Kraft Foods Inc. Reports Steady Progress with Second-Quarter 2006 Results.NORTHFIELD Northfield, city (1990 pop. 14,684), Rice co., SE Minn., near Minneapolis–St. Paul, on the Cannon River; inc. 1875. It is the trade center for a dairy and farming region. Manufactures include printed circuit boards, toys, feeds and seeds, and cereals. On Sept. , Ill. -- Kraft Foods Kraft Foods Inc. (NYSE: KFT) is the largest food and beverage company headquartered in North America and the second largest in the world after Nestlé SA. The Philip Morris Company (now known as Altria Group), a company that produces tobacco products, acquired Kraft for Inc. (NYSE NYSE See: New York Stock Exchange :KFT KFT Korlátolt Felelõsségû Társaság (Hungarian: limited liability corporation) KFT Kraft Foods International (stock symbol) KFT Kilo-Feet KFT Kung Fu Tzu (Confucius) ): --Second-quarter reported net revenues grew 3.4% driven by organic net revenue(1) growth of 4.9%. --Second-quarter reported diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. EPS (Encapsulated PostScript) A PostScript file format used to transfer a graphic image between applications and platforms. EPS files contain PostScript code as well as an optional preview image in TIFF, WMF, PICT or EPSI, the latter being an ASCII-only format. increased 46.4% to $0.41; excluding items affecting comparability, diluted EPS grew 8.5% to $0.51. --Full-year 2006 EPS guidance raised to $1.78 - $1.83 from $1.55 - $1.60 driven by a projected one-time one-time adj. 1. or one·time a. Occurring or undertaken only once: a one-time winner in 1995. b. gain related to the pending United Biscuits __FORCETOC__ United Biscuits ("UB") is a British multinational food manufacturer, makers of McVitie's biscuits, KP nuts, Hula Hoops, The Real McCoy's crisps, Phileas Fogg crisps, and Jacob's Cream Crackers. transaction and the timing of restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). costs. Kraft Foods Inc. (NYSE:KFT) today reported steady progress with second-quarter 2006 results driven by favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. product mix, the benefits of a strong increase in advertising and continued cost savings. "Second-quarter results reflect further improvements in Kraft's business fundamentals business fundamentals The general background within which an economy operates including earnings, sales, wage rates, taxes, and inflation. Improving business fundamentals are generally viewed as bullish for stocks, although stock prices at any given point ," said Irene Irene, Byzantine empress Irene (īrē`nē), c.750–803, Byzantine empress (797–802). She served (780–90) as regent for her son, Constantine VI, and later was made (792) joint ruler. B. Rosenfeld Rosenfeld is a German name meaning "field of roses" and may refer to:
Contraction of we are. we're we are making good progress focusing and strengthening the portfolio, which will set the stage for accelerating our growth." Net revenues for the second quarter grew 3.4% to $8.6 billion despite a negative 1.1 percentage point impact from divestitures and an unfavorable currency impact of 0.4 percentage points. Organic net revenue(1) growth was 4.9% led by double-digit dou·ble-dig·it adj. Being between 10 and 99 percent: double-digit inflation. gains in Eastern Europe Eastern Europe The countries of eastern Europe, especially those that were allied with the USSR in the Warsaw Pact, which was established in 1955 and dissolved in 1991. and Latin America Latin America, the Spanish-speaking, Portuguese-speaking, and French-speaking countries (except Canada) of North America, South America, Central America, and the West Indies. as well as solid growth in North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. . Product mix contributed 3.6 percentage points to organic net revenue growth behind brands such as Wheat Thins Wheat Thins are a popular baked snack cracker found in North America and distributed by Nabisco, a subsidiary of Kraft Foods Global Inc.. The product's slogan 'Great Taste...Big Crunch' was developed by Brian Eaton. , South Beach Diet, Jacobs coffee and Cote d'Or chocolate chocolate, general term for the products of the seeds of the cacao or chocolate tree, used for making beverages or confectionery. The flavor of chocolate depends not only on the quality of the cocoa nibs (the remainder after the seeds are fermented, dried, and . The impact of price increases added 0.4 percentage points to growth while ongoing volume added 0.9 percentage points. The ongoing volume growth of 0.9% included gains in Oscar Mayer Oscar Mayer is an American meat and cold cut production company, now owned by Kraft Foods, known for its hot dogs, bologna, bacon and Lunchables products. German immigrant Oscar Ferdinand Mayer meats and Maxwell House Maxwell House is a brand of coffee manufactured by a like-named division of Kraft Foods. It is named in honor of the Maxwell House Hotel in Nashville, Tennessee. For many years until the late 1980s it was the largest-selling coffee in the U.S. and is currently (ca. coffee. Volume growth also included an estimated one percentage point benefit from the shift in timing of Easter Easter [A.S. Eastre, name of a spring goddess], chief Christian feast, commemorating the resurrection of Jesus after his crucifixion. In the West, Easter is celebrated on the Sunday following the full moon next after the vernal equinox (see calendar); thus, it shipments versus last year. In addition, the impact of product item pruning pruning, the horticultural practice of cutting away an unwanted, unnecessary, or undesirable plant part, used most often on trees, shrubs, hedges, and woody vines. and the discontinuation dis·con·tin·u·a·tion n. A cessation; a discontinuance. Noun 1. discontinuation - the act of discontinuing or breaking off; an interruption (temporary or permanent) discontinuance of select product lines represented approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 2% of prior year volume.
