was financed through a combination of short-term and long-term debt. The components of intangible assets included in the final allo- cation of purchase price were (in millions): trademarks and trade- names-$1,310.0, direct store door (DSD) delivery system-$590.0, goodwill-$2,938.5. During 2001, these intangibles were amortized based on an estimated useful life of 40 years. As a result of the Company’s adoption of SFAS No. 142 on January 1, 2002 (refer to Note 1), these intangibles were no longer amortized after 2001, but are subject to annual impairment reviews. Unaudited pro forma combined results as if the Company had acquired Keebler as of the beginning of 2001 are (in millions except per share data): net sales-$8,049.8, earnings before cumulative effect of accounting change-$430.6, net earnings-$429.6, net earnings per share (basic and diluted)-$1.06. These pro forma results include amortization of the acquired intangibles and interest expense on debt assumed is- sued to finance the purchase. The pro forma results are not neces- sarily indicative of what actually would have occurred if the acquisi- tion had been completed as of the beginning of 2001, nor are they necessarily indicative of future consolidated results. The final purchase price allocation included $71.3 million of liabili- ties related to management’s plans, as of the acquisition date, to exit certain activities and operations of Keebler, as presented in the table below. During the year ended December 27, 2003, $6.7 million of excess reserves were reversed to goodwill. This excess resulted primarily from lower than projected facility closure costs and employee severance payments, and higher than projected pro- ceeds from sale of leased vehicles and sub-lease revenue. Acquisition-date exit plans were substantially completed during 2003, with remaining reserves consisting primarily of contractual obligations for severance and leases extending through 2011. duction from the Grand Rapids, Michigan bakery to other facili- ties. As a result of these initiatives, over 800 employee positions were relocated or eliminated. These exit plans also included the divesture of some of Keebler’s private-label operations. During April 2002, the Company sold cer- tain assets of the Bake-Line unit, including a bakery in Marietta, Oklahoma, to Atlantic Baking Group, Inc. for approximately $65 million in cash. In January 2003, the Company sold additional pri- vate-label operations, including a bakery in Cleveland, Tennessee, for approximately $14 million in cash. For both of these transac- tions, the carrying value of net assets sold, including allocated goodwill, approximated the net sales proceeds. To position the Company for sustained, reliable growth in earnings and cash flow for the long term, management is undertaking a se- ries of cost-saving initiatives. Some of these initiatives are still in the planning stages and individual actions are being announced as plans are finalized. Major actions implemented in 2003 include a wholesome snack plant consolidation in Australia, manufactur- ing capacity rationalization in the Mercosur region of Latin America, and plant workforce reduction in Great Britain. Additionally, manufacturing and distribution network optimization efforts in the Company’s U.S. snacks business have been ongoing since the Company’s acquisition of Keebler in 2001. The wholesome snack plant consolidation in Australia involved the exit of a leased facility and separation of approximately 140 employees during 2003. The Company incurred approximately $6 million in exit costs and asset write-offs during 2003 related to this initiative. The manufacturing capacity rationalization in the Mercosur region of Latin America involved the closure of an owned facility in Argentina and separation of approximately 85 plant and adminis- trative employees during 2003. The Company recorded an impair- ment loss of approximately $6 million to reduce the carrying value of the manufacturing facility to estimated fair value, and incurred approximately $2 million of severance and closure costs during 2003 to complete this initiative. Beginning in 2004, the Company is importing its products for sale in Argentina from other Latin America facilities. Exit plans implemented during the two-year period following the acquisition date included consolidation of various adminis- trative functions in Battle Creek, Michigan; consolidation of ice cream cone and pie crust operations within a single Chicago, Illinois facility; reconfiguration of Keebler’s DSD system in the southeastern United States to accommodate Kellogg snack product volume; closing of the Denver, Colorado bakery and several leased distribution centers; and transferring some pro- The plant workforce reduction in Great Britain resulted from changes in plant crewing to better match the work pattern to the demand cycle. Approximately 130 hourly and salaried employee positions have been eliminated through voluntary severance and early retirement programs. During 2003, the Company incurred approximately $18 million in separation benefit costs related to this initiative. Lease & other Employee Employee contract Facility closure (millions) severance benefits relocation termination costs Total Total reserve at acquisition date: Original estimate $59.3 $8.6 $12.3 $10.4 $90.6 Purchase accounting adjustments (10.3) (7.1) (.5) (1.4) (19.3) Adjusted $49.0 $1.5 $11.8 $ 9.0 $71.3 Amounts utilized during 2001 (23.9) (.8) (.4) (2.9) (28.0) Amounts utilized during 2002 (17.9) (.1) (1.8) (4.2) (24.0) 2003 activity: Utilized (5.0) (.1) (2.9) (.3) (8.3) Reversed (1.9) (.5) (2.8) (1.5) (6.7) Remaining reserve at December 27, 2003 $ .3 $ — $ 3.9 $ .1 $ 4.3 Earning Our Stripes 38 Note 3 Exit activities and other charges 2003-exit activities