Kraft 2005 Annual Report Download - page 57

Download and view the complete annual report

Please find page 57 of the 2005 Kraft annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 100

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100

MERRILL CORPORATION EYOUNG// 8-MAR-06 09:45 DISK126:[06CHI5.06CHI1135]DU1135A.;17
mrll.fmt Free: 170D*/240D Foot: 0D/ 0D VJ RSeq: 1 Clr: 0
DISK024:[PAGER.PSTYLES]UNIVERSAL.BST;51
KRAFT FOODS-FSC CERTIFIED-10K/AR Proj: P1102CHI06 Job: 06CHI1135 File: DU1135A.;17
Merrill Corporation/Chicago (312) 786-6300 Page Dim: 8.250X 10.750Copy Dim: 38. X 54.3
KRAFT FOODS INC. and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Background and Basis of Presentation:
Background:
Kraft Foods Inc. (‘‘Kraft’’) was incorporated in 2000 in the Commonwealth of Virginia. Kraft, through
its subsidiaries (Kraft and its subsidiaries are hereinafter referred to as the ‘‘Company’’), is engaged in
the manufacture and sale of packaged foods and beverages in the United States, Canada, Europe, Latin
America, Asia Pacific and Middle East and Africa.
Prior to June 13, 2001, the Company was a wholly-owned subsidiary of Altria Group, Inc. On
June 13, 2001, the Company completed an initial public offering (‘‘IPO’’) of 280,000,000 shares of its
Class A common stock at a price of $31.00 per share. At December 31, 2005, Altria Group, Inc. held
98.3% of the combined voting power of the Company’s outstanding capital stock and owned 87.2% of
the outstanding shares of the Company’s capital stock.
In June 2005, the Company sold substantially all of its sugar confectionery business for pre-tax
proceeds of approximately $1.4 billion. The Company has reflected the results of its sugar confectionery
business prior to the closing date as discontinued operations on the consolidated statements of
earnings. The assets related to the sugar confectionery business were reflected as assets of
discontinued operations held for sale on the consolidated balance sheet at December 31, 2004.
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.
Beginning in the first quarter of 2006, the operating results of the Canadian business will be reported
throughout the North American food segments. In addition, 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 to reflect
increased management attention to the reporting in the Company’s developing markets—Developing
Markets, Oceania and North Asia. Accordingly, prior period segment results will be restated.
Basis of presentation:
The consolidated financial statements include Kraft, as well as its wholly-owned and majority-owned
subsidiaries. Investments in which the Company exercises significant influence (20%—50% ownership
interest) are accounted for under the equity method of accounting. Investments in which the Company
has an ownership interest of less than 20%, or does not exercise significant influence, are accounted for
with the cost method of accounting. All intercompany transactions and balances between and among
Kraft’s subsidiaries have been eliminated. Transactions between any of the Company’s businesses and
Altria Group, Inc. and its affiliates are included in these financial statements.
The preparation of financial statements in conformity with accounting principles generally accepted
in the United States of America requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, the disclosure of contingent liabilities at the dates of the
financial statements and the reported amounts of net revenues and expenses during the reporting
periods. Significant estimates and assumptions include, among other things, pension and benefit plan
assumptions, lives and valuation assumptions of goodwill and other intangible assets, marketing
programs and income taxes. Actual results could differ from those estimates.
The Company’s operating subsidiaries generally report year-end results as of the Saturday closest
to the end of each year. This resulted in fifty-three weeks of operating results in the Company’s
56
6 C Cs: 53777