Kraft 2009 Annual Report Download - page 76

In 2009, we reversed $85 million of previously accrued Restructuring Program charges. Those reversals related to the following:
• We sold a plant in Spain that we previously announced we would close under our Restructuring Program. Accordingly, we reversed
$35 million in Restructuring Program charges, primarily related to severance, and recorded a $17 million loss on the divestiture of the
plant in 2009. The reversal occurred in our Kraft Foods Europe segment.
• We also reversed $50 million in Restructuring Program charges, primarily due to planned position eliminations that did not occur.
These were primarily the result of redeployment and natural attrition. The majority of these reversals occurred in our Kraft Foods
Europe segment, with the remainder spread across all other segments.
We incurred charges under the Restructuring Program of $989 million in 2008 and $459 million in 2007. Since the inception of the Restructuring
Program, we have paid cash of $1.7 billion of the $2.0 billion in expected cash payments, including $176 million paid in 2009. At December 31,
2009, we had an accrual of $270 million, and we had eliminated approximately 17,300 positions under the Restructuring Program.
In 2008, we implemented a new operating structure built on three core elements: business units, shared services that leverage the scale of our
global portfolio, and a streamlined corporate staff. Within the 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 we make decisions that affect our consumers and customers. Our
corporate and shared service functions streamlined their organizations to focus 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
Foods. In total, we eliminated approximately 1,400 positions as we streamlined our headquarter functions.
The reorganization of our European operations to function on a pan-European centralized category management and value chain model was
completed in 2009 for our Chocolate, Coffee and Cheese categories. Significant progress was made in 2009 related to the integration of our
Europe Biscuits business, and we expect the integration to be completed by mid-2010. The European Principal Company (“EPC”) will manage the
European categories centrally and make decisions for all aspects of the value chain, except for sales and distribution. The European subsidiaries
will execute sales and distribution locally, and the local production companies will act as toll manufacturers on behalf of the EPC. The EPC legal
entity has been incorporated as Kraft Foods Europe GmbH in Zurich, Switzerland. As part of the reorganization, we incurred $32 million of
severance costs, $25 million of implementation costs and $56 million of other non-recurring costs during 2009; we incurred $16 million of
restructuring costs, $39 million of implementation costs and $11 million of other non-recurring costs during 2008; and we incurred $21 million of
restructuring costs, $24 million of implementation costs and $10 million of other non-recurring costs during 2007. Through 2009, we have incurred
aggregate charges of $241 million related to our Kraft Foods Europe Reorganization, and we expect to incur approximately $40 million in
additional charges in 2010 to complete the integration of the Europe Biscuits business. In 2009, these charges were recorded within cost of sales
and marketing, administration and research costs. The 2008 and 2007 restructuring and implementation costs were included in the total
Restructuring Program charges. Other non-recurring costs relating to our Kraft Foods Europe Reorganization were recorded as marketing,
administration and research costs. Management believes the disclosure of implementation and other non-recurring charges provides readers of
our financial statements greater transparency to the total costs of our Kraft Foods Europe Reorganization.
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Source: KRAFT FOODS INC, 10-K, February 25, 2010 Powered by Morningstar® Document Research℠