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NORTHFIELD, Ill.--(BUSINESS WIRE)--Jan. 30, 2006--Kraft Foods Inc.
(NYSE:KFT):
- Fourth quarter diluted E.P.S. from continuing operations up 15.0% to
$0.46 (including $0.10 in exit and implementation costs for the restructuring
program and impairment charges)
- Full-year diluted E.P.S. from continuing operations up 11.0% to $1.72
(including $0.20 in exit and implementation costs for the restructuring program
and impairment charges and $0.04 in net gains on sales of businesses)
- Expanding cost restructuring program by $2.5 billion with $700 million in
newly identified annual savings as part of Sustainable Growth Plan
- Diluted E.P.S. in 2006 projected at $1.38 - $1.43 (including
approximately $0.50 in exit and implementation costs for the expanded
restructuring program and impairment charges)
Kraft Foods Inc. (NYSE:KFT), a global leader in branded food and beverages,
today reported 2005 results, announced an expanded restructuring program as part
of its Sustainable Growth Plan, and issued its earnings outlook for 2006.
Kraft's fourth quarter results (which included an additional week versus 2004)
reflected solid momentum in several areas including better price realization,
improved U.S. market shares, strong product mix and new product contributions.
For the full year, the company delivered on its top-line growth and earnings
guidance provided in October. Additionally, the company generated $4.0 billion
in discretionary cash flow(1) plus divestiture proceeds in 2005 and returned
approximately $2.6 billion in cash to shareholders through dividends and share
repurchases. In providing its 2006 outlook, the company expects many of the cost
pressures it faced in 2005 to continue in 2006 and has announced an expanded
restructuring program as part of its Sustainable Growth Plan to aggressively
reduce its cost structure.
"While 2005 was a difficult year for Kraft and several of the challenges we
faced will continue in 2006, I am pleased by our progress in many areas,
particularly in our fourth quarter U.S. market shares," said Roger K. Deromedi,
Chief Executive Officer of Kraft Foods. "The actions we've taken over the past
two years have improved our Brand Value propositions and are enabling us to
drive out costs even more aggressively."
(1) The company defines discretionary cash flow as net cash provided by
operating activities less capital expenditures.
(Kraft Foods results are discussed on a continuing operations basis,
following the company's sale effective June 26, 2005 of its sugar confectionery
business, and the treatment of this business as discontinued operations. As
such, net revenues and operating companies income for the sugar confectionery
business are excluded from the company's results, while the net earnings impact
is included as a single line item in reported earnings. All references in this
release are to continuing operations, unless otherwise noted. Additionally, the
company's fourth quarter and full-year 2005 results include an extra shipping
week versus 2004. The company estimates that this week positively impacts
volume, revenue and operating income growth rates by approximately 7 pp. on the
quarter and 2 pp. on the full year.)
In the fourth quarter and on the full year, the company made good progress
against its Sustainable Growth Plan in several key areas. Highlights
included:
- Top-line growth consistent with guidance. Reported revenue growth of
10.0% in the fourth quarter and 6.0% for the full-year represents approximately
3% growth in ongoing constant currency revenues(2) in both periods, adjusting
for comparable numbers of weeks, consistent with the company's guidance.
- Improved U.S. market share performance. For the company's top 25
categories in the U.S., aggregate dollar market share including Wal-Mart was up
0.4 pp. in the fourth quarter, the company's best quarterly performance in over
three years. For the full year, aggregate dollar market share was up 0.1 pp.,
impacted earlier in the year by pricing actions, but overall continuing a solid
turnaround in performance that began in mid-2004.
- Positive product mix. The mix contribution to revenue growth was 2.7
pp. on the quarter and 2.2 pp. on the year, with six of seven business segments
delivering positive mix in both periods, reflecting increased focus by the
organization on revenue versus volume growth.
- Strong new product results. New product momentum continued in the
quarter, resulting in full-year revenues of approximately $1.5 billion. Most
notably, the 2005 launch of the South Beach Diet product line exceeded
the company's expectations, achieving approximately $170 million in just ten
months.
- Solid growth in developing markets. Ongoing constant currency
revenues in developing markets were up approximately 4% in the quarter and 8% on
the year (based on a comparable number of weeks). Aggregate growth was slightly
faster in the company's "Big Four" developing markets, driven by particularly
strong growth in Russia.
- Favorable restructuring results. The cost restructuring program
announced in January 2004 remained on track, with fourth quarter and full-year
savings in-line with expectations, while charges were favorable to previous
projections.
However, two primary factors offset this progress:
- Higher commodity costs. Commodity costs were up approximately $200
million versus prior year in the fourth quarter, resulting in a full-year
increase of more than $800 million. Pricing actions only partially offset the
impact of these higher costs in 2005, as the company's price increases generally
lagged the related cost impacts, and the company made strategic decisions not to
price certain brands in order to maintain competitiveness. On the full year, the
adverse impact of higher commodity costs net of pricing on operating margins was
1.3 pp. In the fourth quarter, the magnitude declined to 0.5 pp. versus the
third quarter year-to-date impact of 1.6pp., as pricing realization
improved.
- Flat volume. Full-year ongoing volume was essentially flat to prior
year (on a comparable 52-week basis), including a 0.7 pp. benefit from
acquisitions. Fourth quarter volume was down approximately 2% (on a comparable
13-week basis). Factors contributing to the volume softness included the
company's focus on mix improvement, its SKU reduction program, the
discontinuation of slower-moving and lower profit product lines and the impacts
of pricing and competition. In the quarter and on the year, the pricing impact
was most pronounced in the competitive European environment, where discounter
and retailer store brands generally either lagged or did not follow the
company's price increases. In particular, volume in Germany declined
approximately 10% in both the quarter and year (based on a comparable number of
weeks) as a result of price increases in both coffee and chocolate.
(2) The company's top-line guidance measure is ongoing constant currency
revenue growth, which includes acquisitions and excludes divestitures and
implementation costs associated with the company's restructuring program. The
company believes this measure better represents the revenue growth prospects of
the business on a go-forward basis and provides improved comparability of
results.
Restructuring Program
In January 2004, the company announced a three-year restructuring program
that was projected to deliver annual pre-tax savings of $400 million by the end
of 2006 and result in one-time pre-tax costs of $1.2 billion. Through two years
of the program, results have tracked favorably with cumulative savings reaching
approximately $260 million (in-line with original 2-year projections of $260 -
$280 million), while total charges were approximately $940 million (better than
original 2-year projections of $1,080 - $1,160 million). Through the second
year, the company has announced the planned closures of 19 production facilities
(versus a 3-year plan of up to 20) and the elimination of approximately 5,500
positions (versus a 3-year plan of 6,000). Ongoing savings for the original
restructuring initiatives are now projected to exceed original expectations and
reach approximately $450 million annually, while the projection for one-time
costs remains at $1.2 billion. The higher than expected savings primarily result
from the substantial nature and accelerated timing of the North America
reorganization announced in October 2005.
Building on the success of the 2004 program, the company has leveraged its
business simplification initiatives and organizational changes to identify
significant additional cost savings opportunities in an expanded restructuring
program. Initiatives in this program include further organizational streamlining
and facility closures, and the company expects to close up to an additional 20
production facilities and eliminate approximately 8,000 positions at all levels
of the organization (about 8% of its workforce) through 2008. Thus far, the
company has announced its intention to close production facilities in
Broadmeadows, Victoria, Australia and Hoover, Alabama. The company has
reorganized management in the European Union to more effectively manage its
business in this competitive environment, while also reducing overhead costs.
