Mondelez 2009 Annual Report Download

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Morningstar® Document Research℠
FORM 10-K
KRAFT FOODS INC - KFT
Filed: February 25, 2010 (period: December 31, 2009)
Annual report which provides a comprehensive overview of the company for the past year

Table of contents

  • Page 1
    Morningstar Document Research ® ℠FORM 10-K KRAFT FOODS INC - KFT Filed: February 25, 2010 (period: December 31, 2009) Annual report which provides a comprehensive overview of the company for the past year

  • Page 2
    ... year ended December 31, 2009 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NUMBER 1-16483 Kraft Foods Inc. (Exact name of registrant as specified in its charter) Virginia (State or other jurisdiction of incorporation or organization...

  • Page 3
    ... Disclosure Controls and Procedures Report of Management on Internal Control over Financial Reporting Report of Independent Registered Public Accounting Firm Other Information Directors, Executive Officers and Corporate Governance Executive Compensation Security Ownership of Certain Beneficial...

  • Page 4
    ... Europe by product category, and we manage the operations of Kraft Foods Developing Markets by location. Our reportable segments are U.S. Beverages, U.S. Cheese, U.S. Convenient Meals, U.S. Grocery, U.S. Snacks, Canada & North America Foodservice, Kraft Foods Europe (formerly known as European Union...

  • Page 5
    ... to each reportable segment were: For the Years Ended December 31, 2008 2007 Kraft Foods North America: U.S. Beverages U.S. Cheese U.S. Convenient Meals U.S. Grocery U.S. Snacks Canada & N.A. Foodservice (1) Kraft Foods Europe Kraft Foods Developing Markets Total Kraft Segment Operating Income...

  • Page 6
    ... Cheese cheese spread. Canada and foodservice products span all Kraft Foods North America segments and sectors. Canadian brand offerings include Delissio pizza, Nabob coffee, Kraft peanut butter and Peek Freans biscuits, as well as a range of products bearing brand names similar to those marketed...

  • Page 7
    .... Maxwell House, Maxim, Carte Noire, Nova Brasilia and Jacobs coffee; and Tang, Clight, Kool-Aid, Verao, Frisco, Q-Refres-Ko, Royal and Fresh powdered beverages. Kraft, Velveeta and Eden processed cheeses; Philadelphia cream cheese; Kraft natural cheese; and Cheez Whiz processed cheese spread. Royal...

  • Page 8
    ... net proceeds, approximately $960 million, to repay debt. As a result of the split-off, we recorded a gain on discontinued operations of $926 million, or $0.61 per diluted share, in 2008. LU Biscuit Acquisition: On November 30, 2007, we acquired the Groupe Danone S.A. global LU biscuit business ("LU...

  • Page 9
    ..., distributors, convenience stores, gasoline stations, drug stores, value stores and other retail food outlets. In general, the retail trade for food products is consolidating. Food products are distributed through distribution centers, satellite warehouses, company-operated and public cold-storage...

  • Page 10
    ...New York; Banbury, United Kingdom; Paris, France; and Munich, Germany. These technology centers are equipped with pilot plants and state-of-the-art instruments. Research and development expense was $477 million in 2009, $498 million in 2008 and $442 million in 2007. Regulation Our U.S. food products...

  • Page 11
    ... Global Human Resources Executive Vice President and Chief Financial Officer Executive Vice President, Strategy Executive Vice President, Research, Development and Quality Executive Vice President and President, Kraft Foods North America Executive Vice President and Chief Marketing Officer 8 Source...

  • Page 12
    ...President, Research and Development, Kraft Foods North America. She joined Kraft Foods in 1981. Ms. Spence also serves on the Board of Directors of International Life Sciences Institute. Mr. Vernon joined Kraft Foods as Executive Vice President and President, Kraft Foods North America in August 2009...

  • Page 13
    ... condition in the future. We operate in a highly competitive industry, which may affect our profitability. The food industry is highly competitive. We compete based on price, product innovation, product quality, brand recognition and loyalty, effectiveness of marketing, promotional activity and...

  • Page 14
    ... in sales to a significant customer could have a material adverse effect on our net revenues and results of operations. Increased price volatility for commodities we purchase may affect our profitability. We are a major purchaser of commodities, including dairy, coffee, cocoa, wheat, corn products...

  • Page 15
    ...more competitive as other companies grow globally and local low cost manufacturers expand their production capacities. If we are unable to increase our business in emerging markets, our market share and profitability could be adversely affected. We may not be able to consummate proposed acquisitions...

  • Page 16
    ...our sales, reputation and profitability. Increased regulation could increase our costs and affect our profitability. Food production and marketing are highly regulated by a variety of federal, state, local and foreign agencies. New regulations and changes to existing regulations are issued regularly...

  • Page 17
    ..., and outside of North America, we have 105 facilities located in 44 countries. These manufacturing and processing facilities are located throughout the following territories: Number of Facilities U.S. Canada Western Europe Central & Eastern Europe, Middle East and Africa Latin America Asia Pacific...

  • Page 18
    ... record of our Common Stock. As part of our February 2, 2010 acquisition of Cadbury plc, we anticipate issuing approximately 260 million additional shares of our Common Stock to the approximately 45,000 Cadbury plc shareholders of record. Comparison of Five-Year Cumulative Total Return The following...

  • Page 19
    ... stock that vested. Accordingly, these are non-cash transactions. Total Number of Shares Average Price Paid per Share October 1-31, 2009 November 1-30, 2009 December 1-31, 2009 For the Quarter Ended December 31, 2009 38,524 $ 81,302 $ 19,185 $ 139,011 $ 26.02 26.66 26.96 26.52 16 Source: KRAFT...

  • Page 20
    ...Equity Total Equity Book value per common share outstanding Market price per Common Stock share - high / low Closing price of Common Stock at year end Price / earnings ratio at year end - Basic Price / earnings ratio at year end - Diluted Shares outstanding at year end Number of employees $ 40,386...

  • Page 21
    ... of this Annual Report on Form 10-K. Description of the Company We manufacture and market packaged food products, including snacks, beverages, cheese, convenient meals and various packaged grocery products, in approximately 160 countries. Executive Summary The following executive summary is intended...

  • Page 22
    ... in order to gain share versus grocery channels in the U.S. and European Union; and enhancing margins by improving our portfolio mix and reducing costs while investing in quality. Items Affecting Comparability of Financial Results Acquisitions and Divestitures Cadbury Acquisition: On January 19...

  • Page 23
    ... Agreement, we provided certain sales, co-manufacturing, distribution, information technology, and accounting and finance services to Ralcorp through 2009. Summary results of operations for the Post cereals business through August 4, 2008, were as follows: For the Years Ended December 31, 2008 2007...

  • Page 24
    ... the split-off (in millions): Inventories, net Property, plant and equipment, net Goodwill Other assets Other liabilities Distributed assets of the Post cereals business $ 94 425 1,234 11 (3) 1,761 $ LU Biscuit Acquisition: On November 30, 2007, we acquired the Groupe Danone S.A. global LU biscuit...

  • Page 25
    ... Ended December 31, 2008 (in millions) 2009 Gains / (losses) & asset impairment charges on divestitures, net: 2007 Kraft Foods North America: U.S. Beverages U.S. Cheese U.S. Convenient Meals U.S. Grocery U.S. Snacks Canada & N.A. Foodservice (1) Kraft Foods Europe Kraft Foods Developing Markets...

  • Page 26
    ...17,300 positions under the Restructuring Program. In 2008, we implemented a new operating structure built on three core elements: business units, shared services that leverage the scale of our global portfolio, and a streamlined corporate staff. Within the new structure, business units now have full...

  • Page 27
    ... of holidays and other annual or special events, seasonality, significant weather conditions, timing of our own or customer incentive programs and pricing actions, customer inventory programs and general economic conditions. Our domestic operating subsidiaries report year-end results as of the last...

  • Page 28
    ... contributions from Kraft Foods Developing Markets and U.S. Convenient Meals. The decrease in input costs was driven by lower raw material costs, partially offset by higher manufacturing costs. During 2009, we reversed $85 million in Restructuring Program charges recorded in the prior year, versus...

  • Page 29
    ... to Kraft Foods Increases in operations Lower charges from certain legal matters Lower Restructuring Program costs Change in unrealized gains on hedging activities Lower asset impairment charges Lower losses on divestitures, net 2008 favorable resolution of Brazilian value added tax claim...

  • Page 30
    ... years. The increase in input costs was primarily related to higher raw material costs. The unfavorable volume/mix was driven by declines across most segments within Kraft Foods North America, partially offset by volume/mix gains in Kraft Foods Developing Markets and Kraft Foods Europe. The increase...

  • Page 31
    ... Kraft Foods North America and Kraft Foods Europe by product category, and we manage the operations of Kraft Foods Developing Markets by location. Our reportable segments are U.S. Beverages, U.S. Cheese, U.S. Convenient Meals, U.S. Grocery, U.S. Snacks, Canada & N.A. Foodservice, Kraft Foods Europe...

