NOTE 5: HOG PRODUCTION COST SAVINGS INITIATIVE

In the fourth quarter of fiscal 2010, we announced a plan to improve the cost structure and profitability of our domestic hog production operations (the Cost Savings Initiative). The plan includes a number of undertakings designed to improve operating efficiencies and productivity. These consist of farm reconfigurations and conversions, termination of certain high cost, third party hog grower contracts and breeding stock sourcing contracts, as well as a number of other cost reduction activities. Certain of these activities are expected to occur over the next two years in order to allow for the successful transformation of farms while minimizing disruption of supply.

The following table summarizes the balance of accrued expenses, the cumulative expenses incurred to date and the expected remaining expenses to be incurred related to the Cost Savings Initiative by major type of cost. All of the charges presented have been recorded in cost of sales in the Hog Production segment.



	Accrued Balance May 2, 2010		Fiscal 2011 Expense		Payments			Accrued Balance May 1, 2011		Cumulative Expense-to-Date		Estimated Remaining Expense
	(in millions)
Cost savings activities:
Contract terminations	$	1.8	$	19.4	$	(20.4	)	$	0.8	$	22.2	$	3.4
Other associated costs	—		6.9		(5.3		)	1.6		6.9		2.5
Total cost savings activities	$	1.8	26.3		$	(25.7	)	$	2.4	29.1		5.9
Other charges:
Accelerated depreciation			1.7							5.5		0.4
Impairment			—							2.5		—
Total other charges			1.7							8.0		0.4
Total cost savings activities and other charges			$	28.0						$	37.1	$	6.3

In addition to the charges presented in the table above, we anticipate capital expenditures totaling approximately $86 million, of which we have spent $46.3 million through May 1, 2011.