Additionally, to reduce operational complexity and enable facility closures, the
company will expand the SKU reduction program that has been in place since 2004.
The company eliminated approximately 20% of its SKUs in the past two years and
plans to eliminate an additional 10% in 2006.
The expanded restructuring program adds approximately $700 million in
incremental pre-tax savings and $2.5 billion in pre-tax costs to the original
initiatives. Capital expenditures required for the expanded program are included
within the company's overall capital spending budget, which is projected to
remain flat in 2006 versus 2005 at $1.2 billion. The breakdown of the cash and
non-cash components of the program, timing of pre-tax savings and costs, and
capital expenditures, are as follows:
Annual Savings Exit & Implementation Costs
--------------------------- ---------------------------
($ millions) Total Approx. Cash Total Approx. Cash
------------ -------------- ------------ --------------
Original
Initiatives $450 $425 $1,200 $700
Expanded
Initiatives 700 675 2,500 1,600
------------ -------------- ------------ --------------
Total Program $1,150 $1,100 $3,700 $2,300
2004/ Ongoing Savings &
2005 2006 2007 2008 Total Costs/Capital
------- ------ ------ ------ -------------------
($ millions)
Cumulative Savings $260 $560 $820 $1,050 $1,150
Exit & Implementation
Costs $940 $1,300 $850 $610 $3,700
Capital Expenditures $145 $220 $150 $60 $575
KRAFT FOODS INC.
----------------
% Change / pp. Impact (a)
------------------------------
Q4 Full Year
--------------- --------------
Net Revenues 10.0% / 3%(a) 6.0% / 4%(a)
Currency 0.8 pp 1.6 pp
Divestitures/Other (0.8) (0.6)
Ongoing Constant Currency Revenues 10.0% / 3%(a) 5.0% / 3%(a)
Volume 5.3 pp 1.2 pp
Mix 2.7 2.2
Net Pricing 2.0 1.4
Acquisitions 0.0 0.2
Operating Income (0.1)% / (7%)(a) 3.0 /1%(a)
Impact of Change In Restructuring &
Impairment Charges (5.7) pp 2.9 pp
Impact of Net Gain/(Loss) on Sales of
Businesses (0.9) 2.1
Impact of Lost Income on Divested
Businesses (1.2) (0.6)
Impact of All Other Operations 7.7 (1.4)
(a) The company's fourth quarter and full-year 2005 results include an
extra shipping week. The company estimates that this week
represents 7 pp. of growth on the quarter and 2 pp. of growth on
the full year.
Fourth quarter net revenues were $9.7 billion, up 10.0% versus prior year (or
approximately 3% on a comparable 13-week basis). In addition to the benefits
from favorable currency and an extra week, growth was driven by pricing in
multiple categories and countries and positive mix across most of the portfolio,
partially offset by the impact of divestitures. Revenue growth was particularly
strong in U.S. Beverages and U.S. Convenient Meals. For the full year, revenues
were up 6.0% to $34.1 billion, reflecting pricing, positive mix and currency, in
addition to the benefit of the extra week. Full-year ongoing constant currency
revenues were up 5.0% (or approximately 3% on a comparable 52-week basis),
consistent with the company's guidance.
Operating income was essentially flat to prior year at $1.2 billion in the
fourth quarter. Productivity and restructuring savings, positive mix, favorable
currency and the benefit of the extra week were essentially offset by increased
post-employment benefit costs, higher restructuring and divestiture-related
impairment costs and higher commodity costs (net of pricing). For the full year,
operating income increased 3.0% to $4.8 billion driven by positive mix,
productivity and restructuring savings, lower restructuring and impairment
costs, currency, net gains on sales of businesses and brands and the benefit of
the extra week. These drivers were partially offset by significantly higher
commodity costs (net of pricing), increased post-employment benefit costs and
increased consumer marketing support. For the full year, commodity costs
increased more than $800 million versus the prior year. Full-year consumer
marketing spending increased approximately $130 million versus the prior year.
Net earnings were up 14.2% to $773 million in the fourth quarter, and up 8.8%
to $2.9 billion on the year. Earnings per share were up 15.0% in the fourth
quarter to $0.46, while full-year earnings per share were up 11.0% to $1.72,
reflecting the following impacts:
Q4 Full Year
--------------- --------------
2004 E.P.S. $0.40 $1.55
Increase/(Decrease) Due To:
Restructuring/Impairment Charges -
2004 0.08 0.27
Restructuring/Impairment Charges -
2005 (0.10) (0.20)
Gains On Sales of Businesses - 2005 - 0.04
Taxes (Excludes Stella D'oro
Divestiture Benefit) 0.02 0.06
Extra Week (Estimated) 0.04 0.04
All Other Operations 0.02 (0.04)
--------------- --------------
Net Increase/(Decrease) 0.06 0.17
2005 E.P.S. $0.46 $1.72
Exit and implementation costs for the restructuring program and asset
impairment charges ("restructuring and impairment charges") were $300 million
pre-tax in the quarter (corresponding EPS impact of $0.10). Of this total,
restructuring program costs were $124 million and divestiture-related impairment
charges were $176 million. Announced divestitures in the fourth quarter included
the Stella D'oro brand ($63 million pre-tax impairment charge) and certain
Canadian grocery assets ($113 million pre-tax impairment charge.) While the
Stella D'oro divestiture generated a $63 million pre-tax charge, the structure
of the sale yielded a significant tax benefit, resulting in an after-tax charge
of $6 million. The tax benefit (equivalent to $0.02 per share) is included in
the $0.10 per share restructuring and impairment charges in the quarter. The
Canadian grocery asset sale was completed in January, and the company expects to
close the Stella D'oro sale in the first quarter of 2006. For the full year,
total restructuring and impairment charges were $566 million pre-tax ($0.20 EPS
impact), including restructuring program costs of $297 million and
divestiture-related impairment charges of $269 million. Full-year charges
associated with the restructuring program of $297 million pre-tax were below the
previous projection of $440 - $470 million, reflecting a change in the mix of
activities. While the 2005 charges for the program were less than anticipated,
full-year pre-tax savings of approximately $130 million were in-line with
previous projections of $120 - $140 million.
The fourth quarter tax favorability of $0.02 per share versus the prior year
primarily reflects benefits from the American Jobs Creation Act (AJCA) and other
repatriation benefits in the company's international operations. The fourth
quarter effective tax rate was 26.4% including a 3.5 pp. favorable impact from
the Stella D'oro divestiture. The full-year effective tax rate was 29.4% as
compared to 32.3% in 2004, with the decrease primarily a result of the AJCA and
other repatriation benefits.
Full-year discretionary cash flow(3) plus divestiture proceeds was $4.0
billion, up $1.0 billion from 2004. The increase was attributable to $1.3
billion in proceeds (net of taxes) from the sales of businesses, including the
global sugar confectionery business. Excluding the net benefit from
divestitures, discretionary cash flow was down $0.3 billion versus last year due
primarily to increased capital and restructuring spending. The company's
management of working capital remained strong, with a 6-day improvement in the
aggregate cash conversion cycle versus December of last year, including a 3-day
improvement in inventory days on hand.
