Note 6. Restructuring Programs

2014-2018 Restructuring Program

On May 6, 2014, our Board of Directors approved a $3.5 billion restructuring program, comprised of approximately $2.5 billion in cash costs and $1 billion in non-cash costs (the “2014-2018 Restructuring Program”), and up to $2.2 billion of capital expenditures. The primary objective of the 2014-2018 Restructuring Program is to reduce our operating cost structure in both our supply chain and overhead costs. The program is intended primarily to cover severance as well as asset disposals and other manufacturing-related one-time costs. We expect to incur the majority of the program’s charges in 2015 and 2016 and to complete the program by year-end 2018.

Restructuring Costs:

We recorded restructuring charges of $274 million in 2014 within asset impairment and exit costs. The activity for the 2014-2018 Restructuring Program liability for the year ended December 31, 2014 was:


	Severance
	and related			Asset
	costs			Write-downs			Total
				(in millions)

Liability balance, January 1, 2014	$	–		$	–		$	–
Charges		251			23			274
Cash spent		(17	)		–			(17	)
Non-cash settlements		(5	)		(23	)		(28	)
Currency		(5	)		–			(5	)

Liability balance, December 31, 2014	$	224		$	–		$	224

We spent $17 million in 2014 in cash severance and related costs. We also recognized non-cash pension plan settlement losses (see Note 10, Benefit Plans, for more details), non-cash asset write-downs (including accelerated depreciation and asset impairments) and other non-cash adjustments totaling $28 million in 2014. At December 31, 2014, $209 million of our net restructuring liability was recorded within other current liabilities and $15 million was recorded within other long-term liabilities.

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 readers of our financial statements with more information on the total costs of our 2014-2018 Restructuring Program. Implementation costs primarily relate to reorganizing our operations and facilities in connection with our supply chain reinvention program and other identified productivity and cost saving initiatives. The costs include incremental expenses related to the closure of facilities, costs to terminate certain contracts and the simplification of our information systems. Within our continuing results of operations, we recorded implementation costs of $107 million in 2014. We recorded these costs within cost of sales and general corporate expense within selling, general and administrative expenses.

Restructuring and Implementation Costs in Operating Income:

During 2014, we recorded restructuring and implementation costs related to the 2014-2018 Restructuring Program within operating income as follows:


For the Year Ended December 31, 2014	Latin		Asia						North
For the Year Ended December 31, 2014	America		Pacific		EEMEA		Europe		America		Corporate ⁽¹⁾		Total
							(in millions)
Restructuring Costs	$	81	$	16	$	19	$	91	$	57	$	10	$	274
Implementation Costs		16		9		4		37		5		36		107

Total	$	97	$	25	$	23	$	128	$	62	$	46	$	381

(1)

Includes adjustment for rounding.

2012-2014 Restructuring Program

In 2012, our Board of Directors approved $1.5 billion of restructuring and related implementation costs (the “2012-2014 Restructuring Program”) reflecting primarily severance, asset disposals and other manufacturing-related one-time costs. The primary objective of the 2012-2014 Restructuring Program was to ensure that Mondelēz International and Kraft Foods Group were each set up to operate efficiently and execute on our respective business strategies upon separation and in the future.

Of the $1.5 billion of 2012-2014 Restructuring Program costs, we retained approximately $925 million and Kraft Foods Group retained the balance of the program. Through the end of 2014, we have incurred total restructuring and related implementation charges of $899 million, and we do not expect to incur any additional charges on the 2012-2014 Restructuring Program.

Restructuring Costs:

We recorded restructuring charges of $360 million in 2014, $267 million in 2013 and $102 million in 2012 within asset impairment and exit costs. During 2014, we also recorded out-of-period accruals for $73 million of severance ($52 million related to 2014 and $21 million related to 2013) in connection with a change in the timing of accruals for ongoing negotiations with workers’ councils and labor unions.

The activity for the 2012-2014 Restructuring Program liability for the years ended December 31, 2014 and 2013 was:


	Severance
	and related			Asset
	costs			Write-downs			Total
	(in millions)

Liability balance, January 1, 2013	$	36		$	–		$	36
Charges		176			91			267
Cash spent		(108	)		–			(108	)
Non-cash settlements		(36	)		(91	)		(127	)

Liability balance, December 31, 2013	$	68		$	–		$	68

Charges		201			159			360
Cash spent		(130	)		–			(130	)
Non-cash settlements		(2	)		(159	)		(161	)
Currency		(9	)		–			(9	)

Liability balance, December 31, 2014	$	128		$	–		$	128

We spent $130 million in 2014, $108 million in 2013 and $33 million in 2012 in cash severance and related costs. We also recognized non-cash pension plan settlement losses (See Note 10, Benefit Plans), non-cash asset write-downs (including accelerated depreciation and asset impairments) and other non-cash adjustments totaling $161million in 2014, $127 million in 2013 and $33 million in 2012. At December 31, 2014, $98 million of our net restructuring liability was recorded within other current liabilities and $30 million was recorded within other long-term liabilities.

Implementation Costs:

Implementation costs related to our 2012-2014 Restructuring Program primarily relate to activities in connection with the Spin-Off such as reorganizing our operations and facilities, the discontinuance of certain product lines and incremental expenses related to the closure of facilities, replicating our information systems infrastructure and reorganizing our sales function. We recorded these costs within cost of sales and selling, general and administrative expenses primarily within our Europe and North America segments.

Restructuring and Implementation Costs in Operating Income:

During 2014, 2013 and 2012, we recorded restructuring and implementation costs related to the 2012-2014 Restructuring Program within operating income as follows:


For the Years Ended December 31,	Latin		Asia						North
For the Years Ended December 31,	America		Pacific		EEMEA		Europe		America		Corporate ⁽¹⁾		Total
							(in millions)

2014
Restructuring Costs	$	8	$	34	$	57	$	148	$	113	$	–	$	360
Implementation Costs		3		6		2		52		32		4		99

Total	$	11	$	40	$	59	$	200	$	145	$	4	$	459

2013
Restructuring Costs	$	21	$	2	$	12	$	95	$	135	$	2	$	267
Implementation Costs		–		–		2		36		25		–		63

Total	$	21	$	2	$	14	$	131	$	160	$	2	$	330

2012
Restructuring Costs	$	7	$	–	$	–	$	6	$	89	$	–	$	102
Implementation Costs		–		–		–		–		8		–		8

Total	$	7	$	–	$	–	$	6	$	97	$	–	$	110

Total Project 2012-2014
Restructuring Costs	$	36	$	36	$	69	$	249	$	337	$	2	$	729
Implementation Costs		3		6		4		88		65		4		170

Total	$	39	$	42	$	73	$	337	$	402	$	6	$	899

(1)

Includes adjustment for rounding.