Directly operated markets314(34%)506(45%)592(46%)89%GMV by Markets1,9482,4032,87948 %-Distributor markets1,5241,7472,11439!%-Directly operated markets42465676580ily GMV per Storein RMB thousand12.0313.5715.3027%Average Store Number2,0002,1592,25013%4%7MINISO Overseas:Store&GMVSep Quarter 2023StoreGMV(in RMB million)Revenue(in RMB million)NumberPercent（%）YoYVolumePercent（%）YoYVolumePercent（%）YoYOverseas Stores2,3132862,87948%1,29541%-Directly operated markets678291765 27Y2 46%-Distributor markets1,6357152,114 739p3 54%By Region-North America1406$346 12910 244%-Latin America51422t1,079 37W14 24!%-Asian excluding China12645561,063 37%T6 42%-Europe2189I248 9 70%-Middle East and North Africa5327 2# 1%-Others1245%-1776 3%-14 2%-12%8Top 20 Markets Accounted for 80%GMV and Recovered BetterRankMarketShare of GMVGMV per Storegrowth rate(vs 2022Q3)GMV per Storerecovery rate(vs 2019Q3)Comparable salesgrowth rate(vs 2022Q3)Comparable salesrecovery rate(vs 2019Q3)StorenumbersStorenet addition(YTD)1Mexico23I8I31102U.S.A9350 2213Indonesia7iQu#7204Colombia64tAy245Philippines5s$216India5%-3Uv$1187Chile31%-21%-28-18Saudi Arabia3%-16d%-12U(69Canada37180F210UAE25!(811Italy2%-0%-37212Peru2%-21%-26613Thailand2Gpftt1214Morocco2!e$g3115Spain1$p$1Q-116UK1%8%-30%-22117Kazakstan1&8&16618Singapore1D5I219Vietnam1Yy8X920France1%-31%-232TOP 20804A1%1,53611491Overseas10034%2,3131981.TOP 20 total numbers9MINISO Overseas:Store AdditionSep Quarter2023Net Addition(YTD)Forecast(Q4)Overseas Stores2,313198 100-200By RegionAsian excluding China1,26498 Latin America51443 North America14022 Europe 21833 Others1772-Directly Operated Markets67878 India24018 Indonesia24021 U.S.A9020 Vietnam609-Distributor Markets1,635120 Mexico22010 Philippines15024 Colombia801 Thailand758 Spain506 10Disney Train&MINISO Wink联合迪士尼联合迪士尼100周年打造“笑绒专列”周年打造“笑绒专列”，融合名创优品的超级符号融合名创优品的超级符号-“Wink”11“Fancy Fragrance,Good Things Happen“花式上香“花式上香 好事花生好事花生”花艺香薰快闪活动花艺香薰快闪活动12Best-selling Products in September Quarter13Initial Success of MINISOs First Blind Box Store14Celebrated Grand Opening of Our First Theme Store with Sanrio in Indonesia15TOP TOYSep Quarter2022Jun Quarter2023Sep Quarter2023YoYQoQRevenue(in RMB million)124 173181 46%5%Percentage of Revenue By Product Type-Exclusive products2652%-Third-party products74eh%TOP TOY Offline Stores109 118122 13 4By Type-Directly operated stores8 99 1 0-Third-party stores101 109113 12 4By Region-Tier 133 3236 3 4-Tier 262 6968 6-1-Tier 3 and below14 1718 4 116“Innovation and Mutual Benefit of Pop Toys Ecology”TOP TOY store in Shanghai DisneyTOP TOY17New Products18Revenue BreakdownGrowth Driversin RMB millionSep Quarter2022Jun Quarter2023Sep Quarter2023YoYQoQGrowth in average store countGrowth in per-store salesRevenue2,772 3,2523,791 37%Domestic Operations 1,852 2,1372,496 35%-MINISO Brand1,700 1,9522,307 36%-MINISO China offline1,519 1,7912,144 41 %Mid-teens Mid-twenties-MINISO eCommerce181 161163-11%1%-TOP TOY Brand124 173 181 46%4%Mid-teens Mid-twenties-Others28 128-71%-34%Overseas Operations 920 1,1151,295 41%Low-teens Mid-twenties-Distributor markets606(66%)609(55%)703(54%)16%-Directly operated markets314(34%)506(45%)592(46%)89Demonstrated Resilience and Profitability1.Including revenues from MINISO China,TOP TOY and other business.2.Excluding share-based compensation expensesin RMB millionSep Quarter2022Jun Quarter2023Sep Quarter2023YoYQoQRevenue2,7723,2523,79137%-China11,8522,1372,49635%-Overseas9201,1151,29541%Gross profit9891,2961,58460%Gross margin35.79.8A.8%6%2%S&D expense2373458621676%S&D%3%2%G&A expense21631611672%4%G&A%6%5%4%-2%-1j net profit41757164254j net margin15.1.6.9%2%-1j net profit（Excluding the impact of foreign exchange gains）36550564978)j net margin（Excluding the impact of foreign exchange gains）13.2.5.1%4%2 Expenses by Nature1.The proportion of current revenuein RMB millionSep QuarterYOY2022Percentage(%)12023Percentage(%)1Payroll and employee benefits194 72 7%Rental and related expense12 0.44 13preciation and amortization103 46 3%Licensing expenses48 2 2%Promotion and advertising expense61 21 3%Logistics expenses38 1X 2S%Travelling expenses19 1 1%Other expenses74 3 22%Total expenses549 201 21H!Capital Allocation Balance Shareholder Return in RMB millionFY 2020FY 2021FY 2022FY 2023Cash position,end of period2,861 6,878 5,828 7,303Net cash generated from operating activities826 916 1,406 1,666 Capital expenditures57 180 1,234 174 Free cash flow769 746 172 1,492 Cash dividends paid330306 361 934Share repurchases-91 3222MINISO Group is a global value retailer offering a variety of trendy lifestyle products featuring IP design.The Company serves consumers primarily through its large network of MINISO stores,and promotes a relaxing,treasure-hunting and engaging shopping experience full of delightful surprises that appeals to all demographics.Aesthetically pleasing design,quality and affordability are at the core of every product in MINISOs wide product portfolio,and the Company continually and frequently rolls out products with these qualities.Since the opening of its first store in China in 2013,the Company has built its flagship brand“MINISO”as a globally recognized retail brand and established a massive store network worldwide.For more information,please visit https:/ Relations Contact:Raine Hu MINISO Group Holding LimitedEmail: Phone: 86(20)36228788 Ext.8039About MINISO
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Table of ContentsUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549_FORM 10-Q_(Mark.
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Successful start to fiscal 2024Roland Busch,CEO Siemens AGRalf P.Thomas,CFO Siemens AGUnrestricted|S.
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February7,2024THEWALTDISNEYCOMPANYREPORTSFIRSTQUARTEREARNINGSFORFISCAL2024BURBANK,Calif.TheWaltDisne.
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May7,2024THEWALTDISNEYCOMPANYREPORTSSECONDQUARTERANDSIXMONTHSEARNINGSFORFISCAL2024BURBANK,Calif.TheW.
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Table of ContentsUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549 FORM 10-QQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF1934For the quarterly period ended November 24,2024orTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF1934Commission file number 0-20355Costco Wholesale Corporation(Exact name of registrant as specified in its charter)Washington 91-1223280(State or other jurisdiction ofincorporation or organization)(I.R.S.Employer Identification No.)999 Lake Drive,Issaquah,WA 98027(Address of principal executive offices)(Zip Code)(Registrants telephone number,including area code):(425)313-8100Securities registered pursuant to Section 12(b)of the Act:Title of each classTrading symbol(s)Name of each exchange on which registeredCommon Stock,$.005 Par ValueCOSTThe Nasdaq Global Select MarketIndicate 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 of1934 during the preceding 12 months(or for such shorter period that the registrant was required to file such reports),and(2)has been subject tosuch filing requirements for the past 90 days.Yes No Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule405 of Regulation S-T(232.405 of this chapter)during the preceding 12 months(or for such shorter period that the registrant was required tosubmit such files).Yes No Indicate by check mark whether the registrant is a large accelerated filer,an accelerated filer,a non-accelerated filer,a smaller reportingcompany,or an emerging growth company.See the definitions of“large accelerated filer,”“accelerated filer,”“smaller reporting company,”and“emerging growth company”in Rule 12b-2 of the Exchange Act.Large accelerated filerAccelerated filerNon-accelerated filerSmaller reporting companyEmerging growth companyIf an emerging growth company,indicate by check mark if the registrant has elected not to use the extended transition period for complying withany new or revised financial accounting standards provided pursuant to Section 13(a)of the Exchange Act.Indicate by check mark whether the registrant is a shell company(as defined in Rule 12b-2 of the Exchange Act).Yes No The number of shares outstanding of the issuers common stock as of December 11,2024,was 443,898,870.1Table of ContentsCOSTCO WHOLESALE CORPORATIONINDEX TO FORM 10-Q PagePART IFINANCIAL INFORMATIONItem 1.Financial Statements3Condensed Consolidated Statements of Income3Condensed Consolidated Statements of Comprehensive Income4Condensed Consolidated Balance Sheets5Condensed Consolidated Statements of Equity6Condensed Consolidated Statements of Cash Flows7Notes to Condensed Consolidated Financial Statements8Item 2.Managements Discussion and Analysis of Financial Condition and Results of Operations16Item 3.Quantitative and Qualitative Disclosures About Market Risk24Item 4.Controls and Procedures24PART IIOTHER INFORMATIONItem 1.Legal Proceedings24Item 1A.Risk Factors24Item 2.Unregistered Sales of Equity Securities and Use of Proceeds25Item 3.Defaults Upon Senior Securities25Item 4.Mine Safety Disclosures25Item 5.Other Information25Item 6.Exhibits26Signatures272Table of ContentsPART IFINANCIAL INFORMATIONItem 1Financial StatementsCOSTCO WHOLESALE CORPORATIONCONDENSED CONSOLIDATED STATEMENTS OF INCOME(amounts in millions,except per share data)(unaudited)12 Weeks EndedNovember 24,2024November 26,2023REVENUENet sales$60,985$56,717 Membership fees1,166 1,082 Total revenue62,151 57,799 OPERATING EXPENSESMerchandise costs54,109 50,457 Selling,general and administrative5,846 5,358 Operating income2,196 1,984 OTHER INCOME(EXPENSE)Interest expense(37)(38)Interest income and other,net147 160 INCOME BEFORE INCOME TAXES2,306 2,106 Provision for income taxes508 517 NET INCOME$1,798$1,589 NET INCOME PER COMMON SHARE:Basic$4.05$3.58 Diluted$4.04$3.58 Shares used in calculation(000s):Basic443,988 443,827 Diluted444,891 444,403 The accompanying notes are an integral part of these condensed consolidated financial statements.3Table of ContentsCOSTCO WHOLESALE CORPORATIONCONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(amounts in millions)(unaudited)12 Weeks Ended November 24,2024November 26,2023NET INCOME$1,798$1,589 Foreign-currency translation adjustment and other,net(324)(38)COMPREHENSIVE INCOME$1,474$1,551 The accompanying notes are an integral part of these condensed consolidated financial statements.4Table of ContentsCOSTCO WHOLESALE CORPORATIONCONDENSED CONSOLIDATED BALANCE SHEETS(amounts in millions,except par value and share data)(unaudited)November 24,2024September 1,2024ASSETSCURRENT ASSETSCash and cash equivalents$10,907$9,906 Short-term investments920 1,238 Receivables,net2,963 2,721 Merchandise inventories20,979 18,647 Other current assets1,754 1,734 Total current assets37,523 34,246 OTHER ASSETSProperty and equipment,net29,336 29,032 Operating lease right-of-use assets2,539 2,617 Other long-term assets3,988 3,936 TOTAL ASSETS$73,386$69,831 LIABILITIES AND EQUITYCURRENT LIABILITIESAccounts payable$21,793$19,421 Accrued salaries and benefits4,785 4,794 Accrued member rewards2,444 2,435 Deferred membership fees2,683 2,501 Other current liabilities6,584 6,313 Total current liabilities38,289 35,464 OTHER LIABILITIESLong-term debt,excluding current portion5,745 5,794 Long-term operating lease liabilities2,288 2,375 Other long-term liabilities2,613 2,576 TOTAL LIABILITIES48,935 46,209 COMMITMENTS AND CONTINGENCIESEQUITYPreferred stock$0.005 par value;100,000,000 shares authorized;no shares issued andoutstanding Common stock$0.005 par value;900,000,000 shares authorized;443,942,000 and443,126,000 shares issued and outstanding2 2 Additional paid-in capital7,901 7,829 Accumulated other comprehensive loss(2,152)(1,828)Retained earnings18,700 17,619 TOTAL EQUITY24,451 23,622 TOTAL LIABILITIES AND EQUITY$73,386$69,831 The accompanying notes are an integral part of these condensed consolidated financial statements.5Table of ContentsCOSTCO WHOLESALE CORPORATIONCONDENSED CONSOLIDATED STATEMENTS OF EQUITY(amounts in millions)(unaudited)12 Weeks Ended November 24,2024 Common StockAdditionalPaid-inCapitalAccumulatedOtherComprehensive LossRetainedEarningsTotalEquity Shares(000s)AmountBALANCE AT SEPTEMBER 1,2024443,126$2$7,829$(1,828)$17,619$23,622 Net income 1,798 1,798 Foreign-currency translation adjustment andother,net (324)(324)Stock-based compensation 465 465 Release of vested restricted stock units(RSUs),including tax effects1,046 (389)(389)Repurchases of common stock(230)(4)(202)(206)Cash dividend declared (515)(515)BALANCE AT NOVEMBER 24,2024443,942$2$7,901$(2,152)$18,700$24,451 12 Weeks Ended November 26,2023 Common StockAdditionalPaid-inCapitalAccumulatedOtherComprehensive LossRetainedEarningsTotalEquity Shares(000s)AmountBALANCE AT SEPTEMBER 3,2023442,793$2$7,340$(1,805)$19,521$25,058 Net income 1,589 1,589 Foreign-currency translation adjustment andother,net (38)(38)Stock-based compensation 446 446 Release of vested RSUs,including taxeffects1,282 (292)(292)Repurchases of common stock(288)(5)(157)(162)Cash dividend declared and other (454)(454)BALANCE AT NOVEMBER 26,2023443,787$2$7,489$(1,843)$20,499$26,147 The accompanying notes are an integral part of these condensed consolidated financial statements.6Table of ContentsCOSTCO WHOLESALE CORPORATIONCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(amounts in millions)(unaudited)12 Weeks EndedNovember 24,2024November 26,2023CASH FLOWS FROM OPERATING ACTIVITIESNet income$1,798$1,589 Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization548 501 Non-cash lease expense72 74 Stock-based compensation463 444 Other non-cash operating activities,net(72)43 Changes in operating assets and liabilities:Merchandise inventories(2,541)(1,384)Accounts payable2,601 2,854 Other operating assets and liabilities,net391 530 Net cash provided by operating activities3,260 4,651 CASH FLOWS FROM INVESTING ACTIVITIESPurchases of short-term investments(247)(200)Maturities of short-term investments541 878 Additions to property and equipment(1,264)(1,040)Other investing activities,net(15)(4)Net cash used in investing activities(985)(366)CASH FLOWS FROM FINANCING ACTIVITIESRepayments of short-term borrowings(194)(173)Proceeds from short-term borrowings133 144 Proceeds from issuance of long-term debt 498 Tax withholdings on stock-based awards(389)(292)Repurchases of common stock(207)(162)Cash dividend payments(515)(905)Financing lease payments and other financing activities,net(21)(84)Net cash used in financing activities(1,193)(974)EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS(81)Net change in cash and cash equivalents1,001 3,311 CASH AND CASH EQUIVALENTS BEGINNING OF YEAR9,906 13,700 CASH AND CASH EQUIVALENTS END OF PERIOD$10,907$17,011 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:Cash paid during the first 12 weeks of the year for:Interest$44$52 Income taxes,net$401$210 SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES:Financing lease assets obtained in exchange for new or modified leases$111$29 Operating lease assets obtained in exchange for new or modified leases$15$18 Capital expenditures included in liabilities$204$203 The accompanying notes are an integral part of these condensed consolidated financial statements.7Table of ContentsCOSTCO WHOLESALE CORPORATIONNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(amounts in millions,except share,per share,and warehouse count data)(unaudited)Note 1Summary of Significant Accounting PoliciesDescription of BusinessCostco Wholesale Corporation(Costco or the Company),a Washington corporation,and its subsidiaries operate membership warehousesbased on the concept that offering members low prices on a limited selection of nationally-branded and private-label products in a wide range ofmerchandise categories will produce high sales volumes and rapid inventory turnover.At November 24,2024,Costco operated 896 warehousesworldwide:616 in the United States(U.S.)located in 47 states,Washington,D.C.,and Puerto Rico,109 in Canada,41 in Mexico,36 inJapan,29 in the United Kingdom(U.K.),19 in Korea,15 in Australia,14 in Taiwan,seven in China,five in Spain,two in France,and one eachin Iceland,New Zealand,and Sweden.The Company operates e-commerce sites in the U.S.,Canada,the U.K.,Mexico,Korea,Taiwan,Japan,and Australia.Basis of PresentationThe condensed consolidated financial statements include the accounts of Costco and its wholly-owned subsidiaries.All material inter-companytransactions among the Company and its consolidated subsidiaries have been eliminated in consolidation.These unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q for interimfinancial reporting pursuant to the rules and regulations of the Securities and Exchange Commission(SEC).While these statements reflect allnormal recurring adjustments that are,in the opinion of management,necessary for fair presentation of the results of the interim period,they donot include all of the information and footnotes required by U.S.generally accepted accounting principles(U.S.GAAP)for complete financialstatements.Therefore,the interim condensed consolidated financial statements should be read in conjunction with the consolidated financialstatements and notes included in the Companys Annual Report on Form 10-K for the fiscal year ended September 1,2024.Fiscal Year EndThe Company operates on a 52/53 week fiscal year basis,with the fiscal year ending on the Sunday closest to August 31.Fiscal 2025 is a 52-week year ending on August 31,2025.References to the first quarter of 2025 and 2024 relate to the 12-week fiscal quartersended November 24,2024,and November 26,2023.Use of EstimatesThe preparation of financial statements in conformity with U.S.GAAP requires management to make estimates and assumptions that affect;thereported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements;and thereported amounts of revenues and expenses during the reporting period.These estimates and assumptions take into account historical andforward-looking factors that the Company believes are reasonable.Actual results could differ from those estimates and assumptions.ReclassificationReclassifications were made to the condensed consolidated balance sheet and statement of cash flows for the first quarter of fiscal 2024 toconform with current year presentation.8Table of ContentsRecent Accounting Pronouncements Not Yet Adopted By The CompanyIn November 2023,the Financial Accounting Standards Board(FASB)issued Accounting Standards Update(ASU)2023-07,which is intended toimprove reportable segment disclosure requirements,primarily about significant segment expenses.The standard is effective for fiscal yearsbeginning after December 15,2023,and interim periods within fiscal years beginning after December 15,2024,with early adoption permitted.The amendments should be applied retrospectively to all prior periods presented in the financial statements.In December 2023,the FASB issued ASU 2023-09,which requires public business entities on an annual basis to disclose specific categories inthe income-tax rate reconciliation,provide information for reconciling items that meet a quantitative threshold,and disclose certain informationabout income taxes paid.The standard is effective for annual periods beginning after December 15,2024,with early adoption permitted.Theamendments should be applied on a prospective basis.Retrospective application is permitted.In November 2024,the FASB issued ASU 2024-03,which requires disaggregated disclosures of certain costs and expenses on the incomestatement on an annual and interim basis.The standard is effective for fiscal years beginning after December 15,2026,and interim periodswithin fiscal years beginning after December 15,2027,with early adoption permitted.The amendments should be applied on a prospectivebasis.Retrospective application is permitted.The Company is evaluating these standards.Note 2InvestmentsThe Companys investments were as follows:November 24,2024:CostBasisUnrealizedLosses,NetRecordedBasisAvailable-for-sale:Government and agency securities$702$(11)$691 Held-to-maturity:Certificates of deposit229 229 Total short-term investments$931$(11)$920 September 1,2024:CostBasisUnrealizedLosses,NetRecordedBasisAvailable-for-sale:Government and agency securities$689$(1)$688 Held-to-maturity:Certificates of deposit550 550 Total short-term investments$1,239$(1)$1,238 Gross unrealized holding gains and losses on available-for-sale securities were not material for the periods ended November 24,2024,orSeptember 1,2024.At those dates,there were no available-for-sale securities in a material continuous unrealized-loss position.There were nosales of available-for-sale securities during the first quarter of 2025 or 2024.9Table of ContentsThe maturities of available-for-sale and held-to-maturity securities at November 24,2024,are as follows:Available-For-SaleHeld-To-Maturity Cost BasisFair ValueDue in one year or less$132$132$229 Due after one year through five years414 408 Due after five years156 151 Total$702$691$229 Note 3Fair Value MeasurementAssets and Liabilities Measured at Fair Value on a Recurring BasisThe table below presents information regarding the Companys financial assets and financial liabilities that are measured at fair value on arecurring basis and indicates the level within the hierarchy reflecting the valuation techniques utilized.Level 2November 24,2024September 1,2024Investment in government and agency securities$691$688 Forward foreign-exchange contracts,in asset position21 1 Forward foreign-exchange contracts,in(liability)position(2)(28)Total$710$661 _(1)The asset and liability values are included in other current assets and other current liabilities,respectively,in the accompanying condensed consolidated balance sheets.On November 24,2024,and September 1,2024,the Company did not hold any Level 1 or 3 financial assets or liabilities that were measured atfair value on a recurring basis.There were no transfers between levels during the first quarter of 2025 or 2024.Assets and Liabilities Measured at Fair Value on a Nonrecurring BasisAssets and liabilities recognized and disclosed at fair value on a nonrecurring basis include items such as financial assets measured atamortized cost and long-lived nonfinancial assets.These assets are measured at fair value if determined to be impaired.There were no fairvalue adjustments to these items during the first quarter of 2025 and no material fair value adjustments in 2024.(1)(1)10Table of ContentsNote 4DebtThe carrying value of the Companys long-term debt consisted of the following:November 24,2024September 1,20243.000%Senior Notes due May 2027$1,000$1,000 1.375%Senior Notes due June 20271,250 1,250 1.600%Senior Notes due April 20301,750 1,750 1.750%Senior Notes due April 20321,000 1,000 Other long-term debt863 919 Total long-term debt5,863 5,919 Less unamortized debt discounts and issuance costs21 22 Less current portion97 103 Long-term debt,excluding current portion$5,745$5,794 _(1)Net of unamortized debt discounts and issuance costs.The fair value of the Senior Notes is estimated using Level 2 inputs.Other long-term debt consists of Guaranteed Senior Notes issued by theCompanys Japan subsidiary,valued using Level 3 inputs.The fair value of the Companys long-term debt,including the current portion,wasapproximately$5,273 and$5,412 at November 24,2024,and September 1,2024.Note 5EquityDividendsA quarterly cash dividend of$1.16 per share was declared on October 16,2024,and paid on November 15,2024.The dividend was$1.02 pershare in the first quarter of 2024.Stock Repurchase ProgramsThe Companys stock repurchase program is conducted under a$4,000 authorization by the Board of Directors,which expires in January 2027.At November 24,2024,the remaining amount available under the program was$2,659.The following table summarizes the repurchase activity:Shares Repurchased(000s)Average Price per ShareTotal CostFirst quarter of 2025230$899.23$206 First quarter of 2024288$564.06$162 These amounts may differ from the accompanying condensed consolidated statements of cash flows due to changes in unsettled stockrepurchases at the end of each quarter.Purchases are made from time to time,as conditions warrant,in the open market or in block purchasesand pursuant to plans under SEC Rule 10b5-1.(1)11Table of ContentsNote 6Stock-Based CompensationThe 2019 Incentive Plan authorizes the issuance of up to a maximum of 15,885,000 RSUs.To preserve the value of outstanding awards,thenumber of RSUs that may be granted under this Plan is subject to adjustments from changes in capital structure.The Company issues newshares of common stock upon vesting of RSUs.Shares for vested RSUs are generally delivered to participants annually,net of shares withheldfor taxes.Summary of Restricted Stock Unit ActivityAt November 24,2024,6,195,000 shares were available to be granted as RSUs,and the following awards were outstanding:2,280,000 time-based RSUs,which vest upon continued employment over specified periods and accelerate upon achievement of a long-service term;51,000 performance-based RSUs granted to executive officers,for which the performance targets have been met.The awards vest uponcontinued employment over specified periods of time and upon achievement of a long-service term;and70,000 performance-based RSUs granted to executive officers,subject to achievement of performance targets for 2025,as determinedby the Compensation Committee of the Board of Directors after the end of the fiscal year.These awards are not included in the tablebelow or in the amount of unrecognized compensation cost.The following table summarizes RSU transactions during the first quarter of 2025:Number ofUnits(in 000s)Weighted-AverageGrant Date Fair ValueOutstanding at September 1,20242,799$463.24 Granted1,025 883.78 Vested and delivered(1,481)557.85 Forfeited(12)502.86 Outstanding at November 24,20242,331$534.69 The remaining unrecognized compensation cost related to RSUs unvested at November 24,2024,was$1,277,and the weighted-average periodover which this cost will be recognized is 1.8 years.Summary of Stock-Based CompensationThe following table summarizes stock-based compensation expense and the related tax benefits:12 Weeks EndedNovember 24,2024November 26,2023Stock-based compensation expense$463$444 Less recognized income tax benefits101 95 Stock-based compensation expense,net$362$349 12Table of ContentsNote 7Net Income per Common and Common Equivalent ShareThe following table shows the amounts used in computing net income per share and the weighted average number of shares of basic and ofpotentially dilutive common shares outstanding(shares in 000s):12 Weeks EndedNovember 24,2024November 26,2023Net income$1,798$1,589 Weighted average basic shares443,988 443,827 RSUs903 576 Weighted average diluted shares444,891 444,403 Basic earnings per share is calculated by dividing net income by the weighted average number of shares of common stock outstanding duringthe period.Diluted earnings per share is calculated based on the dilutive effect of RSUs using the treasury stock method.Note 8Commitments and ContingenciesLegal ProceedingsThe Company is involved in many claims,proceedings and litigations arising from its business and property ownership.In accordance withaccounting guidance,the Company establishes an accrual for legal proceedings if and when those matters present loss contingencies that areboth probable and reasonably estimable.There may be actual losses in excess of amounts accrued.The Company monitors those matters fordevelopments that would affect the likelihood of a loss(taking into account where applicable indemnification arrangements concerning suppliersand insurers)and the accrued amount,if any,thereof,and adjusts the amount as appropriate.The Company has recorded an immaterial accrualwith respect to one matter described below,in addition to other immaterial accruals for matters not described below.If the loss contingency atissue is not both probable and reasonably estimable,the Company does not establish an accrual,but monitors for developments that make thecontingency both probable and reasonably estimable.In each case,there is a reasonable possibility that a loss may be incurred,including a lossin excess of the applicable accrual.For matters where no accrual has been recorded,the possible loss or range of loss(including any loss inexcess of the accrual)cannot,in the Companys view,be reasonably estimated because,among other things:the remedies or penalties soughtare indeterminate or unspecified;the legal and/or factual theories are not well developed;and/or the matters involve complex or novel legaltheories or a large number of parties.In November 2023,a former employee filed a class action against the Company alleging claims under California law for failure to pay minimumwage,failure to pay overtime,failure to provide meal and rest breaks,failure to provide accurate wage statements,failure to reimburseexpenses,failure to pay wages when due,and failure to pay sick pay.Martin Reyes v.Costco Wholesale Corporation,Sacramento CountySuperior Court(No.23cv011351),removed to federal court,No.2:24-cv-00300(E.D.Cal.).A second amended complaint was filed,which theCompany has moved to dismiss.In January 2024,the same plaintiff filed a related Private Attorneys General Act(PAGA)representative action,seeking civil penalties and asserting the same alleged underlying Labor Code violations and an additional suitable seating claim.In May 2024,the plaintiff filed an amended PAGA complaint;the Company has denied the material allegations of the complaint and filed a motion to stay theaction.In August 2024,an employee filed an action under PAGA against the Company,alleging claims for penalties for alleged violations of theCalifornia Labor Code regarding:off-the-clock work,incorrect and untimely payment of wages.Nader v.Costco(No.CV-24-006198;StanislausCounty Superior Court).An amended complaint was filed in November 2024,as to which the Company has yet to respond.13Table of ContentsBeginning in December 2017,the United States Judicial Panel on Multidistrict Litigation consolidated numerous cases concerning the impacts ofopioid abuses filed against various defendants by counties,cities,hospitals,Native American tribes,third-party payors,and others.In re NationalPrescription Opiate Litigation(MDL No.2804)(N.D.Ohio).Included are cases filed against the Company by counties and cities in Michigan,New Jersey,Oregon,Virginia and South Carolina,a third-party payor in Ohio,and a hospital in Texas,class actions filed on behalf of infants bornwith opioid-related medical conditions in 40 states,and class actions and individual actions filed on behalf of individuals seeking to recoveralleged increased insurance costs associated with opioid abuse in 43 states and American Samoa.Claims against the Company filed in federalcourt outside the MDL by one county in Georgia are pending,and claims filed by certain cities and counties in New York are pending in statecourt,as are claims by certain county district attorneys in Pennsylvania.Claims against the Company in state courts in New Jersey,Oklahoma,Utah,and Arizona have been dismissed.Claims against the Company in federal court in Georgia and Florida have been dismissed.TheCompany is defending all of the pending matters.Between September 25 and October 31,2023,five class action suits were filed against the Company alleging privacy law violations stemmingfrom pixel trackers on C:Birdwell v.Costco Wholesale Corp.,No.T23-1405,Contra Costa County Superior Court;and Scott v.CostcoWholesale Corp.,No.2:23-cv-08808(C.D.Cal.),now consolidated with R.S.v.Costco Wholesale Corp.,No.2:23-cv-01628(W.D.Wash.);Groves,et ano.,v.Costco Wholesale Corp.,No.2:23-cv-01662(W.D.Wash.),and Castillo v.Costco Wholesale Corp.,under No.2:34-cv-01548(W.D.Wash.).The Castillo plaintiffs filed a consolidated complaint on January 26,2024,which seeks damages,equitable relief and attorneysfees under various statutes,including the Washington Consumer Protection Act,Washington Privacy Act,Washington Uniform Health CareInformation Act,Electronic Communications Privacy Act,California Invasion of Privacy Act,and California Confidentiality of Medical InformationAct.The consolidated complaint also alleges breach of implied contract,invasion of privacy,conversion,and unjust enrichment.The Companyfiled a motion to dismiss the Castillo complaint on March 11,2024.In November 2024 the court denied the motion to dismiss in substantial part.On May 16,2024,the parties stipulated to stay Birdwell pending resolution of Castillo.On January 2,and August 22,2024,the Companyreceived related civil investigative demands from the Washington Attorney Generals Office.On January 3,2024,the Company received arelated pre-litigation letter from the Los Angeles Office of the County Counsel.The Company is in the process of responding to both agencies.On June 20,2024,a class-action lawsuit was filed against the Company and Nice-Pak Products,Inc.,alleging that Kirkland Signature FragranceFree Baby Wipes contain 3.7 parts per billion of per-and polyfluoroalkyl substances.The complaint alleges that the label claim that the wipes aremade with naturally derived ingredients thus violates various state consumer protection and false advertising laws.The complaint seeksunspecified damages,including punitive damages,as well as equitable relief and attorneys fees and costs.The defendants filed a motion todismiss on August 9,2024.Bullard,et ano.,v.Costco Wholesale Corp.,et ano.,No.3:24-cv-03714(N.D.Cal.).The Company has been served in over seventy product liability cases in California and Oregon related to its alleged sale of artificial and naturalstone countertops.These lawsuits allege strict liability,negligence,breach of warranty,fraud,and failure to warn claims on the grounds that thefabricators and cutters of the stone slabs used to fabricate countertops offered for sale by Costco are exposed to silica particulates in the airwhile performing such work,allegedly causing lung diseases,including,but not limited to,silicosis.The defendants in these cases include themanufacturers,distributors,and retailers.The Company has denied all claims,has filed cross-claims pertaining to indemnity and contribution,and otherwise sought indemnity from responsible parties.In January 2023 the Company received a Civil Investigative Demand from the U.S.Attorneys Office,Western District of Washington,requestingdocuments.The government is conducting a False Claims Act investigation concerning whether the Company presented or caused to bepresented to the federal government for payment false claims relating to prescription medications.14Table of ContentsIn May 2024 the Company received a Notice of Intent to File Administrative Complaint for Violations of the Federal Insecticide,Fungicide andRodenticide Act(FIFRA)from the U.S.Environmental Protection Agency.The EPA is seeking administrative fines for importation,sale anddistribution of misbranded devices and unregistered products the government asserts are pesticides under FIFRA.The Company does not believe that any pending claim,proceeding or litigation,either alone or in the aggregate,will have a material adverseeffect on the Companys financial position,results of operations or cash flows;it is possible that an unfavorable outcome of some or all of thematters,however unlikely,could result in a charge that might be material to the results of an individual fiscal quarter or year.Note 9Segment ReportingThe Company is principally engaged in the operation of membership warehouses through wholly owned subsidiaries in the U.S.,Canada,Mexico,Japan,the U.K.,Korea,Australia,Taiwan,China,Spain,France,Iceland,New Zealand,and Sweden.Reportable segments are largelybased on managements organization of the operating segments for operational decisions and assessments of financial performance,whichconsider geographic locations.The material accounting policies of the segments are as described in the notes to the consolidated financialstatements included in the Companys Annual Report filed on Form 10-K for the fiscal year ended September 1,2024,and Note 1 above.Inter-segment net sales and expenses have been eliminated in calculating total revenue and operating income.The following table provides information for the Companys reportable segments:United StatesCanadaOtherInternationalTotal12 Weeks Ended November 24,2024Total revenue$45,088$8,404$8,659$62,151 Operating income1,498 362 336 2,196 12 Weeks Ended November 26,2023Total revenue$41,833$7,901$8,065$57,799 Operating income1,358 325 301 1,984 52 Weeks Ended September 1,2024Total revenue$184,143$34,874$35,436$254,453 Operating income6,217 1,648 1,420 9,285 Disaggregated RevenueThe following table summarizes net sales by merchandise category;sales from e-commerce sites and business centers have been allocated tothe applicable merchandise categories:12 Weeks EndedNovember 24,2024November 26,2023Foods and Sundries$25,062$23,024 Non-Foods16,171 14,766 Fresh Foods8,218 7,328 Warehouse Ancillary and Other Businesses11,534 11,599 Total net sales$60,985$56,717 15Table of ContentsItem 2Managements Discussion and Analysis of Financial Condition and Results of Operations(amounts in millions,except per share,share,percentages and warehouse count data)FORWARD-LOOKING STATEMENTSCertain statements contained in this document constitute forward-looking statements within the meaning of the Private Securities LitigationReform Act of 1995.For these purposes,forward-looking statements are statements that address activities,events,conditions or developmentsthat the Company expects or anticipates may occur in the future and may relate to such matters as net sales growth,changes in comparablesales,cannibalization of existing locations by