During the quarter, the company declared a regular quarterly dividend of
$0.23 per common share. The company repurchased 13.9 million shares of Class A
common stock for $400 million, bringing its full-year share repurchases to $1.2
billion.
(3) 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.
2006 Outlook
The company projects diluted earnings per share of $1.38-$1.43 in 2006,
including $0.50 in restructuring and impairment charges. On a reported basis,
earnings will be down versus 2005 due primarily to higher charges for the
expanded restructuring program. The company's earnings guidance reflects a
strong contribution from operations, which more than offsets the significant
impacts of one-time tax benefits in the prior year and one less week.
Commenting on the company's 2006 outlook, CEO Deromedi said, "While we expect
the challenging environment to continue in 2006, I believe that our combination
of stronger Brand Value propositions and aggressive cost reduction programs will
drive improved results this year and beyond."
Below are the key drivers of the projected change in EPS in 2006 versus
2005:
EPS
---------------
2005 Reported $1.72
Increase/(Decrease) Due To:
Restructuring And Impairment Charges - 2005 0.20
Restructuring And Impairment Charges - 2006 (0.50)
Net Gain On Divestitures - 2005 (0.04)
Taxes (0.09)
One Less Week (Estimated) (0.04)
All Other Operations 0.13 - 0.18
---------------
2006 Guidance $1.38 - $1.43
Total pre-tax restructuring and impairment charges are projected at
approximately $1.3 billion in 2006, or around $0.50 per share. A higher
effective tax rate in 2006 of approximately 33%, which does not reflect
potential impacts from the resolution of outstanding tax audits, is expected to
result in year-over-year earnings unfavorability of $0.09 per share, or 5
percentage points of EPS growth.
The growth in EPS from all other operations of $0.13 - $0.18 is expected to
be driven by strong contributions from top-line growth, including pricing and
positive mix, and cost restructuring initiatives (original and expanded).
Incremental restructuring savings in 2006 are projected at approximately $300
million ($0.12 per share). These positive drivers are expected to be partially
offset by higher energy and packaging costs, increased marketing spending,
higher post-employment benefit costs ($0.03 per share) and dilution from
divestitures ($0.01 per share).
Earnings growth in 2006 is expected to be skewed to the second half of the
year. The first half will be impacted by the carryover impacts of higher input
costs for energy and packaging. Also, realization of pricing actions taken late
in 2005 and early in 2006 is expected to build throughout the year, providing
greater benefit to the second half. Within the first half of the year, shipments
for the Easter holiday will primarily occur in the second quarter of 2006,
whereas prior year Easter shipments occurred more in the first quarter. This
timing shift will result in difficult comparisons for the company in the first
quarter for both revenues and earnings.
The company projects ongoing constant currency revenue growth of 3% or
greater in 2006 on a comparable 52-week basis (approximately 1% including the
impact of one less week). Growth is expected to be driven by new products,
increased marketing spending, net price realization, positive mix and developing
market growth.
Discretionary cash flow including divestiture proceeds in 2006 is projected
at $2.7 billion, down from $4.0 billion in 2005. The decline is due to $1.2
billion in lower after-tax divestiture proceeds ($0.1 billion in 2006 versus
$1.3 billion in 2005) and approximately $0.4 billion in higher spending
associated with the restructuring program, partially offset by continued
improvements in working capital.
As described in "Note 14, Segment Reporting" of Kraft Foods Inc.'s 2004
Annual Report, management reviews operating companies income (OCI), which is
defined as operating income before corporate expenses and amortization of
intangibles, to evaluate segment performance and allocate resources. Management
believes it is appropriate to disclose this measure to help investors analyze
business performance and trends. (For a reconciliation of OCI to operating
income, see the Condensed Statements of Earnings contained in this release.)
KRAFT NORTH AMERICA COMMERCIAL (KNAC)
-------------------------------------
% Change / pp. Impact(a)
------------------------------
Q4 Full Year
--------------- --------------
Net Revenues 11.0% / 4%(a) 5.6% / 4%(a)
Currency 0.8 pp 0.7 pp
Divestitures/Other (0.7) (0.4)
Ongoing Constant Currency Revenues 10.9% / 4%(a) 5.3% / 3%(a)
Volume 7.3 pp 1.9 pp
Mix 2.4 2.1
Net Pricing 1.2 1.1
Acquisitions 0.0 0.2
Operating Companies Income (OCI) (3.4)% / (10)%(a) (1.0)% /(3)%(a)
Impact of Change In Restructuring &
Impairment Charges (9.2) pp 0.9 pp
Impact of Lost Income on Divested
Businesses (0.7) (0.2)
Impact of All Other Operations 6.5 (1.7)
(a) The company's fourth quarter and full-year 2005 results include an
extra shipping week. The company estimates that this week
represents 7 pp. of growth on the quarter and 2 pp. of growth on
the full year.
Fourth quarter net revenues were $6.4 billion, up 11.0% versus prior year (or
approximately 4% on a comparable 13-week basis). In addition to favorable
currency and an extra week, growth was driven by positive mix and pricing.
Revenue growth was strong across multiple categories, including coffee, meats,
biscuits and cereals. Ongoing volume was up 7.3% versus prior year in the
quarter, but was approximately flat excluding the impact of the extra week, as
growth in meat and cheese was offset by the impact of the company's SKU
reduction program and elimination of lower profit product lines. Full-year
ongoing constant currency revenues were up 5.3%, reflecting positive mix, net
pricing and the benefit of the extra week (or approximately 3% on a comparable
52-week basis).
Fourth quarter OCI decreased 3.4% to $915 million, as higher commodity costs
net of pricing, increased restructuring and impairment charges and higher
post-employment benefit costs were partially offset by productivity and
restructuring savings and the benefit of the extra week. Full-year OCI declined
1.0% to $3.8 billion, with increased post-employment benefit costs, higher
commodity costs net of pricing and increased marketing spending partially offset
by productivity and restructuring savings, positive mix, lower restructuring and
impairment charges and the benefit of the extra week.
Following are fourth quarter results by segment for KNAC.
Revenue results for reporting segments are discussed on both a net revenue and
ongoing constant currency revenue basis; all revenue results below the segment
level are discussed on an ongoing constant currency revenue basis. All
references to volume, revenue and OCI growth include an extra week in 2005
versus 2004 (which represents approximately 7 pp. of growth).
U.S. Beverages net revenues grew 23.9% to $736 million.
Ongoing constant currency revenues increased 23.5% behind growth in both
Refreshment Beverages and Coffee. Growth in Refreshment Beverages was driven by
base business growth in Capri Sun ready-to-drink beverages and
distribution gains on Fruit2 0 flavored water. Coffee revenues
were up significantly, reflecting increased net pricing and positive mix from
strong sales of Starbucks and Seattle's Best premium coffees, as
well as a benefit from disruptions in a competitor's supply. Segment OCI was up
20.8% to $64 million driven by volume growth, net pricing and positive mix,
partially offset by higher coffee, packaging and energy costs, increased
marketing spending and higher post-employment benefit costs.
