Kraft 2004 Annual Report Download - page 70

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Note 14. Segment Reporting:
The Company manufactures and markets packaged food products, consisting principally of
beverages, cheese, snacks, convenient meals and various packaged grocery products. Kraft manages
and reports operating results through two units, Kraft North America Commercial and Kraft International
Commercial. Reportable segments for Kraft North America Commercial are organized and managed
principally by product category. Kraft International Commercial’s operations are organized and
managed by geographic location.
During January 2004, the Company announced a new global organizational structure, which
resulted in new segments. During the fourth quarter of 2004, following the sale of its sugar confectionery
business, as discussed in Note 5. Divestitures, the Company realigned its North American segments.
Kraft North America Commercial’s new segments are U.S. Beverages; U.S. Cheese, Canada & North
America Foodservice; U.S. Convenient Meals; U.S. Grocery; and U.S. Snacks & Cereals. Kraft
International Commercial’s segments are Europe, Middle East & Africa; and Latin America & Asia Pacific.
The new segment structure in North America reflects a shift of certain divisions and brands between
segments to more closely align these businesses to consumer sectors, to provide more focus on the
separate beverage and grocery businesses, and to benefit from synergies in grain based products.
Historical data have been restated to reflect the new segment structure.
The Company’s management uses operating companies income, which is defined as operating
income before general corporate expenses and amortization of intangibles, to evaluate segment
performance and allocate resources. Management believes it is appropriate to disclose this measure to
help investors analyze the business performance and trends of the various business segments. Interest
and other debt expense, net, and provision for income taxes are centrally managed and, accordingly,
such items are not presented by segment since they are not included in the measure of segment
profitability reviewed by management. The Company’s assets, which are principally in the United States
and Europe, are managed geographically. The accounting policies of the segments are the same as
those described in Note 2. Summary of Significant Accounting Policies.
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