Restructuring Charges and Cost Savings Initiatives

9 Months Ended

May 01, 2022

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.

Over the years, we expanded these initiatives by continuing to optimize 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 continued to implement this program and identified opportunities for additional cost synergies as we integrated Snyder's-Lance.

In 2022, we expanded these initiatives as we continue to pursue cost savings by further optimizing our supply chain and manufacturing network and through effective cost management. Cost estimates for these expanded initiatives, 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				Nine Months Ended
(Millions)	May 1, 2022		May 2, 2021		May 1, 2022		May 2, 2021		Recognized as of May 1, 2022
Restructuring charges	$	—	$	2	$	—	$	21	$	259
Administrative expenses	5		11		10		21		349
Cost of products sold	1		2		5		1		84
Marketing and selling expenses	—		—		—		—		13
Research and development expenses	—		—		—		—		4
Total pre-tax charges	$	6	$	15	$	15	$	43	$	709

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


(Millions)	Recognized as of May 1, 2022
Severance pay and benefits	$	222
Asset impairment/accelerated depreciation	82
Implementation costs and other related costs	405
Total	$	709

The total estimated pre-tax costs for actions associated with continuing operations that have been identified are approximately $725 million to $735 million and we expect to incur substantially all of the costs through 2022. These estimates will be updated as 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 $225 million in severance pay and benefits; approximately $85 million in asset impairment and accelerated depreciation; and approximately $415 million to $425 million in implementation costs and other related costs. We expect these pre-tax costs to be associated with our segments as follows: Meals & Beverages - approximately 31%; Snacks - approximately 43%; and Corporate - approximately 26%.

Of the aggregate $725 million to $735 million of pre-tax costs associated with continuing operations identified to date, we expect approximately $625 million to $635 million will be cash expenditures. In addition, we expect to invest approximately $440 million in capital expenditures, of which we invested $433 million as of May 1, 2022. We expect to invest in substantially all of the capital expenditures through 2022. 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 our existing 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, 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 May 1, 2022, is as follows:


(Millions)	Severance Pay and Benefits		Implementation Costs and Other Related Costs(2)	Total Charges
Accrued balance at August 1, 2021(1)	$	7
2022 charges	—		15	$	15
2022 cash payments	(4)

Accrued balance at May 1, 2022	$	3

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

(2)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.

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:


	May 1, 2022
(Millions)	Three Months Ended		Nine Months Ended		Costs Incurred to Date
Meals & Beverages	$	—	$	2	$	225
Snacks	4		11		310
Corporate	2		2		174
Total	$	6	$	15	$	709

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