The Company views its continued spending on cost-reduction initiatives as part of its ongoing operating principles to provide greater visibility in achieving its long-term profit growth targets. Initiatives undertaken are currently expected to recover cash implementation costs within a five-year period of completion. Upon completion (or as each major stage is completed in the case of multi-year programs), the project begins to deliver cash savings and/or reduced depreciation.

During 2011, the Company recorded $24 million of costs associated with exit or disposal activities. $7 million represented severance, $12 million was for pension costs, $2 million for other cash costs including relocation of assets and employees and $3 million for asset write-offs. $10 million of the charges were recorded in cost of goods sold (COGS) in the European reportable segment. $14 million of the charges were recorded in selling, general and administrative (SGA) expense in the following reportable segments (in millions): U.S. Snacks—$13; and Europe—$1.

The Company recorded $19 million of costs in 2010 associated with exit or disposal activities. $6 million represented severance, $7 million for other cash costs including relocation of assets and employees, $5 million was for pension costs and $1 million for asset write offs. $4 million of the charges were recorded in COGS in the European reportable segment. $15 million of the charges were recorded in SGA expense in the following reportable segments (in millions): U.S. Morning Foods and Kashi—$2; U.S. Snacks—$8; North America Other—$1; Europe—$2; and Asia Pacific—$2.

For 2009, the Company recorded charges of $65 million associated with exit or disposal activities. $42 million represented severance, $3 million was for pension costs, $6 million for asset write offs, and $14 million for other cash costs including relocation of assets and employees. $40 million of the charges were recorded in COGS in the following reportable segments (in millions): U.S. Morning Foods and Kashi—$4; U.S. Snacks—$9; North America Other—$1; Europe—$16; Latin America—$9; and Asia Pacific—$1. $25 million of the charges were recorded in SGA expense in the following reportable segments (in millions): U.S. Morning Foods and Kashi—$4; U.S. Snacks—$3; U.S. Specialty—$2; North America Other—$1; Europe—$13; Latin America—$1; and Asia Pacific—$1.

At December 31, 2011, exit cost reserves were $1 million, related to severance payments which will be made in 2012. Exit cost reserves at January 1, 2011 were $5 million related to severance payments.

During 2011, the Company incurred costs related to two ongoing programs which will result in COGS and SGA expense savings. The COGS program seeks to optimize the Company's global manufacturing network, reduce waste, and develop best practices on a global basis. The SGA programs focus on improvements in the efficiency and effectiveness of various global support functions. The Company commenced the COGS and the various SGA programs in 2009.

The following table presents the total program costs incurred for these programs through December 31, 2011.


			Employee		Other cash		Asset		Pension
(millions)			severance		costs (a)		write-offs		costs (b)		Total
For the year ended, January 2, 2010		$	32	$	14	$	-	$	3	$	49
For the year ended, January 1, 2011			6		7		1		5		19
For the year ended, December 31, 2011			7		2		3		12		24
Total program costs		$	45	$	23	$	4	$	20	$	92

(a)	Includes cash costs for equipment removal and relocation.
(b)	Pension plan curtailment losses and special termination benefits.

The above costs impacted the reportable segments, as follows (in millions): U.S. Morning Foods and Kashi—$10; U.S. Snacks—$33; U.S. Specialty—$2; North America Other—$3; Europe—$39; Asia Pacific—$4; and Latin America—$1. The cost and cash outlay in 2012 for these programs is estimated to be an additional $7 million.

The following table presents a reconciliation of the severance reserve for these programs.


		Beginning						End of
(millions)		of period		Accruals		Payments		period
For the year ended, January 2, 2010	$	-	$	32	$	(14)	$	18
For the year ended, January 1, 2011	$	18		6		(19)	$	5
For the year ended, December 31, 2011	$	5		7		(11)	$	1
Total project to date			$	45	$	(44)

During 2009, in addition to the COGS and SGA programs above, the Company incurred costs related to a European manufacturing optimization program in Bremen, Germany and a supply chain network rationalization program in Latin America.

The Company incurred $7 million of costs representing cash payments for severance, related to a manufacturing optimization program in Bremen, Germany. The program resulted in cash savings through the elimination of employee positions and was recorded within COGS in the European reportable segment. The program was substantially complete in 2009. Severance reserves were $7 million as of January 2, 2010 and were paid during 2010.

The Company incurred $9 million of costs related to a supply chain rationalization in Latin America which resulted in the closing of a plant in Guatemala. The charges represent $3 million of cash payments for severance and other cash costs associated with the elimination of employee positions and $6 million for asset removal and relocation costs as well as non-cash asset write offs. Efficiencies gained in other plants in the Latin America network allow the Company to service the Guatemala market from those plants. The costs were recorded in COGS in the Latin America reportable segment and there were no severance reserves as of January 2, 2010.