That has been on our mind at Calcbench lately as the Q3 earnings reports come flooding in. Lots of companies announced restructuring programs one or two years ago when inflation and high interest rates were exerting severe pressure, so a fresh set of filings is always a good time to see whether those original restructuring announcements lived up to their promise.

One good example is Colgate-Palmolive ($CL). In early 2022, Colgate announced a restructuring plan that the company expected to complete by mid-2023, and would cost somewhere between $200 million to $240 million. 

Things didn’t quite go according to that plan. According to Colgate’s most recent quarterly report, filed on Oct. 25, the restructuring plan didn’t finish until this summer, one full year later than originally forecast. The program did cost $225 million, smack in the middle of the $200 million to $240 million range estimated in 2022; but Colgate spent $67 million on the restructuring plan in the first nine months of 2024. See Figure 1, below.

So yes, Colgate nailed the cost estimate; but it missed its timeline goals. On the other hand, the company’s revenues, gross profit, operating profit, pretax income, and net income are all up 12 to 20 percent compared to Q3-2022 numbers. (See Figure 2, below.) Food for thought as you prepare for Colgate’s next earnings call.

Other Presentations of Restructuring

Other companies are less user-friendly when disclosing their restructuring efforts. For example, in January 2024 Newell Brands ($NWL) announced a restructuring plan that would (a) cost $75 million to $90 million; and (b) be “substantially completed” by the end of the year. That disclosure, however, was tucked away in narrative form in a Restructuring footnote; if you didn’t know to read the footnotes closely, you wouldn’t see it otherwise.

Newell filed its third-quarter report on Oct. 25. It did provide an update on those restructuring charges, but again they were tucked away in narrative form in the Restructuring footnote; no easy-to-read presentation in a table like what Colgate provides.

Once you start reading, you find that Newell spent $42 million on its restructuring plan in the first nine months of this year. The company also reaffirmed that its total spending on the plan should be $75 million to $90 million, so one could reasonably expect that restructuring charges will be roughly $40 million in Q4. (That is, $42 million subtracted from $82 million, which is midway between $75 million and $90 million.)

That seems like Newell is shoving a lot of restructuring costs toward the end of its one-year timeline: $42 million across the first nine months of the year, and upwards of $40 million in the final three. What should a financial analyst make of that? We don’t know, but the data is there for you to do the math and ask more precise questions. 

When Restructuring Is Every Day

We also give an honorable mention to Procter & Gamble ($PG), the $84 billion consumer products giant, for plainly stating that it has “an ongoing annual level of restructuring-type activities,” which routinely run into the hundreds of millions — but P&G does not include those costs in any non-GAAP adjusted earnings metric. 

That’s the way it’s supposed to be, according to earnings quality purists. A company can make a non-GAAP adjustment to earnings to exclude one-time restructuring charges; but if the company keeps declaring such one-time restructuring programs year after year, that’s not cool.

So here we have P&G, which does incur substantial restructuring charges: $659 million in 2023; $329 million in 2022; and a whopping $886 million in third-quarter 2024 alone, according to its most recent filing. The company does not, however, pass off those recurring charges as one-time cost barfs that deserve a non-GAAP adjustment. Good for them. 

Other companies have pushed the envelope on restructuring charges in the past. For example, in 2020 we noted that Jabil Inc. ($JBL) launched one restructuring program after another in the 2010s, and even had multiple restructuring programs at the same time. 

Way back in 2016, we noted that Hewlett-Packard ($HP) announced a restructuring program in 2012 that was supposed to cut 29,000 jobs, and cost $3.7 billion. By the time that program ended three years later, the final numbers were 55,000 job cuts and $5.5 billion in costs.

So you have to watch restructuring programs closely. How they start at the beginning and what they are by the end can often be two different things.