Restructuring Charges and Cost Savings Initiatives

6 Months Ended

Jan. 31, 2021

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, Inc. (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 (gains) recorded in Earnings from continuing operations related to these initiatives is as follows:


	Three Months Ended				Six Months Ended
	January 31, 2021		January 26, 2020		January 31, 2021		January 26, 2020		Recognized as of January 31, 2021
Restructuring charges	$	18	$	7	$	19	$	10	$	257
Administrative expenses	6		13		10		21		321
Cost of products sold	(2)		2		(1)		2		75
Marketing and selling expenses	—		2		—		2		12
Research and development expenses	—		1		—		1		4
Total pre-tax charges	$	22	$	25	$	28	$	36	$	669

A summary of the pre-tax costs in Earnings from discontinued operations associated with these initiatives is as follows:


	Recognized as of January 31, 2021
Severance pay and benefits	$	19
Implementation costs and other related costs	4
Total	$	23

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 31, 2021
Severance pay and benefits	$	219
Asset impairment/accelerated depreciation	80
Implementation costs and other related costs	370
Total	$	669

The total estimated pre-tax costs for actions associated with continuing operations that have been identified are approximately $695 to $725 and we expect to incur the costs through 2022. 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 $220 to $225 in severance pay and benefits; approximately $85 in asset impairment and accelerated depreciation; and approximately $390 to $415 in implementation costs and other related costs. We expect these pre-tax costs to be associated with our segments as follows: Meals & Beverages - approximately 32%; Snacks - approximately 44%; and Corporate - approximately 24%.

Of the aggregate $695 to $725 of pre-tax costs associated with continuing operations identified to date, we expect approximately $595 to $625 will be cash expenditures. In addition, we expect to invest approximately $455 in capital expenditures through 2022, of which we invested $367 as of January 31, 2021. The capital expenditures primarily relate to a 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 January 31, 2021, is as follows:


	Severance Pay and Benefits		Implementation Costs and Other Related Costs(3)	Asset Impairment/Accelerated Depreciation	Other Non-Cash Exit Costs(4)	Total Charges
Accrued balance at August 2, 2020(1)	$	15
2021 charges	4		8	13	3	$	28
2021 cash payments	(9)

Accrued balance at January 31, 2021(2)	$	10

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(1)Includes $3 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 and Cost of products sold in the Consolidated Statements of Earnings.

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

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 31, 2021
	Three Months Ended		Six Months Ended		Costs Incurred to Date
Meals & Beverages	$	1	$	1	$	221
Snacks	21		26		277
Corporate	—		1		171
Total	$	22	$	28	$	669

In addition, in the second quarter of 2021, we recorded a $19 deferred tax charge in connection with a legal entity reorganization as part of the continued integration of Snyder's-Lance.