new openings,price or fee changes,earnings performance,earnings per share,stock-basedcompensation expense,warehouse openings and closures,capital spending,the effect of adopting certain accounting standards,future financialreporting,financing,margins,return on invested capital,investments in technology,strategic direction,expense controls,membership renewalrates,shopping frequency,litigation,attainment of sustainability goals,and the demand for our products and services.In some cases,forward-looking statements can be identified because they contain words such as“anticipate,”“believe,”“continue,”“could,”“estimate,”“expect,”“intend,”“likely,”“may,”“might,”“plan,”“potential,”“predict,”“project,”“seek,”“should,”“target,”“will,”“would,”or similar expressions and the negatives ofthose terms.Such forward-looking statements involve risks and uncertainties that may cause actual events,results or performance to differmaterially from those indicated by such statements.These risks and uncertainties include,but are not limited to,domestic and internationaleconomic conditions,including exchange rates,inflation or deflation,the effects of competition and regulation,uncertainties in the financialmarkets,consumer and small business spending patterns and debt levels,breaches of security or privacy of member or business information,conditions affecting the acquisition,development,ownership or use of real estate,capital spending,actions of vendors,rising costs associatedwith employees(generally including health-care costs and wages),workforce interruptions,energy and certain commodities,geopoliticalconditions(including tariffs),the ability to maintain effective internal control over financial reporting,regulatory and other impacts related toenvironmental and social matters,public-health related factors,and other risks identified from time to time in the Companys public statementsand reports filed with the Securities and Exchange Commission.Forward-looking statements speak only as of the date they are made,and theCompany does not undertake to update these statements,except as required by law.OVERVIEWManagements Discussion and Analysis of Financial Condition and Results of Operations(MD&A)is intended to promote understanding of theresults of operations and financial condition.MD&A is provided as a supplement to,and should be read in conjunction with,our condensedconsolidated financial statements and the accompanying Notes to Financial Statements(Part I,Item 1 of this Form 10-Q),as well as ourconsolidated financial statements,the accompanying Notes to Financial Statements,and the related Managements Discussion and Analysis ofFinancial Condition and Results of Operations in our fiscal year 2024 Form 10-K,filed with the United States Securities and ExchangeCommission on October 9,2024.We operate membership warehouses and e-commerce sites based on the concept that offering our members low prices on a limited selection ofnationally-branded and private-label products in a wide range of categories will produce high sales volumes and rapid inventory turnover.Whencombined with the operating efficiencies achieved by volume purchasing,efficient distribution and reduced handling of merchandise in no-frills,self-service warehouse facilities,these volumes and turnover enable us to operate profitably at significantly lower gross margins(net sales lessmerchandise costs)than most other retailers.We often sell inventory before we are required to pay for it,even while taking advantage of earlypayment discounts.We believe that the most important driver of our profitability is increasing net sales,particularly comparable sales.Net sales includes our coremerchandise categories(foods and sundries,non-foods,and fresh foods),warehouse ancillary(gasoline,pharmacy,optical,food court,hearingaids,and tire16Table of Contentsinstallation)and other businesses(e-commerce,business centers,travel,and other).E-commerce and business center sales are allocated tothe appropriate merchandise categories in the Net Sales discussion.Comparable sales is defined as net sales from warehouses open for morethan one year,including remodels,relocations and expansions,and sales related to e-commerce sites operating for more than one year.Themeasure is intended as supplemental information and is not a substitute for net sales presented in accordance with U.S.GAAP and should bereviewed in conjunction with results reported in accordance with U.S.GAAP.Comparable sales growth is achieved through increasing shoppingfrequency from new and existing members and the amount they spend on each visit(average ticket).Sales comparisons can also be particularlyinfluenced by certain factors that are beyond our control:fluctuations in currency exchange rates(with respect to our international operations)and inflation or deflation in the cost of gasoline and associated competitive conditions.The higher our comparable sales exclusive of theseitems,the more we can leverage our selling general and administrative(SG&A)expenses,reducing them as a percentage of sales andenhancing profitability.Generating comparable sales growth is foremost a question of making available the right merchandise at the right prices,a skill that we believe we have repeatedly demonstrated over the long-term.Another substantial factor in net sales growth is the health of theeconomies in which we do business,including the effects of inflation or deflation,especially the United States.Net sales growth and grossmargins are also impacted by our competition,which is vigorous and widespread,across a wide range of global,national and regionalwholesalers and retailers,including those with e-commerce operations.While we cannot control or reliably predict general economic health orchanges in competition,we believe that we have been successful historically in adapting our business to these changes,such as throughadjustments to our pricing and merchandise mix,including increasing the penetration of our private-label items,and through online offerings.Our philosophy is to provide our members with quality goods and services at competitive prices.We do not focus in the short-term onmaximizing prices charged,but instead seek to maintain what we believe is a perception among our members of our“pricing authority”consistently providing the most competitive values.Our net sales and gross margin are influenced in part by our merchandising and pricingstrategies in response to cost increases.Those strategies can include,but are not limited to,working with our suppliers to share in absorbingcost increases,earlier-than-usual purchasing and in greater volumes,as well as passing cost increases on to our members.Our investments inmerchandise pricing may include reducing prices on merchandise to drive sales or meet competition and holding prices steady despite costincreases instead of passing the increases on to our members,negatively impacting gross margin and gross margin as a percentage of netsales(gross margin percentage)in the near term.Our e-commerce business,domestically and internationally,has a lower gross-marginpercentage than our warehouse operations.We believe our gasoline business enhances traffic in our warehouses;it generally has a lower gross margin percentage and lower SG&Aexpense relative to our non-gasoline businesses.A higher penetration of gasoline sales will generally lower our gross margin percentage.Generally,rising gasoline prices benefit net sales growth which,given the higher sales base,negatively impacts our gross margin percentagebut decreases our SG&A expenses as a percentage of net sales.A decline in gasoline prices has the inverse effect.Government actions in various countries relating to tariffs,particularly China and the United States,affect the costs of some of our merchandise.The degree of our exposure is dependent on(among other things)the type of goods,rates imposed,and timing of the tariffs.Higher tariffs couldadversely impact our results.We also achieve net sales growth by opening new warehouses.As our warehouse base grows,available and desirable sites become moredifficult to secure,and square footage growth becomes a comparatively less substantial component of growth.Negative aspects of such growthinclude lower initial operating profitability relative to existing warehouses and cannibalization of sales at existing warehouses when openingsoccur in existing markets.Our rate of square footage growth is generally higher in many of our foreign markets,due to the smaller base in thosemarkets,and we expect that to continue.17Table of ContentsThe membership format is an integral part of our business and profitability.This format is designed to reinforce member loyalty and providecontinuing fee revenue.The extent to which we achieve growth in our membership base,increase the penetration of Executive memberships,and sustain high renewal rates materially influences our profitability.Our paid-membership growth rate may be adversely impacted whenwarehouse openings occur in existing markets as compared to new markets.Our worldwide renewal rate may be adversely impacted bymemberships in newer international markets and a higher penetration of memberships sold online,both of which typically renew at a lower rate.Our financial performance depends heavily on controlling costs.While we believe that we have achieved successes in this area,some significantcosts are partially outside our control,particularly health care and utility expenses.With respect to the compensation of our employees,ourphilosophy is not to seek to minimize their wages and benefits.Rather,we believe that achieving our longer-term objectives of reducingemployee turnover,increasing productivity and enhancing employee satisfaction requires maintaining compensation levels that are better thanthe industry average for much of our workforce.This may cause us,for example,to absorb costs that other employers might seek to passthrough to their workforces.Because our business operates on very low margins,modest changes in various items in the consolidatedstatements of income,particularly merchandise costs and SG&A expenses,can have substantial impacts on net income.Our operating model is generally the same across our U.S.,Canadian,and Other International operating segments(see Note 9 to theconsolidated financial statements included in Part I,Item 1,of this Report).Certain operations in the Other International segment have relativelyhigher rates of square footage growth,lower wage and benefit costs as a percentage of sales,less or no direct membership warehousecompetition,or lack e-commerce or business delivery.In discussions of our consolidated operating results,we refer to the impact of changes in foreign currencies relative to the U.S.dollar,which aredifferences between the foreign-exchange rates we use to convert the financial results of our international operations from local currencies intoU.S.dollars.This impact is calculated based on the difference between the current and prior periods exchange rates.The impact of changes ingasoline prices on net sales is calculated based on the difference between the current and prior periods average price per gallon.Resultsexpressed excluding the impacts of foreign exchange and gasoline prices are intended as supplemental information and are not a substitute fornet sales presented in accordance with U.S.GAAP and should be reviewed in conjunction with results reported in accordance with U.S.GAAP.Our fiscal year ends on the Sunday closest to August 31.References to the first quarter of 2025 and 2024 relate to the 12-week fiscal quartersended November 24,2024,and November 26,2023.Certain percentages presented are calculated using actual results prior to rounding.Highlights for the first quarter of 2025 versus 2024 include:Net sales increased 8%to$60,985,driven by an increase in comparable sales and sales at 26 net new warehouses opened since theend of the first quarter of 2024;Membership fee revenue increased 8%to$1,166,driven by new member sign-ups and upgrades to Executive Membership;Gross margin percentage increased 24 basis points;seven basis points excluding the impact of gasoline price deflation on net sales;SG&A expenses as a percentage of net sales increased 14 basis points and was flat excluding the impact of gasoline price deflation;The provision for income taxes was positively impacted by a benefit related to stock compensation of$100,$0.22 per diluted share,compared to$44,$0.10 per diluted share,in 2024;Net income was$1,798,$4.04 per diluted share,compared to$1,589,$3.58 per diluted share in 2024;andA quarterly cash dividend of$1.16 per share was declared on October 16,2024,and paid on November 15,2024.18Table of ContentsRESULTS OF OPERATIONSNet Sales12 Weeks EndedNovember 24,2024November 26,2023Net Sales$60,985$56,717 Increases in net sales:U.S.8%4nada6%7%Other International7%Total Company8%6%Increases in comparable sales:U.S.5%2nada6%6%Other International5%Total Company5%4%E-commerce13%6%Increases in comparable sales excluding the impact of changes in foreign-currencyand gasoline prices:U.S.7%3nada7%8%Other International7%7%Total Company7%4%E-commerce13%6%_(1)Comparable sales for the first quarter of 2024 were calculated using comparable retail weeks.Net SalesNet sales increased$4,268 or 8%during the first quarter of 2025.The improvement was attributable to an increase in comparable sales andsales at the 26 net new warehouses opened since the end of the first quarter of 2024.Sales increased$4,333 or 10%in core merchandisecategories during the first quarter of 2025.Sales in warehouse ancillary and other businesses decreased less than 1%during the first quarter of2025,due to lower gasoline prices,partially offset by pharmacy and all other warehouse ancillary businesses.Lower gasoline prices negativelyimpacted net sales by$908,160 basis points,compared to 2024,with a 12crease in the average price per gallon.The volume of gasolinesold increased approximately 1%.Changes in foreign currencies relative to the U.S.dollar negatively impacted net sales by approximately$164,29 basis points,attributable to our Other International and Canadian operations.Comparable SalesComparable sales increased 5%in the first quarter of 2025 and were positively impacted by increased shopping frequency and a slightly higheraverage ticket.(1)(1)19Table of ContentsMembership Fees12 Weeks EndedNovember 24,2024November 26,2023Membership fees$1,166$1,082 Membership fees increase8%8%Total paid members(000s)77,400 72,000 Total cardholders(000s)138,800 129,500 Membership fee revenue increased 8%in the first quarter of 2025,driven by new member sign-ups and upgrades to Executive Membership.Atthe end of the first quarter of 2025,our renewal rates were 92.8%in the U.S.and Canada and 90.4%worldwide.Our renewal rate,whichexcludes affiliates of Business members,is a trailing calculation that captures renewals during the period seven to eighteen months prior to thereporting date.As previously reported,we increased our annual membership fees in the U.S.and Canada,effective September 1,2024.We account formembership fee revenue on a deferred basis,recognized ratably over the one-year membership period.Due to this deferral,the increases hadan immaterial impact in the first quarter of 2025.Gross Margin12 Weeks EndedNovember 24,2024November 26,2023Net sales$60,985$56,717 Less merchandise costs54,109 50,457 Gross margin$6,876$6,260 Gross margin percentage11.28.04%Quarterly ResultsGross margin percentage increased 24 basis points.Excluding the impact of gasoline price deflation on net sales,gross margin percentage was11.11%,an increase of seven basis points.This increase was positively impacted by:17 basis points in our core merchandise categories,primarily due to sales mix and our co-branded credit card program,and six basis points related to 2%rewards.This increase was partially offsetby 16 basis points due to warehouse ancillary and other businesses,primarily gasoline,partially offset by e-commerce.The gross margin in core merchandise categories,when expressed as a percentage of core merchandise sales(rather than total net sales),increased three basis points.The increase was primarily due to fresh foods,partially offset by non-foods.This measure eliminates the impact ofchanges in sales penetration and gross margin from our warehouse ancillary and other businesses.Gross margin percentage on a segment basis,when expressed as a percentage of the segments own sales and excluding the impact ofchanges in gasoline prices on net sales(segment gross margin percentage),increased in all segments.Our U.S.segment performed similarly tothe consolidated results above.Our Canadian and Other International segments gross margin percentage increased,primarily due to increasesin core merchandise categories,partially offset by increased 2%rewards.20Table of ContentsSelling,General and Administrative Expenses12 Weeks EndedNovember 24,2024November 26,2023SG&A expenses$5,846$5,358 SG&A expenses as a percentage of net sales9.59%9.45%Quarterly ResultsSG&A expenses as a percentage of net sales increased 14 basis points.Excluding the impact of gasoline price deflation that measure was flat.The comparison to last year was favorably impacted by four basis points due to lower preopening costs and three basis points due to stockcompensation expense.SG&A was negatively impacted by four basis points due to warehouse operations and other businesses,which includedthe impact of the wage increase in July 2024,partially offset by sales leverage and improved productivity.Central operating costs were alsohigher by three basis points.SG&A expenses as a percentage of net sales were lower in our U.S.segment and higher in our Canadian andOther International segments.Interest Expense12 Weeks EndedNovember 24,2024November 26,2023Interest expense$37$38 Interest expense is primarily related to Senior Notes and financing leases.Interest Income and Other,Net12 Weeks EndedNovember 24,2024November 26,2023Interest income$96$154 Foreign-currency transaction gains,net43 3 Other,net8 3 Interest income and other,net$147$160 The decrease in interest income in the first quarter was due to lower average cash and investment balances,following the special dividend inJanuary 2024,and lower interest rates.Foreign-currency transaction gains,net,include mark-to-market adjustments for forward foreign-exchange contracts and revaluation or settlement of monetary assets and liabilities by our Canadian and Other International operations.SeeDerivatives and Foreign Currency sections in Item 8,Note 1 of our Annual Report on Form 10-K,for the fiscal year ended September 1,2024.Provision for Income Taxes 12 Weeks Ended November 24,2024November 26,2023Provision for income taxes$508$517 Effective tax rate22.0$.5%The effective tax rate for the first quarter of 2025 and 2024 was favorably impacted by discrete tax benefits of$100 and$44 of excess taxbenefits related to stock compensation.21Table of ContentsLIQUIDITY AND CAPITAL RESOURCESThe following table summarizes our significant sources and uses of cash and cash equivalents:12 Weeks EndedNovember 24,2024November 26,2023Net cash provided by operating activities$3,260$4,651 Net cash used in investing activities(985)(366)Net cash used in financing activities(1,193)(974)Our primary sources of liquidity are cash flows from operations,cash and cash equivalents,and short-term investments.Cash and cashequivalents and short-term investments were$11,827 and$11,144 at November 24,2024,and September 1,2024.Of these balances,unsettledcredit and debit card receivables represented approximately$2,789 and$2,519 at November 24,2024,and September 1,2024.Thesereceivables generally settle within four days.Material contractual obligations arising in the normal course of business primarily consist of purchase obligations,long-term debt and relatedinterest payments,leases,and construction and land purchase obligations.Purchase obligations consist of contracts primarily related tomerchandise,equipment,and third-party services,the majority of which are due in the next 12 months.Construction and land-purchaseobligations consist of contracts primarily related to the development and opening of new and relocated warehouses,the majority of which(otherthan leases)are due in the next 12 months.We believe that our cash and investment position and operating cash flow,with capacity under existing and available credit agreements,will besufficient to meet our liquidity and capital requirements for the foreseeable future and our U.S.current and projected asset position is sufficient tomeet our U.S.liquidity requirements.Cash Flows from Operating ActivitiesNet cash provided by operating activities totaled$3,260 in the first quarter of 2025,compared to$4,651 in the first quarter of 2024.Thedecrease in net cash provided by operating activities was due to an increase in our net investment in merchandise inventories.Our cash flowprovided by operations is primarily from net sales and membership fees.Cash flow used in operations generally consists of payments tomerchandise suppliers,warehouse operating costs,including wages and employee benefits,utilities,credit and debit card processing fees,andoperating leases.Cash used in operations also includes payments for income taxes.Changes in our net investment in merchandise inventories(the difference between merchandise inventories and accounts payable)is impacted by several factors,including inventory levels and turnover,payment terms with suppliers,early payments to obtain discounts,and the shift in timing of the seasonal holiday to the second quarter of 2025.Cash Flows from Investing ActivitiesNet cash used in investing activities totaled$985 in the first quarter of 2025,compared to$366 in the first quarter of 2024,and is primarilyrelated to capital expenditures.Net cash from investing activities also includes purchases and maturities of short-term investments.Capital Expenditure PlansOur primary requirements for capital are acquiring land,buildings,and equipment for new and remodeled warehouses,information systems andmanufacturing and distribution facilities.In the first quarter of 2025,we spent$1,264 on capital expenditures,and it is our current intention tospend a total of approximately$5,000 during fiscal 2025.These expenditures are expected to be financed with cash from operations,cash andcash equivalents,and short-term investments.We opened seven new warehouses,including one relocation,in the first quarter of 2025 and planto open 22 additional new warehouses,including two22Table of Contentsrelocations,in the remainder of fiscal 2025.There can be no assurance that current expectations will be realized,and plans are subject tochange upon further review of our capital expenditure needs and the economic environment.Cash Flows from Financing ActivitiesNet cash used in financing activities totaled$1,193 in the first quarter of 2025,compared to$974 in the first quarter of 2024.Cash flow used infinancing activities during the first quarter of 2025 was primarily related to the payment of dividends,withholding taxes on stock-based awards,repurchases of common stock,and repayments of short-term borrowings.Cash flow provided by financing activities included proceeds fromshort-term borrowings.DividendsA quarterly cash dividend of$1.16 per share was declared on October 16,2024,and paid on November 15,2024.Share Repurchase ProgramOn January 19,2023,the Board of Directors authorized a share repurchase program in the amount of$4,000,which expires in January 2027.During the first quarter of 2025 and 2024,we repurchased 230,000 and 288,000 shares of common stock,at an average price per share of$899.23 and$564.06,totaling approximately$206 and$162.These amounts may differ from the accompanying condensed consolidatedstatements of cash flows due to changes in unsettled repurchases at the end of a quarter.Purchases are made from time to time,as conditionswarrant,in the open market or in block purchases,pursuant to plans under SEC Rule 10b5-1.Repurchased shares are retired,in accordancewith the Washington Business Corporation Act.The remaining amount available to be purchased under our approved plan was$2,659 at the endof the first quarter.Bank Credit Facilities and Commercial Paper ProgramsWe maintain bank credit facilities for working capital and general corporate purposes.At November 24,2024,we had borrowing capacity underthese facilities of$1,184.Our international operations maintain$689 of this capacity under bank credit facilities,of which$159 is guaranteed bythe Company.Short-term borrowings outstanding under the bank credit facilities,which are included in other current liabilities on theconsolidated balance sheets,were immaterial at the end of the first quarter of 2025 and at the end of fiscal 2024.We have letter of credit facilities,for commercial and standby letters of credit,totaling$222.The outstanding commitments under these facilitiesat the end of the first quarter of 2025 totaled$202,most of which were standby letters of credit that do not expire or have expiration dates withinone year.The bank credit facilities have various expiration dates,most within one year,and we generally intend to renew these facilities.Theamount of borrowings available at any time under our bank credit facilities is reduced by the amount of standby and commercial letters of creditoutstanding.Critical Accounting EstimatesThe preparation of our consolidated financial statements in accordance with U.S.GAAP requires that we make estimates and judgments.Webase these on historical experience and on assumptions that we believe to be reasonable.Our critical accounting policies are discussed in PartII,Item 7,“Managements Discussion and Analysis of Financial Condition and Results of Operations”section of our Annual Report on Form 10-K,for the fiscal year ended September 1,2024.There have been no material changes to the critical accounting estimates previously disclosed inthat Report.23Table of ContentsRecent Accounting PronouncementsSee discussion of Recent Accounting Pronouncements in Note 1 to the condensed consolidated financial statements included in Part I,Item 1 ofthis Report.Item 3Quantitative and Qualitative Disclosures about Market RiskOur direct exposure to financial market risk results from fluctuations in foreign-currency exchange rates and interest rates.There have been nomaterial changes to our market risks as disclosed in our Annual Report on Form 10-K,for the fiscal year ended September 1,2024.Item 4Controls and ProceduresEvaluation of Disclosure Controls and ProceduresOur disclosure controls and procedures(as defined in Rules 13a-15(e)or 15d-15(e)under the Securities Exchange Act of 1934,as amended)are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded,processed,summarized,and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission andto ensure that information required to be disclosed is accumulated and communicated to management,including our principal executive andfinancial officers,to allow timely decisions regarding disclosure.The Chief Executive Officer and the Chief Financial Officer,with assistance fromother members of management,have reviewed the effectiveness of our disclosure controls and procedures as of November 24,2024,and,based on their evaluation,have concluded the disclosure controls and procedures were effective as of such date.Changes in Internal Control over Financial ReportingThere have been no changes in our internal control over financial reporting(as defined in Rules 13a-15(f)or 15d-15(f)of the Exchange Act)thatoccurred during the first quarter of fiscal 2025 that have materially affected,or are reasonably likely to materially affect,the Companys internalcontrol over financial reporting.PART IIOTHER INFORMATIONItem 1Legal ProceedingsSee discussion of Legal Proceedings in Note 8 to the condensed consolidated financial statements included in Part I,Item 1 of this Report.Item 1ARisk FactorsIn addition to the other information set forth in the Quarterly Report on Form 10-Q,you should carefully consider the factors discussed in Part I,Item 1A,“Risk Factors”in our Annual Report on Form 10-K,for the fiscal year ended September 1,2024.There have been no material changesin our risk factors from those disclosed in our Annual Report on Form 10-K.24Table of ContentsItem 2Unregistered Sales of Equity Securities and Use of ProceedsThe following table sets forth information on our common stock repurchase activity for the first quarter of 2025(amounts in millions,except shareand per share data):PeriodTotal Number ofSharesPurchasedAverage PricePaid Per ShareTotal Number of SharesPurchased as Part ofPublicly AnnouncedProgramsMaximum Dollar Value ofShares that May Yet bePurchased Under theProgramsSeptember 2,2024 September 29,202474,000$897.54 74,000$2,799 September 30,2024 October 27,202479,000 888.35 79,000 2,729 October 28,2024 November 24,202477,000 912.04 77,000 2,659 Total first quarter230,000$899.23 230,000 _(1)Our share repurchase program is conducted under a$4,000 authorization approved by our Board of Directors in January 2023,which expires in January 2027.Item 3Defaults Upon Senior SecuritiesNone.Item 4Mine Safety DisclosuresNot applicable.Item 5Other InformationNone.(1)(1)25Table of ContentsItem 6ExhibitsThe following exhibits are filed as part of this Quarterly Report on Form 10-Q or are incorporated herein by reference.Incorporated by ReferenceExhibitNumberExhibit DescriptionFiledHerewithFormPeriod EndingFiling Date3.1Articles of Incorporation as amended of CostcoWholesale Corporation10-K8/28/202210/5/20223.2Bylaws as amended of Costco Wholesale Corporation8-K9/20/202410.1*Fiscal 2025 Executive Bonus Plan8-K11/7/202410.2*Executive Employment Agreement effective January 1,2025,between Ron Vachris and Costco WholesaleCorporationx10.3Thirteenth Amendment to Citi,N.A.Co-Branded CreditCard Agreementx31.1Rule 13(a)14(a)Certificationsx32.1Section 1350 Certificationsx101.INSInline XBRL Instance Documentx101.SCHInline XBRL Taxonomy Extension Schema Documentx101.CALInline XBRL Taxonomy Extension Calculation LinkbaseDocumentx101.DEFInline XBRL Taxonomy Extension Definition LinkbaseDocumentx101.LABInline XBRL Taxonomy Extension Label LinkbaseDocumentx101.PREInline XBRL Taxonomy Extension Presentation LinkbaseDocumentx104Cover Page Interactive Data File(formatted as inlineXBRL and contained in Exhibit 101)x_*Management contract,compensatory plan or arrangement.#Certain information in this exhibit has been omitted because it is(i)immaterial and(ii)customarily and actually treated by the registrant as private or confidential.#26Table of ContentsSIGNATURESPursuant to the requirements of the Securities Exchange Act of 1934,the registrant has duly caused this Report to be signed on its behalf by theundersigned,thereunto duly authorized.COSTCO WHOLESALE CORPORATION(Registrant)December 18,2024By/s/RON M.VACHRISDateRon M.VachrisChief Executive Officer,President and DirectorDecember 18,2024By/s/GARY MILLERCHIPDateGary MillerchipExecutive Vice President and Chief Financial Officer27Exhibit 10.2EXECUTIVE EMPLOYMENT AGREEMENTTHIS EXECUTIVE EMPLOYMENT AGREEMENT(this“Agreement”),effective January 1,2025(the“Effective Date”),is made betweenCostco Wholesale Corporation,a Washington corporation(the“Company”),and Ron Vachris(“Executive”).WHEREAS,Executive will be employed as the Companys President and Chief Executive Officer effective January 1,2025 and isexpected to make major contributions to profitability,growth and financial strength of the Company;andWHEREAS,in consideration of Executives employment with the Company,the Company desires to provide Executive with certaincompensation and benefits as set forth in this Agreement and to define the parties respective rights and responsibilities.NOW,THEREFORE,in consideration of the foregoing and the mutual covenants and agreements hereinafter set forth and intending tobe legally bound hereby,the Company and Executive agree as follows:1.Certain Defined Terms.In addition to terms defined elsewhere herein,the following terms have the following meanings whenused in this Agreement with initial capital letters:(a)“Annual Base Salary”means Executives annual base salary rate,exclusive of bonuses,commissions and otherincentive pay,as in effect immediately preceding the Termination Date.As of the Effective Date,Executives Annual Base Salary is$1,200,000.(b)“Board”means the Board of Directors of the Company,including any authorized committee of the Board.(c)“Cause”means:(i)an intentional tort(excluding any tort relating to a motor vehicle)which causes substantial loss,damage or injuryto the property or reputation of the Company or its subsidiaries;(ii)any serious crime or intentional,material act of fraud or dishonesty against the Company;(iii)the commission of a felony that results in other than immaterial harm to the Companys business or to thereputation of the Company or Executive;(iv)habitual neglect of Executives reasonable duties(for a reason other than illness or incapacity)which is notcured within ten(10)days after written notice thereof by the Board to Executive;(v)the disregard of written,material policies of the Company or its subsidiaries which causes other than immaterialloss,damage or injury to the property or reputation of the Company or its subsidiaries which is not cured within ten(10)days afterwritten notice thereof by the Board to Executive;or(vi)any material breach of Executives ongoing obligation not to disclose confidential information and not to assignintellectual property developed during employment which,if capable of being cured,is not cured within ten(10)days after written noticethereof by the Board to Executive.1(d)“COBRA”means the Consolidated Omnibus Budget Reconciliation Act of 1986,as amended.(e)“Code”means the Internal Revenue Code of 1986,as amended.(f)“Disability”means,in the opinion of the Company,the inability of Executive,because of physical or mental illness orincapacity,to perform substantially all of the duties and services required of him under this Agreement for a period of ninety(90)days in theaggregate during any twelve(12)month period;provided,however,for the Company to be able to terminate Executives employment with theCompany on account of Disability the Company must provide at least ten(10)days prior written notice to Executive at any time after theexpiration of such ninety(90)day period that confirms its intention to terminate Executives employment as of the date set forth in the notice.(g)“Good Reason”means:(i)a material diminution in Executives Annual Base Salary or Target Bonus below the amount as of the EffectiveDate or as increased during the course of his employment with the Company,excluding one or more reductions(totaling no more thantwenty percent(20%)in the aggregate)generally applicable to all senior executives of the Company;(ii)a material diminution in Executives authority,duties or responsibilities;(iii)a requirement that that Executive report to a corporate officer or employee of the Company instead of reportingdirectly to the Board;(iv)a material diminution in the budget over which Executive retains authority;(v)a material change in the geographic location at which Executive must perform services;or(vi)any action or inaction that constitutes a material breach by the Company of this Agreement;provided,however,that for Executive to be able to terminate his employment with the Company on account of Good Reason he must providenotice of the occurrence of the event constituting Good Reason and his desire to terminate his employment with the Company on account ofsuch within ninety(90)days following the initial existence of the condition constituting Good Reason,and the Company must have a period ofthirty(30)days following receipt of such notice to cure the condition.If the Company does not cure the event constituting Good Reason withinsuch thirty(30)day period,the Termination Date shall be the day immediately following the end of such thirty(30)day period,unless theCompany provides for an earlier Termination Date.(h)“Target Bonus”means the amount of annual cash bonus at target that Executive is eligible for,as in effect immediatelypreceding the Termination Date.(i)“Termination Date”means the last day of Executives employment with the Company or a subsidiary or an affiliate of theCompany.2.Termination.(a)Involuntary Termination.In the event of:(i)an involuntary termination of Executives employment by the Company forany reason other than Cause,death or Disability,or(ii)Executives resignation for Good Reason,subject to Section 4,Executive shall be entitledto the payments and benefits provided in Section 2(b).2(b)Compensation Upon Involuntary Termination.In the event a termination described in Section 2(a)occurs,subject toSection 4,the Company shall provide Executive with the following:(i)1.5 times the sum of Annual Base Salary and Target Bonus,paid in a single lump sum cash payment on thesixtieth(60th)day following the Termination Date.(For purposes of this subsection(i),Annual Base Salary will mean the largest amongExecutives Annual Base Salary immediately prior to(A)the Termination Date,or(B)any reduction of Executives base salary describedin the first clause of subsection(i)in the definition of Good Reason.For purposes of this subsection(i),Target Bonus will mean thelargest among Executives Target Bonus immediately prior to(A)the Termination Date,or(B)any reduction of Executives target bonusdescribed in the first clause of subsection(i)in the definition of Good Reason.)