Kraft 2007 Annual Report Download - page 92

exchange options with aggregate notional amounts of $4.0 billion at December 31, 2007, and $2.6 billion at December 31, 2006.
As of December 31, 2007, we had hedged forecasted foreign currency transactions for periods not exceeding the next 48
months. During the first quarter of 2007, we hedged currency exposure related to new, longer term intercompany loans with
foreign subsidiaries. Excluding these intercompany loans, we had hedged forecasted foreign currency transactions for periods
not exceeding the next twelve months.
Hedging activity affected accumulated other comprehensive losses, net of income taxes, during the years ended December 31,
2007, 2006 and 2005 as follows:
2007 2006 2005
(in millions)
Accumulated gain / (loss) at beginning
of period $ (4) $ (4) $ 6
Transfer of realized (gains) / losses in
fair value to earnings (10) 32 (42)
Unrealized gain / (loss) in fair value 41 (32) 32
Accumulated gain / (loss) at December 31 $ 27 $ (4) $ (4)
Hedges of net investments in foreign operations:
We have numerous investments in foreign subsidiaries. The net assets of these subsidiaries are exposed to volatility in foreign
currency exchange rates. Upon the acquisition of Danone Biscuit, we designated the euro denominated borrowings used to
finance the transaction as a net investment hedge of a portion of our overall European operations. The gains and losses in our
net investment in these designated European operations are economically offset by losses and gains in our euro denominated
borrowings. For the year ended December 31, 2007, $28 million of gains related to the euro denominated borrowings were
included in our cumulative translation adjustment.
Note 15. Commitments and Contingencies:
Legal Proceedings:
We are defendants in a variety of legal proceedings. Plaintiffs in a few of those cases seek substantial damages. We cannot
predict with certainty the results of these proceedings. However, we believe that the final outcome of these proceedings will not
materially affect our financial results.
Third-Party Guarantees:
We have third-party guarantees because of our acquisition, divestiture and construction activities. As part of those transactions,
we guarantee that third parties will make contractual payments or achieve performance measures. At December 31, 2007, the
maximum potential payments under our third-party guarantees were approximately $32 million, of which approximately
$8 million have no specified expiration dates. Substantially all of the remainder expire at various times through 2016. The
carrying amounts of these guarantees were $25 million on our consolidated balance sheet at December 31, 2007.
Leases:
Rental expenses were $456 million in 2007, $441 million in 2006 and $436 million in 2005. Minimum rental commitments
under non-cancelable operating leases in effect at December 31, 2007 were (in millions):
2008 $ 256
2009 189
2010 140
2011 109
2012 84
Thereafter 82
Note 16. Segment Reporting:
Kraft manufactures and markets packaged food products, including snacks, beverages, cheese, convenient meals and various
packaged grocery products. We manage and report operating results through two commercial units, Kraft North America and
Kraft International. We manage Kraft North America’s operations by product category, and its reportable segments are North
America Beverages; North America Cheese & Foodservice; North America Convenient Meals; North America Grocery; and
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