Items Affecting Diluted EPS Comparability
------------------------------------------
Second Quarter Six Months
------------------ ------------------
Growth Growth
2006 2005 (%) 2006 2005 (%)
----- ------ ----- ----- ------ -----
Reported Diluted EPS $0.41 $0.28 46.4% $1.02 $0.70 45.7%
Asset Impairment, Exit, and
Implementation Costs 0.10 0.02 0.19 0.09
(Gains)/Losses on Sales of
Businesses (0.04)
(Favorable) resolution of the
Altria Group, Inc. 1996-1999
IRS Tax Audit (0.24)
Discontinued Operations 0.17 0.16
----- ------ ------ ------
Diluted EPS excluding above
items $0.51 $0.47 8.5% $0.97 $0.91 6.6%
During the quarter, $243 million ($162 million after-tax af·ter-tax also af·ter·tax adj. Relating to or being that which remains after payment, especially of income taxes: after-tax profits. or $0.10 per diluted share) in asset impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. , exit, and implementation costs were incurred primarily related to the announced closure of three manufacturing facilities and ongoing streamlining efforts. For comparison, in the second quarter 2005, the Company incurred $55 million ($37 million after-tax or $0.02 per diluted share) in asset impairment, exit, and implementation costs. Operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. decreased 5.8% to $1.2 billion. However, excluding the asset impairment, exit, and implementation costs; and gains/losses on the sale of businesses, operating income increased 9.3% and operating income margin increased to 16.6% from 15.7%. These gains were driven by net revenue growth and cost savings. Higher packaging and energy costs partially offset the expansion in operating income margins. The Company's tax rate in the second quarter 2006 was 33.7%. Excluding the tax effects of asset impairment, exit, and implementation costs; and gains/losses on the sale of businesses, the effective tax rate in the second quarter 2006 was 33.4%. This compares to an effective tax rate of 29.5% in the second quarter last year. Second-quarter 2006 reported net earnings were $682 million, an increase of 44.5% versus last year, while reported diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of were $0.41, up 46.4%. Excluding asset impairment, exit, and implementation costs; the gains/losses on the sale of businesses; and earnings from discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. , net earnings for the quarter grew 7.0% and diluted earnings per share increased 8.5% to $0.51. The Company continues to make progress on its cost restructuring program. Year-to-date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. , seven facility closures have been announced and various headquarter head·quar·ter v. head·quar·tered, head·quar·ter·ing, head·quar·ters Usage Problem v.tr. To provide with headquarters: overhead reduction programs and initiatives to simplify internal business practices have been implemented. By the end of the second quarter, ongoing savings for the program to date totaled approximately $385 million, up from approximately $260 million at the end of 2005. During the quarter, the Company repurchased 9.9 million Class A shares at a total cost of $313 million, bringing year-to-date share repurchases Share Repurchase A program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. This is usually an indication that the company's management thinks the shares are undervalued. to 20.5 million Class A shares at a total cost of $625 million. As of June June: see month. 30, 2006, $1.6 billion remained under the Company's $2.0 billion share repurchase plan share repurchase plan A corporation's plan for buying back a predetermined number of its own shares in the open market. Institution of a share repurchase plan derives from management's view that the company has limited outside investment opportunities and . 2006 Outlook Today, the Company is increasing its EPS guidance for 2006 to $1.78 to $1.83, or by $0.23 per diluted share, to reflect a projected third quarter $0.13 one-time gain related to Kraft's pending redemption The liberation of an estate in real property from a mortgage. Redemption is the process by which land that has been mortgaged or pledged is bought back or reclaimed. It is accomplished through a payment of the debt owed or a fulfillment of the other conditions. of its interest in United Biscuits and $0.10 in lower asset impairment, exit, and implementation costs. Guidance now includes $0.40 per diluted share of charges attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to the Company's restructuring program and other impairment charges (versus $0.50 previously) and a loss of $0.07 per diluted share for divestiture The breakup of AT&T. By federal court order, AT&T divested itself on January 1, 1984 of its 23 operating companies, which became known as the Regional Bell Operating Companies (RBOCs). of the pet snacks business, partially offset by the projected $0.13 per diluted share one-time gain on the pending redemption of interest in United Biscuits and $0.24 per diluted share for the favorable resolution of the Altria Group “Philip Morris” redirects here. For the racecar driver, see Philip Morris (autoracer). Altria Group, Inc. (NYSE: MO) (previously named Philip Morris Companies Inc. , Inc. 1996-1999 IRS An abbreviation for the Internal Revenue Service, a federal agency charged with the responsibility of administering and enforcing internal revenue laws. Tax Audit. The Company expects charges attributable to the restructuring program and other impairment charges to total approximately $1 billion in 2006 (versus the $1.3 billion estimated previously) due to the timing of program announcements. There is no change to the full program. In addition, there is no change to the Company's expectation that cumulative savings will reach approximately $560 million by the end of 2006. In addition, the Company confirmed its guidance for organic net revenue growth at 3% or greater in 2006 on a comparable 52-week basis, or approximately 1% reflecting the impact of one less week. The Company continues to expect its full year effective tax rate to average 33% excluding charges for asset impairment, exit, and implementation costs; the impacts of the IRS tax audit resolution; and one-time gains and losses related to acquisitions and divestitures. Expectations for discretionary cash flow Discretionary cash flow Cash flow that is available after the funding of all positive net present value (NPV) capital investment projects; it is available for paying cash dividends, repurchasing common stock, retiring debt, and so on. (2) including the proceeds from announced divestitures are also unchanged at $3.4 billion. Results by Segment The following results by segment are presented in the manner described in the business segment reporting Business segment reporting Reporting the results of the separate divisions or subsidiaries of a business. structure discussion in the Company's Form 8-K Form 8-K The form required by the SEC when a publicly held company incurs any event that might affect its financial situation or the share value of its stock. Form 8-K See 8-K. filing dated March 27, 2006. Reported operating companies operating company A business that engages in transactions with outsiders. income (OCI OCI Oracle Call Interface OCI Organisation de la Conférence Islamique (French: Organization of the Islamic Conference) OCI Other Comprehensive Income OCI Office of the Commissioner of Insurance OCI Organizational Conflict of Interest ) is defined as operating income before corporate expenses and amortization of intangibles Property that is a "right" such as a patent, Copyright, or trademark, or one that is lacking physical existence, such as good will. . Management believes this measure helps investors analyze an·a·lyze v. 1. To examine methodically by separating into parts and studying their interrelations. 2. To separate a chemical substance into its constituent elements to determine their nature or proportions. 3. business segment performance and trends. For a reconciliation of OCI to operating income, see Schedules 1 and 6 of the attached financial schedules.
Summary of Reported Results By Segment
----------------------------------------
(percent change from prior year)
Second Quarter
----------------------------
Net
Volume Revenue OCI
--------- --------- --------
Beverages (2.1)% 6.2% (8.7)%
Cheese & Foodservice (0.5) 0.5 (22.5)
Convenient Meals 4.2 7.3 0.5
Grocery (15.8) (4.8) 5.4
Snacks & Cereals 2.2 6.2 13.0
North America (2.5) 3.4 (1.5)
European Union 1.3 (3.1) (39.4)
Developing Markets, Oceania & North Asia (0.1) 14.2 (6.7)
Total Kraft (1.7)% 3.4% (6.1)%
The following table presents the 2006 segment growth rates Growth Rates The compounded annualized rate of growth of a company's revenues, earnings, dividends, or other figures. Notes: Remember, historically high growth rates don't always mean a high rate of growth looking into the future. on an ongoing basis, which excludes the impact of divestitures; asset impairment, exit, and implementation costs; and gains/losses on the sale of businesses. Also presented is organic net revenue growth, which excludes acquisitions; the impact of divestitures; currency impact; and asset impairment, exit, and implementation costs. Further information on the impact of these items, including reference to comparable GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). measures, is included in the attached financial schedules. A quantitative quantitative /quan·ti·ta·tive/ (kwahn´ti-ta?tiv) 1. denoting or expressing a quantity. 2. relating to the proportionate quantities or to the amount of the constituents of a compound. reconciliation of all non-GAAP measures for the Q2 2006 earnings release can be found in the Investors section of www.kraft.com by clicking "Financial News and Events," then "Financial News Releases".
