Restructuring and cost reduction activities

The Company views its restructuring and cost reduction activities as part of its operating principles to provide greater visibility in achieving its long-term profit growth targets. Initiatives undertaken are currently expected to recover cash implementation costs within a 3 to 5-year period of completion. Upon 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.

Project K

Project K continued generating savings used to invest in key strategic areas of focus for the business or utilized to achieve our growth initiatives.

Since inception, Project K has reduced the Company’s cost structure, and is expected to provide enduring benefits, including an optimized supply chain infrastructure, an efficient global business services model, a global focus on categories, increased agility from a more efficient organization design, and improved effectiveness in go-to-market models. These benefits are intended to strengthen existing businesses in core markets, increase growth in developing and emerging markets, and drive an increased level of value-added innovation.

The Company approved all remaining Project K initiatives as of the end of 2018 and implementation of these remaining initiatives will be completed in 2019. Project charges, after-tax costs and annual savings remain in line with expectations.

The Company currently anticipates that the program will result in total pre-tax charges, once all phases are implemented, of $1.6 billion, with after-tax cash costs, including incremental capital investments, estimated to be approximately $1.2 billion. Based on current estimates and actual charges to date, the Company expects the total project charges will consist of asset-related costs of approximately $500 million which will consist primarily of asset impairments, accelerated depreciation and other exit-related costs; employee-related costs of approximately $400 million which includes severance, pension and other termination benefits; and other costs of approximately $700 million which consists primarily of charges related to the design and implementation of global business capabilities and a more efficient go-to-market model.

The Company currently expects that total pre-tax charges related to Project K will impact reportable segments as follows: North America (approximately 65%), Europe (approximately 22%), Latin America (approximately 3%), AMEA (approximately 6%), and Corporate (approximately 4%).

Since the inception of Project K, the Company has recognized charges of $1,528 million that have been attributed to the program. The charges consist of $6 million recorded as a reduction of revenue, $899 million recorded in cost of goods sold (COGS), $790 million recorded in selling, general and administrative (SG&A) expense, and $(167) million recorded in OIE.

The tables below provide the details for charges incurred during the quarters ended March 30, 2019 and March 31, 2018 and program costs to date for all programs currently active as of March 30, 2019.



	Quarter ended					Program costs to date
(millions)	March 30, 2019			March 31, 2018		March 30, 2019
Employee related costs	$	(3	)	$	4	$	594
Pension curtailment (gain) loss, net	—			—		(167		)
Asset related costs	3			4		288
Asset impairment	—			—		169
Other costs	8			12		644
Total	$	8		$	20	$	1,528

	Quarter ended					Program costs to date
(millions)	March 30, 2019			March 31, 2018		March 30, 2019
North America	$	4		$	10	$	1,026
Europe	1			7		334
Latin America	2			2		44
AMEA	1			—		99
Corporate	—			1		25
Total	$	8		$	20	$	1,528

During the quarter ended March 30, 2019, the Company recorded total net charges of $8 million across all restructuring and cost reduction activities. The charges were comprised of a $6 million expense recorded in COGS, a $2 million expense recorded in SG&A expense.

During the quarter ended March 31, 2018, the Company recorded total charges of $20 million across all restructuring and cost reduction activities. The charges were comprised of $13 million recorded in COGS, $7 million recorded in SG&A expense.

Employee related costs consist primarily of severance and related benefits. Pension curtailment (gain) loss consists of curtailment gains or losses that resulted from project initiatives. Asset related costs consist primarily of accelerated depreciation. Asset impairments were recorded for fixed assets that were determined to be impaired and were written down to their estimated fair value. Other costs consist of lease termination costs as well as third-party incremental costs related to the development and implementation of global business capabilities and a more efficient go-to-market model.

At March 30, 2019 total project reserves were $74 million, related to severance payments and other costs of which a substantial portion will be paid in 2019. The following table provides details for exit cost reserves.



	Employee Related Costs			Pension curtailment (gain) loss, net		Asset Impairment		Asset Related Costs			Other Costs			Total
Liability as of December 29, 2018	$	93		$	—	$	—	$	1		$	10		$	104
2019 restructuring charges	(3		)	—		—		3			8			8
Cash payments	(19		)	—		—		(3		)	(15		)	(37		)
Non-cash charges and other	—			—		—		(1		)	—			(1		)
Liability as of March 30, 2019	$	71		$	—	$	—	$	—		$	3		$	74