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Kraft Foods Inc. Reports 2002 Results.

Business Editors

NORTHFIELD, Ill.--(BUSINESS WIRE)--Jan. 28, 2003

Kraft Foods Inc.


 Full-Year 2002 Highlights:

-- Reported diluted earnings per share up 67.5%, or $0.79, to $1.96
 and pro forma diluted earnings per share up 15.4%, or $0.27, to
 $2.02

 2001 reported diluted EPS $ 1.17
 -- Cessation of goodwill amortization 0.55
 -- Nabisco integration and other charges 0.02
 -- Impact assuming full-year Kraft IPO 0.01
 ------
 2001 pro forma diluted EPS $ 1.75


 2002 reported diluted EPS $ 1.96
 -- Separation programs 0.05
 -- Nabisco integration charges 0.04
 -- Gains on sales of businesses (0.03)
 ------
 2002 pro forma diluted EPS $ 2.02

-- Reported operating companies income up 4.1%, or $248 million, to
 $6.3 billion and pro forma operating companies income up 5.5%, or
 $333 million, to $6.4 billion.

-- Reported worldwide volume up 6.7%. Pro forma worldwide volume up
 3.1%, with Kraft Foods North America up 2.8% and Kraft Foods
 International up 3.7%.

 Fourth Quarter Highlights:

-- Reported diluted earnings per share up 68.8%, or $0.22, to $0.54
 and pro forma diluted earnings per share up 10.9%, or $0.05, to
 $0.51

 2001 reported diluted EPS $ 0.32
 -- Cessation of goodwill amortization 0.14
 ------
 2001 pro forma diluted EPS $ 0.46

 2002 reported diluted EPS $ 0.54
 -- Gains on sales of businesses (0.03)
 ------
 2002 pro forma diluted EPS $ 0.51

-- Reported operating companies income up 7.8%, or $120 million, to
 $1.7 billion and pro forma operating companies income up 1.5%, or
 $24 million, to $1.6 billion.

-- Reported worldwide volume up 8.5%. Pro forma worldwide volume up
 4.3%, with Kraft Foods North America up 4.0% and Kraft Foods
 International up 5.1%.



Audio Webcast:

A conference call with members of the investment community will be Webcast at 5:00 p.m. ET on January 28, 2003. Access is available at www.kraft.com.

Kraft Foods Inc. Reports 2002 Results


Fourth Quarter 2002:
 Reported Diluted E.P.S. Up 68.8% to $0.54
 Reported Net Earnings Up 69.9% to $931 Million

 Pro Forma Diluted E.P.S. Up 10.9% to $0.51
 Pro Forma Net Earnings Up 9.8% to $876 Million

Full-Year 2002:
 Reported Diluted E.P.S. Up 67.5% to $1.96
 Reported Net Earnings Up 80.3% to $3.4 Billion

 Pro Forma Diluted E.P.S. Up 15.4% to $2.02
 Pro Forma Net Earnings Up 15.2% to $3.5 Billion



NORTHFIELD, Ill.--Jan. 28, 2003--Kraft Foods Inc. (NYSE:KFT), a global leader in branded foods and beverages, today announced full-year 2002 results, with reported diluted EPS up 67.5% to $1.96 and pro forma diluted EPS up 15.4% to $2.02. Fourth quarter 2002 reported diluted EPS was up 68.8% to $0.54 and pro forma diluted EPS was up 10.9% to $0.51.

"Kraft delivered another year of strong performance in 2002," said Betsy D. Holden, Co-Chief Executive Officer of Kraft Foods, "with superior earnings growth and a broad-based volume increase in line with our projections."

"Our top line growth accelerated in the fourth quarter, with worldwide pro forma volume up 4.3% and all six segments posting growth over the prior year," said Roger K. Deromedi, Co-Chief Executive Officer of Kraft Foods. "For the full year, pro forma volume increased 3.1%, driven by new products, growth in developing markets and tack-on acquisitions."

"On the cost management side, we met our commitments as well," Holden said. "We achieved our productivity target, exceeded our synergy target from the Nabisco integration and lowered our interest expense."

"As we enter 2003, our business momentum remains strong," Deromedi said. "On the top line, we are again projecting volume growth of around 3%. However, on the bottom line, three significant items-benefit cost increases, stock based compensation expenses and devaluation-driven cost increases in Latin America-will restrain earnings growth, with diluted earnings per share expected to be $2.10 to $2.15, an increase of 4-6% from the pro forma 2002 base."

Higher benefit costs, driven primarily by the incremental impact of higher pension and post retirement expenses, is expected to impact 2003 EPS by approximately $0.07 per share, or three percentage points of growth. The higher costs are primarily the result of lower returns on pension fund assets and higher retiree medical costs. For Kraft's U.S. pension plans, the company will maintain its long-term return on assets assumption at 9.0% and reduce its discount rate from 7.0% to 6.5%.

Restricted stock awards will impact 2003 EPS by two cents, or one percentage point of growth. Restricted stock will have a three-year vesting period and will further align the long-term interest of employees with those of Kraft's shareholders. Furthermore, it enables Kraft to expense stock based compensation in a transparent manner that also benefits from ease of valuation.

The impact of the Latin American economic crisis and other weak economies, changes in commodity costs and currencies, as well as other factors described in the Forward-Looking and Cautionary Statements section of this release, represent continuing risks to these projections.

During the quarter, Kraft declared a quarterly dividend of $0.15 per common share and repurchased approximately 2.2 million shares of Class A common stock for $85 million to offset any potential dilution arising from the exercise of previously granted employee stock options. In November, Kraft issued $750 million in debt through floating rate notes, the proceeds of which were used to pay down debt to Altria Group, Inc. (formerly Philip Morris Companies Inc.) Additionally, during the quarter, Kraft finalized the sale of the Fleischmann's yeast and industrial bakery ingredient business in Latin America, resulting in a gain of $69 million.

