Restructuring Charges and Cost Savings Initiatives

3 Months Ended

Oct. 27, 2019

Restructuring Charges and Cost Savings Initiatives

Multi-year Cost Savings Initiatives and Snyder's-Lance Cost Transformation Program and Integration

Beginning in fiscal 2015, we implemented initiatives to reduce costs and to streamline our organizational structure.

In recent years, we expanded these initiatives by further optimizing our supply chain and manufacturing networks, including closing our manufacturing facility in Toronto, Ontario, as well as our information technology infrastructure. We will continue to streamline our organization and expand our zero-based budgeting efforts.

On March 26, 2018, we completed the acquisition of Snyder's-Lance. Prior to the acquisition, Snyder's-Lance launched a cost transformation program following a comprehensive review of its operations with the goal of significantly improving its financial performance. We continue to implement this program. In addition, we have identified opportunities for additional cost synergies as we integrate Snyder's-Lance.

Cost estimates, as well as timing for certain activities, are continuing to be developed.

A summary of the pre-tax charges recorded in Earnings from continuing operations related to these initiatives is as follows:


	Three Months Ended
	October 27, 2019		October 28, 2018		Recognized as of October 27, 2019
Restructuring charges	$	3	$	18	$	232
Administrative expenses	8		13		271
Cost of products sold	—		12		67
Marketing and selling expenses	—		2		10
Research and development expenses	—		—		3
Total pre-tax charges	$	11	$	45	$	583

A summary of the pre-tax charges recorded in Earnings (loss) from discontinued operations is as follows:


	Three Months Ended
	October 27, 2019		October 28, 2018		Recognized as of October 27, 2019⁽¹⁾
Total pre-tax charges	$	—	$	1	$	23

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⁽¹⁾Includes $19 of severance pay and benefits and $4 of implementation costs and other related costs.

As of April 28, 2019, we incurred substantially all of the costs for actions associated with discontinued operations. All of the costs were cash expenditures.

A summary of the pre-tax costs in Earnings from continuing operations associated with the initiatives is as follows:


	Recognized as of October 27, 2019
Severance pay and benefits	$	208
Asset impairment/accelerated depreciation	63
Implementation costs and other related costs	312
Total	$	583

The total estimated pre-tax costs for actions associated with continuing operations that have been identified are approximately $635 to $670 and we expect to incur the costs through 2021. This estimate will be updated as costs for the expanded initiatives are developed.

We expect the costs for actions associated with continuing operations that have been identified to date to consist of the following: approximately $210 to $215 in severance pay and benefits; approximately $65 in asset impairment and accelerated depreciation; and approximately $360 to $390 in implementation costs and other related costs. We expect these pre-tax costs to be associated with our segments as follows: Meals & Beverages - approximately 34%; Snacks - approximately 41%; and Corporate - approximately 25%.

Of the aggregate $635 to $670 of pre-tax costs associated with continuing operations identified to date, we expect approximately $560 to $595 will be cash expenditures. In addition, we expect to invest approximately $390 in capital expenditures through 2021, of which we invested approximately $265 as of October 27, 2019. The capital expenditures primarily relate to the U.S. warehouse optimization project, implementation of an SAP enterprise-resource planning system for Snyder's-Lance, improvement of quality, safety and cost structure across the Snyder’s-Lance manufacturing network, transition of production of the Toronto manufacturing facility to our U.S. thermal plants, optimization of information technology infrastructure and applications, insourcing of manufacturing for certain simple meal products, and optimization of the Snyder’s-Lance warehouse and distribution network.

A summary of the restructuring activity and related reserves associated with continuing operations at October 27, 2019, is as follows:


	Severance Pay and Benefits		Implementation Costs and Other Related Costs⁽³⁾	Total Charges
Accrued balance at July 28, 2019⁽¹⁾	$	37
2020 charges	3		8	$	11
2020 cash payments	(9)

Accrued balance at October 27, 2019⁽²⁾	$	31

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⁽¹⁾Includes $8 of severance pay and benefits recorded in Other liabilities in the Consolidated Balance Sheet.

⁽²⁾Includes $6 of severance pay and benefits recorded in Other liabilities in the Consolidated Balance Sheet.

⁽³⁾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 in the Consolidated Statements of Earnings.

Restructuring reserves included in Current liabilities of discontinued operations were $1 at October 27, 2019 and July 28, 2019.

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 in Earnings from continuing operations associated with segments is as follows:


	October 27, 2019
	Three Months Ended		Costs Incurred to Date
Meals & Beverages	$	2	$	213
Snacks	9		210
Corporate	—		160
Total	$	11	$	583