(ii)For the period following the Termination Date until Executive is first eligible for Medicare(currently at age sixty-five(65),Executive,and where applicable,Executives spouse and eligible dependents,will continue to be eligible to receive medicalcoverage under the Companys medical plans in accordance with the terms of the applicable plan documents;provided,that in order toreceive such continued coverage at such rates,Executive will be required to pay the applicable premiums to the plan provider,and theCompany will reimburse Executive,within sixty(60)days following the date such monthly premium payment is due,an amount equal tothe monthly COBRA premium payment,less applicable tax withholdings.Notwithstanding the foregoing,if Executive obtainsemployment during this period that entitles him and his spouse and eligible dependents to comprehensive medical coverage,Executivemust notify the Company,and no further reimbursements will be paid by the Company to Executive pursuant to this subsection.Inaddition,if Executive does not pay the applicable monthly COBRA premium for a particular month at any time and coverage is lost as aresult,no further reimbursements will be paid by the Company to Executive pursuant to this subsection.Notwithstanding the above,ifthe Company determines in its sole discretion that it cannot provide the foregoing COBRA benefits without potentially violating applicablelaw(including,without limitation,section 2716 of the Public Health Service Act),the Company shall in lieu thereof provide to Executive ataxable lump-sum payment in an amount equal to the monthly(or then remaining)COBRA premium that Executive would be required topay to continue his group health coverage in effect on the Termination Date(which amount shall be based on the premium for the firstmonth of COBRA coverage).(iii)Any outstanding stock options held by Executive that are vested and exercisable as of the Termination Dateshall remain exercisable,notwithstanding anything in any other agreement governing such options,until the earlier of(A)a period of oneyear after the Termination Date,or(B)the original term of the option.(iv)Any Restricted Stock Units held by Executive that are unvested as of the Termination Date shall vest.Notwithstanding anything to the contrary in the applicable Grant Detail and Restricted Stock Unit Award Agreement,any unvestedRestricted Stock Units that so vest will be settled within three(3)business days following the sixtieth(60th)day following the TerminationDate.(v)Any of Executives performance-based Restricted Stock Units(“PRUs”)that remain outstanding as of theTermination Date shall be treated in accordance with the terms of a written letter agreement or other instrument between the Companyand Executive(a“PRU Agreement”);provided,however,that notwithstanding anything to the contrary in the PRU Agreement,none ofthe PRUs will be settled until after the sixtieth(60th)day following the Termination Date,but in any event by the sixty-fifth(65th)dayfollowing the last day of the applicable performance period for the PRUs33.Termination of Employment on Account of Disability,Death,Cause or Voluntary Resignation Without Good Reason.(a)Termination on Account of Disability.Notwithstanding anything in this Agreement to the contrary,if Executivesemployment terminates on account of Disability,Executive shall be entitled to receive disability benefits subject to and under the terms of anydisability plan or program maintained by the Company that covers Executive(including under the original terms of any stock option held byExecutive),and Executive shall not receive payments or benefits pursuant to Section 2,except that Executive shall be entitled to the followingbenefits,subject to Section 4:(i)For a period of up to eighteen(18)months following the Termination Date,Executive,and where applicable,Executives spouse and eligible dependents will continue to be eligible to receive medical coverage under the Companys medical plansin accordance with the terms of the applicable plan documents;provided,that in order to receive such continued coverage at such rates,Executive will be required to pay the applicable premiums to the plan provider,and the Company will reimburse Executive,within 60days following the date such monthly premium payment is due,an amount equal to the monthly COBRA premium payment,lessapplicable tax withholdings.Notwithstanding the foregoing,if Executive obtains employment during this eighteen(18)month period thatentitles him and his spouse and eligible dependents to comprehensive medical coverage,Executive must notify the Company and nofurther reimbursements will be paid by the Company to Executive pursuant to this subsection.In addition,if Executive does not pay theapplicable monthly COBRA premium for a particular month at any time during the eighteen(18)month period and coverage is lost as aresult,no further reimbursements will be paid by the Company to Executive pursuant to this subsection.Notwithstanding the above,ifthe Company determines in its sole discretion that it cannot provide the foregoing COBRA benefits without potentially violating applicablelaw(including,without limitation,section 2716 of the Public Health Service Act),the Company shall in lieu thereof provide to Executive ataxable lump-sum payment in an amount equal to the monthly(or then remaining)COBRA premium that Executive would be required topay to continue his group health coverage in effect on the Termination Date(which amount shall be based on the premium for the firstmonth of COBRA coverage).(ii)Any Restricted Stock Units held by Executive that are unvested as of the Termination Date shall vest.Notwithstanding anything to the contrary in the applicable Grant Detail and Restricted Stock Unit Award Agreement,any unvestedRestricted Stock Units that so vest will be settled within three(3)business days following the sixtieth(60th)day following the TerminationDate.(iii)Any of Executives PRUs that remain outstanding as of the Termination Date shall be treated in accordance withthe terms of the PRU Agreement;provided,however,that notwithstanding anything to the contrary in the PRU Agreement,none of thePRUs will be settled until after the sixtieth(60th)day following the Termination Date,but in any event by the sixty-fifth(65th)dayfollowing the last day of the applicable performance period for the PRUs.(b)Termination on Account of Death.Notwithstanding anything in this Agreement to the contrary,if Executives employmentterminates on account of death,Executive shall be entitled to receive death benefits under any death benefit program maintained by theCompany that covers Executive(including under the original terms of any stock option or Restricted Stock Units held by Executive),andExecutive shall not receive payments or benefits pursuant to Section 2,except that any of Executives PRUs that remain outstanding as of thedate of death shall be treated in accordance with the terms of the PRU Agreement.(c)Termination on Account of Cause.Notwithstanding anything in this Agreement to the contrary,if Executives employmentterminates by the Company on account of Cause,Executive shall not receive benefits pursuant to Section 2.4(d)Termination on Account of Voluntary Resignation Without Good Reason.Notwithstanding anything in this Agreement tothe contrary,if Executives employment terminates on account of a resignation by Executive for no reason or any reason other than on accountof Good Reason,Executive shall not receive payments or benefits pursuant to Section 2,except that any of Executives PRUs that remainoutstanding as of the Termination Date shall be treated in a manner consistent with Section 2(b)(v)of this Agreement.4.Conditions on Certain Payments or Benefits.(a)General Release of Claims.Notwithstanding anything to the contrary in this Agreement,in consideration of Executivesreceipt of the payments and benefits described under Section 2(b)or Section 3(a),as applicable,Executive agrees that,as a condition to hisreceipt of any such payments and benefits,he shall timely execute(and not revoke thereafter)a general release of claims(a“Release”),in aform to be provided by the Company,releasing any and all claims of any kind arising from his employment or the termination of his employmentwith the Company.To be timely,the Release must become effective and irrevocable no later than fifty-five(55)days following the date ofExecutives termination(the“Release Deadline”).If the Release does not become effective and irrevocable by the Release Deadline,Executivewill forfeit any rights to the payments and benefits under Section 2(b)or Section 3(a),as applicable.(b)Clawback Policies.All amounts payable under this Agreement shall be subject to the terms of the Companys“clawback”policies as in effect from time to time.5.Accrued Obligations.To the extent not modified by this Agreement,Executive shall receive any amounts and benefits earned,accrued,or owing but not yet paid to him as of the Termination Date in accordance with the terms of any applicable employee benefit plans,programs,policies and arrangements of the Company.6.Tax Matters.(a)Withholding of Taxes.The Company may withhold from any amounts payable under this Agreement all federal,state,city or other taxes as the Company determines it is required to withhold pursuant to any applicable law.(b)Parachute Excise Tax.In the event that any amounts payable under this Agreement or otherwise to Executive would(i)constitute“parachute payments”within the meaning of section 280G of the Code or any comparable successor provisions and(ii)but for thissubsection would be subject to the excise tax imposed by section 4999 of the Code or any comparable successor provisions(the“Excise Tax”),then such amounts payable to Executive hereunder shall be either:(i)provided to Executive in full;or(ii)provided to Executive to the maximum extent that would result in no portion of such benefits being subject to theExcise Tax;whichever of the foregoing amounts,when taking into account applicable federal,state,local and foreign income and employment taxes,theExcise Tax and any other applicable taxes,results in the receipt by Executive,on an after-tax basis,of the greatest amount of benefits,notwithstanding that all or some portion of such benefits may be subject to the Excise Tax.Unless the Company and Executive otherwise agreein writing,any determination required under this subsection shall be made in writing in good faith by a nationally recognized accounting firmselected by the Company(the“Accountants”).In the event of a reduction in benefits hereunder,the reduction of the total payments shall applyas follows,notwithstanding anything to the contrary in Section 11.9 of the Companys 2019 Incentive Plan,as it may be amended from time totime,unless the Company and Executive otherwise agree in writing,and to the extent required by section 409A:(i)any cash severance paymentdue under this Agreement shall be reduced;(ii)forfeiture of any acceleration of vesting of any equity-based awards subject to section 409A ofthe Code,5with the tranche that would vest last(without any such acceleration)first being subject to forfeiture;(iii)any acceleration of vesting of any equity-based awards not subject to section 409A of the Code shall remain as originally scheduled to vest,with the tranche that would vest last(withoutany such acceleration)first remaining as originally scheduled to vest,and(iv)reduction of all other payments and benefits in a manner and orderof priority that provides Executive with the largest net after-tax value;provided that such other payments and benefits of equal after-tax presentvalue shall be reduced in the reverse order of payment.Notwithstanding anything to the contrary in this Agreement,any reduction under thissubsection shall be structured in a manner intended to comply with section 409A of the Code.For purposes of making the calculations requiredby this subsection,the Accountants may make reasonable assumptions and approximations concerning applicable taxes and may rely onreasonable,good-faith interpretations concerning the application of the Code and other applicable legal authority.The Company and Executiveshall furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make a determinationunder this subsection.The Company shall bear all costs that the Accountants may reasonably incur in connection with any calculationscontemplated by this subsection.If,notwithstanding any reduction described in this subsection,the Internal Revenue Service(“IRS”)determines that Executive is liablefor the Excise Tax as a result of the receipt of amounts payable under this Agreement or otherwise as described above,then Executive shall beobligated to pay back to the Company,within thirty(30)days after a final IRS determination or,in the event that Executive challenges the finalIRS determination,a final judicial determination,a portion of such amounts equal to the Repayment Amount.The“Repayment Amount”withrespect to the payment of benefits shall be the smallest such amount,if any,that is required to be paid to the Company so that Executives netafter-tax proceeds with respect to any payment of benefits(after taking into account the payment of the Excise Tax and all other applicable taxesimposed on such payment)are maximized.The Repayment Amount with respect to the payment of benefits shall be zero if a RepaymentAmount of more than zero would not result in Executives net after-tax proceeds with respect to the payment of such benefits being maximized.Ifthe Excise Tax is not eliminated pursuant to this paragraph,Executive shall pay the Excise Tax.Notwithstanding any other provision of this subsection,if(i)there is a reduction in the payment of benefits as described in thissubsection,(ii)the IRS later determines that Executive is liable for the Excise Tax,the payment of which would result in the maximization ofExecutives net after-tax proceeds(calculated as if Executives benefits had not previously been reduced),and(iii)Executive pays the ExciseTax,then the Company shall pay to Executive the amount by which those benefits which were reduced pursuant to this subsection as soon asadministratively possible after Executive pays the Excise Tax;provided that,to the extent required by section 409A of the Code,thereimbursement is made on or before the last day of Executives taxable year following the taxable year in which the Excise Tax was paid;theright to reimbursement is not subject to liquidation or exchange for another benefit;and the amount subject to reimbursement in one year shallnot affect any other amounts eligible for reimbursement in any other year.7.Employment Rights;Term of Agreement.(a)Employment Rights.Nothing expressed or implied in this Agreement will create any right or duty on the part of theCompany or Executive to have Executive remain in the employment of the Company or any subsidiary or affiliate of the Company.(b)Term of Agreement.The term of this Agreement shall be one year from the Effective Date,and may be renewed for oneor more additional one-year terms upon the written agreement of both parties.8.Successors and Binding Agreement.(a)The Company will require any successor(whether direct or indirect,by purchase,merger,consolidation,reorganizationor otherwise)to all or substantially all of the business or assets of6the Company,by agreement in form and substance reasonably satisfactory to Executive,expressly to assume and agree to perform thisAgreement in the same manner and to the same extent the Company would be required to perform if no such succession had taken place.ThisAgreement will be binding upon and inure to the benefit of the Company and any successor to the Company,including without limitation anypersons acquiring directly or indirectly all or substantially all of the business or assets of the Company whether by purchase,merger,consolidation,reorganization or otherwise(and such successor will thereafter be deemed the“Company”for the purposes of this Agreement),but will not otherwise be assignable,transferable or delegable by the Company.(b)This Agreement will inure to the benefit of and be enforceable by Executives personal or legal representatives,executors,administrators,successors,heirs,distributees and legatees.This Agreement will supersede the provisions of any employment,severance or other agreement between Executive and the Company that relate to any matter that is also the subject of this Agreement,and suchprovisions in such other agreements will be null and void.(c)This Agreement is personal in nature,and neither of the parties hereto will,without the consent of the other,assign,transfer or delegate this Agreement or any rights or obligations hereunder except as expressly provided in Sections 8(a)and 8(b).Withoutlimiting the generality or effect of the foregoing,Executives right to receive payments hereunder will not be assignable,transferable ordelegable,whether by pledge,creation of a security interest,or otherwise,other than by a transfer by Executives will or by the laws of descentand distribution and,in the event of any attempted assignment or transfer contrary to this Section 8(c),the Company will have no liability to payany amount so attempted to be assigned,transferred or delegated.9.Notices.For all purposes of this Agreement,all communications,including without limitation notices,consents,requests orapprovals,required or permitted to be given hereunder will be in writing and will be deemed to have been duly given when hand-delivered ordispatched by electronic facsimile transmission(with receipt thereof orally confirmed),or five(5)business days after having been mailed byUnited States registered or certified mail,return receipt requested,postage prepaid,or three(3)business days after having been sent by anationally recognized overnight courier service such as FedEx or UPS,addressed to the Company(to the attention of John Sullivan,ExecutiveVice President and General Counsel)at its principal executive office and to Executive at his principal residence,or to such other address as anyparty may have furnished to the other in writing and in accordance herewith,except that notices of changes of address will be effective only uponreceipt.10.Section 409A of the Code.(a)Interpretation.Notwithstanding the other provisions hereof,this Agreement is intended to comply with the requirementsof section 409A of the Code,to the extent applicable,and this Agreement shall be interpreted to avoid any penalty sanctions under section 409Aof the Code.Accordingly,all provisions herein,or incorporated by reference,shall be construed and interpreted to comply with section 409A ofthe Code and,if necessary,any such provision shall be deemed amended to comply with section 409A of the Code and the regulationsthereunder.If any payment or benefit cannot be provided or made at the time specified herein without incurring sanctions under section 409A ofthe Code,then such benefit or payment shall be provided in full at the earliest time thereafter when such sanctions will not be imposed.Anyamount payable under this Agreement that constitutes deferred compensation subject to section 409A of the Code shall be paid at the timeprovided under this Agreement or such other time as permitted under section 409A of the Code.No interest will be payable with respect to anyamount paid within a time period permitted by,or delayed because of,section 409A of the Code.All payments to be made upon the TerminationDate under this Agreement that are deferred compensation subject to section 409A of the Code may only be made upon a“separation fromservice”under section 409A of the Code.For purposes of section 409A of the Code,each payment made under this Agreement shall be treatedas a separate payment.In no event may Executive,directly or indirectly,designate the calendar year of payment.7(b)Payment Delay.To the maximum extent permitted under section 409A of the Code,the payments and benefits providedunder this Agreement are intended to comply with the“short-term deferral exception”under Treas.Reg.1.409A-1(b)(4),and any remainingamount is intended to comply with the“separation pay exception”under Treas.Reg.1.409A-1(b)(9)(iii);provided,however,if any amountpayable to Executive during the six(6)month period following the Termination Date does not qualify within either of the foregoing exceptions andconstitutes deferred compensation subject to the requirements of section 409A of the Code,then such amount shall hereinafter be referred to asthe“Excess Amount.”If at the time of Executives separation from service,the Companys(or any entity required to be aggregated with theCompany under section 409A of the Code)stock is publicly-traded on an established securities market or otherwise and Executive is a“specifiedemployee”(as defined in section 409A of the Code and determined in the sole discretion of the Company(or any successor thereto)inaccordance with the Companys(or any successor thereto)“specified employee”determination policy),then the Company shall postpone thecommencement of the payment of the portion of the Excess Amount that is payable within the six(6)month period following the TerminationDate with the Company(or any successor thereto)for six(6)months following the Termination Date with the Company(or any successorthereto).The delayed Excess Amount shall be paid in a lump sum to Executive within ten(10)days following the date that is six(6)monthsfollowing the Termination Date with the Company(or any successor thereto).If Executive dies during such six(6)month period and prior to thepayment of the portion of the Excess Amount that is required to be delayed on account of section 409A of the Code,such Excess Amount shallbe paid to the personal representative of Executives estate within sixty(60)days after Executives death.The Company makes norepresentation that any or all of the payments and benefits provided under this Agreement will be exempt from or comply with section 409A ofthe Code and makes no undertaking to preclude section 409A of the Code from applying to any such payment or benefit.(c)Reimbursements.All reimbursements provided under this Agreement shall be made or provided in accordance with therequirements of section 409A of the Code,including,where applicable,the requirement that(i)any reimbursement is for expenses incurredduring Executives lifetime(or during a shorter period of time specified in this Agreement),(ii)the amount of expenses eligible for reimbursementduring a calendar year may not affect the expenses eligible for reimbursement in any other calendar year,(iii)the reimbursement of an eligibleexpense will be made on or before the last day of the taxable year following the year in which the expense is incurred,and(iv)the right toreimbursement is not subject to liquidation or exchange for another benefit.11.Governing Law;Arbitration.(a)Governing Law.The validity,interpretation,construction and performance of this Agreement will be governed by andconstrued in accordance with the substantive laws of the State of Washington,without giving effect to the principles of conflict of laws of suchState.(b)Arbitration.Any controversies or claims arising out of or relating to this Agreement or Executives employment shall befully and finally settled by confidential arbitration in Seattle,Washington,before a single arbitrator.Judgment on an award issued by the arbitratormay be entered in any court having jurisdiction thereof.The arbitrator shall be chosen(i)by agreement of the parties and need not be affiliatedwith any particular organization,but(ii)absent agreement of the parties,the arbitrator shall be appointed by Judicial Dispute Resolution(“JDR”)in Seattle,Washington,and if JDR is unable to do so,by Judicial Arbitration&Mediation Services,in Seattle,Washington.Absent agreement ofthe parties to the contrary,discovery and motion practice in the arbitration shall be governed by the Washington Civil Rules and the Local Rulesof King County Superior Court,with the understanding that the arbitrator may,at his or her discretion,limit the extent and scope of discovery,and determine the permissibility of pre-hearing dispositive motions.The arbitrator shall fully and finally determine any and all questions ofarbitrability.Confidentiality of the arbitration is at the request of,and for the benefit of,both parties.The Company shall be responsible forpayment of any and all costs and arbitrator fees of such arbitration.Either party shall have the right to seek emergency injunctive relief in court inaid of arbitration to preserve the status quo pending determination of the merits in arbitration.Venue and jurisdiction for8any such action for injunctive relief shall exist exclusively in state and federal courts in King County,Washington.12.Validity.If any provision of this Agreement or the application of any provision hereof to any person or circumstance is heldinvalid,unenforceable or otherwise illegal,the remainder of this Agreement and the application of such provision to any other person orcircumstances will not be affected,and the provision so held to be invalid,unenforceable or otherwise illegal will be reformed to the extent(andonly to the extent)necessary to make it enforceable,valid or legal.13.Miscellaneous.No provision of this Agreement may be modified,waived or discharged unless such waiver,modification ordischarge is agreed to in a writing signed by Executive and the Company.No waiver by either party hereto at any time of any breach by the otherparty hereto or compliance with any condition or provision of this Agreement to be performed by such other party will be deemed a waiver ofsimilar or dissimilar provisions or conditions at the same or at any prior or subsequent time.No agreements or representations,oral or otherwise,expressed or implied with respect to the subject matter hereof have been made by either party that are not set forth expressly in this Agreement.References to Sections are to references to Sections of this Agreement.Any reference in this Agreement to a provision of a statute,rule orregulation will also include any successor provision thereto.14.Board Membership.At each meeting of the Companys shareholders prior to the Termination Date at which Executives boardterm is expiring,the Company will nominate Executive to serve as a member of the Board,subject to required stockholder approval andcompliance with the Companys policies and procedures regarding service as a member of the Board.Upon the termination of Executivesemployment for any reason,unless otherwise requested by the Board,Executive agrees to resign from the Board(and all other positions held atthe Company and its affiliates),and Executive,at the Boards request,will execute any documents necessary to reflect his resignation.15.Indemnification and D&O Insurance.Executive will be provided indemnification to the extent permitted by the Companys and itssubsidiaries and affiliates Articles of Incorporation or Bylaws,including,if applicable,any directors and officers insurance policies,and inaccordance with his existing indemnification agreement with the Company.16.Employee Benefits.Executive will be eligible to participate in the Company employee benefit plans,programs,policies andarrangements that are applicable to other executive officers of the Company,as such plans,programs,policies and arrangements may existfrom time to time and on terms at least as favorable as provided to any other executive officer of the Company.17.Business Expenses.Executive will be reimbursed for all reasonable expenses incurred by him in performing his dutieshereunder provided that such expenses are incurred and accounted for in accordance with the policies and procedures established by theCompany.18.No Duplication of Benefits.The payments and benefits provided under this Agreement shall offset substantially similar benefitsprovided to Executive pursuant to another Company policy,plan or agreement.19.Survival.Notwithstanding any provision of this Agreement to the contrary,the parties respective rights and obligations underSection 2 will survive any termination or expiration of this Agreement or the termination of Executives employment for any reason whatsoever.20.Counterparts.This Agreement may be executed in one or more counterparts,each of which will be deemed to be an original butall of which together will constitute one and the same agreement.9COSTCO WHOLESALE CORPORATIONBy:/s/Hamilton JamesHamilton E.JamesChairman of the Board of DirectorsEXECUTIVEBy:/s/Ron VachrisRon VachrisPresident&Chief Operating Officer10Exhibit 10.3Certain confiden?al informa?on contained in this document,indicated by the mark“*”,has been omi?ed because it is both(i)not material and(ii)customarily and actually treated as private or confiden?alTHIRTEENTH AMENDMENT TO THECO-BRANDED CREDIT CARD PROGRAM AGREEMENTThis Thirteenth Amendment(“Amendment”)is between Ci?bank,N.A.(“Bank”)and Costco Wholesale Corpora?on(“Costco”),iseffec?ve as of September 11,2024,and amends that certain Co-Branded Credit Card Program Agreement,by and between Bankand Costco,dated February 27,2015(the“Agreement”).Pursuant to Sec?on 16.10 of the Agreement,the Bank and Costco agree as follows:1.Defined Terms.All capitalized terms used but not defined in this Amendment will have the meanings ascribed tosuch terms in the Agreement.2.Extension.Costco hereby exercises its right pursuant to Sec?on 12.01(a)to extend the Ini?al Term by three years.Therefore,the par?es acknowledge that the Ini?al Term will con?nue through June 19,2029.3.Tiered Pricing.The single purchase APR listed in the Co-Branded Cardholder Account Terms will be replaced by thefollowing four APRs based on Banks FICO?ers(for both consumer and small business Co-Branded Card Acc
2024-05-11
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Exhibit 99.1 Gaotu Techedu Announces First Quarter 2024 Unaudited Financial Results Beijing,China,M.
2024-05-11
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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549 FORM 10-Q(Mark One)QUARTERLY REP.
2024-05-11
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-1-English Translation of a Report and Financial Statements Originally Issued in ChineseMEDIATEK INC.AND SUBSIDIARIESCONSOLIDATED FINANCIAL STATEMENTSWITHREPORT OF INDEPENDENT ACCOUNTANTSFOR THE THREE MONTHS ENDEDMARCH 31,2024 AND 2023Notice to ReadersThe reader is advised that these financial statements have been prepared originally in Chinese.In the event of a conflictbetween these financial statements and the original Chinese version or difference in interpretation between the twoversions,the Chinese language financial statements shall prevail.A member firm of Ernst&Young Global Limited-2-安永聯合會計師事務所30078 新市新科學園區路1號E-3E-3,No.1,Lixing 1st Rd.,Hsinchu Science ParkHsinchu City,Taiwan,R.O.C.電話 Tel:886 3 688 5678傳真 Fax:886 3 688 Translation of a Report Originally Issued in ChineseReview Report of Independent AccountantsTo the Board of Directors and Shareholdersof MediaTek Inc.IntroductionWe have reviewed the accompanying consolidated balance sheets of MediaTek Inc.and itssubsidiaries as of March 31,2024 and 2023,the related consolidated statements of comprehensiveincome,changes in equity and cash flows for the three-month periods ended March 31,2024 and2023,and notes to the consolidated financial statements,including the summary of significantaccounting policies(together“the consolidated financial statements”).Management is responsiblefor the preparation and fair presentation of these consolidated financial statements in accordance withthe No.34,“Interim Financial Reporting”as endorsed and became effective by Financial SupervisoryCommission of the Republic of China.Our responsibility is to express a conclusion on theseconsolidated financial statements based on our reviews.Scope of ReviewWe conducted our reviews in accordance with Statement of Standards on Auditing No.2410,“Review of Financial Information Performed by the Independent Auditor of the Entity”of theRepublic of China.A review of consolidated financial statements consists of making inquiries,primarily of persons responsible for financial and accounting matters,and applying analytical andother review procedures.A review is substantially less in scope than an audit conducted inaccordance with auditing standards generally accepted in the Republic of China and consequentlydoes not enable us to obtain assurance that we would become aware of all significant matters thatmight be identified in an audit.Accordingly,we do not express an audit opinion.A member firm of Ernst&Young Global Limited-3-ConclusionBased on our reviews,nothing has come to our attention that causes us to believe that theaccompanying consolidated financial statements do not present fairly,in all material respects,theconsolidated financial position of MediaTek Inc.and its subsidiaries as of March 31,2024 and 2023,their consolidated financial performance and cash flows for the three-month periods ended March31,2024 and 2023,in accordance with the Regulations Governing the Preparation of FinancialReports by Securities Issuers and International Accounting Standard No.34,“Interim FinancialReporting”as endorsed and became effective by Financial Supervisory Commission of theRepublic of China.Hsu,Hsin-MinHuang,Chien-CheErnst&Young,TaiwanApril 26,2024Notice to ReadersThe accompanying financial statements are intended only to present the financial position,results of operations and cashflows in accordance with accounting principles and practices generally accepted in the Republic of China and not thoseof any other jurisdictions.The standards,procedures and practices to audit such financial statements are those generallyaccepted and applied in the Republic of China.Accordingly,the accompanying financial statements and report of independent accountants are not intended for use bythose who are not informed about the accounting principles or the Standards on Auditing of the Republic of China,andtheir applications in practice.As the financial statements are the responsibility of the management,Ernst&Young cannotaccept any liability for the use of,or reliance on,the English translation or for any errors or misunderstandings that mayderive from the translation.ASSETSNotesDecember 31,2023Current assets Cash and cash equivalents6(1)143,345,272$22165,396,010$26139,696,362$23 Financial assets at fair value through profit or loss-current6(2)7,640,58115,671,16715,402,0851 Financial assets at fair value through other comprehensive income-current6(3)5,263,07216,040,47514,315,6531 Financial assets measured at amortized cost-current6(4)3,518,45413,565,531-5,296,2241 Notes receivable,net6(23)1,796-3,142-46,585-Trade receivables,net6(5),6(23)54,025,729855,049,729946,224,2858 Trade receivables from related parties,net6(5),6(23),776,405-53,462-39,871-Financing lease receivables,net6(23),6(24)727,892-727,892-181,973-Other receivables6(6)5,386,33414,807,004114,972,0192 Current tax assets4,6(31)348,435-222,054-183,920-Inventories6(7)49,211,768843,220,266769,264,76911 Prepayments6(8),913,569,53325,193,53214,708,6861 Other current assets1,586,151-938,504-1,126,279-Total current assets284,701,42244290,888,76846291,458,71148Non-current assets Financial assets at fair value through profit or loss-noncurrent6(2)5,318,22814,871,34816,326,8501 Financial assets at fair value through other comprehensive income-noncurrent6(3)81,314,7781372,400,8611274,814,43812 Financial assets measured at amortized cost-noncurrent6(4),870,756,4961155,580,529932,506,3495 Investments accounted for using the equity method6(9)18,311,892317,153,100317,578,3613 Property,plant and equipment6(10)54,022,923853,291,265853,692,7859 Right-of-use assets6(24)9,217,88918,597,30518,910,7032 Investment property,net6(11)2,240,032-2,221,916-1,986,995-Intangible assets6(12),6(13)80,032,6811381,244,7681378,374,91113 Deferred tax assets4,6(31)14,160,961214,663,824212,047,8702 Refundable deposits97,648,04317,201,68416,667,6411 Long-term financing lease receivables,net6(23),6(24)545,919-727,892-1,273,811-Net defined benefit assets-noncurrent6(18)26,265-26,265-15,395-Other non-current assets-others919,027,821326,168,969426,730,5754Total non-current assets362,623,92856344,149,72654320,926,68452Total assets647,325,350$100635,038,494$100612,385,395$100The accompanying notes are an integral part of the consolidated financial statements.English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETSAs of March 31,2024,December 31,2023,and March 31,2023March 31,2024%March 31,2023%(Amounts in thousands of New Taiwan Dollars)%-4-LIABILITIES AND EQUITYNotesDecember 31,2023%Current liabilities Short-term borrowings6(14)7,820,000$-2,200,000$-4,600,000$1 Financial liabilities at fair value through profit or loss-current6(2)4,782-301,675-40,889-Contract liabilities-current6(22),74,081,19513,376,75912,488,611-Trade payables37,948,049636,859,388619,515,2243 Trade payables to related parties72,048,501-1,919,652-1,654,002-Other payables6(15)91,613,1551591,653,10515159,019,24226 Other payables to related parties7108,072-108,629-132,071-Current tax liabilities4,6(31)17,801,033315,011,015213,883,4392 Lease liabilities-current6(24)949,169-837,485-715,514-Current portion of long-term liabilities6(17)4,534,43115,626,18315,635,4801 Other current liabilities6(16)80,755,6631274,105,1131239,222,4667Total current liabilities247,664,05038231,999,00437246,906,93840Non-current liabilities Long-term payables3,613,678-4,604,80713,266,3151 Long-term payables to related parties7-60,844-Net defined benefit liabilities-noncurrent6(18)614,705-620,770-756,561-Deposits received7187,113-211,796-189,342-Deferred tax liabilities4,6(31)8,620,36728,452,479111,469,6582 Lease liabilities-noncurrent6(24)8,587,00728,060,35118,350,2032 Other non-current liabilities-others6(19),93,164,720-6,883,92912,413,400-Total non-current liabilities24,787,590428,834,132426,506,3235 