Fourth Quarter Results

On a reported basis, worldwide volume increased 8.5% during the quarter and net revenues increased 4.0% to $7.8 billion. Operating companies income increased 7.8% to $1.7 billion. Net earnings increased 69.9% to $931 million and diluted earnings per share increased 68.8% to $0.54 due to the elimination of substantially all goodwill amortization in accordance with the Company's adoption of Statement of Financial Accounting Standards (SFAS) No. 141 and No. 142 on January 1, 2002, growth in operating companies income and lower interest expense.

On a pro forma basis, worldwide volume increased 4.3%. Net revenues increased 3.1%, as the impact of volume growth was partially offset by the adverse effect of currency and mix, as well as lower selling prices in response to lower commodity costs. Operating companies income increased 1.5%, or 1.2% excluding a favorable currency impact of $6 million, as higher volumes and productivity and synergy gains were partially offset by higher marketing spending, devaluation-driven costs in Latin America, and unfavorable benefit costs, primarily related to pensions. Net earnings increased 9.8% and diluted earnings per share increased 10.9% reflecting growth in operating companies income and lower interest expense.

Full-Year 2002 Results

On a reported basis, worldwide volume increased 6.7% during 2002 and net revenues increased 1.7% to $29.7 billion. Operating companies income increased 4.1% to $6.3 billion. Net earnings increased 80.3% to $3.4 billion and diluted earnings per share increased 67.5% to $1.96 due to the elimination of substantially all goodwill amortization in accordance with the Company's adoption of SFAS No. 141 and No. 142 on January 1, 2002, growth in operating companies income and lower interest expense. Included in the reported results for 2001 and 2002 are cumulative charges of $310 million associated with reconfigurations and consolidations as Kraft and Nabisco are integrated, slightly above the $200-$300 million estimate we communicated at the time of our IPO.

On a pro forma basis, worldwide volume increased 3.1%. Net revenues increased 0.9%, as the impact of volume growth was partially offset by the adverse effect of currency and mix, as well as lower selling prices in response to lower commodity costs. Operating companies income increased 5.5%, while net earnings increased 15.2% and diluted earnings per share increased 15.4% reflecting strong volume growth, productivity and synergy savings, and lower interest expense.

To allow for a more meaningful comparison of business results, the following discussion is on a pro forma basis. Reconciliations of pro forma to reported results are at the end of this release.

KRAFT FOODS NORTH AMERICA

Fourth Quarter 2002 Results

In the fourth quarter, Kraft Foods North America (KFNA) delivered strong volume growth of 4.0%, as all four business segments recorded higher shipments. Net revenues increased 2.9% driven by volume growth, partially offset by reduced prices in response to lower commodity costs, as well as mix. KFNA operating companies income improved 3.0%, driven by volume growth and productivity and synergy savings, partially offset by higher marketing spending and higher benefit costs, primarily related to pensions.

Following are the fourth quarter results by segment for KFNA:

Cheese, Meals and Enhancers recorded strong volume growth of 3.7%, with higher shipments across all six divisions, including contributions from key businesses such as Kraft Singles, Philadelphia Cream Cheese, and Kraft Macaroni and Cheese. Foodservice volume increased driven by higher shipments of salad dressing, beverages and cheese products. Operating companies income was up 0.4% as volume gains, productivity savings and lower commodity costs were largely offset by higher promotional spending in response to lower dairy costs, increased marketing spending supporting growth initiatives and higher benefit costs.

Biscuits, Snacks and Confectionery volume and revenue were up 1.3% and 3.7%, respectively, led by continued strong momentum in our core cookie and cracker businesses, partially offset by a decline in Confections. Operating companies income increased 7.6%, driven by volume gains in Biscuits, lower nut commodity costs and synergy savings, partially offset by lower Confections shipments.

Beverages, Desserts and Cereals recorded strong volume growth of 5.7% fueled by double-digit growth in Beverages driven by continued momentum in Kool-Aid Jammers and Capri Sun ready-to-drink beverages, as well as higher shipments of Maxwell House coffee. Operating companies income was flat as volume gains and productivity savings were offset by increased benefit costs.

Oscar Mayer and Pizza volume was up 6.0% reflecting broad gains in Oscar Mayer luncheon meats and bacon, Lunchables lunch combinations, Boca meat alternatives and DiGiorno frozen pizza. Operating companies income grew 12.5% led by higher volume, lower cheese and meat commodity costs and productivity savings, partially offset by increases in benefit costs.

Full-Year 2002 Results

For the full year, KFNA volume increased 2.8% behind strong marketing programs and new products. Net revenue was up 1.3% as the favorable impact of higher volume was partially offset by reduced prices in response to lower commodity costs, as well as mix. Operating companies income improved 5.6%, driven by volume growth and productivity and synergy savings, partially offset by increased marketing spending and higher benefit costs.

Following are the full year 2002 results by segment for KFNA:

Cheese, Meals and Enhancers volume increased 0.5%. Operating companies income was up 3.3% driven by volume, lower cheese commodity costs and productivity savings, partially offset by increased promotional spending in response to lower dairy costs as well as higher benefit expenses. Volume gains were led by growth in Kraft salad dressings, barbecue sauce and macaroni and cheese dinners and It's Pasta Anytime. Cheese volume was lower due to significant competitor promotion and merchandising activities.

Biscuits, Snacks and Confectionery volume was up 0.7% and revenue increased 2.2%. Operating companies income increased a strong 12.4% due primarily to volume gains in Biscuits and Snacks, lower nut commodity costs and synergy savings, partially offset by a decline in Confectionery shipments. In Biscuits, the cookie and cracker business delivered strong volume and revenue growth led by successful new products including Double Delight Oreo, Chips Ahoy! Cremewiches, Oreo Cookie Barz, Honey Maid Sticks and Ritz Bits Peanut Butter and Fudge, with dollar share gains in both cookies and crackers. Snacks volume also increased driven by innovative promotional initiatives. Confectionery shipments were lower due to competitive activity in the breath freshening category, partially offset by the introduction of Altoids Sours.