U.S. Cheese, Canada & North America Foodservice net
revenues grew 8.5% to $2.3 billion, including a 2.1 pp. benefit from currency
and (1.1) pp. impact from divestitures. Ongoing constant currency revenues
increased 7.6%. Cheese growth was driven by volume gains in Kraft process
cheeses and natural cheeses and Breakstone's cottage cheese, partially
offset by lower commodity-driven pricing. Growth in Canada reflects gains in
cheese and coffee, including higher commodity-driven pricing, and confectionery
sales from a transition supply agreement (associated with the divestiture of the
sugar confectionery business), partially offset by lower volumes in canned
fruits and vegetables (which are part of the recent grocery asset sale). In
Foodservice, growth was driven by strength in national accounts, partially
offset by the elimination of lower margin SKUs. Segment OCI declined 21.9% to
$228 million, reflecting $113 million in impairment charges on the divestiture
of certain Canadian grocery assets, lower net pricing and higher post-employment
benefit costs, partially offset by volume growth, productivity savings and
currency.
U.S. Convenient Meals net and ongoing constant currency
revenues increased 12.4% to $1.2 billion with growth across most of the
portfolio. Growth in meats was driven by volume gains in Oscar Mayer cold
cuts and bacon and Lunchables lunch combinations. Growth also reflects
strong results for new products, including Oscar Mayer deli shaved meats
and South Beach Diet sandwich wraps. In Pizza, new products including
California Pizza Kitchen Crispy Thin Crust pizza contributed to volume
growth and positive mix. Meals revenue growth was driven by Stove Top
stuffing and South Beach Diet frozen entrees. Segment OCI increased 5.6%
to $188 million due to volume growth and lower restructuring charges, partially
offset by higher post-employment benefit costs and higher commodity costs net of
pricing.
U.S Grocery net revenues grew 5.6% to $660 million,
including a (3.1) pp. impact from the fruit snacks divestiture in the second
quarter. Ongoing constant currency revenues increased 8.6% driven by volume
growth and increased net pricing. Desserts growth was driven by new products,
including sugar-free Jell-O pudding snacks and Jell-O Sundae
Toppers pudding. Enhancers growth resulted from strong consumer response to
an innovative package and increased merchandising activity on Kraft
mayonnaise. Segment OCI increased 5.0% to $229 million as volume growth was
partially offset by higher post-employment benefit costs and increased
restructuring charges.
U.S. Snacks & Cereals net and ongoing constant
currency revenues increased 10.5% to $1.6 billion, reflecting positive mix and
increased net pricing. Biscuits growth was driven by volume gains on Oreo
cookies and Wheat Thins crackers, as well as new products, including
varieties of whole grain cookies, Oreo Peanut Butter Double Stuf
cookies and Nabisco 100 Calorie Packs line extensions. Salted Snacks
growth reflected increased merchandising activity and higher net pricing. In
Cereal, revenues were up due to higher volume, positive mix and increased net
pricing, with strong base business growth on Post Honey Bunches of Oats
cereals, along with new Post Honey Bunches of Oats cereal bars and
South Beach Diet cereal bars. Segment OCI was unchanged at $206 million,
as volume growth and positive mix were offset by higher nut, packaging and
energy costs net of pricing and higher post-employment benefit costs.
KRAFT INTERNATIONAL COMMERCIAL (KIC)
------------------------------------
% Change / pp. Impact(a)
------------------------------
Q4 Full Year
-------------- ---------------
Net Revenues 8.1% / 1%(a) 7.0% / 5%(a)
Currency 0.8 pp 3.6 pp
Divestitures/Other (1.0) (0.9)
Ongoing Constant Currency Revenues 8.3% / 1%(a) 4.3% / 2%(a)
Volume 0.7 pp (0.7) pp
Mix 4.1 2.9
Net Pricing 3.5 2.1
Operating Companies Income (OCI) 10.0% / 3%(a) 20.3% / 18%(a)
Impact of Change In Restructuring &
Impairment Charges 5.6 pp 12.3 pp
Impact of Net Gain/(Loss) on Sales of
Businesses (3.1) 9.3
Impact of Lost Income on Divested
Businesses (2.6) (2.0)
Impact of All Other Operations 10.1 0.7
(a) The company's fourth quarter and full-year 2005 results include an
extra shipping week. The company estimates that this week
represents 7 pp. of growth on the quarter and 2 pp. of growth on
the full year.
Fourth quarter net revenues were $3.2 billion, up 8.1% versus prior year (or
approximately 1% on a comparable 13-week basis). In addition to the benefits
from favorable currency and an extra week, growth was driven by positive mix and
pricing, partially offset by the impact of divestitures. Revenues grew in most
developing markets with particularly strong growth in Eastern Europe. Fourth
quarter ongoing volume was up 0.7% versus prior year, but was down excluding the
impact of the additional week. The volume decline reflected the impact of
pricing actions, particularly in coffee and chocolate in Europe, increased
competition in select markets, product re-sizing, particularly in Latin America,
and the company's SKU reduction program. Full-year ongoing constant currency
revenues were up 4.3% behind growth in both Europe, Middle East and Africa and
Latin America and Asia Pacific segments.
Fourth quarter OCI increased 10.0% to $330 million. Growth was driven by
lower restructuring and impairment charges, positive mix, favorable currency and
the benefit of the extra week, partially offset by a loss on sale of brands and
related assets and lost income from divestitures. While total marketing spending
was essentially flat, the investment in the Tassimo hot beverage system
increased, reflecting second year spending in France as well as launch costs in
the United Kingdom, Switzerland and Germany. Full-year OCI increased 20.3% to
$1.1 billion, benefiting from lower restructuring and impairment charges, a net
gain on sale of brands and related assets, positive mix and favorable currency,
partially offset by higher commodity costs net of pricing, increased developing
market infrastructure costs and lost income from divestitures.
Following are fourth quarter results by segment for KIC.
Revenue results for reporting segments are discussed on both a net revenue and
ongoing constant currency revenue basis; all revenue results below the segment
level are discussed on an ongoing constant currency revenue basis. All
references to volume, revenue and OCI growth include an extra week in 2005
versus 2004 (which represents approximately 7 pp. of growth).
Europe, Middle East and Africa net revenues increased
6.4% to $2.4 billion, reflecting a (1.3) pp. impact from the United Kingdom
desserts divestiture in the first quarter and (1.2) pp. from unfavorable
currency. Ongoing constant currency revenues grew 8.9%, reflecting double-digit
growth in Eastern Europe, Middle East & Africa and gains in several key
European markets including France and Italy. In Russia and Ukraine, strong
growth continued behind volume gains in Jacobs coffee, Milka
chocolate and Estrella salted snacks. Revenue growth in France reflected
higher coffee pricing, as well as increased shipments of Tassimo hot
beverage T-DISC capsules. In Italy, revenue growth benefited from higher
volume in Philadelphia cream cheese and Sottilette process cheese.
While revenues were up in Germany due to the extra week, as well as higher
pricing and positive mix, volume was down, as the company continued to face
price competition with retailer brands, particularly in coffee. Segment OCI was
up 0.5% to $222 million, as positive mix and lower restructuring and impairment
charges were largely offset by higher commodity costs net of pricing and the
negative impacts of divestitures.
Latin America and Asia Pacific net revenues increased
13.4% to $819 million, reflecting strong product mix, increased net pricing and
a 7.1 pp. benefit from favorable currency. Ongoing constant currency revenues
grew 6.6%, with growth in most Latin American markets, including Argentina,
Mexico and Venezuela, behind gains in biscuits and cheese. In Asia Pacific,
revenues in China declined, as competitive activity continued in biscuits.