Total liabilities272,451,64042260,833,13641273,413,26145Equity attributable to owners of the parent Share capital6(20)Common stock15,996,234315,996,475315,996,2923 Capital collected in advance-550-Capital surplus6(20),6(21),6(33)28,855,880428,350,438424,972,0584 Retained earnings6(20)Legal reserve75,782,9481275,782,9481262,058,49810 Undistributed earnings195,660,41630212,669,73633204,597,26333 Other equity6(21)52,689,505835,462,155628,909,4915 Treasury shares6(20)(55,970)-(55,970)-(55,970)-Equity attributable to owners of the parent368,929,01357368,205,78258336,478,18255Non-controlling interests6(20),6(33)5,944,69715,999,57612,493,952-Total equity374,873,71058374,205,35859338,972,13455Total liabilities and equity647,325,350$100635,038,494$100612,385,395$100The accompanying notes are an integral part of the consolidated financial statements.As of March 31,2024,December 31,2023,and March 31,2023English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS(Amounts in thousands of New Taiwan Dollars)March 31,2024%March 31,2023%-5-Net sales6(22),7133,458,147$10095,651,513$100Operating costs6(7),6(25),7(63,557,617)(48)(49,739,271)(52)Gross profit69,900,5305245,912,24248Operating expenses6(23),6(24),6(25),7Selling expenses(3,806,233)(3)(2,694,325)(3)Administrative expenses(2,820,094)(2)(2,360,947)(2)Research and development expenses(31,146,829)(23)(26,483,077)(28)Expected credit gains(losses)52,490-(5,131)-Total operating expenses(37,720,666)(28)(31,543,480)(33)Operating income32,179,8642414,368,76215Non-operating income and expensesInterest income6(26)2,297,79321,390,6152Other income6(27),7736,45813,203,2683 Other gains and losses6(28)386,824-285,463-Finance costs6(29)(58,111)-(36,086)-Share of profit of associates and joint ventures accounted for using the equity method6(9)126,795-(108,251)-Total non-operating income and expenses3,489,75934,735,0095Net income before income tax35,669,6232719,103,77120Income tax expense4,6(31)(4,014,816)(3)(2,213,280)(2)Net income31,654,8072416,890,49118Other comprehensive income6(9),6(18),6(30),6(31)Items that may not be reclassified subsequently to profit or loss Unrealized gains(losses)from equity instrument investments measured at fair value through other comprehensive income6,620,22852,886,7253 Share of other comprehensive income of associates and joint ventures accounted for using the equity method66,392-88,664-Income tax relating to those items not to be reclassified to profit or loss250,195-(153,220)-Items that may be reclassified subsequently to profit or loss Exchange differences resulting from translating the financial statements of foreign operations10,298,5438(2,406,980)(3)Unrealized gains(losses)from debt instrument investments measured at fair value through other comprehensive income(2,321)-11,317-Share of other comprehensive income of associates and joint ventures accounted for using the equity method(135,530)-24,079-Other comprehensive income,net of tax17,097,50713450,585-Total comprehensive income48,752,314$3717,341,076$18Net income for the periods attributable to:Owners of the parent6(32)31,535,653$16,873,549$Non-controlling interests6(20)119,15416,94231,654,807$16,890,491$Total comprehensive income for the periods attributable to:Owners of the parent48,619,979$17,334,712$Non-controlling interests132,3356,36448,752,314$17,341,076$Basic Earnings Per Share(in New Taiwan Dollars)6(32)19.85$10.64$Diluted Earnings Per Share(in New Taiwan Dollars)6(32)19.80$10.60$Three Months Ended March 31DescriptionNotesEnglish Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMEFor the three months ended March 31,2024 and 2023(Amounts in thousands of New Taiwan Dollars,except for earnings per share)The accompanying notes are an integral part of the consolidated financial statements.2024 23%-6-English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CHANGES IN EQUITYFor the three months ended March 31,2024 and 2023(Amounts in thousands of New Taiwan Dollars)Balance as of January 1,202315,994,353$113$47,185,281$62,058,498$286,688,675$7,359,676$23,079,555$(2,200,891)$(55,970)$440,109,290$2,948,949$443,058,239$Distribution of earnings:Cash dividends-(99,178,441)-(99,178,441)-(99,178,441)Total-(99,178,441)-(99,178,441)-(99,178,441)Cash dividends distributed from capital surplus-(22,395,132)-(22,395,132)-(22,395,132)Profit for the three months ended March 31,2023-16,873,549-16,873,54916,94216,890,491Other comprehensive income for the three months ended March 31,2023-(2,364,168)2,825,331-461,163(10,578)450,585Total comprehensive income-16,873,549(2,364,168)2,825,331-17,334,7126,36417,341,076Share-based payment transactions1134374,037-4,58748,18552,772Changes in associates and joint ventures accounted for using the equity method-51,450-51,4504,45355,903Issuance of restricted stock for employees1,826-110,754-14,889-408,579-536,048-536,048Changes in other capital surplus-15,668-15,668-15,668Proceeds from disposal of equity instruments measured at fair value through other comprehensive income-198,591-(198,591)-Non-controlling interests-(513,999)(513,999)Balance as of March 31,202315,996,292$550$24,972,058$62,058,498$204,597,263$4,995,508$25,706,295$(1,792,312)$(55,970)$336,478,182$2,493,952$338,972,134$Balance as of January 1,202415,996,475$-$28,350,438$75,782,948$212,669,736$6,108,654$29,887,085$(533,584)$(55,970)$368,205,782$5,999,576$374,205,358$Distribution of earnings:Cash dividends-(48,628,552)-(48,628,552)-(48,628,552)Total-(48,628,552)-(48,628,552)-(48,628,552)Profit for the three months ended March 31,2024-31,535,653-31,535,653119,15431,654,807Other comprehensive income for the three months ended March 31,2024-10,148,7916,935,535-17,084,32613,18117,097,507Total comprehensive income-31,535,65310,148,7916,935,535-48,619,979132,33548,752,314Adjustments due to dividends that subsidiaries received from parent company-191,734-191,734-191,734Changes in associates and joint ventures accounted for using the equity method-525,090-525,090-525,090The differences between the fair value of the consideration paid or received from acquiring or disposing subsidiaries and the carrying amounts of the subsidiaries-(177,922)-(177,922)(45,743)(223,665)Changes in ownership interests in subsidiaries-102,498102,498Issuance of restricted stock for employees(241)-(42,298)-9,588-217,015-184,064-184,064Changes in other capital surplus-8,838-8,838-8,838Proceeds from disposal of equity instruments measured at fair value through other comprehensive income-73,991-(73,991)-Non-controlling interests-(243,969)(243,969)Balance as of March 31,202415,996,234$-$28,855,880$75,782,948$195,660,416$16,257,445$36,748,629$(316,569)$(55,970)$368,929,013$5,944,697$374,873,710$The accompanying notes are an integral part of the consolidated financial statements.Exchangedifferences resultingfrom translating thefinancial statementsof foreignoperationsUnrealized gains(losses)fromfinancial assetsmeasured at fairvalue through othercomprehensiveincomeDescriptionEquity attributable to owners of the parent Non-controllinginterestsTotal equityShare capitalCapitalsurplusRetained earningsOther equityTreasurysharesEquity attributableto owners ofthe parentOthersCommonstockCapital collectedin advanceLegalreserve Undistributedearnings-7-(Amounts in thousands of New Taiwan Dollars)2024Cash flows from operating activities:Profit before tax from continuing operations35,669,623$19,103,771$Adjustments for:The profit or loss items which did not affect cash flows:Depreciation3,049,3682,793,805 Amortization1,911,6401,522,386 Expected credit(gains)losses(52,490)5,131 Gains on financial assets and liabilities at fair value through profit or loss(763,396)(118,693)Interest expenses58,11136,086 Losses on derecognition of financial assets measured at amortized cost72,792-Interest income(2,297,793)(1,390,615)Dividend income(639,566)(3,116,021)Share-based payment expenses172,895566,297 Share of profit of associates and joint ventures accounted for using the equity method(126,795)108,251 Gains on disposal of property,plant and equipment(2,005)(1,945)Others-(12)Changes in operating assets and liabilities:Financial assets mandatorily measured at fair value through profit or loss(1,461,097)3,685,516 Notes receivable1,346(43,774)Trade receivables1,758,312(5,540,066)Trade receivables from related parties(22,943)(5,278)Other receivables(323,352)1,167,590 Inventories(6,140,844)1,485,472 Prepayments(1,030,166)1,185,928 Other current assets(647,647)76,783 Other non-current assets-others394,2168 Contract liabilities704,436(2,412,283)Trade payables1,088,661(238,932)Trade payables to related parties128,849(109,792)Other payables(9,454,744)(15,619,314)Other payables to related parties27,690(22,246)Other current liabilities5,071,862(3,877,706)Net defined benefit liabilities(6,065)(5,319)Other non-current liabilities-others(4,072,481)231,981Cash generated from(used in)operating activities:23,068,417(532,991)Interest received1,996,3121,381,640 Dividends received635,8143,255,670 Interest paid(66,508)(46,561)Income tax paid(430,233)(1,200,218)Net cash provided by operating activities25,203,8022,857,540Cash flows from investing activities:Acquisition of financial assets at fair value through other comprehensive income(367,742)(379,258)Proceeds from disposal of financial assets at fair value through other comprehensive income1,458,929215,644 Proceeds from capital return of financial assets at fair value through other comprehensive income59,7653,196 Acquisition of financial assets measured at amortized cost(15,797,001)(8,198,014)Proceeds from redemption of financial assets measured at amortized cost2,670,9001,041,002 Acquisition of property,plant and equipment(3,275,873)(2,100,216)Proceeds from disposal of property,plant and equipment2,4994,949 (Increase)decrease in refundable deposits(446,359)649,061 Acquisition of intangible assets(2,757,862)(1,191,735)Decrease in financing lease receivables181,973-Net cash used in investing activities(18,270,771)(9,955,371)Cash flows from financing activities:Increase in short-term borrowings5,620,000900,000 Decrease in deposits received(24,683)(365)Cash payment for the principal portion of the lease liabilities(215,307)(252,341)Proceeds from exercise of employee stock options-20,255 Cash dividends(39,159,180)(959)Acquisition of ownership interests in subsidiaries(223,665)-Changes in non-controlling interests102,49850 Other financing activities19,837-Net cash(used in)provided by financing activities(33,880,500)666,640 Effect of changes in exchange rate on cash and cash equivalents4,896,731(1,374,602)Net decrease in cash and cash equivalents(22,050,738)(7,805,793)Cash and cash equivalents at the beginning of the period165,396,010147,502,155 Cash and cash equivalents at the end of the period143,345,272$139,696,362$The accompanying notes are an integral part of the consolidated financial statements.English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSFor the three months ended March 31,2024 and 20232023Three Months Ended March 31Description-8-English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)-9-1.Organization and OperationAs officially approved,MediaTek Inc.(“MTK”)was incorporated at Hsinchu Science-basedIndustrial Park on May 28,1997.Since then,it has been specialized in the R&D,production,manufacturing and marketing of multimedia integrated circuits(ICs),computer peripheralsoriented ICs,high-end consumer-oriented ICs and other ICs of extraordinary application.Meanwhile,it has rendered design,test runs,maintenance and repair and technologicalconsultation services for software&hardware of the aforementioned products,import and exporttrades for the aforementioned products,sale and delegation of patents and circuit layout rights forthe aforementioned products.2.Date and Procedures of Authorization of Financial Statements for IssueThe consolidated financial statements were authorized for issue in accordance with a resolution ofthe Board of Directors on April 26,2024.3.Newly Issued or Revised Standards and Interpretations(1)Changes in accounting policies resulting from applying for the first time certain standards andamendmentsMTK and its subsidiaries(“the Company”)applied for the first time International FinancialReporting Standards,International Accounting Standards,and Interpretations issued,revisedor amended which are recognized by Financial Supervisory Commission(“FSC”)and becameeffective for annual periods beginning on or after January 1,2024.The application of thesenew standards and amendments had no material effect on the Company.(2)Standards or interpretations issued,revised or amended,by International AccountingStandards Board(“IASB”)but not yet endorsed by FSC,and not yet adopted by the Companyas at the end of the reporting period are listed below:Standards orInterpretations NumbersThe Projects of Standards or InterpretationsEffective Dateissued by IASBIFRS 10 and IAS 28“Consolidated Financial Statements”and“Investments in Associates and JointVentures”-Sale or Contribution ofAssets between an Investor and itsAssociate or Joint Ventures(Amendment)To be determinedby IASBIFRS 17“Insurance Contracts”January 1,2023IAS 21“Lack of Exchangeability”(Amendment)January 1,2025IFRS 18“Presentation and Disclosure in FinancialStatements”January 1,2027English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)-10-A.IFRS 10“Consolidated Financial Statements”and IAS 28“Investments in Associates andJoint Ventures”-Sale or Contribution of Assets between an Investor and its Associate orJoint Ventures(Amendment)The amendments address the inconsistency between the requirements in IFRS 10“Consolidated Financial Statements”(IFRS 10)and IAS 28“Investments in Associatesand Joint Ventures”(IAS 28),in dealing with the loss of control of a subsidiary that iscontributed to an associate or a joint venture.IAS 28 restricts gains and losses arising fromcontributions of non-monetary assets to an associate or a joint venture to the extent of theinterest attributable to the other equity holders in the associate or joint venture.IFRS 10requires full profit or loss recognition on the loss of control of a subsidiary.IAS 28 wasamended so that the gain or loss resulting from the sale or contribution of assets thatconstitute a business as defined in IFRS 3“Business Combinations”(IFRS 3)between aninvestor and its associate or joint venture is recognized in full.IFRS 10 was also amended so that the gain or loss resulting from the sale or contributionof a subsidiary that does not constitute a business as defined in IFRS 3 between an investorand its associate or joint venture is recognized only to the extent of the unrelated investorsinterests in the associate or joint venture.B.IFRS 18“Presentation and Disclosure in Financial Statements”The main changes in the new standard are as below:(1)Improved comparability in the statement of profit or loss(income statement)IFRS 18 requires entities to classify all income and expenses within their incomestatement into the three new categories:operating;investing and financing,to improvethe structure of the income statement,and requires entities to provide new definedsubtotals which give investors a consistent starting point for analyzing entitiesperformance and make it easier to compare entities.(2)Enhanced transparency of management-defined performance measuresIFRS 18 requires entities to disclose those management-defined performance measuresthat are related to the income statement.English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)-11-(3)Useful grouping of information in the financial statementsIFRS 18 provides enhanced guidance on how to organize information and whether toprovide it in the primary financial statements or in the notes,to provide more detailedand useful information.Besides,IFRS 18 requires entities to provide moretransparency about operating expenses,helping investors to find and understand theinformation they need.IFRS 18 replaces IAS 1“Presentation of Financial Statements”.IFRS 18 is effective forannual reporting periods beginning on or after January 1,2027.The abovementioned standards and interpretations issued by IASB have not yet been endorsed byFSC at the date of issuance of the Companys financial statements,the local effective dates are tobe determined by FSC.As the Company is currently determining the potential impact of thestandards and interpretations listed under A and B.All other standards and interpretations have nomaterial impact on the Company.4.Summary of Material Accounting PoliciesStatement of ComplianceThe consolidated financial statements of the Company for the three-month periods ended March31,2024 and 2023 have been prepared in accordance with the Regulations Governing thePreparation of Financial Reports by Securities Issuers(“the Regulations”)and IAS 34“InterimFinancial Reporting”as endorsed and became effective by FSC.Basis of PreparationThe consolidated financial statements have been prepared on a historical cost basis,except forfinancial instruments that have been measured at fair value.The consolidated financial statementsare expressed in thousands of New Taiwan Dollars(“NT$”)unless otherwise stated.Basis of ConsolidationPreparation principle of consolidated financial statementsControl is achieved when MTK is exposed,or has rights,to variable returns from its involvementwith the investee and has the ability to affect those returns through its power over the investee.Specifically,MTK controls an investee if and only if MTK has:English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)-12-(1)power over the investee(i.e.existing rights that give it the current ability to direct the relevantactivities of the investee),(2)exposure,or rights,to variable returns from its involvement with the investee,and(3)the ability to use its power over the investee to affect its returns.When MTK has less than a majority of the voting or similar rights of an investee,MTK considersall relevant facts and circumstances in assessing whether it has power over an investee,including:(1)the contractual arrangement with the other vote holders of the investee;(2)rights arising from other contractual arrangements;(3)MTKs voting rights and potential voting rights.MTK re-assesses whether or not it controls an investee if facts and circumstances indicate thatthere are changes to one or more of the three elements of control.Subsidiaries are fully consolidated from the acquisition date,being the date on which the Companyobtains control,and continue to be consolidated until the date that such control ceases.Thefinancial statements of the subsidiaries are prepared for the same reporting period as the parentcompany,using uniform accounting policies.All intra-group balances,income and expenses,unrealized gains and losses and dividends resulting from intra-group transactions are eliminatedin full.A change in the ownership interest of a subsidiary,without a change of control,is accounted foras an equity transaction.Total comprehensive income of the subsidiaries is attributed to the owners of the parent and to thenon-controlling interests even if this results in the non-controlling interests having a deficitbalance.If loses control of a subsidiary,it:(1)derecognizes the assets(including goodwill)and liabilities of the subsidiary;(2)derecognizes the carrying amount of any non-controlling interest;(3)recognizes the fair value of the consideration received;(4)recognizes the fair value of any investment retained;(5)reclassifies the parents share of components previously recognized in other comprehensiveincome to profit or loss,or transfers directly to retained earnings if required by other IFRSs;and(6)recognizes differences in profit or loss.English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)-13-The consolidated entities are listed as follows:Percentage of OwnershipInvestorSubsidiaryBusiness natureMarch 31,2024December 31,2023March 31,2023NoteMTKHsu-Ta InvestmentCorp.General investing10000%-MTKMediaTek SingaporePte.Ltd.Research,manufacturingand sales10000%-MTKMediaTek InvestmentSingapore Pte.Ltd.General investing10000%-MTKHFI Innovation Inc.Intellectual propertyright management10000%-MTKMStar Co.,Ltd.General investing10000%-MTKSpidcom TechnologiesIntellectual propertyright management10000%-MTKRichtek TechnologyCorp.Research,manufacturingand sales10000%-MTKMediaTek Capital Co.General investing10000%-MTKAiroha TechnologyCorp.Research,manufacturingand sales67gv%-MTKHsu-Yuan InvestmentCorp.General investing10000%-MTKMediaTek Research UKLimitedResearch10000%-MTKMediaTek BangalorePrivate LimitedResearch10000%-Hsu-Ta InvestmentCorp.Hsiang Fa Co.General investing10000%-Hsu-Ta InvestmentCorp.MediaTek BangalorePrivate LimitedResearch0%0%0%-Hsu-Ta InvestmentCorp.Airoha TechnologyCorp.Research,manufacturingand sales4%3%-1Hsiang Fa Co.Chingis TechnologyCorporationResearch10000%-(To be continued)English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)-14-(Continued)Percentage of OwnershipInvestorSubsidiaryBusiness natureMarch 31,2024December 31,2023March 31,2023NoteHsiang Fa Co.MediaTek ResearchCorp.Research10000%-Hsiang Fa Co.InnoFusionTechnology Corp.Technical services10000%-MediaTek SingaporePte.Ltd.Core Tech ResourcesInc.General investing-100%2MediaTek SingaporePte.Ltd.MediaTek InvestmentHK LimitedGeneral investing10000%-Core Tech ResourcesInc.MediaTek IndiaTechnology Pvt.Ltd.Research0%0%0%-Richtek TechnologyCorp.Richtek EuropeHolding B.V.General investing10000%-Richtek TechnologyCorp.Richtek HoldingInternational LimitedGeneral investing10000%-Richtek TechnologyCorp.RichnexMicroelectronicsCorp.Research,manufacturing andsales82%-Richtek TechnologyCorp.Richtek Korea LLC.Research andtechnical services10000%-Richtek TechnologyCorp.Richtek USA,Inc.Sales,research andtechnical services10000%-Richtek TechnologyCorp.RichpowerMicroelectronics Co.,Ltd.Technical services10000%-Richtek TechnologyCorp.Li-We TechnologyCorp.Technical services10000%-Richtek TechnologyCorp.Richtek Japan Inc.Research andtechnical services10000%-Richtek EuropeHolding B.V.Richtek Europe B.V.Marketing services10000%-(To be continued)English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)-15-(Continued)Percentage of OwnershipInvestorSubsidiaryBusiness natureMarch 31,2024December 31,2023March 31,2023NoteAiroha(Cayman)Inc.Airotek(Shenzhen)Inc.Research andtechnical services10000%-Airoha(Cayman)Inc.Airotek(Chengdu)Inc.Research10000%-Airoha(Cayman)Inc.Airoha TechnologyIndia Private LimitedResearch0%0%0%-Airoha TechnologyCorp.Airoha(Cayman)Inc.General investing10000%-Airoha TechnologyCorp.Shadow InvestmentLimitedGeneral investing10000%-Airoha TechnologyCorp.Airoha Technology(HK)LimitedGeneral investing,research,manufacturing andsales10000%-Airoha TechnologyCorp.Airoha TechnologyUSA Inc.Research10000%-Airoha TechnologyCorp.Airoha TechnologyIndia PrivateLimitedResearch10000%-Gaintech Co.LimitedMediaTek ChinaLimitedGeneral investing10000%-Gaintech Co.LimitedMTK Wireless LimitedResearch10000%-Gaintech Co.LimitedMediaTek Japan Inc.Technical services10000%-Gaintech Co.LimitedMediaTek Korea Inc.Research10000%-Gaintech Co.LimitedSmarthead LimitedGeneral investing10000%-Gaintech Co.LimitedMediaTek WirelessFZ-LLCTechnical services10000%-Gaintech Co.LimitedNephos Cayman Co.LimitedGeneral investing10000%-Gaintech Co.LimitedZelus(Shenzhen)Technology Ltd.Research and sales88%-(To be continued)English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)-16-(Continued)Percentage of OwnershipInvestorSubsidiaryBusiness natureMarch 31,2024December 31,2023March 31,2023NoteGaintech Co.LimitedIStar Technology Ltd.General investing-100%3Gaintech Co.LimitedSigmastar TechnologyInc.General investing10000%-Gaintech Co.LimitedMediaTek GlobalHoldings LimitedGeneral investing10000%-Gaintech Co.LimitedCore Tech Resources Inc.General investing1000%-2MediaTek China LimitedMediaTek(Hefei)Inc.Research10000%-MediaTek China LimitedMediaTek(Beijing)Inc.Research10000%-MediaTek China LimitedMediaTek(Shenzhen)Inc.Research10000%-MediaTek China LimitedMediaTek(Chengdu)Inc.Research10000%-MediaTek China LimitedMediaTek(Wuhan)Inc.Research10000%-MediaTek China LimitedXuxin Investment(Shanghai)Inc.General investing10000%-MediaTek China LimitedMediaTek(Shanghai)Inc.Research10000%-MTK Wireless LimitedMediaTek Sweden ABResearch10000%-MTK Wireless LimitedMediaTek USA Inc.Research10000%-MTK Wireless LimitedMediaTek WirelessFinland OyResearch10000%-MTK Wireless LimitedMStar SemiconductorUK Ltd.Research andtechnical services-4MTK Wireless LimitedMStar France SASResearch10000%-MTK Wireless LimitedMediaTek NorthAmerica Inc.Sales support and marketing services10000%-(To be continued)English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)-17-(Continued)Percentage of OwnershipInvestorSubsidiaryBusiness natureMarch 31,2024December 31,2023March 31,2023NoteMTK Wireless LimitedMediaTek Polandsp.z o.o.Technical services10000%5MTK Wireless LimitedMediaTek TechnologyUSA Inc.Research1000%-6Gold Rich International(Samoa)LimitedGold Rich International(HK)LimitedGeneral investing10000%-Airoha Technology(HK)LimitedAiroha Technology(Suzhou)LimitedResearch,manufacturingand sales10000%-Airoha Technology(Suzhou)LimitedEcoNet LimitedGeneral investing andsales10000%-MediaTek InvestmentSingapore Pte.Ltd.Gaintech Co.LimitedGeneral investing10000%-MediaTek BangalorePrivate LimitedMediaTek IndiaTechnology Pvt.Ltd.Research10000%-MStar Co.,Ltd.MStar Software R&D(Shenzhen),Ltd.Technical services10000%-Nephos Cayman Co.LimitedNephos(Hefei)Co.,Ltd.Research,manufacturingand sales10000%-Xuxin Investment(Shanghai)Inc.Xuxi(Shanghai)ManagementConsulting Co.,Ltd.General investing10000%-Xuxi(Shanghai)ManagementConsulting Co.,Ltd.Hefei XuhuiManagementConsulting Co.,Ltd.General investing10000%-MediaTek GlobalHoldings LimitedHsu Zhan(HK)Investment LimitedGeneral investing10000%-MediaTek GlobalHoldings LimitedMTKC Global HoldingsCo.LimitedGeneral investing10000%-(To be continued)English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)-18-(Continued)Percentage of OwnershipInvestorSubsidiaryBusiness natureMarch 31,2024December 31,2023March 31,2023NoteMediaTek GlobalHoldings LimitedDigimoc HoldingsLimitedGeneral investing10000%-MediaTek Capital Co.IStar Technology Ltd.General investing1000%-3Digimoc HoldingsLimitedCloud Ranger LimitedGeneral investing10000%-Digimoc HoldingsLimitedGold Rich International(Samoa)LimitedGeneral investing10000%-MTKC GlobalHoldings Co.LimitedLePower(HK)LimitedGeneral investing10000%-MediaTek InvestmentHK LimitedHsu Chia(Samoa)Investment Ltd.General investing10000%-MediaTek InvestmentHK LimitedHsu Fa(Samoa)Investment Ltd.General investing10000%-MediaTek InvestmentHK LimitedHsu Kang(Samoa)Investment Ltd.General investing10000%-MediaTek WirelessFinland OyMediaTek GermanyGmbHTechnical services10000%-1.Hsu-Ta Investment Corp.acquired voting shares of Airoha Technology Corp.in severaltranches from November 2023 to January 2024.2.For the purpose of reorganization,the 100%ownership of Core Tech Resources Inc.,whichwas previously owned by MediaTek Singapore Pte.Ltd.,was transferred to Gaintech Co.Limited in December 2023.3.For the purpose of reorganization,the 100%ownership of IStar Technology Ltd.,which waspreviously owned by Gaintech Co.Limited,was transferred to MediaTek Capital Co.inAugust 2023.4.For the purpose of reorganization,MStar Semiconductor UK Ltd.has been liquidated inFebruary 2023.5.MTK Wireless Limited established MediaTek Poland sp.z o.o.in January 2023.6.MTK Wireless Limited established MediaTek Technology USA Inc.in June 2023.The financial statements of all the consolidated subsidiaries listed above had been reviewed byauditors.English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)-19-Except for the accounting policies listed below,the same accounting policies have been followedin the consolidated financial statements for the three-month periods ended March 31,2024 and2023 as were applied in the preparation of the Companys consolidated financial statements forthe year ended December 31,2023.For the summary of other significant accounting policies,please refer to the consolidated financial statements for the year ended December 31,2023.(1)Pension cost for an interim period is calculated on a year-to-date basis by using the actuariallydetermined pension cost rate at the end of the prior financial year,adjusted and disclosed forsignificant market fluctuations since that time and for significant curtailments,settlements,orother significant one-off events.(2)Interim period income tax expense is accrued using the tax rate that would be applicable toexpected total annual earnings,that is,the estimated average annual effective income tax rateapplied to the pre-tax income of the interim period.The average annual effective income taxrate is estimated by current income tax expense only.Deferred income tax is recognized andmeasured according to IAS 12“Income Tax”and follows the same accounting policies of theCompanys annual consolidated financial statements.When income tax rate changes occur ininterim period,the effect on deferred income tax is recognized in profit or loss,othercomprehensive income or equity at once.5.Significant Accounting Judgments,Estimates and AssumptionsThe same significant accounting judgments,estimates and assumptions have been followed in theconsolidated financial statements for the three-month periods ended March 31,2024 and 2023 aswere applied in the preparation of the Companys consolidated financial statements for the yearended December 31,2023.Please refer to the consolidated financial statements for the year endedDecember 31,2023.6.Contents of Significant Accounts(1)Cash and cash equivalentsMarch 31,2024December 31,2023March 31,2023Cash on hand and petty cash$916$1,058$1,169Checking and savings accounts 16,209,249 12,096,686 16,968,032Time deposits 125,625,107 144,468,348 119,777,161Repurchase agreements 1,510,000 5,832,700 2,950,000United States Treasury bills-2,997,218-Total$143,345,272$165,396,010$139,696,362English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)-20-Time deposits,repurchase agreements and United States Treasury bills were those securitieswhose maturities are within twelve months and are readily convertible to known amounts ofcash with values subject to an insignificant risk of changes.(2)Financial assets and financial liabilities at fair value through profit or lossMarch 31,2024December 31,2023March 31,2023CurrentFinancial assets mandatorilymeasured at fair value throughprofit or lossFunds$6,278,919$4,708,086$4,663,807Linked deposits520,300520,375525,163Bonds446,502421,189147,160Stocks817926-Forward exchange contracts394,04313,26865,955Cross-currency swap contracts-7,323-Total$7,640,581$5,671,167$5,402,085Held for trading financial liabilitiesForward exchange contracts$4,782$301,675$40,889NoncurrentFinancial assets mandatorilymeasured at fair value throughprofit or lossLinked deposits$2,261,614$2,216,056$3,520,557Bonds1,185,3771,119,9311,553,421Trust funds1,768,3021,415,0311,103,352Stocks102,935120,330149,520Total$5,318,228$4,871,348$6,326,850English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)-21-(3)Financial assets at fair value through other comprehensive incomeMarch 31,2024December 31,2023March 31,2023CurrentEquity instrument investmentsmeasured at fair value throughother comprehensive incomeListed company stocks$5,263,072$6,040,475$4,315,653NoncurrentDebt instrument investmentsmeasured at fair value throughother comprehensive incomeBonds$1,226,851$1,196,037$1,188,336Equity instrument investmentsmeasured at fair value throughother comprehensive incomeListed company stocks43,944,37637,301,8439,332,063Capital22,735,48222,111,16751,660,879Unlisted company stocks10,506,1488,938,3329,610,151Funds2,901,9212,853,4823,023,009Subtotal80,087,92771,204,82473,626,102Total$81,314,778$72,400,861$74,814,438No impairment was recognized for debt instrument investments measured at fair value throughother comprehensive income.Please refer to Note 12 for more details on credit risk.English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)-22-The Company has equity instrument investments measured at fair value through othercomprehensive income.Details on dividends recognized for the three months ended March31,2024 and 2023 are as follows:Three months ended March 3120242023Related to investments held at the end of the reportingperiod$639,566$3,116,021In consideration of disposition according to the Companys investment strategy,the Companyderecognized certain equity instrument investments measured at fair value through othercomprehensive income.Details on derecognition of the investments for the three monthsended March 31,2024 and 2023 are as follows:Three months ended March 3120242023The fair value of the investments at the date ofderecognition$1,458,929$549,684The cumulative gain on disposal reclassified from otherequity to retained earnings$73,991$202,314(4)Financial assets measured at amortized costMarch 31,2024December 31,2023March 31,2023CurrentBonds$3,240,718$2,945,946$3,506,589Time deposits277,736619,5851,789,635Total$3,518,454$3,565,531$5,296,224NoncurrentBonds$70,402,594$55,226,656$31,902,748Time deposits(including the portionwith maturity later than one year)353,902353,873603,601Total$70,756,496$55,580,529$32,506,349English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)-23-No loss allowance was recognized for financial assets measured at amortized cost.Please referto Note 8 for more details on financial assets measured at amortized cost under pledge andNote 12 for more details on credit risk.(5)Trade receivables and trade receivables from related partiesMarch 31,2024December 31,2023March 31,2023Trade receivables$54,031,172$55,107,662$46,231,029Less:allowance for doubtful debts(5,443)(57,933)(6,744)Subtotal54,025,72955,049,72946,224,285Trade receivables from related parties76,40553,46239,871Less:allowance for doubtful debts-Subtotal76,40553,46239,871Total$54,102,134$55,103,191$46,264,156Trade receivables are generally on 30 to 150 day terms.The total carrying amounts were NT$54,107,577 thousand,NT$55,161,124 thousand and NT$46,270,900 thousand as of March 31,2024,December 31,2023,and March 31,2023,respectively.Please refer to Note 6.(23)formore details on impairment of trade receivables for the three months ended March 31,2024and 2023.Please refer to Note 12 for more details on credit risk management.Trade receivables classified as financial assets measured at fair value through profit or lossdue to regular factoring without recourse were NT$2,052,824 thousand,NT$1,922,492thousand and NT$2,426,193 thousand as of March 31,2024,December 31,2023,and March31,2023,respectively.(6)Other receivablesMarch 31,2024December 31,2023March 31,2023Factoring receivables$2,613,912$1,973,817$3,031,674Others2,772,4222,833,18711,940,345Total$5,386,334$4,807,004$14,972,019English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)-24-The Company entered into several factoring agreements without recourse with financialinstitutions.According to those agreements,the Company does not take the risk ofuncollectible trade receivables,but only the risk of loss due to commercial disputes.TheCompany did not provide any collateral,and the factoring agreements met the criteria offinancial asset derecognition.The Company derecognized related trade receivables afterdeducting the estimated value of commercial disputes.As of March 31,2024,December 31,2023,and March 31,2023,trade receivablesderecognized were summarized(by transferee)as follows:A.As of March 31,2024:The Factor(Transferee)InterestRate(%)Tradereceivablesderecognized(US$000)Cashwithdrawn(US$000)Unutilized(US$000)Credit line(US$000)BNP Paribas-$21,236$-$21,236$105,000TaishinInternational Bank-58,571-58,571227,000SMBC-18,000CTBC-3-3400SinoPac-1,410-1,41010,000CHB-472-4721,200Total$81,692$-$81,692$361,600B.As of December 31,2023:The Factor(Transferee)InterestRate(%)Tradereceivablesderecognized(US$000)Cashwithdrawn(US$000)Unutilized(US$000)Credit line(US$000)BNP Paribas-$14,198$-$14,198$105,000TaishinInternational Bank-48,395-48,395218,000SMBC-18,000CTBC-400SinoPac-1,218-1,21810,000CHB-384-3841,200Total$64,195$-$64,195$352,600English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)-25-C.As of March 31,2023:The Factor(Transferee)InterestRate(%)Tradereceivablesderecognized(US$000)Cashwithdrawn(US$000)Unutilized(US$000)Credit line(US$000)BNP Paribas-$9,616$-$9,616$155,000TaishinInternational Bank-87,823-87,823227,000SMBC-18,000CTBC-33-33400SinoPac-2,078-2,07810,000CHB-104-1041,500Total$99,654$-$99,654$411,900(7)InventoriesMarch 31,2024December 31,2023March 31,2023Raw materials$2,069,800$2,259,099$2,017,583Work in progress 34,460,339 27,818,347 47,169,317Finished goods 12,681,629 13,142,820 20,077,869Net amount$49,211,768$43,220,266$69,264,769The operating cost related to inventories included the reversal of write-down of inventories ofNT$735,803 thousand for the three months ended March 31,2024 because of circumstancesthat caused the net realizable value of inventory to be lower than its cost no longer existed andwrite-down of inventories of NT$377,964 thousand for the three months ended March 31,2023.(8)PrepaymentsMarch 31,2024December 31,2023March 31,2023Prepaid expenses$723,390$524,016$854,805Input tax191,676121,583214,508Others 12,654,467 4,547,933 3,639,373Total$13,569,533$5,193,532$4,708,686English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)-26-(9)Investments accounted for using the equity methodDetails of investments in associates and jointly controlled entities are as follows:March 31,2024December 31,2023March 31,2023InvesteesCarryingamountPercentageof ownership(%)CarryingamountPercentageof ownership(%)CarryingamountPercentageof ownership(%)Investments in associates:Vanchip(Tianjin)Technology Co.,Ltd.