Kraft 2005 Annual Report Download - page 64

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MERRILL CORPORATION EYOUNG// 8-MAR-06 09:45 DISK126:[06CHI5.06CHI1135]DU1135A.;17
mrll.fmt Free: 2510D*/4810D Foot: 0D/ 0D VJ RSeq: 8 Clr: 0
DISK024:[PAGER.PSTYLES]UNIVERSAL.BST;51
KRAFT FOODS-FSC CERTIFIED-10K/AR Proj: P1102CHI06 Job: 06CHI1135 File: DU1135A.;17
Merrill Corporation/Chicago (312) 786-6300 Page Dim: 8.250X 10.750Copy Dim: 38. X 54.3
Asset Impairment Charges:
During 2005, the Company sold its fruit snacks assets for approximately $30 million and incurred a
pre-tax asset impairment charge of $93 million in recognition of the sale. During December 2005, the
Company reached agreements to sell certain assets in Canada and a small biscuit brand in the U.S.
These transactions are expected to close in the first quarter of 2006. The Company incurred pre-tax
asset impairment charges of $176 million in recognition of these pending sales. These charges, which
include the write-off of all associated intangible assets, were recorded as asset impairment and exit costs
on the consolidated statement of earnings.
During 2005, the Company completed its annual review of goodwill and intangible assets and no
charges resulted from this review. During 2004, the Company recorded non-cash pre-tax charges of
$29 million related to an intangible asset impairment for a small confectionery business in the United
States and certain brands in Mexico. A portion of this charge, $17 million, was reclassified to earnings
from discontinued operations on the consolidated statement of earnings in the fourth quarter of 2004.
The remaining charge was recorded as asset impairment and exit costs on the consolidated statement
of earnings.
In November 2004, following discussions with the Company’s joint venture partner in Turkey and an
independent valuation of its equity investment, it was determined that a permanent decline in value had
occurred. This valuation resulted in a $47 million non-cash pre-tax charge. This charge was recorded as
marketing, administration and research costs on the consolidated statement of earnings. During 2005,
the Company’s interest in the joint venture was sold.
In June 2005, the Company sold substantially all of its sugar confectionery business for
approximately $1.4 billion. In 2004, as a result of the anticipated transaction, the Company recorded
non-cash asset impairments totaling $107 million. This charge was included in loss from discontinued
operations on the consolidated statement of earnings.
In December 2004, the Company announced the sale of its yogurt assets, which closed in the first
quarter of 2005. In 2004, as a result of the anticipated transaction, the Company recorded asset
impairments totaling $8 million. This charge was recorded as asset impairment and exit costs on the
consolidated statement of earnings.
63
6 C Cs: 39803