Kraft 2005 Annual Report Download - page 3

MERRILL CORPORATION MBLOUNT// 9-MAR-06 14:03 DISK126:[06CHI5.06CHI1135]DE1135A.;25
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KRAFT FOODS-FSC CERTIFIED-10K/AR Proj: P1102CHI06 Job: 06CHI1135 File: DE1135A.;25
Merrill Corporation/Chicago [phone] Page Dim: 8.250 X 10.750Copy Dim: 38. X 54.3
(b) Financial Information About Segments
The Company manufactures and markets packaged food products, consisting principally of
beverages, cheese, snacks, convenient meals and various packaged grocery products. The Company
manages and reports operating results through two units: Kraft North America Commercial and Kraft
International Commercial. Kraft North America Commercial operates in the United States and Canada,
and manages its operations principally by product category, while Kraft International Commercial
manages its operations by geographic region. The Company has operations in 71 countries and sells its
products in more than 150 countries.
Kraft North America Commercial’s segments at December 31, 2005 were U.S. Beverages; U.S.
Cheese, Canada & North America Foodservice; U.S. Convenient Meals; U.S. Grocery; and U.S.
Snacks & Cereals. In October 2005, the Company announced that, effective January 1, 2006, its
Canadian business will be realigned to better integrate it into the Company’s North American business
by product category. Accordingly, in 2006 the operating results of the Canadian business will be
reported throughout the North American food segments and prior period segment amounts will be
restated.
Kraft International Commercial’s segments at December 31, 2005 were Europe, Middle East &
Africa; and Latin America & Asia Pacific. In the first quarter of 2006, the Company’s international
businesses will be realigned to reflect the reorganization announced within Europe in November 2005.
Beginning in the first quarter of 2006, the operating results of the Company’s international businesses
will be reported in two revised segments—European Union; and Developing Markets, Oceania and
North Asia, the latter to reflect the Company’s increased management focus on developing markets.
Accordingly, prior period segment results will be restated.
Net revenues and operating companies income* attributable to each segment (together with a
reconciliation to consolidated operating income) for each of the last three years are set forth in Note 14 to
the Company’s consolidated financial statements contained in Part II hereof.
The relative percentages of operating companies income attributable to each reportable segment
were as follows:
For the Years Ended
December 31,
2005 2004 2003
Kraft North America Commercial:
U.S. Beverages ......................................... 9.2% 10.0% 10.4%
U.S. Cheese, Canada & North America Foodservice .............. 20.6% 20.6% 21.0%
U.S. Convenient Meals ................................... 15.0% 16.1% 13.5%
U.S. Grocery .......................................... 15.0% 18.6% 14.8%
U.S. Snacks & Cereals ................................... 17.6% 15.3% 17.3%
Kraft International Commercial:
Europe, Middle East & Africa ............................... 16.1% 14.2% 16.5%
Latin America & Asia Pacific ............................... 6.5% 5.2% 6.5%
Total Kraft Foods Inc. .................................. 100.0% 100.0% 100.0%
* 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 business performance and trends of the various business
segments.
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6 C Cs: 26351