Beverages, Desserts and Cereals volume was up a strong 8.4%. Operating companies income was up 3.1% resulting from volume growth and productivity savings, partially offset by increased marketing spending and higher benefit costs. Volume growth was led by ready-to-drink beverages, which recorded double-digit gains driven by momentum in Kool-Aid Jammers, Capri Sun and Kool-Aid Bursts. In Coffee, strong promotional programs and packaging innovation drove volume and share gains in Maxwell House. Shipments in Desserts were up in key businesses including Jell-O dry packaged desserts and Cool Whip frozen toppings, which benefited from strong holiday programs, and Jell-O ready-to-eat desserts, aided by new products.

Oscar Mayer and Pizza volume was up 2.3%. Operating companies income increased 8.1% driven by volume gains, lower meat and cheese commodity costs and productivity savings, partially offset by increased marketing spending and higher benefit costs. Volume growth was led by Oscar Mayer hot dogs and bacon and Boca meat alternatives, aided by new product introductions, and strong volume and share gains in our frozen pizza business driven by continued momentum in DiGiorno stuffed crust pizza and the introduction of DiGiorno deep dish pizza.

KRAFT FOODS INTERNATIONAL

Fourth-Quarter 2002 Results

In the fourth quarter, volume for Kraft Foods International (KFI) increased 5.1% with growth from both the Europe, Middle East and Africa (EMEA) segment and the Latin America and Asia Pacific (LAAP) segment, benefiting from acquisitions. Net revenue increased 3.3%, driven by higher volume and increased pricing, moderated by an unfavorable currency impact in Latin America and mix. Excluding an unfavorable currency impact of $33 million, net revenue was up 4.7%.

Operating companies income decreased 2.4% to $409 million, with growth in the EMEA segment more than offset by a shortfall in the LAAP segment, which was impacted by the economic crisis in Latin America. Excluding a favorable currency impact of $7 million, reflecting the positive effect of the strengthening Euro moderated by the significant weakening of currencies in Latin America, operating companies income decreased 4.1%.

Following are results by segment for KFI:

Europe, Middle East and Africa (EMEA) volume grew 5.4% driven by acquisitions and growth across most markets, moderated by a decline in Germany reflecting intense price competition. Operating companies income increased 14.1%, driven by higher volume and margins and favorable currency, partially offset by higher expenses. Excluding a favorable currency impact of $23 million, operating companies income grew 6.4%.

Latin America and Asia Pacific (LAAP) volume grew 4.6% as continued business momentum was partially offset by declines in several Latin American countries. Beverages, snacks, cheese and convenient meals all reported strong volume growth. Operating companies income was down 43.0% as the favorable impact of higher volume and productivity and synergy savings was more than offset by unfavorable mix, higher costs and a negative currency impact, primarily due to the devaluations of the Argentinean Peso, Brazilian Real and Venezuelan Bolivar. Excluding an unfavorable currency impact of $16 million, operating companies income was still down 29.8%, reflecting devaluation-driven cost increases in Latin America.

Full-Year 2002 Results

For the full year, KFI volume increased 3.7%, with gains from acquisitions, successful new product introductions, geographic expansion and strengthened marketing programs partially offset by the impact from significant issues in several Latin American countries.

Net revenue was flat to last year, as higher volume, which benefited from acquisitions, and increased pricing were offset by the impact of unfavorable currency in Latin America and mix. Excluding an unfavorable currency impact of $271 million, net revenue grew 3.3%.

Operating companies income increased 4.9%, driven by volume growth and continued productivity and synergy savings, partially offset by mix. Currency impact was flat versus prior year, as the positive impact of the weakened dollar against the Euro and most other currencies was offset by the unfavorable impact of the significant devaluations of the Argentinean Peso, Brazilian Real and Venezuelan Bolivar.

Following are results by segment for KFI:

Europe, Middle East and Africa (EMEA) volume increased 4.8% driven by acquisitions and solid growth across most markets including Italy, the United Kingdom, Sweden, the Ukraine, the Middle East and Poland, moderated by declines in Germany and Romania. Operating companies income increased 12.3%, driven by higher volume and margins, and favorable currency of $37 million, partially offset by increased expenses. On a constant currency basis, operating companies income increased 8.0%.

EMEA snacks volume increased, benefiting from the successful integration and continued growth of the Stollwerck chocolate business in Russia and Poland, the Kar Gida snacks acquisition in Turkey and successful new product introductions such as premium filled tablets under Cote d'Or in France, Freia in Norway and Marabou in Sweden, Korona aerated chocolate in the Ukraine and expansion of Milka to new markets. Overall confectionery volume growth was moderated by a decline in Germany, reflecting a difficult competitive environment and in Romania, due to lower consumer purchasing power.

Volume growth in EMEA beverages was driven by favorable performance in both coffee and refreshment beverages. Coffee volume was up across most markets driven by continued good performance of key brands including Gevalia in Sweden and Maxwell House in Poland and the Ukraine, successful new product introductions such as ready-to-drink Ice Presso in Germany, Sweden and Greece, and acquisitions in Bulgaria, Romania and Morocco. Overall coffee volume growth was moderated by a decline in Germany, reflecting market softness and increased price competition. Refreshment beverages volume also grew, driven by the geographic expansion of Tang powdered beverages and successful new product introductions.

