Proctor and Gamble 2001 Annual Report Download - page 29

Before-tax restructuring charges to date are:
Charges for the program are reflected in the corporate segment for
management and external reporting.
Separation Costs
Employee separation charges are related to severance packages for
approximately 6,000 people in 2001, 2,800 people in 2000 and
400 people in 1999. The packages are predominantly voluntary
and are formula driven based on salary levels and past service.
Severance costs related to voluntary separations are charged to
earnings when the employee accepts the offer. The current and
planned separations span the entire organization, including
manufacturing, selling, research and administrative positions.
Asset Write-Downs and Accelerated Depreciation
Asset write-downs relate to establishment of new fair value bases
for assets held for sale or disposal that represent excess capacity in
the process of being removed from service or disposed and
businesses held for sale in the next 12 months. These assets were
written down to the amounts expected to be realized upon sale or
disposal, less minor disposal costs.
Additionally, asset write-downs included certain manufacturing
assets that are expected to operate at levels significantly below their
planned capacity, primarily capital expansions related to recent
initiatives that have not met expectations. The projected cash flows
profitability projections that incorporate the impact of the
Company’s existing businesses. The analyses necessarily involve
significant management judgment to evaluate the capacity of an
acquired business to perform within projections.
Property, Plant and Equipment: Property, plant and equipment are
recorded at cost reduced by accumulated depreciation.
Depreciation expense is based on estimated useful lives using the
straight-line method. Estimated useful lives are periodically
reviewed, and where warranted, changes are made that result in an
acceleration of depreciation.
Fair Values of Financial Instruments: Fair values of cash
equivalents, short- and long-term investments and short-term debt
approximate cost. The estimated fair values of other financial
instruments, including debt, equity and risk management
instruments, have been determined using available market
information and valuation methodologies, primarily discounted
cash flow analysis. These estimates require considerable judgment
in interpreting market data, and changes in assumptions or
estimation methods may significantly affect the fair value estimates.
Reclassifications: Certain reclassifications of prior years’ amounts
have been made to conform to the current year presentation.
NOTE 2 RESTRUCTURING PROGRAM
Beginning in 1999 – concurrent with the Company’s reorganization
into product-based global business units – the Company initiated its
Organization 2005 restructuring program. The program was
expanded in the current year to deliver further cost reductions
through reduced overheads, additional manufacturing
consolidations, and discontinuation of under-performing
businesses and initiatives.
Costs to be incurred include separation related costs, asset write-
downs or accelerated depreciation, and other costs directly related
to the restructuring effort.
Due to the nature of the charges and the duration of the program,
estimates of the timing and amount of costs and savings require
significant judgment and may change over time. Based on current
estimates, the overall program is expected to result in total charges
of $5.6 billion ($4.4 billion after tax) over the six-year period that
began in fiscal 1999.
Notes to Consolidated Financial Statements (continued)
27
The Procter & Gamble Company and Subsidiaries
Millions of dollars except per share amounts
814
320
450
88
2000:
Charges
Cash spent
Charged against
assets
Reserve balance
June 30, 2000
153
100
–
88
64
–
64
–
386
–
386
–
211
220
–
–
1,850
385
1,093
460
2001:
Charges
Cash spent
Charged against
assets
Reserve balance
June 30, 2001
341
186
–
243
731
–
731
–
276
–
276
–
502
199
86
217
( )
( )
( )
( )
( )
( )
( )
( )
( )
( )
( )
( )
( )
$ 481
12
425
44
Separations
Asset Write-
Downs Accelerated
Depreciation Other Total
1999:
Charges
Cash spent
Charged against
assets
Reserve balance
June 30, 1999
$ 45
10
–
35
$ 208
–
208
–
$ 11
2
–
9
( ) ( ) ( )
( )
( )
$ 217
–
217
–
( )