RESTRUCTURING, IMPAIRMENT, AND OTHER EXIT COSTS

12 Months Ended

May 29, 2016

RESTRUCTURING, IMPAIRMENT, AND OTHER EXIT COSTS [Abstract]

RESTRUCTURING, IMPAIRMENT, AND OTHER EXIT COSTS

NOTE 4. RESTRUCTURING, IMPAIRMENT, AND OTHER EXIT COSTS

INTANGIBLE ASSET IMPAIRMENT

In fiscal 2015, we recorded a $260.0 million charge related to the impairment of our Green Giant brand intangible assetin restructuring, impairment, and other exit costs. See Note 6 for additional information.

RESTRUCTURING INITIATIVES

We view our restructuring activities as actions that help us meet our long-term growth targets. Activities we undertake must meet internal rate of return and net present value targets. Each restructuring action normally takes one to two years to complete. At completion (or as each major stage is completed in the case of multi-year programs), the project begins to deliver cash savings and/or reduced depreciation. These activities result in various restructuring costs, including asset write-offs, exit charges including severance, contract termination fees, and decommissioning and other costs. Accelerated depreciation associated with restructured assets, as used in the context of our disclosures regarding restructuring activity, refers to the increase in depreciation expense caused by shortening the useful life or updating the salvage value of depreciable fixed assets to coincide with the end of production under an approved restructuring plan. Any impairment of the asset is recognized immediately in the period the plan is approved.

We are currently pursuing several multi-year restructuring initiatives designed to increase our efficiency and focus our business behind our key growth strategies. Charges recorded in fiscal 2016 and 2015 related to these initiatives were as follows:

	Fiscal 2016												Fiscal 2015
In Millions		Severance		Asset Write-offs		Pension Related		Accelerated Depreciation		Other		Total		Severance		Asset Write-offs		Pension Related		Accelerated Depreciation		Other		Total
Project Compass	$	45.4	$	-	$	1.4	$	-	$	7.9	$	54.7	$	-	$	-	$	-	$	-	$	-	$	-
Project Catalyst		(8.7)		1.2		-		-		-		(7.5)		121.5		12.3		6.6		-		8.0		148.4
Project Century		30.9		30.7		19.1		76.5		25.4		182.6		44.3		42.3		31.2		53.1		10.9		181.8
Combination of certain
operational facilities		-		-		-		-		-		-		13.0		0.7		-		-		0.2		13.9
Charges associated with
restructuring actions
previously announced		-		-		-		-		-		-		(0.6)		-		-		-		-		(0.6)
Total	$	67.6	$	31.9	$	20.5	$	76.5	$	33.3	$	229.8	$	178.2	$	55.3	$	37.8	$	53.1	$	19.1	$	343.5

In the first quarter of fiscal 2016, we approved Project Compass, a restructuring plan designed to enable our International segment to accelerate long-term growth through increased organizational effectiveness and reduced administrative expense. In connection with this project, we expect to eliminate approximately 725 to 775 positions. We expect to incur approximately $60 million of net expenses relating to this action of which approximately $60 million will be cash. We recorded $54.7 million of restructuring charges relating to this action in fiscal 2016. We expect this action to be completed by the end of fiscal 2017.

Project Century (Century) began in fiscal 2015 as a review of our North American manufacturing and distribution network to streamline operations and identify potential capacity reductions. In the second quarter of fiscal 2016, we broadened the scope of Project Century to identify opportunities to streamline our supply chain outside of North America. As part of the expanded project, we approved a restructuring plan to close manufacturing facilities in our International segment supply chain located in Berwick, United Kingdom and East Tamaki, New Zealand. These actions affected approximately 285 positions. We expect to incur total restructuring charges of approximately $41 million relating to these actions, of which approximately $20 million will be cash. We recorded $30.0 million of restructuring charges relating to these actions in fiscal 2016. We expect these actions to be completed by the end of fiscal 2018.

As part of Century, in the first quarter of fiscal 2016, we approved a restructuring plan to close our West Chicago, Illinois cereal and dry dinner manufacturing plant in our U.S. Retail segment supply chain. This action will affect approximately 500 positions, and we expect to incur approximately $117 million of net expenses relating to this action, of which approximately $53 million will be cash. We recorded $79.2 million of restructuring charges relating to this action in fiscal 2016. We expect this action to be completed by the end of fiscal 2019.

As part of Century, in the first quarter of fiscal 2016, we approved a restructuring plan to close our Joplin, Missouri snacks plant in our U.S. Retail segment supply chain. This action affected approximately 120 positions, and we incurred $6.3 million of net expenses relating to this action, of which less than $1 million was cash. We recorded $6.3 million of restructuring charges relating to this action in fiscal 2016. This action was completed in fiscal 2016.

