RESTRUCTURING, IMPAIRMENT, AND OTHER EXIT COSTS

12 Months Ended

May 31, 2020

RESTRUCTURING, IMPAIRMENT, AND OTHER EXIT COSTS [Abstract]

RESTRUCTURING, IMPAIRMENT, AND OTHER EXIT COSTS

NOTE 4. RESTRUCTURING, IMPAIRMENT, AND OTHER EXIT COSTS

ASSET IMPAIRMENTS

In fiscal 2019, we recorded a $192.6 million charge related to the impairment of our Progresso, Food Should Taste Good, and Mountain High brand intangible assets in restructuring, impairment, and other exit costs.

In fiscal 2019, we recorded a $14.8 million charge in restructuring, impairment, and other exit costs related to the impairment of certain manufacturing assets in our North America Retail and Asia & Latin America segments.

In fiscal 2018, we recorded a $96.9 million charge related to the impairment of our Yoki, Mountain High, and Immaculate Baking brand intangible assets in restructuring, impairment, and other exit costs.

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.

In fiscal 2020, we did not undertake any new restructuring actions and recorded $50.2 million of restructuring charges for previously announced restructuring actions.

In fiscal 2019, we recorded $77.6 million of restructuring charges primarily related to approved restructuring actions to drive efficiencies in targeted areas of our global supply chain. In fiscal 2020, we increased the estimate of expected severance charges by $3 million and decreased the estimate of other exit costs related to these actions by $4 million. We now expect to spend a total of approximately $24 million of cash related to these actions. Certain actions are subject to union negotiations and works counsel consultations, where required. We expect these actions to be completed by the end of fiscal 2022. The remaining expense to be incurred is approximately $8 million of other exit costs.

We paid net $6.6 million of cash related to restructuring actions previously announced in fiscal 2020, compared to $49.3 million in fiscal 2019.

Charges recorded in fiscal 2019 were as follows:

Expense, in Millions
Targeted actions in global supply chain	$	80.2
Charges associated with restructuring actions previously announced		(2.6)
Total	$	77.6

Charges recorded in fiscal 2018 were as follows:

Expense, in Millions
Global cost savings initiatives	$	49.3
Charges associated with restructuring actions previously announced		33.4
Total	$	82.7

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

		Fiscal Year
In Millions		2020		2019		2018
Cost of sales	$	25.8	$	9.9	$	14.0
Restructuring, impairment, and other exit costs		24.4		275.1		165.6
Total restructuring and impairment charges		50.2		285.0		179.6
Project-related costs classified in cost of sales	$	1.5	$	1.3	$	11.3

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

In Millions		Severance		Contract Termination		Other Exit Costs		Total
Reserve balance as of May 28, 2017	$	81.8	$	0.7	$	2.5	$	85.0
Fiscal 2018 charges, including foreign currency translation		40.8		0.2		(0.7)		40.3
Utilized in fiscal 2018		(56.6)		(0.8)		(1.1)		(58.5)
Reserve balance as of May 27, 2018		66.0		0.1		0.7		66.8
Fiscal 2019 charges, including foreign currency translation		7.7		2.5		1.4		11.6
Utilized in fiscal 2019		(37.2)		(2.6)		(2.1)		(41.9)
Reserve balance as of May 26, 2019		36.5		-		-		36.5
Fiscal 2020 charges, including foreign currency translation		(5.0)		0.8		1.7		(2.5)
Utilized in fiscal 2020		(13.7)		(0.8)		(1.7)		(16.2)
Reserve balance as of May 31, 2020	$	17.8	$	-	$	-	$	17.8

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.