  • Page 32
    ...,858 Operating income: Kraft Foods North America: U.S. Beverages U.S. Cheese U.S. Convenient Meals U.S. Grocery U.S. Snacks Canada & N.A. Foodservice Kraft Foods Europe Kraft Foods Developing Markets Unrealized gains / (losses) on hedging activities Certain U.S. pension plan costs General corporate...

  • Page 33
    ... operating income increased $130 million (34.1%), due primarily to lower costs due to the completion of the Restructuring Program, lower raw material costs, higher net pricing, favorable volume/mix (higher shipments, net of unfavorable product mix), lower manufacturing costs and lower marketing...

  • Page 34
    ... product innovations, primarily Kraft Bagel-fuls. Segment operating income increased $76 million (15.6%), due primarily to higher net pricing and lower Restructuring Program costs, partially offset by higher raw material costs, unfavorable volume/mix, higher manufacturing costs and higher marketing...

  • Page 35
    ... primarily to higher net pricing, favorable volume/mix and lower marketing support costs, partially offset by higher raw material costs, higher marketing, administration and research costs, higher manufacturing costs and higher Restructuring Program costs. 32 Source: KRAFT FOODS INC, 10-K, February...

  • Page 36
    ... raw material costs, unfavorable volume/mix (lower shipments, net of improved product mix), higher marketing, administration and research costs and higher Restructuring Program costs, partially offset by higher net pricing and lower marketing support costs. U.S. Snacks For the Years Ended December...

  • Page 37
    ... and the discontinuation of less profitable product lines, lower input cost-driven pricing and unfavorable foreign currency. Segment operating income increased $79 million (17.6%), due primarily to lower costs due to the completion of the Restructuring Program and lower raw material costs, partially...

  • Page 38
    ...net of unfavorable mix) and favorable foreign currency. These favorable variances were partially offset by higher raw material costs, higher Restructuring Program costs and higher marketing support costs. Kraft Foods Europe For the Years Ended December 31, 2009 2008 (in millions) $ change % change...

  • Page 39
    ... costs), lower manufacturing costs, lower marketing support costs and favorable volume/mix (improved mix, net of lower shipments). Kraft Foods Europe Reorganization - The reorganization of our European operations to function on a pan-European centralized category management and value chain model...

  • Page 40
    ... value added tax claim (1.1 pp). In Central & Eastern Europe, Middle East & Africa, net revenues increased, driven by higher net pricing across the region, volume growth in chocolate, biscuits and coffee categories, our LU Biscuit acquisition and favorable foreign currency. In Latin America, net...

  • Page 41
    ...regarding our future plans, industry and economic conditions. For our reporting units within our Kraft Foods North America and Kraft Foods Europe geographic units, we used a market-participant, weighted-average cost of capital of 7.5% to discount the projected cash flows of those operations. For our...

  • Page 42
    ... our product mix to our lower margin offerings. If we are not able to maintain or improve our brand image or value proposition, it could have a material effect on our market share and our profitability. As we primarily use a forecasted discounted cash flow model based on segment operating income...

  • Page 43
    ...on plan assets, compensation increases, turnover rates and health care cost trend rates. We review our actuarial assumptions on an annual basis and make modifications to the assumptions based on current rates and trends when appropriate. As permitted by U.S. GAAP, we generally amortize any effect of...

  • Page 44
    ...amounts reported for the health care plans. A one-percentage-point change in assumed health care cost trend rates would have the following effects as of December 31, 2009: One-Percentage-Point Increase Decrease Effect on total of service and interest cost Effect on postretirement benefit obligation...

  • Page 45
    ... health care plans, as a sensitivity measure, a fifty-basis point change in our discount rate or a fifty-basis point change in the expected rate of return on plan assets would have the following effects, increase / (decrease) in cost, as of December 31, 2009: U.S. Plans Fifty-Basis-Point Increase...

  • Page 46
    ... processors. The prices for milk and other dairy product purchases are substantially influenced by market supply and demand, as well as by government programs. Dairy commodity costs on average were lower in 2009 than in 2008. Significant cost items in our biscuit and grocery products are grains...

  • Page 47
    ... and from time to time sell businesses to accelerate the shift in our portfolio toward businesses-whether global, regional or local - that offer us a sustainable competitive advantage. The impact of future acquisitions or divestitures could have a material impact on our cash flows. Net cash used...

  • Page 48
    ...agreement dated November 9, 2009 (the "Cadbury Bridge Facility"). The net cash used in financing activities in 2008 primarily related to $5.9 billion in payments made on the bridge facility used to fund our LU Biscuit acquisition, $1.7 billion in dividend payments, $777 million in Common Stock share...

  • Page 49
    ... long-term debt was 8.4 years. On February 8, 2010, we issued $9.5 billion of senior unsecured notes at a weighted-average effective rate of 5.364% and are using the net proceeds ($9,379 million) to finance the Cadbury acquisition and for general corporate purposes. After the issuance of the...

  • Page 50
    ..., 2009, and does not reflect the impacts of our recent acquisition and divestiture activity. Payments Due Total 2010 2011-12 (in millions) 2013-14 2015 and Thereafter Long-term debt (2) Interest expense (3) Capital leases (4) Operating leases (5) Purchase obligations: Inventory and production costs...

  • Page 51
    ...accordance with our spin-off agreement with Altria. Stock Plans: At our 2009 annual meeting, our shareholders approved the Kraft Foods Inc. Amended and Restated 2005 Performance Incentive Plan (the "2005 Plan"). The 2005 Plan includes, among other provisions, a limit on the number of shares that may...

  • Page 52
    ...rights and do not pay dividends. In January 2009, we granted 1.5 million shares of stock in connection with our long-term incentive plan. The market value per share was $27.00 on the date of grant. In February 2009, as part of our annual equity program, we issued 4.1 million shares of restricted and...

  • Page 53
    ..., onwards. The combination of Kraft Foods and Cadbury is expected to provide the potential for meaningful revenue synergies over time from investments in distribution, marketing and product development. As a result, the combined company is targeting long-term organic net revenue growth of 5 percent...

  • Page 54
    ...one-time impacts of acquisitions and divestitures on net revenues. The limitation of this measure is that it excludes items that have an impact on net revenues. The best way that this limitation can be addressed is by using organic net revenues in combination with our U.S. GAAP reported net revenues...

  • Page 55
    ...pension plan cost; our expectation for health care trend rates; our anticipated health care cost trend rate assumption; our discount rate model and expected future cash flows of benefit obligations; that the final outcome of our legal proceedings will not materially affect our financial results; our...

  • Page 56
    ... not limited to, continued volatility in commodity costs, pricing actions, increased competition, our ability to differentiate our products from private label products, increased costs of sales, our indebtedness and our ability to pay our indebtedness, unexpected safety or manufacturing issues, Food...

  • Page 57
    ... rates and commodity prices under normal market conditions. The computation does not represent actual losses in fair value or earnings to be incurred by Kraft Foods, nor does it consider the effect of favorable changes in market rates. We cannot predict actual future movements in such market rates...

  • Page 58
    ... Data. Kraft Foods Inc. and Subsidiaries Consolidated Statements of Earnings for the years ended December 31, (in millions of dollars, except per share data) 2009 2008 2007 Net revenues Cost of sales Gross profit Marketing, administration and research costs Asset impairment and exit costs (Gains...

  • Page 59
    ... health care costs Other liabilities TOTAL LIABILITIES Contingencies (Note 13) EQUITY Common Stock, no par value (1,735,000,000 shares issued in 2009 and 2008) Additional paid-in capital Retained earnings Accumulated other comprehensive losses Treasury stock, at cost Total Kraft Foods Shareholders...

  • Page 60
    ..., net of income taxes Total comprehensive losses Adoption of new benefit plan guidance Exercise of stock options and issuance of other stock awards Cash dividends declared ($1.12 per share) Acquisitions of noncontrolling interest and other activities Common Stock repurchased Common Stock tendered...

  • Page 61
    ...-based compensation expense Deferred income tax provision / (benefit) (Gains) / losses on divestitures, net Gain on discontinued operations (Note 2) Asset impairment and exit costs, net of cash paid Other non-cash expense, net Change in assets and liabilities, excluding the effects of acquisitions...

  • Page 62
    ... financial statements include Kraft Foods, as well as our wholly owned and majority owned subsidiaries. Our domestic operating subsidiaries report year-end results as of the last Saturday of the year, and our international operating subsidiaries generally report year-end results two weeks prior...

  • Page 63
    ... the Year Ended December 31, 2009 As Computed under LIFO As Reported under Average Cost (in millions, except per share data) Favorable / (Unfavorable) Cost of sales Provision for income taxes Earnings from continuing operations Earnings and gain from discontinued operations, net of income taxes Net...

