Restructuring Charges and Cost Savings Initiatives

9 Months Ended

Apr. 28, 2024

Restructuring Charges [Abstract]

Restructuring Charges

Restructuring Charges, Cost Savings Initiatives and Other Optimization Initiatives

Multi-year Cost Savings Initiatives and Snyder's-Lance Cost Transformation Program and Integration

Continuing Operations

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, 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. In the second quarter of 2023, we announced plans to consolidate our Snacks offices in Charlotte, North Carolina, and Norwalk, Connecticut, into our headquarters in Camden, New Jersey. 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 recognized in the Consolidated Statements of Earnings related to these initiatives is as follows:

	Three Months Ended				Nine Months Ended
(Millions)	April 28, 2024		April 30, 2023		April 28, 2024		April 30, 2023		Recognized as of April 28, 2024
Restructuring charges	$	(3)	$	6	$	1	$	15	$	281
Administrative expenses	13		13		47		21		430
Cost of products sold	3		12		9		12		111
Marketing and selling expenses	1		—		4		—		23
Research and development expenses	1		2		3		2		10
Total pre-tax charges	$	15	$	33	$	64	$	50	$	855

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

(Millions)	Recognized as of April 28, 2024
Severance pay and benefits	$	241
Asset impairment/accelerated depreciation	124
Implementation costs and other related costs	490
Total	$	855

The total estimated pre-tax costs for actions that have been identified are approximately $905 million to $930 million and we expect to incur substantially all of the costs through 2025. These estimates will be updated as the expanded initiatives are developed.

We expect the costs for actions that have been identified to date to consist of the following: approximately $250 million to $255 million in severance pay and benefits; approximately $140 million in asset impairment and accelerated depreciation; and approximately $515 million to $535 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 33%; Snacks - approximately 43%; and Corporate - approximately 24%.

Of the aggregate $905 million to $930 million of pre-tax costs identified to date, we expect approximately $725 million to $750 million will be cash expenditures. In addition, we expect to invest approximately $705 million in capital expenditures, of which we invested $508 million as of April 28, 2024. We expect to invest in substantially all of the capital expenditures through 2025. The capital expenditures primarily relate to optimization of production within our Meals & Beverages manufacturing network, a U.S. warehouse optimization project, improvement of quality, safety and cost structure across the Snyder’s-Lance manufacturing network, optimization of information technology infrastructure and applications, enhancements to our headquarters in Camden, New Jersey, implementation of our existing SAP enterprise-resource planning system for Snyder's-Lance, and optimization of the Snyder’s-Lance warehouse and distribution network.

A summary of the restructuring activity and related reserves at April 28, 2024, is as follows:

(Millions)	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 July 30, 2023(1)	$	13
2024 charges	1		27	18	18	$	64
2024 cash payments	(7)
Accrued balance at April 28, 2024(2)	$	7

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(1)Includes $7 million of severance pay and benefits recorded in Other liabilities in the Consolidated Balance Sheet.

(2)Includes $4 million 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.

(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 associated with segments is as follows:

	April 28, 2024
(Millions)	Three Months Ended		Nine Months Ended		Costs Incurred to Date
Meals & Beverages	$	7	$	16	$	267
Snacks	—		30		375
Corporate	8		18		213
Total	$	15	$	64	$	855

Other Optimization Initiatives

In the second quarter of 2024, we began implementation of a new initiative to improve the effectiveness of our Snacks direct-store-delivery route-to-market network. Pursuant to this initiative we will purchase certain Pepperidge Farm and Snyder's-Lance routes where there are opportunities to unlock greater scale in select markets, combine them and sell the combined routes to independent contractor distributors. We expect to execute this program in a staggered rollout and to incur expenses of up to approximately $115 million through 2029. In the three-month period ended April 28, 2024, we incurred $5 million in Marketing and selling expenses related to this initiative.

Sovos Brands Integration Initiatives

On March 12, 2024, we completed the acquisition of Sovos Brands. See Note 3 for additional information. We have identified opportunities for cost synergies as we integrate Sovos Brands. Cost estimates to achieve the synergies are continuing to be developed. The total expected pre-tax costs and timing of when we expect to incur those costs, as well as the expected future cash expenditures, will be updated as detailed plans are developed. We expect the pre-tax costs to be associated primarily with the Meals & Beverages segment.

In the three-month period ended April 28, 2024, we recorded Restructuring charges of $16 million related to initiatives to achieve the synergies.

A summary of the restructuring activity and related reserves associated with the Sovos Brands integration at April 28, 2024, is as follows:

(Millions)	Severance Pay and Benefits
2024 charges	$	16
2024 cash payments	—
Accrued balance at April 28, 2024(1)	$	16

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(1)Includes $5 million of severance pay and benefits recorded in Other liabilities in the Consolidated Balance Sheet.

Segment operating results do not include restructuring charges, nor implementation and integration costs, because we evaluate segment performance excluding such charges. The costs incurred in the three-month period ended April 28, 2024 were associated with the Meals & Beverages segment.