Kraft 2008 Annual Report Download - page 4

PART I
Item 1. Business.
General
Kraft was incorporated in 2000 in the Commonwealth of Virginia. We manufacture and market packaged foods and beverages worldwide in more than 150
countries. We have nine brands with revenues exceeding $1 billion: Kraft cheeses, dinners and dressings; Oscar Mayer meats; Philadelphia cream cheese;
Maxwell House coffee; Nabisco cookies and crackers and its Oreo brand; Jacobs coffees, Milka chocolates and LU biscuits. We have more than 50 additional
brands with revenues of at least $100 million.
Prior to June 13, 2001, Kraft was a wholly-owned subsidiary of Altria Group, Inc. (“Altria”). On June 13, 2001, we completed an initial public offering of
280,000,000 shares of our Common Stock at a price of $31.00 per share.
In the first quarter of 2007, Altria spun off its remaining interest (89.0%) in Kraft on a pro rata basis to Altria stockholders in a tax-free transaction. Effective as
of the close of business on March 30, 2007, all Kraft shares owned by Altria were distributed to Altria’s stockholders, and our separation from Altria was
completed (the “Distribution”). Before the Distribution, Altria converted all of its Class B shares of Kraft common stock into Class A shares of Kraft common
stock. The Distribution ratio was calculated by dividing the number of shares of Kraft Common Stock held by Altria by the number of Altria shares outstanding
on the record date, March 16, 2007. The distribution ratio was 0.692024 shares of Kraft Common Stock for every share of Altria common stock outstanding.
Following the Distribution, we only have Class A common stock outstanding.
Because Kraft is a holding company, our principal source of funds is dividends from our subsidiaries. Our 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.
Reportable Segments
We manufacture and market packaged food products, including snacks, beverages, cheese, convenient meals and various packaged grocery products. We manage
and report operating results through two commercial units, Kraft North America and Kraft International. Kraft North America operates in the U.S. and Canada,
and we manage Kraft North America’s operations by product category. We manage Kraft International’s operations by geographic location. We have operations
in more than 70 countries and sell our products in more than 150 countries.
Note 16 to our consolidated financial statements includes a breakout of net revenues and segment operating income by reportable segment for each of the last
three years. Management uses segment operating income to evaluate segment performance and allocate resources. Segment operating income excludes
unallocated general corporate expenses and amortization of intangibles. Management believes it is appropriate to disclose this measure to help investors analyze
segment performance and trends.
The relative percentages of segment operating income attributable to each reportable segment were:
For the Years Ended December 31,
2007 2006 2005
Kraft North America:
North America Beverages 7.4% 4.3% 9.3%
North America Cheese &
Foodservice 13.6% 18.8% 18.6%
North America Convenient Meals 15.3% 19.4% 16.0%
North America Grocery 18.0% 19.5% 14.6%
North America Snacks & Cereals 22.4% 17.6% 18.8%
Kraft International:
European Union 12.5% 11.6% 14.6%
Developing Markets (1)
10.8% 8.8% 8.1%
Total Kraft 100.0% 100.0% 100.0%
(1) This segment was formerly known as Developing Markets, Oceania & North Asia
2
Source: KRAFT FOODS INC, 10-K, February 25, 2008 Powered by Morningstar® Document Research℠