Summary of Ongoing Results and Organic Net Revenue Growth By Segment
----------------------------------------------------------------------
(percent change from prior year)
Second Quarter
----------------------------------
Organic
Ongoing Net
Ongoing Net Ongoing Revenue
Volume Revenue OCI Growth
------- -------- ------- --------
Beverages (2.1)% 6.2% (3.1)% 5.6%
Cheese & Foodservice 1.2 1.0 5.6 (0.3)
Convenient Meals 4.2 7.3 21.1 6.9
Grocery 0.9 3.9 5.9 2.8
Snacks & Cereals 2.5 6.6 12.4 6.0
North America 1.0 4.9 8.9 4.0
European Union 1.3 (3.1) 4.8 3.5
Developing Markets, Oceania & North
Asia (0.1) 14.8 8.8 12.2
Total Kraft 0.9% 4.5% 8.4% 4.9%
North America Beverages reported an increase in net revenues for the second quarter of 6.2% to $819 million. Organic net revenue growth of 5.6% reflected favorable product mix that was partially offset by lower volume due to ready-to-drink product line discontinuations, particularly in Canada Canada (kăn`ədə), independent nation (2001 pop. 30,007,094), 3,851,787 sq mi (9,976,128 sq km), N North America. Canada occupies all of North America N of the United States (and E of Alaska) except for Greenland and the French islands of . In Coffee, double-digit revenue growth was driven by solid volume gains in Maxwell House, ongoing strength in Gevalia Gevalia, a wholly owned subsidiary of Kraft Foods, is the largest coffee roastery in Scandinavia. It is located in Gävle (Gevalia in Latin). Gevalia was introduced in 1853 in Sweden by Victor Theodore Engwall & Co. and Starbucks super premium coffees, as well as the introduction of the Tassimo Tassimo is a consumer hot beverage system that prepares one-cup servings of espresso, regular coffee, tea, hot chocolate, and various other coffee drinks, notably those including milk such as latte or cappuccino. hot beverage system. Powdered pow·der n. 1. A substance consisting of ground, pulverized, or otherwise finely dispersed solid particles. 2. Any of various preparations in the form of powder, as certain cosmetics and medicines. 3. beverages posted solid revenue growth behind single-serve initiatives including new Kool-Aid Singles and additional flavors Flavors - Lisp with object-oriented features by D. Weinreb and D.A. Moon <moon@cambridge.apple.com>, 1980. ["Object-Oriented Programming with Flavors", D.A. Moon, SIGPLAN Notices 21(11):1-8 (OOPSLA '86) (Nov 1986)]. of Crystal Light On-The-Go. Ready-to-drink beverage revenues were down slightly as the introduction of Capri Sun Capri Sun is a brand of juice drink owned by the German Company WILD (Chairman Dr. Hans-Peter Wild) sold in silver pouches. Kraft Foods is a licensed production partner, and owns the exclusive rights for North America. Roarin' Waters was more than offset by lower Fruit20 flavored fla·vor n. 1. Distinctive taste; savor: a flavor of smoke in bacon. See Synonyms at taste. 2. water volumes and the discontinuation of certain product lines. Reported OCI of $115 million was down 8.7% and included $7 million in incremental Additional or increased growth, bulk, quantity, number, or value; enlarged. Incremental cost is additional or increased cost of an item or service apart from its actual cost. asset impairment, exit, and implementation costs. Ongoing OCI was down 3.1% reflecting favorable product mix which was more than offset by investments behind the introduction of the Tassimo hot beverage system and higher packaging, energy, and green coffee costs. North America Cheese & Foodservice The foodservice (or food service) industry (US English; catering industry in British English) encompasses those places, institutions, and companies responsible for any meal eaten away from home. reported net revenues were up 0.5% to $1.50 billion. Organic net revenue growth was down slightly reflecting lower pricing related to declines in cheese costs. Volume gains benefited from the shift in timing of Easter shipments, market share gains in several cheese segments, and new products including Kraft Crumbles natural cheese. Solid volume gains in cheese were partially offset by the discontinuation of lower margin product lines in the Foodservice business. Reported OCI was down 22.5% to $179 million due to a $55 million increase in asset impairment, implementation and exit costs as well as a $10 million loss primarily related to the sale of certain Foodservice assets. Ongoing OCI grew 5.6% reflecting lower cheese costs, improved product mix, and volume growth partially offset by lower prices and higher marketing spending. North America Convenient Meals reported net revenues grew 7.3% to $1.23 billion. Organic net revenue growth of 6.9% was driven by volume growth from new products, favorable product mix, and price increases. Double-digit revenue growth in Oscar Mayer meats was driven by volume gains, higher prices, and positive mix in cold cuts, due to continued market share gains for Oscar Mayer Deli Shaved shave v. shaved, shaved or shav·en , shav·ing, shaves v.tr. 1. a. To remove the beard or other body hair from, with a razor or shaver: meats, and Oscar Mayer breakfast meats. Revenue growth in the quarter also benefited from the ongoing growth of Lunchables Lunchables are Oscar Mayer/Kraft combinations of food that are packaged and aimed at children's lunches. In late 2005 they were added to Sensible Solution's line of products to make them more healthy. lunch combinations and the introduction of Kraft Easy Mac macaroni macaroni: see pasta. and cheese in a microwaveable cup. Reported OCI grew 0.5% to $185 million including $38 million of higher asset impairment, implementation and exit costs versus the prior year. Ongoing OCI grew 21.1% driven by volume growth, higher meat pricing and lower cheese costs that were partially offset by higher packaging and energy costs. North America Grocery reported net revenues declined 4.8% to $790 million including an 8.7 percentage point impact from divestitures. Organic net revenues were up 2.8% driven by the shift in Easter-related shipments of Miracle Whip Miracle Whip is a salad dressing and sandwich spread that was invented in Salem, Illinois at Max Crosset's Cafe. It was originally called Max Crossett's X-tra Fine Salad Dressing. dressings, Kraft mayonnaise and Jell-O dry packaged desserts. Good Seasons liquid salad dressings continued to perform well, also contributing to organic growth. Reported OCI increased 5.4% to $294 million driven by strong product mix and higher net prices partially offset by higher packaging and energy costs. North America Snacks & Cereals reported net revenues grew 6.2% to $1.61 billion. Organic net revenue growth of 6.0% was driven by a combination of volume growth, favorable product mix and higher pricing. Growth in crackers led revenue gains behind new varieties of Wheat Thins including Parmesan Basil and continued momentum in Triscuit Triscuit is a brand of Nabisco snack crackers which take the form of square baked whole wheat wafers. It was invented in 1902, by the Shredded Wheat Company, in Niagara Falls, New York. snack crackers. Cookie cookie File or part of a file put on a Web user's hard disk by a Web site. Cookies are used to store registration data, to make it possible to customize information for visitors to a Web site, to target Web advertising, and to keep track of the products a user wishes to revenues were up slightly as continued growth of Nabisco 100 Calorie calorie, abbr. cal, unit of heat energy in the metric system. The measurement of heat is called calorimetry. The calorie, or gram calorie, is the quantity of heat required to raise the temperature of 1 gram of pure water 1°C;. Packs and whole grain Newtons was partially offset by lower Oreo revenue due to strong year-ago comparisons. Cereals net revenues were up slightly as the success of new Grape Nuts Trail Mix Crunch (1) To process data. See number crunching. (2) To compress data. See data compression. 