RESTRUCTURING, IMPAIRMENT, AND OTHER EXIT COSTS

12 Months Ended

May 28, 2017

RESTRUCTURING, IMPAIRMENT, AND OTHER EXIT COSTS [Abstract]

RESTRUCTURING, IMPAIRMENT, AND OTHER EXIT COSTS

NOTE 4. RESTRUCTURING, IMPAIRMENT, AND OTHER EXIT COSTS

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 2017related to these initiatives were as follows:

	Fiscal 2017
In Millions		Severance		Asset Write-offs		Pension Related		Accelerated Depreciation		Other		Total
Global reorganization	$	66.3	$	-	$	-	$	-	$	5.8	$	72.1
Closure of Melbourne, Australia plant		11.4		4.5		-		5.6		0.4		21.9
Restructuring of certain international product lines		7.0		37.0		-		(0.3)		1.4		45.1
Closure of Vineland, New Jersey plant		12.3		7.9		1.5		14.5		5.2		41.4
Project Compass		(1.5)		0.1		-		0.2		0.8		(0.4)
Project Century		(1.0)		13.0		0.7		18.5		12.8		44.0
Total	$	94.5	$	62.5	$	2.2	$	38.5	$	26.4	$	224.1

In the third quarter of fiscal 2017, we approved restructuring actions designed to better align our organizational structure with our strategic initiatives. This action will affect approximately 600 positions and we expect to incur approximately $75 million of net expenses relating to these actions, all of which will be cash. We recorded $72.1 million of restructuring charges relating to these actions in fiscal 2017. 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, of which approximately $3 million will be cash. We recorded $21.9 million of restructuring charges relating to this action in fiscal 2017. We expect this action 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 also 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 $42 million of net expenses related to these actions, most of which will be non-cash. We recorded $45.1 million of restructuring charges relating to these actions in fiscal 2017. We expect these actions to be completed by the end of fiscal 2019.

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 380 positions, and we expect to incur approximately $58 million of net expenses related to this action, of which approximately $19 million will be cash. We recorded $41.4 million of restructuring charges relating to this action in fiscal 2017. We expect this action to be completed by the end of fiscal 2019.

	Fiscal 2016
In Millions		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)
Project Century		30.9		30.7		19.1		76.5		25.4		182.6
Total	$	67.6	$	31.9	$	20.5	$	76.5	$	33.3	$	229.8

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 fiscal 2017, we reduced the estimate of charges related to this action by $0.4 million. We recorded $54.7 million of restructuring charges relating to this action in fiscal 2016. This action was completed in fiscal 2017.

In fiscal 2015, we announced Project Century (Century) which initially involved a review of our North American manufacturing and distribution network to streamline operations and identify potential capacity reductions. In fiscal 2016, we broadened the scope of Century to identify opportunities to streamline our supply chain outside of North America.

As part of Century, in the second quarter of fiscal 2016, we approved a restructuring plan to close manufacturing facilities in our Europe & Australia segment supply chain located in Berwick, United Kingdom and East Tamaki, New Zealand. These actions affected 287 positions and we incurred $31.8 million of net expenses related to these actions, of which $12 million was cash. We recorded $1.8 million of restructuring charges relating to these actions in fiscal 2017 and $30.0 million in fiscal 2016. These actions were completed in fiscal 2017.

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 North America Retail segment supply chain. This action affected 484 positions, and we expect to incur approximately $104 million of net expenses relating to this action, of which approximately $41 million will be cash. We recorded $23.2 million of restructuring charges relating to this action in fiscal 2017 and $79.2 million in fiscal 2016. 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 Joplin, Missouri snacks plant in our North America Retail segment’s supply chain. This action affected 125 positions, and we incurred $6.6 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.