As part of Century, in the third quarter of fiscal 2015, we approved a restructuring plan to reduce our refrigerated dough capacity and exit our Midland, Ontario, Canada and New Albany, Indiana facilities, which support our U.S. Retail, International, and Convenience Stores and Foodservice supply chains. The Midland action will affect approximately 100 positions, and we expect to incur approximately $23 million of net expenses relating to this action, of which approximately $16 million will be cash. We recorded $2.7 million of restructuring charges relating to this action in fiscal 2016. We recorded $6.5 million of restructuring charges relating to this action in fiscal 2015. The New Albany action will affect approximately 400 positions, and we expect to incur approximately $82 million of net expenses relating to this action of which approximately $40 million will be cash. We recorded $17.1 million of restructuring charges relating to this action in fiscal 2016 and $51.3 million in fiscal 2015. We expect these actions to be completed by the end of fiscal 2018.

As part of Century, in the second quarter of fiscal 2015, we approved a restructuring plan to consolidate yogurt manufacturing capacity and exit our Methuen, Massachusetts facility in our U.S. Retail segment and Convenience Stores and Foodservice segment supply chains. This action affected approximately 175 positions. We expect to incur approximately $58 million of net expenses relating to this action of which approximately $12 million will be cash. We recorded $15.6 million of restructuring charges relating to this action in fiscal 2016 and $43.6 million in fiscal 2015. This action was largely completed in fiscal 2016.

As part of Century, in the second quarter of fiscal 2015, we approved a restructuring plan to eliminate excess cereal and dry mix capacity and exit our Lodi, California facility in our U.S. Retail supply chain. This action affected approximately 430 positions. We incurred $93.8 million of net expenses relating to this action of which $20 million was cash. We recorded $30.6 million of restructuring charges relating to this action in fiscal 2016 and $63.2 million in fiscal 2015. This action was completed in fiscal 2016.

In addition to the actions taken at certain facilities described above, we incurred $1.1 million of restructuring charges in fiscal 2016, relating to Century, and $17.2 million in fiscal 2015, of which $6 million was cash.

During the second quarter of fiscal 2015, we approved Project Catalyst, a restructuring plan to increase organizational effectiveness and reduce overhead expense. In connection with this project, we eliminated approximately 750 positions primarily in the United States. We incurred $140.9 million of net expenses relating to these actions of which $118 million will be cash. In fiscal 2016, we reduced the estimate of charges related to this action by $7.5 million. We recorded $148.4 million of restructuring charges relating to this action in fiscal 2015. These actions were largely completed in fiscal 2015.

During the first quarter of fiscal 2015, we approved a plan to combine certain Yoplait and General Mills operational facilities within our International segment to increase efficiencies and reduce costs. This action will affect approximately 240 positions. We expect to incur approximately $15 million of net expenses relating to this action of which approximately $12 million will be cash. We recorded $13.9 million of restructuring charges relating to this action in fiscal 2015. We expect this action to be completed in fiscal 2017.

In fiscal 2014, we recorded $3.6 million of restructuring charges related to a productivity and cost savings plan approved in the fourth quarter of fiscal 2012. These restructuring actions were completed in fiscal 2014.

In fiscal 2016, we paid $122.6 million in cash relating to restructuring initiatives. In fiscal 2015, we paid $63.6 million in cash relating to restructuring initiatives. In fiscal 2014, we paid $22.4 million in cash related to restructuring actions.

In addition to restructuring charges, we expect to incur approximately $109 million of additional project-related costs, which will be recorded in cost of sales, all of which will be cash. We recorded project-related costs in cost of sales of $57.5 million in fiscal 2016 and $13.2 million in fiscal 2015. In addition, we paid $54.5 million in cash in fiscal 2016 and $9.7 million in fiscal 2015 for project-related costs.

Restructuring charges and project-related costs are classified in our Consolidated Statements of Earnings as follows:

		Fiscal
In Millions		2016		2015		2014
Cost of sales	$	78.4	$	59.6	$	-
Restructuring, impairment, and other exit costs		151.4		283.9		3.6
Total restructuring charges		229.8		343.5		3.6
Project-related costs classified in cost of sales	$	57.5	$	13.2	$	-

The roll forward of our restructuring and other exit cost reserves, included in other current liabilities, is as follows:

In Millions		Severance		Contract Termination		OtherExit Costs		Total
Reserve balance as of May 26, 2013	$	19.5	$	-	$	-	$	19.5
2014 charges, including foreign currency translation		6.4		-		-		6.4
Utilized in 2014		(22.4)		-		-		(22.4)
Reserve balance as of May 25, 2014		3.5		-		-		3.5
2015 charges, including foreign currency translation		176.4		0.6		8.1		185.1
Utilized in 2015		(61.3)		-		(6.5)		(67.8)
Reserve balance as of May 31, 2015		118.6		0.6		1.6		120.8
2016 charges, including foreign currency translation		64.3		1.6		4.3		70.2
Utilized in 2016		(109.3)		(0.7)		(4.4)		(114.4)
Reserve balance as of May 29, 2016	$	73.6	$	1.5	$	1.5	$	76.6

The charges recognized in the roll forward of our reserves for restructuring and other exit costs do not include items charged directly to expense (e.g., asset impairment charges, the gain or loss on the sale of restructured assets, and the write-off of spare parts) and other periodic exit costs recognized as incurred, as those items are not reflected in our restructuring and other exit cost reserves on our Consolidated Balance Sheets.