Quarterly report pursuant to Section 13 or 15(d)

Productivity, Integration and Restructuring Initiatives

v3.21.2
Productivity, Integration and Restructuring Initiatives
 6 Months Ended
Jul. 02, 2021
Productivity integration and restructuring initiatives  
Productivity, Integration and Restructuring Initiatives[Text Block] RESTRUCTURING
Strategic Realignment
In August 2020, the Company announced strategic steps to transform our organizational structure in an effort to better enable us to capture growth in the fast-changing marketplace. The Company is building a networked global organization designed to combine the power of scale with the deep knowledge required to win locally. We created new operating units effective January 1, 2021, which are focused on regional and local execution. The operating units, which sit under the four existing geographic operating segments, are highly interconnected, with more consistency in their structure and a focus on eliminating duplication of resources and scaling new products more quickly. The operating units work closely with five global marketing category leadership teams to rapidly scale ideas. The global marketing category leadership teams primarily focus on innovation, marketing efficiency and effectiveness. The organizational structure also includes our existing center that provides strategy, governance and scale for global initiatives. The operating units, global marketing category leadership teams and the center are supported by a platform services organization, which focuses on providing efficient and scaled global services and capabilities including, but not limited to, governance, transactional work, data management, consumer analytics, digital commerce and social/digital hubs.
The Company has incurred total pretax expenses of $632 million related to these strategic realignment initiatives since they commenced. These expenses were recorded in the line items other operating charges and other income (loss) — net in our condensed consolidated statements of income. Refer to Note 16 for the impact these expenses had on our operating segments and Corporate. Outside services reported in the tables below primarily relate to expenses in connection with legal and
consulting activities. The Company currently expects the total costs of the strategic realignment initiatives will be approximately $650 million, including pension benefit plan settlement charges. The new networked organization is established and functioning, and the platform services activities will be integrated, standardized and scaled over the course of 2021.
The following tables summarize the balance of accrued expenses related to these strategic realignment initiatives and the changes in the accrued amounts as of and for the three and six months ended July 2, 2021 (in millions):
Severance Pay
and Benefits		 Outside Services Other
Direct Costs		 Total
Accrued balance April 2, 2021 $ 143  $ 1  $ 3  $ 147 
Costs incurred 45  10  3  58 
Payments (130) (8) (2) (140)
Noncash and exchange (29)
1
 (2) —  (31)
Accrued balance July 2, 2021 $ 29  $ 1  $ 4  $ 34 
1 Includes pension benefit plan settlement charges. Refer to Note 13.
Severance Pay
and Benefits		 Outside Services Other
Direct Costs		 Total
Accrued balance December 31, 2020 $ 181  $ 1  $ 3  $ 185 
Costs incurred 186  16  3  205 
Payments (252) (14) (2) (268)
Noncash and exchange (86)
1
 (2) —  (88)
Accrued balance July 2, 2021 $ 29  $ 1  $ 4  $ 34 
1 Includes pension benefit plan settlement charges. Refer to Note 13.
Productivity and Reinvestment Program    
In February 2012, the Company announced a productivity and reinvestment program designed to strengthen our brands and reinvest our resources to drive long-term profitable growth. The program was expanded multiple times since it commenced, with the last expansion occurring in April of 2017. We expect the remaining initiatives included in this program, which are primarily designed to further simplify and standardize our organization, to be completed by the end of 2022.
The Company has incurred total pretax expenses of $3,969 million related to our productivity and reinvestment program since it commenced. These expenses were recorded in the line items other operating charges and other income (loss) — net in our condensed consolidated statements of income. Refer to Note 16 for the impact these charges had on our operating segments and Corporate. Outside services reported in the tables below primarily include costs associated with consulting activities. Other direct costs reported in the tables below primarily include internal and external costs associated with the implementation of these initiatives and accelerated depreciation on certain fixed assets.
The following tables summarize the balance of accrued expenses related to our productivity and reinvestment program and the changes in the accrued amounts as of and for the three and six months ended July 2, 2021 (in millions):
Severance Pay
and Benefits		 Outside Services Other
Direct Costs		 Total
Accrued balance April 2, 2021 $ 15  $ —  $ 2  $ 17 
Costs incurred 2  12  8  22 
Payments (1) (12) (7) (20)
Noncash and exchange —  —  —  — 
Accrued balance July 2, 2021 $ 16  $ —  $ 3  $ 19 
Severance Pay
and Benefits		 Outside Services Other
Direct Costs		 Total
Accrued balance December 31, 2020 $ 15  $ —  $ 2  $ 17 
Costs incurred 2  29  9  40 
Payments (1) (29) (13) (43)
Noncash and exchange —  —  5  5 
Accrued balance July 2, 2021 $ 16  $ —  $ 3  $ 19