Kraft 2010 Annual Report Download - page 75

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 $2.9 billion in pre-tax charges reflecting asset disposals, severance and implementation costs;
• announced the closure of 35 facilities and announced the elimination of approximately 18,200 positions; and
• will use cash to pay for $1.9 billion of the $2.9 billion in charges.
In 2010, we reversed $37 million of previously accrued Restructuring Program charges, primarily related to severance. In 2009, we reversed $85 million of
previously accrued Restructuring Program charges. The reversal in 2009 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 of previously accrued Restructuring Program charges in 2009, 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 from continuing operations under the Restructuring Program of $989 million in 2008. Since the inception of the Restructuring Program,
we have paid cash of $1.8 billion of the $1.9 billion in expected cash payments, including $94 million paid in 2010. At December 31, 2010, we had an accrual
of $125 million related to the Restructuring Program.
Restructuring Costs:
Under the Restructuring Program, we recorded asset impairment and exit costs of $884 million during 2008. We recorded implementation costs from of $105
million in 2008. Restructuring liability activity for the years ended December 31, 2010 and 2009 was (in millions):
Liability balance, January 1, 2009 489
Reversal of charges (85)
Cash spent (176)
Currency 42
Liability balance, December 31, 2009 270
Reversal of charges (37)
Cash spent (94)
Currency (14)
Liability balance, December 31, 2010 $ 125
Our 2010 activity was related to cash outflows on prior year Restructuring Program charges and reversals relating to severance benefits and other charges.
Our prior year charges to the liability included severance benefits received by terminated employees, other costs related primarily to the renegotiation of
supplier contract costs, workforce reductions associated with facility closings and the termination of leasing agreements. We anticipate utilizing the majority
of the remaining accrual during 2011.
Implementation Costs:
Implementation costs were directly attributable to exit and disposal costs; however, they did not qualify for special accounting treatment as exit or disposal
activities. These costs primarily included the discontinuance of certain product lines, incremental expenses related to the closure of facilities and the
reorganization of our European operations discussed above. Management believes the disclosure of implementation charges provides readers of our financial
statements greater transparency to the total costs of our Restructuring Program.
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