Segment OCI was up 36.7% to $108 million, as increased net pricing, positive mix
and favorable currency were partially offset by higher product costs, a loss on
sale of business and increased infrastructure costs.
The company will host a conference call for members of the investment
community to review its results at 5:00 p.m. ET on January 30, 2006. Access to a
live audio webcast and presentation slides is available at www.kraft.com and a replay of the conference
call and webcast presentations will be available on the company's web site.
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 155 countries.
Forward-Looking and Cautionary Statements
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 assumptions and estimates and are subject to risks and
uncertainties. In connection with the "safe harbor" provisions of the Private
Securities Litigation Reform Act 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; any such statement is qualified by reference to the
following cautionary statements.
Each of the company's segments is subject to intense competition, changes in
consumer preferences and demand for its products, including diet trends, the
effects of changing prices for its raw materials and local economic and market
conditions. Their results are dependent upon their 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. The company's
results are also dependent on its ability to consummate and successfully
integrate acquisitions and to realize the cost savings and improved asset
utilization contemplated by its restructuring program. The company may, from
time to time, divest businesses that are less of a strategic fit within its
portfolio, and its results may be impacted by either the gains or losses, or
lost operating income, from the sales of those businesses. In addition, the
company is subject to the effects of foreign economies, changes in tax
requirements, currency movements, fluctuations in levels of customer inventories
and credit and other business risks related to its customers operating in a
challenging economic and competitive environment. The company's results are
affected by its access to credit markets, borrowing costs and credit ratings,
which may in turn be influenced by the credit ratings of Altria Group, Inc. The
company's benefit expense is subject to the investment performance of pension
plan assets, interest rates and cost increases for medical benefits offered to
employees and retirees. The company's assessment of the fair value of its
operations for purposes of assessing impairment of goodwill and intangibles is
based on discounting projections of future cash flows and is affected by the
interest rate market and general economic and market conditions. The food
industry continues to be subject to recalls if products become adulterated or
misbranded, liability if product consumption causes injury, ingredient
disclosure and labeling laws and regulations and the possibility that consumers
could lose confidence in the safety and quality of certain food products. The
food industry is also subject to consumer concerns regarding genetically
modified organisms and the health implications of obesity and trans-fatty acids.
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. Any forward-looking statements in this press release are made
as of the date hereof. The company does not undertake to update any
forward-looking statement.
KRAFT FOODS INC.
and Subsidiaries
Condensed Statements of Earnings(a) Schedule 1
For the Quarters Ended December 31, ----------
(in millions, except per share data)
(Unaudited)
2005 2004 % Change
------------------ ---------
Net revenues $9,663 $8,784 10.0 %
Cost of sales 6,265 5,645 11.0 %
------------------
Gross profit 3,398 3,139 8.3 %
Marketing, administration
and research costs 1,872 1,758
Asset impairment and exit costs 274 139
(Gains)/Losses on sales of businesses 7 (5)
------------------
Operating companies income 1,245 1,247 (0.2)%
Amortization of intangibles 1 3
General corporate expenses 47 46
------------------
Operating income 1,197 1,198 (0.1)%
Interest and other debt expense, net 147 179
------------------
Earnings from continuing operations before
income taxes and minority interest 1,050 1,019 3.0 %
Provision for income taxes 277 343 (19.2)%
------------------
Earnings from continuing operations before
minority interest 773 676 14.3 %
Minority interest in earnings from
continuing operations, net - (1)
------------------
Earnings from continuing operations $773 $677 14.2 %
------------------
Earnings from discontinued operations,
net of income taxes - 20
Loss on sale of discontinued operations,
net of income taxes - (69)
------------------
Net earnings $773 $628 23.1 %
==================
Per share data: (a)
Basic earnings per share:
Continuing operations $0.46 $0.40 15.0 %
------------------
Discontinued operations - (0.03)
------------------
Net earnings $0.46 $0.37 24.3 %
==================
Diluted earnings per share:
Continuing operations $0.46 $0.40 15.0 %
------------------
Discontinued operations - (0.03)
------------------
Net earnings $0.46 $0.37 24.3 %
==================
Weighted average number of
shares outstanding - Basic 1,668 1,702 (2.0)%
- Diluted 1,676 1,707 (1.8)%
(a) The company's fourth quarter 2005 results include an extra
shipping week. The company estimates that this week represents
7 pp. of revenue and operating income growth on the quarter.
KRAFT FOODS INC.
and Subsidiaries
Net Earnings and Diluted Earnings Per Share(a) Schedule 2
For the Quarters Ended December 31, ----------
($ in millions, except per share data)
(Unaudited)
Net Diluted
Earnings EPS
---------- ---------
2005 Earnings from continuing operations $773 $0.46
2004 Earnings from continuing operations 677 0.40
% Change 14.2% 15.0%
Reconciliation:
---------------
2004 Earnings from continuing operations $677 $0.40
- 2005 Asset impairment, exit & implementation
costs (162) (0.10)
- 2004 Asset impairment, exit & implementation
costs 114 0.06
- 2004 Investment impairment 31 0.02
- Change in tax rate 39 0.02
- Shares outstanding 0.01
- Currency 12 0.01
- Operations 62 0.04
---------- ---------
2005 Earnings from continuing operations $773 $0.46
---------- ---------
2005 Earnings from discontinued operations - -
2005 Loss on sale of discontinued operations - -
---------- ---------
2005 Net earnings $773 $0.46
========== =========
(a) The company's fourth quarter 2005 results include an extra
shipping week. The company estimates that this week represents
7 pp. of operating income growth on the quarter.
KRAFT FOODS INC.
and Subsidiaries
Volume by Business Segment(a) Schedule 3
For the Quarters Ended December 31, ----------
(pounds in millions)
(Unaudited)
U.S. Cheese, U.S. Kraft
----------- ------- ----------
Canada & U.S. Snacks North
----------- ---------- ------- ----------
North Convenient & America
U.S. America U.S.
--------- ----------- ---------- ------- ------- ----------
Beverages Foodservice Meals Grocery Cereals Commercial
--------- ----------- ---------- ------- ------- ----------
Volume
2005 Volume 700 1,273 582 439 684 3,678
2004 Volume 657 1,232 530 412 632 3,463
% Change 6.5% 3.3% 9.8% 6.6% 8.2% 6.2%
Divested
Businesses:
- Divested
Businesses
- 2004 - (26) - (9) - (35)
- Divested
Businesses
- 2005 - - - - - -
Ongoing Volume
2005 Volume 700 1,273 582 439 684 3,678
2004 Volume 657 1,206 530 403 632 3,428
% Change 6.5% 5.6% 9.8% 8.9% 8.2% 7.3%
Europe, Latin
--------- --------
Middle America Kraft
--------- -------- ----------
East & & Asia Int'l Total
--------- -------- ---------- -------
Africa Pacific Commercial Kraft
--------- -------- ---------- -------
Volume
2005 Volume 837 637 1,474 5,152
2004 Volume 837 641 1,478 4,941
% Change 0.0% (0.6)% (0.3)% 4.3%
Divested
Businesses:
- Divested
Businesses
- 2004 (14) - (14) (49)
- Divested
Businesses
- 2005 - - - -
Ongoing Volume
2005 Volume 837 637 1,474 5,152
2004 Volume 823 641 1,464 4,892
% Change 1.7% (0.6)% 0.7% 5.3%
(a) The company's fourth quarter 2005 results include an extra
shipping week. The company estimates that this week represents
7 pp. of volume growth on the quarter.