  • Page 64
    ...Year Ended December 31, 2007 As Reported under Average Cost (in millions, except per share data) Favorable / (Unfavorable) Cost of sales Gains on divestitures, net Provision for income taxes Earnings from continuing operations Earnings and gain from discontinued operations, net of income taxes Net...

  • Page 65
    ...regarding our future plans, industry and economic conditions. For our reporting units within our Kraft Foods North America and Kraft Foods Europe geographic units, we used a market-participant, weighted-average cost of capital of 7.5% to discount the projected cash flows of those operations. For our...

  • Page 66
    ... plans generally cover health care benefits for retirees outside the U.S. and Canada. Our postemployment benefit plans cover most salaried and certain hourly employees. The cost of these plans is charged to expense over the working life of the covered employees. Financial Instruments: As we operate...

  • Page 67
    ... costs, including dairy, coffee, cocoa, wheat, corn products, soybean oils, meat products, sugar, natural gas and heating oil. Some of these derivative instruments are highly effective and qualify for hedge accounting treatment. We also sell commodity futures to unprice future purchase commitments...

  • Page 68
    ... of certain liabilities so that the net interest margin is not, on a material basis, adversely affected by movements in interest rates. As a result of interest rate fluctuations, hedged fixed-rate liabilities appreciate or depreciate in market value. The effect of this unrealized appreciation or...

  • Page 69
    ...$83 million in 2007 from marketing, administration and research costs to cost of sales. This change did not have an impact on net earnings for any of the periods presented. New Accounting Pronouncements: In September 2006, new guidance was issued on fair value measurements. The guidance defines fair...

  • Page 70
    ... Cadbury ADS validly tendered. This valued each Cadbury ordinary share at 840 pence and each Cadbury ADS at £33.60 (based on the closing price of $29.58 for a share of Kraft Foods Common Stock on January 15, 2010 and an exchange rate of $1.63 per £1.00) and valued the entire issued share capital...

  • Page 71
    ... Agreement, we provided certain sales, co-manufacturing, distribution, information technology, and accounting and finance services to Ralcorp through 2009. Summary results of operations for the Post cereals business through August 4, 2008, were as follows: For the Years Ended December 31, 2008 2007...

  • Page 72
    ...Post split-off (in millions): Inventories, net Property, plant and equipment, net Goodwill Other assets Other liabilities Distributed assets of the Post cereals business $ 94 425 1,234 11 (3) 1,761 $ LU Biscuit Acquisition: On November 30, 2007, we acquired the Groupe Danone S.A. global LU biscuit...

  • Page 73
    ... Assets: At December 31, 2009 and 2008, goodwill by reportable segment was: 2009 (in millions) 2008 Kraft Foods North America: U.S. Beverages U.S. Cheese U.S. Convenient Meals U.S. Grocery U.S. Snacks Canada & N.A. Foodservice (1) Kraft Foods Europe Kraft Foods Developing Markets Total goodwill...

  • Page 74
    ... intangible assets consist principally of brand names purchased through our acquisitions of Nabisco Holdings Corp., LU Biscuit and the Spanish and Portuguese operations of United Biscuits. Amortizable intangible assets consist primarily of trademark licenses, customer-related intangibles and non...

  • Page 75
    ..., associated benefit plan costs and other related activities. 2004-2008 Restructuring Program In 2008, we completed our five-year restructuring program (the "Restructuring Program"). The Restructuring Program's objectives were to leverage our global scale, realign and lower our cost structure, and...

  • Page 76
    ...17,300 positions under the Restructuring Program. In 2008, we implemented a new operating structure built on three core elements: business units, shared services that leverage the scale of our global portfolio, and a streamlined corporate staff. Within the new structure, business units now have full...

  • Page 77
    ... to the total costs of our Restructuring Program. Implementation costs associated with the Restructuring Program were: 2008 (in millions) 2007 Cost of sales Marketing, administration and research costs Total implementation costs $ $ 74 38 67 105 $ $ 67 60 127 Source: KRAFT FOODS INC, 10...

  • Page 78
    ... Year Ended December 31, 2008 Restructuring Implementation Costs Costs (in millions) Total Kraft Foods North America: U.S. Beverages U.S. Cheese U.S. Convenient Meals U.S. Grocery U.S. Snacks Canada & N.A. Foodservice Kraft Foods Europe Kraft Foods Developing Markets Total - continuing operations...

  • Page 79
    ...alternative financing sources. Long-Term Debt: On February 8, 2010, we issued $9.5 billion of senior unsecured notes at a weighted-average effective rate of 5.364% and are using the net proceeds ($9,379 million) to finance the Cadbury acquisition and for general corporate purposes. The general terms...

  • Page 80
    ... 2008, we issued $2.0 billion of senior unsecured notes and used the net proceeds ($1,967 million) for general corporate purposes, including the repayment of borrowings under the 364-day bridge facility agreement we used to acquire LU Biscuit and other short-term borrowings. The general terms of the...

  • Page 81
    ...644 million. At December 31, 2009, 146,863,809 shares of Common Stock were reserved for stock options and other stock awards. In 2010, we expect to issue approximately 260 million additional shares of our Common Stock as part of the Cadbury acquisition. 78 Source: KRAFT FOODS INC, 10-K, February 25...

  • Page 82
    ... of our Common Stock in open market transactions. In March 2007, we repurchased 1.4 million additional shares of our Common Stock from Altria at a cost of $46.5 million. We paid $32.085 per share, which was the average of the high and the low price of Kraft Foods Common Stock as reported on the NYSE...

  • Page 83
    ..., under the Kraft Foods 2006 Stock Compensation Plan for Non-Employee Directors (the "2006 Directors Plan"), we may grant up to 500,000 shares of Common Stock to members of the Board of Directors who are not our full-time employees. At December 31, 2009, there were 80 Source: KRAFT FOODS INC, 10...

  • Page 84
    ... anniversary of the grant date. Additionally, we changed our long-term incentive plan from a cash-based program to a share-based program. These shares vest based on varying performance, market and service conditions. All stock awards are issued to employees from treasury stock. We have no specific...

  • Page 85
    ... our long-term incentive plan, and the market value per share was $27.00 on the date of grant. In February 2009, as part of our annual equity program, we issued 4.1 million shares of restricted and deferred stock to eligible employees, and the market value per restricted or deferred share was $23.64...

  • Page 86
    ... not receive Kraft Foods restricted stock or stock rights because Altria had announced the spin-off at that time. We reimbursed Altria $179 million for net settlement of the employee stock awards. We determined the fair value of the stock options using the Black-Scholes option valuation model, and...

  • Page 87
    ... Status: The projected benefit obligations, plan assets and funded status of our pension plans at December 31, 2009 and 2008 were: U.S. Plans Non-U.S. Plans 2009 2008 (in millions) 2009 2008 Benefit obligation at January 1 Service cost Interest cost Benefits paid Settlements paid Curtailment...

  • Page 88
    ... expected future cash flows of the benefit obligations. Year-end discount rates for our non-U.S. plans (other than Canadian plans) were developed from local bond indices that match local benefit obligations as closely as possible. Changes in our discount rates were primarily the result of changes in...

  • Page 89
    ... of prior service cost. We used the following weighted-average assumptions to determine our net pension cost for the years ended December 31: U.S. Plans 2008 Non-U.S. Plans 2008 2009 2007 2009 2007 Discount rate Expected rate of return on plan assets Rate of compensation increase 6.10% 8.00...

  • Page 90
    ...factors, including changes in tax and other benefit laws, or significant differences between expected and actual pension asset performance or interest rates. Future Benefit Payments: The estimated future benefit payments from our pension plans at December 31, 2009 were: U.S. Plans Non-U.S. Plans (in...

  • Page 91
    ...Year-end discount rates for our U.S. and Canadian plans were developed from a model portfolio of high quality, fixed-income debt instruments with durations that match the expected future cash flows of the benefit obligations. Changes in our U.S. and Canadian discount rates were primarily the result...

  • Page 92
    ... net postretirement cost for the years ended December 31: 2009 U.S. Plans 2008 2007 2009 Canadian Plans 2008 2007 Discount rate Health care cost trend rate 6.10% 7.00% 6.10% 7.50% 5.90% 8.00% 7.60% 9.00% 5.80% 9.00% 5.00% 8.50% Future Benefit Payments: Our estimated future benefit payments...

  • Page 93
    ... discount rate of 6.5% in 2009 and 7.1% in 2008, an assumed ultimate annual turnover rate of 0.5% in 2009 and 2008, assumed compensation cost increases of 4.0% in 2009 and 2008, and assumed benefits as defined in the respective plans. Postemployment costs arising from actions that offer employees...

  • Page 94
    ... 31, 2009 were determined using: Quoted Prices in Active Markets for Total Fair Value Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) (in millions) Foreign exchange contracts Commodity contracts Interest rate contracts Total...

