Restructuring and Related Implementation Charges

9 Months Ended

Sep. 30, 2023

Restructuring and Related Activities [Abstract]

Restructuring and Related Implementation Charges

On January 27, 2022, the Company’s Board of Directors (the “Board”) approved a targeted productivity program (the “2022 Global Productivity Initiative”). The program is intended to reallocate resources towards the Company’s strategic priorities and faster growth businesses, drive efficiencies in the Company’s operations and streamline the Company’s 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 in cumulative pretax charges, once all phases are approved and implemented, in the range of $200 to $240 ($170 to $200 aftertax), which is currently estimated 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 of implementation-related charges resulting directly from exit activities and the implementation of new strategies. It is estimated that approximately 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 North America (5%), Latin America (10%), Europe (45%), Asia Pacific (5%), Africa/Eurasia (10%), Hill’s Pet Nutrition (10%) and Corporate (15%).

For the three months ended September 30, 2023, charges resulting from the 2022 Global Productivity Initiative were $2 pretax ($2 aftertax). For the three months ended September 30, 2022, charges resulting from the 2022 Global Productivity Initiative were $2 pretax ($2 aftertax).

For the nine months ended September 30, 2023 and September 30, 2022, charges resulting from the 2022 Global Productivity Initiative are reflected in the income statement as follows:


	Nine Months Ended September 30,
	2023		2022
Gross Profit	$	1	$	—
Selling, general and administrative expenses	2		4
Other (income) expense, net	22		75
Non-service related postretirement costs	4		13
Total 2022 Global Productivity Initiative charges, pretax	$	29	$	92

Total 2022 Global Productivity Initiative charges, aftertax	$	23	$	72

Restructuring and related implementation charges in the preceding table were 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 2022 Global Productivity Initiative relate to initiatives undertaken by the following reportable operating segments:


	Nine Months Ended September 30,				Program-to-date Accumulated Charges
	2023		2022
North America	14	%	11	%	11	%
Latin America	1	%	16	%	15	%
Europe	20	%	16	%	19	%
Asia Pacific	21	%	9	%	11	%
Africa/Eurasia	10	%	12	%	11	%
Hill's Pet Nutrition	14	%	10	%	12	%
Corporate	20	%	26	%	21	%
Total	100	%	100	%	100	%

Since the inception of the 2022 Global Productivity Initiative, the Company has incurred cumulative pretax charges of $139 ($110 aftertax) in connection with the implementation of various projects as follows:


	Cumulative Charges
	as of September 30, 2023
Employee-Related Costs	$	125
Incremental Depreciation	—
Asset Impairments	1
Other	13
Total	$	139

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


	Nine Months Ended September 30, 2023
	Employee-Related Costs		Incremental Depreciation		Asset Impairments		Other		Total
Balance at December 31, 2022	$	30	$	—	$	1	$	3	$	34
Charges	23		—		—		6		29
Cash Payments	(38)		—		—		(8)		(46)
Charges against assets	(4)		—		(1)		—		(5)
Foreign exchange	5		—		—		—		5
Balance at September 30, 2023	$	16	$	—	$	—	$	1	$	17

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 also include pension enhancements of $4 for the nine months ended September 30, 2023, 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 liabilities.