Restructuring and Related Implementation Charges

In the fourth quarter of 2012, the Company commenced a four-year Global Growth and Efficiency 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.

On October 23, 2014, the Company’s Board of Directors approved an expansion of the Global Growth and Efficiency Program (as expanded, the “2012 Restructuring Program”) to take advantage of additional savings opportunities.

Cumulative pretax charges related to the 2012 Restructuring Program, once all phases are approved and implemented, are estimated to be $1,285 to $1,435 ($950 to $1,050 aftertax). Implementation of the 2012 Restructuring Program is expected to be substantially completed by December 31, 2016. These pretax charges 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 implementation-related charges resulting directly from exit activities (20%) and the implementation of new strategies (20%). Anticipated pretax charges for 2015 are expected to amount to approximately $330 to $385 ($245 to $285 aftertax). Over the course of the 2012 Restructuring Program, it is currently 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 contribute a net reduction of approximately 2,000-2,500 positions from the Company’s global employee workforce.

For the three and six months ended June 30, 2015 and 2014, restructuring and implementation-related charges are reflected in the Condensed Consolidated Statements of Income as follows:



	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2015		2014		2015		2014
Cost of sales	$	4	$	6	$	8	$	16
Selling, general and administrative expenses	11		12		29		29
Other (income) expense, net	37		56		115		131
Total 2012 Restructuring Program charges, pretax	$	52	$	74	$	152	$	176

Total 2012 Restructuring Program charges, aftertax	$	40	$	53	$	107	$	126

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 2012 Restructuring Program relate to initiatives undertaken by the following reportable operating segments:



	Three Months Ended				Six Months Ended				Program-to-date
	June 30,				June 30,				Accumulated Charges
	2015		2014		2015		2014
North America	14	%	11	%	17	%	10	%	11	%
Latin America	5	%	5	%	2	%	4	%	3	%
Europe/South Pacific	19	%	16	%	11	%	19	%	25	%
Asia	11	%	—	%	4	%	—	%	2	%
Africa/Eurasia	4	%	2	%	3	%	2	%	5	%
Hill’s Pet Nutrition	13	%	11	%	7	%	9	%	8	%
Corporate	34	%	55	%	56	%	56	%	46	%

Since the inception of the 2012 Restructuring Program in the fourth quarter of 2012, the Company has incurred pretax cumulative charges of $898 ($663 aftertax) in connection with the implementation of various projects as follows:



	Cumulative Charges
	as of June 30, 2015
Employee-Related Costs	$	362
Incremental Depreciation	60
Asset Impairments	3
Other	473
Total	$	898

The majority of costs incurred since inception relate to the following projects: the implementation of the Company’s overall hubbing strategy; the consolidation of facilities; the extension of shared business services and streamlining of global functions; the simplification and streamlining of the Company’s research and development capabilities and oral care supply chain, both in Europe; restructuring how the Company will provide future retirement benefits to substantially all of its U.S.-based employees participating in the Company’s defined benefit retirement plan by shifting them to the Company’s defined contribution plan; and the closing of the Morristown, New Jersey personal care facility.

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



	Three Months Ended June 30, 2015
	Employee-Related Costs			Incremental Depreciation			Asset Impairments			Other			Total
Balance at March 31, 2015	$	92		$	—		$	—		$	139		$	231
Charges	32			3			1			16			52
Cash payments	(29		)	—			—			(18		)	(47		)
Charges against assets	(1		)	(3		)	(1		)	—			(5		)
Foreign exchange	—			—			—			—			—
Balance at June 30, 2015	$	94		$	—		$	—		$	137		$	231



	Six Months Ended June 30, 2015
	Employee-Related Costs			Incremental Depreciation			Asset Impairments			Other			Total
Balance at December 31, 2014	$	85		$	—		$	—		$	107		$	192
Charges	67			9			1			75			152
Cash payments	(44		)	—			—			(44		)	(88		)
Charges against assets	(9		)	(9		)	(1		)	—			(19		)
Foreign exchange	(5		)	—			—			(1		)	(6		)
Balance at June 30, 2015	$	94		$	—		$	—		$	137		$	231

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 $9 for the six months ended June 30, 2015, 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 three and six months ended June 30, 2015 include third-party incremental costs related to the development and implementation of new business and strategic initiatives of $14 and $26, respectively, and contract termination costs and charges resulting directly from exit activities of $1 and $4, respectively, directly related to the 2012 Restructuring Program. These charges were expensed as incurred. Also included in Other charges for the three and six months ended June 30, 2015 are other exit costs related to the consolidation of facilities of $1 and $45, respectively.