  • Page 95
    ...from effectiveness testing in cost of sales for commodity contracts; cost of sales or marketing, administration and research costs for foreign exchange contracts related to forecasted transactions, depending on the type of transaction; and interest and other expense, net for interest rate contracts...

  • Page 96
    ... gain on the related interest rate swap in interest and other expense, net. Hedges of Net Investments in Foreign Operations: The effect of hedges of net investments in foreign operations for the year ended December 31, 2009 was: Gain / (Loss) Recognized in OCI (in millions) Location of Gain / (Loss...

  • Page 97
    ... and $433 million in 2007. As of December 31, 2009, minimum rental commitments under non-cancelable operating leases in effect at year-end were (in millions): 2010 2011 2012 2013 2014 Thereafter $ 306 243 185 103 76 212 94 Source: KRAFT FOODS INC, 10-K, February 25, 2010 Powered by Morningstar...

  • Page 98
    ...485 649 (54) 595 1,080 $ $ $ Additionally, the 2008 earnings and gain from discontinued operations from the split-off of the Post cereals business included a net tax benefit of $104 million. As of January 1, 2009, our unrecognized tax benefits were $807 million. If we had recognized all of these...

  • Page 99
    ...income tax rate on pre-tax earnings differed from the U.S. federal statutory rate for the following reasons for the years ended December 31, 2009, 2008 and 2007: 2009 2008 2007 U.S. federal statutory rate Increase / (decrease) resulting from: State and local income taxes, net of federal tax benefit...

  • Page 100
    ... rate and from the expected tax benefit of 2008 restructuring expenses. These benefits were only partially offset by state tax expense and certain foreign costs. Our 2007 effective tax rate included net tax benefits of $184 million, primarily including the effects of dividend repatriation benefits...

  • Page 101
    ... Kraft Foods North America and Kraft Foods Europe by product category, and we manage the operations of Kraft Foods Developing Markets by location. Our reportable segments are U.S. Beverages, U.S. Cheese, U.S. Convenient Meals, U.S. Grocery, U.S. Snacks, Canada & N.A. Foodservice, Kraft Foods Europe...

  • Page 102
    ...data were: For the Years Ended December 31, 2008 2007 (in millions) 2009 Net revenues: Kraft Foods North America: U.S. Beverages U.S. Cheese U.S. Convenient Meals U.S. Grocery U.S. Snacks Canada & N.A. Foodservice Kraft Foods Europe Kraft Foods Developing Markets Net revenues 99 $ $ 3,057 3,605...

  • Page 103
    ...: Operating income: Kraft Foods North America: U.S. Beverages U.S. Cheese U.S. Convenient Meals U.S. Grocery U.S. Snacks Canada & N.A. Foodservice Kraft Foods Europe Kraft Foods Developing Markets Unrealized gains / (losses) on hedging activities Certain U.S. pension plan costs General corporate...

  • Page 104
    ... Years Ended December 31, 2008 (in millions) 2009 2007 Depreciation expense: Kraft Foods North America: U.S. Beverages U.S. Cheese U.S. Convenient Meals U.S. Grocery U.S. Snacks Canada & N.A. Foodservice Kraft Foods Europe Kraft Foods Developing Markets Total - continuing operations Discontinued...

  • Page 105
    ... of Canada & N.A. Foodservice, Kraft Foods Europe and Kraft Foods Developing Markets into sector components, were: For the Year Ended December 31, 2009 Kraft Foods Kraft Foods Developing Europe Markets (in millions) Kraft Foods North America Total Snacks Beverages Cheese Grocery Convenient...

  • Page 106
    ... share data: Basic EPS attributable to Kraft Foods: Continuing operations Discontinued operations Net earnings attributable to Kraft Foods Diluted EPS attributable to Kraft Foods: Continuing operations Discontinued operations Net earnings attributable to Kraft Foods Dividends declared Market price...

  • Page 107
    ... to Kraft Foods: Continuing operations Discontinued operations Net earnings attributable to Kraft Foods Diluted EPS attributable to Kraft Foods: Continuing operations Discontinued operations Net earnings attributable to Kraft Foods Dividends declared Market price - high Market price - low...

  • Page 108
    ... that there were no other changes in our internal control over financial reporting during the quarter ended December 31, 2009, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 105 Source: KRAFT FOODS INC, 10-K, February 25...

  • Page 109
    ... operational effectiveness of our internal control over financial reporting. Management reviewed the results of our assessment with the Audit Committee of our Board of Directors. Based on this assessment, management determined that, as of December 31, 2009, we maintained effective internal control...

  • Page 110
    ... results of their operations and their cash flows for each of the three years in the period ended December 31, 2009 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal...

  • Page 111
    ... Management and Related Stockholder Matters. The number of shares to be issued upon exercise or vesting of awards issued under, and the number of shares remaining available for future issuance under, our equity compensation plans at December 31, 2009 were: Equity Compensation Plan Information Number...

  • Page 112
    ... Holdings, Inc. and Ralcorp Mailman LLC, dated as of November 15, 2007 (incorporated by reference to Exhibit 2.1 to the Registrant's Current Report on Form 8-K filed with the SEC on November 20, 2007). Master Sale and Purchase Agreement, between Groupe Danone S.A. and Kraft Foods Global, Inc., dated...

  • Page 113
    ... the year ended December 31, 1995).+ Kraft Foods Inc. 2006 Stock Compensation Plan for Non-Employee Directors, amended as of December 31, 2008 (incorporated by reference to Exhibit 10.14 to the Registrant's Annual Report on Form 10-K filed with the SEC on February 27, 2009).+ Kraft Foods Inc. 2001...

  • Page 114
    ... Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. The following materials from Kraft Foods' Annual Report on Form 10-K for the fiscal year ended December 31, 2009, formatted in XBRL (eXtensible Business...

  • Page 115
    ...of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. KRAFT FOODS INC. By: /s/ TIMOTHY R. MCLEVISH (Timothy R. McLevish, Executive Vice President and Chief Financial Officer) Date: February 25, 2010 Pursuant to the requirements...

  • Page 116
    ...the Board of Directors and Shareholders of Kraft Foods Inc.: Our audits of the consolidated financial statements and of the effectiveness of internal control over financial reporting referred to in our report dated February 16, 2010 appearing in the 2009 Annual Report on Form 10-K of Kraft Foods Inc...

  • Page 117
    Kraft Foods Inc. and Subsidiaries Valuation and Qualifying Accounts for the years ended December 31, 2009, 2008 and 2007 (in millions) Col. A Col. B Balance at Description Beginning of Period Charged to Costs and Expenses Col. C Additions Col. D Charged to Other Accounts (a) Deductions (b) Col. E ...

  • Page 118
    ... Foods Inc., a Virginia corporation ("Kraft"), Citibank, N.A. ("Citi"), as Paying Agent (the "Paying Agent") and the Lenders set forth on the signature pages hereto to the Acquisition and Refinancing Bridge Credit Agreement dated as of November 9, 2009 (as amended, modified or supplemented from time...

  • Page 119
    ... or email shall be effective as delivery of a manually executed counterpart hereof. Section 5. Applicable Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE SUBSTANTIVE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CHOICE OF LAW DOCTRINES. Source: KRAFT FOODS INC, 10...

  • Page 120
    ... the Credit Agreement or any document related thereto, all of which are ratified and affirmed in all respects and shall continue in full force and effect. [SIGNATURE PAGES FOLLOW] Source: KRAFT FOODS INC, 10-K, February 25, 2010 Powered by Morningstar® Document...

  • Page 121
    ... Amendment to be duly executed as of the date first above written. KRAFT FOODS INC. By: /s/ Barbara Brasier Name: Barbara Brasier Title: Senior Vice President and Treasurer CITIBANK, N.A., as Paying Agent and as a Lender By: /s/ Carolyn Kee Name: Carolyn Kee Title: Vice President DEUTSCHE BANK AG...

  • Page 122
    ... Cahll Title: Director By: THE ROYAL BANK OF SCOTLAND PLC, as a Lender By: /s/ Tracy Rahn Name: Tracy Rahn Title: Vice President Amendment No. 2 to Acquisition and Refinancing Bridge Credit Agreement Source: KRAFT FOODS INC, 10-K, February 25, 2010 Powered by Morningstar® Document Researchâ„

  • Page 123
    ... Falce Name: Renaud-Franick Falce Title: Managing Director /s/ Scott Tricarico Name: Scott Tricarico Title: Vice President Amendment No. 2 to Acquisition and Refinancing Bridge Credit Agreement By: Source: KRAFT FOODS INC, 10-K, February 25, 2010 Powered by Morningstar® Document Researchâ„

  • Page 124
    ... Name: Francesco Di Mario Title: FVP, Credit Manager /s/ John J. Michalisin Name: John J. Michalisin Title: First Vice President Amendment No. 2 to Acquisition and Refinancing Bridge Credit Agreement By: Source: KRAFT FOODS INC, 10-K, February 25, 2010 Powered by Morningstar® Document Research...

