Kraft 2006 Annual Report Download - page 50

Net Cash Used in Financing Activities
During 2006, net cash of $3.7 billion was used in financing activities, compared with $4.0 billion during 2005. The decrease in net cash used in 2006 was
due primarily to a decrease in net debt repayments, partially offset by an increase in the Company's Class A share repurchases and dividend payments.
During 2005, net cash of $4.0 billion was used in financing activities, compared with $3.2 billion during 2004. The increase in cash used in 2005 was due
primarily to an increase in the Company's Class A share repurchases and the repayment of debt, partially offset by an increase in amounts due to Altria
Group, Inc. and affiliates.
Debt and Liquidity
Debt. The Company's total debt, including amounts due to Altria Group, Inc. and affiliates, was $10.8 billion at December 31, 2006 and $11.2 billion at
December 31, 2005. The Company's debt-to-equity ratio was 0.38 at December 31, 2006 and 2005. The Company's debt-to-capitalization ratio was 0.27 at
December 31, 2006 and 2005.
The Company has a Form S-3 shelf registration statement on file with the Securities and Exchange Commission ("SEC") under which the Company may
sell debt securities and/or warrants to purchase debt securities in one or more offerings up to a total amount of $4.0 billion. At December 31, 2006, the Company
had $3.5 billion of capacity remaining under its shelf registration.
At December 31, 2006 and 2005, the Company had short-term amounts payable to Altria Group, Inc. and affiliates of $607 million and $652 million,
respectively. The amounts payable to Altria Group, Inc. generally include accrued dividends, taxes and service fees. Interest on intercompany borrowings is
based on the applicable London Interbank Offered Rate. The Company had no long-term amounts payable to Altria Group, Inc. and affiliates. As discussed under
Kraft Spin-Off from Altria Group, Inc. within the Description of the Company section above, all intercompany accounts will be settled in cash. However, once
items arising from the normal course of business, such as dividends and tax deposits, are accounted for, the net settlement arising from the spin-off will be
insignificant.
The Company is currently included in the Altria Group, Inc. consolidated federal income tax return, and federal income tax contingencies are recorded as
liabilities on the balance sheet of Altria Group, Inc. Prior to the distribution of Kraft shares, Altria Group, Inc. will reimburse the Company in cash for these
liabilities, which are approximately $300 million, plus interest.
Credit Ratings. At December 31, 2006, the Company's debt ratings by major credit rating agencies were as follows:
Short-term Long-term
Moody's P-2 A3
Standard & Poor's A-2 BBB+
Fitch F-2 A-
On January 31, 2007, Standard & Poor's placed the Company's long-term and short-term credit ratings on CreditWatch with positive implications. On
February 20, 2007, following the announcement of a $5 billion, two year share repurchase program, Standard & Poor's maintained its CreditWatch with positive
implications and Moody's placed Kraft's long-term credit ratings under review for possible downgrade.
Credit Lines. The Company maintains revolving credit facilities that have historically been used to support the issuance of commercial paper. At
December 31, 2006, the Company has a $4.5 billion, multi-year revolving credit facility that expires in April 2010 on which no amounts were drawn.
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Source: KRAFT FOODS INC, 10-K, March 01, 2007