RESTRUCTURING INITIATIVES

9 Months Ended

Feb. 26, 2017

Restructuring Initiatives [Abstract]

(3) Restructuring Initiatives

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

	Quarter Ended											Quarter Ended
	Feb. 26, 2017											Feb. 28, 2016
In Millions		Severance		Asset Write-offs		Accelerated Depreciation		Other		Total		Severance		Asset Write-offs		Accelerated Depreciation		Other		Total
Global reorganization	$	67.4	$	-	$	-	$	5.7	$	73.1	$	-	$	-	$	-	$	-	$	-
Closure of Melbourne, Australia plant		-		-		5.6		0.1		5.7		-		-		-		-		-
Restructuring of certain international product lines		0.6		1.6		-		0.1		2.3		-		-		-		-		-
Closure of Vineland, New Jersey plant		-		0.4		7.1		0.2		7.7		-		-		-		-		-
Project Compass		(1.4)		-		-		-		(1.4)		(0.9)		-		-		0.1		(0.8)
Project Century		0.2		1.7		3.4		1.8		7.1		7.4		10.4		17.0		9.1		43.9
Project Catalyst		-		-		-		-		-		(8.9)		-		-		-		(8.9)
Combination of certain operational facilities		(0.5)		-		-		-		(0.5)		-		-		-		-		-
Total	$	66.3	$	3.7	$	16.1	$	7.9	$	94.0	$	(2.4)	$	10.4	$	17.0	$	9.2	$	34.2

	Nine-Month Period Ended										Nine-Month Period Ended
	Feb. 26, 2017										Feb. 28, 2016
In Millions		Severance		Asset Write-offs		Accelerated Depreciation		Other		Total		Severance		Asset Write-offs		Accelerated Depreciation		Other		Total
Global reorganization	$	67.4	$	-	$	-	$	5.7	$	73.1	$	-	$	-	$	-	$	-	$	-
Closure of Melbourne, Australia plant		11.3		-		6.3		0.1		17.7		-		-		-		-		-
Restructuring of certain international product lines		7.0		37.4		(0.3)		1.5		45.6		-		-		-		-		-
Closure of Vineland, New Jersey plant		12.3		5.4		16.1		1.8		35.6		-		-		-		-		-
Project Compass		(1.4)		-		0.2		0.8		(0.4)		46.2		-		-		6.6		52.8
Project Century		0.7		9.8		18.0		8.7		37.2		35.5		22.9		59.6		37.1		155.1
Project Catalyst		-		-		-		-		-		(8.7)		-		-		-		(8.7)
Combination of certain operational facilities		(0.5)		-		-		-		(0.5)		-		-		-		-		-
Total	$	96.8	$	52.6	$	40.3	$	18.6	$	208.3	$	73.0	$	22.9	$	59.6	$	43.7	$	199.2

In the third quarter of fiscal 2017, we approved restructuring actions designed to better align our organizational structure with our strategic initiatives. In connection with these actions, we expect to eliminate approximately 400 to 600 positions. We expect to incur approximately $80 million of net expenses relating to these actions, all of which will be cash. We recorded $73.1 million of restructuring charges in the third quarter of fiscal 2017 relating to these actions. We expect these actions to be completed by the end of fiscal 2018.

In the second quarter of fiscal 2017, we notified the employees and their representatives of our decision to close our pasta manufacturing facility in Melbourne, Australia in our Europe & Australia segment to improve our margin structure. This action will affect approximately 350 positions, and we expect to incur approximately $34 million of net expenses relating to this action, most of which will be non-cash. We recorded $5.7 million of restructuring charges in the third quarter of fiscal 2017 and $17.7 million in the nine-month period ended February 26, 2017 relating to this action. We expect these actions to be completed by the end of fiscal 2019.

In the first quarter of fiscal 2017, we announced a plan to restructure certain product lines in our Asia & Latin America segment. To eliminate excess capacity, we closed our snacks manufacturing facility in Marília, Brazil and ceased production operations for meals and snacks at our facility in São Bernardo do Campo, Brazil. We ceased production of certain underperforming snack products at our facility in Nanjing, China. These and other actions will affect approximately 420 positions in our Brazilian operations and approximately 440 positions in our Greater China operations. We expect to incur approximately $38 million of net expenses of which approximately $4 million will be cash. We recorded $2.3 million of restructuring charges in the third quarter of fiscal 2017 and $45.6 million in the nine-month period ended February 26, 2017 relating to this action. We expect these actions to be completed by the end of fiscal 2018.