KRAFT FOODS INC.
and Subsidiaries
Net Revenues by Business Segment(a) Schedule 4
For the Quarters Ended December 31, ----------
($ in millions)
(Unaudited)
U.S. Cheese, U.S. Kraft
----------- ------- ----------
Canada & U.S. Snacks North
----------- ---------- ------- ----------
North Convenient & America
U.S. America U.S.
--------- ----------- ---------- ------- ------- ----------
Beverages Foodservice Meals Grocery Cereals Commercial
--------- ----------- ---------- ------- ------- ----------
2005 Net
Revenues $736 $2,264 $1,193 $660 $1,585 $6,438
2004 Net
Revenues 594 2,086 1,061 625 1,435 5,801
% Change 23.9% 8.5% 12.4% 5.6% 10.5% 11.0%
Reconciliation:
---------------
2004 Net
Revenues $594 $2,086 $1,061 $625 $1,435 $5,801
- Divested
Businesses
- 2004 - (20) - (18) - (38)
- Divested
Businesses
- 2005 - - - - - -
- Implementation
Costs
- 2004 1 - - 1 - 2
- Implementation
Costs
- 2005 1 (2) - - - (1)
- Currency - 44 - - - 44
- Operations 140 156 132 52 150 630
--------- ----------- ---------- ------- ------- ----------
2005 Net
Revenues $736 $2,264 $1,193 $660 $1,585 $6,438
========= =========== ========== ======= ======= ==========
Memo: Ongoing, Constant
Currency Revenues (1)
% Change 23.5% 7.6% 12.4% 8.6% 10.5% 10.9%
Europe, Latin
--------- --------
Middle America Kraft
--------- -------- ----------
East & & Asia Int'l Total
--------- -------- ---------- -------
Africa Pacific Commercial Kraft
--------- -------- ---------- -------
2005 Net Revenues $2,406 $819 $3,225 $9,663
2004 Net Revenues 2,261 722 2,983 8,784
% Change 6.4% 13.4% 8.1% 10.0%
Reconciliation:
-------------------
2004 Net Revenues $2,261 $722 $2,983 $8,784
- Divested
Businesses
- 2004 (26) (5) (31) (69)
- Divested
Businesses
- 2005 - 4 4 4
- Implementation
Costs
- 2004 - - - 2
- Implementation
Costs
- 2005 - - - (1)
- Currency (27) 51 24 68
- Operations 198 47 245 875
--------- -------- ---------- -------
2005 Net Revenues $2,406 $819 $3,225 $9,663
========= ======== ========== =======
Memo: Ongoing, Constant
Currency Revenues (1)
% Change 8.9% 6.6% 8.3% 10.0%
(1) The company's top-line guidance measure is ongoing, constant
currency revenue growth, which excludes divestitures and
implementation costs associated with the company's restructuring
program. The company believes this measure better represents the
revenue growth prospects of the business on a go-forward basis,
and provides improved comparability of results.
(a) The company's fourth quarter 2005 results include an extra
shipping week. The company estimates that this week represents
7 pp. of revenue growth on the quarter.
KRAFT FOODS INC.
and Subsidiaries
Operating Companies Income by Business Segment(a)
For the Quarters Ended December 31, Schedule 5
($ in millions) ----------
(Unaudited)
U.S. Cheese, U.S. Kraft
----------- ------- ----------
Canada & U.S. Snacks North
----------- ---------- ------- ----------
U.S. North Convenient U.S. & America
America
--------- ----------- ---------- ------- ------- ----------
Beverages Foodservice Meals Grocery Cereals Commercial
--------- ----------- ---------- ------- ------- ----------
2005 Operating
Companies
Income $64 $228 $188 $229 $206 $915
2004 Operating
Companies
Income 53 292 178 218 206 947
% Change 20.8% (21.9)% 5.6% 5.0% 0.0% (3.4)%
Reconciliation:
---------------
2004 Operating
Companies
Income $53 $292 $178 $218 $206 $947
- Divested
Businesses
- 2004 - (4) - (3) - (7)
- (Gains)/Losses
on Sales of
Businesses
- 2004 - - - - - -
- Asset
Impairment
and Exit
Costs
- 2004 (1) 21 33 (1) 50 102
- Implementation
Costs
- 2004 4 6 4 4 9 27
- Investment
Impairment
- 2004 - - - - - -
--------- ----------- ---------- ------- ------- ----------
3 23 37 - 59 122
--------- ----------- ---------- ------- ------- ----------
- Divested
Businesses
- 2005 - - - - - -
- Gains/(Losses)
on Sales of
Businesses
- 2005 - - - - - -
- Asset
Impairment
and Exit
Costs
- 2005 (6) (127) (10) (4) (64) (211)
- Implementation
Costs
- 2005 (2) (8) (5) (2) 5 (12)
--------- ----------- ---------- ------- ------- ----------
(8) (135) (15) (6) (59) (223)
--------- ----------- ---------- ------- ------- ----------
- Currency - 9 - - - 9
- Operations 16 39 (12) 17 - 60
--------- ----------- ---------- ------- ------- ----------
2005 Operating
Companies
Income $64 $228 $188 $229 $206 $915
========= =========== ========== ======= ======= ==========
Europe, Latin
--------- --------
Middle America Kraft
--------- -------- ----------
East & & Asia Int'l Total
--------- -------- ---------- -------
Africa Pacific Commercial Kraft
--------- -------- ---------- -------
2005 Operating
Companies
Income $222 $108 $330 $1,245
2004 Operating
Companies
Income 221 79 300 1,247
% Change 0.5% 36.7% 10.0% (0.2)%
Reconciliation:
---------------
2004 Operating
Companies
Income $221 $79 $300 $1,247
- Divested
Businesses
- 2004 (10) - (10) (17)
- (Gains)/Losses
on Sales of
Businesses
- 2004 (5) - (5) (5)
- Asset
Impairment
and Exit
Costs
- 2004 31 6 37 139
- Implementation
Costs
- 2004 5 1 6 33
- Investment
Impairment
- 2004 47 - 47 47
--------- -------- ---------- -------
68 7 75 197
--------- -------- ---------- -------
- Divested
Businesses
- 2005 - 1 1 1
- Gains/(Losses)
on Sales of
Businesses
- 2005 (2) (5) (7) (7)
- Asset
Impairment
and Exit
Costs
- 2005 (60) (3) (63) (274)
- Implementation
Costs
- 2005 (8) (6) (14) (26)
--------- -------- ---------- -------
(70) (13) (83) (306)
--------- -------- ---------- -------
- Currency - 8 8 17
- Operations 3 27 30 90
--------- -------- ---------- -------
2005 Operating
Companies
Income $222 $108 $330 $1,245
========= ======== ========== =======
(a) The company's fourth quarter 2005 results include an extra
shipping week. The company estimates that this week represents
7 pp. of operating companies income growth on the quarter.