EMEA cheese volume was higher, driven by gains in Philadelphia cream cheese, benefiting from successful advertising and new products such as Tomato Basil and Extra Light. EMEA convenient meals volume grew double-digit, driven by higher canned meats volume in Italy and the continued strength of Dairylea Lunchables in the United Kingdom, benefiting from new product launches.

Latin America and Asia Pacific (LAAP) volume increased 2.1%, driven by gains across numerous markets and the acquisition of Lanes biscuits in Australia. Overall volume was impacted by a decline in Argentina due to the economic crisis and lower results in China. Operating companies income was down 13.4%, reflecting the significant devaluation of several Latin American currencies. Excluding an unfavorable currency impact of $37 million, operating companies income decreased 2.8%, as the positive impact of higher volume, productivity and synergy savings was more than offset by devaluation-driven cost increases and unfavorable mix.

In snacks, LAAP volume growth was driven by gains in biscuits, benefiting from successful geographic expansion of Club Social crackers, Ritz sandwich, Mini Oreo and Trakinas cookies in Latin America, the launch of Chocolate Creme Oreo in several Asian markets and the acquisition of Lanes biscuits in Australia. Volume growth was moderated by the impact of the economic crisis in Argentina and distributor inventory reductions in China.

LAAP beverages volume grew strongly, driven by double-digit gains in Tang powdered beverages in numerous markets across Latin America and Asia Pacific, which benefited from successful new products such as Tang Plus, fortified with vitamins and minerals.

Kraft Foods Inc. is the largest branded food and beverage company headquartered in the United States and the second largest worldwide. Kraft Foods markets many of the world's leading food brands, including Kraft cheese, Jacobs and Maxwell House coffees, Nabisco cookies and crackers, Philadelphia cream cheese, Oscar Mayer meats, Post cereals and Milka chocolates, in more than 145 countries. You may learn more by listening to a live audio webcast of the Kraft conference call with members of the investment community at 5:00 p.m. ET on January 28, 2003. Access is available at www.kraft.com. A rebroadcast of the webcast will be available on our web site for one week after broadcast.

Pro Forma Statement

Pro forma results assume that shares issued following the Kraft IPO on June 13, 2001, were outstanding since January 1, 2001, and that the net proceeds of the IPO were used to retire indebtedness incurred to finance the Nabisco acquisition. Results for 2001 have been adjusted to exclude businesses that were reclassified as assets held for sale during 2001 and to include Nabisco's Canadian grocery business. Results for 2001 have also been adjusted to assume that the Company's adoption of SFAS No. 141 and No. 142, which eliminates substantially all goodwill amortization, was effective January 1, 2001. In addition, these results adjust for certain items, including charges associated with reconfigurations and consolidations as Kraft and Nabisco are integrated and, due to the recent gains on divestitures, all gains and losses on sales of businesses.

Forward-Looking and Cautionary Statements

This press release contains projections of future results and other forward-looking statements that involve a number of risks and uncertainties and are made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. The following important factors could cause actual results and outcomes to differ materially from those contained in such forward-looking statements.

The Company is subject to unfavorable currency movements, intense competition, changes in consumer preferences and demand for its products, changing prices for raw materials, fluctuations in levels of customer inventories and the effects of foreign economies and local economic and market conditions. Its results are dependent upon its continued ability to promote brand equity successfully; to anticipate and respond to new consumer trends; to develop new products and markets and to broaden brand portfolios; to compete effectively with lower-priced products in a consolidating environment at the retail and manufacturing levels; to improve productivity; to consummate and successfully integrate acquisitions, including Nabisco; and other risks detailed from time to time in the Company's publicly-filed documents, including the Prospectus related to its initial public offering of shares. The Company cautions that the foregoing list of important factors is not complete and does not undertake to update any forward-looking statement.


 KRAFT FOODS INC.
 and Subsidiaries
 Condensed Statements of Earnings
 For the Quarters Ended December 31,
 (in millions, except per share data)


 REPORTED PRO FORMA (b)
 ----------------------- ------------------------
 % %
 2002 2001 Change 2002 2001 Change
 -------- -------- ------ -------- -------- ------
Net revenues (a) $ 7,847 $ 7,546 4.0% $ 7,833 $ 7,601 3.1%

Cost of sales 4,806 4,656 3.2%
 -------- --------

Gross profit 3,041 2,890 5.2%

Marketing,
 administration
 and research costs 1,464 1,332

Integration costs and
 a loss on sale of a
 food factory (8) 16

Gains on sales of
 businesses (77) -
 -------- --------

Operating companies
 income 1,662 1,542 7.8% $ 1,575 $ 1,551 1.5%

Amortization of
 intangibles 2 243
General corporate
 expenses 29 48
Interest and other debt
 expense, net 186 248
 -------- --------

Earnings before income
 taxes and minority
 interest 1,445 1,003 44.1%

Provision for income
 taxes 512 455 12.5%
 -------- --------

Earnings before
 minority interest 933 548

Minority interest in
 earnings, net 2 -
 -------- --------
Net earnings $ 931 $ 548 69.9% $ 876 $ 798 9.8%
 ======== ======== ======== ========

Basic earnings per
 share (c) $ 0.54 $ 0.32 68.8% $ 0.51 $ 0.46 10.9%
 ======== ======== ======== ========

Diluted earnings per
 share (c) $ 0.54 $ 0.32 68.8% $ 0.51 $ 0.46 10.9%
 ======== ======== ======== ========


Weighted average number
 of shares outstanding
 - Basic 1,731 1,735 (0.2)% 1,731 1,735 (0.2)%
 - Diluted 1,734 1,736 (0.1)% 1,734 1,736 (0.1)%

(a) The Company has adopted Emerging Issues Task Force ("EITF")
 statements relating to the classification of vendor consideration
 and certain sales incentives. Prior period data has been restated.
 The adoption of the EITF statements has no impact on operating
 companies income, net earnings, or basic or diluted earnings per
 share.
(b) Pro forma results exclude the items listed in the notes on the
 last page of this release. Pro forma results also treat the Kraft
 Initial Public Offering as though it occurred on January 1, 2001,
 and reflect the cessation of goodwill amortization as if SFAS 141
 and 142 were in effect in 2001.
(c) Basic and Diluted earnings per share are computed for each of the
 periods presented. Accordingly, the sum of the quarterly earnings
 per share amounts may not agree to the year-to-date amounts.


