Restructuring and Impairment Charges

9 Months Ended

Sep. 30, 2019

Restructuring and Impairment Charges

Impairment and Restructuring Charges

5. Restructuring and Impairment Charges

For the three and nine months ended September 30, 2019, the Company recorded $28 million and $41 million of pre-tax restructuring charges, respectively.  Pre-tax restructuring charges of $14 million and $23 million were recorded for the three and nine months ended September 30, 2019, respectively, for its Cost Smart SG&A program. These costs include $8 million and $11 million, of other costs, including professional services, and $6 million and $12 million of employee-

related severance for the three and nine months ended September 30, 2019, respectively. These charges were recorded primarily in the Company’s North America and South America operations, and include $1 million and $2 million of other costs associated with the Finance Transformation initiative in Latin America for the three and nine months ended September 30, 2019, respectively. The Company expects to continue to incur additional charges during the year related to the Cost Smart SG&A program, however, it does not expect to incur any additional restructuring costs related to its Finance Transformation initiative.  

Additionally, for the three and nine months ended September 30, 2019, the Company recorded $14 million and $18 million, respectively, for its Cost Smart cost of sales program.  During the three months ended September 30, 2019, the Company recorded $6 million of restructuring charges in relation to the closure of the Lane Cove, Australia production facility, consisting of $4 million of employee-related severance and $2 million of accelerated depreciation. The Company expects to incur an additional $10 million of restructuring costs during the remainder of 2019 and between $10 million and $12 million in 2020 in relation to the closure. Additionally, during the three months ended September 30, 2019, the Company recorded $4 million of employee-related expenses primarily related to the South America operations restructuring.  Finally, the Company recorded $4 million and $8 million of other costs, including professional services, during the three and nine months ended September 30, 2019, primarily in North America including other costs of $2 million in relation to the prior year cessation of wet-milling at the Stockton, California plant.  The Company does not expect to incur any additional costs in relation to the cessation of wet-milling at the Stockton, California plant.

For the three and nine months ended September 30, 2018, the Company recorded $34 million and $45 million of pre-tax restructuring charges, respectively.  This included $28 million of accelerated depreciation and $3 million of employee-related severance costs for the three and nine months ended September 30, 2018, as part of the Cost Smart cost of sales program in relation to the cessation of wet-milling at the Stockton, California plant. In addition, for the three and nine months ended September 30, 2018, the Company recorded $3 million and $4 million, respectively, of employee-related severance and other costs in relation to its Finance Transformation initiative in Latin America as part of its Cost Smart SG&A program.  There were also employee-related severance costs of $5 million recorded for the nine months ended September 30, 2018 in relation to the Cost Smart SG&A program in its South America and North America segments. The Company also recorded other costs related to the North America Finance Transformation initiative of $4 million for the nine months ended September 30, 2018, and there were other restructuring costs related to the leaf extraction process in Brazil of $1 million for the nine months ended September 30, 2018.

A summary of the Company’s employee-related severance accrual as of September 30, 2019 is as follows (in millions):

Balance in severance accrual as of December 31, 2018	$	10
Cost Smart cost of sales and SG&A		20
Payments made to terminated employees		(13)
Foreign exchange translation		(2)
Balance in severance accrual as of September 30, 2019	$	15

Of the $15 million severance accrual as of September 30, 2019, $14 million is expected to be paid in the next 12 months.