  • Page 125
    ... Title: Authorized Signatory THE BANK OF NOVA SCOTIA, as a Lender By: /s/ Paula Czach Name: Paula Czach Title: Director and Execution Head Amendment No. 2 to Acquisition and Refinancing Bridge Credit Agreement Source: KRAFT FOODS INC, 10-K, February 25, 2010 Powered by Morningstar® Document...

  • Page 126
    ... DUBLIN BRANCH, as a Lender By: /s/ Padraig Matthews Name: Padraig Matthews Title: Vice President /s/ Sean Hassett Name: Sean Hassett Title: Director Amendment No. 2 to Acquisition and Refinancing Bridge Credit Agreement By: Source: KRAFT FOODS INC, 10-K, February 25, 2010 Powered by Morningstar...

  • Page 127
    ...the ability to provide incentives more directly linked to the profitability of the Company's businesses and increases in shareholder value. For purposes of the Plan, the following terms are defined as set forth below: (a) (b) "Annual Incentive Award" means an Incentive Award made pursuant to Section...

  • Page 128
    ... Company. "Company" means Kraft Foods Inc., a corporation organized under the laws of the Commonwealth of Virginia, or any successor thereto. "Deferred Stock Unit" means such Award as described in Section 5(a)(v). "Economic Value Added" means net after-tax operating profit less the cost of capital...

  • Page 129
    ..., but not limited to, growth measures and total shareholder return), cost control, margins, operating efficiency, market share, customer satisfaction or employee satisfaction, working capital, management development, succession planning, taxes, depreciation and amortization or Economic Value Added...

  • Page 130
    ..."Restricted Stock Unit" means such Award as described in Section 5(a)(v). (cc) "Spread Value" means, with respect to a share of Common Stock subject to an Award, an amount equal to the excess of the Fair Market Value, on the date such value is determined, over the Award's exercise or grant price, if...

  • Page 131
    ...payment for the exercise or conversion price of an Award under the Plan will be deemed distributed for purposes of determining the maximum number of shares remaining available for delivery under the Plan. 5 Source: KRAFT FOODS INC, 10-K, February 25, 2010 Powered by Morningstar® Document Research...

  • Page 132
    ... and, if applicable, the grant or exercise price or Spread Value of outstanding Awards. In addition, the Committee may make an Award in substitution for incentive awards, stock awards, stock options or similar awards held by an individual who is, previously was, or becomes an employee of the Company...

  • Page 133
    ... Plan and to Awards granted thereunder (x) to grant Awards (including Stock Options, SARs, and Other Stock-Based Awards) with a grant price that is less than Fair Market Value on the date of grant in order to preserve existing gain under any similar type of award previously granted by the Company...

  • Page 134
    ... Fair Market Value on the date of grant. Subject to the applicable Award agreement, Stock Options may be exercised, in whole or in part, by giving written notice of exercise specifying the number of shares to be purchased. Such notice shall be accompanied by payment in full of the purchase price by...

  • Page 135
    ... of the Fair Market Value on the date of grant. Restricted Stock. Shares of Restricted Stock are shares of Common Stock that are awarded to a Participant and that during the Restricted Period may be forfeitable to the Company upon such conditions as may be set forth in the applicable Award agreement...

  • Page 136
    ... of 1,000,000 shares of Common Stock may be issued or issuable to any Participant in a calendar year pursuant to Restricted Stock, Restricted Stock Units, Deferred Stock Units, and Other Stock-Based Awards, except that Other Stock-Based Awards with values based on Spread Values shall not be included...

  • Page 137
    ...'s employment with, or performance of services for, the Company is terminated by the Company for any reasons other than Cause or, by such Participant eligible to participate in the Kraft Foods Inc. Change in Control Plan for Key Executives, for Good Reason, in each case, within the two-year period...

  • Page 138
    ... that change the timing of payment of an Award shall not be applicable to an Award subject to Section 409A of the Code. For the avoidance of doubt, the foregoing is applicable to Awards issued before and existing on the date this amendment to the Plan is being made as well as to Awards issued after...

  • Page 139
    ... increase the number of securities which may be issued under the Plan, (iii) would materially modify the requirements for participation in the Plan or (iv) must otherwise be approved by the shareholders of the Company in order to comply with applicable law or the rules of the New York Stock...

  • Page 140
    ...exercise price or base price, as applicable, that is less than the exercise price of the original Stock Option or base price of the original SAR, as applicable, without shareholder approval. Subject to Section 7(b) hereof, the Board may amend the terms of any Award theretofore granted under the Plan...

  • Page 141
    ...unfunded" status of the Plan. Section 13. General Provisions. (a) The Committee may require each person acquiring shares of Common Stock pursuant to an Award to represent to and agree with the Company in writing that such person is acquiring the shares without a view to the distribution thereof. The...

  • Page 142
    ..., to terminate the employment of any employee at any time. No later than the date as of which an amount first becomes includible in the gross income of the Participant for income tax purposes with respect to any Award under the Plan, the Participant shall pay to the Company, or make arrangements...

  • Page 143
    ...The Plan was approved by stockholders and became effective on May 20, 2009. No Awards shall be made after May 20, 2019, provided that any Awards granted prior to that date may extend beyond it. 17 (h) (i) Source: KRAFT FOODS INC, 10-K, February 25, 2010 Powered by Morningstar® Document Research...

  • Page 144
    ...PLAN RESTRICTED STOCK AGREEMENT FOR KRAFT FOODS COMMON STOCK KRAFT FOODS INC., a Virginia corporation (the "Company"), hereby grants to the employee (the "Employee") named in the Award Statement (the "Award Statement") attached hereto, as of the date set forth in the Award Statement (the "Award Date...

  • Page 145
    ... the Fair Market Value of the Common Stock received in payment of vested Restricted Shares on the date as of which the amount giving rise to the withholding requirement first became includible in the gross income of the Employee under applicable tax laws. If the Employee is covered by a Company tax...

  • Page 146
    ... of the Board of Directors of the Company or the Committee; (d) the Employee is voluntarily participating in the Plan; (e) the Restricted Shares are extraordinary items that do not constitute compensation of any kind for services of any kind rendered to any member of the Kraft Foods Group, and...

  • Page 147
    ... Common Stock, the value of those shares of Common Stock acquired upon vesting may increase or decrease in value; (k) no claim or entitlement to compensation or damages shall arise from forfeiture of the Restricted Shares resulting from the termination of the Employee's employment by the Company or...

  • Page 148
    ...dividend, stock split, reverse stock split, split-up, spin-off, issuance of rights or warrants or other similar transaction or event affecting the Common Stock after the date of this Award, the Board of Directors of the Company or the Committee shall make adjustments to the number and kind of shares...

  • Page 149
    ... the Employee to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing. IN WITNESS WHEREOF, this Restricted Stock Agreement has been duly executed as of KRAFT FOODS INC. By: Carol J. Ward Vice President and Corporate Secretary 6 . Source: KRAFT FOODS INC...

  • Page 150
    ... PERFORMANCE INCENTIVE PLAN NON-QUALIFIED US STOCK OPTION AWARD AGREEMENT KRAFT FOODS INC., a Virginia corporation (the "Company"), hereby grants to the employee identified in the Award Statement (the "Optionee" identified in the "Award Statement") attached hereto under the Kraft Foods Inc. Amended...

  • Page 151
    ... shares to be valued at Fair Market Value on the exercise date. Finally, the Optionee shall pay to the Company or the Employer any amount of Tax-Related Items and theoretical taxes that the Company or the Employer may be required to withhold as a result of the Optionee's participation in the Plan...

  • Page 152
    ... Stock after the date of this Award, the Board of Directors of the Company or the Committee may make adjustments to the terms and provisions of this Award (including, without limiting the generality of the foregoing, terms and provisions relating to the Grant Price and the number and kind of shares...

  • Page 153
    ..., past services for the Company or the Employer; (h) the Option grant and the Optionee's participation in the Plan will not be interpreted to form an employment contract or relationship with any member of the Kraft Foods Group; (i) the future value of the underlying shares of Common Stock is unknown...

  • Page 154
    ... Kraft Foods Group, or under an employment contract with any member of the Kraft Foods Group, on or after the date specified as normal retirement age in the pension plan or employment contract, if any, under which the Optionee is at that time accruing pension benefits for his or her current service...

