Kraft 2009 Annual Report Download - page 47

Liquidity
We believe that our cash from operations, our existing $4.5 billion revolving credit facility (which supports our commercial paper program) and our
authorized long-term financing will provide sufficient liquidity to meet our working capital needs, planned capital expenditures, future contractual
obligations and payment of our anticipated quarterly dividends. We continue to utilize our commercial paper program and primarily uncommitted
international credit lines for daily funding requirements. We also use short-term intercompany loans from foreign subsidiaries to improve financial
flexibility. Overall, we do not expect any negative effects to our funding sources that would have a material effect on our liquidity.
Net Cash Provided by Operating Activities:
Operating activities provided net cash of $5.1 billion in 2009, $4.1 billion in 2008 and $3.6 billion in 2007. The increase in operating cash flows in
2009 primarily related to working capital improvements over the prior year (primarily due to improved inventory positions, partially offset by higher
interest payments, principally due to the first annual payment on our euro notes) and higher earnings. The increase in operating cash flows was
partially offset by higher pension contributions, driven by total voluntary contributions of $400 million that we made to our U.S. pension plans in
May and December 2009.
Operating cash flows increased in 2008 from 2007 primarily due to increased earnings and working capital improvements (mainly from lower
income tax payments and lower inventory levels), partially offset by increased interest paid. The increase in operating cash flows was partially
offset by a $305 million tax transfer from Altria in 2007 for the federal tax contingencies held by them, less the impact of federal reserves reversed
due to the adoption of new guidance which addressed accounting for the uncertainty in income taxes. The transfer from Altria was reflected as a
component of the change in other current assets within the net cash provided by operating activities section of the consolidated statement of cash
flows.
We anticipate making U.S. pension contributions of approximately $40 million in 2010 and non-U.S. pension contributions of approximately $200
million in 2010. We expect to fund these contributions from operations. Our estimated pension contributions do not include anticipated
contributions for our newly acquired Cadbury business. We will update this figure in future filings to reflect these anticipated contributions.
Net Cash Used in Investing Activities:
One element of our growth strategy is to strengthen our brand portfolios and / or expand our geographic reach through disciplined programs of
selective acquisitions and divestitures. We are regularly reviewing potential acquisition candidates and from time to time sell businesses to
accelerate the shift in our portfolio toward businesses—whether global, regional or local - that offer us a sustainable competitive advantage. The
impact of future acquisitions or divestitures could have a material impact on our cash flows.
Net cash used in investing activities was $1.2 billion in 2009, $1.3 billion in 2008 and $8.4 billion in 2007. The decrease in cash used in investing
activities in 2009 primarily related to a $99 million payment made to Groupe Danone S.A. in 2008 to refund excess cash received in the acquisition
of LU Biscuit and lower capital expenditures, partially offset by lower proceeds from divestitures. The decrease in cash used in investing activities
in 2008 primarily related to lower payments for acquisitions, partially offset by lower proceeds from divestitures and higher capital expenditures.
During 2009, we divested our Balance bar operations in the U.S., a juice operation in Brazil and a plant in Spain and received $41 million in net
proceeds. During 2008, we received $153 million in net proceeds on divestitures, primarily related to a Nordic and Baltic snacks operation and four
operations in Spain, and we disbursed $56 million for transaction fees related to the split-off of the Post cereals business. Additionally, we paid
Groupe Danone S.A. the aforementioned refund in 2008. During 2007, we received net proceeds of $216 million from the divestitures of our
flavored water and juice brand assets and related trademarks, our sugar confectionery assets in Romania and related trademarks and our hot
cereal assets and trademarks. Additionally, we acquired LU Biscuit for €5.1 billion (approximately $7.6 billion) in cash in 2007.
Capital expenditures, which were funded by operating activities, were $1.3 billion in 2009, $1.4 billion in 2008 and $1.2 billion in 2007. The 2009
capital expenditures were primarily used to modernize manufacturing facilities and
44
Source: KRAFT FOODS INC, 10-K, February 25, 2010 Powered by Morningstar® Document Research℠