Kraft 2006 Annual Report Download - page 13

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Acquisitions and Divestitures
During the third quarter of 2006, the Company acquired the Spanish and Portuguese operations of United Biscuits ("UB"), and rights to all Nabisco
trademarks in the European Union, Eastern Europe, the Middle East and Africa, which UB has held since 2000, for a total cost of approximately $1.1 billion. The
Spanish and Portuguese operations of UB include its biscuits, dry desserts, canned meats, tomato and fruit juice businesses as well as seven manufacturing
facilities and 1,300 employees. From September 2006 to December 31, 2006, these businesses contributed net revenues of $111 million. The non-cash
acquisition was financed by the Company's assumption of $541 million of debt issued by the acquired business immediately prior to the acquisition, as well as
$530 million of value for the redemption of the Company's outstanding investment in UB, primarily deep-discount securities. The redemption of the Company's
investment in UB resulted in a pre-tax gain on closing of $251 million.
Aside from the debt assumed as part of the acquisition price, the Company acquired assets consisting primarily of goodwill of $734 million, other intangible
assets of $217 million, property, plant and equipment of $161 million, receivables of $101 million and inventories of $34 million. These amounts represent the
preliminary allocation of purchase price and are subject to revision when appraisals are finalized, which is expected to occur during the first quarter of 2007.
During 2006, the Company sold its rice brand and assets, and its industrial coconut assets. The Company also sold its pet snacks brand and assets in 2006
and recorded tax expense of $57 million related to the sale. In addition, the Company incurred a pre-tax asset impairment charge of $86 million in 2006 in
recognition of this sale. Additionally, during 2006, the Company sold certain Canadian assets and a small U.S. biscuit brand, and incurred pre-tax asset
impairment charges of $176 million in 2005 in recognition of these sales. Also during 2006, the Company sold a U.S. coffee plant. The aggregate proceeds
received from these sales were $946 million, on which the Company recorded pre-tax gains of $117 million.
In January 2007, the Company announced the sale of its hot cereal assets and trademarks. In recognition of the anticipated sale, the Company recorded a
pre-tax asset impairment charge of $69 million in 2006 for these assets. This amount represents the preliminary estimates and is subject to revision upon the
finalization of the sale, which is expected in the first half of 2007.
In June 2005, the Company sold substantially all of its sugar confectionery business for pre-tax proceeds of approximately $1.4 billion. The sale included
theLife Savers,Creme Savers,Altoids,Trolli andSugus brands. The Company has reflected the results of its sugar confectionery business prior to the closing date
as discontinued operations on the consolidated statements of earnings. The Company recorded a loss on sale of discontinued operations of $297 million in the
second quarter of 2005, related largely to taxes on the transaction.
During 2005, the Company sold its fruit snacks assets, and incurred a pre-tax asset impairment charge of $93 million in recognition of this sale.
Additionally, during 2005, the Company sold its U.K. desserts assets, its U.S. yogurt assets, a small business in Colombia, a minor trademark in Mexico and a
small equity investment in Turkey. The aggregate proceeds received from these sales were $238 million, on which the Company recorded pre-tax gains of
$108 million.
During 2004, the Company sold a Brazilian snack nuts business and trademarks associated with a candy business in Norway. The aggregate proceeds
received from the sales of these businesses were $18 million, on which pre-tax losses of $3 million were recorded.
During 2004, the Company acquired a U.S.-based beverage business for a total cost of $137 million.
The operating results of the businesses acquired and sold, other than the UB acquisition and the divestiture of the sugar confectionery business, in the
aggregate, were not material to the Company's consolidated financial position, results of operations or cash flows in any of the periods presented.
9
Source: KRAFT FOODS INC, 10-K, March 01, 2007