  • Page 155
    IN WITNESS WHEREOF, this Non-Qualified US Stock Option Award Agreement has been granted as of KRAFT FOODS INC. By: Carol J. Ward Vice President and Corporate Secretary 6 . Source: KRAFT FOODS INC, 10-K, February 25, 2010 Powered by Morningstar® Document Researchâ„

  • Page 156
    Exhibit 10.16 KRAFT FOODS INC. CHANGE IN CONTROL PLAN ADOPTED: APRIL FOR KEY EXECUTIVES AMENDED: DECEMBER 24, 2007 31, 2009 Source: KRAFT FOODS INC, 10-K, February 25, 2010 Powered by Morningstar® Document Researchâ„

  • Page 157
    ...in effect at any time thereafter, in each case including any base salary that has been earned and deferred. The Board of Directors of the Company. Board Annual Incentive Award Target The annual incentive award that the Participant would receive in a fiscal year under the Management Incentive Plan...

  • Page 158
    ... from time to time. Code Committee The Board's Human Resources and Compensation Committee or a subcommittee thereof, any successor thereto or such other committee or subcommittee as may be designated by the Board to administer the Plan. Kraft Foods Inc., a corporation organized under the laws of...

  • Page 159
    ... a Participant for the purposes of this Plan. 4 Long-Term Incentive Plan Award Target Net After-Tax Benefit Non-Competition Agreement Non-Solicitation Agreement Non-U.S. Executive Participant Source: KRAFT FOODS INC, 10-K, February 25, 2010 Powered by Morningstar® Document Researchâ„

  • Page 160
    ... home country, for purposes of the Employer's personnel and benefits programs and policies, is the United States. 2.1. Participation. Except as set forth in the definition of Participant above, each employee who is a Key Executive on the Effective Date shall be a Participant in the Plan effective...

  • Page 161
    ...to be based at any office or location other than any other location which does not extend the Participant's home to work location commute as of the time of the Change in Control by more than 50 miles; the Employer requiring the Participant to travel on business to a substantially greater extent than...

  • Page 162
    ..., that such specified date shall not be considered the Date of Termination for any purpose of this Plan if such date differs from the Participant's actual Date of Termination. The failure by the Participant or the Employer to set forth in the Notice of Termination any fact or circumstance which...

  • Page 163
    ...later date as required under Section 3.3(g), an amount ("Separation Pay") equal to the product of (A) two (or in the case of a Participant who served as Chairman and Chief Executive Officer immediately prior to the Change in Control, three) and (B) the sum of (x) the Participant's Annual Base Salary...

  • Page 164
    ..., employee/spouse/child life insurance, executive life, estate preservation (second-to-die life insurance) and travel accident insurance plans and programs), as if the Participant's employment had not been terminated, or, if more favorable to the Participant, as in effect generally at any time...

  • Page 165
    ... costs payable by the Company pursuant to Sections 3.3(c) and (e) hereof. For all purposes under the applicable Company non-qualified defined benefit pension plan, the Company shall credit the Participant with two (or in the case of a Participant who served as Chairman and Chief Executive Officer...

  • Page 166
    ... upon the Company, its Affiliates and the Participant. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Employer should...

  • Page 167
    ... who commence participation in the Plan on or before December 31, 2009. The Participant shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Employer of the Gross-Up Payment. Such notification shall be given...

  • Page 168
    ... of this Plan, nor shall the amount of any payment or value of any benefits hereunder be reduced by any compensation or benefits earned by a Participant as a result of employment by another employer, except as specifically provided under Section 3.3. 13 Source: KRAFT FOODS INC, 10-K, February...

  • Page 169
    ... pay the Participant any payments that may be remaining due under this Plan. 3.7. Non-Disparagement. Upon a Change in Control and termination of employment under the circumstances described in Section 3.2(a), the obligations of the Company and its Affiliates to pay or provide the Separation Benefits...

  • Page 170
    ... any successor of the Company, its assets or its businesses (whether direct or indirect, by purchase, merger, consolidation or otherwise), in the same manner and to the same extent that the Company or its Affiliates would be obligated under this Plan if no succession had taken place. In the case of...

  • Page 171
    ... thereof (including as a result of any contest by the Participant about the amount of any payment pursuant to this Plan), plus in each case interest on any delayed payment at the applicable Federal rate provided for in Section 7872(f)(2)(A) of the Code; provided that the Company shall have no...

  • Page 172
    ... a right to receive an adjustment in benefits being paid under the Plan, the Company shall treat it as a claim for benefits. All claims for Separation Benefits under the Plan shall be sent to the General Counsel of the Company and must be received within 30 days after the Date of Termination. If the...

  • Page 173
    ... benefits, EXCEPT FOR the 2005 Performance Incentive Plan. IN WITNESS WHEREOF, the Company has caused this Plan to be executed by its duly authorized officer effective as of the Effective Date set forth above. KRAFT FOODS INC. By: /s/ Karen May Karen May EVP, Global Human Resources 18 Source: KRAFT...

  • Page 174
    ... the terms of our offer letter to you, dated June 17, 2009 (the "Letter"), for the position of President Kraft Foods North America. The Letter is amended in the following respects, effective November 23, 2009: 1. The following new sentence is added at the end of the third paragraph of the Section...

  • Page 175
    ... company based on matters covered by section 409A of the Code. Please signify your agreement with the terms of this amendment by signing this letter and returning it to my attention before November 27, 2009. Sincerely yours, /s/ David Pendleton David Pendleton Vice President Compensation Kraft Foods...

  • Page 176
    ... Foods Inc. and Subsidiaries Computation of Ratios of Earnings to Fixed Charges (in millions of dollars) Years Ended December 31, 2008 2007 2006 2009 2005 Earnings from continuing operations before income taxes Add / (Deduct): Equity in net earnings of less than 50% owned affiliates Dividends...

  • Page 177
    ... United Kingdom United States United States Ukraine Venezuela Belgium Pakistan Mexico Italy Venezuela Korea, Republic of Germany Korea, Republic of Korea, Republic of Costa Rica Egypt Italy Canada Norway Source: KRAFT FOODS INC, 10-K, February 25, 2010 Powered by Morningstar® Document Research...

  • Page 178
    ...India Private Limited Knutsen Boyelaster II K/S Kohrs Packing Company KPC Foods, Inc. Kraft Beverage (Tianjin) Co., Ltd. Kraft Biscuits Iberia, S.L. Kraft Canada Inc. Kraft Food Ingredients Corp. Kraft Foods (Australia) Limited Kraft Foods (Bahrain) W.L.L. Kraft Foods (Beijing) Company Limited Kraft...

  • Page 179
    ...Kraft Foods Ausser-Haus Service GmbH Kraft Foods Aviation, LLC Kraft Foods Bakery Companies, Inc. Kraft Foods Belgium SPRL Kraft Foods Belgium Distribution BVBA Kraft Foods Belgium Intellectual Property BVBA Kraft Foods Belgium Production BVBA Kraft Foods Belgium Production Holdings BVBA Kraft Foods...

  • Page 180
    ... Holdings LLC Kraft Foods International Europe Holdings LLC Kraft Foods International Holdings Delaware LLC Kraft Foods International Services LLC Kraft Foods International, Inc. Kraft Foods Ireland Limited Kraft Foods Italia Intellectual Property S.r.l. Kraft Foods Italia Production S.r.l. Kraft...

  • Page 181
    Company Name State of Incorporation Country of Incorporation Kraft Foods LA NVA B.V. Kraft Foods LA VA Holding B.V. Kraft Foods Latin America Holding LLC Kraft Foods Laverune Production S.N.C. Kraft Foods Limited Kraft Foods Limited (Asia) Kraft Foods Luxembourg S.a.r.l. Kraft Foods Manufacturing...

  • Page 182
    Company Name State of Incorporation Country of Incorporation Kraft Foods Sverige Holding AB Kraft Foods Sverige Intellectual Property AB Kraft Foods Sverige Production AB Kraft Foods Taiwan Holdings LLC Kraft Foods Trading Singapore Pte Ltd Kraft Foods UK Intellectual Property Limited Kraft Foods...

  • Page 183
    ... LLC Nabisco Taiwan Corporation NISA Holdings LLC NSA Holdings, L.L.C. OAO "UNITED BAKERS - Pskov" OAO Bolshevik OMFC Service Company ONKO Grossroesterei G.m.b.H. OOO Kraft Foods Rus OOO Kraft Foods Sales & Marketing Opavia LU s.r.o. Opavia LU s.r.o. Oy Kraft Foods Finland Ab PT Kraft Foods Company...

  • Page 184
    ... Limited Yili-Nabisco Biscuit & Food Company Limited Delaware Oregon New Jersey Delaware Delaware Tunisia Czech Republic Singapore Singapore Brazil Switzerland Colombia United States Venezuela United States United Kingdom United States United States China United States Jamaica China Source: KRAFT...

  • Page 185
    ... statement schedule and the effectiveness of internal control over financial reporting, which appear in this Annual Report on Form 10-K. /s/ PricewaterhouseCoopers LLP Chicago, Illinois February 25, 2010 Source: KRAFT FOODS INC, 10-K, February 25, 2010 Powered by Morningstar® Document Researchâ„

  • Page 186
    ..., whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. (b) Date: February 25, 2010 /s/ IRENE B. ROSENFELD Irene B. Rosenfeld Chairman and Chief Executive Officer Source: KRAFT FOODS INC, 10...

