PRODUCTIVITY, INTEGRATION AND RESTRUCTURING INITIATIVES
Productivity and Reinvestment
In February 2012, the Company announced a four-year productivity and reinvestment program which will further enable our efforts to strengthen our brands and reinvest our resources to drive long-term profitable growth. This program will be 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 CCE's former North America business.
The Company incurred total pretax expenses of $764 million related to this program since the plan commenced. These expenses were recorded in the line item other operating charges in our consolidated statement of income. Refer to Note 19 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 since the commencement of the plan (in millions):
|
| | | | | | | | | | | | | | | |
| Severance Pay and Benefits |
| | Outside Services |
| | Other Direct Costs |
| | Total |
|
2012 | | | | | | | |
Costs incurred | $ | 21 |
| | $ | 61 |
| | $ | 188 |
| | $ | 270 |
|
Payments | (8 | ) | | (55 | ) | | (167 | ) | | (230 | ) |
Noncash and exchange | (1 | ) | | — |
| | (13 | ) | | (14 | ) |
Accrued balance as of December 31 | $ | 12 |
| | $ | 6 |
| | $ | 8 |
| | $ | 26 |
|
2013 | | | | | | | |
Costs incurred | $ | 188 |
| | $ | 59 |
| | $ | 247 |
| | $ | 494 |
|
Payments | (113 | ) | | (59 | ) | | (209 | ) | | (381 | ) |
Noncash and exchange | 1 |
| | — |
| | (28 | ) | | (27 | ) |
Accrued balance as of December 31 | $ | 88 |
| | $ | 6 |
| | $ | 18 |
| | $ | 112 |
|
Productivity Initiatives
During 2008, the Company announced a transformation effort centered on productivity initiatives to provide additional flexibility to invest for growth. The initiatives impacted a number of areas, including aggressively managing operating expenses supported by lean techniques; redesigning key processes to drive standardization and effectiveness; better leveraging our size and scale; and driving savings in indirect costs through the implementation of a "procure-to-pay" program.
In 2011, we completed this program. The Company reversed charges of $2 million and $10 million, during the years ended December 31, 2013 and 2012, respectively. The Company incurred expenses of $156 million during the year ended December 31, 2011, and has incurred total pretax expenses of $496 million related to these productivity initiatives since they commenced. These expenses were recorded in the line item other operating charges in our consolidated statements of income. Refer to Note 19 for the impact these charges had on our operating segments. The Company had $11 million accrued related to these productivity initiatives as of December 31, 2012. As of December 31, 2013, the Company did not have any remaining accruals related to these initiatives.
Integration Initiatives
Integration of CCE's Former North America Business
In 2010, we acquired CCE's former North America business and began an integration initiative to develop, design and implement our operating framework. In 2011, we completed this program. The Company reversed charges of $1 million and $6 million, respectively, during the years ended December 31, 2013 and 2012. The Company incurred expenses of $358 million during the year ended December 31, 2011, and has incurred total pretax expenses of $486 million related to this initiative since the plan commenced. These expenses were recorded in the line item other operating charges in our consolidated statements of income. Refer to Note 19 for the impact these charges had on our operating segments. The Company had $3 million accrued related to these integration initiatives as of December 31, 2012. As of December 31, 2013, the Company did not have any remaining accruals related to these initiatives.
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 $187 million, $148 million and $67 million of expenses related to this initiative in 2013, 2012 and 2011, respectively, and has incurred total pretax expenses of $627 million related to this initiative since it commenced. These expenses were recorded in the line item other operating charges in our 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 $127 million and $96 million accrued related to these integration costs as of December 31, 2013 and 2012, respectively.
The Company is currently reviewing other restructuring opportunities within the German bottling and distribution operations, which if implemented will result in additional charges in future periods. However, as of December 31, 2013, the Company had not finalized any additional plans.
Restructuring Initiatives
The Company incurred charges of $15 million and $52 million related to other restructuring initiatives during 2012 and 2011, respectively. These other restructuring initiatives were outside the scope of the productivity and reinvestment, productivity and integration initiatives discussed above and were related to individually insignificant activities throughout many of our business units. These charges were recorded in the line item other operating charges in our consolidated statements of income. Refer to Note 19 for the impact these charges had on our operating segments.
