Kraft 2012 Annual Report Download - page 60

Note 6. Restructuring Program
On October 29, 2012, our Board of Directors approved a $650 million restructuring program consisting of restructuring
costs, implementation costs, and Spin-Off transition costs (“Restructuring Program”). The Restructuring Program is part of,
and its costs are consistent with, a restructuring program previously announced by Mondele¯ z International prior to the
Spin-Off. The primary objective of the Restructuring Program activities is to ensure that we are set up to operate efficiently
and execute our business strategy as a stand-alone company. Approximately one-half of the total Restructuring Program
costs are expected to result in cash expenditures. We have incurred $303 million of Restructuring Program costs, of which
$170 million was incurred prior to the Spin-Off. Of the total Restructuring Program costs incurred to date, $153 million
were cash expenditures in 2012, of which $32 million was incurred prior to the Spin-Off. We expect to incur up to $300
million of Restructuring Program costs in 2013. In addition to approving the Restructuring Program, our Board approved
related capital expenditures of $200 million. We expect to complete the program by the end of 2014.
Restructuring Costs:
We anticipate incurring up to $260 million of restructuring charges, of which approximately $158 million are expected to be
cash expenditures through 2014. These charges reflect primarily severance, asset disposals, and other manufacturing-
related one-time costs. We recorded one-time restructuring charges of $141 million in 2012 within asset impairment and
exit costs. We spent $51 million in 2012 in cash, and we also recognized non-cash asset write-downs totaling $28 million.
At December 29, 2012, we recorded a $44 million restructuring liability within other current liabilities.
Severance
and Related
Costs
Asset
Write-downs Total
(in millions)
Liability balance, January 1, 2012 $ - $ - $ -
Charges 113 28 141
Cash spent (51) - (51)
Non-cash settlements (18) (28) (46)
Liability balance, December 29, 2012 $ 44 $ - $ 44
Implementation Costs:
Implementation costs are directly attributable to restructuring activities; however, they do not qualify for special accounting
treatment as exit or disposal activities. We believe the disclosure of implementation costs provides greater transparency to
the total costs of our Restructuring Program. Through the end of 2014, we expect to incur up to $320 million of
implementation costs. To date, we recorded implementation costs of $131 million within cost of sales and selling, general
and administrative expenses. These costs primarily relate to reorganization costs related to our sales function, the
optimization of information systems infrastructure, and accelerated depreciation on assets.
Spin-Off Transition Costs:
We expect to incur up to $70 million of Spin-Off transition costs consisting mostly of professional service fees within the
finance, legal, and information system functions and therefore, has not been allocated to the segments. During 2012, we
recorded Spin-Off transition costs of $31 million within selling, general and administrative expenses. Prior to October 1,
2012, all Spin-Off transition costs were incurred by Mondele¯z International.
Restructuring Program Costs by Segment:
During 2012, we recorded Restructuring Program costs within segment operating income as follows:
For the Year Ended December 29, 2012
Restructuring
Costs
Implementation
Costs
Spin-Off Transition
Costs Total
(in millions)
Beverages $ 44 $ 19 $ - $ 63
Cheese 26 72 - 98
Refrigerated Meals 19 11 - 30
Grocery 32 17 - 49
International & Foodservice 20 12 - 32
Corporate expenses - - 31 31
Total $ 141 $ 131 $ 31 $ 303
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