  • Page 187
    ...not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. (b) Date: February 25, 2010 /s/ TIMOTHY R. MCLEVISH Timothy R. McLevish Executive Vice President and Chief Financial Officer Source: KRAFT FOODS INC...

  • Page 188
    ... contained in Kraft Foods' Annual Report on Form 10-K fairly presents in all material respects Kraft Foods' financial condition and results of operations. /s/ TIMOTHY R. MCLEVISH Timothy R. McLevish Executive Vice President and Chief Financial Officer February 25, 2010 A signed original of...

  • Page 189
    ... Per Share Data) 12 Months Ended 12/31/2009 12 Months Ended 12/31/2008 12 Months Ended 12/31/2007 Net revenues Cost of sales Gross profit Marketing, administration and research costs Asset impairment and exit costs (Gains) / losses on divestitures, net Amortization of intangibles Operating income...

  • Page 190
    ... marketing Accrued employment costs Other current liabilities Total current liabilities Long-term debt Deferred income taxes Accrued pension costs Accrued postretirement health care costs Other liabilities TOTAL LIABILITIES EQUITY Common Stock, no par value (1,735,000,000 shares issued in 2009...

  • Page 191
    ... Position Classified (Parenthetical) (USD $) (in Millions except Share Data) 12/31/2009 12/31/2008 Receivables, allowances Common Stock, no par value Common Stock, shares issued $ 121 $0 $ 129 $0 1,735,000,0001,735,000,000 Source: KRAFT FOODS INC, 10-K, February 25, 2010 Powered by Morningstar...

  • Page 192
    ...(losses), net of income taxes Total comprehensive earnings /(losses) Adoption of new benefit plan guidance Exercise of stock options and issuance of other stock awards Cash dividends declared ($1.16 per share in 2009, $1.12 per share in 2008 and $1.04 per share in 2007) Acquisition of noncontrolling...

  • Page 193
    ... Income (Parenthetical) Statement Of Shareholders Equity And Other Comprehensive Income (Parenthetical) (USD $) 12 Months Ended 12/31/2009 12 Months Ended 12/31/2008 12 Months Ended 12/31/2007 Cash dividends declared, per share $ 1.16 $ 1.12 $ 1.04 Source: KRAFT FOODS INC, 10-K, February 25...

  • Page 194
    ...-based compensation expense Deferred income tax provision / (benefit) (Gains) / losses on divestitures, net Gain on discontinued operations (Note 2) Asset impairment and exit costs, net of cash paid Other non-cash expense, net Change in assets and liabilities, excluding the effects of acquisitions...

  • Page 195
    ... financial statements include Kraft Foods, as well as our wholly owned and majority owned subsidiaries. Our domestic operating subsidiaries report year-end results as of the last Saturday of the year, and our international operating subsidiaries generally report year-end results two weeks prior...

  • Page 196
    ... Year Ended December 31, 2009 As Reported under Average Cost (in millions, except per share data) As Computed under LIFO Favorable / (Unfavorable) Cost of sales $ Provision for income taxes Earnings from continuing operations Earnings and gain from discontinued operations, net of income taxes Net...

  • Page 197
    ...Year Ended December 31, 2007 As Reported under Average Cost (in millions, except per share data) Favorable / (Unfavorable) Cost of sales Gains on divestitures, net Provision for income taxes Earnings from continuing operations Earnings and gain from discontinued operations, net of income taxes Net...

  • Page 198
    ...regarding our future plans, industry and economic conditions. For our reporting units within our Kraft Foods North America and Kraft Foods Europe geographic units, we used a market-participant, weighted-average cost of capital of 7.5% to discount the projected cash flows of those operations. For our...

  • Page 199
    ... plans generally cover health care benefits for retirees outside the U.S. and Canada. Our postemployment benefit plans cover most salaried and certain hourly employees. The cost of these plans is charged to expense over the working life of the covered employees. Financial Instruments: As we operate...

  • Page 200
    ... of certain liabilities so that the net interest margin is not, on a material basis, adversely affected by movements in interest rates. As a result of interest rate fluctuations, hedged fixed-rate liabilities appreciate or depreciate in market value. The effect of this unrealized appreciation or...

  • Page 201
    ... stock awards are now considered participating units in our calculation of EPS. The adoption of this guidance did not have a material impact on our financial statements. In May 2009, new guidance was issued on subsequent events that requires management to evaluate subsequent events through the date...

  • Page 202
    ... Cadbury ADS validly tendered. This valued each Cadbury ordinary share at 840 pence and each Cadbury ADS at £33.60 (based on the closing price of $29.58 for a share of Kraft Foods Common Stock on January 15, 2010 and an exchange rate of $1.63 per £1.00) and valued the entire issued share capital...

  • Page 203
    ... Agreement, we provided certain sales, co-manufacturing, distribution, information technology, and accounting and finance services to Ralcorp through 2009. Summary results of operations for the Post cereals business through August 4, 2008, were as follows: For the Years Ended December 31, 2008 2007...

  • Page 204
    ..., other than the divestiture of the Post cereals business, were not material to our financial statements in any of the periods presented. Refer to Note 16, Segment Reporting, for details of the gains and losses on divestitures by segment. Source: KRAFT FOODS INC, 10-K, February 25, 2010 Powered by...

  • Page 205
    ...Inventories: (USD $) 12 Months Ended 12/31/2009 Inventories: Note 3. Inventories: Inventories at December 31, 2009 and 2008 were: 2009 (in millions) 2008 Raw materials $ Finished product Inventories, net $ 1,410 2,365 3,775 $ 1,568 2,313 $ 3,881 Source: KRAFT FOODS INC, 10-K, February 25...

  • Page 206
    ... depreciation Property, plant and equipment, net $ $ 492 4,231 13,872 828 19,423 (8,730) 10,693 $ $ 462 3,913 12,590 850 17,815 (7,898) 9,917 Refer to Note 5, Goodwill and Intangible Assets, for asset impairment charges taken against property, plant and equipment. Source: KRAFT FOODS INC...

  • Page 207
    ... 31, 2009 and 2008, goodwill by reportable segment was: 2009 (in millions) 2008 Goodwill and Intangible Assets: Kraft Foods North America: U.S. Beverages U.S. Cheese U.S. Convenient Meals U.S. Grocery U.S. Snacks Canada & N.A. Foodservice Kraft Foods (1) Europe Kraft Foods Developing Markets Total...

  • Page 208
    ... recorded upon our 2007 acquisition of LU Biscuit. In addition, in December 2008, we reached a preliminary agreement to divest a juice operation in Brazil and reached an agreement to sell a cheese plant in Australia. In anticipation of divesting the juice operation in Brazil, we recorded an asset...

  • Page 209
    ...17,300 positions under the Restructuring Program. In 2008, we implemented a new operating structure built on three core elements: business units, shared services that leverage the scale of our global portfolio, and a streamlined corporate staff. Within the new structure, business units now have full...

  • Page 210
    ... Year Ended December 31, 2008 Restructuring Implementation Costs Costs (in millions) Total Kraft Foods North America: U.S. Beverages U.S. Cheese U.S. Convenient Meals U.S. Grocery U.S. Snacks Canada & N.A. Foodservice Kraft Foods Europe Kraft Foods Developing Markets Total - continuing operations...

  • Page 211
    U.S. Grocery U.S. Snacks Canada & N.A. Foodservice Kraft Foods Europe Kraft Foods Developing Markets Total - continuing operations Discontinued operations Total $ 25 17 50 108 38 320 12 332 $ 7 15 2 44 12 127 127 $ 32 32 52 152 50 447 12 459 Source: KRAFT FOODS INC, 10-K, February 25, 2010 ...

  • Page 212
    ...alternative financing sources. Long-Term Debt: On February 8, 2010, we issued $9.5 billion of senior unsecured notes at a weighted-average effective rate of 5.364% and are using the net proceeds ($9,379 million) to finance the Cadbury acquisition and for general corporate purposes. The general terms...

  • Page 213
    ...and began on February 19, 2009. On May 22, 2008, we issued $2.0 billion of senior unsecured notes and used the net proceeds ($1,967 million) for general corporate purposes, including the repayment of borrowings under the 364-day bridge facility agreement we used to acquire LU Biscuit and other short...

  • Page 214
    ...31, 2008 (in millions) 2009 2007 Interest and other expense, net: Interest expense, external debt Interest income, Altria and affiliates Other income, net Total interest and other expense, net $ 1,260 (23) $ 1,272 (32) $ 739 (74) (61) $ 1,237 $ 1,240 $ 604 Source: KRAFT FOODS INC, 10...

