Restructuring and Related Implementation Charges

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

On October 23, 2014, the Company’s Board of Directors (the “Board”) approved an expansion of the Global Growth and Efficiency Program to take advantage of additional savings opportunities.

On October 29, 2015, the Board approved the reinvestment of the funds from the sale of the Company’s laundry detergent business in the South Pacific to expand the Global Growth and Efficiency Program and extend it for one year through December 31, 2017. The Board approved the implementation plan for this expansion on March 10, 2016.

Building on the Company’s successful implementation of the Global Growth and Efficiency Program to date, on October 26, 2017, the Board approved an expansion of the Global Growth and Efficiency Program and an extension of the program through December 31, 2019 to take advantage of additional opportunities to streamline the Company’s operations.

Initiatives under the Global Growth and Efficiency Program continue to fit within the program’s three focus areas of expanding commercial hubs, extending shared business services and streamlining global functions and optimizing the global supply chain and facilities.

As a result of the expansion, cumulative pretax charges resulting from the Global Growth and Efficiency Program, once all phases are approved and implemented, are now estimated to be in the range of $1,730 to $1,885 ($1,280 to $1,380 aftertax) as compared to the previous estimate of $1,500 to $1,585 ($1,120 to $1,170 aftertax). The Company now anticipates that pretax charges for 2017 will approximate $340 to $380 ($250 to $280 aftertax) as compared to the previous estimate of $275 to $360 ($210 to $260 aftertax). It is expected that substantially all charges resulting from the Global Growth and Efficiency Program will be incurred by December 31, 2019.

The pretax charges resulting from the Global Growth and Efficiency Program are currently estimated to be comprised of the following categories: Employee-Related Costs, including severance, pension and other termination benefits (50%); asset-related costs, primarily Incremental Depreciation and Asset Impairments (10%); and Other charges, which include contract termination costs, consisting primarily of related implementation charges resulting directly from exit activities (20%) and the implementation of new strategies (20%). Over the course of the Global Growth and Efficiency Program, it is currently estimated that approximately 80% of the charges will result in cash expenditures.

The Company currently expects that the cumulative pretax charges, once all projects are approved and implemented, will relate to initiatives undertaken in North America (15%), Europe (20%), Latin America (5%), Asia Pacific (5%), Africa/Eurasia (5%), Hill’s Pet Nutrition (10%) and Corporate (40%), which includes substantially all of the costs related to the implementation of new strategies, noted above, on a global basis. The Company now expects that, when it has been fully implemented, the Global Growth and Efficiency Program will contribute a net reduction of approximately 3,800 to 4,400 positions from the Company’s global employee workforce.

For the three and nine months ended September 30, 2017 and 2016, restructuring and related implementation charges are reflected in the Condensed Consolidated Statements of Income as follows:



	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2017		2016		2017		2016
Cost of sales	$	16	$	11	$	51	$	31
Selling, general and administrative expenses	22		9		60		49
Other (income) expense, net	20		22		135		76
Total Global Growth and Efficiency Program charges, pretax	$	58	$	42	$	246	$	156

Total Global Growth and Efficiency Program charges, aftertax	$	39	$	32	$	185	$	114

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

Total charges incurred for the Global Growth and Efficiency Program relate to initiatives undertaken by the following reportable operating segments:



	Three Months Ended				Nine Months Ended				Program-to-date
	September 30,				September 30,				Accumulated Charges
	2017		2016		2017		2016
North America	27	%	30	%	23	%	32	%	18	%
Latin America	2	%	3	%	3	%	5	%	3	%
Europe	(11	)%	19	%	29	%	10	%	23	%
Asia Pacific	7	%	4	%	4	%	6	%	3	%
Africa/Eurasia	2	%	12	%	2	%	14	%	6	%
Hill’s Pet Nutrition	9	%	5	%	5	%	8	%	7	%
Corporate	64	%	27	%	34	%	25	%	40	%

Since the inception of the Global Growth and Efficiency Program in the fourth quarter of 2012, the Company has incurred cumulative pretax charges of $1,474 ($1,092 aftertax) in connection with the implementation of various projects as follows:



	Cumulative Charges
	as of September 30, 2017
Employee-Related Costs	$	594
Incremental Depreciation	88
Asset Impairments	29
Other	763
Total	$	1,474

The majority of costs incurred since inception relate to the following projects: the implementation of the Company’s overall hubbing strategy; the extension of shared business services and streamlining of global functions; the consolidation of facilities; 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; redesigning the European commercial organization; restructuring how the Company will provide future retirement benefits to substantially all of the U.S.-based employees participating in the Company’s defined benefit retirement plan by shifting them to the Company’s defined contribution plan.

The following tables summarize the activity for the restructuring and related implementation charges discussed above and the related accruals:



	Three Months Ended September 30, 2017
	Employee-Related Costs			Incremental Depreciation			Asset Impairments		Other			Total
Balance at June 30, 2017	$	138		$	—		$	—	$	116		$	254
Charges	21			2			—		35			58
Cash payments	(16		)	—			—		(42		)	(58		)
Charges against assets	(15		)	(2		)	—		—			(17		)
Foreign exchange	—			—			—		—			—
Balance at September 30, 2017	$	128		$	—		$	—	$	109		$	237



	Nine Months Ended September 30, 2017
	Employee-Related Costs			Incremental Depreciation			Asset Impairments			Other			Total
Balance at December 31, 2016	$	56		$	—		$	—		$	125		$	181
Charges	129			8			2			107			246
Cash payments	(43		)	—			—			(124		)	(167		)
Charges against assets	(17		)	(8		)	(2		)	—			(27		)
Foreign exchange	3			—			—			1			4
Balance at September 30, 2017	$	128		$	—		$	—		$	109		$	237

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 $15 and $17 for the three and nine months ended September 30, 2017, respectively, 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 9, 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 Global Growth and Efficiency Program. These charges for the three and nine months ended September 30, 2017 include third-party incremental costs related to the development and implementation of new business and strategic initiatives of $33 and $103, respectively, and contract termination costs and charges resulting directly from exit activities of $2 and $4, respectively. These charges were expensed as incurred.