1. (jargon) crunch - To process, usually in a time-consuming or complicated way. cereal cereal or grain Any grass yielding starchy seeds suitable for food. The most commonly cultivated cereals are wheat, rice, rye, oats, barley, corn, and sorghum. As human food, cereals are usually marketed in raw grain form or as ingredients of food products. and ongoing momentum of the Post Honey Bunches of Oats Honey Bunches of Oats is a cold cereal introduced in 1989 by Post Cereals, a subdivision of Kraft Foods. The cereal is made up of three kinds of flakes and crunchy oat clusters baked with a touch of honey. It is also a good source of whole grain. cereal line were largely offset by lower revenues in kids' cereals. Snack and cereal bars contributed strong double-digit growth driven by the continued success of South Beach Diet cereal bars. Reported OCI was up 13% to $269 million driven by volume growth, favorable product mix, higher prices, and lower marketing spending due to the timing of spending. These gains more than offset incremental investments in health and wellness initiatives as well as higher packaging and energy costs. European Union European Union (EU), name given since the ratification (Nov., 1993) of the Treaty of European Union, or Maastricht Treaty, to the European Community reported net revenues fell 3.1% to $1.54 billion, but increased 3.5% excluding the impacts of unfavorable currency. The organic net revenue growth reflects positive product mix from new products, volume gains in Chocolate and Coffee as well as price increases. In Coffee, revenues were up due to positive product mix driven by the expansion of Tassimo, the benefits of price increases, and volume growth from gains in Jacobs in Germany Germany (jûr`mənē), Ger. Deutschland, officially Federal Republic of Germany, republic (2005 est. pop. 82,431,000), 137,699 sq mi (356,733 sq km). and across most markets in Central Europe Central Europe is the region lying between the variously and vaguely defined areas of Eastern and Western Europe. In addition, Northern, Southern and Southeastern Europe may variously delimit or overlap into Central Europe. . In Chocolate, revenue growth was primarily driven by volume and mix gains related to strong growth of Milka and premium Cote d'Or chocolates. In Cheese, positive product mix in Philadelphia Philadelphia, ancient cities Philadelphia, name of several ancient cities. One was in Lydia, W Asia Minor (now W Turkey). At the foot of Mt. Tmolus and near the location of modern Alaşehir, it was founded in the 2d cent. B.C. cream cheese was more than offset by unfavorable volume and increased promotional spending. Reported OCI decreased 39.4% to $86 million due to $64 million of higher asset impairment, implementation and exit costs versus the prior year. Ongoing OCI grew 4.8% driven by volume growth, positive product mix and lower overhead expenses that were partially offset by incremental investments in the Tassimo hot beverage system. Ongoing OCI growth also reflected an $18 million gain from the sale of a facility and a negative $14 million impact from currency. Developing Markets, Oceania Oceania (ōshēăn`ēə, –ā`nēə) or Oceanica (ōshēăn`ĭkə) & North Asia North Asia or Northern Asia is a subregion of Asia. The most common definition of the term is;
n the firing bakes, or stages (referred to as low, medium, and high), during the fusing of dental porcelain preceding the final, or glaze, bake. biscuit in dogs, a grayish-yellow coat color. growth in Venezuela Venezuela (vĕnəzwā`lə, Span. vānāswā`lä), officially the Bolivarian Republic of Venezuela, republic (2005 est. pop. 25,375,000), 352,143 sq mi (912,050 sq km), N South America. , and Tang tang, in zoology tang: see butterfly fish. in Mexico Mexico, city, Mexico Mexico or Mexico City, Span. Ciudad de México (Méjico), city (1990 pop. 8,236,960; 1991 met. area est. 20,899,000), central Mexico, capital and largest city of Mexico. , were partially offset by the impact of product discontinuations in Mexico. In EEMA, revenues rose significantly due to volume gains across all key markets including Kraft cheese in the Middle East and Africa, strong product mix behind Jacobs and Carte Noire soluble soluble /sol·u·ble/ (sol´u-b'l) susceptible of being dissolved. sol·u·ble adj. Capable of being dissolved, especially easily dissolved. coffees in Russia Russia, officially the Russian Federation, Rus. Rossiya, republic (2005 est. pop. 143,420,000), 6,591,100 sq mi (17,070,949 sq km). and Ukraine Ukraine (y  `krān, ykrān`), Ukr. Ukraina, republic (2005 est. pop. , and the benefits of pricing actions. In Asia,
revenue was down slightly as pricing in China and South East Asia East AsiaA region of Asia coextensive with the Far East. East Asian adj. & n. was offset by cheese category weakness in Australia Australia (ôstrāl`yə), smallest continent, between the Indian and Pacific oceans. With the island state of Tasmania to the south, the continent makes up the Commonwealth of Australia, a federal parliamentary state (2005 est. pop. . Reported OCI was down 6.7% to $98 million due to a $17 million increase in asset impairment, implementation and exit costs. Ongoing OCI was up 8.8% reflecting strong revenue growth while absorbing ab·sorb tr.v. ab·sorbed, ab·sorb·ing, ab·sorbs 1. To take (something) in through or as through pores or interstices. 2. To occupy the full attention, interest, or time of; engross. significant incremental investments in marketing and infrastructure, as well as a $16 million benefit from the recovery of receivables Receivables An asset designation applicable to all debts, unsettled transactions or other monetary obligations owed to a company by its debtors or customers. Receivables are recorded by a company's accountants and reported on the balance sheet, and they and include all debts owed in the second quarter of 2005. The Company will host a conference call for members of the investment community to review its results at 5:00 p.m. ET on July July: see month. 24, 2006. Access to a live audio webcast is available at www.kraft.com and a replay of the conference call will be available on the Company's web site. Forward-Looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. This press release contains projections of future results and other forward-looking statements. One can identify these forward-looking statements by use of words such as "strategy," "expects," "plans," "anticipates," "believes," "will," "continues," "estimates," "intends," "projects," "goals," "targets" and other words of similar meaning. One can also identify them by the fact that they do not relate strictly to historical or current facts. These statements are based on the Company's current assumptions and estimates and are subject to risks and uncertainties. In connection with the "safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. " provisions of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995, the Company is hereby identifying important factors that could cause actual results and outcomes to differ materially from those contained in any forward looking statement made by or on behalf of the Company. These factors include: (a) the effect on the Company of competition in its markets, changes in consumer preferences and demand for its products, including diet trends, changing prices for its raw materials and local economic and market conditions; (b) the Company's continued ability to promote brand equity successfully, to anticipate and respond to new consumer trends, to develop new products and markets, to broaden brand portfolios, to compete effectively with lower priced products in a consolidating environment at the retail and manufacturing levels and to improve productivity; (c) the Company's ability to consummate To carry into completion; to fulfill; to accomplish. A Common-Law Marriage is consummated when the parties live in a manner intended to bring about public recognition of their relationship as Husband and Wife. and successfully integrate acquisitions and to realize the cost savings and improved asset utilization utilization, n 1. the extent to which a given group uses a particular service in a specified period. Although usually expressed as the number of services used per year per 100 or per 1000 persons eligible for the service, utilization rates may be contemplated by its restructuring program; (d) the impact of gains or losses, or lost operating income, from the sales of businesses that are less of a strategic fit within the Company's portfolio; (e) the effects of foreign economies, changes in tax requirements and currency movements; (f) fluctuations in levels of customer inventories and credit and other business risks related to the operations of the Company's customers; (g) the Company's access to credit markets, borrowing costs and credit ratings, which may in turn be influenced by the credit ratings of Altria Group, Inc.; (h) the Company's benefit expense, which is subject to the investment performance of pension plan assets, interest rates and cost increases for medical benefits offered to employees and retirees; (i) the impact of recalls if products become adulterated a·dul·ter·ate tr.v. a·dul·ter·at·ed, a·dul·ter·at·ing, a·dul·ter·ates To make impure by adding extraneous, improper, or inferior ingredients. adj. 1. Spurious; adulterated. 2. Adulterous. or misbranded mis·brand tr.v. mis·brand·ed, mis·brand·ing, mis·brands To brand or label misleadingly or fraudulently. Adj. 1. , liability if product consumption causes injury, ingredient
