Kraft 2008 Annual Report Download - page 24

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sugar confectionery business prior to the closing date as discontinued operations on the consolidated statements of earnings. We recorded a loss on sale of
discontinued operations of $272 million in 2005, related largely to taxes on the transaction.
These (gains) / losses on divestitures were included in segment operating income as follows:
For the Years Ended
December 31,
2007 2006 2005
(in millions)
North America Beverages $ 5 $ 95 $ -
North America Cheese & Foodservice - 8 (1)
North America Convenient Meals - (226) -
North America Grocery - 1 2
North America Snacks & Cereals (12) 5 -
European Union - - (114)
Developing Markets (1)
(8) - 5
Gains on divestitures, net $ (15) $ (117) $ (108)
(1) This segment was formerly known as Developing Markets, Oceania & North Asia
These gains and losses on divestitures do not reflect the related asset impairment charges discussed below.
The aggregate operating results of the acquisitions and divestitures discussed above, other than the UB acquisition, and the divestiture of the sugar confectionery
business, were not material to our financial statements in any of the periods presented.
Restructuring Program
In January 2004, we announced a three-year restructuring program (the “Restructuring Program”) and, in January 2006, extended it through 2008. The objectives
of this program are to leverage our global scale, realign and lower our cost structure, and optimize capacity. As part of the Restructuring Program we anticipate:
• incurring approximately $2.8 billion in pre-tax charges reflecting asset disposals, severance and implementation costs;
• closing at least 35 facilities and eliminating approximately 13,500 positions;
• using cash to pay for approximately $1.7 billion of the $2.8 billion in charges; and
• cumulative, annualized savings reaching $1.2 billion by the end of 2009.
In February 2008, we announced the implementation of our new operating structure built on three core elements: accountable business units; shared services that
leverage the scale of our global portfolio; and a streamlined corporate staff. Within our new structure, business units now have full P&L accountability and are
staffed accordingly. This also ensures that we are putting our resources closer to where decisions are made that affect our consumers. Our corporate and shared
service functions are streamlining their organizations and focusing them on core activities that can more efficiently support the goals of the business units. The
intent was to simplify, streamline and increase accountability, with the ultimate goal of generating reliable growth for Kraft. As a result, we have eliminated
approximately 700 positions as we streamline our headquarters functions.
We incurred charges under the Restructuring Program of $459 million in 2007, or $0.19 per diluted share; $673 million in 2006, or $0.27 per diluted share; and
$297 million in 2005, or $0.12 per diluted share. Since the inception of the Restructuring Program, we have incurred $2.1 billion in charges, and paid cash for
$1.1 billion. We announced the closure of three plants during 2007; we have now announced the closure of 30 facilities since the program began in 2004. In
connection with our severance initiatives, we have eliminated approximately 11,000 positions as of December 31, 2007; at that time we had announced the
elimination of an additional 400 positions.
Under the Restructuring Program, we recorded asset impairment and exit costs of $332 million during 2007, $578 million during 2006 and $210 million during
2005. We recorded implementation costs of $127 million in 2007, $95 million in 2006 and $87 million in 2005. Implementation costs are directly attributable to
exit costs; however they do not qualify for treatment under Statement of Financial Accounting Standards (“SFAS”) No. 146, Accounting for Costs Associated
with Exit or Disposal Activities. These costs primarily include the discontinuance of certain product lines, incremental expenses related to the closure of facilities
and the Electronic Data Systems (“EDS”) transition discussed in Note 2 to the consolidated financial statements.
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Source: KRAFT FOODS INC, 10-K, February 25, 2008 Powered by Morningstar® Document Research℠