 KRAFT FOODS INC.
 and Subsidiaries
 Volume by Business Segments
 For the Quarters Ended December 31,
 (pounds in millions)


REPORTED VOLUME 2002 2001 % Change
--------------- ------ ------ ---------
KF North America:
-----------------
 Cheese, Meals and Enhancers 1,501 1,274 17.8 %
 Biscuits, Snacks and Confectionery 639 630 1.4 %
 Beverages, Desserts and Cereals 834 772 8.0 %
 Oscar Mayer and Pizza 355 335 6.0 %
 ------ ------
 Total KF North America reported volume 3,329 3,011 10.6 %
 ------ ------

KF International:
-----------------
 Europe, Middle East and Africa 871 827 5.3 %
 Latin America and Asia Pacific 570 558 2.2 %
 ------ ------
 Total KF International reported volume 1,441 1,385 4.0 %
 ------ ------

Total Kraft Foods Inc. reported volume 4,770 4,396 8.5 %
 ====== ======

Changes Due to Businesses Held for Sale:
 Cheese, Meals and Enhancers - 173
 Beverages, Desserts and Cereals - 17
 Latin America and Asia Pacific - 15

Divested Businesses:
 Biscuits, Snacks and Confectionery (4) (3)
 Europe, Middle East and Africa - (1)
 Latin America and Asia Pacific (24) (51)


PRO FORMA VOLUME 2002 2001 % Change
---------------- ------ ------ ---------
KF North America:
----------------
 Cheese, Meals and Enhancers 1,501 1,447 3.7 %
 Biscuits, Snacks and Confectionery 635 627 1.3 %
 Beverages, Desserts and Cereals 834 789 5.7 %
 Oscar Mayer and Pizza 355 335 6.0 %
 ------ ------
 Total KF North America pro forma volume 3,325 3,198 4.0 %
 ------ ------

KF International:
----------------
 Europe, Middle East and Africa 871 826 5.4 %
 Latin America and Asia Pacific 546 522 4.6 %
 ------ ------
 Total KF International pro forma volume 1,417 1,348 5.1 %
 ------ ------

 Total Kraft Foods Inc. pro forma volume 4,742 4,546 4.3 %
 ====== ======


 KRAFT FOODS INC.
 and Subsidiaries
 Net Revenues by Business Segments
 For the Quarters Ended December 31,
 ($ in millions)


REPORTED NET REVENUES 2002 2001 % Change
--------------------- ------ ------ ---------
KF North America:
----------------
 Cheese, Meals and Enhancers $2,261 $2,189 3.3 %
 Biscuits, Snacks and Confectionery 1,414 1,364 3.7 %
 Beverages, Desserts and Cereals 1,027 955 7.5 %
 Oscar Mayer and Pizza 696 649 7.2 %
 ------ ------
 Total KF North America reported net
 revenues 5,398 5,157 4.7 %
 ------ ------

KF International:
----------------
 Europe, Middle East and Africa 1,934 1,775 9.0 %
 Latin America and Asia Pacific 515 614 (16.1)%
 ------ ------
 Total KF International reported net
 revenues 2,449 2,389 2.5 %
 ------ ------


Total Kraft Foods Inc. reported net revenues 7,847 7,546 4.0 %
 ====== ======

Changes Due to Businesses Held for Sale:
 Cheese, Meals and Enhancers - 67
 Beverages, Desserts and Cereals - 23
 Latin America and Asia Pacific - (8)

Divested Businesses:
 Biscuits, Snacks and Confectionery (4) (4)
 Beverages, Desserts and Cereals - (2)
 Latin America and Asia Pacific (10) (21)


PRO FORMA NET REVENUES 2002 2001 % Change
---------------------- ------ ------ ---------
KF North America:
----------------
 Cheese, Meals and Enhancers 2,261 2,256 0.2 %
 Biscuits, Snacks and Confectionery 1,410 1,360 3.7 %
 Beverages, Desserts and Cereals 1,027 976 5.2 %
 Oscar Mayer and Pizza 696 649 7.2 %
 ------ ------
 Total KF North America pro forma net
 revenues 5,394 5,241 2.9 %
 ------ ------

KF International:
----------------
 Europe, Middle East and Africa 1,934 1,775 9.0 %
 Latin America and Asia Pacific 505 585 (13.7)%
 ------ ------
 Total KF International pro forma net
 revenues 2,439 2,360 3.3 %
 ------ ------

Total Kraft Foods Inc. pro forma net
 revenues $7,833 $7,601 3.1 %
 ====== ======


 KRAFT FOODS INC.
 and Subsidiaries
 Operating Companies Income by Business Segments
 For the Quarters Ended December 31,
 ($ in millions)


REPORTED OPERATING COMPANIES INCOME 2002 2001 % Change
----------------------------------- ------ ------ ---------
KF North America:
----------------
 Cheese, Meals and Enhancers $ 529 $ 512 3.3 %
 Biscuits, Snacks and Confectionery 308 277 11.2 %
 Beverages, Desserts and Cereals 247 245 0.8 %
 Oscar Mayer and Pizza 99 83 19.3 %
 ------ ------
 Total KF North America reported operating
 companies income 1,183 1,117 5.9 %
 ------ ------

KF International:
----------------
 Europe, Middle East and Africa 340 298 14.1 %
 Latin America and Asia Pacific 139 127 9.4 %
 ------ ------

