Kraft 2006 Annual Report Download - page 71

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Restructuring Costs:
During 2006, 2005 and 2004, pre-tax charges under the restructuring program of $578 million, $210 million and $583 million, respectively, were recorded
as asset impairment and exit costs on the consolidated statements of earnings. These pre-tax charges resulted from the announcement of the closing of 27 plants
since January 2004, of which 8 occurred in 2006, the continuation of a number of workforce reduction programs, and the termination of co-manufacturing
agreements in 2004. Approximately $332 million of the pre-tax charges incurred during 2006 will require cash payments.
Pre-tax restructuring liability activity for the years ended December 31, 2006 and 2005, was as follows:
Severance
Asset
Write-downs
Other
Total
(in millions)
Liability balance, January 1, 2005 $ 91 $ — $ 19 $ 110
Charges 154 30 26 210
Cash spent (114) (50) (164)
Charges against assets (12) (30) (42)
Currency/other (5) 6 1
Liability balance, December 31, 2005 114 — 1 115
Charges 272 252 54 578
Cash (spent) received (204) 16 (21) (209)
Charges against assets (25) (268) (293)
Currency/other 8 (2) 6
Liability balance, December 31, 2006 $ 165 $ — $ 32 $ 197
Severance costs in the above schedule, which relate to the workforce reduction programs, include the cost of related benefits. Specific programs announced
since 2004, as part of the overall restructuring program, will result in the elimination of approximately 9,800 positions. At December 31, 2006, approximately
8,400 of these positions have been eliminated. Asset write-downs relate to the impairment of assets caused by the plant closings and related activity. Other costs
incurred relate primarily to contract termination costs associated with the plant closings and the termination of leasing agreements. Severance costs taken against
assets relate to incremental pension costs, which reduce prepaid pension assets.
Implementation Costs:
During 2006, 2005 and 2004, the Company recorded pre-tax implementation costs associated with the restructuring program. These costs include the
discontinuance of certain product lines and incremental costs related to the integration and streamlining of functions and closure of facilities.
66
Source: KRAFT FOODS INC, 10-K, March 01, 2007