Restructuring Charges and Cost Savings Initiatives

6 Months Ended

Jan. 26, 2020

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.

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						Six Months Ended
	January 26, 2020		January 27, 2019		January 26, 2020		January 27, 2019		Recognized as of January 26, 2020
Restructuring charges	$	7	$	2	$	10	$	20	$	239
Administrative expenses	13		10		21		23		284
Cost of products sold	2		9		2		21		69
Marketing and selling expenses	2		2		2		4		12
Research and development expenses	1		1		1		1		4
Total pre-tax charges	$	25	$	24	$	36	$	69	$	608

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


	Three Months Ended						Six Months Ended
	January 26, 2020		January 27, 2019		January 26, 2020		January 27, 2019		Recognized as of January 26, 2020⁽¹⁾
Total pre-tax charges	$	—	$	—	$	—	$	1	$	23

_______________________________________

⁽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 January 26, 2020
Severance pay and benefits	$	215
Asset impairment/accelerated depreciation	65
Implementation costs and other related costs	328
Total	$	608

The total estimated pre-tax costs for actions associated with continuing operations that have been identified are approximately $660 to $685 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 $215 to $220 in severance pay and benefits; approximately $65 in asset impairment and accelerated depreciation; and approximately $380 to $400 in implementation costs and other related costs. We expect these pre-tax costs to be associated with our segments as follows: Meals & Beverages - approximately 33%; Snacks - approximately 42%; and Corporate - approximately 25%.

Of the aggregate $660 to $685 of pre-tax costs associated with continuing operations identified to date, we expect approximately $585 to $610 will be cash expenditures. In addition, we expect to invest approximately $395 in capital expenditures through 2021, of which we invested approximately $300 as of January 26, 2020. 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, optimization of information technology infrastructure and applications, transition of production of the Toronto manufacturing

facility to our U.S. thermal plants, 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 January 26, 2020, is as follows:


	Severance Pay and Benefits		Implementation Costs and Other Related		Asset Impairment/Accelerated Depreciation	Total Charges
				Costs⁽³⁾
Accrued balance at July 28, 2019⁽¹⁾	$	37
2020 charges	10		24		2	$	36
2020 cash payments	(16)

Accrued balance at January 26, 2020⁽²⁾	$	31

_______________________________________

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

⁽²⁾Includes $4 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, Cost of products sold, Marketing and selling expenses, and Research and development expenses in the Consolidated Statements of Earnings.

Restructuring reserves included in Current liabilities of discontinued operations were $1 at 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:


	January 26, 2020
	Three Months Ended		Six Months Ended		Costs Incurred to Date
Meals & Beverages	$	3	$	5	$	216
Snacks	18		27		228
Corporate	4		4		164
Total	$	25	$	36	$	608