Quarterly report pursuant to Section 13 or 15(d)

Productivity, Integration and Restructuring Initiatives

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Productivity, Integration and Restructuring Initiatives
 6 Months Ended
Jun. 27, 2014
Productivity integration and restructuring initiatives  
Restructuring and Related Activities Disclosure [Text Block]
PRODUCTIVITY, INTEGRATION AND RESTRUCTURING INITIATIVES
Productivity and Reinvestment
In February 2012, the Company announced a four-year 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 further integration of Coca-Cola Enterprises Inc.'s former North America business.
In February 2014, the Company announced that we are expanding our productivity and reinvestment program to drive an incremental $1 billion in productivity by 2016 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. These savings will be reinvested in global brand-building initiatives, with an emphasis on increased media spending. 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.
As of June 27, 2014, the Company has incurred total pretax expenses of $939 million related to our productivity and reinvestment program since the plan 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; losses on disposal of certain 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 June 27, 2014 (in millions):
 
Accrued
Balance
March 28, 2014

Costs
Incurred
Three Months Ended
June 27, 2014

Payments

Noncash
and
Exchange

Accrued
Balance
June 27, 2014

Severance pay and benefits
$
68

$
8

$
(32
)
$
(1
)
$
43

Outside services
6

22

(24
)
—

4

Other direct costs
16

59

(56
)
(5
)
14

Total
$
90

$
89

$
(112
)
$
(6
)
$
61

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 six months ended June 27, 2014 (in millions):
 
Accrued
Balance
December 31, 2013

Costs
Incurred
Six Months Ended
June 27, 2014

Payments

Noncash
and
Exchange

Accrued
Balance
June 27, 2014

Severance pay and benefits
$
88

$
14

$
(58
)
$
(1
)
$
43

Outside services
6

31

(33
)
—

4

Other direct costs
18

130

(113
)
(21
)
14

Total
$
112

$
175

$
(204
)
$
(22
)
$
61


Integration of Our German Bottling and Distribution Operations
In 2008, the Company began an integration initiative related to the 18 German bottling and distribution operations acquired in 2007. The Company incurred expenses of $66 million and $108 million related to this initiative during the three and six months ended June 27, 2014, and has incurred total pretax expenses of $735 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 have been primarily due to involuntary terminations. The Company had $142 million and $127 million accrued related to these integration costs as of June 27, 2014, and December 31, 2013, respectively.
We are currently reviewing additional restructuring opportunities within the German bottling and distribution operations, including integration costs related to information technology and other initiatives. If implemented, these initiatives will result in additional charges in future periods. However, as of June 27, 2014, the Company has not finalized any additional plans.