Restructuring Charges
On June 28, 2011, the company announced a series of initiatives to improve supply chain efficiency and reduce overhead costs across the organization to help fund plans to drive the growth of the business. The company also announced its intent to exit the Russian market. Details of the initiatives include:
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• | In Australia, the company will invest in a new system to automate packing operations at its biscuit plant in Virginia. This investment will occur through the second quarter of 2013 and will result in the elimination of approximately 190 positions. Further, the company improved asset utilization in the U.S. by shifting production of ready-to-serve soups from Paris, Texas, to other facilities in 2012. In addition, the manufacturing facility in Marshall, Michigan, was closed in 2011, and manufacturing of Campbell’s Soup at Hand microwavable products was consolidated at the Maxton, North Carolina, plant in 2012. |
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• | The company streamlined its salaried workforce by approximately 510 positions around the world, including approximately 130 positions at its world headquarters in Camden, New Jersey. These actions were substantially completed in 2011. As part of this initiative, the company outsourced a larger portion of its U.S. retail merchandising activities to its current retail sales agent, Acosta Sales and Marketing, and eliminated approximately 190 positions. |
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• | In connection with exiting the Russian market, the company has eliminated approximately 50 positions. The exit process commenced in 2011 and was substantially completed in 2012. |
In 2012, the company recorded a restructuring charge of $10 ($6 after tax or $.02 per share) related to these initiatives. In the fourth quarter of 2011, the company recorded a restructuring charge of $63 ($41 after tax or $.12 per share). A summary of the pre-tax charges and remaining costs associated with the initiatives is as follows:
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| | | | | | | | | | | |
| Total Program | | Recognized as of July 29, 2012 | | Remaining Costs to be Recognized |
Severance pay and benefits | $ | 43 |
| | $ | (41 | ) | | $ | 2 |
|
Asset impairment/accelerated depreciation | 23 |
| | (23 | ) | | — |
|
Other exit costs | 9 |
| | (9 | ) | | — |
|
Total | $ | 75 |
| | $ | (73 | ) | | $ | 2 |
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Of the aggregate $75 of pre-tax costs, the company expects approximately $50 will be cash expenditures, the majority of which was spent in 2012. In addition, the company expects to invest approximately $40 in capital expenditures in connection with the actions, of which approximately $18 has been invested as of July 29, 2012. The initiatives are expected to be completed by the end of 2013.
A summary of the restructuring activity and related reserves associated with these initiatives at July 29, 2012 is as follows:
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| Accrued Balance at | | 2011 | | 2011 Cash | | Accrued Balance at | | 2012 | | 2012 Cash | | Foreign Currency Translation | | Accrued Balance at |
| August 1, 2010 | | Charges | | Payments | | July 31, 2011 | | Charges | | Payments | | Adjustment | | July 29, 2012 |
Severance pay and benefits | $ | — |
| | $ | 37 |
| | $ | (2 | ) | | $ | 35 |
| | $ | 4 |
| | $ | (24 | ) | | $ | (1 | ) | | $ | 14 |
|
Other exit costs | — |
| | 4 |
| | — |
| | 4 |
| | 2 |
| | (4 | ) | | — |
| | 2 |
|
| $ | — |
| | 41 |
| | $ | (2 | ) | | $ | 39 |
| | 6 |
| | $ | (28 | ) | | $ | (1 | ) | | $ | 16 |
|
Asset impairment/accelerated depreciation | | | 22 |
| | | | | | 1 |
| | | | | | |
Other non-cash exit costs | | | — |
| | | | | | 3 |
| | | | | |
|
Total charges | | | $ | 63 |
| | | |
|
| | $ | 10 |
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A summary of restructuring charges incurred to date associated with each segment is as follows:
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| U.S. Simple Meals | | Global Baking and Snacking | | International Simple Meals and Beverages | | U.S. Beverages | | North America Foodservice | | Corporate | | Total |
Severance pay and benefits | $ | 10 |
| | $ | 13 |
| | $ | 12 |
| | $ | 3 |
| | $ | 1 |
| | $ | 2 |
| | $ | 41 |
|
Asset impairment/accelerated depreciation | 20 |
| | — |
| | 3 |
| | — |
| | — |
| | — |
| | 23 |
|
Other exit costs | 2 |
| | — |
| | 3 |
| | — |
| | — |
| | 4 |
| | 9 |
|
| $ | 32 |
| | $ | 13 |
| | $ | 18 |
| | $ | 3 |
| | $ | 1 |
| | $ | 6 |
| | $ | 73 |
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The company expects to incur additional pre-tax costs of approximately $2 in the Global Baking and Snacking segment. Segment operating results do not include restructuring charges as segment performance is evaluated excluding such charges.
2008 Initiatives
On April 28, 2008, the company announced a series of initiatives to improve operational efficiency and long-term profitability, including selling certain salty snack food brands and assets in Australia, closing certain production facilities in Australia and Canada, and streamlining the company's management structure.
As a result of these initiatives, in 2010, the company recorded a restructuring charge of $12 ($8 after tax or $.02 per share) for pension benefit costs, which represented the final costs associated with the 2008 initiatives. These costs related to the International Simple Meals and Beverages segment.
Recent Development - 2013 Initiatives
On September 27, 2012, the company announced several initiatives to improve its U.S. supply chain cost structure and increase asset utilization across its U.S. thermal plant network. The initiatives include closing the company's Sacramento, California, thermal plant, which produces soups, sauces and beverages, and the company's South Plainfield, New Jersey, spice plant, which supplies ingredients to the company's U.S. thermal plants. As a result of the initiatives, the company expects to incur pre-tax costs of approximately $115, most of which will be incurred in 2013. The company also expects to invest approximately $27 in capital expenditures, primarily to relocate and refurbish a beverage filling and packaging line. For additional information relating to the initiatives, see Note 19.