An ingredient is something that forms part of a mixture (in a general sense). disclosure and labeling laws and regulations, potential claims relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc false or deceptive de·cep·tive adj. Deceptive or tending to deceive. de·cep  tive·ness n. advertising under consumer protection or other laws and the possibility
that consumers could lose confidence in the safety and quality of
certain food products; (j) consumer concerns regarding genetically
modified organisms ge·net·i·cal·ly modified organismn. Abbr. GMO An organism whose genetic characteristics have been altered by the insertion of a modified gene or a gene from another organism using the techniques of genetic engineering. and the health implications of obesity obesity, condition resulting from excessive storage of fat in the body. Obesity has been defined as a weight more than 20% above what is considered normal according to standard age, height, and weight tables, or by a complex formula known as the body mass index. and trans fatty acids trans fatty acid An unsaturated fatty acid–present in minimal amounts in animal fat–prepared by hydrogenation, which ↑ serum cholesterol Cardiovascular disease ↑ TFAs have a relative risk of 1. ; and (k) potential short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. volatility Volatility 1. A statistical measure of the tendency of a market or security to rise or fall sharply within a period of time. 2. A variable in option pricing formulas that denotes the extent to which the return of the underlying asset will fluctuate between now and the in the trading volume Trading volume The number of shares transacted every day. As there is a seller for every buyer, one can think of the trading volume as half of the number of shares transacted. That is, if A sells 100 shares to B, the volume is 100 shares. and market price of the Company's stock as a result of a spin-off The situation that arises when a parent corporation organizes a subsidiary corporation, to which it transfers a portion of its assets in exchange for all of the subsidiary's capital stock, which is subsequently transferred to the parent corporation's shareholders. of the Company from Altria Group, Inc. Developments in any of these areas could cause the Company's results to differ materially from results that have been or may be projected by or on behalf of the Company. The Company cautions that the foregoing list of important factors is not exclusive. For additional information on these and other factors that could affect the Company's forward-looking statements, see the Company's filings with the Securities and Exchange Commission, including the Company's most recently filed Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. and subsequent reports on Form 10-Q Form 10-Q See 10-Q. and 8-K. Any forward looking statements in this press release are made as of the date hereof here·of adv. Of this. hereof Adverb Formal or law of or concerning this Adv. 1. hereof - of or concerning this; "the twigs hereof are physic" . The Company does not undertake to update any forward looking statement. Non-GAAP Financial Measures The Company reports its financial results in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting (GAAP). Management believes that certain non-GAAP measures and corresponding ratios that it uses to manage the business provide additional meaningful comparisons between current results and results in prior operating periods. More specifically, management believes these non-GAAP measures reflect fundamental business performance because they exclude certain items that affect comparability of results. The non-GAAP measures that the Company is using to present operating results exclude certain items, such as asset impairment, exit, and implementation costs primarily related to a restructuring program that began in the second quarter of 2004 (the "Restructuring Program"). These restructuring charges restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. include separation-related costs, asset write-downs, and other costs related to the implementation of the Restructuring Program. Other excluded items pertain to pertain to verb relate to, concern, refer to, regard, be part of, belong to, apply to, bear on, befit, be relevant to, be appropriate to, appertain to the impact of divested businesses; asset impairment charges on certain long-lived long-lived adj. 1. Having a long life: a long-lived aunt. 2. Lasting a long time; persistent: a long-lived rumor. 3. assets; gains and losses on the sales of businesses; the favorable resolution of Altria Group, Inc.'s 1996-1999 IRS Tax Audit in 2006; and earnings from discontinued operations in 2005. The Company also uses organic net revenue and operating companies income (OCI) and corresponding growth ratios as non-GAAP measures. Organic net revenue is defined as net revenue excluding acquisitions; the impact of divestitures; currency impact; and asset impairment, exit, and implementation costs. Management believes this measure reflects revenue on a go-forward basis and provides improved comparability of results. Reported operating companies income (OCI) is defined as operating income before corporate expenses and amortization of intangibles. Management uses ongoing OCI to evaluate segment performance and allocate To reserve a resource such as memory or disk. See memory allocation. resources. Ongoing OCI at a segment level excludes the impact of divestitures; asset impairment, exit, and implementation costs; and gains/losses on the sales of businesses. Management believes this measure helps investors analyze business segment performance and trends. Ongoing OCI on a total-Company (consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: ) basis does not exclude the impact of divestitures. See the Tables below for supplemental financial data and corresponding reconciliations to GAAP financial measures for the quarter and six months ended June 30, 2006, and June 30, 2005. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the Company's reported results prepared in accordance with GAAP. In addition, the non-GAAP measures the Company is using may differ from non-GAAP measures that other companies use. (1) The Company's top-line guidance measure has been redefined in 2006 to be organic net revenue, which excludes acquisitions; the impact of divestitures; currency impact; and asset impairment, exit, and implementation costs. This measure differs from the previous ongoing constant currency revenue measure by also excluding the impact of acquisitions. Management believes this measure better reflects revenue on a go-forward basis and provides improved comparability of results. (2) The Company defines discretionary cash flow as net cash provided by operating activities less capital expenditures, and utilizes this measure for its cash flow guidance because it believes it more fully reflects both ongoing cash generation and usage activities. Discretionary cash flow is available to finance acquisitions, repay maturing debt, and distribute to shareholders.
