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Restructuring Programs

9 Months Ended

Sep. 30, 2015

Restructuring Programs

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. Since inception, we have incurred total restructuring and related implementation charges of $1.0 billion related to the 2014-2018 Restructuring Program.

Restructuring Costs:

We recorded restructuring charges of $146 million in the three months and $442 million in the nine months ended September 30, 2015 and $25 million in the three months and $26 million in the nine months ended September 30, 2014 within asset impairment and exit costs. The activity for the 2014-2018 Restructuring Program liability for the nine months ended September 30, 2015 was:

		Severance and Related Costs				Asset Write-downs				Total
		(in millions)
Liability balance, January 1, 2015		$	224			$	–			$	224
Charges			252				190				442
Cash spent			(156	)			–				(156	)
Non-cash settlements / adjustments			(6	)			(190	)			(196	)
Currency			(15	)			–				(15	)
Liability balance, September 30, 2015		$	299			$	–			$	299

We spent $51 million in the three months and $156 million in the nine months ended September 30, 2015 and $25 million in the three months and $26 million in the nine months ended September 30, 2014 in cash severance and related costs. We also recognized non-cash pension settlement losses (See Note 9, Benefit Plans), non-cash asset write-downs (including accelerated depreciation and asset impairments) and other non-cash adjustments totaling $56 million in the three months and $196 million in the nine months ended September 30, 2015. At September 30, 2015, $267 million of our net restructuring liability was recorded within other current liabilities and $32 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 $75 million in the three months and $185 million in the nine months ended September 30, 2015 and $42 million in the three months and $51 million in the nine months ended September 30, 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 2015 and 2014, we recorded restructuring and implementation costs related to the 2014-2018 Restructuring Program within operating income as follows:

		Latin America				Asia Pacific				EEMEA				Europe				North America				Corporate (1)				Total
														(in millions)
For the Three Months Ended September 30, 2015
Restructuring Costs		$	30			$	33			$	7			$	35			$	39			$	2			$	146
Implementation Costs			6				3				1				19				19				27				75
Total		$	36			$	36			$	8			$	54			$	58			$	29			$	221
For the Nine Months Ended September 30, 2015
Restructuring Costs		$	79			$	78			$	21			$	190			$	70			$	4			$	442
Implementation Costs			27				12				7				47				40				52				185
Total		$	106			$	90			$	28			$	237			$	110			$	56			$	627
For the Three Months Ended September 30, 2014
Restructuring Costs		$	25			$	–			$	–			$	–			$	–			$	–			$	25
Implementation Costs			7				4				3				14				1				13				42
Total		$	32			$	4			$	3			$	14			$	1			$	13			$	67
For the Nine Months Ended September 30, 2014
Restructuring Costs		$	26			$	–			$	–			$	–			$	–			$	–			$	26
Implementation Costs			8				4				3				14				1				21				51
Total		$	34			$	4			$	3			$	14			$	1			$	21			$	77
Total Project 2014-2015 (2)
Restructuring Costs		$	158			$	94			$	40			$	283			$	124			$	18			$	717
Implementation Costs			45				21				11				82				48				84				291
Total		$	203			$	115			$	51			$	365			$	172			$	102			$	1,008

(1) Includes adjustment for rounding.

(2) Includes all charges recorded since program inception on May 6, 2014 through September 30, 2015.

2012-2014 Restructuring Program

On October 1, 2012, we completed the Spin-Off of our North American grocery business, Kraft Foods Group, Inc. (“Kraft Foods Group”), to our shareholders (the “Spin-Off”). Prior to this transaction, in 2012, our Board of Directors approved $1.5 billion of related restructuring and 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 incurred total restructuring and related implementation charges of $899 million and completed incurring planned charges on the 2012-2014 Restructuring Program.

Restructuring Costs:

We recorded reversals to the restructuring charges of $3 million in the nine months ended September 30, 2015 related to accruals no longer required. We recorded restructuring charges of $163 million in the three months and $259 million in the nine months ended September 30, 2014 within asset impairment and exit costs. The activity for the 2012-2014 Restructuring Program liability for the nine months ended September 30, 2015 was:

		Severance and Related Costs				Asset Write-downs				Total
		(in millions)
Liability balance, January 1, 2015		$	128			$	–			$	128
Charges			(3	)			–				(3	)
Cash spent			(57	)			–				(57	)
Non-cash settlements / adjustments			–				–				–
Currency			(6	)			–				(6	)
Liability balance, September 30, 2015		$	62			$	–			$	62

We spent $14 million in the three months and $57 million in the nine months ended September 30, 2015 and $44 million in the three months and $110 million in the nine months ended September 30, 2014 in cash severance and related costs. We also recognized non-cash pension plan settlement losses (See Note 9, Benefit Plans), non-cash asset write-downs (including accelerated depreciation and asset impairments) and other non-cash adjustments totaling $53 million in the three months and $77 million in the nine months ended September 30, 2014. At September 30, 2015, $47 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 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. Within our continuing results of operations, we recorded implementation costs of $23 million in the three months and $66 million in the nine months ended September 30, 2014. We recorded these costs within cost of sales and selling, general and administrative expenses.

Restructuring and Implementation Costs in Operating Income:

During the three and nine months ended September 30, 2014 and since inception of the 2012-2014 Restructuring Program, we recorded restructuring and implementation costs within operating income as follows:

		Latin America				Asia Pacific				EEMEA				Europe				North America				Corporate (1)				Total
														(in millions)
For the Three Months Ended September 30, 2014
Restructuring Costs		$	3			$	27			$	14			$	85			$	34			$	–			$	163
Implementation Costs			–				1				–				14				7				1				23
Total		$	3			$	28			$	14			$	99			$	41			$	1			$	186
For the Nine Months Ended September 30, 2014
Restructuring Costs		$	7			$	28			$	26			$	128			$	70			$	–			$	259
Implementation Costs			1				1				2				42				20				–				66
Total		$	8			$	29			$	28			$	170			$	90			$	–			$	325
Total Project 2012-2014 (2)
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.

(2) Includes all charges recorded since program inception in 2012 through conclusion on December 31, 2014.

X

- Definition

The entire disclosure for restructuring and related activities. Description of restructuring activities such as exit and disposal activities, include facts and circumstances leading to the plan, the expected plan completion date, the major types of costs associated with the plan activities, total expected costs, the accrual balance at the end of the period, and the periods over which the remaining accrual will be settled.

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