 Total KF International reported operating
 companies income 479 425 12.7 %
 ------ ------

Total Kraft Foods Inc. reported operating
 companies income 1,662 1,542 7.8 %
 ====== ======

Gains on Sales of Businesses:
 Biscuits, Snacks and Confectionery (8) -
 Latin America and Asia Pacific (69) -

Changes Due to Businesses Held for Sale:
 Cheese, Meals and Enhancers - 7
 Beverages, Desserts and Cereals - (6)
 Latin America and Asia Pacific - (1)

Divested Businesses:
 Biscuits, Snacks and Confectionery (1) (1)
 Beverages, Desserts and Cereals - (1)
 Latin America and Asia Pacific (1) (5)

Integration Costs and a Loss on Sale of a
 Food Factory:
 Cheese, Meals and Enhancers (5) 3
 Biscuits, Snacks and Confectionery - 2
 Beverages, Desserts and Cereals (3) 6
 Oscar Mayer and Pizza - 5


PRO FORMA OPERATING COMPANIES INCOME 2002 2001 % Change
------------------------------------ ------ ------ ---------
KF North America:
----------------
 Cheese, Meals and Enhancers 524 522 0.4 %
 Biscuits, Snacks and Confectionery 299 278 7.6 %
 Beverages, Desserts and Cereals 244 244 - %
 Oscar Mayer and Pizza 99 88 12.5 %
 ------ ------
 Total KF North America pro forma operating
 companies income 1,166 1,132 3.0 %
 ------ ------

KF International:
----------------
 Europe, Middle East and Africa 340 298 14.1 %
 Latin America and Asia Pacific 69 121 (43.0)%
 ------ ------
 Total KF International pro forma operating
 companies income 409 419 (2.4)%
 ------ ------

Total Kraft Foods Inc. pro forma operating
 companies income $1,575 $1,551 1.5 %
 ====== ======


 KRAFT FOODS INC.
 and Subsidiaries
 Condensed Statements of Earnings
 For the Years Ended December 31,
 (in millions, except per share data)


 REPORTED PRO FORMA (b)
 ------------------------ ------------------------
 % %
 2002 2001 Change 2002 2001 Change
 -------- -------- ------ -------- -------- ------
Net revenues (a) $ 29,723 $ 29,234 1.7% $ 29,634 $ 29,365 0.9%

Cost of sales 17,720 17,566 0.9%
 -------- --------

Gross profit 12,003 11,668 2.9%

Marketing,
 administration
 and research costs 5,547 5,559

Integration costs and
 a loss on sale of a
 food factory 111 82
Separation programs 142 -
Gains on sales of
 businesses (80) (8)
 -------- --------
Operating companies
 income 6,283 6,035 4.1% $ 6,441 $ 6,108 5.5%

Amortization of
 intangibles 7 962
General corporate
 expenses 162 189
Interest and other
 debt expense, net 847 1,437
 -------- --------

Earnings before income
 taxes and minority
 interest 5,267 3,447 52.8%

Provision for income
 taxes 1,869 1,565 19.4%
 -------- --------

Earnings before
 minority interest 3,398 1,882

Minority interest in
 earnings, net 4 -
 -------- --------
Net earnings $ 3,394 $ 1,882 80.3% $ 3,505 $ 3,042 15.2%
 ======== ======== ======== ========

Basic earnings per
 share (c) $ 1.96 $ 1.17 67.5% $ 2.02 $ 1.75 15.4%
 ======== ======== ======== ========

Diluted earnings per
 share (c) $ 1.96 $ 1.17 67.5% $ 2.02 $ 1.75 15.4%
 ======== ======== ======== ========


Weighted average number
 of shares outstanding
 - Basic 1,734 1,610 7.7% 1,734 1,735 (0.1)%
 - Diluted 1,736 1,610 7.8% 1,736 1,735 0.1%

(a) The Company has adopted Emerging Issues Task Force ("EITF")
 statements relating to the classification of vendor consideration
 and certain sales incentives. Prior period data has been restated.
 The adoption of the EITF statements has no impact on operating
 companies income, net earnings, or basic or diluted earnings per
 share.

(b) Pro forma results exclude the items listed in the notes on the
 last page of this release. Pro forma results also treat the Kraft
 Initial Public Offering as though it occurred on January 1, 2001,
 and reflect the cessation of goodwill amortization as if SFAS 141
 and 142 were in effect in 2001.

(c) Basic and Diluted earnings per share are computed for each of the
 periods presented. Accordingly, the sum of the quarterly earnings
 per share amounts may not agree to the year-to-date amounts.


 KRAFT FOODS INC.
 and Subsidiaries
 Volume by Business Segments
 For the Years Ended December 31,
 (pounds in millions)


REPORTED VOLUME 2002 2001 % Change
--------------- ------ ------ ---------
KF North America:
----------------
 Cheese, Meals and Enhancers 5,898 5,219 13.0 %
 Biscuits, Snacks and Confectionery 2,369 2,350 0.8 %
 Beverages, Desserts and Cereals 3,708 3,421 8.4 %
 Oscar Mayer and Pizza 1,554 1,519 2.3 %
 ------ ------

 Total KF North America reported volume 13,529 12,509 8.2 %
 ------ ------

KF International:
----------------
 Europe, Middle East and Africa 2,961 2,826 4.8 %
 Latin America and Asia Pacific 2,059 2,057 0.1 %
 ------ ------
 Total KF International reported volume 5,020 4,883 2.8 %
 ------ ------

Total Kraft Foods Inc. reported volume 18,549 17,392 6.7 %
 ====== ======

Changes Due to Businesses Held for Sale:
 Cheese, Meals and Enhancers - 647

Divested Businesses:
 Biscuits, Snacks and Confectionery (15) (13)
 Beverages, Desserts and Cereals - (1)
 Europe, Middle East and Africa - (1)
 Latin America and Asia Pacific (135) (172)


