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 pre-tax charges recorded in Earnings from continuing operations related to both programs is as follows:



	2019		2018⁽¹⁾		2017		Recognized as of July 28, 2019⁽¹⁾
Restructuring charges	$	31	$	55	$	11	$	229
Administrative expenses	62		99		33		263
Cost of products sold	18		45		4		67
Marketing and selling expenses	7		3		—		10
Research and development expenses	3		—		—		3
Total pre-tax charges	$	121	$	202	$	48	$	572

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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 charges recorded in Earnings (loss) from discontinued operations is as follows:



	2019		2018		2017		Recognized as of July 28, 2019⁽¹⁾
Total pre-tax charges	$	—	$	8	$	10	$	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 both programs is as follows:



	Recognized as of July 28, 2019
Severance pay and benefits⁽¹⁾	$	205
Asset impairment/accelerated depreciation	63
Implementation costs and other related costs⁽²⁾	304
Total	$	572

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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 associated with continuing operations that have been identified under both programs are approximately $615 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 associated with continuing operations that have been identified to date under both programs to consist of the following: approximately $205 to $210 in severance pay and benefits; approximately $65 in asset impairment and accelerated depreciation; and approximately $345 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 35%; Snacks - approximately 40%; and Corporate - approximately 25%.

Of the aggregate $615 to $665 of pre-tax costs associated with continuing operations identified to date under both programs, we expect approximately $540 to $590 will be cash expenditures. In addition, we expect to invest approximately $395 in capital expenditures through 2021, of which we invested approximately $250 as of July 28, 2019. The capital expenditures primarily relate to the U.S. warehouse optimization project, improvement of quality, safety and cost structure across the Snyder’s-Lance manufacturing network, implementation of an SAP enterprise-resource planning system for Snyder's-Lance, 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 July 28, 2019, is as follows:



	Severance Pay and Benefits			Non-Cash Benefits⁽⁴⁾	Implementation Costs and Other Related Costs⁽⁵⁾	Asset Impairment/Accelerated Depreciation	Other Non-Cash Exit Costs⁽⁶⁾	Total Charges
Accrued balance at July 30, 2017⁽¹⁾	$	19
2018 charges	49			2	115	33	3	$	202
2018 cash payments	(24		)
Foreign currency translation adjustment	(1		)
Accrued balance at July 29, 2018⁽²⁾	$	43
2019 charges	31			—	72	18	—	$	121
2019 cash payments	(36		)
Foreign currency translation adjustment	(1		)
Accrued balance at July 28, 2019⁽³⁾	$	37

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


⁽²⁾	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.


⁽³⁾	Includes $8 of severance pay and benefits recorded in Other liabilities in the Consolidated Balance Sheet.


⁽⁴⁾	Represents pension special termination benefits. See Note 11 for additional information.


⁽⁵⁾	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, Cost of products sold, Marketing and selling expenses, and Research and development expenses in the Consolidated Statements of Earnings.


⁽⁶⁾	Includes non-cash costs that are not reflected in the restructuring reserve in the Consolidated Balance Sheet.

Restructuring reserves included in Current liabilities of discontinued operations were $1 at July 28, 2019, $3 at July 29, 2018, and $7 at July 30, 2017, respectively.

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:



	2019		Costs Incurred to Date⁽¹⁾
Meals & Beverages	$	34	$	212
Snacks	40		200
Corporate	47		160
Total	$	121	$	572

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