KRAFT FOODS INC.
and Subsidiaries Schedule 1
Condensed Statements of Earnings
For the Quarters Ended June 30,
(in millions, except per share data)
(Unaudited)
2006 2005 % Change
-------------------- ---------
Net revenues (a) $8,619 $8,334 3.4 %
Cost of sales (b) 5,435 5,275 3.0 %
--------------------
Gross profit 3,184 3,059 4.1 %
Marketing, administration
and research costs (c) 1,724 1,724
Asset impairment and exit costs 226 29
(Gains)/Losses on sales of businesses 8 1
--------------------
Operating companies income 1,226 1,305 (6.1)%
Amortization of intangibles 3 2
General corporate expenses 46 53
--------------------
Operating income 1,177 1,250 (5.8)%
Interest and other debt expense, net 147 174
--------------------
Earnings from continuing operations
before income taxes and minority
interest 1,030 1,076 (4.3)%
Provision for income taxes 347 316
--------------------
Earnings from continuing operations
before minority interest 683 760 (10.1)%
Minority interest in earnings from
continuing operations, net 1 2
--------------------
Earnings from continuing operations $ 682 $ 758 (10.0)%
--------------------
Earnings from discontinued operations,
net of income tax - 11
Loss on sale of discontinued
operations, net of income tax - (297)
--------------------
Net earnings $ 682 $ 472 44.5 %
====================
Basic and diluted earnings per share:
Continuing operations $ 0.41 $ 0.45 (8.9)%
Discontinued operations - -
Loss on sale of discontinued operations - (0.17)
--------------------
Net earnings $ 0.41 $ 0.28 46.4 %
====================
Weighted average number of
shares outstanding - Basic 1,647 1,691 (2.6)%
- Diluted 1,656 1,698 (2.5)%
(a) Includes implementation costs of $1 in 2005
(b) Includes implementation costs of $5 in 2006 and $11 in 2005
(c) Includes implementation costs of $12 in 2006 and $14 in 2005
KRAFT FOODS INC.
and Subsidiaries Schedule 2
Net earnings and Diluted Earnings Per Share
For the Quarters Ended June 30,
($ in millions, except per share data)
(Unaudited)
Net Diluted
Earnings EPS
--------- ---------
2006 Earnings from continuing operations $ 682 $ 0.41
2005 Earnings from continuing operations 758 0.45
% Change (10.0)% (8.9)%
Reconciliation:
---------------
2005 Earnings from continuing operations $ 758 $ 0.45
- 2006 Asset impairment, exit & implementation
costs - Restructuring (162) (0.10)
- 2005 Asset impairment, exit & implementation
costs - Restructuring 37 0.02
- Change in tax rate (44) (0.03)
- Shares outstanding - 0.01
- Operations 93 0.06
--------- ---------
2006 Earnings from continuing operations $ 682 $ 0.41
--------- ---------
2006 Earnings from discontinued operations - -
--------- ---------
2006 Net earnings $ 682 $ 0.41
========= =========
KRAFT FOODS INC.
and Subsidiaries Schedule 3
Volume By Business
Segments
For the Quarters Ended June 30, (a)
(pounds in millions)
(Unaudited)
Cheese Kraft
& Conven- Snacks North
Bever- Food- ient & America
ages service Meals Grocery Cereals Commercial
------ ------- ------- ------- ------- ----------
Volume
2006 Volume 915 773 627 566 684 3,565
2005 Volume 935 777 602 672 669 3,655
% Change (2.1)% (0.5)% 4.2% (15.8)% 2.2% (2.5)%
Divested Businesses:
- Impact of
divestitures -
2006 - (5) - - - (5)
- Impact of
divestitures -
2005 - (18) - (111) (2) (131)
Ongoing Volume
2006 Volume 915 768 627 566 684 3,560
2005 Volume 935 759 602 561 667 3,524
% Change (2.1)% 1.2% 4.2% 0.9% 2.5% 1.0%
(a) Prior period results have been restated for the new segment
structure.
Developing
Markets, Kraft
European Oceania & Int'l Total
Union North Asia Commercial Kraft
-------- ---------- ---------- ------
Volume
2006 Volume 545 727 1,272 4,837
2005 Volume 538 728 1,266 4,921
% Change 1.3% (0.1)% 0.5% (1.7)%
Divested Businesses:
- Impact of divestitures -
2006 - - - (5)
- Impact of divestitures -
2005 - - - (131)
Ongoing Volume
2006 Volume 545 727 1,272 4,832
2005 Volume 538 728 1,266 4,790
% Change 1.3% (0.1)% 0.5% 0.9%
(a) Prior period results have been restated for the new segment
structure.
KRAFT FOODS INC.
and Subsidiaries Schedule 4
Net Revenues by
Business Segments
For the Quarters Ended June 30, (a)
($ in millions)
(Unaudited)
Cheese Kraft
& Conven- Snacks North
Bever- Food- ient & America
ages service Meals Grocery Cereals Commercial
------ ------- ------- ------- ------- ----------
2006 Net Revenues $ 819 $1,495 $1,230 $ 790 $1,611 $5,945
2005 Net Revenues 771 1,487 1,146 830 1,517 5,751
% Change 6.2% 0.5% 7.3% (4.8)% 6.2% 3.4%
Reconciliation:
---------------
2005 Net Revenues $ 771 $1,487 $1,146 $ 830 $1,517 $5,751
- Impact of
divestitures -
2006 - 3 - - - 3
- Impact of
divestitures -
2005 - (10) - (70) (7) (87)
- Implementation
costs - 2005 - - - - 1 1
- Currency impact 5 19 5 9 10 48
- Operations 43 (4) 79 21 90 229
------ ------- ------- ------- ------- ----------
2006 Net Revenues $ 819 $1,495 $1,230 $ 790 $1,611 $5,945
====== ======= ======= ======= ======= ==========
(a) Prior period results have been restated for the new segment
structure.
Developing
Markets, Kraft
European Oceania & Int'l Total
Union North Asia Commercial Kraft
-------- ---------- ---------- -------
2006 Net Revenues $1,539 $1,135 $2,674 $8,619
2005 Net Revenues 1,589 994 2,583 8,334
% Change (3.1)% 14.2% 3.5% 3.4%
Reconciliation:
---------------
2005 Net Revenues $1,589 $ 994 $2,583 $8,334
- Impact of divestitures -
2006 - - - 3
- Impact of divestitures -
2005 - (5) (5) (92)
- Implementation costs - 2005 - - - 1
- Currency impact (105) 25 (80) (32)
- Operations 55 121 176 405
-------- ---------- ---------- -------
2006 Net Revenues $1,539 $1,135 $2,674 $8,619
======== ========== ========== =======
(a) Prior period results have been restated for the new segment
structure.
KRAFT FOODS INC.
and Subsidiaries Schedule 5
Operating Companies Income by Business Segments
For the Quarters Ended June 30, (a)
($ in millions)
(Unaudited)
Cheese Kraft
& Conven- Snacks North
Bever- Food- ient & America
ages service Meals Grocery Cereals Commercial
------ ------- ------- ------- ------- ----------
2006 Operating
Companies Income $ 115 $ 179 $ 185 $ 294 $ 269 $1,042
2005 Operating
Companies Income 126 231 184 279 238 1,058
% Change (8.7)% (22.5)% 0.5% 5.4% 13.0% (1.5)%
Reconciliation:
---------------
2005 Operating
Companies Income $ 126 $ 231 $ 184 $ 279 $ 238 $1,058
- Impact of
divestitures -
2005 - (1) - 4 (1) 2
- Asset impairment
and exit costs -
2005 1 1 - 3 - 5
- Implementation
costs - 2005 2 1 1 - 14 18
- (Gains)/Losses
on sales of
businesses - 2005 - (1) - 2 - 1
------ ------- ------- ------- ------- ----------
3 - 1 9 13 26
------ ------- ------- ------- ------- ----------
- Asset impairment
and exit costs -
2006 (7) (60) (35) (8) (10) (120)
- Implementation
costs - 2006 (3) 3 (4) (3) (3) (10)
- Gains/(Losses)
on sales of
businesses - 2006 - (8) - - - (8)
------ ------- ------- ------- ------- ----------
(10) (65) (39) (11) (13) (138)
------ ------- ------- ------- ------- ----------
- Currency impact - 3 1 2 2 8
- Operations (4) 10 38 15 29 88
------ ------- ------- ------- ------- ----------
2006 Operating
Companies Income $ 115 $ 179 $ 185 $ 294 $ 269 $1,042
====== ======= ======= ======= ======= ==========
(a) Prior period results have been restated for the new segment
structure.
