Item 2.05 Costs Associated With Exit or Disposal Activities.
As previously announced, on October 26, 2018, Conagra Brands, Inc. (the
Company
) completed its acquisition of Pinnacle Foods
Inc. (
Pinnacle
) whereby Patriot Merger Sub Inc., a wholly-owned subsidiary of the Company, merged with and into Pinnacle, with Pinnacle continuing as the surviving corporation (the
Merger
). On
December 6, 2018, the Board of Directors of the Company (the
Board
) authorized the establishment of the Pinnacle Integration Restructuring Plan in connection with the Merger and managements desire to take actions
and implement projects to achieve significant cost synergies between the Company and Pinnacle (the
Pinnacle Restructuring Plan
). The Board approved the incurrence under the Pinnacle Restructuring Plan of up to (1)
$365 million of cash costs, including up to (a) $150 million of capital expenditures and (b) $215 million of operational expenditures, and (2) $75 million of
non-cash
charges. Overall
charges expected to be incurred under the Pinnacle Restructuring Plan are up to $440 million.
As of December 6, 2018, the Company has incurred
approximately $103 million of charges under the Pinnacle Restructuring Plan. The Company expects to incur all of the restructuring charges under the Pinnacle Restructuring Plan over the next three years.
The Companys preliminary estimates of accounting charges related to these actions include the following:
Capital expenditure cash costs
: $150 million
Operational expenditure cash costs
: $215 million, comprised of:
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Employee severance, retention, relocation and related costs: $95 million
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Costs related to supply chain restructuring activities: $60 million
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Other costs: $60 million
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Operational expenditure
non-cash
charges
: $75 million
The Company intends to treat charges related to the Pinnacle Restructuring Plan as items impacting comparability of results. The estimated charges, costs and
synergies noted above are subject to a number of assumptions. Actual results may differ materially as a result of various important factors, including the risks and uncertainties described under the heading Cautionary Note Regarding
Forward-Looking Statements below.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Current Report on
Form 8-K contains
forward-looking statements within the meaning of the federal
securities laws about the Company. These forward-looking statements are based on managements current expectations and are subject to uncertainty and changes in circumstances. Readers of this Current Report on
Form 8-K should
understand that these statements are not guarantees of performance or results. Many factors could affect actual financial results and cause them to vary materially from the
expectations contained in the forward-looking statements, including those set forth in this Current Report on
Form 8-K. These
risks and uncertainties include, among other things: the risk that the
cost savings and any other synergies from the acquisition of Pinnacle (the acquisition) may not be fully realized or may take longer to realize than expected; the risk that the actual amount of charges under the Pinnacle Restructuring
Plan may vary, perhaps materially, from the estimates contained in this Current Report on Form
8-K;
the risk that the acquisition may not be accretive within the expected timeframe or to the extent
anticipated; the risks that the acquisition and related integration will create disruption to Conagra Brands and its management and impede the achievement of business plans; the risk that the acquisition will negatively impact the ability to retain
and hire key personnel and maintain relationships with customers, suppliers and other third parties; risks related to Conagra Brands ability to achieve the intended benefits of recent and pending acquisitions and divestitures, including the
recent
spin-off
of Conagra Brands Lamb Weston business and the continued evaluation of the role of Conagra Brands Wesson oil business; risks associated with general economic and industry
conditions; risks associated with Conagra Brands ability to successfully execute its long-term value creation strategies, including those in place for specific brands at Pinnacle Foods before the acquisition; risks related to Conagra
Brands ability to deleverage on currently anticipated timelines, and to continue to access capital on acceptable terms or at all; risks related to Conagra Brands ability to execute operating and restructuring plans and achieve targeted
operating efficiencies from cost-saving initiatives, related to the acquisition and otherwise, and to benefit from trade optimization programs, related to the acquisition and otherwise; risks related to the effectiveness of Conagra Brands
hedging activities and ability to respond to volatility in commodities; risks related to the