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Restructuring and Cost Reduction Activities | 9 Months Ended
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Sep. 28, 2019
Restructuring and Related Activities [Abstract] |
Restructuring and Cost Reduction Activities | Restructuring Programs The Company views its restructuring programs 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 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 previous estimates. 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%). During the quarter and year-to-date period ended September 28, 2019, the Company recorded total net charges of $15 million and $38 million, respectively related to Project K. During the quarter and year-to-date period ended September 29, 2018, the Company recorded total net charges of $34 million and $59 million, respectively related to Project K. Since the inception of Project K, the Company has recognized charges of $1,558 million that have been attributed to the program. The charges consist of $6 million recorded as a reduction of revenue, $923 million recorded in cost of goods sold (COGS), $796 million recorded in selling, general and administrative (SG&A) expense, and $(167) million recorded in OIE. Other Programs During the second quarter of 2019, the Company announced a reorganization plan for the European reportable segment designed to simplify the organization, increase organizational efficiency, and enhance key processes. The overall project is expected to be substantially completed by December 31, 2020. The project is expected to result in cumulative pretax net charges of approximately $40 million, including certain non-cash credits. Cash costs are expected to be approximately $50 million. The total expected charges will include severance and other termination benefits and charges related to relocation, third party legal and consulting fees, and contract termination costs. During the year-to-date periods ended September 28, 2019, the Company recorded total charges of $32 million related to this initiative. These charges were recorded in SG&A expense. Additionally during the second quarter of 2019, the Company announced a reorganization plan which primarily impacts the North America reportable segment. The reorganization plan is designed to simplify the organization that supports the remaining North America reportable segment after the divestiture and related transition. The overall project is expected to be substantially completed by December 31, 2020. The overall project is expected to result in cumulative pretax charges of approximately $30 million. Cash costs are expected to approximate the pretax charges. Total expected charges will include severance and other termination benefits and charges related to third party consulting fees. During the quarter and year-to-date periods ended September 28, 2019, the Company recorded total charges of $3 million and $21 million, respectively, related to this initiative. These charges were recorded in SG&A expense. All Programs During the quarter ended September 28, 2019, the Company recorded total net charges of $18 million across all restructuring programs. The charges were comprised of $13 million of expense recorded in COGS, $5 million of expense recorded in SG&A expense. During the year-to-date period ended September 28, 2019, the Company recorded total charges of $91 million across all restructuring programs. The charges were comprised of $30 million recorded in COGS and $61 million recorded in SG&A expense. During the quarter ended September 29, 2018, the Company recorded total net charges of $34 million across all restructuring programs. The charges were comprised of $49 million recorded in COGS, $15 million recorded in SG&A expense and a $(30) million net curtailment gain recorded in OIE. During the year-to-date period ended September 29, 2018, the Company recorded total charges of $59 million across all restructuring programs. The charges were comprised of $58 million recorded in COGS, $31 million recorded in SG&A expense and a net gain of $(30) million recorded in OIE. The tables below provide the details for charges incurred during the quarters ended September 28, 2019 and September 29, 2018 and program costs to date for all programs currently active as of September 28, 2019.
| Quarter ended |  | Year-to-date period ended |  | Program costs to date
(millions) | September 28, 2019 | September 29, 2018 |  | September 28, 2019 | September 29, 2018 |  | September 28, 2019
Employee related costs | $ | (1 | ) | $ | 17 |  |  | $ | 41 |  | $ | 22 |  |  | $ | 638 |
Pension curtailment (gain) loss, net | — |  | (30 | ) |  | — |  | (30 | ) |  | (167 | )
Asset related costs | 5 |  | 10 |  |  | 15 |  | — |  |  | 300 |
Asset impairment | — |  | 14 |  |  | — |  | 14 |  |  | 169 |
Other costs | 14 |  | 23 |  |  | 35 |  | 53 |  |  | 671 |
Total | $ | 18 |  | $ | 34 |  |  | $ | 91 |  | $ | 59 |  |  | $ | 1,611 |
| Quarter ended |  | Year-to-date period ended |  | Program costs to date
(millions) | September 28, 2019 | September 29, 2018 |  | September 28, 2019 | September 29, 2018 |  | September 28, 2019
North America | $ | 13 |  | $ | 44 |  |  | $ | 45 |  | $ | 66 |  |  | $ | 1,067 |
Europe | 1 |  | (16 | ) |  | 35 |  | (22 | ) |  | 368 |
Latin America | 4 |  | 3 |  |  | 8 |  | 7 |  |  | 50 |
AMEA | — |  | 2 |  |  | 3 |  | 5 |  |  | 101 |
Corporate | — |  | 1 |  |  | — |  | 3 |  |  | 25 |
Total | $ | 18 |  | $ | 34 |  |  | $ | 91 |  | $ | 59 |  |  | $ | 1,611 |
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 third-party incremental costs related to the development and implementation of enhanced global structures and capabilities. At September 28, 2019 total project reserves were $84 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 | 41 |  | — |  | — |  | 15 |  | 35 |  | 91 |
Cash payments | (58 | ) | — |  | — |  | (7 | ) | (38 | ) | (103 | )
Non-cash charges and other | — |  | — |  | — |  | (8 | ) | — |  | (8 | )
Liability as of September 28, 2019 | $ | 76 |  | $ | — |  | $ | — |  | $ | 1 |  | $ | 7 |  | $ | 84 |

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- Definition The entire disclosure for restructuring and related activities. Description of restructuring activities such as exit and disposal activities, include facts and circumstances leading to the plan, the expected plan completion date, the major types of costs associated with the plan activities, total expected costs, the accrual balance at the end of the period, and the periods over which the remaining accrual will be settled. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 420 -URI http://asc.fasb.org/topic&trid=2175745 + Details
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