SPECIAL (GAINS) AND CHARGES

3 Months Ended

Mar. 31, 2024

SPECIAL (GAINS) AND CHARGES

SPECIAL (GAINS) AND CHARGES

2. SPECIAL (GAINS) AND CHARGES

Special (gains) and charges reported on the Consolidated Statements of Income include the following:

	First Quarter Ended
	March 31
(millions)	2024		2023
Cost of sales
Restructuring activities		$1.6		$3.2
Cost of sales subtotal		1.6		3.2
Special (gains) and charges
Restructuring activities		18.1		12.6
Acquisition and integration activities		2.5		5.0
Other		7.6		6.9
Special (gains) and charges subtotal		28.2		24.5
Total special (gains) and charges		$29.8		$27.7

For segment reporting purposes, special (gains) and charges are not allocated to reportable segments, which is consistent with the Company’s internal management reporting.

Restructuring activities

Restructuring activities are primarily related to the Combined Program which is described below. These activities have been included as a component of cost of sales and special (gains) and charges on the Consolidated Statements of Income. Restructuring liabilities have been classified as a component of other current and other noncurrent liabilities on the Consolidated Balance Sheets.

Combined Program

In November 2022 the Company approved a Europe cost savings program. In connection with these actions, the Company expected to incur pre-tax charges of $130 million ($110 million after tax). In February 2023, the Company expanded its previously announced Europe cost savings program to focus on its Institutional and Healthcare businesses in other regions. In connection with the expanded program (“Combined Program”), the Company expects to incur total pre-tax charges of $195 million ($150 million after tax). The Company expects that these restructuring charges will be substantially completed by the end of 2024. Program actions include headcount reductions from terminations, not filling certain open positions, and facility closures. The Combined Program charges are expected to be primarily cash expenditures related to severance and asset disposals.

In anticipation of this Combined Program, a limited number of actions were taken in the fourth quarter of 2022. As a result, the Company reclassified $19.3 million ($14.5 million after tax) from other restructuring to the Combined Program in the first quarter of 2023.

During the first quarter of 2024 and 2023, the Company recorded restructuring charges of $19.7 million ($15.8 million after tax) and $13.4 million ($10.2 million after tax), respectively, primarily related to severance and professional services. The Company has recorded $183.9 million ($152.7 million after tax) of cumulative charges under the Combined Plan. The net liability related to the Combined Program was $44.1 million and $43.1 million as of March 31, 2024 and December 31, 2023, respectively. The remaining liability is expected to be paid over a period of a few months to several quarters and will continue to be funded from operating activities.

Restructuring activity related to the Combined Program since inception of the underlying actions includes the following items:

	Employee		Asset
(millions)	Costs		Disposals		Other		Total
2022-2023 Activity
Recorded expense and accrual		$114.2		$14.0		$16.7		$144.9
Net cash payments		(90.4)		-		(16.7)		(107.1)
Non-cash charges		-		(14.0)		-		(14.0)
Reclassification		19.3		-		-		19.3
Net restructuring liability, December 31, 2023		43.1		-		-		43.1
2024 Activity
Recorded expense and accrual		2.3		0.4		17.0		19.7
Net cash payments		(15.9)		-		(2.4)		(18.3)
Non-cash charges		-		(0.4)		-		(0.4)
Net restructuring liability, March 31, 2024		$29.5		$-		$14.6		$44.1

Acquisition and integration related costs

Acquisition and integration related costs reported in special (gains) and charges on the Consolidated Statements of Income include $2.5 million ($1.9 million after tax) and $5.0 million ($3.7 million after tax) during the first quarter of 2024 and 2023, respectively.

Further information related to the Company’s acquisitions is included in Note 3.

Other operating activities

Other special charges of $7.6 million ($5.4 million after tax) and $6.9 million ($5.4 million after tax) recorded in the first quarter of 2024 and 2023, respectively, which are recorded in special (gains) and charges on the Consolidated Statements of Income.