Restructuring Program

3 Months Ended

Mar. 31, 2020

Restructuring and Related Activities [Abstract]

Note 7. Restructuring Program

On May 6, 2014, our Board of Directors approved a $3.5 billion 2014-2018 restructuring program and up to $2.2 billion of capital expenditures. On August 31, 2016, our Board of Directors approved a $600 million reallocation between restructuring program cash costs and capital expenditures so the $5.7 billion program consisted of approximately $4.1 billion of restructuring program charges ($3.1 billion cash costs and $1.0 billion non-cash costs) and up to $1.6 billion of capital expenditures. On September 6, 2018, our Board of Directors approved an extension of the restructuring program through 2022, an increase of $1.3 billion in the program charges and an increase of $700 million in capital expenditures. The total $7.7 billion program now consists of $5.4 billion of program charges ($4.1 billion of cash costs and $1.3 billion of non-cash costs) and total capital expenditures of $2.3 billion to be incurred over the life of the program. The current restructuring program, as increased and extended by these actions, is now called the Simplify to Grow Program.

The primary objective of the Simplify to Grow Program is to reduce our operating cost structure in both our supply chain and overhead costs. The program covers severance as well as asset disposals and other manufacturing and procurement-related one-time costs. Since inception, we have incurred total restructuring and implementation charges of $4.4 billion related to the Simplify to Grow Program. We expect to incur the program charges by year-end 2022.

Restructuring Costs:

The Simplify to Grow Program liability activity for the three months ended March 31, 2020 was:



	Severance and related costs			Asset Write-downs			Total
	(in millions)
Liability balance, January 1, 2020	$	301		$	—		$	301
Charges	14			1			15
Cash spent	(37		)	—			(37		)
Non-cash settlements/adjustments	(2		)	(1		)	(3		)
Currency	(11		)	—			(11		)
Liability balance, March 31, 2020	$	265		$	—		$	265

We recorded restructuring charges of $15 million in the first three months of 2020 and $20 million in the first three months of 2019 within asset impairment and exit costs and benefit plan non-service income. We spent $37 million in the first three months of 2020 and $53 million in the first three months of 2019 in cash severance and related costs. We also recognized non-cash pension settlement losses (refer to Note 10, Benefit Plans), non-cash asset write-downs (including accelerated depreciation and asset impairments) and other non-cash adjustments totaling $3 million in the first three months of 2020 and $29 million in the first three months of 2019. At March 31, 2020, $243 million of our net restructuring liability was recorded within other current liabilities and $22 million was recorded within other long-term liabilities.

Implementation Costs:

Implementation costs are directly attributable to restructuring activities; however, they do not qualify for special accounting treatment as exit or disposal activities. We believe the disclosure of implementation costs provides readers of our financial statements with more information on the total costs of our Simplify to Grow Program. Implementation costs primarily relate to reorganizing our operations and facilities in connection with our supply chain reinvention program and other identified productivity and cost saving initiatives. The costs include incremental expenses related to the closure of facilities, costs to terminate certain contracts and the simplification of our information systems. Within our continuing results of operations, we recorded implementation costs of $43 million in the first three months of 2020 and $50 million in the first three months of 2019. We recorded these costs within cost of sales and general corporate expense within selling, general and administrative expenses.

Restructuring and Implementation Costs:

During the three months ended March 31, 2020 and March 31, 2019, and since inception of the Simplify to Grow Program, we recorded the following restructuring and implementation costs within segment operating income and earnings before income taxes:



	Latin America		AMEA			Europe		North America ⁽¹⁾		Corporate ⁽²⁾		Total
	(in millions)
For the Three Months Ended March 31, 2020
Restructuring Costs	$	4	$	(1	)	$	3	$	2	$	7	$	15
Implementation Costs	7		3			14		10		9		43
Total	$	11	$	2		$	17	$	12	$	16	$	58
For the Three Months Ended March 31, 2019
Restructuring Costs	$	—	$	6		$	—	$	6	$	8	$	20
Implementation Costs	15		7			11		4		13		50
Total	$	15	$	13		$	11	$	10	$	21	$	70
Total Project ⁽³⁾
Restructuring Costs	$	521	$	534		$	1,079	$	471	$	136	$	2,741
Implementation Costs	276		209			462		394		316		1,657
Total	$	797	$	743		$	1,541	$	865	$	452	$	4,398


(1)	During 2019, our North America region implementation costs included incremental costs that we incurred related to renegotiating collective bargaining agreements that expired in February 2016 for eight U.S. facilities and related to executing business continuity plans for the North America business.


(2)	The Corporate column includes minor adjustments for pension settlement losses and rounding.

(3)

Includes all charges recorded since program inception on May 6, 2014 through March 31, 2020.