Proctor and Gamble 2013 Annual Report Download - page 60

58 The Procter & Gamble Company
Amounts in millions of dollars except per share amounts or as otherwise specified.
approximately 5,700 by the end of fiscal 2013. Through
fiscal 2013, the Company has reduced non-manufacturing
enrollment by approximately 7,000, which is 1,300 positions
above the initial target. In addition to the reduction of 5,700
employees, the restructuring program includes plans for a
further non-manufacturing overhead personnel reduction of
approximately 2% - 4% annually from fiscal 2014 through
fiscal 2016, roughly doubling the size of the initial
enrollment reduction target. This is being done via the
elimination of duplicate work, simplification through the use
of technology and the optimization of various functional and
business organizations and the Company's global footprint.
In addition, the plan includes integration of newly acquired
companies and the optimization of the supply chain and
other manufacturing processes.
Restructuring costs incurred consist primarily of costs to
separate employees and asset-related costs to exit facilities.
The Company is also incurring other types of costs as
outlined below. The Company incurred total restructuring
charges of approximately $956 million and $1.1 billion for
the years ended June 30, 2013 and June 30, 2012,
respectively. Approximately $600 and $746 of these charges
were recorded in SG&A for the years ended June 30, 2013
and June 30, 2012, respectively. The remainder is included
in cost of products sold. Since the inception of this
restructuring program, the Company has incurred charges of
approximately $2.0 billion. Approximately $1.1 billion of
these charges were related to separations, $487 million were
asset-related and $431 million were related to other
restructuring-type costs. The following table presents
restructuring activity for the years ended June 30, 2013 and
2012:
Separations
Asset-
Related
Costs Other Total
RESERVE
JUNE 30, 2011 $ 121 $ — $ 30 $ 151
Charges 495 378 179 1,052
Cash spent (300) — (182) (482)
Charges against
assets — (378) — (378)
RESERVE
JUNE 30, 2012 316 — 27 343
Charges 595 109 252 956
Cash spent (615) — (252) (867)
Charges against
assets — (109) — (109)
RESERVE
JUNE 30, 2013 296 — 27 323
Separation Costs
Employee separation charges for the years ended June 30,
2013 and June 30, 2012 relate to severance packages for
approximately 3,450 and 3,300 employees, respectively. For
the years ended June 30, 2013 and June 30, 2012, these
severance packages include approximately 2,390 and 2,250
non-manufacturing employees, respectively. These
separations are primarily in North America and Western
Europe. The packages are predominantly voluntary and the
amounts are calculated based on salary levels and past
service periods. Severance costs related to voluntary
separations are generally charged to earnings when the
employee accepts the offer. Since its inception, the
restructuring program has incurred separation charges
related to approximately 6,750 employees, of which
approximately 4,640 are non-manufacturing overhead
personnel.
Asset-Related Costs
Asset-related costs consist of both asset write-downs and
accelerated depreciation. Asset write-downs relate to the
establishment of a new fair value basis for assets held-for-
sale or disposal. These assets were written down to the
lower of their current carrying basis or amounts expected to
be realized upon disposal, less minor disposal costs.
Charges for accelerated depreciation relate to long-lived
assets that will be taken out of service prior to the end of
their normal service period. These assets relate primarily to
manufacturing consolidations and technology
standardization. The asset-related charges will not have a
significant impact on future depreciation charges.
Other Costs
Other restructuring-type charges are incurred as a direct
result of the restructuring program. Such charges primarily
include employee relocation related to separations and office
consolidations, termination of contracts related to supply
chain redesign and the cost to change internal systems and
processes to support the underlying organizational changes.
Consistent with our historical policies for ongoing
restructuring-type activities, the restructuring program
charges are funded by and included within Corporate for
both management and segment reporting. Accordingly,
100% of the charges under the program are included within
the Corporate reportable segment. However, for informative
purposes, the following table summarizes the total
restructuring costs related to our reportable segments:
Years Ended June 30 2013 2012
Beauty $ 132 $ 120
Grooming 50 20
Health Care 58 25
Fabric Care and Home Care 148 184
Baby Care and Family Care 88 63
Corporate (1) 480 640
Total Company 956 1,052
(1) Corporate includes costs related to allocated overheads,
including charges related to our MDO, Global Business Services
and Corporate Functions activities.