PRO FORMA VOLUME 2002 2001 % Change
---------------- ------ ------ ---------
KF North America:
----------------
 Cheese, Meals and Enhancers 5,898 5,866 0.5 %
 Biscuits, Snacks and Confectionery 2,354 2,337 0.7 %
 Beverages, Desserts and Cereals 3,708 3,420 8.4 %
 Oscar Mayer and Pizza 1,554 1,519 2.3 %
 ------ ------
 Total KF North America pro forma volume 13,514 13,142 2.8 %
 ------ ------

KF International:
----------------
 Europe, Middle East and Africa 2,961 2,825 4.8 %
 Latin America and Asia Pacific 1,924 1,885 2.1 %
 ------ ------
 Total KF International pro forma volume 4,885 4,710 3.7 %
 ------ ------

Total Kraft Foods Inc. pro forma volume 18,399 17,852 3.1 %
 ====== ======


 KRAFT FOODS INC.
 and Subsidiaries
 Net Revenues by Business Segments
 For the Years Ended December 31,
 ($ in millions)


REPORTED NET REVENUES 2002 2001 % Change
--------------------- ------ ------ ---------
KF North America:
----------------
 Cheese, Meals and Enhancers $8,877 $8,732 1.7 %
 Biscuits, Snacks and Confectionery 5,182 5,071 2.2 %
 Beverages, Desserts and Cereals 4,412 4,237 4.1 %
 Oscar Mayer and Pizza 3,014 2,930 2.9 %
 ------ ------

 Total KF North America reported net
 revenues 21,485 20,970 2.5 %
 ------ ------

KF International:
----------------
 Europe, Middle East and Africa 6,203 5,936 4.5 %
 Latin America and Asia Pacific 2,035 2,328 (12.6)%
 ------ ------

 Total KF International reported net
 revenues 8,238 8,264 (0.3)%
 ------ ------

Total Kraft Foods Inc. reported net
 revenues 29,723 29,234 1.7 %
 ====== ======

Changes Due to Businesses Held for Sale:
 Cheese, Meals and Enhancers - 252

Divested Businesses:
 Biscuits, Snacks and Confectionery (21) (19)
 Beverages, Desserts and Cereals - (12)
 Latin America and Asia Pacific (68) (90)


PRO FORMA NET REVENUES 2002 2001 % Change
---------------------- ------ ------ ---------
KF North America:
----------------
 Cheese, Meals and Enhancers 8,877 8,984 (1.2)%
 Biscuits, Snacks and Confectionery 5,161 5,052 2.2 %
 Beverages, Desserts and Cereals 4,412 4,225 4.4 %
 Oscar Mayer and Pizza 3,014 2,930 2.9 %
 ------ ------

 Total KF North America pro forma net
 revenues 21,464 21,191 1.3 %
 ------ ------

KF International:
----------------
 Europe, Middle East and Africa 6,203 5,936 4.5 %
 Latin America and Asia Pacific 1,967 2,238 (12.1)%
 ------ ------

 Total KF International pro forma net
 revenues 8,170 8,174 - %
 ------ ------

Total Kraft Foods Inc. pro forma net
 revenues $29,634 $29,365 0.9%
 ======= =======


 KRAFT FOODS INC.
 and Subsidiaries
 Operating Companies Income by Business Segments
 For the Years Ended December 31,
 ($ in millions)


REPORTED OPERATING COMPANIES INCOME 2002 2001 % Change
----------------------------------- ------ ------ ---------
KF North America:
----------------
 Cheese, Meals and Enhancers $2,168 $2,099 3.3 %
 Biscuits, Snacks and Confectionery 1,093 966 13.1 %
 Beverages, Desserts and Cereals 1,136 1,192 (4.7)%
 Oscar Mayer and Pizza 556 539 3.2 %
 ------ ------
 Total KF North America reported operating
 companies income 4,953 4,796 3.3 %
 ------ ------

KF International:
----------------
 Europe, Middle East and Africa 962 861 11.7 %
 Latin America and Asia Pacific 368 378 (2.6)%
 ------ ------
 Total KF International reported operating
 companies income 1,330 1,239 7.3 %
 ------ ------
Total Kraft Foods Inc. reported operating
 companies income 6,283 6,035 4.1 %
 ====== ======

Gains on Sales of Businesses:
 Biscuits, Snacks and Confectionery (8) -
 Latin America and Asia Pacific (72) (8)

Changes Due to Businesses Held for Sale:
 Cheese, Meals and Enhancers - 23

Divested Businesses:
 Biscuits, Snacks and Confectionery (5) (4)
 Beverages, Desserts and Cereals - (2)
 Latin America and Asia Pacific (10) (18)

Integration Costs and a Loss on Sale of a
 Food Factory:
 Cheese, Meals and Enhancers 30 63
 Biscuits, Snacks and Confectionery 1 2
 Beverages, Desserts and Cereals 56 12
 Oscar Mayer and Pizza 7 5
 Latin America and Asia Pacific 17 -

Separation Programs:
 Cheese, Meals and Enhancers 60 -
 Biscuits, Snacks and Confectionery 3 -
 Beverages, Desserts and Cereals 47 -
 Oscar Mayer and Pizza 25 -
 Europe, Middle East and Africa 5 -
 Latin America and Asia Pacific 2 -


PRO FORMA OPERATING COMPANIES INCOME 2002 2001 % Change
------------------------------------ ------ ------ ---------
KF North America:
----------------
 Cheese, Meals and Enhancers 2,258 2,185 3.3 %
 Biscuits, Snacks and Confectionery 1,084 964 12.4 %
 Beverages, Desserts and Cereals 1,239 1,202 3.1 %
 Oscar Mayer and Pizza 588 544 8.1 %
 ------ ------
 Total KF North America pro forma operating
 companies income 5,169 4,895 5.6 %
 ------ ------