$4,606,50924$4,434,22324$4,443,90325FONTAINECAPITALFUND,L.P.-57585,75957Sigmastar TechnologyLtd.9,654,084298,788,996328,545,27532Zilltek TechnologyCorp.1,892,444181,799,106181,771,22218Others2,158,855-2,130,775-2,232,202-Total$18,311,892$17,153,100$17,578,361FONTAINE CAPITAL FUND,L.P.resolved to be dissolved and liquidated in August 2023,and the liquidation process had been completed in January 2024.Sigmastar Technology Ltd.increased capital by cash for the three months ended March 31,2024,and the Company did not subscribe to the new shares proportionate to its originalownership interest.Its ownership was therefore reduced to 29%.Since the Company does nothave the ability to direct the relevant activities of Sigmastar Technology Ltd.and thereforedoes not have control,the Company accounts for the Sigmastar Technology Ltd.investmentusing the equity method.Although partial of the Companys ownership in the aforementioned investments were higherthan 50%,those investments were Limited Partnership and the Company merely served as aLimited Partner who had no ability to direct the relevant activities of them.Therefore,theCompany had no control over them and they were not included in the consolidated entities.English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)-27-The Companys investments in associates were not individually material.The following tablesummarizes financial information of the Companys ownership in the associates:Investments in associatesThree months ended March 3120242023Profit(loss)from continuing operations$56,463$(44,847)Other comprehensive income(post-tax)37,05832,775Total comprehensive income$93,521$(12,072)(10)Property,plant and equipmentMarch 31,2024December 31,2023March 31,2023Owner-occupied property,plant andequipment$54,022,923$53,291,265$53,692,785English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)-28-LandBuildings andfacilitiesMachineryequipmentComputer andtelecommunicationequipmentTestingequipmentMiscellaneousequipmentConstruction inprogress andequipment awaitingexaminationTotalCost:As of January 1,2024$9,605,842$33,110,317$1,355,918$16,157,848$20,210,878$14,323,664$661,567$95,426,034Additions-acquired separately-28,2171,368,586213,254676,173693,350200,6003,180,180Disposals-(32,769)(31,902)(3,507)-(68,178)Transfers129,916306,098-67917,10517,851(472,477)(828)Exchange differences-243,18921993,13792,019230,6544,695663,913As of March 31,2024$9,735,758$33,687,821$2,724,723$16,432,149$20,964,273$15,262,012$394,385$99,201,121As of January 1,2023$9,068,386$32,536,899$1,332,015$15,376,222$18,434,608$10,057,520$547,525$87,353,175Additions-acquired separately-68,4284,093505,001298,4761,283,724145,5832,305,305Disposals-(1,834)(129)(43,045)(75,424)(9,593)-(130,025)Transfers-99,178298213,84656,565(223,205)(52,116)94,566Exchange differences-(75,429)(62)(17,677)(21,692)55,596-(59,264)As of March 31,2023$9,068,386$32,627,242$1,336,215$16,034,347$18,692,533$11,164,042$640,992$89,563,757English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)-29-LandBuildings andfacilitiesMachineryequipmentComputer andtelecommunicationequipmentTestingequipmentMiscellaneousequipmentConstruction inprogress andequipment awaitingexaminationTotalDepreciation and impairment:As of January 1,2024$-$7,947,970$1,047,497$11,541,615$12,933,301$8,664,386$-$42,134,769Depreciation-225,90658,091627,214593,8041,269,422-2,774,437Disposals-(32,463)(31,788)(3,430)-(67,681)Transfers-679-679Exchange differences-44,89319470,33170,008150,568-335,994As of March 31,2024$-$8,218,769$1,105,782$12,207,376$13,565,325$10,080,946$-$45,178,198As of January 1,2023$-$7,394,611$935,345$9,201,784$11,205,065$4,754,741$-$33,491,546Depreciation-222,65032,802682,536534,5921,101,164-2,573,744Disposals-(1,816)(129)(41,861)(74,618)(8,607)-(127,031)Transfers-21,67773142,39811,871(154,342)-21,677Exchange differences-(12,021)(60)(15,170)(14,044)(47,669)-(88,964)As of March 31,2023$-$7,625,101$968,031$9,969,687$11,662,866$5,645,287$-$35,870,972Net carrying amount as of:March 31,2024$9,735,758$25,469,052$1,618,941$4,224,773$7,398,948$5,181,066$394,385$54,022,923December 31,2023$9,605,842$25,162,347$308,421$4,616,233$7,277,577$5,659,278$661,567$53,291,265March 31,2023$9,068,386$25,002,141$368,184$6,064,660$7,029,667$5,518,755$640,992$53,692,785English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)-30-In accordance with IAS 16 and IAS 23,the Company capitalized depreciation expense andinterest expense arising from right-of-use assets and lease liabilities in the amount ofNT$17,174 thousand and NT$11,225 thousand for the three months ended March 31,2024,respectively.And the amount of NT$17,174 thousand and NT$11,141 thousand for the threemonths ended March 31,2023,respectively.The interest rate of the capitalization were0.925%for the three months ended March 31,2024 and 2023.(11)Investment propertyThe Companys investment properties include both owned investment properties andinvestment properties held by the Company as right-of-use assets.The Company has entered into commercial property leases for its owned investment propertieswith terms between 40 and 50 years.These leases include a clause to enable upward revisionof the rental charge on an annual basis according to prevailing market conditions.Theinvestment properties held by the Company as right-of-use assets with non-cancellableperiod of 3 to 50 years.Some of these contracts provide the Company options to extend theleases.Buildings andfacilitiesRight-of-useassetsTotalCost:As of January 1,2024$2,512,330$118,864$2,631,194Transfers1,507-1,507Exchange differences39,94477040,714As of March 31,2024$2,553,781$119,634$2,673,415As of January 1,2023$2,326,327$116,159$2,442,486Transfers(94,565)(3,408)(97,973)Exchange differences(10,895)(203)(11,098)As of March 31,2023$2,220,867$112,548$2,333,415(To be continued)English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)-31-(Continued)Buildings andfacilitiesRight-of-useassetsTotalDepreciation and impairment:As of January 1,2024$394,887$14,391$409,278Depreciation17,11792618,043Exchange differences6,020426,062As of March 31,2024$418,024$15,359$433,383As of January 1,2023$345,083$11,209$356,292Depreciation12,46090813,368Transfers(21,676)-(21,676)Exchange differences(1,556)(8)(1,564)As of March 31,2023$334,311$12,109$346,420Net carrying amount as of:March 31,2024$2,135,757$104,275$2,240,032December 31,2023$2,117,443$104,473$2,221,916March 31,2023$1,886,556$100,439$1,986,995Three months ended March 3120242023Rental income from investment properties$58,206$40,493Direct operating expenses from investment propertiesgenerating rental income(18,043)(13,368)Total$40,163$27,125The following fair value has been determined at balance sheet date based on market approach,which were performed by an independent valuer.The significant assumptions and the fairvalue are as follows:Based on market approach:March 31,2024December 31,2023March 31,2023Fair value$3,595,528$3,543,736$3,052,528English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)-32-The fair values of investment properties were NT$3,543,736 thousand and NT$3,067,378thousand as of December 31,2023 and 2022,respectively.The Companys managementassessed that the fair value of its investment properties did not change significantly for thethree months ended March 31,2024 and 2023.For those right-of-use assets leased as operating leases and presented in investment properties,please refer to Note 6.(24)for relevant disclosure as required by IFRS 16.English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)-33-(12)Intangible assetsTrademarksSoftwareCustomerrelationshipPatents,IPs andothersGoodwillTotalCost:As of January 1,2024$352,055$1,243,595$2,581,940$28,681,170$66,042,932$98,901,692Additions-acquired separately-67,438-446,580-514,018Disposals-(50,366)-(666,432)-(716,798)Exchange differences-5,903-318,32322,513346,739As of March 31,2024$352,055$1,266,570$2,581,940$28,779,641$66,065,445$99,045,651As of January 1,2023$352,055$1,188,524$2,581,940$23,365,076$66,042,887$93,530,482Additions-acquired separately-27,185-6,431,303-6,458,488Disposals-(40,816)-(2,242,988)-(2,283,804)Exchange differences-(835)-(65,164)(5,267)(71,266)As of March 31,2023$352,055$1,174,058$2,581,940$27,488,227$66,037,620$97,633,900English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)-34-TrademarksSoftwareCustomerrelationshipPatents,IPs andothersGoodwillTotalAmortization and impairment:As of January 1,2024$351,842$803,168$1,898,571$14,603,343$-$17,656,924Amortization3891,06563,4521,757,085-1,911,640Disposals-(50,366)-(666,432)-(716,798)Exchange differences-4,884-156,320-161,204As of March 31,2024$351,880$848,751$1,962,023$15,850,316$-$19,012,970As of January 1,2023$344,565$651,925$1,644,762$17,434,700$-$20,075,952Amortization7,16579,88363,4521,371,886-1,522,386Disposals-(40,816)-(2,242,988)-(2,283,804)Exchange differences-(630)-(54,915)-(55,545)As of March 31,2023$351,730$690,362$1,708,214$16,508,683$-$19,258,989Net carrying amount as of:March 31,2024$175$417,819$619,917$12,929,325$66,065,445$80,032,681December 31,2023$213$440,427$683,369$14,077,827$66,042,932$81,244,768March 31,2023$325$483,696$873,726$10,979,544$66,037,620$78,374,911English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)-35-(13)Impairment testing of goodwillThe Company has no intangible assets with indefinite lives.Goodwill acquired throughbusiness combination has been allocated to a cash-generating unit which is expected to benefitfrom synergies of the business combination and has been assessed for impairment of therecoverable amount of goodwill at the end of each year.The recoverable amount has beendetermined based on the value-in-use calculated using cash flow projections discounted bythe pre-tax discount rate from a five-year period financial budget.The projected cash flowsreflect the change in demand for products and services.The Company had assessed forimpairment of the recoverable amount of goodwill on December 31,2023.The Company didnot identify any impairment of goodwill for the year ended December 31,2023.(14)Short-term borrowingsMarch 31,2024December 31,2023March 31,2023Unsecured bank loans$7,820,000$2,200,000$4,600,000Interest rates1.47%1.80%1.80%1.73%-1.98%(15)Other payablesMarch 31,2024December 31,2023March 31,2023Accrued salaries and bonuses$25,626,730$33,714,697$22,592,183Accrued royalties2,409,4443,633,1752,893,032Dividends payable48,628,55239,350,914122,087,622Others14,948,42914,954,31911,446,405Total$91,613,155$91,653,105$159,019,242(16)Other current liabilitiesMarch 31,2024December 31,2023March 31,2023Refund liabilities$79,693,099$73,189,582$38,078,447Others1,062,564915,5311,144,019Total$80,755,663$74,105,113$39,222,466English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)-36-(17)Long-term borrowingsDetails of long-term loans as of March 31,2024 were as follows:None.Details of long-term loans as of December 31,2023 were as follows:None.Details of long-term loans as of March 31,2023 were as follows:LendersMarch 31,2023InterestRate(%)Maturity date and terms of repaymentJP Morgan Chase Bank$827,6600fective from June 11,2021 toSeptember 11,2023,principal isrepaid once due.Less:current portion(827,660)Noncurrent portion$-(18)Post-employment benefits plansDefined contribution planMTK and its domestic subsidiaries adopt a defined contribution plan in accordance with theLabor Pension Act of the R.O.C.MTK and its domestic subsidiaries have made monthlycontributions of 6%of each individual employees salaries or wages to employees pensionaccounts.Subsidiaries located in the Peoples Republic of China will contribute social welfarebenefits based on a certain percentage of employees salaries or wages to the employeesindividual pension accounts.Pension benefits for employees of foreign subsidiaries areprovided in accordance with the local regulations.Pension expenses under the defined contribution plan for the three months ended March 31,2024 and 2023 were NT$728,498 thousand and NT$689,548 thousand,respectively.English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)-37-Defined benefits planMTK and its domestic subsidiaries adopt a defined benefit plan in accordance with the LaborStandards Act of the R.O.C.The pension benefits are disbursed based on the units of serviceyears and the average salaries in the last month of the service year.Two units per year areawarded for the first 15 years of services while one unit per year is awarded after thecompletion of the 15th year.The total units shall not exceed 45 units.Under the LaborStandards Act,MTK and its domestic subsidiaries contribute an amount equivalent to 2%ofthe employees total salaries and wages on a monthly basis to the pension fund deposited atthe Bank of Taiwan in the name of the administered pension fund committee.Pension expenses under the defined benefits plan for the three months ended March 31,2024and 2023 were NT$3,345 thousand and NT$4,284 thousand,respectively.(19)Other non-current liabilitiesMarch 31,2024December 31,2023March 31,2023Provisions$-$4,183,904$208,861Decommissioning liabilities46,86245,04244,583Others3,117,858 2,654,983 2,159,956Total$3,164,720$6,883,929$2,413,400The Companys provisions for revolving for the three months ended March 31,2024 wasNT$4,183,904 thousand.Please refer to Note 9 for more details.(20)EquityA.Share capitalMTKs authorized capital as of March 31,2024,December 31,2023,and March 31,2023was NT$20,000,000 thousand,divided into 2,000,000,000 shares(including 20,000,000shares reserved for exercise of employee stock options at each period),each at a par valueof NT$10.MTKs issued capital was NT$15,996,234 thousand,NT$15,996,475 thousand,and NT$15,996,292 thousand,divided into 1,599,623,421 shares,1,599,647,517 shares,and 1,599,629,197 shares as of March 31,2024,December 31,2023,and March 31,2023,respectively.Each share has one voting right and a right to receive dividends.English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)-38-On July 5,2021,the general shareholders meeting approved to issue restricted stocks foremployees.As of March 31,2024,9,012,427 shares of restricted stocks for employees wereissued.Relevant regulators approvals have been obtained and related registrationprocesses have been completed.MTK has redeemed and cancelled 24,096 shares and 19,344 shares of issued restrictedstocks for employees during the three months ended March 31,2024 and 2023,respectively.Relevant regulators approvals have been obtained and related registrationprocesses have been completed.MTK issued 55,042 new shares for the three months ended March 31,2023,at par valueof NT$10 for exercising employee stock options.The aforementioned newly issued shares(NT$550 thousand in the amount)were not yet registered and therefore were classified ascapital collected in advance as of March 31,2023.B.Capital surplusMarch 31,2024December 31,2023March 31,2023Additional paid-in capital$3,047,653$3,046,242$440,738Treasury share transactions3,401,1773,209,4432,617,042The difference between the fairvalue of the consideration paidor received from acquiring ordisposing subsidiaries and thecarrying amounts of thesubsidiaries6,942,7157,120,6379,477,276Changes in ownership interests insubsidiaries8,090,2808,090,2803,003,434Donated assets1,2611,2611,261Share of changes in net assets ofassociates4,663,9024,138,8124,157,383Employee stock options-73,524Restricted stocks for employees2,340,4072,384,1164,894,671Others368,485359,647306,729Total$28,855,880$28,350,438$24,972,058English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)-39-According to the Company Act,the capital surplus shall not be used except for offset thedeficit of the company.When a company incurs no loss,it may distribute the capital surplusgenerated from the excess of the issuance price over the par value of share capital(including the shares issued for mergers and the surplus from treasury shares transactions)and donations.The distribution could be made in cash to its shareholders in proportion tothe number of shares being held by each of them.C.Treasury sharesAs of March 31,2024,December 31,2023,and March 31,2023,7,794,085 shares ofMTKs common shares amounting to NT$55,970 thousand were held by the subsidiary,Hsiang Fa Co.These shares held by Hsiang Fa Co.were acquired for the purpose offinancing before the amendment of the Company Act on November 12,2001.As of March 31,2024,December 31,2023,and March 31,2023,MTK did not hold anyother treasury shares.D.Retained earnings and dividend policyAccording to the MTKs previous version of Articles of Incorporation,current yearsearnings,if any,shall be distributed in the following order:a.reserve for tax payments;b.offset accumulated losses in previous years,if any;c.legal reserve,which is 10%of leftover profits.However,this restriction does not applyin the event that the amount of the accumulated legal reserve equals or exceeds MTKstotal capital stock;d.allocation or reverse of special reserves as required by law or government authorities;e.the remaining net profits and the retained earnings from previous years will be allocatedas shareholders dividend.The Board of Directors will prepare a distribution proposalaccording to laws and regulations and the procedures and principles specified in theArticles of Incorporation and report such distribution to the shareholders meeting orsubmit the same to the shareholders meeting for review and approval by a resolution.On May 31,2023,MTKs shareholders resolved to amend the Articles that the distributionof profits or the covering of losses may be made on a half-yearly basis after the close ofeach half of fiscal year.The Board of Directors shall prepare relevant proposals perapplicable laws and regulations and the procedures and principles specified in the Articlesof Incorporation and report such proposals to the shareholders meeting or submit the sameto the shareholders meeting for review and approval by a resolution.English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)-40-When allocating the profits,MTK shall first estimate and reserve the taxes to be paid,offsetits losses per laws and regulations,and set aside a legal reserve at 10%of leftover profitsprovided that the legal reserve requirement shall not apply in the event that the amount ofaccumulated legal reserve has reached the amount of the paid-in capital of MTK,then setaside or reverse a special reserve in accordance with relevant laws or regulations or asrequested by the authorities in charge.For the distribution of profits for the first half ofeach fiscal year,MTK shall also estimate and reserve the employees compensation andremuneration to directors per applicable laws and regulations and the provisions specifiedin the Articles of Incorporation.Based on the authorization from the Articles of Incorporation as mentioned above,Boardof Directors may resolve(by a majority vote in a meeting attended by over two thirds ofthe Directors)to distribute cash dividends and report such resolution to the shareholdersmeeting.Shareholders dividends may be distributed in the form of shares or cash and cash dividendsto be distributed may not be less than 10%of total dividends to be distributed.According to the Company Act,MTK needs to set aside amount to legal reserve unlesswhere such legal reserve amounts to the total paid-in capital.The legal reserve can be usedto offset the deficit of MTK.When MTK incurs no loss,it may distribute the portion oflegal reserve which exceeds 25%of the paid-in capital by issuing new shares or by cash inproportion to the number of shares being held by each of the shareholders.Pursuant to existing regulations,MTK is required to set aside additional special reserveequivalent to the net debit balance of the other components of shareholders equity.Forany subsequent reversal of other net deductions from shareholders equity,the amountreversed may be distributed.The distribution of earnings for 2022 was resolved by the Board of Directors meeting onFebruary 24,2023.The details of the distribution are as follows:Distribution of earningsDividends per share(NT$)20222022Legal reserve$13,724,450-Cash dividends-common stock99,178,441$62.00Total$112,902,891English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)-41-In addition,the Board of Directors meeting on February 24,2023 resolved to distributethe additional paid-in capital by cash in the amount of NT$22,395,132 thousand,or NT$14per share.The distribution of earnings for the first and second half year of 2023 was resolved by theBoard of Directors meeting on October 27,2023 and February 23,2024,respectively.Thedetails of the distribution are as follows:First half year of 2023Second half year of 2023Legal reserve(Note)$3,540,881$4,282,606Cash dividends-common stock$39,350,914$48,628,552Dividends per share(NT$)$24.60$30.40Note:Legal reserve for 2023 is subject to the resolution of general shareholders meetingwhich will be held on May 27,2024.E.Non-controlling interestsThree months ended March 3120242023Beginning balance$5,999,576$2,948,949Gains attributable to non-controlling interests119,15416,942Other comprehensive income(losses),attributable tonon-controlling interests,net of tax:Exchange differences resulting from translating thefinancial statements of foreign operations13,181(10,578)Share-based payment transactions-48,185Changes in associates and joint ventures accountedfor using the equity method-4,453Changes in ownership interests in subsidiaries102,498-Sale of additional interest in a subsidiary(45,743)-Others(243,969)(513,999)Ending balance$5,944,697$2,493,952English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)-42-(21)Share-based payment plansCertain employees of the Company are entitled to share-based payments as part of theirremuneration.Services are provided by the employees in return for the equity instrumentsgranted.These plans are accounted for as equity-settled share-based payment transactions.Employee stock option plans of MTKIn August 2013,MTK was authorized by the FSC,Executive Yuan,to issue employee stockoptions of 3,500,000 units,each unit eligible to subscribe for one common share.The optionsmay be granted to qualified employees of MTK or any of its domestic or foreign subsidiaries,in which MTKs shareholding with voting rights,directly or indirectly,is more than fiftypercent.The options are valid for ten years and exercisable at certain percentage subsequentto the second anniversary of the granted date.Under the terms of the plan,the options aregranted at an exercise price equal to the closing price of MTKs common shares listed on theTaiwan Stock Exchange Corporation(“TWSE”)on the grant date.Detail information relevant to the share-based payment plans is as follows:Date of grantTotal number ofoptions grantedTotal number ofoptions outstandingShares available foroption holdersExercise price(NT$)(Note)2013.08.221,436,343-$368.0Note:The exercise prices have been adjusted to reflect the change of outstanding shares(e.g.shares issued for cash,the distribution of earnings,issuance of new shares in connectionwith merger,or issuance of new shares to acquire shares of other companies)inaccordance with the plan.The compensation cost was recognized under the fair value method and the Black-ScholesOption Pricing model was used to estimate the fair value of options granted.Assumptionsused in calculating the fair value are disclosed as follows:Employee Stock OptionExpected dividend yield(%)2.43%Expected volatility(%)32.9%-33.7%Risk free interest rate(%)1.18515%-1.65%Expected life(Years)6.5 yearsEnglish Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)-43-The expected life of the share options is based on historical data and current expectations andis not necessarily indicative of exercise patterns that may occur.The expected volatilityreflects the assumption that the historical volatility over a period similar to the life of theoptions is indicative of future trends,which may also not necessarily be the actual outcome.The following table contains further details on the aforementioned share-based payment plans:Three months ended March 312023Employee Stock OptionOptions(Unit)Weighted-averageExercise Price perShare(NT$)Outstanding at beginning of period218,120$368.0Exercised(Note)(55,042)368.0Forfeited(Expired)-Outstanding at end of period163,078368.0Exercisable at end of period163,078-Weighted-average fair value of options granted during theperiod(in NT$)$-Note:The weighted average share price at the date of exercise of those options was NT$750.3for the three months ended March 31,2023.The information on the outstanding share-based payment plans is as follows:March 31,2023Outstanding stock optionsDate of grantRange of ExercisePrice(NT$)Weighted-averageExpectedRemaining YearsWeighted-averageExercise Price perShare(NT$)2013.08.09$368.00.42$368.0Restricted stocks plan for employees of MTKOn July 5,2021,the shareholders meeting approved to issue gratuitous restricted stocks foremployees,at a total of 19,080,000 common shares.MTK shall set up the actual issuancedate(s)in one tranche or in installments within one year from the date of receipt of the effectiveregistration of the competent authority.English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)-44-MTK issued 8,381,181,157,274,272,034 and 201,938 gratuitous restricted stocks on August31,2021,February 23,2022,August 31,2022 and February 23,2023,respectively.Theissuance process was granted effective registration by the securities authority.The fair value of the restricted stocks issued was NT$824.81-NT$901,NT$1,024.8-NT$1,120,NT$610.31-NT$667 and NT$681.68-NT$745 per share,respectively.Theestimated compensation expenses amounted to NT$7,496,702 thousand in total based on thevesting conditions and will be recognized during the vesting period.As of March 31,2024,MTK had recognized NT$7,148,698 thousand as compensation expense and NT$316,569thousand as unearned employee compensation,which were recorded under salary expense andother equity,respectively.The aforementioned restricted stocks plans for employees were evaluated under the fair valuemethod.Assumptions used in calculating the fair value are disclosed as follows:Restricted stocks plan for employeesExpected volatility(%)40%Risk free interest rate(%)0.24%Pricing ApproachMonte Carlo SimulationRestrictions on the rights and vesting conditions of the first restricted stocks for employees ofthe 2021 plan are as follows:A.To issue common shares of MTK with gratuitous issue price.B.Employees continuous employment with the Company through the vesting dates,with noviolation on any terms of the Companys employment agreement,employee handbook,orpolicies and achievement of both personal performance criteria and the Companysoperation objectives(including Total Shareholder Return)during the vesting period,areeligible to receive the vested shares.The maximum portions of the vesting shares of 2022are 34%,and the cumulative maximum portions of vesting shares from 2022 to 2023 and2022 to 2024 are 67%,100%,respectively.The actual portions of the vesting shares shallbe determined by achievement of both personal performance and the Companys operationobjectives.English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)-45-C.During the vesting period,employees may not sell,pledge,transfer,give to another person,create any encumbrance on,or otherwise dispose of,restricted employee shares,excludinginheritance.D.During the vesting period,the rights of attending shareholders meeting,proposal,speech,resolution and voting,etc.,are the same as those of the common shareholders,and therights will be exercised by the custodian organizations according to the trust contracts.Restrictions on the rights and vesting conditions of the second restricted stocks for employeesof the 2021 plan are as follows:A.To issue common shares of MTK with gratuitous issue price.B.Employees continuous employment with the Company through the vesting dates,with noviolation on any terms of the Companys employment agreement,employee handbook,orpolicies and achievement of both personal performance criteria and the Companysoperation objectives(including Total Shareholder Return)during the vesting period,areeligible to receive the vested shares.The maximum portions of the vesting shares of 2023are 50%,and the cumulative maximum portions of vesting shares from 2023 to 2024 are100%.The actual portions of the vesting shares shall be determined by achievement ofboth personal performance and the Companys operation objectives.C.During the vesting period,employees may not sell,pledge,transfer,give to another person,create any encumbrance on,or otherwise dispose of,restricted employee shares,excludinginheritance.D.During the vesting period,the rights of attending shareholders meeting,proposal,speech,resolution and voting,etc.,are the same as those of the common shareholders,and therights will be exercised by the custodian organizations according to the trust contracts.Share-based payment plans of subsidiariesOn November 29,2021,Board of Directors of Airoha Technology Corp.approved the optionplans for Taiwanese employees and foreign employees.The total units of the stock optionsare 2,155,464 units for Taiwanese optionees and 1,111,727 units for foreign optionees,eachunit of employee stock options is eligible to subscribe for one common share of AirohaTechnology Corp.The options may be granted to qualified employees of Airoha TechnologyCorp.or any of its domestic or foreign subsidiaries.Settlement upon the exercise of the optionswill be made through the issuance of new shares by Airoha Technology Corp.The rights ofthe new shares are the same as those of common shares.English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)-46-The issuance date,the exercisable periods and the exercise price of the Taiwanese employee stockoptions were determined to be on January 3,2022,from January 3,2022 to January 7,2022 andNT$264 per share,respectively.The options have all been exercised,with January 10,2022 beingthe record date of the capital increase.Relevant regulators approvals have been obtained andrelated registration processes have been completed.The issuance date of foreign employee stock options was determined to be on January 10,2022.The option holders of the employee stock options may exercise the options within twomonths after the date that the stocks of Airoha Technology Corp.are listed on a centralizedexchange market and the designated accounts required by the relevant regulators are opened.The exercise price ranged between NT$67 to NT$137 per share.In accordance with the plan,the number of exercisable shares is subject to adjustments in the situation that AirohaTechnology Corp.increases its capital through the capitalization of retained earnings orcapital surplus.On February 8,2022,the general shareholders meeting of Airoha TechnologyCorp.resolved to issue 41,573 thousand new common shares in the amount of NT$415,730thousands from capital surplus.Accordingly,the number of exercisable shares was adjustedupward by 441,986 common shares.The incremental fair value thus incurred would berecognized as an expense during the remaining vesting period.Airoha Technology Corp.adopted the fair value method to determine the compensation costand the Black-Scholes Option Pricing Model was used to estimate the fair value of optionsgranted.Assumptions used in calculating the fair value are disclosed as follows:Employee Stock OptionExpected dividend yield(%)0.00%Expected volatility(%)35.91%-54.66%Risk free interest rate(%)0.41%Expected life(Years)0.01-1.61 yearsThe expected life of the shares options is based on historical data and current expectations andis not necessarily indicative of exercise patterns that may occur.The expected volatilityreflects the assumption that the historical volatility over a period similar to the life of theoptions is indicative of future trends,which may also not necessarily be the actual outcome.English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)-47-The following table contains further details on the aforementioned share-based payment plans:Three months ended March 3120242023Employee Stock OptionOptions(Unit)Weighted-averageExercise Price perShare(NT$)Options(Unit)Weighted-averageExercise Price perShare(NT$)Outstanding at beginning of period1,483,851$821,491,839$82Exercised(Note 1,2)(1,483,851)82-Forfeited(Expired)-(7,988)80Outstanding at end of period-1,483,85182Exercisable at end of period-Weighted-average fair value ofoptions granted during theperiod(in NT$)$-$-Note1:Including the foreign employees exercised 220,888 units of stock options for the threemonth periods ended March 31,2024,but the stock subscription amounted toNT$19,232 thousand has not yet been settled to the segregated collective investmentaccount as of March 31,2024.Note2:The weighted average share price at the date of exercise of those options was NT$635for the three months ended March 31,2024.The information on the outstanding share-based payment plans is as follows:March 31,2024March 31,2023Outstanding stock optionsOutstanding stock optionsDate of grantRange ofExercise Price(NT$)Weighted-averageExpectedRemainingYearsWeighted-averageExercise Priceper Share(NT$)Weighted-averageExpectedRemainingYearsWeighted-averageExercise Priceper Share(NT$)2022.01.10$67-137-$-0.50$67-137English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)-48-Share-based compensation expenses recognized for the three months ended March 31,2024and 2023 are shown in the following table:Three months ended March 3120242023Employee stock options$-$48,185Restricted stocks for employees172,895518,112Total$172,895$566,297The Company did not modify or cancel any share-based payment plans for the three monthsended March 31,2024 and 2023.(22)SalesAnalysis of revenue from contracts with customers for the three months ended March 31,2024and 2023 is as follows:A.Disaggregation of revenueThree months ended March 3120242023Sale of goods$131,193,824$94,071,563Services and other operating revenue 2,264,323 1,579,950Total$133,458,147$95,651,513Revenue recognition point:At a point in time$132,007,165$94,432,997Satisfies the performance obligation over time 1,450,982 1,218,516Total$133,458,147$95,651,513B.Contract balancesContract liabilities currentMarch 31,2024January 1,2024March 31,2023January 1,2023Sale of goods$1,694,179$1,615,650$1,560,827$4,043,364Services and otheroperating revenue2,387,0161,761,109927,784857,530Total$4,081,195$3,376,759$2,488,611$4,900,894English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)-49-The significant changes in the Companys balances of contract liabilities for the threemonths ended March 31,2024 and 2023 were as follows:Three months ended March 3120242023Revenue recognized during the period that wasincluded in the beginning balance$1,891,345$3,744,957Increase in receipt in advance during the period(deducting the amount incurred and transferredto revenue during the period)$2,595,716$1,337,306C.Transaction price allocated to unsatisfied performance obligationsAs of March 31,2024,and 2023,no disclosure of the unsatisfied performance obligationswas needed as the contract terms with customers about the sales of goods are all shorterthan one year.Besides,the summarized amounts of transaction price allocated tounsatisfied performance obligations about rendering of services were NT$3,386,818thousand and NT$5,643,585 thousand.The Company recognizes revenue in accordancewith the stage of completion of the contracts.Those contracts are expected to be completedwithin the next 1 to 2 years.(23)Expected credit gains(losses)Three months ended March 3120242023Operating expense-expected credit gains(losses)Trade receivables$52,490$(5,131)Please refer to Note 12 for more details on credit risk.The Company measures the loss allowance of its receivables(including notes receivable,tradereceivables and trade receivables from related parties)and financing lease receivables,net atan amount equal to lifetime expected credit losses.The assessment of the Companys lossallowance as of March 31,2024,December 31,2023,and March 31,2023 was as follows:The Company considers the grouping of receivables by counterparties credit ratings,geographical regions and industry sectors.Loss allowance is measured by using a provisionmatrix.Details were as follows:English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)-50-2024.03.31Neither past duePast due(Note)Within 30 days31-60 days61-90 daysAfter 90 daysTotalGross carryingamount$52,691,184$1,050,407$196,614$81,410$11,557$54,031,172Loss ratio0%0%0%0%-10 %-100%Lifetime expectedcredit losses-(5,443)(5,443)Carrying amount oftrade receivables$52,691,184$1,050,407$196,614$81,410$6,114$54,025,7292023.12.31Neither past duePast due(Note)Within 30 days31-60 days61-90 daysAfter 90 daysTotalGross carryingamount$53,323,182$1,565,910$97,942$4,263$116,365$55,107,662Loss ratio0%0%0%0%-10 %-100%Lifetime expectedcredit losses-(195)(57,738)(57,933)Carrying amount oftrade receivables$53,323,182$1,565,910$97,942$4,068$58,627$55,049,7292023.03.31Neither past duePast due(Note)Within 30 days31-60 days61-90 daysAfter 90 daysTotalGross carryingamount$45,536,497$603,795$30,358$57,306$3,073$46,231,029Loss ratio0%0%0%0%-10 %-100%Lifetime expectedcredit losses-(5,730)(1,014)(6,744)Carrying amount oftrade receivables$45,536,497$603,795$30,358$51,576$2,059$46,224,285Note:Neither the Companys note and trade receivables from related parties nor financinglease receivables were past due.English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)-51-The movements in the provision for impairment of receivables and financing lease receivablesfor the three months ended March 31,2024 and 2023 are as follows:NotesreceivableTradereceivables(includingrelated parties)Financing leasereceivablesAs of January 1,2024$-$57,933$-Allowance for the current period-(52,490)-As of March 31,2024$-$5,443$-NotesreceivableTradereceivables(includingrelated parties)Financing leasereceivablesAs of January 1,2023$-$1,640$-Allowance for the current period-5,131-Effect of changes in exchange rate-(27)-As of March 31,2023$-$6,744$-(24)LeasesA.The Company as a lesseeThe Company leases various property(land and buildings),machinery equipment,transportation equipment and office equipment.The leases have terms between 1 and 50years.a.Right-of-use assetMarch 31,2024December 31,2023March 31,2023Land$6,552,969$6,582,463$6,628,503Buildings and facilities2,450,7211,900,3612,198,834Machinery equipment205,990104,40666,811Transportation equipment5,7207,21312,555Office equipment2,4892,8624,000Total$9,217,889$8,597,305$8,910,703English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)-52-During the three months ended March 31,2024 and 2023,the additions to right-of-useassets of the Company amounted to NT$853,871 thousand and NT$216,366 thousand,respectively.b.Lease liabilityMarch 31,2024December 31,2023March 31,2023Lease liability-current$949,169$837,485$715,514Lease liability-noncurrent8,587,0078,060,3518,350,203Total$9,536,176$8,897,836$9,065,717Please refer to Note 6.