Kraft 2009 Annual Report Download - page 75

Annual Impairment Review & Asset Impairment Charges:
As a result of our 2009 annual review of goodwill and non-amortizable intangible assets, we recorded a $12 million charge for the impairment of
intangible assets in the Netherlands. In addition, during 2009, we recorded a $9 million asset impairment charge to write off an investment in
Norway. We recorded the aggregate charges within asset impairment and exit costs. During our 2009 impairment review, we also noted that the
following three reporting units were the most sensitive to near-term changes in our discounted cash flow assumptions:
Percentage of
Excess Fair
Value over
Carrying Value
October 1, 2009
Carrying Value
of Goodwill
(in millions)
U.S. Salty Snacks 11% $ 1,186
N.A. Foodservice 22% 861
Europe Biscuits 11% 2,555
During the fourth quarter of 2008, we completed the annual review of goodwill and non-amortizable intangible assets and recorded a $44 million
charge for the impairment of intangible assets in the Netherlands, France and Puerto Rico. During our 2008 impairment review, we determined
that our Europe Biscuits reporting unit was the most sensitive to near-term changes in our discounted cash flow assumptions, as it contains a
significant portion of the goodwill recorded upon our 2007 acquisition of LU Biscuit. In addition, in December 2008, we reached a preliminary
agreement to divest a juice operation in Brazil and reached an agreement to sell a cheese plant in Australia. In anticipation of divesting the juice
operation in Brazil, we recorded an asset impairment charge of $13 million in the fourth quarter of 2008. The charge primarily included the write-off
of associated intangible assets of $8 million and property, plant and equipment of $4 million. In anticipation of selling the cheese plant in Australia,
we recorded an asset impairment charge of $28 million to property, plant and equipment in the fourth quarter of 2008. Additionally, in 2008, we
divested a Nordic and Baltic snacks operation and incurred an asset impairment charge of $55 million in connection with the divestiture. This
charge primarily included the write-off of associated goodwill of $34 million and property, plant and equipment of $16 million. We recorded the
aggregate charges within asset impairment and exit costs.
In 2007, we divested our flavored water and juice brand assets and related trademarks. In recognition of the divestiture, we recorded a $120
million asset impairment charge for these assets. The charge primarily included the write-off of associated intangible assets of $70 million and
property, plant and equipment of $47 million and was recorded within asset impairment and exit costs.
Note 6. Restructuring Costs:
Cost Savings Initiatives
We incurred costs associated with our Cost Savings Initiatives of $318 million in 2009. These charges were recorded in operations, primarily within
the segment operating income of Kraft Foods Europe with the remainder spread across all other segments. The Kraft Foods Europe charges were
largely a result of the reorganization of our European operations discussed below. Cost Savings Initiatives include exit, disposal and
implementation costs. Even though implementation costs were directly attributable to exit and disposal costs, they did not qualify for special
accounting treatment as exit or disposal activities. In 2009, our Cost Savings Initiatives primarily included severance charges for benefits received
by terminated employees, associated benefit plan costs and other related activities.
2004-2008 Restructuring Program
In 2008, we completed our five-year restructuring program (the “Restructuring Program”). The Restructuring Program’s objectives were to leverage
our global scale, realign and lower our cost structure, and optimize capacity. As part of the Restructuring Program, we:
• incurred $3.0 billion in pre-tax charges reflecting asset disposals, severance and implementation costs;
• announced the closure of 35 facilities and announced the elimination of approximately 18,600 positions; and
• will use cash to pay for $2.0 billion of the $3.0 billion in charges.
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Source: KRAFT FOODS INC, 10-K, February 25, 2010 Powered by Morningstar® Document Research℠