Kraft 2005 Annual Report Download - page 75

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MERRILL CORPORATION ABLIJDE// 7-MAR-06 14:42 DISK126:[06CHI5.06CHI1135]DY1135A.;6
mrll.fmt Free: 2270DM/0D Foot: 0D/ 0D VJ RSeq: 6 Clr: 0
DISK024:[PAGER.PSTYLES]UNIVERSAL.BST;51
KRAFT FOODS-FSC CERTIFIED-10K/AR Proj: P1102CHI06 Job: 06CHI1135 File: DY1135A.;6
Merrill Corporation/Chicago (312) 786-6300 Page Dim: 8.250X 10.750Copy Dim: 38. X 54.3
tax liabilities on the December 31, 2004 consolidated balance sheet increased $618 million from
$5,850 million to $6,468 million, with a corresponding reduction in other liabilities.
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 North America Commercial’s 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 operations are organized and managed by
geographic location. Kraft International Commercial’s segments are Europe, Middle East & Africa; and
Latin America & Asia Pacific.
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.
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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6 C Cs: 52102