KF International:
----------------
 Europe, Middle East and Africa 967 861 12.3 %
 Latin America and Asia Pacific 305 352 (13.4)%
 ------ ------
 Total KF International pro forma operating
 companies income 1,272 1,213 4.9 %
 ------ ------

Total Kraft Foods Inc. pro forma operating
 companies income $6,441 $6,108 5.5 %
 ====== ======

 KRAFT FOODS INC.
 and Subsidiaries
 Diluted Earnings per Share
 Reconciliation of Reported to Pro forma Results
 For the Years Ended December 31,
 (in millions, except per share data)


 2002 2001 % Change
 ------ ------ ---------

Reported net earnings $3,394 $1,882 80.3 %

Integration costs and a loss on sale of a food
 factory 72 45

Separation programs 91 -

Gains on sales of businesses (52) (5)
Interest reduction assuming full-year IPO - 165
Cessation of goodwill amortization - 955
 ------ ------
Pro forma net earnings $3,505 $3,042 15.2 %
 ====== ======


 2002 2001 % Change
 ------ ------ ---------

Reported diluted earnings per share (a) $ 1.96 $ 1.17 67.5 %

Integration costs and a loss on sale of a food
 factory 0.04 0.02
Separation programs 0.05 -

Gains on sales of businesses (0.03) -
Interest reduction assuming full-year IPO - 0.10
Share impact of IPO - (0.09)
Cessation of goodwill amortization - 0.55
 ------ ------
Pro forma diluted earnings per share (a) $ 2.02 $ 1.75 15.4 %
 ====== ======

Average diluted shares outstanding 1,736 1,610

Adjustment to reflect shares outstanding after
 IPO - 125

 ------ ------
Pro forma diluted shares outstanding 1,736 1,735
 ====== ======

(a) Diluted earnings per share are computed for each of the periods
 presented. Accordingly, the sum of the quarterly earnings per
 share amounts may not agree to the year-to-date amounts.


 KRAFT FOODS INC.
 and Subsidiaries
 Diluted Earnings per Share
 Reconciliation of Reported to Pro forma Results
 For the Quarters Ended December 31,
 (in millions, except per share data)


 2002 2001 % Change
 ------ ------ ---------

Reported net earnings $ 931 $ 548 69.9 %

Integration costs and a loss on sale of a food
 factory (5) 8
Gains on sales of businesses (50) -
Cessation of goodwill amortization - 242
 ------ ------
Pro forma net earnings $ 876 $ 798 9.8 %
 ====== ======


 2002 2001 % Change
 ------ ------ ---------

Reported diluted earnings per share (a) $ 0.54 $ 0.32 68.8 %

Integration costs and a loss on sale of a food
 factory - -
Gains on sales of businesses (0.03) -
Cessation of goodwill amortization - 0.14
 ------ ------
Pro forma diluted earnings per share (a) $ 0.51 $ 0.46 10.9 %
 ====== ======

Pro forma diluted shares outstanding 1,734 1,736
 ====== ======

(a) Diluted earnings per share are computed for each of the periods
 presented. Accordingly, the sum of the quarterly earnings per
 share amounts may not agree to the year-to-date amounts.


 KRAFT FOODS INC.
 and Subsidiaries
 Condensed Balance Sheets
 ($ in millions, except ratios)

 December December
 31, 31,
 2002 2001
 -------- --------
Assets
------
Current assets $ 7,456 $ 7,006

Property, plant and equipment, net 9,559 9,109

Goodwill and other intangible assets, net 36,420 35,957

Other assets 3,665 3,726
 -------- --------

 Total assets $ 57,100 $ 55,798
 ======== ========

Liabilities and Shareholders' Equity
------------------------------------

Total current liabilities $ 7,169 $ 8,875

Long-term debt 10,416 8,134

Notes payable to Altria Group, Inc. and affiliates 2,560 5,000

Deferred income taxes 5,428 5,031

Other long-term liabilities 5,695 5,280
 -------- --------

 Total liabilities 31,268 32,320


 Total shareholders' equity 25,832 23,478
 -------- --------

 Total liabilities and shareholders' equity $ 57,100 $ 55,798
 ======== ========


Total debt $ 14,443 $ 16,007


Debt/equity ratio 0.56 0.68


 KRAFT FOODS INC.
 and Subsidiaries
 Notes to Condensed Statements of Earnings and Selected Financial
 Data
 ($ in millions)

The following pre-tax items had an impact on pro forma results in 2002
and 2001:

 Fourth Fourth Twelve Twelve
 Quarter Quarter Months Months
 2002 2001 2002 2001
 -------- -------- -------- --------
- Integration costs and a loss on
 sale of a food factory $ (8) $ 16 $ 111 $ 82
- Separation programs - - 142 -
- Gains on sales of businesses (77) - (80) (8)

 -------- -------- -------- --------
 $ (85) $ 16 $ 173 $ 74
 ======== ======== ======== ========


Operating results of businesses sold since the beginning of 2001 are
excluded from pro forma net revenues and operating companies income
(but not from pro forma net earnings or earnings per share). Several
North American and international food businesses were divested since
the beginning of 2001. No assumptions were made as to the application
of proceeds from the sale of any operations.

During 2001, certain Nabisco businesses were reclassified to
businesses held for sale, and the results of operations for these
businesses were removed from the statements of earnings. These
businesses have subsequently been sold. In addition, the Company was
unable to sell one business that had been held for sale since the
acquisition of Nabisco. This business has been included in 2002
reported results and has been included as an adjustment to arrive at
pro forma results for 2001.

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No portion of this article can be reproduced without the express written permission from the copyright holder.
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