  • Page 215
    ... other stock awards. In 2010, we expect to issue approximately 260 million additional shares of our Common Stock as part of the Cadbury acquisition. Our Board of Directors authorized the following Common Stock repurchase programs. Our $5.0 billion share repurchase authority expired on March 30, 2009...

  • Page 216
    ... / (Losses): (USD $) 12 Months Ended 12/31/2009 Accumulated Other Comprehensive Earnings / (Losses): Note...net of income taxes: Currency translation adjustments Amortization of experience losses and prior service costs Settlement losses Net actuarial gain arising during period Change in fair value...

  • Page 217
    Other comprehensive earnings / (losses), net of income taxes: Currency translation adjustments Amortization of experience losses and prior service costs Settlement losses Net actuarial loss arising during period Change in fair value of cash flow hedges Total other comprehensive earnings Balances at ...

  • Page 218
    ... anniversary of the grant date. Additionally, we changed our long-term incentive plan from a cash-based program to a share-based program. These shares vest based on varying performance, market and service conditions. All stock awards are issued to employees from treasury stock. We have no specific...

  • Page 219
    ... not receive Kraft Foods restricted stock or stock rights because Altria had announced the spin-off at that time. We reimbursed Altria $179 million for net settlement of the employee stock awards. We determined the fair value of the stock options using the Black-Scholes option valuation model, and...

  • Page 220
    ... obligations and the fair value of plan assets at December 31, 2009 and 2008 were: 2009 U.S. Plans 2008 Non-U.S. Plans 2009 2008 (in millions) Projected benefit obligation $ 4,666 $ 6,133 $ 3,703 $ 1,740 Powered by Morningstar® Document Research℠Source: KRAFT FOODS INC, 10-K, February...

  • Page 221
    ... expected future cash flows of the benefit obligations. Year-end discount rates for our non-U.S. plans (other than Canadian plans) were developed from local bond indices that match local benefit obligations as closely as possible. Changes in our discount rates were primarily the result of changes in...

  • Page 222
    ...our postretirement benefit obligations at December 31: 2009 U.S. Plans 2008 Canadian Plans 2009 2008 Discount rate Health care cost trend rate assumed 5.70% 7.00% 6.10% 7.00% 5.25% 9.00% 7.60% 9.00% Source: KRAFT FOODS INC, 10-K, February 25, 2010 Powered by Morningstar® Document Researchâ„

  • Page 223
    ... net postretirement cost for the years ended December 31: 2009 U.S. Plans 2008 2007 2009 Canadian Plans 2008 2007 Discount rate Health care cost trend rate 6.10% 7.00% 6.10% 7.50% 5.90% 8.00% 7.60% 9.00% 5.80% 9.00% 5.00% 8.50% Future Benefit Payments: Our estimated future benefit payments...

  • Page 224
    ... discount rate of 6.5% in 2009 and 7.1% in 2008, an assumed ultimate annual turnover rate of 0.5% in 2009 and 2008, assumed compensation cost increases of 4.0% in 2009 and 2008, and assumed benefits as defined in the respective plans. Postemployment costs arising from actions that offer employees...

  • Page 225
    ... effect of cash flow hedges for the year ended December 31, 2009 was: Gain / (Loss) Recognized in OCI (Gain) / Loss Reclassified from AOCI into Earnings (in millions) Foreign exchange contracts intercompany loans Foreign exchange contracts forecasted transactions Commodity contracts Interest rate...

  • Page 226
    ...from effectiveness testing in cost of sales for commodity contracts; cost of sales or marketing, administration and research costs for foreign exchange contracts related to forecasted transactions, depending on the type of transaction; and interest and other expense, net for interest rate contracts...

  • Page 227
    ...) Foreign exchange contracts intercompany loans Foreign exchange contracts forecasted transactions Commodity contracts Interest rate contracts Net investment hedge - euro notes $ 1,376 631 1,832 2,350 4,081 Source: KRAFT FOODS INC, 10-K, February 25, 2010 Powered by Morningstar® Document...

  • Page 228
    ... $433 million in 2007. As of December 31, 2009, minimum rental commitments under non-cancelable operating leases in effect at year-end were (in millions): 2010 2011 2012 2013 2014 Thereafter $ 306 243 185 103 76 212 Source: KRAFT FOODS INC, 10-K, February 25, 2010 Powered by Morningstar® Document...

  • Page 229
    ... of the statutes of limitations in various jurisdictions. We also paid interest and penalties of $10 million during 2009. The changes in our unrecognized tax benefits for the years ended December 31, 2009, 2008 and 2007 were (in millions): 2009 2008 2007 January 1 Increases from positions taken...

  • Page 230
    ...income tax rate on pre-tax earnings differed from the U.S. federal statutory rate for the following reasons for the years ended December 31, 2009, 2008 and 2007: 2009 2008 2007 U.S. federal statutory rate Increase / (decrease) resulting from: State and local income taxes, net of federal tax benefit...

  • Page 231
    ...the year ended December 31, 2009 and 11.3 million antidilutive options for the year ended December 31, 2008. We excluded an insignificant number of antidilutive options for the year ended December 31, 2007. Source: KRAFT FOODS INC, 10-K, February 25, 2010 Powered by Morningstar® Document Research...

  • Page 232
    ... Kraft Foods North America and Kraft Foods Europe by product category, and we manage the operations of Kraft Foods Developing Markets by location. Our reportable segments are U.S. Beverages, U.S. Cheese, U.S. Convenient Meals, U.S. Grocery, U.S. Snacks, Canada & N.A. Foodservice, Kraft Foods Europe...

  • Page 233
    ... in segment operating income as follows: For the Years Ended December 31, 2008 (in millions) 2009 2007 Kraft Foods North America: U.S. Beverages $ U.S. Cheese U.S. Convenient Meals U.S. Grocery U.S. Snacks Canada & N.A. Foodservice Kraft Foods Europe Kraft Foods Developing Markets Gains / (losses...

  • Page 234
    ... of Canada & N.A. Foodservice, Kraft Foods Europe and Kraft Foods Developing Markets into sector components, were: For the Year Ended December 31, 2009 Kraft Foods Kraft Foods Developing Europe Markets (in millions) Kraft Foods North America Total Snacks Beverages Cheese Grocery Convenient...

  • Page 235
    ... 8,248 $ $ 15,910 8,215 7,462 4,172 6,173 41,932 Kraft Foods North America For the Year Ended December 31, 2007 Kraft Foods Kraft Foods Developing Europe Markets (in millions) Total Snacks Beverages Cheese Grocery Convenient Meals Total net revenues $ $ 5,704 3,499 5,199 3,138 5,336 22,876...

  • Page 236
    ...: Basic EPS attributable to Kraft Foods: Continuing operations $ Discontinued operations Net earnings attributable to Kraft Foods $ Diluted EPS attributable to Kraft Foods: Continuing operations $ Discontinued operations Net earnings attributable to Kraft Foods $ Dividends declared 662 2 660 $ 829...

  • Page 237
    ... to Kraft Foods: Continuing operations $ Discontinued operations Net earnings attributable to Kraft Foods $ Diluted EPS attributable to Kraft Foods: Continuing operations $ Discontinued operations Net earnings attributable to Kraft Foods $ Dividends declared Market price high Market price low...

  • Page 238
    ...: (USD $) 12 Months Ended 12/31/2009 Subsequent Events: Note 18. Subsequent Events: We evaluated subsequent events through February 16, 2010 and included all accounting and disclosure requirements related to subsequent events in our financial statements. Source: KRAFT FOODS INC, 10-K, February 25...

  • Page 239
    ... (USD $) 12 Months Ended 12/31/2009 Valuation and Qualifying Accounts Kraft Foods Inc. and Subsidiaries Valuation and Qualifying Accounts for the years ended December 31, 2009, 2008 and 2007 (in millions) Col. A Col. B Balance at Beginning of Period Charged to Costs and Expenses Col. C Additions...

  • Page 240
    Document Information Document Information (USD $) 12 Months Ended 12/31/2009 Document Type Amendment Flag Document Period End Date 10-K false 2009-12-31 Source: KRAFT FOODS INC, 10-K, February 25, 2010 Powered by Morningstar® Document Researchâ„

  • Page 241
    ... 06/30/2009 Trading Symbol Entity Registrant Name Entity Central Index Key Current Fiscal Year End Date Entity Well-known Seasoned Issuer Entity Current Reporting Status Entity Voluntary Filers Entity Filer Category Entity Common Stock, Shares Outstanding Entity Public Float KFT KRAFT FOODS INC...

  • Page 242
    Source: KRAFT FOODS INC, 10-K, February 25, 2010 Powered by Morningstar® Document Researchâ„

  • Page 243
    _____ Created by Morningstar® Document Researchâ„ http://documentresearch.morningstar.com Source: KRAFT FOODS INC, 10-K, February 25, 2010 Powered by Morningstar® Document Researchâ„