KRAFT FOODS INC.
and Subsidiaries
Condensed Statements of Earnings(a) Schedule 6
For the Years Ended December 31, ----------
(in millions, except per share data)
(Unaudited)
2005 2004 % Change
------------------ ---------
Net revenues $34,113 $32,168 6.0 %
Cost of sales 21,845 20,281 7.7 %
------------------
Gross profit 12,268 11,887 3.2 %
Marketing, administration
and research costs 6,944 6,478
Asset impairment and exit costs 479 603
(Gains)/Losses on sales of businesses (108) 3
------------------
Operating companies income 4,953 4,803 3.1 %
Amortization of intangibles 10 11
General corporate expenses 191 180
------------------
Operating income 4,752 4,612 3.0 %
Interest and other debt expense, net 636 666
------------------
Earnings from continuing operations before
income taxes and minority interest 4,116 3,946 4.3 %
Provision for income taxes 1,209 1,274 (5.1)%
------------------
Earnings from continuing operations before
minority interest 2,907 2,672 8.8 %
Minority interest in earnings from
continuing operations, net 3 3
------------------
Earnings from continuing operations $2,904 $2,669 8.8 %
------------------
Earnings from discontinued operations,
net of income taxes 25 65
Loss on sale of discontinued operations,
net of income taxes (297) (69)
------------------
Net earnings $2,632 $2,665 (1.2)%
==================
Per share data: (b)
Basic earnings per share:
Continuing operations $1.72 $1.56 10.3 %
Discontinued operations 0.01 0.04
Loss on sale of discontinued operations (0.17) (0.04)
------------------
Net earnings $1.56 $1.56 0.0 %
==================
Diluted earnings per share:
Continuing operations $1.72 $1.55 11.0 %
Discontinued operations 0.01 0.04
Loss on sale of discontinued operations (0.18) (0.04)
------------------
Net earnings $1.55 $1.55 0.0 %
==================
Weighted average number of
shares outstanding - Basic 1,684 1,709 (1.5)%
- Diluted 1,693 1,714 (1.2)%
(a) The company's full year 2005 results include an extra shipping
week. The company estimates that this week represents 2 pp. of
revenue and operating income growth on the full year.
(b) Basic and diluted earnings per share are computed for each of the
periods presented. Accordingly, the sum of the quarterly earnings
per share amounts may not agree to the year-to-date amounts.
KRAFT FOODS INC.
and Subsidiaries
Net Earnings and Diluted Earnings Per Share(a)
For the Years Ended December 31, Schedule 7
($ in millions, except per share data) ----------
(Unaudited)
Net Diluted
Earnings EPS (b)
--------- ---------
2005 Earnings from continuing operations $2,904 $1.72
2004 Earnings from continuing operations 2,669 1.55
% Change 8.8% 11.0%
Reconciliation:
---------------
2004 Earnings from continuing operations $2,669 $1.55
- 2005 Asset impairment, exit &
implementation costs (339) (0.20)
- 2004 Asset impairment, exit &
implementation costs 424 0.25
- 2004 Investment impairment 31 0.02
- 2005 Gains on sales of businesses 65 0.04
- Change in tax rate 102 0.06
- Shares outstanding 0.02
- Currency 58 0.03
- Operations (106) (0.05)
--------- ---------
2005 Earnings from continuing operations $2,904 $1.72
--------- ---------
2005 Earnings from discontinued operations 25 0.01
2005 Loss on sale of discontinued operations (297) (0.18)
--------- ---------
2005 Net earnings $2,632 $1.55
========= =========
(a) The company's full year 2005 results include an extra shipping
week. The company estimates that this week represents 2 pp. of
operating income growth on the full year.
(b) 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 Segment(a) Schedule 8
For the Years Ended December 31, ----------
(pounds in millions)
(Unaudited)
U.S. U.S. Kraft
Cheese,
----------- ------- ----------
Canada & U.S. Snacks North
----------- ---------- ------- ----------
U.S. North Convenient U.S. & America
America
--------- ----------- ---------- ------- ------- ----------
Beverages Foodservice Meals Grocery Cereals Commercial
--------- ----------- ---------- ------- ------- ----------
Volume
2005 Volume 3,109 4,493 2,267 1,709 2,509 14,087
2004 Volume 2,968 4,527 2,205 1,690 2,424 13,814
% Change 4.8% (0.8)% 2.8% 1.1% 3.5% 2.0%
Divested Businesses:
- Divested
Businesses
- 2004 - (124) - (36) - (160)
- Divested
Businesses
- 2005 - (32) - (24) - (56)
Ongoing Volume -
Including
Acquisitions
2005 Volume 3,109 4,461 2,267 1,685 2,509 14,031
2004 Volume 2,968 4,403 2,205 1,654 2,424 13,654
% Change 4.8% 1.3% 2.8% 1.9% 3.5% 2.8%
Memo: Acquired Businesses
Volume 103 16 - - - 119
Europe, Latin
--------- --------
Middle America Kraft
--------- -------- ----------
East & & Asia Int'l Total
--------- -------- ---------- -------
Africa Pacific Commercial Kraft
--------- -------- ---------- -------
Volume
2005 Volume 2,862 2,263 5,125 19,212
2004 Volume 2,915 2,273 5,188 19,002
% Change (1.8)% (0.4)% (1.2)% 1.1%
Divested Businesses:
- Divested
Businesses
- 2004 (38) (1) (39) (199)
- Divested
Businesses
- 2005 (7) - (7) (63)
Ongoing Volume -
Including
Acquisitions
2005 Volume 2,855 2,263 5,118 19,149
2004 Volume 2,877 2,272 5,149 18,803
% Change (0.8)% (0.4)% (0.6)% 1.8%
Memo: Acquired Businesses
Volume - 3 3 122
(a) The company's full year 2005 results include an extra shipping
week. The company estimates that this week represents 2 pp. of
volume growth on the full year.
KRAFT FOODS INC.
