CAMPBELL SOUP CO - 10-Q filing on 2016-06-07

Restructuring Charges and Cost Savings Initiatives

9 Months Ended

May. 01, 2016

Restructuring Charges and Cost Savings Initiatives

2015 Initiatives

On January 29, 2015, we announced plans to implement a new enterprise design focused mainly on product categories. Under the new design, which we fully implemented at the beginning of 2016, our businesses are organized in the following divisions: Americas Simple Meals and Beverages, Global Biscuits and Snacks, and Campbell Fresh.

In support of the new enterprise design, we designed and implemented a new Integrated Global Services (IGS) organization to deliver shared services across the company. IGS, which became effective at the beginning of 2016, is expected to reduce costs while increasing our efficiency and effectiveness. We also streamlined our organizational structure. We are pursuing other initiatives to reduce costs and increase effectiveness, such as adopting zero-based budgeting over time.

As part of these initiatives, we commenced a voluntary employee separation program available to certain U.S.-based salaried employees nearing retirement who met age, length-of-service and business unit/function criteria. A total of 471 employees elected the program. The electing employees remained with us through at least July 31, 2015, with some remaining beyond July 31. We also implemented an initiative to reduce overhead across the organization by eliminating approximately 245 positions. In the three- and nine-month periods ended May 1, 2016, we recorded a restructuring charge of $2 and $35, respectively, related to these initiatives. In 2015, we recorded a restructuring charge of $102 related to these initiatives. Of the amounts recorded in 2015, $9 was recorded in the nine-month period ended May 3, 2015.

In the three- and nine-month periods ended May 1, 2016, we also incurred charges of $13 and $35, respectively, recorded in Administrative expenses related to the implementation of the new organizational structure and cost savings initiatives. In 2015, we incurred charges of $22 recorded in Administrative expenses related to the these initiatives. Of the amounts recorded in 2015, $9 was recorded in the nine-month period ended May 3, 2015.

In the three- and nine-month periods ended May 1, 2016, the aggregate after-tax impact of restructuring charges, implementation costs and other related costs recorded was $9, or $.03 per share, and $44, or $.14 per share, respectively. In the three- and nine-month periods ended May 3, 2015, the aggregate after-tax impact of restructuring charges and implementation costs was $11, or $.04 per share. The aggregate after-tax impact of restructuring charges and implementation and other costs recorded in 2015 was $78, or $.25 per share. A summary of the pre-tax costs associated with the 2015 initiatives is as follows:



	Recognized as of May 1, 2016
Severance pay and benefits	$	128
Implementation costs and other related costs	66
Total	$	194

The total estimated pre-tax costs for the 2015 initiatives are approximately $250 to $325. We expect to incur these costs through 2018.

We expect the costs to consist of approximately $150 to $165 in severance pay and benefits, and approximately $100 to $160 in implementation costs and other related costs.We expect the total pre-tax costs related to the 2015 initiatives will be associated with segments as follows: Americas Simple Meals and Beverages - approximately 31%; Global Biscuits and Snacks - approximately 35%; Campbell Fresh - approximately 3%; and Corporate - approximately 31%.

A summary of the restructuring activity and related reserves associated with the 2015 initiatives at May 1, 2016, is as follows:



	Severance Pay and Benefits			Other Restructuring Costs			Implementation Costs and Other Related Costs⁽³⁾	Total Charges
Accrued balance at August 2, 2015⁽¹⁾	$	85		$	8
2016 charges	34			1			35	$	70
2016 cash payments	(31		)	(9		)
Accrued balance at May 1, 2016⁽²⁾	$	88		$	—

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⁽¹⁾	Includes $45 of severance pay and benefits recorded in Other liabilities in the Consolidated Balance Sheet.


⁽²⁾	Includes $37 of severance pay and benefits recorded in Other liabilities in the Consolidated Balance Sheet.


⁽³⁾	Includes other costs recognized as incurred that are not reflected in the restructuring reserve in the Consolidated Balance Sheet. The costs are included in Administrative expenses in the Consolidated Statements of Earnings.

Segment operating results do not include restructuring charges, implementation costs and other related costs because we evaluate segment performance excluding such charges. A summary of the pre-tax costs associated with segments is as follows:



	May 1, 2016
	Three Months Ended		Nine Months Ended		Costs Incurred to Date
Americas Simple Meals and Beverages	$	1	$	17	$	71
Global Biscuits and Snacks	3		23		67
Campbell Fresh	—		—		1
Corporate	11		30		55
Total	$	15	$	70	$	194

2014 Initiatives

In the nine-month period ended May 1, 2016, we recorded a reduction to restructuring charges of $3 ($2 after tax, or $.01 per share) related to the fiscal 2014 initiative to improve supply chain efficiency in Australia. As of January 31, 2016, we incurred substantially all of the costs related to the 2014 initiatives.

A summary of the pre-tax costs associated with the 2014 initiatives is as follows:



	Total Program⁽¹⁾		Change in Estimate			Recognized as of May 1, 2016
Severance pay and benefits	$	41	$	(3	)	$	38
Asset impairment	12		—			12
Other exit costs	1		—			1
Total	$	54	$	(3	)	$	51

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⁽¹⁾	Recognized as of August 2, 2015.