Kimberly-Clark 2007 Annual Report Download - page 89

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KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The Corporation accounts for its interests in its nonconsolidated real estate entities by the equity method of
accounting or by the effective yield method, as appropriate, and has accounted for the related income tax credits
and other tax benefits as a reduction in its income tax provision. As of December 31, 2007, the Corporation had
net equity of $14.3 million in its nonconsolidated real estate entities. As of December 31, 2007, the Corporation
has earned income tax credits totaling approximately $87.5 million on these nonconsolidated real estate entities.
As of December 31, 2007, total permanent financing debt for the nonconsolidated entities was $260.9 million. A
total of $21.7 million of the permanent financing debt is guaranteed by the Corporation and the remainder of this
debt is secured solely by the properties and is nonrecourse to the Corporation. At December 31, 2007, the
Corporation’s maximum loss exposure for its nonconsolidated real estate entities is estimated to be $53.5 million
and is comprised of its net equity in these entities of $14.3 million, its permanent financing guarantees of $21.7
million, and the income tax credit recapture risk of $17.5 million.
If the Corporation’s investments in all of its real estate entities were to be disposed of at their carrying
amounts, a portion of the tax credits may be recaptured and may result in a charge to earnings. As of
December 31, 2007, this recapture risk is estimated to be $41.8 million. The Corporation has no current intention
of disposing of these investments during the recapture period, nor does it anticipate the need to do so in the
foreseeable future in order to satisfy any anticipated liquidity need. Accordingly, the recapture risk is considered
to be remote.
Note 12. Leases and Commitments
Leases
The Corporation has entered into operating leases for certain warehouse facilities, automobiles and
equipment. The future minimum obligations under operating leases having a noncancelable term in excess of one
year as of December 31, 2007, are as follows:
Millions
Year Ending December 31:
2008 ........................................................................ $126.3
2009 ........................................................................ 101.7
2010 ........................................................................ 79.1
2011 ........................................................................ 65.3
2012 ........................................................................ 51.6
Thereafter .................................................................... 152.6
Future minimum obligations ......................................................... $576.6
Certain operating leases contain residual value guarantees, which provide that if the Corporation does not
purchase the leased property from the lessor at the end of the lease term, the Corporation is liable to the lessor for
the shortfall, if any, between the proceeds from the sale of the property and an agreed value. At December 31,
2007, the maximum amount of the residual value guarantee was approximately $16 million. Management expects
the proceeds from the sale of the properties under the operating leases will exceed the agreed values.
Operating lease obligations have been reduced by approximately $1 million for rental income from
noncancelable sublease agreements.
Consolidated rental expense under operating leases was $271.0 million, $227.9 million and $199.0 million
in 2007, 2006 and 2005, respectively.
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