Restructuring Activities (Notes)

3 Months Ended

Mar. 28, 2020

Restructuring and Related Activities [Abstract]

As part of our restructuring activities, we incur expenses that qualify as exit and disposal costs under U.S. GAAP. These include severance and employee benefit costs and other exit costs. Severance and employee benefit costs primarily relate to cash severance, non-cash severance, including accelerated equity award compensation expense, and pension and other termination benefits. Other exit costs primarily relate to lease and contract terminations. We also incur expenses that are an integral component of, and directly attributable to, our restructuring activities, which do not qualify as exit and disposal costs under U.S. GAAP. These include asset-related costs and other implementation costs. Asset-related costs primarily relate to accelerated depreciation and asset impairment charges. Other implementation costs primarily relate to start-up costs of new facilities, professional fees, asset relocation costs, costs to exit facilities, and costs associated with restructuring benefit plans.

Employee severance and other termination benefit packages are primarily determined based on established benefit arrangements, local statutory requirements, or historical benefit practices. We recognize the contractual component of these benefits when payment is probable and estimable; additional elements of severance and termination benefits associated with non-recurring benefits are recognized ratably over each employee’s required future service period. Charges for accelerated depreciation are recognized on long-lived assets that will be taken out of service before the end of their normal service, in which case depreciation estimates are revised to reflect the use of the asset over its shortened useful life. Asset impairments establish a new fair value basis for assets held for disposal or sale, and those assets are written down to expected net realizable value if carrying value exceeds fair value. All other costs are recognized as incurred.

Restructuring Activities:

We have restructuring programs globally, which are focused primarily on workforce reduction and factory closure and consolidation. For the three months ended March 28, 2020, we eliminated approximately 80 positions outside of the U.S. related to these programs. As of March 28, 2020, we expect to eliminate approximately 250 additional positions outside the U.S. related to these programs primarily due to the formation of the International zone. Total restructuring expenses during the three months ended March 28, 2020 were insignificant and included $3 million of credits in severance and employee benefit costs, $2 million of other implementation costs, and $1 million of other exit costs. Restructuring expenses totaled $27 million for the three months ended March 30, 2019.

Our net liability balance for restructuring project costs that qualify as exit and disposal costs under U.S. GAAP (i.e., severance and employee benefit costs and other exit costs) was (in millions):


	Severance and Employee Benefit Costs		Other Exit Costs		Total
Balance at December 28, 2019	$	22	$	24	$	46
Charges/(credits)	(3)		1		(2)
Cash payments	(7)		(1)		(8)
Balance at March 28, 2020	$	12	$	24	$	36

We expect the majority of the liability for severance and employee benefit costs as of March 28, 2020 to be paid by the end of 2020. The liability for other exit costs primarily relates to lease obligations. The cash impact of these obligations will continue for the duration of the lease terms, which expire between 2020 and 2026.

Total Expenses:

Total expense/(income) related to restructuring activities, by income statement caption, were (in millions):


	For the Three Months Ended
	March 28, 2020		March 30, 2019
Severance and employee benefit costs - COGS	$	1	$	—
Severance and employee benefit costs - SG&A	(4)		1
Asset-related costs - COGS	—		2
Asset-related costs - SG&A	—		7
Other costs - COGS	—		7
Other costs - SG&A	3		10
	$	—	$	27

We do not include our restructuring activities within Segment Adjusted EBITDA (as defined in Note 18, Segment Reporting). The pre-tax impact of allocating such expenses to our segments would have been (in millions):


	For the Three Months Ended
	March 28, 2020		March 30, 2019
United States	$	—	$	19
International	(1)		4
Canada	1		2
General corporate expenses	—		2
	$	—	$	27