Developing
Markets, Kraft
European Oceania & Int'l Total
Union North Asia Commercial Kraft
-------- ---------- ---------- -------
2006 Operating Companies Income $ 86 $ 98 $ 184 $1,226
2005 Operating Companies Income 142 105 247 1,305
% Change (39.4)% (6.7)% (25.5)% (6.1)%
Reconciliation:
---------------
2005 Operating Companies Income $ 142 $ 105 $ 247 $1,305
- Impact of divestitures -
2005 - - - 2
- Asset impairment and exit
costs - 2005 17 7 24 29
- Implementation costs - 2005 6 2 8 26
- (Gains)/Losses on sales of
businesses - 2005 - - - 1
-------- ---------- ---------- -------
23 9 32 58
-------- ---------- ---------- -------
- Asset impairment and exit
costs - 2006 (81) (25) (106) (226)
- Implementation costs - 2006 (6) (1) (7) (17)
- Gains/(Losses) on sales of
businesses - 2006 - - - (8)
-------- ---------- ---------- -------
(87) (26) (113) (251)
-------- ---------- ---------- -------
- Currency impact (14) 7 (7) 1
- Operations 22 3 25 113
-------- ---------- ---------- -------
2006 Operating Companies Income $ 86 $ 98 $ 184 $1,226
======== ========== ========== =======
(a) Prior period results have been restated for the new segment
structure.
KRAFT FOODS INC.
and Subsidiaries Schedule 6
Condensed Statements of Earnings
For the Six Months Ended June 30,
(in millions, except per share data)
(Unaudited)
2006 2005 % Change
------------------- ---------
Net revenues (a) $16,742 $16,393 2.1 %
Cost of sales (b) 10,626 10,379 2.4 %
-------------------
Gross profit 6,116 6,014 1.7 %
Marketing, administration
and research costs (c) 3,391 3,442
Asset impairment and exit costs 428 179
(Gains)/Losses on sales of businesses 11 (115)
-------------------
Operating companies income 2,286 2,508 (8.9)%
Amortization of intangibles 5 5
General corporate expenses 86 96
-------------------
Operating income 2,195 2,407 (8.8)%
Interest and other debt expense, net 243 350
-------------------
Earnings from continuing operations
before income taxes and minority
interest 1,952 2,057 (5.1)%
Provision for income taxes 262 598
-------------------
Earnings from continuing operations
before minority interest 1,690 1,459 15.8 %
Minority interest in earnings from
continuing operations, net 2 2
-------------------
Earnings from continuing operations $ 1,688 $ 1,457 15.9 %
-------------------
Earnings from discontinued operations,
net of income tax - 25
Loss on sale of discontinued
operations, net of income tax - (297)
-------------------
Net earnings $ 1,688 $ 1,185 42.4 %
===================
Basic and diluted earnings per share:
Continuing operations $ 1.02 $ 0.86 18.6 %
Discontinued operations - 0.01
Loss on sale of discontinued operations - (0.17)
-------------------
Net earnings $ 1.02 $ 0.70 45.7 %
===================
Weighted average number of
shares outstanding - Basic 1,652 1,694 (2.5)%
- Diluted 1,661 1,701 (2.4)%
(a) Includes implementation costs of $1 in 2005
(b) Includes implementation costs of $11 in 2006 and $26 in 2005
(c) Includes implementation costs of $19 in 2006 and $18 in 2005
KRAFT FOODS INC.
and Subsidiaries Schedule 7
Net earnings and Diluted Earnings Per Share
For the Six Months Ended June 30,
($ in millions, except per share data)
(Unaudited)
Net Diluted
Earnings EPS
---------- ----------
2006 Earnings from continuing operations $1,688 $1.02
2005 Earnings from continuing operations 1,457 0.86
% Change 15.9% 18.6%
Reconciliation:
---------------
2005 Earnings from continuing operations $1,457 $0.86
- 2006 Asset impairment, exit &
implementation costs - Restructuring (236) (0.14)
- 2005 Asset impairment, exit &
implementation costs - Restructuring 89 0.05
- 2006 Asset impairments - Non-Restructuring (78) (0.05)
- 2005 Asset impairments - Non-Restructuring 60 0.04
- 2005 (Gains)/Losses on sales of businesses (67) (0.04)
- Change in tax rate (71) (0.04)
- Favorable resolution of the Altria Group,
Inc. 1996-1999 IRS Tax Audit 405 0.24
- Shares outstanding - 0.02
- Operations 129 0.08
---------- ----------
2006 Earnings from continuing operations $1,688 $1.02
---------- ----------
2006 Earnings from discontinued operations - -
---------- ----------
2006 Net earnings $1,688 $1.02
========== ==========
KRAFT FOODS INC.
and Subsidiaries Schedule 8
Volume By Business Segments
For the Six Months Ended June 30, (a)
(pounds in millions)
(Unaudited)
Cheese Kraft
& Conven- Snacks North
Bever- Food- ient & America
ages service Meals Grocery Cereals Commercial
------ ------- ------- ------- ------- ----------
Volume
2006 Volume 1,667 1,518 1,230 1,020 1,338 6,773
2005 Volume 1,732 1,565 1,187 1,250 1,309 7,043
% Change (3.8)% (3.0)% 3.6% (18.4)% 2.2% (3.8)%
Divested Businesses:
- Impact of
divestitures -
2006 - (13) - (14) (1) (28)
- Impact of
divestitures -
2005 - (65) - (236) (5) (306)
Ongoing Volume
2006 Volume 1,667 1,505 1,230 1,006 1,337 6,745
2005 Volume 1,732 1,500 1,187 1,014 1,304 6,737
% Change (3.8)% 0.3% 3.6% (0.8)% 2.5% 0.1%
(a) Prior period results have been restated for the new segment
structure.
Developing
Markets, Kraft
European Oceania & Int'l Total
Union North Asia Commercial Kraft
-------- ---------- ---------- ------
Volume
2006 Volume 1,050 1,356 2,406 9,179
2005 Volume 1,068 1,356 2,424 9,467
% Change (1.7)% - (0.7)% (3.0)%
Divested Businesses:
- Impact of divestitures - 2006 - - - (28)
- Impact of divestitures - 2005 (7) - (7) (313)
Ongoing Volume
2006 Volume 1,050 1,356 2,406 9,151
2005 Volume 1,061 1,356 2,417 9,154
% Change (1.0)% - (0.5)% 0.0%
(a) Prior period results have been restated for the new segment
structure.
