Restructuring Charges and Cost Savings Initiatives

2015 Initiatives

On January 29, 2015, we announced plans to implement a new enterprise design focused mainly on product categories. Under the new structure, which we fully implemented at the beginning of 2016, our businesses are organized in the following divisions: Americas Simple Meals and Beverages, Global Biscuits and Snacks, and Campbell Fresh.

In support of the new structure, we designed and implemented a global shared services organization. We also streamlined our organizational structure, implemented an initiative to reduce overhead across the organization and are pursuing other initiatives to reduce costs and increase effectiveness. As part of these initiatives, we commenced a voluntary employee separation program available to certain U.S.-based salaried employees nearing retirement who met age, length-of-service and business unit/function criteria. A total of 471 employees elected the program. The electing employees remained with us through at least July 31, 2015, with some remaining beyond that date.

In February 2017, we announced that we were expanding these cost savings initiatives by further optimizing our supply chain network, primarily in North America, continuing to evolve our operating model to drive efficiencies, and more fully integrating our recent acquisitions. We extended the time horizon for the initiatives from 2018 to 2020. Cost estimates for these expanded initiatives, as well as timing for certain activities, are continuing to be developed. In January 2018, as part of the expanded initiatives, we authorized additional pre-tax costs to improve the operational efficiency of our thermal supply chain network in North America by closing our manufacturing facility in Toronto, Ontario, and to optimize our information technology infrastructure by migrating certain applications to the latest cloud technology platform.

A summary of the restructuring charges we recorded and charges incurred in Administrative expenses and Cost of products sold related to the implementation of the new organizational structure and costs savings initiatives is as follows:



	Three Months Ended					Six Months Ended				Year Ended
	January 28, 2018		January 29, 2017			January 28, 2018		January 29, 2017		July 30, 2017		July 31, 2016		August 2, 2015
Restructuring charges	$	33	$	(1	)	$	35	$	—	$	18	$	35	$	102
Administrative expenses	26		3			38		11		36		47		22
Cost of products sold	1		—			6		—		4		—		—
Total pre-tax charges	$	60	$	2		$	79	$	11	$	58	$	82	$	124

A summary of the pre-tax costs associated with the initiatives is as follows:



	Recognized as of January 28, 2018
Severance pay and benefits	$	167
Asset impairment/accelerated depreciation	19
Implementation costs and other related costs	157
Total	$	343

The total estimated pre-tax costs for actions that have been identified are approximately $515 to $560. We expect to incur substantially all of the costs through 2019. This estimate will be updated as costs for the expanded initiatives are developed.

We expect the costs for actions that have been identified to date to consist of the following: approximately $170 in severance pay and benefits; approximately $85 in asset impairment and accelerated depreciation; and approximately $260 to $305 in implementation costs and other related costs. We expect these pre-tax costs to be associated with our segments as follows: Americas Simple Meals and Beverages - approximately 39%; Global Biscuits and Snacks - approximately 30%; Campbell Fresh - approximately 3%; and Corporate - approximately 28%.

Of the aggregate $515 to $560 of pre-tax costs identified to date, we expect approximately $415 to $460 will be cash expenditures. In addition, we expect to invest approximately $250 in capital expenditures through 2020 primarily related to the U.S. warehouse optimization project, transition of production of the Toronto manufacturing facility to our U.S. thermal plants, insourcing of manufacturing for certain simple meal products and optimization of information technology infrastructure and applications, of which we invested approximately $37 as of January 28, 2018.

A summary of the restructuring activity and related reserves associated with the initiatives at January 28, 2018, is as follows:



	Severance Pay and Benefits			Non-Cash Benefits⁽³⁾	Implementation Costs and Other Related Costs⁽⁴⁾	Asset Impairment/Accelerated Depreciation	Other Non-Cash Exit Costs⁽⁵⁾	Total Charges
Accrued balance at July 30, 2017⁽¹⁾	$	26
2018 charges	30			2	37	7	3	$	79
2018 cash payments	(18		)
Accrued balance at January 28, 2018⁽²⁾	$	38

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⁽¹⁾	Includes $2 of severance pay and benefits recorded in Other liabilities in the Consolidated Balance Sheet.


⁽²⁾	Includes $27 of severance pay and benefits recorded in Other liabilities in the Consolidated Balance Sheet.


⁽³⁾	Represents pension termination benefits. See Note 10.


⁽⁴⁾	Includes other costs recognized as incurred that are not reflected in the restructuring reserve in the Consolidated Balance Sheet. The costs are included in Administrative expenses and Cost of products sold in the Consolidated Statements of Earnings.


⁽⁵⁾	Includes non-cash costs that are not reflected in the restructuring reserve in the Consolidated Balance Sheet.

Segment operating results do not include restructuring charges, implementation costs and other related costs because we evaluate segment performance excluding such charges. A summary of the pre-tax costs associated with segments is as follows:



	January 28, 2018
	Three Months Ended		Six Months Ended		Costs Incurred to Date
Americas Simple Meals and Beverages	$	33	$	40	$	132
Global Biscuits and Snacks	21		27		105
Campbell Fresh	2		3		9
Corporate	4		9		97
Total	$	60	$	79	$	343