BUSINESS REALIGNMENT ACTIVITIES

2015 Productivity Initiative

In mid-2015, we announced a new productivity initiative (the “2015 Productivity Initiative”) intended to move decision making closer to the customer and the consumer, to enable a more enterprise-wide approach to innovation, to more swiftly advance our knowledge agenda, and to provide for a more efficient cost structure, while ensuring that we effectively allocate resources to future growth areas. Overall, the 2015 Productivity Initiative is intended to simplify the organizational structure to enhance the Company's ability to rapidly anticipate and respond to the changing demands of the global consumer.

The 2015 Productivity Initiative was executed throughout the third and fourth quarters of 2015, resulting in a net reduction of approximately 300 positions, with the majority of the departures taking place by the end of 2015. For the three months ended April 3, 2016, we incurred charges totaling $1,458, representing adjustments to estimated severance benefits as well as incremental third-party costs related to the design and implementation of the new organizational structure. Since the program's inception, we have incurred total costs of $107,211, including a pension settlement charge of $10,178 recorded in the fourth quarter of 2015, relating to lump sum withdrawals by employees retiring or leaving the Company as a result of this program.

Total pre-tax charges and costs for this program are currently expected to be approximately $110 million, the majority of which are cash. This excludes the pension settlement cost recorded in 2015 and any additional pension settlement costs that could be triggered by additional lump sum withdrawals in 2016. The remaining costs for the 2015 Productivity Initiative are expected to be incurred over the next two quarters.

China structure optimization

During the first quarter of 2016, we initiated the process of optimizing the China business and workforce structure and incurred initial costs totaling $12,972, relating primarily to severance and other third party charges. In addition, given the challenges impacting the retail landscape in China, we continue to assess the impact of potential excess capacity on operational efficiencies as well as the carrying value of our long-lived assets in the region.

Other international programs

Costs incurred for the three months ended April 5, 2015 relate principally to accelerated depreciation and amortization and employee severance costs for a couple of programs commenced in 2014 to rationalize certain non-U.S. manufacturing and distribution activities and to establish our own sales and distribution teams in Brazil in connection with our exit from the Bauducco joint venture.

Expenses recorded for business realignment activities during the three months ended April 3, 2016 and April 5, 2015 were classified as follows:



	Three Months Ended
	April 3, 2016			April 5, 2015
Cost of sales:
China structure optimization	$	(487	)	$	—
Other international restructuring programs	—			1,348
Total cost of sales	(487		)	1,348
Selling, marketing and administrative:
2015 productivity initiative	2,752			—
China structure optimization	6,032
Other international restructuring programs	—			1,125
Total selling, marketing and administrative	8,784			1,125
Business realignment charges:
2015 productivity initiative	(1,294		)	—
China integration initiative	7,427			—
Divestiture of Mauna Loa (see Note 2)	—			2,667
Total business realignment charges	6,133			2,667
Total charges associated with business realignment activities	$	14,430		$	5,140

The costs and related benefits to be derived from the 2015 Productivity Initiative relate primarily to the North American segment, while the costs and related benefits of the China integration initiative and other international programs relate primary to the International and Other segment. However, segment operating results do not include business realignment and related charges because we evaluate segment performance excluding such charges.

The following table presents the liability activity for employee related costs qualifying as exit and disposal costs:



	Total
Liability balance at December 31, 2015	$	16,310
2016 business realignment charges	6,133
Cash payments	(6,918		)
Other, net	(161		)
Liability balance at April 3, 2016	$	15,364

The charges reflected in the liability roll-forward above do not include items charged directly to expense, such as accelerated depreciation and amortization and the loss on the Mauna Loa divestiture and certain of the third-party charges associated with various programs, as those items are not reflected in the business realignment liability in our Consolidated Balance Sheets.