Kraft 2010 Annual Report Download - page 26

Earnings before income taxes as presented exclude associated allocated overheads of $25 million in 2010, $108 million in 2009 and $112 million in 2008.
The 2010 gain on discontinued operations from the sale of the Frozen Pizza business included tax expense of $1.2 billion.
The following assets of the Frozen Pizza business were included in the Frozen Pizza divestiture (in millions):
Inventories, net $ 102
Property, plant and equipment, net 317
Goodwill 475
Distributed assets of the Frozen Pizza business $ 894
Post Cereals Split-off:
On August 4, 2008, we completed the split-off of the Post cereals business into Ralcorp Holdings, Inc. ("Ralcorp"), after an exchange with our shareholders.
Accordingly, the Post cereals business prior period results were reflected as discontinued operations on the consolidated statement of earnings. The exchange
was expected to be tax-free to participating shareholders for U.S. federal income tax purposes.
In this split-off transaction, approximately 46 million shares of Kraft Foods Common Stock were tendered for $1,644 million. Our shareholders had the option
to exchange some or all of their shares of Kraft Foods Common Stock and receive shares of common stock of Cable Holdco, Inc. ("Cable Holdco"). Cable
Holdco was our wholly owned subsidiary that owned certain assets and liabilities of the Post cereals business. In exchange for the contribution of the Post
cereals business, Cable Holdco issued approximately $665 million in debt securities, issued shares of its common stock and assumed a $300 million credit
facility. Upon closing, we used the cash equivalent net proceeds, approximately $960 million, to repay debt. As a result of the split-off, we recorded a gain on
discontinued operations of $926 million, or $0.61 per diluted share, in 2008.
The Post cereals business included such brands as Honey Bunches of Oats, Pebbles, Shredded Wheat, Selects, Grape-Nuts and Honeycomb. Under Kraft
Foods, the brands in this transaction were distributed primarily in North America. In addition to the Post brands, the transaction included four manufacturing
facilities, certain manufacturing equipment and approximately 1,230 employees who joined Ralcorp as part of the transaction.
Pursuant to the Post cereals business Transition Services Agreement, we provided certain sales, co-manufacturing, distribution, information technology, and
accounting and finance services to Ralcorp through 2009.
Summary results of operations for the Post cereals business through August 4, 2008, were as follows:
For the Year Ended
December 31, 2008
(in millions)
Net revenues $ 666
Earnings before income taxes 189
Provision for income taxes (70)
Gain on discontinued operations, net of income taxes 926
Earnings and gain from discontinued operations, net of income taxes $ 1,045
Other Divestitures:
The EU Commission required, as a condition of our Cadbury acquisition, that we divest certain Cadbury confectionery operations in Poland and Romania. In
2010, we completed the sale of the assets of the confectionery operations in Poland and Romania. The total proceeds from the divestitures were $342 million
and the impacts of these divestitures were primarily reflected as adjustments to the purchase price allocations.
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