In the first quarter of fiscal 2017, we approved a plan to close our Vineland, New Jersey facility to eliminate excess soup capacity in our North America Retail segment. This action will affect approximately 370 positions, and we expect to incur approximately $65 million of net expenses, of which approximately $18 million will be cash. We recorded $7.7 million of restructuring charges in the third quarter of fiscal 2017 and $35.6 million in the nine-month period ended February 26, 2017 relating to this action. We expect this action to be completed by the end of fiscal 2019.

In the first quarter of fiscal 2016, we approved Project Compass, a restructuring plan designed to enable our international operations to accelerate long-term growth through increased organizational effectiveness and reduced administrative expense. In connection with this project, we eliminated 749 positions. We incurred $54.3 million of net expenses, all of which was cash. In the third quarter of fiscal 2017, we reduced the estimate of charges related to this action by $1.4 million. We recorded $52.8 million of restructuring charges in the nine-month period ended February 28, 2016 related to this action. This action was completed in the third quarter of fiscal 2017.

Project Century (Century) began in fiscal 2015 and was a review of our manufacturing and distribution network to streamline operations and identify potential capacity reductions. As part of Century, in the second quarter of fiscal 2016, we notified the employees and their representatives of our decision to close the dough and dry mix manufacturing facility in our Europe & Australia segment supply chain located in Berwick, United Kingdom. This action affected 265 positions, and we incurred $32 million of net expenses related to this action, of which $12 million was cash. We recorded $1.2 million of restructuring charges in the nine-month period ended February 26, 2017 and $17.7 million in the nine-month period ended February 28, 2016 related to this action. This action was completed in fiscal 2017.

As part of Century, in the first quarter of fiscal 2016, we approved a restructuring plan to close our cereal and dry dinner manufacturing plant in West Chicago, Illinois in our North America Retail segment supply chain. This action will affect approximately 500 positions, and we expect to incur approximately $105 million of net expenses relating to this action, of which approximately $44 million will be cash. We recorded $6.7 million of restructuring charges in the third quarter of fiscal 2017 and $19.6 million in the nine-month period ended February 26, 2017 relating to this action. We recorded $8.2 million in the third quarter of fiscal 2016 and $72.2 million in the nine-month period ended February 28, 2016 relating to this action. We expect this action 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 snacks manufacturing facility in Joplin, Missouri in our North America Retail segment supply chain. This action affected approximately 120 positions, and we incurred $6.6 million of net expenses relating to this action, including $0.6 million in the third quarter of fiscal 2016 and $8.4 million in the nine-month period ended February 28, 2016, of which less than $1 million was cash. This action was completed in fiscal 2016.

In addition, we recorded restructuring charges of $0.4 million in the third quarter of fiscal 2017, $17.4 million in the third quarter of fiscal 2016, $16.4 million in the nine-month period ended February 26, 2017, and $56.8 million in the nine-month period ended February 28, 2016 relating to other Century actions previously announced.

During the nine-month period ended February 26, 2017, we paid $67.1 million in cash relating to restructuring initiatives.

In addition to restructuring charges, we recorded $11.5 million of project-related costs in cost of sales in the third quarter of fiscal 2017, $10.1 million in the third quarter of fiscal 2016, $36.4 million in the nine-month period ended February 26, 2017 and $39.4 million in the nine-month period ended February 28, 2016. We paid $11.5 million in cash in the third quarter of fiscal 2017 for project-related costs. We expect to incur approximately $17.1 million of project-related costs in future periods related to our restructuring initiatives.

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

		Quarter Ended				Nine-MonthPeriod Ended
In Millions		Feb. 26, 2017		Feb. 28, 2016		Feb. 26, 2017		Feb. 28, 2016
Cost of sales	$	16.4	$	17.3	$	42.8	$	60.9
Restructuring, impairment, and other exit costs		77.6		16.9		165.5		138.3
Total restructuring charges		94.0		34.2		208.3		199.2
Project-related costs classified in cost of sales	$	11.5	$	10.1	$	36.4	$	39.4

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 29, 2016	$	73.6	$	1.5	$	1.5	$	76.6
Fiscal 2017 charges, including foreign currency translation		97.4		0.9		8.3		106.6
Utilized in fiscal 2017		(54.5)		(1.6)		(6.5)		(62.6)
Reserve balance as of Feb. 26, 2017	$	116.5	$	0.8	$	3.3	$	120.6

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.