Restructuring, impairment, and other exit costs

12 Months Ended

May 30, 2021

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.

RESTRUCTURING INITIATIVES

We view our restructuring activities as actions that help us meet our long-term growth targets and are evaluated against 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.

Charges recorded in fiscal 2021 were as follows:

Expense, in Millions
Global organizational structure and resource alignment	$	157.3
Asia & Latin America route-to-market and supply chain optimization		13.0
Charges associated with restructuring actions previously announced		2.4
Total	$	172.7

In fiscal 2021, we approved restructuring actions designed to better align our organizational structure and resources with strategic initiatives. We expect to incur approximately $170 million to $220 million of restructuring charges related to these global actions, of which approximately $130 million to $180 million will be cash. These charges are expected to consist primarily of severance and other benefits costs and other charges, including consulting and professional fees, contract termination costs, and fixed asset write-offs. We recognized $148.8 million of severance and other benefits costs and $8.5 million of other costs in fiscal 2021 related to these actions. We expect these actions to be completed by the end of fiscal 2023.

In fiscal 2021, we approved restructuring actions to leverage more efficient and effective route-to-market models and to optimize our supply chain in our Asia & Latin America segment. We expect to incur approximately $17 million of restructuring charges related to these actions, of which approximately $10 million will be cash. These charges are expected to consist of approximately $9 million of severance and $8 million of other costs, primarily asset write-offs. We recognized $8.8 million of severance and $4.2 million of other costs in fiscal 2021 related to these actions. We expect these actions to be completed by the end of the first quarter of fiscal 2022.

The charges associated with restructuring actions previously announced primarily relate to actions to drive efficiencies in targeted areas of our global supply chain. We expect these actions to be completed by the end of fiscal 2023.

Certain actions are subject to union negotiations and works counsel consultations, where required.

We paid net $21.8 million of cash related to restructuring actions in fiscal 2021. We paid net $6.6 million of cash in fiscal 2020.

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

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

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

	Fiscal Year
In Millions		2021		2020		2019
Restructuring, impairment, and other exit costs	$	170.4	$	24.4	$	275.1
Cost of sales		2.3		25.8		9.9
Total restructuring and impairment charges		172.7		50.2		285.0
Project-related costs classified in cost of sales	$	-	$	1.5	$	1.3

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 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
Fiscal 2021 charges, including foreign currency translation		142.3		0.3		1.3		143.9
Utilized in fiscal 2021		(12.8)		(0.1)		-		(12.9)
Reserve balance as of May 30, 2021	$	147.3	$	0.2	$	1.3	$	148.8

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.