(29)for the interest on lease liability recognized during the threemonths ended March 31,2024 and 2023 and Note 12.(2)C.for the maturity analysis oflease liabilities.In accordance with IAS 16 and IAS 23,the Company capitalized certain depreciationand interest expenses during the three months ended March 31,2024.Please refer toNote 6.(10)for related information.c.Depreciation charge for right-of-use assetsThree months ended March 3120242023Land$31,226$31,142Buildings and facilities200,801173,113Machinery equipment40,17816,986Transportation equipment1,4922,206Office equipment365420Total$274,062$223,867d.Income and costs relating to leasing activitiesThree months ended March 3120242023The expense relating to short-term leases$10,669$29,490The expense relating to leases of low-value assets(not including the expense relating to short-termleases of low-value assets)$462$1,480Income from subleasing right-of-use assets$1,343$499English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)-53-e.Cash outflow relating to leasing activitiesDuring the three months ended March 31,2024 and 2023,the Companys total cashoutflows for leases amounted to NT$248,913 thousand and NT$299,421 thousand,respectively.f.Other information relating to leasing activitiesSubsidiary Hsu-Yuan Investment Corp.(“Hsu-Yuan”)signed a contract with RailwayBureau,MOTC(“RB”)to obtain land use right.The contract contains variable paymentterms that are linked to certain percentages of sales generated from the leased land.Assuch variable lease payments do not meet the definition of lease payments,thosepayments are not included in the measurement of the assets and liabilities.The variablerental payment will be 1%(when Hsu-Yuans sales range between NT$350,000-430,000 thousand),2%(when Hsu-Yuans sales range between NT$430,000-520,000thousand),and 3%(when Hsu-Yuans salesexceed NT$520,000 thousand)of Hsu-Yuanssales,respectively.B.The Company as a lessorPlease refer to Note 6.(11)for details on the Companys owned investment properties andinvestment properties held by the Company as right-of-use assets.Leases of ownedinvestment properties are classified as operating leases as they do not transfer substantiallyall the risks and rewards incidental to ownership of underlying assets.The Company has entered into machinery and equipment lease agreements with terms fromthe year 2020 to 2025.These leases are classified as finance leases as they transfersubstantially all the risks and rewards incidental to ownership of the underlying assets.Three months ended March 3120242023Lease income for operating leasesIncome relating to fixed lease payments andvariable lease payments that depend on an index ora rate$73,817$56,409Lease income for finance leasesFinance income on the net investment in the lease5,8075,743Total$79,624$62,152English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)-54-The undiscounted lease payments to be received for the remaining years as of March 31,2024,December 31,2023,and March 31,2023 were as follows:March 31,2024December 31,2023March 31,2023Not later than one year$743,918$746,853$205,329Later than one year and not laterthan two years550,298735,143743,918Later than two years and not laterthan three years-550,298Total non-discounted lease payments 1,294,216 1,481,996 1,499,545Less:unearned finance income offinance lease(20,405)(26,212)(43,761)Less:allowance for doubtful debts-Net investment in the finance lease(receivable of a finance lease)$1,273,811$1,455,784$1,455,784Current$727,892$727,892$181,973Noncurrent$545,919$727,892$1,273,811(25)Employee benefits,depreciation and amortization expenses are summarized by function asfollows:Three months ended March 3120242023OperatingcostsOperatingexpensesTotalOperatingcostsOperatingexpensesTotalEmployee benefits expensePension$12,549$719,294$731,843$13,340$680,492$693,832Others$310,132$24,832,087$25,142,219$364,637$19,476,187$19,840,824Depreciation$62,186$2,987,182$3,049,368$24,735$2,769,070$2,793,805Amortization$748$1,910,892$1,911,640$1,146$1,521,240$1,522,386English Translation of Financial Statements Originally Issued in ChineseMEDIATEK INC.AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)(Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)-55-According to the Articles of Incorporation of MTK,no lower than 1%of profit of the currentyear is distributable as employees compensation and no higher than 0.5%of profit of thecurrent year is distributable as remuneration to directors.However,MTKs accumulated lossesshall have been covered(if any).MTK may,by a resolution adopted by a majority vote at ameeting of Board of Directors attended by two-thirds of the total number of directors,havethe profit distributable as employees compensation in the form of shares or in cash;and inaddition thereto a report of such distribution is submitted to the shareholders meeting.Information on the Board of Directors resolution regarding the employees compensation andremuneration to directors can be obtained from the“Market Observation Post System”on thewebsite of the TWSE.MTK accrued employees compensation and remuneration to directors based on a specificrate of profit for the three months ended March 31,2024,and 2023.If the estimated amountsdiffer from the actual distribution resolved by the Board of Directors,MTK will recognize thechange as an adjustment to income of next year.If the Board of Directors resolves to distributeemployees compensation in stock,the number of shares distributed is determined by dividingthe amount of bonuses by the closing price(after considering the effect of cash and stockdividends)of shares on the day preceding the Board of Directors meeting.The amounts ofemployees compensation and remuneration to directors were NT$424,803 thousand andNT$43,011 thousand for the three months ended March 31,2024,respectively.The amountsof employees compensation and remuneration to directors were NT$224,120 thousand andNT$22,692 thousand for the three months ended March 31,2023,respectively.Theemployees compensation and remuneration to directors were recognized as expense.A resolution was approved in a meeting of the Board of Directors held on February 23,2024to distribute NT$1,045,717 thousand and NT$103,000 thousand in cash as employeescompens
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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON,D.C.20549_FORM 10-Q_(Mark One)QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended March 31,2024ORTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from_ to_.Commission File Number:1-644COLGATE-PALMOLIVE COMPANY(Exact name of registrant as specified in its charter)Delaware13-1815595(State or other jurisdiction of incorporation or organization)(I.R.S.Employer Identification No.)300 Park AvenueNew York,New York10022(Address of principal executive offices)(Zip Code)(212)310-2000(Registrants telephone number,including area code)NO CHANGES(Former name,former address and former fiscal year,if changed since last report)Securities registered pursuant to Section 12(b)of the Act:Title of each classTrading Symbol(s)Name of each exchange on which registeredCommon Stock,$1.00 par valueCLNew York Stock Exchange0.500%Notes due 2026CL26New York Stock Exchange0.300%Notes due 2029CL29New York Stock Exchange1.375%Notes due 2034CL34New York Stock Exchange0.875%Notes due 2039CL39New York Stock ExchangeIndicate 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 thepreceding 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 90days.Yes No Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T(232.405 of this chapter)during the preceding 12 months(or for such shorter period that the registrant was required to submit such files).Yes No Indicate by check mark whether the registrant is a large accelerated filer,an accelerated filer,a non-accelerated filer,a smaller reporting company,or an emerginggrowth company.See definitions of“large accelerated filer,”“accelerated filer,”“smaller reporting company”and“emerging growth company”in Rule 12b-2 of theExchange Act.Large accelerated filerAccelerated filerNon-accelerated filerSmaller reporting companyEmerging growth companyIf an emerging growth company,indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revisedfinancial accounting standards provided pursuant to Section 13(a)of the Exchange Act.Indicate by check mark whether the registrant is a shell company(as defined in Rule 12b-2 of the Exchange Act).Yes No Indicate the number of shares outstanding of each of the issuers classes of common stock,as of the latest practicable date:ClassShares OutstandingDateCommon stock,$1.00 par value820,441,114March 31,2024PART I.FINANCIAL INFORMATIONCOLGATE-PALMOLIVE COMPANYCondensed Consolidated Statements of Income(Dollars in Millions Except Per Share Amounts)(Unaudited)Three Months EndedMarch 31,20242023Net sales$5,065$4,770 Cost of sales2,026 2,058 Gross profit3,039 2,712 Selling,general and administrative expenses1,916 1,758 Other(income)expense,net76 45 Operating profit1,047 909 Non-service related postretirement costs22 294 Interest(income)expense,net58 54 Income before income taxes967 561 Provision for income taxes238 147 Net income including noncontrolling interests729 414 Less:Net income attributable to noncontrolling interests46 42 Net income attributable to Colgate-Palmolive Company$683$372 Earnings per common share,basic$0.83$0.45 Earnings per common share,diluted$0.83$0.45 See Notes to Condensed Consolidated Financial Statements.2COLGATE-PALMOLIVE COMPANYCondensed Consolidated Statements of Comprehensive Income(Dollars in Millions)(Unaudited)Three Months EndedMarch 31,20242023Net income including noncontrolling interests$729$414 Other comprehensive income(loss),net of tax:Cumulative translation adjustments(94)43 Retirement plans and other retiree benefit adjustments4 7 Gains(losses)on cash flow hedges1 6 Total Other comprehensive income(loss),net of tax(89)56 Total Comprehensive income including noncontrolling interests640 470 Less:Net income attributable to noncontrolling interests46 42 Less:Cumulative translation adjustments attributable to noncontrolling interests(7)(16)Total Comprehensive income attributable to noncontrolling interests39 26 Total Comprehensive income attributable to Colgate-Palmolive Company$601$444 See Notes to Condensed Consolidated Financial Statements.3COLGATE-PALMOLIVE COMPANYCondensed Consolidated Balance Sheets(Dollars in Millions)(Unaudited)March 31,2024December 31,2023AssetsCurrent AssetsCash and cash equivalents$1,079$966 Receivables(net of allowances of$85 and$80,respectively)1,813 1,586 Inventories1,914 1,934 Other current assets834 793 Total current assets5,640 5,279 Property,plant and equipment:Cost10,261 10,286 Less:Accumulated depreciation(5,764)(5,704)4,497 4,582 Goodwill3,341 3,410 Other intangible assets,net1,837 1,887 Deferred income taxes222 214 Other assets1,034 1,021 Total assets$16,571$16,393 Liabilities and Shareholders Equity Current Liabilities Notes and loans payable$518$310 Current portion of long-term debt20 20 Accounts payable1,646 1,698 Accrued income taxes410 336 Other accruals2,720 2,377 Total current liabilities5,314 4,741 Long-term debt8,151 8,219 Deferred income taxes392 361 Other liabilities2,097 2,115 Total liabilities15,954 15,436 Shareholders Equity Common stock,$1 par value(2,000,000,000 shares authorized,1,465,706,360 shares issued)1,466 1,466 Additional paid-in capital3,962 3,808 Retained earnings25,164 25,289 Accumulated other comprehensive income(loss)(4,019)(3,937)Treasury stock,at cost(26,343)(26,017)Total Colgate-Palmolive Company shareholders equity230 609 Noncontrolling interests387 348 Total equity617 957 Total liabilities and equity$16,571$16,393 See Notes to Condensed Consolidated Financial Statements.4COLGATE-PALMOLIVE COMPANYCondensed Consolidated Statements of Cash Flows(Dollars in Millions)(Unaudited)Three Months Ended March 31,20242023Operating Activities Net income including noncontrolling interests$729$414 Adjustments to reconcile net income including noncontrolling interests to net cash provided byoperations:Depreciation and amortization150 128 ERISA litigation matter 267 Restructuring and termination benefits,net of cash30(7)Stock-based compensation expense19 14 Deferred income taxes12(20)Cash effects of changes in:Receivables(252)(57)Inventories11(24)Accounts payable and other accruals8(2)Other non-current assets and liabilities(26)22 Net cash provided by(used in)operations681 735 Investing Activities Capital expenditures(126)(163)Purchases of marketable securities and investments(139)(112)Proceeds from sale of marketable securities and investments78 14 Other investing activities(6)(3)Net cash provided by(used in)investing activities(193)(264)Financing Activities Short-term borrowing(repayment)less than 90 days,net728(927)Principal payments of debt(500)(500)Proceeds from issuance of debt1 1,495 Dividends paid(394)(390)Purchases of treasury shares(509)(180)Proceeds from exercise of stock options336 122 Other financing activities(23)5 Net cash provided by(used in)financing activities(361)(375)Effect of exchange rate changes on Cash and cash equivalents(14)(4)Net increase(decrease)in Cash and cash equivalents113 92 Cash and cash equivalents at beginning of the period966 775 Cash and cash equivalents at end of the period$1,079$867 Supplemental Cash Flow Information Income taxes paid$150$171 Interest paid$123$94 See Notes to Condensed Consolidated Financial Statements.5COLGATE-PALMOLIVE COMPANYCondensed Consolidated Statements of Changes in Shareholders Equity(Dollars in Millions)(Unaudited)Three Months Ended March 31,2024Colgate-Palmolive Company Shareholders EquityCommonStockAdditionalPaid-in CapitalUnearnedCompensationTreasuryStockRetainedEarningsAccumulatedOtherComprehensiveIncome(Loss)NoncontrollingInterestsBalance,December 31,2023$1,466$3,808$(26,017)$25,289$(3,937)$348 Net income 683 46 Other comprehensive income(loss),net oftax (82)(7)Dividends($0.98 per share)*(808)Stock-based compensation expense 19 Shares issued for stock options 154 163 Shares issued for restricted stock units(21)21 Treasury stock acquired (509)Other 2 (1)Balance,March 31,2024$1,466$3,962$(26,343)$25,164$(4,019)$387 Three Months Ended March 31,2023Colgate-Palmolive Company Shareholders EquityCommon StockAdditional Paid-in CapitalUnearned CompensationTreasury StockRetained EarningsAccumulatedOtherComprehensiveIncome(Loss)Noncontrolling InterestsBalance,December 31,2022$1,466$3,546$(1)$(25,128)$24,573$(4,055)$405 Net income 372 42 Other comprehensive income(loss),net oftax 72(16)Dividends($0.95 per share)*(792)Stock-based compensation expense 14 Shares issued for stock options 54 50 Shares issued for restricted stock units(13)13 Treasury stock acquired (180)Other 2 1 Balance,March 31,2023$1,466$3,603$(25,245)$24,153$(3,983)$431 Accumulated other comprehensive income(loss)includes cumulative translation losses of$3,438 at March 31,2024($3,431 at March 31,2023)and$3,351 at December 31,2023($3,491 atDecember 31,2022),respectively,and unrecognized retirement plan and other retiree benefits costs of$643 at March 31,2024($624 at March 31,2023)and$647 at December 31,2023($631 atDecember 31,2022),respectively.*Two dividends were declared in the first quarter of each of 2024 and 2023.(1)(1)(1)See Notes to Condensed Consolidated Financial Statements.6COLGATE-PALMOLIVE COMPANY Notes to Condensed Consolidated Financial Statements(Dollars in Millions Except Share and Per Share Amounts)(Unaudited)1.Basis of PresentationThe Condensed Consolidated Financial Statements reflect all normal recurring adjustments which,in managements opinion,are necessary for a fairstatement of the results for interim periods.Results of operations for interim periods may not be representative of results to be expected for a full year.Colgate-Palmolive Company(together with its subsidiaries,the“Company”or“Colgate”)reclassifies certain prior year amounts,as applicable,toconform to the current year presentation.For a complete set of financial statement notes,including the Companys significant accounting policies,refer to the Companys Annual Report onForm 10-K for the year ended December 31,2023,filed with the Securities and Exchange Commission(the“SEC”).2.Use of EstimatesProvisions for certain expenses,including income taxes,advertising and consumer promotion,are based on full year assumptions and are included inthe accompanying Condensed Consolidated Financial Statements in proportion with estimated annual tax rates,the passage of time or estimated annualsales,as applicable.3.Recent Accounting Pronouncements and Disclosure RulesIn March 2024,the SEC finalized rules intended to enhance and standardize climate-related disclosures in registrants registration statements andAnnual Reports on Form 10-K.The new rules will require climate-related disclosures,including as they relate to governance,strategy,riskmanagement,targets and goals and greenhouse gas emissions.In addition,the rules would require certain climate-related disclosure as it relates tosevere weather events and other natural conditions and carbon offsets and renewable energy credits.While the SEC voluntarily stayed the rules due topending judicial review,the rules in their current form would be effective for the Company beginning in fiscal year 2025.The Company is currentlyassessing the impact of these rules on the Companys Consolidated Financial Statements.In December 2023,the Financial Accounting Standards Board(the“FASB”)issued Accounting Standards Update(“ASU”)No.2023-09,“IncomeTaxes(Topic 740):Improvements to Income Tax Disclosures.”This ASU improves the transparency of income tax disclosure by requiring consistentcategories and greater disaggregation of information in the rate reconciliation,and income taxes paid disaggregated by jurisdiction.This guidance iseffective for the Company for fiscal years beginning after December 15,2024.The Company is currently assessing the impact of this guidance on itsincome tax disclosures.In December 2023,the FASB issued ASU No.2023-08,“IntangiblesGoodwill and OtherCrypto Assets(Subtopic 350-60):Accounting for andDisclosure of Crypto Assets.”This ASU improves the accounting for certain crypto assets by requiring companies to measure them at fair value foreach reporting period with changes in fair value recognized in net income.This guidance is effective for the Company for fiscal years beginning afterDecember 15,2024 and is not expected to have an impact on the Companys Consolidated Financial Statements.In November 2023,the FASB issued ASU No.2023-07,“Segment Reporting(Topic 280):Improvements to Reportable Segment Disclosures.”ThisASU modified the disclosure and presentation requirements primarily through enhanced disclosures of significant segment expenses and other segmentitems.This guidance is effective for the Company for fiscal years beginning after December 15,2023,and interim periods within fiscal yearsbeginning after December 15,2024.The Company is currently assessing the impact of this guidance on its disclosures.In October 2023,the FASB issued ASU No.2023-06,“Disclosure Improvements-Codification Amendments in Response to the SECs DisclosureUpdate and Simplification Initiative.”This ASU modified the disclosure and presentation requirements of a variety of codification topics by aligningthem with the SECs regulations.This guidance is effective for the Company no later than June 30,2027 and is not expected to have a material impacton the Companys Consolidated Financial Statements.7COLGATE-PALMOLIVE COMPANY Notes to Condensed Consolidated Financial Statements(continued)(Dollars in Millions Except Share and Per Share Amounts)(Unaudited)In August 2023,the FASB issued ASU No.2023-05,“Business Combinations-Joint Venture Formations(Subtopic 805-60):Recognition and InitialMeasurement.”This ASU requires a joint venture to initially measure all contributions received upon its formation at fair value.This guidance isapplicable to joint ventures with a formation date on or after January 1,2025 and is not expected to have a material impact on the CompanysConsolidated Financial Statements.In March 2023,the FASB issued ASU No.2023-01,“Leases(Topic 842):Common Control Arrangements.”This ASU clarified the accounting forleasehold improvements for leases under common control.The guidance was effective for the Company beginning on January 1,2024 and did nothave a material impact on the Companys Consolidated Financial Statements.In September 2022,the FASB issued ASU No.2022-04,“Liabilities-Supplier Finance Programs(Subtopic 405-50):Disclosure of Supplier FinanceProgram Obligations.”This ASU requires a buyer that uses supplier finance programs to make annual disclosures about the programs key terms,thebalance sheet presentation of related amounts,the confirmed amount outstanding at the end of the period and associated roll-forward information.TheCompany adopted the guidance beginning on January 1,2023,and with respect to the roll-forward information disclosure,beginning on January 1,2024.See Note 12,Supplier Finance Program for additional information.4.Restructuring and Related Implementation Charges On January 27,2022,the Companys Board of Directors(the“Board”)approved a targeted productivity program(the“2022 Global ProductivityInitiative”).The program is intended to reallocate resources towards the Companys strategic priorities and faster growth businesses,drive efficienciesin the Companys operations and streamline the Companys supply chain to reduce structural costs.Implementation of the 2022 Global Productivity Initiative,which is expected to be substantially completed by mid-year 2024,is estimated to result incumulative pretax charges,once all phases are approved and implemented,in the range of$200 to$240($170 to$200 aftertax),which is currentlyestimated to be comprised of the following:employee-related costs,including severance,pension and other termination benefits(80%);asset-relatedcosts,primarily accelerated depreciation and asset write-downs(10%);and other charges(10%),which include contract termination costs,consistingprimarily of implementation-related charges resulting directly from exit activities and the implementation of new strategies.It is estimated thatapproximately 80%to 90%of the charges will result in cash expenditures.It is expected that the cumulative pretax charges,once all projects are approved and implemented,will relate to initiatives undertaken in NorthAmerica(5%),Latin America(10%),Europe(45%),Asia Pacific(5%),Africa/Eurasia(10%),Hills Pet Nutrition(10%)and Corporate(15%).For the three months ended March 31,2024,charges resulting from the 2022 Global Productivity Initiative were$36 pretax($30 aftertax).For thethree months ended March 31,2023,charges resulting from the 2022 Global Productivity Initiative were$6 pretax($5 aftertax).Three Months Ended March 31,20242023Selling,general and administrative expenses$1$Other(income)expense,net35 5 Non-service related postretirement costs 1 Total 2022 Global Productivity Initiative charges,pretax$36$6 Total 2022 Global Productivity Initiative charges,aftertax$30$5 Restructuring and related implementation charges were recorded in the Corporate segment as these initiatives are predominantly centrally directed andcontrolled and are not included in internal measures of segment operating performance.8COLGATE-PALMOLIVE COMPANY Notes to Condensed Consolidated Financial Statements(continued)(Dollars in Millions Except Share and Per Share Amounts)(Unaudited)Total charges incurred for the 2022 Global Productivity Initiative relate to initiatives undertaken by the following reportable operating segments andCorporate:Three Months Ended March 31,Program-to-date Accumulated Charges 20242023North America%7%9%Latin America%Europe852%Asia Pacific%6%9rica/Eurasia1%8%Hills Pet Nutrition14%Corporate2%Total10000%Since the inception of the 2022 Global Productivity Initiative,the Company has incurred cumulative pretax charges of$178($142 aftertax)inconnection with the implementation of various projects as follows:Cumulative Charges as of March 31,2024Employee-Related Costs$160 Asset Impairments1 Other17 Total$178 The following table summarizes the activity for the restructuring and related implementation charges discussed above and the related accruals:Three Months Ended March 31,2024 Employee-Related Costs Incremental Depreciation Asset ImpairmentsOtherTotalBalance at December 31,2023$10$1$11 Charges34 2 36 Cash Payments(5)(1)(6)Charges against assets Foreign exchange Balance at March 31,2024$39$2$41 Employee-Related Costs primarily include severance and other termination benefits and are calculated based on long-standing benefit practices,written severance policies,local statutory requirements and,in certain cases,voluntary termination arrangements.Employee-Related Costs alsoinclude pension enhancements which are reflected as Charges against assets within Employee-Related Costs in the preceding table as thecorresponding balance sheet amounts are reflected as a reduction of pension assets or an increase in pension liabilities.For the three months endedMarch 31,2024,there were no pension enhancements included in Charges against assets within Employee-Related Costs.9COLGATE-PALMOLIVE COMPANY Notes to Condensed Consolidated Financial Statements(continued)(Dollars in Millions Except Share and Per Share Amounts)(Unaudited)5.InventoriesInventories by major class were as follows:March 31,2024December 31,2023Raw materials and supplies$619$606 Work-in-process43 46 Finished goods1,396 1,411 Total Inventories,net$2,058$2,063 Non-current inventory,net$(144)$(129)Current Inventories,net$1,914$1,934 6.Earnings Per ShareFor the three months ended March 31,2024 and 2023,earnings per share were as follows:Three Months Ended March 31,2024March 31,2023 Net incomeattributable toColgate-PalmoliveCompanyShares(millions)Per ShareNet incomeattributable toColgate-PalmoliveCompanyShares(millions)Per ShareBasic EPS$683 822.8$0.83$372 831.4$0.45 Stock options andrestricted stock units3.1 1.6 Diluted EPS$683 825.9$0.83$372 833.0$0.45 For the three months ended March 31,2024 and 2023,the average number of stock options and restricted stock units that were anti-dilutive and notincluded in diluted earnings per share calculations were 986,909 and 13,671,978,respectively.10COLGATE-PALMOLIVE COMPANY Notes to Condensed Consolidated Financial Statements(continued)(Dollars in Millions Except Share and Per Share Amounts)(Unaudited)7.Other Comprehensive Income(Loss)Additions to and reclassifications out of Accumulated other comprehensive income(loss)attributable to the Company for the three months endedMarch 31,2024 and 2023 were as follows:Three Months Ended March 31,20242023Cumulative translation adjustments,pre-tax$(71)$49 Tax amounts(16)10 Cumulative translation adjustments,net of tax(87)59 Pension and other benefits:Net actuarial gain(loss),prior service costs and settlements during the period(1)1 Amortization of net actuarial loss,transition and prior service costs8 8 Retirement Plan and other retiree benefit adjustments,pre-tax7 9 Tax amounts(3)(2)Retirement Plan and other retiree benefit adjustments,net of tax4 7 Cash flow hedges:Unrealized gains(losses)on cash flow hedges 17 Reclassification of(gains)losses into net earnings on cash flow hedges1(9)Gains(losses)on cash flow hedges,pre-tax1 8 Tax amounts(2)Gains(losses)on cash flow hedges,net of tax1 6 Total Other comprehensive income(loss),net of tax$(82)$72 These components of Other comprehensive income(loss)are included in the computation of total pension cost.See Note 8,Retirement Plans and Other Retiree Benefits for additionaldetails.These(gains)losses are reclassified into Cost of sales.See Note 11,Fair Value Measurements and Financial Instruments for additional details.There were no tax impacts on Other comprehensive income(loss)(“OCI”)attributable to Noncontrolling interests.(1)(2)(1)(2)11COLGATE-PALMOLIVE COMPANY Notes to Condensed Consolidated Financial Statements(continued)(Dollars in Millions Except Share and Per Share Amounts)(Unaudited)8.Retirement Plans and Other Retiree BenefitsComponents of Net periodic benefit cost for the three months ended March 31,2024 and 2023 were as follows:Three Months Ended March 31,Pension BenefitsOther Retiree Benefits United StatesInternational 202420232024202320242023Service cost$3$3$2$2 Interest cost23 23 8 8 9 11 Expected return on plan assets(19)(20)(7)(4)Amortization of actuarial loss(gain)10 11 2 1(4)(4)Net periodic benefit cost$14$14$6$8$7$9 Other postretirement charges 1 ERISA litigation matter 267 Total pension cost$14$282$6$8$7$9 There were no other postretirement charges for the three months ended March 31,2024.Other postretirement charges for the three months endedMarch 31,2023 included pension and other charges of$1 incurred pursuant to the 2022 Global Productivity Initiative.In the three months ended March 31,2023,the Company recorded a charge of$267 as a result of a decision of the United States Court of Appeals forthe Second Circuit(the“Second Circuit”)affirming a grant of summary judgment to the plaintiffs in a lawsuit under the Employee Retirement IncomeSecurity Act seeking the recalculation of benefits and other relief associated with a 2005 residual annuity amendment to the Colgate-PalmoliveCompany Employees Retirement Income Plan(the“Retirement Plan”).The decision resulted in an increase in the obligations of the Retirement Plan,which based on the current funded status of the Retirement Plan will require no immediate cash contribution by the Company.See Note 9,Contingencies for additional information.For the three months ended March 31,2024 and 2023,the Company made no voluntary contributions to its U.S.postretirement plans.9.ContingenciesAs a global company serving consumers in more than 200 countries and territories,the Company is routinely subject to a wide variety of legalproceedings.These include disputes relating to intellectual property,contracts,product liability,marketing,advertising,foreign exchange controls,antitrust and trade regulation,as well as labor and employment,pension,data privacy and security,environmental and tax matters and consumer classactions.Management proactively reviews and monitors the Companys exposure to,and the impact of,environmental matters.The Company is partyto various environmental matters and,as such,may be responsible for all or a portion of the cleanup,restoration and post-closure monitoring of severalsites.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,ifany,when it has determined that a loss is reasonably possible and it is able to determine such estimates.For those matters disclosed below for whichthe amount of any potential losses can be reasonably estimated,the Company currently estimates that the aggregate range of reasonably possible lossesin excess of any accrued liabilities is$0 to approximately$300(based on current exchange rates).The estimates included in this amount are based onthe Companys analysis of currently available information and,as new information is obtained,these estimates may change.Due to the inherentsubjectivity of the assessments and the unpredictability of outcomes of legal proceedings,any amounts accrued or included in this aggregate range maynot represent the ultimate loss to the Company.Thus,the Companys12COLGATE-PALMOLIVE COMPANY Notes to Condensed Consolidated Financial Statements(continued)(Dollars in Millions Except Share and Per Share Amounts)(Unaudited)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 hereinwill have a material effect on the Companys consolidated financial position or its ongoing results of operations or cash flows.However,in light of theinherent uncertainties noted above,an adverse outcome in one or more matters could be material to the Companys results of operations or cash flowsfor any particular quarter or year.Brazilian MattersThere are certain tax and civil proceedings outstanding,as described below,related to the Companys 1995 acquisition of the Kolynos oral carebusiness from Wyeth(the“Seller”).The Brazilian internal revenue authority has disallowed interest deductions and foreign exchange losses taken by the Companys Brazilian subsidiaryfor certain years in connection with the financing of the Kolynos acquisition.The tax assessments with interest,penalties and any court-mandated fees,at the current exchange rate,are approximately$129.This amount includes additional assessments received from the Brazilian internal revenueauthority in April 2016 relating to net operating loss carryforwards used by the Companys Brazilian subsidiary to offset taxable income that had alsobeen deducted from the authoritys original assessments.The Company has been disputing the disallowances by appealing the assessments sinceOctober 2001.In each of September 2015,February 2017,September 2018,April 2019 and August 2020,the Company lost an administrative appeal andsubsequently challenged these assessments in the Brazilian federal courts.Currently,there are three lawsuits pending in the Lower Federal Court andtwo cases have progressed to the Federal Court of Appeals.Although there can be no assurances,management believes,based on the opinion of itsBrazilian legal counsel,that the disallowances are without merit and that the Company should ultimately prevail.The Company is challenging thesedisallowances 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 SoPaulo,seeking to annul an April 2000 decision by the Brazilian Board of Tax Appeals that found in favor of the Sellers Brazilian subsidiary on theissue of whether it had incurred taxable capital gains as a result of the divestiture of Kolynos.The action seeks to make the Companys Braziliansubsidiary jointly and severally liable for any tax due from the Sellers Brazilian subsidiary.The case has been pending since 2002,and the LowerFederal Court has not issued a decision.Although there can be no assurances,management believes,based on the opinion of its Brazilian legalcounsel,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 Companys Brazilian subsidiary a tax assessment with interest,penalties andany court-mandated fees of approximately$57,at the current exchange rate,based on a claim that certain purchases of U.S.Treasury bills by thesubsidiary and their subsequent disposition during the period 2000 to 2001 were subject to a tax on foreign exchange transactions.The Company hadbeen disputing the assessment within the internal revenue authoritys administrative appeals process.However,in November 2015,the SuperiorChamber of Administrative Tax Appeals denied the Companys final administrative appeal,and the Company has filed a lawsuit in the Brazilianfederal court.In the event the Company is unsuccessful in this lawsuit,further appeals are available within the Brazilian federal courts.Although therecan be no assurances,management believes,based on the opinion of its Brazilian legal counsel,that the tax assessment is without merit and that theCompany should ultimately prevail.The Company is challenging this assessment vigorously.Competition MatterCertain of the Companys subsidiaries were historically subject to actions and,in some cases,fines,by governmental authorities in a number ofcountries related to alleged competition law violations.Substantially all of these matters also involved other consumer goods companies and/or retailcustomers.The Companys policy is to comply with antitrust and competition laws and,if a violation of any such laws is found,to take appropriateremedial action and to cooperate fully with any related governmental inquiry.The status as of March 31,2024 of such competition law matters pendingagainst the Company during the three months ended March 31,2024 is set forth below.13COLGATE-PALMOLIVE COMPANY Notes to Condensed Consolidated Financial Statements(continued)(Dollars in Millions Except Share and Per Share Amounts)(Unaudited)In July 2014,the Greek competition law authority issued a statement of objections alleging a restriction of parallel imports into Greece.TheCompany responded to this statement of objections.In July 2017,the Company received the decision from the Greek competition lawauthority in which the Company was fined$11.The Company appealed the decision to the Greek courts.In April 2019,the Greek courtsaffirmed the judgment against the Companys Greek subsidiary,but reduced the fine to$10.5 and dismissed the case against Colgate-Palmolive Company.The Companys Greek subsidiary and the Greek competition