Sara Lee 2008 Annual Report Download - page 60

Notes to financial statements
Dollars in millions except per share data
Non-cancelable
Employee Lease and Asset and
Termination Other Losses on Business Transformation
and Other Contractual Abandonment Disposition Accelerated Costs – IT
In millions Benefits Obligations of Assets Actions Depreciation and Other Total
Exit and disposal costs recognized during 2007 $««98 $13 $«1 $(12) $«32 $«119 $«251
Cash payments (30) (2) – (11) – (100) (143)
Charges against assets and other non-cash charges – – (1) – (32) (12) (45)
Asset and business disposition gains (losses) –––23––23
Accrued costs as of June 30, 2007 68 11 «– «««– «««– «««««7 «««86
Cash payments (40) (9) – – – (7) (56)
Change in estimate (3)2––––(1)
Foreign exchange impacts 6–––––6
Accrued costs as of June 28, 2008 $««31 $««4 $«– $«««– $«««– $«««««– $«««35
The following table summarizes the employee terminations
by location and business segment.
North North
American American Household
Retail Retail International International and
Number of employees Meats Bakery Foodservice Beverage Bakery Body Care Corporate Total
United States 1,572263199–––172,051
Europe – – – 65 118 94 – 277
South America –––184–––184
1,572 263 199 249 118 94 17 2,512
•Recognized accelerated depreciation on manufacturing facilities
and equipment impacting all of our segments and on certain admin-
istrative buildings in our North American operations.
•Incurred transformation costs as a result of management’s
decision to improve operational efficiency and standardize systems.
Costs were incurred to relocate employees, recruit new employees,
and pay retention bonuses to preserve business continuity. The
corporation also incurred consulting costs to assist in the develop-
ment of strategic operating and financial plans and employee training
costs. Certain information technology costs were also incurred and
related to the implementation of common information systems
across the organization.
•Realized a net gain related to the corporation’s decision to
modify its vacation policy for U.S. employees.
The following table summarizes the net charges taken for the exit,
disposal and transformation activities approved during 2006 and the
related status as of June 28, 2008. The accrued amounts remaining
as of the end of 2008 represent those cash expenditures necessary
to satisfy remaining obligations. The majority of the cash payments
to satisfy the accrued costs are expected to be paid in the next year.
The corporation does not anticipate any additional material future
charges related to the 2006 actions.
2006 Actions During 2006, the corporation approved certain actions
related to exit, disposal and transformation activities and recognized
net charges of $277 related to these actions. Each of these actions
was to be completed within a 12-month period after being approved.
A description of these activities includes the following:
•Implemented a plan to terminate 1,873 employees and provide
them with severance benefits in accordance with benefit plans
previously communicated to the affected employee group or with local
employment laws. The specific location of these employees is sum-
marized in a table contained in this note. All of these actions have
been completed.
•Incurred costs to exit certain leased space and other contractual
obligations, including costs to close facilities related to the North
American Retail Meats and Foodservice segments and various
bakery stores.
•Recognized a loss related to the decision to abandon certain
capitalized software in the International Beverage segment.
•Recognized net gains associated with various asset and business
disposition actions related primarily to our European operations.
Total proceeds from these disposals were $215.
58 Sara Lee Corporation and Subsidiaries