Restructuring Charges and Cost Savings Initiatives

2015 Initiatives and Snyder's-Lance Cost Transformation Program and Integration

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

In February 2017, we announced that we were expanding these 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. 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. In August 2018, we announced that we will continue to streamline our organization, expand our zero-based budgeting efforts and optimize our manufacturing network.

On March 26, 2018, we completed the acquisition of Snyder's-Lance. Prior to the acquisition, in April 2017, 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 expect to continue to implement this program and to achieve a majority of the program's targeted savings. 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 restructuring charges and charges recorded in Administrative expenses, Cost of products sold, Marketing and selling expenses, and Research and development expenses related to both programs is as follows:



	Three Months Ended				Six Months Ended
	January 27, 2019		January 28, 2018		January 27, 2019		January 28, 2018		Recognized as of January 27, 2019⁽¹⁾
Restructuring charges	$	2	$	33	$	21	$	35	$	238
Administrative expenses	10		26		23		38		228
Cost of products sold	9		1		21		6		70
Marketing and selling expenses	2		—		4		—		7
Research and development expenses	1		—		1		—		1
Total pre-tax charges	$	24	$	60	$	70	$	79	$	544

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⁽¹⁾	Includes $13 of Restructuring charges and $12 of Administrative expenses associated with the Snyder's-Lance cost transformation program and integration recognized in 2018.

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



	Recognized as of January 27, 2019
Severance pay and benefits⁽¹⁾	$	214
Asset impairment/accelerated depreciation	66
Implementation costs and other related costs⁽²⁾	264
Total	$	544

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⁽¹⁾	Includes $13 of charges associated with the Snyder's-Lance cost transformation program and integration recognized in 2018.


⁽²⁾	Includes $12 of charges associated with the Snyder's-Lance cost transformation program and integration recognized in 2018.

The total estimated pre-tax costs for actions that have been identified under both programs are approximately $620 to $665 and we expect to incur substantially all of the costs through 2020. 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 under both programs to consist of the following: approximately $215 to $220 in severance pay and benefits; approximately $70 in asset impairment and accelerated depreciation; and approximately $335 to $375 in implementation costs and other related costs.We expect these pre-tax costs to be associated with our segments as follows: Meals and Beverages - approximately 37%; Global Biscuits and Snacks - approximately 39%; Campbell Fresh - approximately 2%; and Corporate - approximately 22%.

Of the aggregate $620 to $665 of pre-tax costs identified to date, we expect approximately $540 to $585 will be cash expenditures. In addition, we expect to invest approximately $325 in capital expenditures through 2021, of which we invested approximately $184 as of January 27, 2019. The capital expenditures primarily related to the U.S. warehouse optimization project, 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, insourcing of manufacturing for certain simple meal products, optimization of information technology infrastructure and applications, and optimization of the Snyder’s-Lance warehouse and distribution network.

A summary of the restructuring activity and related reserves associated with both programs at January 27, 2019, is as follows:



	Severance Pay and Benefits			Implementation Costs and Other Related Costs⁽³⁾	Asset Impairment/Accelerated Depreciation	Total Charges
Accrued balance at July 29, 2018⁽¹⁾	$	46
2019 charges	21			28	21	$	70
2019 cash payments	(17		)
Accrued balance at January 27, 2019⁽²⁾	$	50

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⁽¹⁾	Includes $24 of severance pay and benefits recorded in Other liabilities in the Consolidated Balance Sheet, $1 of which is associated with the Snyder's-Lance cost transformation program and integration. Of total accrued balance, $9 is associated with the Snyder's-Lance cost transformation program and integration.


⁽²⁾	Includes $15 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 Sheets. The costs are included in Administrative expenses, Cost of products sold, Marketing and selling expenses, and Research and development expenses in the Consolidated Statements of Earnings.

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 27, 2019
	Three Months Ended		Six Months Ended		Costs Incurred to Date⁽¹⁾
Meals and Beverages	$	12	$	35	$	213
Global Biscuits and Snacks	7		16		192
Campbell Fresh	—		3		14
Corporate	5		16		125
Total	$	24	$	70	$	544

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⁽¹⁾	Includes $25 of pre-tax costs associated with the Global Biscuits and Snacks segment recognized in 2018 related to the Snyder's-Lance cost transformation program and integration.