Kraft 2005 Annual Report Download - page 68

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MERRILL CORPORATION FLANGST// 9-MAR-06 02:24 DISK126:[06CHI5.06CHI1135]DW1135A.;8
mrll.fmt Free: 0D*/1735D Foot: 0D/ 0D VJ RSeq: 2 Clr: 0
DISK024:[PAGER.PSTYLES]UNIVERSAL.BST;51
KRAFT FOODS-FSC CERTIFIED-10K/AR Proj: P1102CHI06 Job: 06CHI1135 File: DW1135A.;8
Merrill Corporation/Chicago (312) 786-6300 Page Dim: 8.250X 10.750Copy Dim: 38. X 54.3
Note 6. Acquisitions:
During 2004, the Company acquired a U.S.-based beverage business for a total cost of $137 million.
During 2003, the Company acquired a biscuits business in Egypt, trademarks associated with a small
U.S.-based natural foods business and other smaller acquisitions for a total cost of $98 million. The
effects of these acquisitions were not material to the Company’s consolidated financial position, results
of operations or cash flows in any of the periods presented.
Note 7. Inventories:
The cost of approximately 40% and 37% of inventories in 2005 and 2004, respectively, was
determined using the LIFO method. The stated LIFO amounts of inventories were approximately
$71 million and $81 million higher than the current cost of inventories at December 31, 2005 and 2004,
respectively.
Note 8. Short-Term Borrowings and Borrowing Arrangements:
At December 31, 2005 and 2004, the Company’s short-term borrowings and related average
interest rates consisted of the following:
2005 2004
Average Average
Amount Year-End Amount Year-End
Outstanding Rate Outstanding Rate
(in millions)
Commercial paper .......................... $407 4.3% $1,668 2.4%
Bank loans ............................... 398 5.5 150 9.0
$805 $1,818
The fair values of the Company’s short-term borrowings at December 31, 2005 and 2004, based
upon current market interest rates, approximate the amounts disclosed above.
The Company maintains revolving credit facilities that have historically been used to support the
issuance of commercial paper. In April 2005, the Company terminated its $2.0 billion, multi-year
revolving credit facility expiring in July 2006 and its $2.5 billion, 364-day revolving credit facility expiring
in July 2005 and replaced them with a new $4.5 billion, multi-year revolving credit facility that expires in
April 2010. At December 31, 2005, the credit line for the Company and the related activity were as follows
(in billions of dollars):
Commercial
Credit Amount Paper
Type Line Drawn Outstanding
Multi-year ............................................ $4.5 $ — $0.4
The Company’s revolving credit facility, which is for its sole use, requires the maintenance of a
minimum net worth of $20.0 billion. At December 31, 2005, the Company’s net worth was $29.6 billion.
The Company expects to continue to meet this covenant. The revolving credit facility does not include
any other financial tests, any credit rating triggers or any provisions that could require the posting of
collateral.
In addition to the above, certain international subsidiaries of Kraft maintain credit lines to meet the
short-term working capital needs of the international businesses. These credit lines, which amounted to
approximately $1.3 billion as of December 31, 2005, are for the sole use of the Company’s international
businesses. Borrowings on these lines amounted to approximately $400 million and $150 million at
December 31, 2005 and 2004, respectively.
67
6 C Cs: 17452