and Subsidiaries
Net Revenues by Business Segment(a) Schedule 9
For the Years Ended December 31, ----------
($ in millions)
(Unaudited)
U.S. Cheese, U.S. Kraft
----------- ------- ----------
Canada & U.S. Snacks North
----------- ---------- ------- ----------
U.S. North Convenient U.S. & America
America
--------- ----------- ---------- ------- ------- ----------
Beverages Foodservice Meals Grocery Cereals Commercial
--------- ----------- ---------- ------- ------- ----------
2005 Net
Revenues $2,852 $7,774 $4,497 $2,421 $5,749 $23,293
2004 Net
Revenues 2,555 7,420 4,250 2,425 5,410 22,060
% Change 11.6% 4.8% 5.8% (0.2)% 6.3% 5.6%
Reconciliation:
---------------
2004 Net
Revenues $2,555 $7,420 $4,250 $2,425 $5,410 $22,060
- Divested
Businesses
- 2004 - (93) - (73) - (166)
- Divested
Businesses
- 2005 - 26 - 43 - 69
- Acquired
Businesses 34 7 - - - 41
- Implementation
Costs
- 2004 1 - - 1 5 7
- Implementation
Costs
- 2005 1 (2) - - (1) (2)
- Currency - 172 - - - 172
- Operations 261 244 247 25 335 1,112
--------- ----------- ---------- ------- ------- ----------
2005 Net
Revenues $2,852 $7,774 $4,497 $2,421 $5,749 $23,293
========= =========== ========== ======= ======= ==========
Memo: Ongoing, Constant
Currency Revenues (1)
% Change 11.5% 3.4% 5.8% 1.1% 6.2% 5.3%
Europe, Latin
--------- --------
Middle America Kraft
--------- -------- ----------
East & & Asia Int'l Total
--------- -------- ---------- --------
Africa Pacific Commercial Kraft
--------- -------- ---------- --------
2005 Net
Revenues $7,999 $2,821 $10,820 $34,113
2004 Net
Revenues 7,522 2,586 10,108 32,168
% Change 6.3% 9.1% 7.0% 6.0%
Reconciliation:
---------------
2004 Net
Revenues $7,522 $2,586 $10,108 $32,168
- Divested
Businesses
- 2004 (72) (36) (108) (274)
- Divested
Businesses
- 2005 12 19 31 100
- Acquired
Businesses - 1 1 42
- Implementation
Costs
- 2004 - - - 7
- Implementation
Costs
- 2005 - - - (2)
- Currency 235 126 361 533
- Operations 302 125 427 1,539
--------- -------- ---------- --------
2005 Net
Revenues $7,999 $2,821 $10,820 $34,113
========= ======== ========== ========
Memo: Ongoing, Constant
Currency Revenues (1)
% Change 4.1% 4.9% 4.3% 5.0%
(1) The company's top-line guidance measure is ongoing, constant
currency revenue growth, which includes acquisitions and excludes
divestitures and implementation costs associated with the
company's restructuring program. The company believes this measure
better represents the revenue growth prospects of the business on
a go- forward basis, and provides improved comparability of
results.
(a) The company's full year 2005 results include an extra shipping
week. The company estimates that this week represents 2 pp. of
revenue growth on the full year.
KRAFT FOODS INC.
and Subsidiaries
Operating Companies Income by Business Segment(a)
For the Years Ended December 31, Schedule 10
($ in millions) -----------
(Unaudited)
U.S. Cheese, U.S. Kraft
----------- ------- ----------
Canada & U.S. Snacks North
----------- ---------- ------- ----------
U.S. North Convenient U.S. & America
America
--------- ----------- ---------- ------- ------- ----------
Beverages Foodservice Meals Grocery Cereals Commercial
--------- ----------- ---------- ------- ------- ----------
2005
Operating
Companies
Income $458 $1,018 $741 $743 $871 $3,831
2004
Operating
Companies
Income 479 989 771 894 737 3,870
% Change (4.4)% 2.9% (3.9)% (16.9)% 18.2% (1.0)%
Reconciliation:
---------------
2004
Operating
Companies
Income $479 $989 $771 $894 $737 $3,870
- Divested
Businesses
- 2004 - (8) - (3) - (11)
- (Gains)/Losses
on Sales of
Businesses
- 2004 - - - - - -
- Asset
Impairment
and Exit
Costs
- 2004 9 111 41 8 222 391
- Implementation
Costs
- 2004 4 8 4 6 18 40
- Investment
Impairment
- 2004 - - - - - -
--------- ----------- ---------- ------- ------- ----------
13 111 45 11 240 420
--------- ----------- ---------- ------- ------- ----------
- Divested
Businesses
- 2005 - 3 - (1) - 2
- Gains/(Losses)
on Sales of
Businesses
- 2005 - 1 - (2) - (1)
- Asset
Impairment
and Exit
Costs
- 2005 (9) (146) (12) (99) (69) (335)
- Implementation
Costs
- 2005 (2) (20) (7) (2) (24) (55)
--------- ----------- ---------- ------- ------- ----------
(11) (162) (19) (104) (93) (389)
--------- ----------- ---------- ------- ------- ----------
- Currency - 31 - - - 31
- Operations (23) 49 (56) (58) (13) (101)
--------- ----------- ---------- ------- ------- ----------
2005
Operating
Companies
Income $458 $1,018 $741 $743 $871 $3,831
========= =========== ========== ======= ======= ==========
Europe, Latin
--------- --------
Middle America Kraft
--------- -------- ----------
East & & Asia Int'l Total
--------- -------- ---------- -------
Africa Pacific Commercial Kraft
--------- -------- ---------- -------
2005 Operating
Companies
Income $798 $324 $1,122 $4,953
2004 Operating
Companies
Income 683 250 933 4,803
% Change 16.8% 29.6% 20.3% 3.1%
Reconciliation:
---------------
2004 Operating
Companies
Income $683 $250 $933 $4,803
- Divested
Businesses
- 2004 (28) - (28) (39)
- (Gains)/Losses
on Sales of
Businesses
- 2004 (5) 8 3 3
- Asset
Impairment and
Exit Costs
- 2004 180 32 212 603
- Implementation
Costs
- 2004 9 1 10 50
- Investment
Impairment
- 2004 47 - 47 47
--------- -------- ---------- -------
203 41 244 664
--------- -------- ---------- -------
- Divested
Businesses
- 2005 3 1 4 6
- Gains/(Losses)
on Sales of
Businesses
- 2005 113 (4) 109 108
- Asset
Impairment
and Exit
Costs
- 2005 (127) (17) (144) (479)
- Implementation
Costs
- 2005 (26) (6) (32) (87)
--------- -------- ---------- -------
(37) (26) (63) (452)
--------- -------- ---------- -------
- Currency 32 27 59 90
- Operations (83) 32 (51) (152)
--------- -------- ---------- -------
2005 Operating
Companies
Income $798 $324 $1,122 $4,953
========= ======== ========== =======
(a) The company's full year 2005 results include an extra shipping
week. The company estimates that this week represents 2 pp. of
operating companies income growth on the full year.
KRAFT FOODS INC.
and Subsidiaries
Condensed Balance Sheets Schedule 11
($ in millions, except ratios) -----------
(Unaudited)
December 31, December 31,
2005 2004
------------ ------------
Assets
------
Cash and cash equivalents $316 $282
Receivables 3,385 3,541
Inventory 3,343 3,447
Assets of Discontinued Operations
held for sale - 1,458
Other current assets 1,109 994
Property, plant and equipment, net 9,817 9,985
Goodwill 24,648 25,177
Other intangible assets, net 10,516 10,634
Other assets 4,494 4,410
------------ ------------
Total assets $57,628 $59,928
============ ============
Liabilities and Shareholders' Equity
------------------------------------
Short-term borrowings $805 $1,818
Current portion of long-term debt 1,268 750
Due to Altria Group, Inc. and affiliates 652 227
Accounts Payable 2,270 2,207
Other current liabilities 3,729 4,076
Long-term debt 8,475 9,723
Deferred income taxes 6,067 6,468
Other long-term liabilities 4,769 4,748
------------ ------------
Total liabilities 28,035 30,017
Total shareholders' equity 29,593 29,911
------------ ------------
Total liabilities and
shareholders' equity $57,628 $59,928
============ ============
Total debt $11,200 $12,518
Debt/equity ratio 0.38 0.42
Capitalization (debt and equity) $40,793 $42,429
Debt/capitalization ratio 0.27 0.30
Contact: Kraft Foods Inc.
Kris Charles (Media), 847-646-6251
kcharles@kraft.com
or
Mark Magnesen (Investors), 847-646-3194
mmagnesen@kraft.com
Source: Kraft Foods Inc.
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