Kraft 2012 Annual Report Download - page 81

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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 is 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, the gains and
losses on hedging activities are recorded 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. We use the same accounting policies for the segments as
those described in Note 1, Summary of Significant Accounting Policies.
Our segment results were:
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)
Earnings from continuing operations before income taxes:
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
Interest and other expense, net (258) (7) (6)
Royalty income from Mondele¯z International 41 55 43
Earnings from continuing operations before income taxes $ 2,453 $ 2,876 $ 3,002
Our largest customer, Wal-Mart Stores, Inc., accounted for approximately 25% of consolidated net revenues in 2012, 24%
in 2011 and 25% in 2010.
On March 1, 2011, Starbucks took control of the Starbucks CPG business in grocery stores and other channels. The
results of the Starbucks CPG business were included primarily in our Beverages and International & Foodservice
segments through March 1, 2011. See our discussion of legal proceedings within Note 12, Commitments and
Contingencies, for additional information.
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