Charges recorded in fiscal 2015 were as follows:

	Fiscal 2015
In Millions		Severance		Asset Write-offs		Pension Related		Accelerated Depreciation		Other		Total
Project Catalyst	$	121.5	$	12.3	$	6.6	$	-	$	8.0	$	148.4
Project Century		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	$	178.2	$	55.3	$	37.8	$	53.1	$	19.1	$	343.5

In 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, 759 positions were impacted, primarily in the United States. We incurred $140.9 million of net expenses relating to this action of which approximately $94 million was cash. We recorded $148.4 million of restructuring charges relating to this action in fiscal 2015. This action was substantially completed in fiscal 2015.

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 North America Retail and Convenience Stores & Foodservice segments’ supply chains. The Midland action affected 94 positions and we expect to incur approximately $13 million of net expenses relating to this action, of which approximately $7 million will be cash. We recorded $1.8 million of restructuring charges relating to this action in fiscal 2017, $2.7 million in fiscal 2016 and $6.5 million in fiscal 2015. The New Albany action will affect 412 positions, and we expect to incur approximately $83 million of net expenses relating to this action of which approximately $40 million will be cash. We recorded $14.6 million of restructuring charges relating to this action in fiscal 2017, $17.1 million in fiscal 2016 and $51.3 million in fiscal 2015. We anticipate these actions will 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 North America Retail and Convenience Stores & Foodservice segments’ supply chains. This action affected 170 positions. We incurred $59.7 million of net expenses relating to this action of which $13 million was 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 substantially completed in fiscal 2017.

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 North America Retail segment supply chain. This action affected 409 positions. We incurred $95.3 million of net expenses related to this action of which $22 million was cash. We recorded $1.5 million of restructuring charges relating to this action in fiscal 2017, $30.6 million in fiscal 2016 and $63.2 million in fiscal 2015. This action was substantially completed in fiscal 2016.

In addition to the actions taken at certain facilities described above, we incurred restructuring charges related to Century of $1.1 million in fiscal 2017, none of which was cash, $1.1 million in fiscal 2016 and $17.2 million 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 North America Retail and Europe & Australia segments to increase efficiencies and reduce costs. This action affected approximately 240 positions. We expect to incur $15 million of net expenses relating to this action of which $14 million will be cash. We recorded $13.9 million of restructuring charges in fiscal 2015. We anticipate these actions will be completed by the end of fiscal 2018.

We paid cash related to restructuring initiatives of $107.8 million in fiscal 2017, $122.6 million in fiscal 2016 and $63.6 million in fiscal 2015.

In addition to restructuring charges, we expect to incur approximately $130 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 $43.9 million in fiscal 2017, $57.5 million in fiscal 2016 and $13.2 million in fiscal 2015. We paid cash for project-related costs of $46.9 million in fiscal 2017, $54.5 million in fiscal 2016 and $9.7 million in fiscal 2015.

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

		Fiscal
In Millions		2017		2016		2015
Cost of sales	$	41.5	$	78.4	$	59.6
Restructuring, impairment, and other exit costs		182.6		151.4		283.9
Total restructuring charges		224.1		229.8		343.5
Project-related costs classified in cost of sales	$	43.9	$	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 25, 2014	$	3.5	$	-	$	-	$	3.5
Fiscal 2015 charges, including foreign currency translation		176.4		0.6		8.1		185.1
Utilized in fiscal 2015		(61.3)		-		(6.5)		(67.8)
Reserve balance as of May 31, 2015		118.6		0.6		1.6		120.8
Fiscal 2016 charges, including foreign currency translation		64.3		1.6		4.3		70.2
Utilized in fiscal 2016		(109.3)		(0.7)		(4.4)		(114.4)
Reserve balance as of May 29, 2016		73.6		1.5		1.5		76.6
Fiscal 2017 charges, including foreign currency translation		95.0		0.9		8.1		104.0
Utilized in fiscal 2017		(86.8)		(1.7)		(7.1)		(95.6)
Reserve balance as of May 28, 2017	$	81.8	$	0.7	$	2.5	$	85.0

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.