Restructuring and Related Implementation Charges

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

Implementation of the 2012 Restructuring Program is projected to result in cumulative pretax charges, once all phases are approved and implemented, totaling between $1,100 and $1,250 ($775 and $875 aftertax), which are currently estimated to be comprised of the following categories: Employee-Related Costs, including severance, pension and other termination benefits (50%); asset-related costs, primarily Incremental Depreciation and Asset Impairments (15%); and Other charges, which include contract termination costs, consisting primarily of implementation-related charges resulting directly from exit activities (20%) and the implementation of new strategies (15%). Anticipated pretax charges for 2014 are expected to amount to approximately $275 to $325 ($200 to $230 aftertax). Over the course of the 2012 Restructuring Program, it is estimated that approximately 75% 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 North America (15%), Europe/South Pacific (20%), Latin America (5%), Asia (5%), Africa/Eurasia (5%), Hill’s Pet Nutrition (10%) and Corporate (40%), which includes substantially all of the costs related to the implementation of new strategies, noted above, on a global basis. It is expected that by the end of 2016, the 2012 Restructuring Program will reduce the Company’s global employee workforce by approximately 6% from the 2012 level of approximately 38,000.

For the years ended December 31, 2013 and 2012, restructuring and implementation-related charges are reflected in the Consolidated Statements of Income as follows:



	2013		2012
Cost of sales	$	32	$	2
Selling, general and administrative expenses	137		6
Other (income) expense, net	202		81
Total 2012 Restructuring Program charges, pretax	$	371	$	89

Total 2012 Restructuring Program charges, aftertax	$	278	$	70

Restructuring and related implementation charges in the preceding table are recorded in the Corporate segment as these initiatives are predominantly centrally directed and controlled and are not included in internal measures of segment operating performance. Total charges for the 2012 Restructuring Program for the year ended December 31, 2013 relate to initiatives undertaken in North America (11%), Europe/South Pacific (28%), Latin America (4%), Africa/Eurasia (7%), Hill’s Pet Nutrition (8%) and Corporate (42%). Total charges for the 2012 Restructuring Program for the year ended December 31, 2012 relate to initiatives undertaken in North America (2%), Europe/South Pacific (55%), Africa/Eurasia (2%), Hill’s Pet Nutrition (3%) and Corporate (38%). Total program-to-date accumulated charges for the 2012 Restructuring Program relate to initiatives undertaken in North America (10%), Europe/South Pacific (33%), Latin America (3%), Africa/Eurasia (6%), Hill’s Pet Nutrition (7%) and Corporate (41%).

Since the inception of the 2012 Restructuring Program in the fourth quarter of 2012, the Company has incurred pretax cumulative charges of $460 ($348 aftertax) in connection with the implementation of various projects as follows:



	Cumulative Charges
	as of December 31, 2013
Employee-Related Costs	$	222
Incremental Depreciation	26
Asset Impairments	1
Other	211
Total	$	460

The majority of costs incurred since inception relate to the following projects: restructuring how the Company provides retirement benefits to its U.S.-based employees by shifting them from the Company’s defined benefit retirement plans to the Company’s defined contribution plan; the closing of the Morristown, New Jersey personal care facility; the simplification and streamlining of the Company’s research and development capabilities and oral care supply chain, both in Europe; other exit costs related to office consolidation; and the restructuring of certain commercial operations in advance of implementing an overall hubbing strategy.

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



	Employee-Related Costs			Incremental Depreciation			Asset Impairments			Other			Total
Balance at January 1, 2012	$	—		$	—		$	—		$	—		$	—
Charges	78			—			—			11			89
Cash payments	(1		)	—			—			(4		)	(5		)
Charges against assets	—			—			—			—			—
Foreign exchange	7			—			—			(2		)	5
Balance at December 31, 2012	$	84		$	—		$	—		$	5		$	89
Charges	144			26			1			200			371
Cash payments	(97		)	—			—			(72		)	(169		)
Charges against assets	(17		)	(26		)	(1		)	—			(44		)
Foreign exchange	2			—			—			—			2
Other	—			—			—			(91		)	(91		)
Balance at December 31, 2013	$	116		$	—		$	—		$	42		$	158

Employee-related costs primarily include severance and other termination benefits and are calculated based on long-standing benefit practices, local statutory requirements and, in certain cases, voluntary termination arrangements. Employee-related costs also include pension and other retiree benefit enhancements amounting to $17 for the year ended December 31, 2013 which are reflected as Charges against assets within Employee-related costs in the preceding tables, as the corresponding balance sheet amounts are reflected as a reduction of pension assets or an increase in pension and other retiree benefit liabilities (see Note 10, Retirement Plans and Other Retiree Benefits).

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

Other charges consist primarily of charges resulting directly from exit activities and the implementation of new strategies as a result of the 2012 Restructuring Program. These charges for the years ended December 31, 2013 and 2012 included third-party incremental costs related to the development and implementation of new business and strategic initiatives of $50 and $8, respectively, and contract termination costs and charges resulting directly from exit activities of $34 and $3, respectively, directly related to the 2012 Restructuring Program. These charges were expensed as incurred. Also included in Other charges for the year ended December 31, 2013 are other exit costs of $25 related to office space consolidation and a curtailment charge of $91 related to changes to the Company’s U.S. defined benefit retirement plans (see Note 10, Retirement Plans and Other Retiree Benefits).