Kraft 2012 Annual Report Download - page 30

Results of Operations by Reportable Segment
Our reportable segments are Beverages, Cheese, Refrigerated Meals, Grocery, and International & Foodservice.
The following discussion compares our results of operations for each of our reportable segments for 2012 with 2011, and
for 2011 with 2010.
For the Years Ended
December 29,
2012
December 31,
2011
December 31,
2010
(in millions)
Net revenues:
Beverages $ 2,734 $ 3,006 $ 3,212
Cheese 3,845 3,810 3,528
Refrigerated Meals 3,296 3,328 3,131
Grocery 4,551 4,556 4,313
International & Foodservice 3,913 3,955 3,613
Net revenues $ 18,339 $ 18,655 $ 17,797
For the Years Ended
December 29,
2012
December 31,
2011
December 31,
2010
(in millions)
Operating income:
Beverages $ 260 $ 450 $ 564
Cheese 618 629 598
Refrigerated Meals 379 319 268
Grocery 1,304 1,316 1,246
International & Foodservice 481 484 476
Unrealized gains / (losses) on
hedging activities 13 (64) 28
Certain postemployment benefit plan costs (305) (240) (130)
General corporate expenses (80) (66) (85)
Operating income $ 2,670 $ 2,828 $ 2,965
As discussed in Note 16, Segment Reporting, to the consolidated financial statements, management uses segment
operating income to evaluate segment performance and allocate resources. We believe it is appropriate to disclose this
measure to help investors analyze segment performance and trends. Segment operating income excludes unrealized
gains and losses on hedging activities (which are a component of cost of sales), certain components of our
postemployment benefit plans (which are a component of cost of sales and selling, general and administrative expenses),
and general corporate expenses (which are a component of selling, general and administrative expenses) for all periods
presented. We exclude the unrealized gains and losses on hedging activities from segment operating income in order to
provide better transparency of our segment operating results. Once realized, we record the gains and losses on hedging
activities within segment operating results. We exclude certain components of our postemployment benefit plans from
segment operating income because we centrally manage postemployment benefit plan funding decisions and the
determination of discount rate, expected rate of return on plan assets, and other actuarial assumptions. We also manage
market-based impacts to these benefit plans centrally. Therefore, we allocate only the service cost component of our
pension plan expense to segment operating income. Furthermore, we centrally manage interest and other expense, net.
Accordingly, we do not present these items by segment because they are excluded from the segment profitability measure
that management reviews.
Comparing 2012 to 2011, net changes in unrealized gains / (losses) on hedging activities were favorable, as we had gains
on commodity hedging activity of $13 million in 2012, compared to losses on commodity hedging activity of $64 million in
2011.
In connection with our Restructuring Program, we recorded restructuring charges of $141 million, implementation costs of
$131 million, and Spin-Off transition costs of $31 million in 2012. We recorded the restructuring charges in operations, as
asset impairment and exit costs, and recorded the implementation and transition costs in operations, as a part of cost of
sales and selling, general and administrative expenses. The breakdown of these costs by segment is shown in Note 6,
Restructuring Program, to the consolidated financial statements.
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