KRAFT FOODS INC.
and Subsidiaries Schedule 9
Net Revenues by Business Segments
For the Six Months Ended June 30, (a)
($ in millions)
(Unaudited)
Cheese Kraft
& Conven- Snacks North
Bever- Food- ient & America
ages service Meals Grocery Cereals Commercial
------- ------- ------- ------- ------- ----------
2006 Net Revenues $1,614 $2,964 $2,444 $1,422 $3,144 $11,588
2005 Net Revenues 1,543 2,977 2,286 1,549 2,949 11,304
% Change 4.6% (0.4)% 6.9% (8.2)% 6.6% 2.5%
Reconciliation:
---------------
2005 Net Revenues $1,543 $2,977 $2,286 $1,549 $2,949 $11,304
- Impact of
divestitures -
2006 - 8 - 8 2 18
- Impact of
divestitures -
2005 - (42) - (153) (15) (210)
- Implementation
costs - 2005 - - - - 1 1
- Currency impact 7 28 7 13 17 72
- Operations 64 (7) 151 5 190 403
------- ------- ------- ------- ------- ----------
2006 Net Revenues $1,614 $2,964 $2,444 $1,422 $3,144 $11,588
======= ======= ======= ======= ======= ==========
(a) Prior period results have been restated for the new segment
structure.
Developing
Markets, Kraft
European Oceania & Int'l Total
Union North Asia Commercial Kraft
-------- ---------- ---------- --------
2006 Net Revenues $ 3,006 $ 2,148 $ 5,154 $16,742
2005 Net Revenues 3,203 1,886 5,089 16,393
% Change (6.2)% 13.9% 1.3% 2.1%
Reconciliation:
------------------------------
2005 Net Revenues $ 3,203 $ 1,886 $ 5,089 $16,393
- Impact of divestitures -
2006 - - - 18
- Impact of divestitures -
2005 (12) (10) (22) (232)
- Implementation costs -
2005 - - - 1
- Currency impact (247) 48 (199) (127)
- Operations 62 224 286 689
-------- ---------- ---------- --------
2006 Net Revenues $ 3,006 $ 2,148 $ 5,154 $16,742
======== ========== ========== ========
(a) Prior period results have been restated for the new segment
structure.
KRAFT FOODS INC.
and Subsidiaries Schedule 10
Operating Companies Income by Business Segments
For the Six Months Ended June 30, (a)
($ in millions)
(Unaudited)
Cheese Kraft
& Conven- Snacks North
Bever- Food- ient & America
ages service Meals Grocery Cereals Commercial
------ ------- ------- ------- ------- ----------
2006 Operating
Companies Income $ 262 $ 382 $ 385 $ 498 $ 411 $1,938
2005 Operating
Companies Income 288 450 382 411 437 1,968
% Change (9.0)% (15.1)% 0.8% 21.2% (5.9)% (1.5)%
Reconciliation:
---------------
2005 Operating
Companies Income $ 288 $ 450 $ 382 $ 411 $ 437 $1,968
- Impact of
divestitures -
2005 - (2) - 1 (1) (2)
- Asset impairment
and exit costs -
2005 4 8 2 104 4 122
- Implementation
costs - 2005 3 4 2 - 23 32
- (Gains)/Losses
on sales of
businesses - 2005 - (1) - 2 - 1
------ ------- ------- ------- ------- ----------
7 9 4 107 26 153
------ ------- ------- ------- ------- ----------
- Impact of
divestitures -
2006 - - - (1) - (1)
- Asset impairment
and exit costs -
2006 (9) (66) (52) (13) (114) (254)
- Implementation
costs - 2006 (4) (1) (4) (4) (4) (17)
- Gains/(Losses)
on sales of
businesses - 2006 - (8) - (1) (2) (11)
------ ------- ------- ------- ------- ----------
(13) (75) (56) (19) (120) (283)
------ ------- ------- ------- ------- ----------
- Currency impact - 4 2 4 3 13
- Operations (20) (6) 53 (5) 65 87
------ ------- ------- ------- ------- ----------
2006 Operating
Companies Income $ 262 $ 382 $ 385 $ 498 $ 411 $1,938
====== ======= ======= ======= ======= ==========
(a) Prior period results have been restated for the new segment
structure.
Developing
Markets, Kraft
European Oceania & Int'l Total
Union North Asia Commercial Kraft
-------- ---------- ---------- -------
2006 Operating Companies Income $ 215 $ 133 $ 348 $2,286
2005 Operating Companies Income 387 153 540 2,508
% Change (44.4)% (13.1)% (35.6)% (8.9)%
Reconciliation:
---------------
2005 Operating Companies Income $ 387 $ 153 $ 540 $2,508
- Impact of divestitures -
2005 (3) - (3) (5)
- Asset impairment and exit
costs - 2005 47 10 57 179
- Implementation costs - 2005 10 3 13 45
- (Gains)/Losses on sales of
businesses - 2005 (115) (1) (116) (115)
-------- ---------- ---------- -------
(61) 12 (49) 104
-------- ---------- ---------- -------
- Impact of divestitures -
2006 - - - (1)
- Asset impairment and exit
costs - 2006 (99) (75) (174) (428)
- Implementation costs - 2006 (9) (4) (13) (30)
- Gains/(Losses) on sales of
businesses - 2006 - - - (11)
-------- ---------- ---------- -------
(108) (79) (187) (470)
-------- ---------- ---------- -------
- Currency impact (29) 10 (19) (6)
- Operations 26 37 63 150
-------- ---------- ---------- -------
2006 Operating Companies Income $ 215 $ 133 $ 348 $2,286
======== ========== ========== =======
(a) Prior period results have been restated for the new segment
structure.
KRAFT FOODS INC.
and Subsidiaries Schedule 11
Condensed Balance Sheets
($ in millions, except ratios)
(Unaudited)
June 30, December 31,
2006 2005
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Assets
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Cash and cash equivalents $ 402 $ 316
Receivables 3,549 3,385
Inventory 3,550 3,343
Other current assets 873 1,109
Property, plant and equipment, net 9,762 9,817
Goodwill 24,985 24,648
Other intangible assets, net 10,428 10,516
Other assets 4,673 4,494
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Total assets $58,222 $57,628
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Liabilities and Shareholders' Equity
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Short-term borrowings $ 1,105 $ 805
Current portion of long-term debt 2,268 1,268
Due to Altria Group, Inc. and affiliates 485 652
Accounts Payable 2,084 2,270
Other current liabilities 3,756 3,729
Long-term debt 7,478 8,475
Deferred income taxes 5,869 6,067
Other long-term liabilities 4,809 4,769
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Total liabilities 27,854 28,035
Total shareholders' equity 30,368 29,593
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Total liabilities and
shareholders' equity $58,222 $57,628
============ ============
Total debt $11,336 $11,200
Debt/equity ratio 0.37 0.38
Capitalization (debt and equity) $41,704 $40,793
Debt/capitalization ratio 0.27 0.27
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