Quarterly report pursuant to Section 13 or 15(d)

Productivity, Integration and Restructuring Initiatives

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Productivity, Integration and Restructuring Initiatives
 9 Months Ended
Sep. 29, 2017
Productivity integration and restructuring initiatives  
Productivity, Integration and Restructuring Initiatives[Text Block]
PRODUCTIVITY, INTEGRATION AND RESTRUCTURING INITIATIVES
Productivity and Reinvestment
In February 2012, the Company announced a productivity and reinvestment program designed to further enable our efforts to strengthen our brands and reinvest our resources to drive long-term profitable growth. This program is focused on the following initiatives: global supply chain optimization; global marketing and innovation effectiveness; operating expense leverage and operational excellence; data and information technology systems standardization; and the integration of Old CCE.
In February 2014, the Company announced the expansion of our productivity and reinvestment program to drive incremental productivity that will primarily be redirected into increased media investments. Our incremental productivity goal consists of two relatively equal components. First, we will expand savings through global supply chain optimization, data and information technology systems standardization, and resource and cost reallocation. Second, we will increase the effectiveness of our marketing investments by transforming our marketing and commercial model to redeploy resources into more consumer-facing marketing investments to accelerate growth.
In October 2014, the Company announced that we were further expanding our productivity and reinvestment program and extending it through 2019. The expansion of the productivity initiatives will focus on four key areas: restructuring the Company's global supply chain; implementing zero-based work, an evolution of zero-based budget principles, across the organization; streamlining and simplifying the Company's operating model; and further driving increased discipline and efficiency in direct marketing investments.
In April 2017, the Company announced its plans to transition to a new, more agile operating model to enable growth. Under this operating model, our business units will be supported by an expanded enabling services organization and a corporate center focused on a few strategic initiatives, policy and governance. The expanded enabling services organization will focus on both simplifying and standardizing key transactional processes and providing support to business units through global centers of excellence.
The Company has incurred total pretax expenses of $2,763 million related to this productivity and reinvestment program since it commenced. These expenses were recorded in the line item other operating charges in our condensed consolidated statements of income. Refer to Note 15 for the impact these charges had on our operating segments. Outside services reported in the table below primarily relate to expenses in connection with legal, outplacement and consulting activities. Other direct costs reported in the table below include, among other items, internal and external costs associated with the development, communication, administration and implementation of these initiatives; accelerated depreciation on certain fixed assets; contract termination fees; and relocation costs.
The following table summarizes the balance of accrued expenses related to these productivity and reinvestment initiatives and the changes in the accrued amounts as of and for the three months ended September 29, 2017 (in millions):
 
Accrued
Balance
June 30, 2017

Costs
Incurred
Three Months Ended
September 29, 2017

Payments

Noncash
and
Exchange

Accrued
Balance
September 29, 2017

Severance pay and benefits
$
162

$
43

$
(88
)
$
2

$
119

Outside services
11

19

(20
)
(1
)
9

Other direct costs
16

67

(69
)
(3
)
11

Total
$
189

$
129

$
(177
)
$
(2
)
$
139







The following table summarizes the balance of accrued expenses related to these productivity and reinvestment initiatives and the changes in the accrued amounts as of and for the nine months ended September 29, 2017 (in millions):
 
Accrued
Balance
December 31, 2016

Costs
Incurred
Nine Months Ended
September 29, 2017

Payments

Noncash
and
Exchange

Accrued
Balance
September 29, 2017

Severance pay and benefits
$
123

$
143

$
(146
)
$
(1
)
$
119

Outside services
6

62

(58
)
(1
)
9

Other direct costs
22

150

(154
)
(7
)
11

Total
$
151

$
355

$
(358
)
$
(9
)
$
139

Integration of Our German Bottling Operations
In 2008, the Company began the integration of our German bottling operations acquired in 2007. The Company incurred pretax expenses of $240 million related to this initiative during the nine months ended September 30, 2016 and has incurred total pretax expenses of $1,367 million related to this initiative since it commenced. These charges were recorded in the line item other operating charges in our condensed consolidated statements of income and impacted the Bottling Investments operating segment. The expenses recorded in connection with these integration activities were primarily due to involuntary terminations. During the year ended December 31, 2016, the Company deconsolidated our German bottling operations. Therefore, there was no remaining accrual balance as of December 31, 2016.