Archer Daniels Midland 2006 Annual Report Download - page 33

2006 Annual Report 31
LIQUIDITY AND CAPITAL RESOURCES
The Company’s objective is to have sufficient liquidity, balance sheet strength, and financial flexibility to fund the operating and capital
requirements of a capital intensive agricultural-based commodity business.
At June 30, 2006, the Company continued to show substantial liquidity with working capital of $5.7 billion and a current ratio, defined as current
assets divided by current liabilities, of 1.9 to 1. Included in working capital is $1.1 billion of cash, cash equivalents, and short-term marketable
securities as well as $3.2 billion of readily marketable commodity inventories. Cash generated from operating activities totaled $1.4 billion for
the year compared to $2.1 billion last year. This decrease was primarily due to an increase in working capital principally related to the impact
of increased inventory levels of commodity-based agricultural raw materials and a $186 million increase in pension contributions. Cash used
in investing activities increased $767 million for the year to $1.1 billion due primarily to last year’s sale of Tate & Lyle PLC shares and increased
investments in acquired businesses, affiliates, and capital expenditures. Cash generated by financing activities was $283 million compared to
cash used in financing activities of $1.8 billion last year. Net long-term borrowings increased primarily as a result of the issuance of $600 million
of 30-year debentures in September 2005. Borrowings under line of credit agreements were $105 million in 2006 compared to payments of
$1.4 billion in 2005 due principally to increased working capital requirements resulting from increased levels of commodity-based agricultural
raw materials. Purchases of the Company’s common stock decreased $137 million. Cash dividends paid in 2006 were $242 million as compared
to $209 million in 2005.
Capital resources were strengthened as shown by the increase in the Company’s net worth from $8.4 billion to $9.8 billion. The Company’s ratio
of long-term debt to total capital (the sum of the Company’s long-term debt and shareholders’ equity) was 29% at June 30, 2006 and 30% at
June 30, 2005. This ratio is a measure of the Company’s long-term liquidity and is an indicator of financial flexibility. The Company currently has
$3.6 billion of commercial paper and commercial bank lines available to meet seasonal cash requirements of which $2.4 billion are committed
and $1.2 billion are uncommitted. At June 30, 2006, the Company had $549 million of short-term debt outstanding. Standard & Poor’s and
Moody’s rate the Company’s commercial paper as A-1 and P-1, respectively, and rate the Company’s long-term debt as A+ and A2, respectively.
In addition to the cash flow generated from operations, the Company has access to equity and debt capital through numerous alternatives from
public and private sources in domestic and international markets.
Contractual Obligations and Off-Balance Sheet Arrangements
In the normal course of business, the Company enters into contracts and commitments which obligate the Company to make payments in the
future. The table below sets forth the Company’s significant future obligations by time period. This table includes commodity-based contracts
entered into in the normal course of business which are further described in the “Market Risk Sensitive Instruments and Positions” section of
“Management’s Discussion of Operations and Financial Condition” and energy-related purchase contracts entered into in the normal course of
business. Where applicable, information included in the Company’s consolidated financial statements and notes is cross-referenced in this table.
Payments Due by Period
Contractual Note Less than 2 - 3 4 - 5 Over
Obligations Reference Total 1 Year Years Years 5 Years
(In thousands)
Purchases
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,508,250 $7,132,075 $ 364,096 $ 12,079 $ —
Energy ..................................................... 469,311 239,648 213,457 13,324 2,882
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 675,142 155,285 194,450 154,404 171,003
Total purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,652,703 7,527,008 772,003 179,807 173,885
Short-term debt ..................................................... 549,419 549,419 — — —
Long-term debt Note 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,195,740 66,002 96,030 551,037 3,482,671
Capital leases Note 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,710 13,766 12,790 154 —
Estimated interest payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,120,190 317,300 562,811 544,932 4,695,147
Operating leases Note 11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 377,828 77,457 108,427 56,331 135,613
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $19,922,590 $8,550,952 $1,552,061 $1,332,261 $8,487,316