authority appealed the decision to the Greek SupremeCourt.Talcum Powder MattersThe Company has been named as a defendant in civil actions alleging that certain talcum powder products that were sold prior to 1996 werecontaminated with asbestos and/or caused mesothelioma and other cancers.Many of these actions involve a number of co-defendants from a variety ofdifferent industries,including suppliers of asbestos and manufacturers of products that,unlike the Companys products,were designed to containasbestos.As of March 31,2024,there were 285 individual cases pending against the Company in state and federal courts throughout the United States,ascompared to 279 cases as of December 31,2023.During the three months ended March 31,2024,26 new cases were filed and 20 cases were resolvedby voluntary dismissal,settlement or dismissal by the court.The value of the settlements in the period presented was not material,either individuallyor in the aggregate,to such periods results of operations.During the three months ended March 31,2024,one case resulted in a jury verdict in favor ofthe Company after a trial.A significant portion of the Companys costs incurred in defending and resolving these claims has been,and the Company believes that a portion of thecosts will continue to be,covered by insurance policies issued by several primary,excess and umbrella insurance carriers,subject to deductibles,exclusions,retentions,policy limits and insurance carrier insolvencies.While the Company and its legal counsel believe that these cases are without merit and intend to challenge them vigorously,there can be no assurancesregarding the ultimate resolution of these matters.ERISA MatterIn June 2016,a lawsuit was filed in the United States District Court for the Southern District of New York(the“District Court”)against the RetirementPlan,the Company and certain individuals(the“Company Defendants”)claiming that residual annuity payments associated with a 2005 residualannuity amendment to the Retirement Plan were improperly calculated for certain Retirement Plan participants in violation of the EmployeeRetirement Income Security Act(“ERISA”).The relief sought included recalculation of benefits,pre-and post-judgment interest and attorneys fees.This action was certified as a class action in July 2017.In July 2020,the Court dismissed certain claims,and in August 2020 granted the plaintiffsmotion for summary judgment on the remaining claims.In September 2020,the Company appealed to the Second Circuit.In March 2023,the SecondCircuit affirmed the grant of summary judgment to the plaintiffs.In light of the Second Circuit decision,the Company recorded a charge to earnings of$267 in the quarter ended March 31,2023,which is comprisedof the recalculation of benefits and interest.Possible additional charges associated with this matter are expected to be immaterial and,where estimable,are reflected in the range of reasonably possible losses disclosed above.The decision resulted in an increase in the obligations of the Retirement Plan,which based on the current funded status of the Retirement Plan will require no immediate cash contribution by the Company.In June 2023,theCompany filed a petition for certiorari to the United States Supreme Court requesting permission for an appeal to that court and that petition wasdenied in October 2023.Also,in June 2023,the plaintiffs filed a motion to enter a revised final judgment in the District Court to address certainunresolved calculation issues,which the Company opposed.In March 2024,the District Court granted the plaintiffs motion and found for theplaintiffs on the unresolved calculation issues.The Company intends to appeal that decision to the Second Circuit.14COLGATE-PALMOLIVE COMPANY Notes to Condensed Consolidated Financial Statements(continued)(Dollars in Millions Except Share and Per Share Amounts)(Unaudited)10.Segment InformationThe Company operates in two product segments:Oral,Personal and Home Care;and Pet Nutrition.The operations of the Oral,Personal and Home Care product segment are managed geographically in five reportable operating segments:NorthAmerica,Latin America,Europe,Asia Pacific and Africa/Eurasia.The Company evaluates segment performance based on several factors,including Operating profit.The Company uses Operating profit as a measureof operating segment performance because it excludes the impact of Corporate-driven decisions related to interest expense and income taxes.The accounting policies of the operating segments are generally the same as those described in Note 2,Summary of Significant Accounting Policies tothe Companys Consolidated Financial Statements included in the Companys Annual Report on Form 10-K for the year ended December 31,2023.Intercompany sales have been eliminated.Corporate operations include costs related to stock options and restricted stock units,research anddevelopment costs,Corporate overhead costs,restructuring and related implementation charges and gains and losses on sales of non-core product linesand assets.The Company reports these items within Corporate operations as they relate to Corporate-based responsibilities and decisions and are notincluded in the internal measures of segment operating performance used by the Company to measure the underlying performance of the operatingsegments.Net sales by segment were as follows:Three Months Ended March 31,20242023Net sales Oral,Personal and Home Care North America$997$958 Latin America1,253 1,075 Europe711 650 Asia Pacific727 738 Africa/Eurasia276 288 Total Oral,Personal and Home Care3,963 3,709 Pet Nutrition1,102 1,061 Total Net sales$5,065$4,770 Note:Table may not sum due to rounding.Approximately two-thirds of the Companys Net sales are generated from markets outside the U.S.,with approximately 45%of the Companys Netsales coming from emerging markets(which consist of Latin America,Asia(excluding Japan),Africa/Eurasia and Central Europe).15COLGATE-PALMOLIVE COMPANY Notes to Condensed Consolidated Financial Statements(continued)(Dollars in Millions Except Share and Per Share Amounts)(Unaudited)The Companys Net sales of Oral,Personal and Home Care and Pet Nutrition products accounted for the following percentages of the Companys Netsales:Three Months Ended March 31,20242023Net salesOral Care43C%Personal Care18%Home Care17%Pet Nutrition22%Total Net sales1000%Operating profit by segment was as follows:Three Months Ended March 31,20242023Operating profit Oral,Personal and Home Care North America$222$193 Latin America405 315 Europe144 116 Asia Pacific207 202 Africa/Eurasia66 68 Total Oral,Personal and Home Care1,044 894 Pet Nutrition199 183 Corporate(196)(168)Total Operating profit$1,047$909 Corporate Operating profit(loss)for the three months ended March 31,2024 included charges resulting from the 2022 Global Productivity Initiative of$36.Corporate Operating profit(loss)for the three months ended March 31,2023 included product recall costs of$25 and charges resulting from the 2022Global Productivity Initiative of$5.16COLGATE-PALMOLIVE COMPANY Notes to Condensed Consolidated Financial Statements(continued)(Dollars in Millions Except Share and Per Share Amounts)(Unaudited)11.Fair Value Measurements and Financial InstrumentsThe Company uses available market information and other valuation methodologies in assessing the fair value of financial instruments.Judgment isrequired in interpreting market data to develop the estimates of fair value and,accordingly,changes in assumptions or the estimation methodologiesmay affect the fair value estimates.The Company is exposed to the risk of credit loss in the event of nonperformance by counterparties to financialinstrument contracts;however,nonperformance is considered unlikely and any nonperformance is unlikely to be material,as it is the Companys policyto contract only with diverse,credit-worthy counterparties based upon both strong credit ratings and other credit considerations.The Company is exposed to market risk from foreign currency exchange rates,interest rates and commodity price fluctuations.Volatility relating tothese exposures is managed on a global basis by utilizing a number of techniques,including working capital management,sourcing strategies,sellingprice increases,selective borrowings in local currencies and entering into selective derivative instrument transactions,issued with standard features,inaccordance with the Companys treasury and risk management policies,which prohibit the use of derivatives for speculative purposes and leveragedderivatives for any purpose.It is the Companys policy to enter into derivative instrument contracts with terms that match the underlying exposurebeing hedged.The Companys derivative instruments include forward-starting interest rate swaps,foreign currency contracts and commodity contracts.TheCompany utilizes forward-starting interest rate swaps to mitigate the risk of variability in interest rate for future debt issuances and these swaps arevalued using observable benchmark rates(Level 2 valuation).The Company utilizes foreign currency contracts,including forward and swap contracts,option contracts,local currency deposits and local currency borrowings to hedge portions of its foreign currency purchases,assets and liabilities arisingin the normal course of business and the net investment in certain foreign subsidiaries.These contracts are valued using observable market rates(Level2 valuation).Commodity futures contracts are utilized to hedge the purchases of raw materials used in production.These contracts are measured usingquoted commodity exchange prices(Level 1 valuation).The duration of foreign currency and commodity contracts generally does not exceed 12months.The following table summarizes the fair value of the Companys derivative instruments and other financial instruments which are carried at fair valuein the Companys Condensed Consolidated Balance Sheets at March 31,2024 and December 31,2023:AssetsLiabilities AccountFair ValueAccountFair ValueDesignated derivative instrumentsMarch 31,2024December 31,2023 March 31,2024December 31,2023Foreign currencycontractsOther current assets$24$19 Other accruals$22$25 CommoditycontractsOther current assets Other accruals2 1 Total designated$24$19$24$26 Other financial instruments MarketablesecuritiesOther current assets$231$179 Total other financial instruments$231$179 17COLGATE-PALMOLIVE COMPANY Notes to Condensed Consolidated Financial Statements(continued)(Dollars in Millions Except Share and Per Share Amounts)(Unaudited)The carrying amount of cash,cash equivalents,marketable securities,accounts receivable and short-term debt approximated fair value as of March 31,2024 and December 31,2023.The estimated fair value of the Companys long-term debt,including the current portion,as of March 31,2024 andDecember 31,2023,was$7,684 and$7,862,respectively,and the related carrying value was$8,171 and$8,239,respectively.In March 2023,theCompany issued$500 of three-year Senior Notes at a fixed coupon rate of 4.800%,$500 of five-year Senior Notes at a fixed coupon rate of 4.600%and$500 of ten-year Senior Notes at a fixed coupon rate of 4.600%.The estimated fair value of long-term debt was derived principally from quotedprices on the Companys outstanding fixed-term notes(Level 2 valuation).The following tables present the notional values as of:March 31,2024 Foreign CurrencyContractsForeignCurrency DebtCommodityContracts TotalFair Value Hedges$1,606$1,606 Cash Flow Hedges898 37 935 Net Investment Hedges288 4,345 4,633 December 31,2023 Foreign CurrencyContractsForeignCurrency DebtCommodityContracts TotalFair Value Hedges$1,625$1,625 Cash Flow Hedges869 39 908 Net Investment Hedges280 3,908 4,188 The following table presents the location and amount of gain(loss)on fair value hedges recognized in the Companys Condensed ConsolidatedStatements of Income:Gain(Loss)Recognized in IncomeLocation of Gain(Loss)Recognizedin IncomeThree Months Ended March 31,20242023Hedging instruments:Foreign currency contractsSelling,general and administrativeexpenses$(21)$5 Total gain(loss)on fair value hedges$(21)$5 18COLGATE-PALMOLIVE COMPANY Notes to Condensed Consolidated Financial Statements(continued)(Dollars in Millions Except Share and Per Share Amounts)(Unaudited)The following tables present the amount of gain(loss)on cash flow hedges recognized in the Companys Accumulated Other Comprehensive Income(AOCI)and reclassification from AOCI into the Condensed Consolidated Statements of Income:Gain(Loss)Recognized in AOCIAmount Reclassified from AOCIInto IncomeThree Months Ended March 31,Location of Gain(Loss)Recognized in IncomeThree Months Ended March 31,2024202320242023Hedging instruments:Foreign currency contracts$4$(1)Cost of Sales$(2)$4 Commodity contracts(2)(1)Cost of Sales(1)3 Forward Starting Swaps(2)19 Interest(income)expense,net2 2 Total gain(loss)on cash flowhedges$17$(1)$9 The following table presents the amount of gain(loss)on net investment hedges recognized in the Companys AOCI:Gain(Loss)Recognized in AOCIThree Months Ended March 31,20242023Hedging instruments:Foreign currency contracts$2$(8)Foreign currency debt106(73)Total gain(loss)on net investment hedges$108$(81)12.Supplier Finance ProgramThe Company has agreements to provide supplier finance programs which facilitate participating suppliers ability to finance payment obligations ofthe Company with designated third-party financial institutions.Participating suppliers may,at their sole discretion,elect to finance one or morepayment obligations of the Company prior to their scheduled due dates at a discounted price to participating financial institutions.The Companysobligations to its suppliers,including amounts due and scheduled payment dates,are not impacted by suppliers decisions to finance amounts underthese arrangements.The outstanding payment obligations under the Companys supplier finance programs are included in Accounts Payable in theCondensed Consolidated Balance Sheets and were not material as of March 31,2024 or December 31,2023.19COLGATE-PALMOLIVE COMPANY Notes to Condensed Consolidated Financial Statements(continued)(Dollars in Millions Except Share and Per Share Amounts)(Unaudited)13.Income TaxesThe effective income tax rate was 24.6%for the first quarter of 2024 as compared to 26.2%for the first quarter of 2023.The quarterly provision forincome taxes is determined based on the Companys estimated full year effective income tax rate adjusted by the amount of tax attributable toinfrequent or unusual items that are separately recognized on a discrete basis in the income tax provision in the quarter in which they occur.TheCompanys current estimate of its full year effective income tax rate before discrete period items is 24.5%,as compared to 24.3%in the comparableperiod of 2023.In the third quarter of 2023,the Internal Revenue Service(the“IRS”)issued a notice giving taxpayers temporary relief from the effects of certain U.S.tax regulations that were issued in December 2021,which place greater restrictions on foreign taxes that are creditable against U.S.taxes on foreign-source income.This notice allowed taxpayers to defer the application of these new regulations through the end of 2023.In December 2023,the IRSissued further guidance modifying this temporary relief period to the date that a notice or other guidance withdrawing or modifying the temporaryrelief is issued.The Company will recognize the impact,if any,in the period in which the temporary relief is withdrawn or modified.The Company has ongoing federal,state and international income tax audits in various jurisdictions and evaluates uncertain tax positions that may bechallenged by local tax authorities and not fully sustained.All U.S.federal income tax returns through December 31,2013 have been audited by theIRS and there are limited matters which the Company plans to appeal for years 2010 through 2013.One such matter relates to the IRS assessment oftaxes on the Company by imputing income on certain activities within one of our international operations,which is also under audit for the years 2014through 2018.There were U.S.Tax Court rulings during 2023 in favor of the IRS against unrelated third parties on similar matters.Despite the U.S.Tax Court rulings,the Company continues to believe that the tax assessment against the Company is without merit.While there can be no assurances,the Company believes this matter will ultimately be decided in favor of the Company.The amount of tax plus interest for the years 2010 through 2018is estimated to be approximately$145,which is not included in the Companys uncertain tax positions.On August 16,2022,the Inflation Reduction Act of 2022(“IRA”)was enacted,which among other things,implements a 15%minimum tax on bookincome of certain large corporations effective for years beginning after December 31,2022.Based on the Companys analysis,as well as guidancepublished by the IRS,the IRA,and in particular the 15%minimum tax,did not have an impact on the Companys Consolidated Financial Statements.The Company will continue to evaluate the potential impact of this law as additional guidance and clarification becomes available.Additionally,on December 15,2022,the 27 member states of the European Union(“EU”)reached an agreement on a minimum level of taxation forcertain large corporations to pay a minimum corporate tax rate of 15%in every jurisdiction in which they operate.This agreement,which is known asthe Minimum Tax Directive(part of the“Pillar II Model Rules”),was supposed to be transposed into the laws of all EU member states by December31,2023.Most member states complied,while some were granted extensions of time.In addition,many other jurisdictions outside the EU have alsocommitted to implement this Directive while others have implemented a similar minimum tax regime consistent with the policy of the Pillar II ModelRules.This Directive does not have a material impact on the Companys Consolidated Financial Statements.20COLGATE-PALMOLIVE COMPANYManagements Discussion and Analysis of FinancialCondition and Results of Operations(Dollars in Millions Except Per Share Amounts)Executive OverviewBusiness OrganizationColgate-Palmolive Company(together with its subsidiaries,“we,”“us,”“our,”the“Company”or“Colgate”)is a caring,innovative growth companyreimagining a healthier future for all people,their pets and our planet.We seek to deliver sustainable,profitable growth and superior shareholder returns,aswell as to provide Colgate people with an innovative and inclusive work environment.We do this by developing and selling science-led products globallythat make peoples and their pets lives healthier and more enjoyable and by embracing our sustainability and social impact and diversity,equity andinclusion(“DE&I”)strategies across our organization.We are tightly focused on two product segments:Oral,Personal and Home Care;and Pet Nutrition.Within these segments,we follow a closely definedbusiness strategy to grow our key product categories and increase our overall market share.Within the categories in which we compete,we prioritize ourefforts based on their capacity to maximize the use of the organizations core competencies and strong global equities and to deliver sustainable,profitablelong-term growth.Operationally,we are organized along geographic lines with management teams having responsibility for the business and financial results in each region.We compete in more than 200 countries and territories worldwide with established businesses in all regions contributing to our sales and profitability.Approximately two-thirds of our Net sales are generated from markets outside the U.S.,with approximately 45%of our Net sales coming from emergingmarkets(which consist of Latin America,Asia(excluding Japan),Africa/Eurasia and Central Europe).This geographic diversity and balance help to reduceour exposure to business and other risks in any one country or part of the world.The Oral,Personal and Home Care product segment is managed geographically in five reportable operating segments:North America,Latin America,Europe,Asia Pacific and Africa/Eurasia,all of which sell primarily to a variety of traditional and eCommerce retailers,wholesalers,distributors,dentistsand,in some segments,skin health professionals.Through Hills Pet Nutrition,we also compete on a worldwide basis in the pet nutrition market,sellingproducts principally through authorized pet supply retailers,veterinarians and eCommerce retailers.We also sell certain of our products direct-to-consumer.We are engaged in manufacturing and sourcing of products and materials on a global scale and have major manufacturing facilities,warehousing facilitiesand distribution centers in every region around the world.On an ongoing basis,management focuses on a variety of key indicators to monitor business health and performance.These indicators include net sales(including volume,pricing and foreign exchange components),organic sales growth(net sales growth excluding the impact of foreign exchange,acquisitions and divestments),a non-GAAP financial measure,and gross profit margin,selling,general and administrative expenses,operating profit,netincome and earnings per share,in each case,on a GAAP and non-GAAP basis,as well as measures used to optimize the management of working capital,capital expenditures,cash flow and return on capital.In addition,we review market share and other data to assess how our brands are performing withintheir categories on a global and regional basis.The monitoring of these indicators and our Code of Conduct and corporate governance practices help tomaintain business health and strong internal controls.For additional information regarding non-GAAP financial measures and the Companys use ofmarket share data and the limitations of such data,see“Non-GAAP Financial Measures”and“Market Share Information”below.21COLGATE-PALMOLIVE COMPANYManagements Discussion and Analysis of FinancialCondition and Results of Operations(Dollars in Millions Except Per Share Amounts)The War in UkraineThe war in Ukraine,and the related geopolitical tensions,have had and continue to have a significant impact on our operations in Ukraine and Russia,though it has not been material to our Consolidated Financial Statements.While our ability to do business in Ukraine has been significantly impacted,weremain committed to providing access to our products to people in the region.In Russia,we are importing and selling a reduced portfolio of health andhygiene products for everyday use.We have no manufacturing facilities in Russia and have ceased all capital investments and media activities in Russia.For the three months ended March 31,2024,our business in the Eurasia region constituted approximately 2%of our consolidated net sales andapproximately 3%of our consolidated operating profit.We,however,have experienced,and expect to continue to experience,risks related to the impact ofthe war in Ukraine,including increases in the costs and,in certain cases,limitations on the availability of certain raw and packaging materials andcommodities(including oil and natural gas),supply chain and logistics challenges,import restrictions,foreign currency volatility and reputationalconcerns.We also have faced and continue to face challenges to our ability to repatriate cash from Russia and find banking partners in Russia and we mayface challenges to our ability to protect our assets in Russia.We also continue to monitor the impact of sanctions,export controls and import restrictionsimposed in response to the war in Ukraine.The Israel-Hamas WarThe Israel-Hamas war has not had a material impact on our Consolidated Financial Statements.Uncertainties and risks remain as to the duration of the warand its impact on geopolitical relations and stability in North Africa,the Middle East and nearby regions.The war has impacted and may continue toimpact,among other things,supply chain and logistics,the availability and price of raw and packaging materials and commodities,such as oil,consumersentiment and consumption and category growth rates in the region.For more information about factors that could impact our business,including due to geopolitical conflicts,such as the war in Ukraine and the Israel-Hamaswar,refer to Part I,Item 1A“Risk Factors”of our Annual Report on Form 10-K for the year ended December 31,2023.22COLGATE-PALMOLIVE COMPANYManagements Discussion and Analysis of FinancialCondition and Results of Operations(Dollars in Millions Except Per Share Amounts)Business StrategyTo achieve our business and financial objectives,we are focused on driving organic sales growth and consistent compounded earnings per share growththrough science-led,core and premium innovation,pursuing higher-growth adjacent categories and segments,expanding in faster-growing channels andmarkets and delivering margin expansion through operating leverage and efficiency.We continue to prioritize our investments in high growth segmentswithin our Oral Care,Personal Care and Pet Nutrition businesses.We are also seeking to lead in the development of human capital and to maximize theimpact of our sustainability and social impact and DE&I strategies.We are strengthening and leveraging our capabilities in areas such as innovation,digital,artificial intelligence,eCommerce and data and analytics,enabling us to be more responsive in todays rapidly changing world.We continue toinvest behind our brands,including through advertising,and to develop initiatives to build strong relationships with consumers,dental,veterinary and skinhealth professionals and traditional and eCommerce retailers.We continue to believe that growth opportunities are greater in those areas of the world inwhich economic development and rising consumer incomes expand the size and number of markets for our products.The investments needed to drive growth are supported through continuous,Company-wide initiatives to lower costs and increase effective asset utilization.Through these initiatives,which are referred to as our funding-the-growth initiatives,we seek to become even more effective and efficient throughout ourbusinesses.These initiatives are designed to reduce costs associated with direct materials,indirect expenses,distribution and logistics and advertising andpromotional materials,among other things,and encompass a wide range of projects,examples of which include raw material substitution,reduction ofpackaging materials,consolidating suppliers to leverage volumes and increasing manufacturing efficiency through SKU reductions and formulationsimplification.Significant Items Impacting ComparabilityDuring the quarter ended March 31,2023,we recorded a charge of$267 as a result of a decision of the United States Court of Appeals for the SecondCircuit(the“Second Circuit”)affirming a grant of summary judgment to the plaintiffs in a lawsuit under the Employee Retirement Income Security Actseeking the recalculation of benefits and other relief associated with a 2005 residual annuity amendment to the Colgate-Palmolive Company EmployeesRetirement Income Plan(the“Retirement Plan”).The decision resulted in an increase in the obligations of the Retirement Plan,which based on the currentfunded status of the Retirement Plan will require no immediate cash contribution by the Company.In June 2023,the Company filed a petition for certiorarito the United States Supreme Court requesting permission for an appeal to that court and that petition was denied in October 2023.Also,in June 2023,theplaintiffs filed a motion to enter a revised final judgment in the United States District Court for the Southern District of New York(the“District Court”)toaddress certain unresolved calculation issues,which the Company opposed.In March 2024,the District Court granted the plaintiffs motion and found forthe plaintiffs on the unresolved calculation issues.The Company intends to appeal that decision to the Second Circuit.See Note 9,Contingencies to theCondensed Consolidated Financial Statements for additional information.During the quarter ended March 31,2023,we announced a voluntary recall of select Fabuloso multi-purpose cleaner products sold in the United States andCanada.The costs associated with the voluntary recall had a$25 impact on our Operating profit in the quarter ended March 31,2023.On January 27,2022,the Companys Board of Directors(the“Board”)approved a targeted productivity program(the“2022 Global ProductivityInitiative”).The program is intended to reallocate resources towards our strategic priorities and faster growth businesses,drive efficiencies in ouroperations and streamline our supply chain to reduce structural costs.Implementation of the 2022 Global Productivity Initiative,which is expected to besubstantially completed by mid-year 2024,is estimated to result in cumulative pretax charges,once all phases are approved and implemented,in the rangeof$200 to$240($170 to$200 aftertax).Annualized pretax savings are projected to be in the range of$90 to$110($70 to$85 aftertax),once all projectsare approved and implemented.Savings achieved since the implementation of the 2022 Global Productivity Initiative were approximately$107 pretax($84aftertax).For more information regarding the 2022 Global Productivity Initiative,see“Restructuring and Related Implementation Charges”below.In the three months ended March 31,2024 and 2023,we incurred pretax costs of$36(aftertax costs of$30)and$6(aftertax costs of$5),respectively,resulting from the 2022 Global Productivity Initiative.23COLGATE-PALMOLIVE COMPANYManagements Discussion and Analysis of FinancialCondition and Results of Operations(Dollars in Millions Except Per Share Amounts)OutlookLooking forward,we expect global macroeconomic,political and market conditions to remain challenging,including as a result of inflation,higher interestrates and foreign currency volatility.During the three months ended March 31,2024,most of our divisions experienced higher raw and packaging materialcosts.We have taken and are taking additional pricing to try to offset these increases in raw and packaging material costs.This has negatively impacted andmay continue to negatively impact consumer demand for our products.Additionally,inflation is impacting the broader economy with consumers around theworld facing widespread rising prices as well as higher interest rates resulting from measures to address inflation.Such inflation and higher interest ratesmay negatively impact consumer consumption or discretionary spending and/or change their purchasing patterns by foregoing purchasing certain of ourproducts or by switching to“private label”or to our lower-priced product offerings.Although we continue to devote significant resources to support ourbrands and market our products at multiple price points,these changes could reduce demand for and sales volumes of our products or result in a shift in ourproduct mix from higher margin to lower margin product offerings.In light of this challenging environment,we expect continued volatility across all of ourcategories and it is therefore difficult to predict category growth rates in the near term.Given that approximately two-thirds of our Net sales originate in markets outside the U.S.,we have experienced and will likely continue to experiencevolatile foreign currency fluctuations,particularly in Argentina and Trkiye,which are considered hyper-inflationary economies.As discussed above,wehave also experienced higher raw and packaging material costs.While we have taken,and will continue to take,measures to mitigate the effect of theseconditions,such as the 2022 Global Productivity Initiative and our funding-the-growth and revenue growth management initiatives,in the currentenvironment,it may become increasingly difficult to implement certain of these mitigation strategies.Should these conditions persist,they could adverselyaffect our future results.While the global marketplace in which we operate has always been highly competitive,we continue to experience heightened competitive activity incertain markets from strong local competitors,from other large multinational companies,some of which have greater resources than we do,and from newentrants into the market in many of our categories.Such activities have included more aggressive product claims and marketing challenges,as well asincreased promotional spending and geographic expansion.We have been negatively affected by changes in the policies and practices of our trade customers in key markets,such as inventory destocking,fulfillmentrequirements,limitations on access to shelf space,delisting of our products and certain sustainability,supply chain and packaging standards or initiatives.In addition,the retail landscape in many of our markets continues to evolve as a result of the continued growth of eCommerce,changing consumerpreferences(as consumers increasingly shop online and via mobile and social applications)and the increased presence of alternative retail channels,such assubscription services and direct-to-consumer businesses.We plan to continue to invest behind our data strategy,digital and analytics capabilities and highergrowth businesses.The substantial growth in eCommerce and the emergence of alternative retail channels have created and may continue to create pricingpressures and/or adversely affect our relationships with our key retailers.We continue to closely monitor the impact of geopolitical events and tensions,such as the war in Ukraine,the Israel-Hamas war and tensions betweenChina and Taiwan and the challenging market conditions discussed above,on our business and the related uncertainties and risks.While we have taken,andwill continue to take,measures to mitigate the effects of these events and conditions,we cannot estimate with certainty the full extent of their impact on ourbusiness,results of operations,cash flows and/or financial condition.For more information about factors that could impact our business,see“Risk Factors”in Part I,Item 1A of our Annual Report on Form 10-K for the year ended December 31,2023.We believe that we are well prepared to meet the challenges ahead due to our strong financial condition,experience operating in challenging environments,resilient global supply chain,dedicated and diverse global team and focused business strategy.Our strategy is based on driving organic sales growth andconsistent compounded earnings per share growth through science-led,core and premium innovation,pursuing higher-growth adjacent categories andsegments,expanding in faster-growing channels and markets and delivering margin expansion through operating leverage and efficiency.We are alsoseeking to lead in the development of human capital and to maximize our sustainability and social impact and DE&I strategies.Our commitment to thesepriorities,the strength of our brands,the breadth of our global footprint and a commitment to profitability and driving efficiency in cash generation shouldposition us well to manage through the challenges we face and increase shareholder value over time.24COLGATE-PALMOLIVE COMPANYManagements Discussion and Analysis of FinancialCondition and Results of Operations(Dollars in Millions Except Per Share Amounts)Results of OperationsThree MonthsWorldwide Net sales were$5,065 in the first quarter of 2024,up 6.2%from the first quarter of 2023,due to volume growth of 1.3%and net selling priceincreases of 8.5%,partially offset by negative foreign exchange of 3.6%.Organic sales(Net sales excluding the impact of foreign exchange,acquisitionsand divestments),a non-GAAP financial measure,increased 9.8%in the first quarter of 2024.A reconciliation of net sales growth to organic sales growthis provided under“Non-GAAP Financial Measures”below.Net sales in the Oral,Personal and Home Care product segment were$3,963 in the first quarter of 2024,up 6.8%from the first quarter of 2023,due tovolume growth of 2.8%and net selling price increases of 8.6%,partially offset by negative foreign exchange of 4.5%.Organic sales in the Oral,Personaland Home Care product segment increased 11.4%in the first quarter of 2024.The Companys share of the global toothpaste market was 41.3%on a year-to-date basis,up 1.0 share points from the year ago period,and its share of theglobal manual toothbrush market was 31.7%on a year-to-date basis,up 1.4 share points from the year ago period.Year-to-date market shares in toothpastewere up in Latin America,Europe,Asia Pacific and Africa/Eurasia and down in North America versus the comparable 2023 period.In the manualtoothbrush category,year-to-date market shares were up in North America and Asia/Pacific,flat in Latin America and Europe and down in Africa/Eurasiaversus the comparable 2023 period.For additional information regarding market shares,see“Market Share Information”below.Net sales in the Hills Pet Nutrition segment were$1,102 in the first quarter of 2024,up 3.9%from the first quarter of 2023,due to net selling priceincreases of 8.2%,partially offset by volume declines of 3.9%and negative foreign exchange of 0.3%.Organic sales in the Hills Pet Nutrition segmentincreased 4.2%in the first quarter of 2024.25COLGATE-PALMOLIVE COMPANYManagements Discussion and Analysis of FinancialCondition and Results of Operations(Dollars in Millions Except Per Share Amounts)Gross Profit/MarginWorldwide Gross profit increased to$3,039 in the first quarter of 2024 compared to$2,712 in the first quarter of 2023,reflecting an increase of$168resulting from higher Net sales and an increase of$159 resulting from higher Gross profit margin.Worldwide Gross profit margin increased to 60.0%in the first quarter of 2024 from 56.9%in the first quarter of 2023.This increase in Gross profit marginwas primarily due to higher pricing(330 bps)and cost savings