Kraft 2006 Annual Report Download - page 64

Download and view the complete annual report

Please find page 64 of the 2006 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 140

  • 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
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140

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, 2006, Altria Group, Inc. held 98.5% of the
combined voting power of the Company's outstanding capital stock and owned 89.0% of the outstanding shares of the Company's capital stock.
As further discussed in Note 20.Subsequent Event, on January 31, 2007, Altria Group, Inc.'s Board of Directors approved a tax-free distribution to its
stockholders of all of its interest in the Company.
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.
In October 2005, the Company announced that, effective January 1, 2006, its Canadian business would 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 were being reported
throughout the North American food segments. In addition, in the first quarter of 2006, the Company's international businesses were realigned to reflect the
reorganization announced within Europe in November 2005. The two revised international segments, which are reflected in these consolidated financial
statements and notes, are European Union; and Developing Markets, Oceania & North Asia, the latter to reflect the Company's increased management focus on
developing markets. Accordingly, prior period segment results have been 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 by 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.
59
Source: KRAFT FOODS INC, 10-K, March 01, 2007