Kraft 2006 Annual Report Download - page 7

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Source of Funds—Dividends
Because Kraft is a holding company, its principal source of funds is dividends from its subsidiaries. Kraft's principal wholly owned subsidiaries currently
are not limited by long-term debt or other agreements in their ability to pay cash dividends or make other distributions with respect to their common stock.
(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 72 countries and sells its products in more than
155 countries.
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 are being reported
throughout the North American food segments. Kraft North America Commercial's segments at December 31, 2006 were North America Beverages; North
America Cheese & Foodservice; North America Convenient Meals; North America Grocery; and North America Snacks & Cereals. 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. Kraft
International Commercial's segments at December 31, 2006 were 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.
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,
2006
2005
2004
Kraft North America Commercial:
North America Beverages 4.3% 9.3% 9.8%
North America Cheese & Foodservice 18.8% 18.6% 16.5%
North America Convenient Meals 19.4% 16.0% 16.7%
North America Grocery 19.5% 14.6% 21.3%
North America Snacks & Cereals 17.6% 18.8% 16.3%
Kraft International Commercial:
European Union 11.6% 14.6% 14.4%
Developing Markets, Oceania & North Asia 8.8% 8.1% 5.0%
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.
3
Source: KRAFT FOODS INC, 10-K, March 01, 2007