from the Companys funding-the-growth initiatives(250 bps),partially offset bysignificantly higher raw and packaging material costs(270 bps),which included foreign exchange transaction costs.Three Months Ended March 31,20242023Gross profit$3,039$2,712 Three Months Ended March 31,20242023Basis PointChangeGross profit margin60.0V.910 26COLGATE-PALMOLIVE COMPANYManagements Discussion and Analysis of FinancialCondition and Results of Operations(Dollars in Millions Except Per Share Amounts)Selling,General and Administrative ExpensesSelling,general and administrative expenses increased 9%to$1,916 in the first quarter of 2024 compared to$1,758 in the first quarter of 2023.Selling,general and administrative expenses in the first quarter of 2024 included charges resulting from the 2022 Global Productivity Initiative.Excluding thecharges resulting from the 2022 Global Productivity Initiative in the first quarter of 2024,Selling,general and administrative expenses increased 9%to$1,915 in the first quarter of 2024 compared to$1,758 in the first quarter of 2023,reflecting increased advertising investment of$93 and higher overheadexpenses of$64.Selling,general and administrative expenses as a percentage of Net sales increased by 90 bps to 37.8%in the first quarter of 2024 as compared to 36.9%inthe first quarter of 2023.This increase was due to increased advertising investment(120 bps),partially offset by lower overhead expenses(30 bps),both asa percentage of Net sales.In the first quarter of 2024,advertising investment increased as a percentage of Net sales to 13.3%from 12.1%in the first quarterof 2023,or 16%in absolute terms,to$672 as compared with$579 in the first quarter of 2023.Three Months Ended March 31,20242023Selling,general and administrative expense,GAAP$1,916$1,758 2022 Global Productivity Initiative(1)Selling,general and administrative expenses,non-GAAP$1,915$1,758 Three Months Ended March 31,20242023Basis PointChangeSelling,general and administrative expenses as a percentage of Net sales37.86.9 Other(Income)Expense,NetOther(income)expense,net was$76 and$45 in the first quarter of 2024 and 2023,respectively.Other(income)expense,net in the first quarter of 2024included charges resulting from the 2022 Global Productivity Initiative.Other(income)expense,net in the first quarter of 2023 included product recallcosts and charges resulting from the 2022 Global Productivity Initiative.Excluding the items described above in both periods,as applicable,Other(income)expense,net was$41 and$15 in the first quarter of 2024 and 2023,respectively.Three Months Ended March 31,20242023Other(income)expense,net,GAAP$76$45 2022 Global Productivity Initiative(35)(5)Product recall costs(25)Other(income)expense,net,non-GAAP$41$15 27COLGATE-PALMOLIVE COMPANYManagements Discussion and Analysis of FinancialCondition and Results of Operations(Dollars in Millions Except Per Share Amounts)Operating ProfitOperating profit increased 15%to$1,047 in the first quarter of 2024 from$909 in the first quarter of 2023.Operating profit in the first quarter of 2024included charges resulting from the 2022 Global Productivity Initiative.Operating profit in the first quarter of 2023 included product recall costs andcharges resulting from the 2022 Global Productivity Initiative.Excluding the items described above in both periods,as applicable,Operating profitincreased 15%to$1,083 in the first quarter of 2024 from$939 in the first quarter of 2023.Operating profit margin was 20.7%in the first quarter of 2024,an increase of 160 bps compared to 19.1%in the first quarter of 2023.Excluding the itemsdescribed above in both periods,as applicable,Operating profit margin was 21.4%in the first quarter of 2024,an increase of 170 bps compared to 19.7%inthe first quarter of 2023.This increase in Operating profit margin was due to an increase in Gross profit(310 bps),partially offset by an increase in Selling,general and administrative expenses(90 bps)and an increase in Other(income)expense,net(50 bps),all as a percentage of Net sales.Three Months Ended March 31,20242023%ChangeOperating profit,GAAP$1,047$909 15 22 Global Productivity Initiative36 5 Product recall costs 25 Operating profit,non-GAAP$1,083$939 15%Three Months Ended March 31,20242023Basis PointChangeOperating profit margin,GAAP20.7.10 2022 Global Productivity Initiative0.7%0.1%Product recall costs%0.5%Operating profit margin,non-GAAP21.4.70 Non-Service Related Postretirement CostsNon-service related postretirement costs were$22 in the first quarter of 2024 as compared to$294 in the first quarter of 2023.Non-service relatedpostretirement costs in the first quarter of 2023 included charges related to the ERISA litigation matter and charges related to the 2022 Global ProductivityInitiative.Excluding these charges in the first quarter of 2023,Non-service related postretirement costs were$22 in the first quarter of 2024 and$26 in thefirst quarter of 2023.Three Months Ended March 31,20242023Non-service related postretirement costs,GAAP$22$294 ERISA litigation matter(267)2022 Global Productivity Initiative(1)Non-service related postretirement costs,non-GAAP$22$26 Interest(Income)Expense,NetInterest(income)expense,net was$58 in the first quarter of 2024 as compared to$54 in the first quarter of 2023.28COLGATE-PALMOLIVE COMPANYManagements Discussion and Analysis of FinancialCondition and Results of Operations(Dollars in Millions Except Per Share Amounts)Income TaxesThe effective income tax rate was 24.6%for the first quarter of 2024 as compared to 26.2%for the first quarter of 2023.As reflected in the table below,thenon-GAAP effective income tax rate was 24.3%for the first three months of 2024 and 2023.The quarterly provision for income taxes is determined based on the Companys estimated full year effective income tax rate adjusted by the amount of taxattributable to infrequent or unusual items that are separately recognized on a discrete basis in the income tax provision in the quarter in which they occur.The Companys current estimate of its full year effective income tax rate before discrete period items is 24.5%,compared to 24.3%in 2023.In the third quarter of 2023,the Internal Revenue Service(the“IRS”)issued a notice giving taxpayers temporary relief from the effects of certain U.S.taxregulations that were issued in December 2021,which place greater restrictions on foreign taxes that are creditable against U.S.taxes on foreign-sourceincome.This notice allowed taxpayers to defer the application of these new regulations through the end of 2023.In December 2023,the IRS issued furtherguidance modifying this temporary relief period to the date that a notice or other guidance withdrawing or modifying the temporary relief is issued.TheCompany will recognize the impact,if any,in the period in which the temporary relief is withdrawn or modified.The Company has ongoing federal,state and international income tax audits in various jurisdictions and evaluates uncertain tax positions that may bechallenged by local tax authorities and not fully sustained.All U.S.federal income tax returns through December 31,2013 have been audited by the IRSand there are limited matters which the Company plans to appeal for years 2010 through 2013.One such matter relates to the IRS assessment of taxes onthe Company by imputing income on certain activities within one of our international operations,which is also under audit for the years 2014 through2018.There were U.S.Tax Court rulings during 2023 in favor of the IRS against unrelated third parties on similar matters.Despite the U.S.Tax Courtrulings,the Company continues to believe that the tax assessment against the Company is without merit.While there can be no assurances,the Companybelieves this matter will ultimately be decided in favor of the Company.The amount of tax plus interest for the years 2010 through 2018 is estimated to beapproximately$145,which is not included in the Companys uncertain tax positions.On August 16,2022,the Inflation Reduction Act of 2022(“IRA”)was enacted,which among other things,implements a 15%minimum tax on bookincome of certain large corporations effective for years beginning after December 31,2022.Based on the Companys analysis,as well as guidancepublished by the IRS,the IRA,and in particular the 15%minimum tax,did not have an impact on the Companys Consolidated Financial Statements.TheCompany will continue to evaluate the potential impact of this law as additional guidance and clarification becomes available.Additionally,on December 15,2022,the 27 member states of the European Union(“EU”)reached an agreement on a minimum level of taxation for certainlarge corporations to pay a minimum corporate tax rate of 15%in every jurisdiction in which they operate.This agreement,which is known as theMinimum Tax Directive(part of the“Pillar II Model Rules”),was supposed to be transposed into the laws of all EU member states by December 31,2023.Most member states complied while some were granted extensions of time.In addition,many other jurisdictions outside the EU have also committed toimplement this Directive while others have implemented a similar minimum tax regime consistent with the policy of the Pillar II Model Rules.ThisDirective does not have a material impact on the Companys Consolidated Financial Statements.29COLGATE-PALMOLIVE COMPANYManagements Discussion and Analysis of FinancialCondition and Results of Operations(Dollars in Millions Except Per Share Amounts)Three Months Ended March 31,20242023Income BeforeIncome TaxesProvision ForIncomeTaxesEffective IncomeTax RateIncome BeforeIncome TaxesProvision ForIncomeTaxesEffective IncomeTax RateAs Reported GAAP$967$238 24.6%$561$147 26.2 22 Global ProductivityInitiative36 6(0.3)6 1(0.1)ERISA litigation matter 267 55(1.8)Product recall costs 25 6 Non-GAAP$1,003$244 24.3%$859$209 24.3%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.The impact of non-GAAP items on the Companys effective tax rate represents the difference in the effective tax rate calculated with and without the non-GAAP adjustment on Income beforeincome taxes and Provision for income taxes.(1)(2)(1)(2)(1)(2)30COLGATE-PALMOLIVE COMPANYManagements Discussion and Analysis of FinancialCondition and Results of Operations(Dollars in Millions Except Per Share Amounts)Net Income Attributable to Colgate-Palmolive Company and Earnings Per ShareNet income attributable to Colgate-Palmolive Company in the first quarter of 2024 increased to$683 from$372 in the first quarter of 2023,and Earningsper common share on a diluted basis increased to$0.83 per share in the first quarter of 2024 from$0.45 in the first quarter of 2023.Net Income attributableto Colgate-Palmolive Company in the first quarter of 2024 included charges resulting from the 2022 Global Productivity Initiative.Net Income attributableto Colgate-Palmolive Company in the first quarter of 2023 included charges resulting from the ERISA litigation matter,product recall costs and chargesresulting from the 2022 Global Productivity Initiative.Excluding the items described above in both periods,as applicable,Net income attributable to Colgate-Palmolive Company in the first quarter of 2024increased 17%to$713 from$608 in the first quarter of 2023,and Earnings per common share on a diluted basis increased 18%to$0.86 in the first quarterof 2024 from$0.73 in the first quarter of 2023.Three Months Ended March 31,2024IncomeBeforeIncomeTaxesProvision ForIncomeTaxesNet IncomeIncludingNoncontrollingInterestsLess:IncomeAttributable toNoncontrollingInterestsNet IncomeAttributable ToColgate-PalmoliveCompanyDilutedEarnings PerShareAs Reported GAAP$967$238$729$46$683$0.83 2022 Global Productivity Initiative36 6 30 30 0.03 Non-GAAP$1,003$244$759$46$713$0.86 Three Months Ended March 31,2023IncomeBeforeIncomeTaxesProvision ForIncomeTaxesNet IncomeIncludingNoncontrollingInterestsLess:IncomeAttributable toNoncontrollingInterestsNet IncomeAttributable ToColgate-PalmoliveCompanyDilutedEarnings PerShareAs Reported GAAP$561$147$414$42$372$0.45 ERISA litigation matter267 55 212 212 0.25 Product recall costs25 6 19 19 0.02 2022 Global Productivity Initiative6 1 5 5 0.01 Non-GAAP$859$209$650$42$608$0.73 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.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.(1)(2)(1)(2)(1)(2)31COLGATE-PALMOLIVE COMPANYManagements Discussion and Analysis of FinancialCondition and Results of Operations(Dollars in Millions Except Per Share Amounts)Net Sales and Operating Profit by SegmentOral,Personal and Home CareNorth AmericaThree Months Ended March 31,20242023ChangeNet sales$997$958 4.0%Operating profit$222$193 15%of Net sales22.3 .10 bpsNet sales in North America increased 4.0%in the first quarter of 2024 to$997,driven by volume growth of 2.9%and net selling price increases of 1.2%,while foreign exchange was flat.Organic sales in North America increased 4.0%in the first quarter of 2024.Organic sales growth was led by the UnitedStates.The increase in organic sales in North America in the first quarter of 2024 versus the first quarter of 2023 was primarily due to increases in Oral Care andHome Care organic sales.The increase in Oral Care was primarily due to organic sales growth in the manual toothbrush category.The increase in HomeCare was primarily due to organic sales growth in the surface cleaners category,partially offset by organic sales declines in the hand dish category.Operating profit in North America increased 15%in the first quarter of 2024 to$222,or 220 bps to 22.3%as a percentage of Net sales.This increase inOperating profit as a percentage of Net sales was primarily due to an increase in Gross profit(260 bps)as a percentage of Net sales.This increase in Grossprofit was primarily due to cost savings from the Companys funding-the-growth initiatives(190 bps),higher pricing and lower raw and packaging materialcosts(30 bps).32COLGATE-PALMOLIVE COMPANYManagements Discussion and Analysis of FinancialCondition and Results of Operations(Dollars in Millions Except Per Share Amounts)Latin AmericaThree Months Ended March 31,20242023ChangeNet sales$1,253$1,075 16.5%Operating profit$405$315 29%of Net sales32.3).300 bpsNet sales in Latin America increased 16.5%in the first quarter of 2024 to$1,253,driven by volume growth of 6.2%and net selling price increases of19.7%,partially offset by negative foreign exchange of 9.4%.Organic sales in Latin America increased 25.9%in the first quarter of 2024.Organic salesgrowth was led by Argentina,Mexico and Brazil.The increase in organic sales in Latin America in the first quarter of 2024 versus the first quarter of 2023 was due to increases in Oral Care,Personal Careand Home Care organic sales.The increase in Oral Care was primarily due to organic sales growth in the toothpaste,manual toothbrush and mouthwashcategories.The increase in Personal Care was primarily due to organic sales growth in the underarm protection and bar soap categories.The increase inHome Care was primarily due to organic sales growth in the surface cleaner,fabric softener and hand dish categories.Operating profit in Latin America increased 29%in the first quarter of 2024 to$405,or 300 bps to 32.3%as a percentage of Net sales.This increase inOperating profit as a percentage of Net sales was primarily due to an increase in Gross profit(420 bps),partially offset by an increase in Other(income)expense,net(100 bps),both as a percentage of Net sales.This increase in Gross profit was due to higher pricing and cost savings from the Companysfunding-the-growth initiatives(230 bps),partially offset by significantly higher raw and packaging material costs(480 bps),which included foreignexchange transaction costs.This increase in Other(income)expense,net was primarily due to losses on investments.Europe Three Months Ended March 31,20242023ChangeNet sales$711$650 9.5%Operating profit$144$116 24%of Net sales20.3.8%0 bpsNet sales in Europe increased 9.5%in the first quarter of 2024 to$711,driven by volume growth of 3.1%,net selling price increases of 4.1%and positiveforeign exchange of 2.3%.Organic sales in Europe increased 7.2%in the first quarter of 2024.Organic sales growth was led by the United Kingdom,Germany and France.The increase in organic sales in Europe in the first quarter of 2024 versus the first quarter of 2023 was primarily due to an increase in Oral Care organicsales.The increase in Oral Care was primarily due to organic sales growth in the toothpaste category.Operating profit in Europe increased 24%in the first quarter of 2024 to$144,or 250 bps to 20.3%as a percentage of Net sales.This increase in Operatingprofit as a percentage of Net sales was due to an increase in Gross profit(340 bps),partially offset by an increase in Selling,general and administrativeexpenses(50 bps),both as a percentage of Net sales.This increase in Gross profit was due to cost savings from the Companys funding-the-growthinitiatives(270 bps),higher pricing and favorable mix(120 bps),partially offset by higher raw and packaging material costs(200 bps).This increase inSelling,general and administrative expenses was due to increased advertising investment(110 bps),partially offset by lower overhead expenses(60 bps).33COLGATE-PALMOLIVE COMPANYManagements Discussion and Analysis of FinancialCondition and Results of Operations(Dollars in Millions Except Per Share Amounts)Asia Pacific Three Months Ended March 31,20242023ChangeNet sales$727$738(1.5)%Operating profit$207$202 2%of Net sales28.5.40 bpsNet sales in Asia Pacific decreased 1.5%in the first quarter of 2024 to$727,driven by volume declines of 2.9%and negative foreign exchange of 3.0%,partially offset by net selling price increases of 4.4%.Organic sales in Asia Pacific increased 1.5%in the first quarter of 2024.Organic sales growth wasled by India,the Philippines and Australia,partially offset by organic sales declines in the Greater China region.The increase in organic sales in Asia Pacific in the first quarter of 2024 versus the first quarter of 2023 was primarily due to increases in Oral Care andPersonal Care organic sales.Operating profit in Asia Pacific increased 2%in the first quarter of 2024 to$207,or 110 bps to 28.5%as a percentage of Net sales.This increase inOperating profit as a percentage of Net sales was primarily due to an increase in Gross profit(160 bps),partially offset by an increase in Selling,generaland administrative expenses(80 bps),both as a percentage of Net sales.This increase in Gross profit was primarily due to cost savings from the Companysfunding-the-growth initiatives(210 bps)and higher pricing,partially offset by higher raw and packaging material costs(190 bps).This increase in Selling,general and administrative expenses was due to increased advertising investment(80 bps).Africa/Eurasia Three Months Ended March 31,20242023ChangeNet sales$276$288(4.5)%Operating profit$66$68(3)%of Net sales23.9#.60 bpsNet sales in Africa/Eurasia decreased 4.5%in the first quarter of 2024 to$276,driven by negative foreign exchange of 20.7%,partially offset by volumegrowth of 3.9%and net selling price increases of 12.2%.Organic sales in Africa/Eurasia increased 16.2%in the first quarter of 2024.Organic sales growthwas led by Trkiye and Nigeria.The increase in organic sales in Africa/Eurasia in the first quarter of 2024 versus the first quarter of 2023 was primarily due to an increase in Oral Careorganic sales.The increase in Oral Care was primarily due to organic sales growth in the toothpaste category.Operating profit in Africa/Eurasia decreased 3%in the first quarter of 2024 to$66,while as a percentage of Net sales it increased 30 bps to 23.9%.Thisincrease in Operating profit as a percentage of Net sales was primarily due to an increase in Gross profit(210 bps),partially offset by an increase in Selling,general and administrative expenses(80 bps),both as a percentage of Net sales.This increase in Gross profit was primarily due to higher pricing,costsavings from the Companys funding-the-growth initiatives(320 bps)and favorable mix(80 bps),partially offset by significantly higher raw and packagingmaterial costs(590 bps),which included foreign exchange transaction costs.This increase in Selling,general and administrative expense was primarily dueto higher overhead expenses(130 bps),partially offset by decreased advertising investment(50 bps).34COLGATE-PALMOLIVE COMPANYManagements Discussion and Analysis of FinancialCondition and Results of Operations(Dollars in Millions Except Per Share Amounts)Hills Pet Nutrition Three Months Ended March 31,20242023ChangeNet sales$1,102$1,061 3.9%Operating profit$199$183 9%of Net sales18.0.2 bpsNet sales for Hills Pet Nutrition increased 3.9%in the first quarter of 2024 to$1,102,driven by net selling price increases of 8.2%,partially offset byvolume declines of 3.9%and negative foreign exchange of 0.3%.Organic sales in Hills Pet Nutrition increased 4.2%in the first quarter of 2024.Organicsales growth was led by the United States and Europe.The increase in organic sales in the first quarter of 2024 was primarily due to organic sales growth in the wellness and therapeutic categories.Operating profit in Hills Pet Nutrition increased 9%in the first quarter of 2024 to$199,or 80 bps to 18.0%.This increase in Operating profit as apercentage of Net sales was primarily due to an increase in Gross profit(390 bps),partially offset by an increase in Selling,general and administrativeexpenses(240 bps),both as a percentage of Net sales.This increase in Gross profit was due to higher pricing and cost savings from the Companysfunding-the-growth initiatives(310 bps),partially offset by significantly higher raw and packaging material costs(310 bps).This increase in Selling,general and administrative expense was largely due to increased advertising investment(220 bps).Corporate Three Months Ended March 31,20242023ChangeOperating profit(loss)$(196)$(168)17%Operating profit(loss)related to Corporate was$(196)in the first quarter of 2024 as compared to$(168)in the first quarter of 2023.In the first quarter of2024,Corporate Operating profit(loss)included charges of$36 resulting from the 2022 Global Productivity Initiative.In the first quarter of 2023,Corporate Operating profit(loss)included product recall costs of$25 and charges resulting from the 2022 Global ProductivityInitiative of$5.35COLGATE-PALMOLIVE COMPANYManagements Discussion and Analysis of FinancialCondition and Results of Operations(Dollars in Millions Except Per Share Amounts)Restructuring and Related Implementation Charges On January 27,2022,the Board approved the 2022 Global Productivity Initiative.The program is intended to reallocate resources towards the Companysstrategic priorities and faster growth businesses,drive efficiencies in the Companys operations and streamline the Companys supply chain to reducestructural costs.Implementation of the 2022 Global Productivity Initiative,which is expected to be substantially completed by mid-year 2024,is estimated to result incumulative pre-tax charges,once all phases are approved and implemented,in the range of$200 to$240($170 to$200 aftertax),which is currentlyestimated to be comprised of the following:employee-related costs,including severance,pension and other termination benefits(80%);asset-related costs,primarily accelerated depreciation and asset write-downs(10%);and other charges(10%),which include contract termination costs,consisting primarily ofimplementation-related charges resulting directly from exit activities and the implementation of new strategies.It is estimated that approximately 80%to90%of the charges will result in cash expenditures.Annualized pre-tax savings are projected to be in the range of$90 to$110($70 to$85 aftertax),onceall projects are approved and implemented.Savings achieved since the implementation of the 2022 Global Productivity Initiative were approximately$107pretax($84 aftertax).It is expected that the cumulative pretax charges,once all projects are approved and implemented,will relate to initiatives undertaken in North America(5%),Latin America(10%),Europe(45%),Asia Pacific(5%),Africa/Eurasia(10%),Hills Pet Nutrition(10%)and Corporate(15%).For the three months ended March 31,2024,charges resulting from the 2022 Global Productivity Initiative were$36 pretax($30 aftertax).For the threemonths ended March 31,2023,charges resulting from the 2022 Global Productivity Initiative were$6 pretax($5 aftertax).Three Months Ended March 31,20242023Selling,general and administrative expenses$1$Other(income)expense,net35 5 Non-service related postretirement costs 1 Total 2022 Global Productivity Initiative charges,pretax$36$6 Total 2022 Global Productivity Initiative charges,aftertax$30$5 Restructuring and related implementation charges are recorded in the Corporate segment as these initiatives are predominantly centrally directed andcontrolled and are not included in internal measures of segment operating performance.Total charges incurred for the 2022 Global Productivity Initiative relate to initiatives undertaken by the following reportable operating segments andCorporate:Three Months Ended March 31,Program-to-date AccumulatedCharges 20242023North America%7%9%Latin America%Europe852%Asia Pacific%6%9rica/Eurasia1%8%Hills Pet Nutrition14%Corporate2%Total100006COLGATE-PALMOLIVE COMPANYManagements Discussion and Analysis of FinancialCondition and Results of Operations(Dollars in Millions Except Per Share Amounts)Since the inception of the 2022 Global Productivity Initiative,the Company has incurred cumulative pretax charges of$178($142 aftertax)in connectionwith the implementation of various projects as follows:Cumulative Charges as of March 31,2024Employee-Related Costs$160 Asset Impairments1 Other17 Total$178 The following table summarizes the activity for the restructuring and related implementation charges discussed above and the related accruals:Three Months Ended March 31,2024 Employee-Related Costs Incremental Depreciation Asset ImpairmentsOtherTotalBalance at December 31,2023$10$1$11 Charges34 2 36 Cash Payments(5)(1)(6)Charges against assets Foreign exchange Balance at March 31,2024$39$2$41 Employee-Related Costs primarily include severance and other termination benefits and are calculated based on long-standing benefit practices,writtenseverance policies,local statutory requirements and,in certain cases,voluntary termination arrangements.Employee-Related Costs also include pensionenhancements,which are reflected as Charges against assets within Employee-Related Costs in the preceding table,as the corresponding balance sheetamounts are reflected as a reduction of pension assets or an increase in pension liabilities.For the three months ended March 31,2024,there were nopension enhancements included in Charges against assets within Employee-Related Costs.37COLGATE-PALMOLIVE COMPANYManagements Discussion and Analysis of FinancialCondition and Results of Operations(Dollars in Millions Except Per Share Amounts)Non-GAAP Financial MeasuresThis Quarterly Report on Form 10-Q discusses certain financial measures on both a GAAP and a non-GAAP basis.The Company uses the non-GAAPfinancial measures described below internally in its budgeting process,to evaluate segment and overall operating performance and as a factor indetermining compensation.The Company believes that these non-GAAP financial measures are useful in evaluating the Companys underlying businessperformance and trends;however,this information should be considered as supplemental in nature and is not meant to be considered in isolation or as asubstitute for the related financial information prepared in accordance with GAAP.In addition,these non-GAAP financial measures may not be the same assimilar measures presented by other companies.Net sales growth(GAAP)and organic sales growth(Net sales growth excluding the impact of foreign exchange,acquisitions and divestments)(non-GAAP)are discussed in this Quarterly Report on Form 10-Q.Management believes the organic sales growth measure provides investors and analysts withuseful supplemental information regarding the Companys underlying sales trends by presenting sales growth excluding the external factor of foreignexchange,as well as the impact of acquisitions and divestments,as applicable.A reconciliation of organic sales growth to Net sales growth for the threemonths ended March 31,2024 is provided below.Selling,general and administrative expenses,Other(income)expense,net,Operating profit,Operating profit margin,Non-service related postretirementcosts,Effective income tax rate,Net income attributable to Colgate-Palmolive Company and Earnings per share on a diluted basis are discussed in thisQuarterly Report on Form 10-Q both on a GAAP basis and excluding,as applicable,charges resulting from the ERISA litigation matter,the 2022 GlobalProductivity Initiative and product recall costs.These non-GAAP financial measures exclude items that,either by their nature or amount,managementwould not expect to occur as part of the Companys normal business on a regular basis,such as restructuring charges,charges for certain litigation and taxmatters,acquisition-related costs,gains and losses from certain divestitures and certain other unusual,non-recurring items.Investors and analysts use thesefinancial measures in assessing the Companys business performance,and management believes that presenting these financial measures on a non-GAAPbasis provides them with useful supplemental information to enhance their understanding of the Companys 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-GAAPfinancial measures to the most directly comparable GAAP financial measures for the three months ended Marc
2024-05-11
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1 Vipshop Reports Unaudited First Quarter 2024 Financial Results Conference Call to Be Held at 7:30.
2024-05-11
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MAY 8TH,2024EARNINGS CALL Q1 2024P2WEMBLEY CALLING!BVB IN CHAMPIONS LEAGUE FINALSQ1 2024 FULLY IN LINE WITH EXPECTATIONS P3AGENDA01.BRAND UPDATE Q1 202403.OUTLOOK 202402.FINANCIAL UPDATE Q1 2024MAIN HIGHLIGHTSQ1 2024 FULLY INLINE WITH EXPECTATIONSP5ONGOING MOMENTUM IN PERFORMANCE BUILDING UP TRACTION WITH SPORTSTYLE NEWNESSMAKING PROGRESS IN BRAND ELEVATIONGREAT PRODUCT NEWNESS IN FOOTBALLQ1 PHENOMENAL DROPP6GROWING FROM STRENGTH TO STRENGTHFUTURE 7SPECIAL EDITION NEYMAR JNRHIGHEST MARKET SHARE GAINFOOTBALL FOOTWEAR FRANCHISE IN Q1P7LOOKING GREAT AT OUR RETAIL PARTNERCONTINUOUS EFFORTS TO BE THE BEST PARTNER IN THE INDUSTRYP8STRONG COLLABORATIONS WITH CLUBS4TH KIT RELEASEMAN CITY YEAR OF THE DRAGON AC MILANPLEASURESP9THEO HERNANDEZWELCOME TO THE FAMP10WESTON MCKENNIEP11STRENGTHENING FOOTBALL PRESENCE IN THE U.S.GREAT PRODUCT NEWNESS IN HOOPSKEY DROPS IN Q1 2024SCOOT ZEROSALL PRO NITRO PEMB.03 SPARKSTEWIE 3P12ONGOING HEAT WITH LAMELOMB.03 SPARKP13BRINGING THE HEAT OFF-COURTUPCOMING LAUNCH IN MAY 2024P14LA FRANCTAPPING INTO AMATEUR BASKETBALLPARTNERSHIP WITH NXT PROP15ALL PRO NITRO PEALL PRO NITROGREAT PRODUCT NEWNESS IN RUNNINGACROSS ALL FRANCHISES SUPPORTING ALL TYPES OF RUNNERSP16FOREVERRUN NITROVELOCITY NITRO 3DEVIATE NITRO 2FAST-R NITRO ELITE 2DEVIATE NITRO ELITE 2RACE DAY FRANCHISESEVERYDAY RUNNING FRANCHISESRACE-DAY PRIORITY:FAST-R2AWARD WINNING SHOEP17HENDRIK PFEIFFER#3 IN HOUSTON2:07:14 IMPROVED PBDEVIATE NITRO ELITE 3 NEWNESS COMING IN AH24P18VIVIAN CHERUIYOTPARIS MARATHON 2024 3RD PLACE2:21:46 PBEDNA KIPLAGATBOSTON MARATHON 2024 3RD PLACE2:23:21DAKOTAH LINDWURMU.S.OLYMPIC TRIALS 20243RD PLACE2:25:31 PBFIONA OKEEFFEU.S.OLYMPIC TRIALS 20241ST PLACE /MARATHON DEBUT 2:22:10PODIUM AT MAJORSPODIUM AT U.S.OLYMPIC TRIALSP19ENTERED TOP 10 BRANDS IN WUXI MARATHONONE OF CHINAS LARGEST MARATHONS WITH 33K RUNNERS JOININGP20OWNING THE GRID IN CHINAFASHION SHOW LINKED TO FIRST SUPER BRAND DAY WITH TMALLALL EYES ON FERRARI IN MIAMIGP RACE COLLECTIONP21ONGOING MOMENTUMIN PERFORMANCEP22P23PALERMOCONTINUOUS ACCELERATION IN TERRACEPALERMODELIVERING NEWNESS THROUGHOUT Q1P25SUEDE XLCONTINUOUS ACCELERATION IN SKATE TRENDP26LOOKING GREAT AT OUR RETAIL PARTNERCONTINUOUS EFFORTS TO BE THE BEST PARTNER IN THE INDUSTRYP27EASY RIDERLAUNCHING AND SCALING NEW FRANCHISEGREAT OPPORTUNITYADDITIONAL NEW FRANCHISES LAUNCHING IN TERRACE&SKATE TRENDSKATETERRACEINDOORDELPHINPALERMO MODAARMY TRAINERARIZONAROMASUEDEPUMA-180PALERMOEASY RIDERSUEDE XLP29RE:SUEDE CAPSULE LAUNCHCONTINUOUS INVESTMENT IN SUSTAINABILITYFENTY X PUMA AVANTI PONY HAIRGREAT CONSUMER ENGAGEMENTP30FENTY X PUMACREEPER PHATTYP31CREATING HEAT AND HALOLEADING INLOW PROFILE P32SPEEDCATINHALEMOSTROP33INCUBATING LOW PROFILE TREND SINCE 12 MONTHSFROM MULTIPLE ANGLESPARIS FASHION WEEK03/2023PARIS FASHION WEEK09/2023NY FASHION WEEK02/2024F1 GP CHINA04/2024A$AP ROCKY02/2024P34SPEEDCAT BUILDING LOW PROFILE TREND IN STREET-FASHION SPACEP35SPEEDCAT OPEN YY COLLABORATION IN Q1 2024P36MOSTROBUILDING LOW PROFILE TREND IN FASHION SPACEECSTASY DROPOTTOLINGERP37INHALEA$AP ROCKY MOTORSPORT ACTIVATIONP38LATEST BRAND AMBASSADOR JOINING PUMAWELCOMEHENRY LAUSTRENGTHENING ROSTER IN CHINA8.4M12.5M9.5MP39BUILDING UP TRACTION WITH SPORTSTYLE NEWNESSEUROSCOPAOLYMPICSPARALYMPICS2024:YEAR OF SPORTFOREVER.FASTER.P402024:YEAR OF SPEEDFOREVER.FASTER.P41P42PRESENCE IN UPCOMING FOOTBALL EVENTSCOPA AMERICA&EURO CUP4 TEAMSRE:FIBREMATCHBALL1 TEAMJAMAICA TRACK&FIELD KIT REVEALP43P44TRACK&FIELD KIT REVEAL17 FEDERATIONS WEARING PUMA IN 2024P45FIREGLOWKEY COLOURWAYFIRST GLOBALBRAND CAMPAIGNIN 10 YEARSP46P47CONSISTENT PERFORMANCE PLATFORMACROSS MAJOR SPORTS CATEGORIESP48P49CONSISTENT IMPLEMENTATIONACROSS DIFFERENT CHANNELSVIDEOSend messagepumaSOCIAL MEDIAOUT-OF-HOMEE-COMP50MAKING PROGRESS IN BRAND ELEVATIONMAIN HIGHLIGHTSQ1 2024 FULLY INLINE WITH EXPECTATIONSP51ONGOING MOMENTUM IN PERFORMANCE BUILDING UP TRACTION WITH SPORTSTYLE NEWNESSMAKING PROGRESS IN BRAND ELEVATION01.BRAND UPDATE Q1 202403.OUTLOOK 202402.FINANCIAL UPDATE Q1 2024AGENDAQ1 2024 SALES BREAKDOWNSALES VS LAST YEAR(IN%,CURRENCY ADJUSTED)BY CHANNELWHOLESALE-2.9%TOTAL DTC 13.5%BRICK&MORTAR 15.4%E-COM 10.4%TOTAL 0.5%TOTAL:EUR 2,102 MBY DIVISIONFOOTWEAR 3.1%APPAREL-2.4CESSORIES-3.2%TOTAL 0.5%TOTAL:EUR 2,102 MBY REGIONEMEA 0.0%AMERICAS 1.0%APAC 0.6%TOTAL 0.5%TOTAL:EUR 2,102 MP53Q1 2024 SALES BREAKDOWNQUARTERLY SALES BY MARKET VS LAST YEAR(IN%,CURRENCY ADJUSTED)Q1 2023Q2 2023Q3 2023Q4 2023Q1 2024EEA 23.4% 9.0%-1.4%-9.2%-3.5MEA 33.5% 111.4% 63.6% 11.6% 15.1%NORTH AMERICA-18.6%-16.7%-12.4%-10.9%-2.7%LATIN AMERICA 54.6% 26.4% 35.2% 4.7%EXCL.ARS DEVALUATION 7.8%GREATER CHINA 9.8% 36.2% 8.6% 31.0% 6.8%APAC(EXCL.GREATER CHINA) 40.9% 19.6% 2.8%-5.9%-3.1%TOTAL 14.4% 11.1% 6.0%-4.0% 0.5%P54OPERATING PERFORMANCEP55Q1 2024 OPERATING PERFORMANCESUMMARY VS LAST YEAR(REPORTED CURRENCY)PUMA GROUPQ1 2023Q1 2024DEVIATIONSALES2,187.72,102.3-3.9%(in EUR M)( 0.5)GROSS PROFIT1,016.9999.0-1.8%(in EUR M/%of Sales)(46.5%)(47.5%)( 1.0%pts)*Including royalty and commission incomeIMPACTCURRENCY EFFECTSPROMOTIONSSOURCING PRICESFREIGHTCHANNEL MIXREGIONAL MIXPRODUCT MIXTOTALQ1P56PUMA GROUPQ1 2023Q1 2024DEVIATIONSALES2,187.72,102.3-3.9%(in EUR M)( 0.5)GROSS PROFIT1,016.9999.0-1.8%(in EUR M/%of Sales)(46.5%)(47.5%)( 1.0%pts)OPEX*-841.4-840.0 0.2%(in EUR M/%of Sales)(-38.8%)(-40.2%)(-1.5%pts)Q1 2024 OPERATING PERFORMANCESUMMARY VS LAST YEAR(REPORTED CURRENCY)*Including royalty and commission incomeIMPACT ON OPEX%MARKETINGCHANNEL MIXOTHER OPEXQ1TOTALP57Q1 2024 OPERATING PERFORMANCESUMMARY VS LAST YEAR(REPORTED CURRENCY)PUMA GROUPQ1 2023Q1 2024DEVIATIONSALES2,187.72,102.3-3.9%(in EUR M)( 0.5)GROSS PROFIT1,016.9999.0-1.8%(in EUR M/%of Sales)(46.5%)(47.5%)( 1.0%pts)OPEX*-841.4-840.0 0.2%(in EUR M/%of Sales)(-38.8%)(-40.2%)(-1.5%pts)EBIT175.5159.0-9.4%(in EUR M/%of Sales)(8.0%)(7.6%)(-0.5%pts)EBITDA260.6240.5-7.7%(in EUR M/%of Sales)(11.9%)(11.4%)(-0.5%pts)NET INCOME117.387.3-25.5%(in EUR M/%of Sales)(5.4%)(4.2%)(-1.2%pts)*Including royalty and commission incomeP58BALANCE SHEET KPISVS LAST YEAR(IN EUR M,REPORTED CURRENCY)PUMA GROUPQ1 2023Q1 2024DEVIATIONINVENTORIES2,147.31,785.6-16.8%TRADE RECEIVABLES1,276.91,432.5 12.2%TRADE PAYABLES1,282.71,222.8-4.7%WORKING CAPITAL1,751.51,845.7 5.4%P59SALES&EBIT IN LINE WITH EXPECTATIONSGROSS PROFIT MARGIN IMPROVEMENTHEALTHY INVENTORY LEVELSP6001.BRAND UPDATE Q1 202403.OUTLOOK 202402.FINANCIAL UPDATE Q1 2024AGENDASALES&EBIT OUTLOOK 2024Q1 2024 FULLY IN LINE WITH EXPECTATIONSSALES(IN EUR M)EBIT(IN EUR M/%OF NET SALES)8,602622(7.2%)FY 2023MID SINGLE-DIGIT GROWTH(CURRENCY-ADJUSTED)BETWEEN 620 700 MILLIONOUTLOOK 2024P62CONTINUING TO FUEL MOMENTUM IN PERFORMANCEWITH INNOVATION AND PRODUCT NEWNESSP63NEW PRODUCTS LAUNCHING IN ALL SPORT CATEGORIESMAJOR ANNOUNCEMENTSNEW PARTNERSA LEADING NATIONAL TEAMANOTHER CHAMPIONS LEAGUE TEAMA LEADING LEAGUEULTRA FASTEST BOOTMB.04 FASTEST DESIGN DEVIATE NITRO FASTEST SHOEBUILDING UP FURTHER TRACTION IN SPORTSTYLEWITH DESIGN AND PRODUCT NEWNESSP64DRIVING BRAND ELEVATIONTHROUGH CONSISTENT INVESTMENTP65FURTHER GLOBAL BRAND CAMPAIGN ROLL-OUTMAJOR BRAND AMBASSADOR ANNOUNCEMENTSNEW SPORTSTYLE COMMUNICATION STRATEGYELEVATED INFLUENCE STRATEGYP66BEST TEAM IN THE INDUSTRY0%COMPLACENCYTHE CHALLENGERP67Q&AP68
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JOYY Reports First Quarter 2024 Unaudited Financial ResultsMay 28,2024SINGAPORE,May 29,2024(GLOBE NE.
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Investor PresentationMay 20242This presentation contains forward-looking statements.These statements.
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Exhibit 99.1 T Group Limited Reports Unaudited First Quarter of 2024 Financial Results SINGAPORE,May.
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UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549FORM 10-Q QUARTERLY REPORT PURSU.
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