Kraft 2004 Annual Report Download - page 12

dependent upon their continued ability to promote brand equity successfully, to anticipate and respond
to new consumer trends, to develop new products and markets, to broaden brand portfolios, to compete
effectively with lower priced products in a consolidating environment at the retail and manufacturing
levels and to improve productivity. The Company’s results are also dependent on its ability to
consummate and successfully integrate acquisitions and to realize the cost savings and improved asset
utilization contemplated by its restructuring program. The Company may, from time to time, divest
businesses that are less of a strategic fit within its portfolio, and its results may be impacted by either the
gains or losses, or lost operating income, from the sales of those businesses. In addition, the Company
is subject to the effects of foreign economies, currency movements, fluctuations in levels of customer
inventories and credit and other business risks related to its customers operating in a challenging
economic and competitive environment. The Company’s results are affected by its access to credit
markets, borrowing costs and credit ratings, which may in turn be influenced by the credit ratings of
Altria Group, Inc. The Company’s benefit expense is subject to the investment performance of pension
plan assets, interest rates and cost increases for medical benefits offered to employees and retirees. The
Company’s assessment of the fair value of its operations for purposes of assessing impairment of
goodwill and intangibles is based on discounting projections of future cash flows and is affected by the
interest rate market and general economic and market conditions. The food industry continues to be
subject to recalls if products become adulterated or misbranded, liability if product consumption causes
injury, ingredient disclosure and labeling laws and regulations and the possibility that consumers could
lose confidence in the safety and quality of certain food products. The food industry is also subject to
concerns and/or regulations regarding genetically modified organisms and the health implications of
obesity and trans-fatty acids. Increased government regulation of the food industry could result in
increased costs to the Company.
(d) Financial Information About Geographic Areas
The amounts of net revenues, total assets and long-lived assets attributable to each of the
Company’s geographic segments for each of the last three fiscal years are set forth in Note 14 to the
Company’s consolidated financial statements contained in Part II hereof.
Kraft’s subsidiaries export coffee products, grocery products, cheese and processed meats. In
2004, exports from the United States by these subsidiaries amounted to approximately $122 million.
In 2004, the Company had operations and plants or sold products to third-party distributors located
in 14 Middle East countries (as defined by the U.S. Department of State, Bureau of Near Eastern Affairs),
including a biscuit business acquired during 2003 in Egypt. In the region, the Company had operations
and plants in three countries (Egypt, Morocco, and through a majority owned joint venture, Saudi
Arabia). In addition, the Company sold products to third-party distributors located in 11 of these
countries (Algeria, Bahrain, Israel, Jordan, Kuwait, Lebanon, Oman, Qatar, Tunisia, United Arab Emirates
and Yemen). Revenue generated from operations or sales to the third-party distributors in the Middle
East was approximately $250 million in 2004, representing 3.3% of the net revenue of the Europe, Middle
East and Africa segment. In addition, in 2004, the Company entered into agreements with third parties
for the resale of the Company’s products into Iraq, Libya and Syria.
(e) Available Information
The Company is required to file annual, quarterly and special reports, proxy statements and other
information with the SEC. Investors may read and copy any document that the Company files, including
this Annual Report on Form 10-K, at the SEC’s Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Investors may obtain information on the operation of the Public Reference
Room by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an Internet site at
www.sec.gov that contains reports, proxy and information statements, and other information regarding
issuers that file electronically with the SEC, from which investors can electronically access the
Company’s SEC filings.
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