BUSINESS REALIGNMENT AND IMPAIRMENT CHARGES

In June 2010, we announced Project Next Century (the “Next Century program”) as part of our ongoing efforts to create an advantaged supply chain and competitive cost structure. As part of the program, production was transitioned from the Company's century-old facility at 19 East Chocolate Avenue in Hershey, Pennsylvania, to an expanded West Hershey facility, which was built in 1992. Production from the 19 East Chocolate Avenue plant, as well as a portion of the workforce, was fully transitioned to the West Hershey facility during 2012.

We estimate that the Next Century program will incur pre-tax charges and non-recurring project implementation costs of $190 million to $200 million. As of December 31, 2013, total costs of $190.4 million have been recorded over the last four years for the Next Century program. Total costs of $16.8 million were recorded during 2013. Total costs of $76.3 million were recorded in 2012, costs of $43.4 million were recorded in 2011 and total costs of $53.9 million were recorded in 2010.

During 2009, we completed our comprehensive, three-year supply chain transformation program (the “global supply chain transformation program”).

In December 2012, the Company recorded non-cash asset impairment charges of approximately $7.5 million, primarily associated with the write off of goodwill and other intangible assets of Tri-US, Inc., a subsidiary in which we held a controlling interest.

Charges (credits) associated with business realignment initiatives and impairment recorded during 2013, 2012 and 2011 were as follows:



For the years ended December 31,	2013		2012		2011
In thousands of dollars

Cost of sales
Next Century program	$	402	$	36,383	$	39,280
Global supply chain transformation program	—		—		5,816

Total cost of sales	402		36,383		45,096

Selling, marketing and administrative - Next Century program	18		2,446		4,961

Business realignment and impairment charges, net
Next Century program:
Pension settlement loss	—		15,787		—
Plant closure expenses	16,387		20,780		8,620
Employee separation costs (credits)	—		914		(9,506		)
India voluntary retirement program	2,278		—		—
Tri-US, Inc. asset impairment charges	—		7,457		—

Total business realignment and impairment charges (credits), net	18,665		44,938		(886		)

Total net charges associated with business realignment initiatives and impairment	$	19,085	$	83,767	$	49,171

Next Century Program

Plant closure expenses of $16.4 million were recorded during 2013, primarily related to costs associated with the demolition of a former manufacturing facility.

The charge of $36.4 million recorded in cost of sales during 2012 related primarily to start-up costs and accelerated depreciation of fixed assets over a reduced estimated remaining useful life associated with the Next Century program. A charge of $2.4 million was recorded in selling, marketing and administrative expenses during 2012 for project administration related to the Next Century program. The level of lump sum withdrawals during 2012 from one of the Company's pension plans by employees retiring or leaving the Company, primarily under the Next Century program, resulted in a non-cash pension settlement loss of $15.8 million. Expenses of $20.8 million were recorded in 2012 primarily related to costs associated with the closure of a manufacturing facility and the relocation of production lines.

The charge of $39.3 million recorded in cost of sales during 2011 related primarily to accelerated depreciation of fixed assets over a reduced estimated remaining useful life associated with the Next Century program. A charge of $5.0 million was recorded in selling, marketing and administrative expenses during 2011 for project administration related to the Next Century program. Plant closure expenses of $8.6 million were recorded in 2011 primarily related to costs associated with the relocation of production lines. Employee separation costs were reduced by $9.5 million during 2011, which consisted of an $11.2 million credit reflecting lower expected costs related to voluntary and involuntary terminations at the two manufacturing facilities and a net benefits curtailment loss of $1.7 million also related to the employee terminations.

Global Supply Chain Transformation Program

The charge of $5.8 million recorded in 2011 was due to a decline in the estimated net realizable value of two properties being held for sale.

Tri-US, Inc. Impairment Charges

In February 2011, we acquired a 49% interest in Tri-US, Inc. of Boulder, Colorado, a company that manufactured, marketed and sold nutritional beverages under the “mix1” brand name. We invested $5.8 million and accounted for this investment using the equity method until January 2012. In January 2012, we made an additional investment of $6.0 million in Tri-US, Inc., resulting in a controlling ownership interest of approximately 69%. In December 2012, the board of directors of Tri-US, Inc. decided to immediately cease operations and dissolve the company as a result of operational difficulties, quality issues and competitive constraints. It was determined that investments necessary to continue the business would not generate a sufficient return. Accordingly, in December 2012, the Company recorded non-cash asset impairment charges of approximately $7.5 million, primarily associated with the write off of goodwill and other intangible assets. These charges excluded the portion of the losses attributable to the noncontrolling interests.

Liabilities Associated with Business Realignment Initiatives

As of December 31, 2013, there was no remaining liability balance relating to the Next Century program. We made payments against the liabilities recorded for the Next Century program of $7.6 million in 2013 and $12.8 million in 2012 related to employee separation and project administration costs.