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.

On October 29, 2015, the Company’s Board of Directors approved the reinvestment of the funds from the sale of the Company’s laundry detergent business in the South Pacific to expand the 2012 Restructuring Program and extend it for one year through December 31, 2017. Initiatives under the expanded 2012 Restructuring Program will 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. The Company expects the initiatives under the expanded program to have a similar aftertax rate of return to the existing program, which on average has been 30%. The Company will update its disclosure to reflect the impact the expansion will have on the range of estimated charges and savings for the 2012 Restructuring Program when the additional initiatives under the expanded program are approved. The charges discussed below do not reflect the impact of the expansion.

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). Anticipated pretax charges for 2015 are now expected to approximate $265 to $290 ($195 to $215 aftertax), as compared to the previously disclosed range of $330 to $385 ($245 to $285 aftertax).

The pretax charges related to the 2012 Restructuring 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 implementation-related charges resulting directly from exit activities (20%) and the implementation of new strategies (20%). 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 now expected that, by the end of 2016, the 2012 Restructuring Program will contribute a net reduction of approximately 2,700-3,200 positions from the Company’s global employee workforce.

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



	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2015		2014		2015		2014
Cost of sales	$	3	$	7	$	11	$	23
Selling, general and administrative expenses	15		13		44		42
Other (income) expense, net	28		35		143		166
Total 2012 Restructuring Program charges, pretax	$	46	$	55	$	198	$	231

Total 2012 Restructuring Program charges, aftertax	$	35	$	41	$	142	$	167

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				Nine Months Ended				Program-to-date
	September 30,				September 30,				Accumulated Charges
	2015		2014		2015		2014
North America	21	%	9	%	17	%	9	%	11	%
Latin America	7	%	3	%	3	%	4	%	4	%
Europe/South Pacific	17	%	17	%	13	%	18	%	25	%
Asia	—	%	15	%	3	%	4	%	2	%
Africa/Eurasia	5	%	4	%	4	%	3	%	5	%
Hill’s Pet Nutrition	(3	)%	6	%	5	%	9	%	7	%
Corporate	53	%	46	%	55	%	53	%	46	%

Since the inception of the 2012 Restructuring Program in the fourth quarter of 2012, the Company has incurred pretax cumulative charges of $944 ($698 aftertax) in connection with the implementation of various projects as follows:



	Cumulative Charges
	as of September 30, 2015
Employee-Related Costs	$	384
Incremental Depreciation	66
Asset Impairments	5
Other	489
Total	$	944

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



	Three Months Ended September 30, 2015
	Employee-Related Costs			Incremental Depreciation			Asset Impairments			Other			Total
Balance at June 30, 2015	$	94		$	—		$	—		$	137		$	231
Charges	22			6			2			16			46
Cash payments	(17		)	—			—			(20		)	(37		)
Charges against assets	(8		)	(6		)	(2		)	—			(16		)
Foreign exchange	—			—			—			—			—
Balance at September 30, 2015	$	91		$	—		$	—		$	133		$	224



	Nine Months Ended September 30, 2015
	Employee-Related Costs			Incremental Depreciation			Asset Impairments			Other			Total
Balance at December 31, 2014	$	85		$	—		$	—		$	107		$	192
Charges	89			15			3			91			198
Cash payments	(61		)	—			—			(64		)	(125		)
Charges against assets	(17		)	(15		)	(3		)	—			(35		)
Foreign exchange	(5		)	—			—			(1		)	(6		)
Balance at September 30, 2015	$	91		$	—		$	—		$	133		$	224

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 $8 and $17 for the three and nine months ended September 30, 2015, 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.

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 nine months ended September 30, 2015 include third-party incremental costs related to the development and implementation of new business and strategic initiatives of $13 and $39, respectively, and contract termination costs and charges resulting directly from exit activities of $1 and $5, respectively, directly related to the 2012 Restructuring Program. These charges were expensed as incurred. Also included in Other charges for the three and nine months ended September 30, 2015 are other exit costs related to the consolidation of facilities of $2 and $47, respectively.