Archer Daniels Midland 2007 Annual Report Download - page 40

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32
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
Payments Due by Period
Contractual Note Less than 2 – 3 4 – 5 Over
Obligations Reference Total 1 Year Years Years 5 Years
(In millions)
Purchases
Inventories $ 11,113 $ 10,312 $ 535 $ 159 $ 107
Energy 429 269 152 7 1
Other 217 67 94 43 13
Total purchases 11,759 10,648 781 209 121
Short-term debt Note 7 468 468 - - -
Long-term debt Note 7 4,897 65 92 425 4,315
Estimated interest payments 5,752 290 509 474 4,479
Operating leases Note 12 900 318 241 132 209
Estimated pension and other
postretirement plan
contributions Note 13 1,045 79 173 195 598
Total $24,821 $ 11,868 $ 1,796 $1,435 $9,722
At June 30, 2007, the Company estimates it will spend approximately $3.0 billion over the next four years to
complete approved capital projects and acquisitions. The Company is a limited partner in various private equity
funds which invest primarily in emerging markets. At June 30, 2007, the Company’s carrying value of these
limited partnership investments was $165 million. The Company has future capital commitments related to these
partnerships of $138 million and expects the majority of these additional capital commitments, if called for, to be
funded by cash flows generated by the partnerships. The Company also has outstanding letters of credit and surety
bonds of $339 million at June 30, 2007.
In addition, the Company has entered into agreements, primarily debt guarantee agreements related to equity-
method investees, which could obligate the Company to make future payments. The Company’s liability under
these agreements arises only if the primary entity fails to perform its contractual obligation. The Company has
collateral for a portion of these contingent obligations. At June 30, 2007, these contingent obligations totaled
approximately $98 million. Amounts outstanding for the primary entity under these contingent obligations were
$51 million at June 30, 2007.
Critical Accounting Policies
The process of preparing financial statements requires management to make estimates and judgments that affect the
carrying values of the Company’s assets and liabilities as well as the recognition of revenues and expenses. These
estimates and judgments are based on the Company’s historical experience and management’s knowledge and
understanding of current facts and circumstances. Certain of the Company’s accounting policies are considered
critical, as these policies are important to the depiction of the Company’s financial statements and require
significant or complex judgment by management. Management has discussed with the Company’s Audit
Committee the development, selection, disclosure, and application of these critical accounting policies. Following
are the accounting policies management considers critical to the Company’s financial statements.