Kraft Foods Inc. (KFT) filed Quarterly Report for the period ended 2009-09-30.
Kraft Foods Inc. is the largest branded food and beverage company headquartered in the U.S. and the second largest in the world. They have a superior brand portfolio created and supported through dynamic product innovation worldclass marketing experienced management global scale and strategic acquisitions. Consumers of all ages around the world enjoy their brands across the entire spectrum of food and beverage occasions: breakfast lunch dinner and snacks. Brands include Kraft Nabisco Oscar Mayer Post Maxwell House Philadelphia and Jacobs. Kraft Foods Inc. has a market cap of $40.64 billion; its shares were traded at around $27.54 with a P/E ratio of 14.6 and P/S ratio of 1. The dividend yield of Kraft Foods Inc. stocks is 4.2%.
Highlight of Business Operations:
During the first nine months of 2009, we received $6 million in proceeds and recorded pre-tax losses of $17 million, or $0.01 per diluted share, on the divestitures of a juice operation in Brazil and a plant in Spain.
During the first nine months of 2008, we recorded pre-tax losses of $93 million, or $0.04 per diluted share, primarily related to the divestitures of several operations in Spain. In aggregate, we received $38 million in net proceeds from divestitures, which included $38 million of disbursements made for transaction fees related to the split-off of the Post cereals business. Separately, we divested a biscuit operation in Spain and a trademark in Hungary that we previously acquired as part of the acquisition of the global LU biscuit business of Groupe Danone S.A. (“LU Biscuit”). Accordingly, we reflected the impacts as adjustments to the purchase price allocations.
In the second quarter of 2009, we sold a plant in Spain that we previously announced we would close under our Restructuring Program. Accordingly, we reversed $35 million in Restructuring Program charges, primarily related to severance (resulting in a favorable impact to diluted EPS of $0.02), and recorded a $17 million loss on the divestiture of the plant (resulting in an unfavorable impact to diluted EPS of $0.01) in the second quarter of 2009. The reversal of the Restructuring Program costs, which affected the segment operating income of the Kraft Foods Europe segment, was recorded within asset impairment and exit costs. We incurred charges under the Restructuring Program of $90 million, or $0.04 per diluted share, during the three months and $309 million, or $0.14 per diluted share, during the nine months ended September 30, 2008. Since the inception of the Restructuring Program, we have paid cash for $1.6 billion of the $2.0 billion in expected cash payments, including $123 million paid in the first nine months of 2009. At September 30, 2009, we had an accrual of $366 million, and we had eliminated approximately 16,500 positions under the Restructuring Program.
Under the Restructuring Program, we recorded asset impairment and exit costs of $68 million during the three months and $251 million during nine months ended September 30, 2008. We recorded implementation costs of $22 million during the three months and $58 million during the nine months ended September 30, 2008 within cost of sales and marketing, administration and research costs. Implementation costs are directly attributable to exit costs; however, they do not qualify for treatment under guidance related to accounting for costs associated with exit or disposal activities. These costs primarily included the discontinuation of less profitable product lines, incremental expenses related to the closure of facilities, the Electronic Data Systems transition and the reorganization of our European operations. Management believes the disclosure of implementation charges provides readers of our financial statements greater transparency to the total costs of our Restructuring Program.
In October 2008, we divested a Nordic and Baltic snacks operation. We recorded an asset impairment charge of $55 million, or $0.03 per diluted share, in the third quarter of 2008 in connection with the anticipated divestiture. This charge primarily included the write-off of associated goodwill of $34 million and property, plant and equipment of $16 million, and was recorded within asset impairment and exit costs.
Net Earnings and Earnings per Share Attributable to Kraft Foods – Net earnings attributable to Kraft Foods of $824 million decreased by $538 million (39.5%) in the third quarter of 2009. Diluted EPS from continuing operations attributable to Kraft Foods were $0.55 in the third quarter of 2009, up 61.8% from $0.34 in the third quarter of 2008. Diluted EPS attributable to Kraft Foods were $0.55 in the third quarter of 2009, down 39.6% from $0.91 in the third quarter of 2008, due to the following:
KFT is in the portfolios of Warren Buffett of Berkshire Hathaway, Prem Watsa of Fairfax Financial Holdings, Inc., Richard Pzena of Pzena Investment Management LLC, NWQ Managers of NWQ Investment Management Co, Brian Rogers of T Rowe Price Equity Income Fund, Brian Rogers of T Rowe Price Equity Income Fund, HOTCHKIS & WILEY of HOTCHKIS & WILEY Capital Management LLC, Donald Yacktman of Yacktman Asset Management Co., Donald Yacktman of Yacktman Asset Management Co., Richard Aster Jr of Meridian Fund, Tweedy Browne of Tweedy Browne CO LLC, Jean-Marie Eveillard of Arnhold & S. Bleichroeder Advisers, LLC, Ruane Cunniff of Ruane & Cunniff & Goldfarb Inc, Dodge & Cox.
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