Baker Hughes 2007 Annual Report Download - page 114

2007 Form 10-K 31
$13.0 million and $15.0 million, and we estimate we will
contribute between $142.0 million and $153.0 million to
our defined contribution plans.
Other than as previously discussed, we do not believe there
are any other material trends, demands, commitments, events
or uncertainties that would have, or are reasonably likely to
have, a material impact on our financial condition and liquidity.
Other than as previously discussed, we currently have no infor-
mation that would create a reasonable likelihood that the
reported levels of revenues and cash flows from operations in
2007 are not indicative of what we can expect in the near term.
Off-Balance Sheet Arrangements
In the normal course of business with customers, vendors
and others, we have entered into off-balance sheet arrangements,
such as letters of credit and other bank issued guarantees, which
totaled approximately $466.8 million at December 31, 2007.
We also had commitments outstanding for purchase obliga-
tions related to capital expenditures and inventory under pur-
chase orders and contracts of approximately $293.1 million at
December 31, 2007. It is not practicable to estimate the fair
value of these financial instruments. None of the off-balance
sheet arrangements either has, or is likely to have, a material
effect on our consolidated financial statements.
Other than normal operating leases, we do not have any
off-balance sheet financing arrangements such as securitization
agreements, liquidity trust vehicles, synthetic leases or special
purpose entities. As such, we are not materially exposed to
any financing, liquidity, market or credit risk that could arise
if we had engaged in such financing arrangements.
CRITICAL ACCOUNTING ESTIMATES
The preparation of our consolidated financial statements
requires us to make estimates and judgments that affect the
reported amounts of assets, liabilities, revenues and expenses
and related disclosures and about contingent assets and liabil-
ities. We base these estimates and judgments on historical
experience and other assumptions and information that are
believed to be reasonable under the circumstances. Estimates
and assumptions about future events and their effects cannot
be perceived with certainty, and accordingly, these estimates
may change as new events occur, as more experience is acquired,
as additional information is obtained and as the business envi-
ronment in which we operate changes.
We have defined a critical accounting estimate as one that
is both important to the portrayal of either our financial condi-
tion or results of operations and requires us to make difficult,
subjective or complex judgments or estimates about matters
that are uncertain. We have discussed the development and
Contractual Obligations
In the table below, we set forth our contractual cash obligations as of December 31, 2007. Certain amounts included in this
table are based on our estimates and assumptions about these obligations, including their duration, anticipated actions by third par-
ties and other factors. The contractual cash obligations we will actually pay in future periods may vary from those reflected in the
table because the estimates and assumptions are subjective (in millions).
Payments Due by Period
Total Less Than 1 year 2–3 Years 4–5 Years More than 5 Years
Total debt (1) $ 1,090.4 $ 15.4 $ 525.0 $ – $ 550.0
Estimated interest payments(2) 851.3 72.6 96.8 80.6 601.3
Operating leases(3) 377.3 95.0 108.1 51.2 123.0
Purchase obligations(4) 293.1 252.0 27.1 14.0 –
Other long-term liabilities(5) 96.4 25.4 53.2 3.3 14.5
FIN 48 tax liabilities(6) 456.9 105.5 119.0 206.2 26.2
Total $ 3,165.4 $ 565.9 $ 929.2 $ 355.3 $ 1,315.0
(1) Amounts represent the expected cash payments for our total debt and do not include any unamortized discounts, deferred issuance costs or net deferred gains on
terminated interest rate swap agreements.
(2) Amounts represent the expected cash payments for interest on our long-term debt.
(3) We enter into operating leases in the normal course of business. Some lease agreements provide us with the option to renew the lease. Our future operating lease
payments would change if we exercised these renewal options and if we entered into additional operating lease agreements.
(4) Purchase obligations include agreements to purchase goods or services that are enforceable and legally binding and that specify all significant terms, including: fixed or
minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. Purchase obligations exclude agree-
ments that are cancelable at anytime without penalty.
(5) Amounts represent other long-term liabilities, including the current portion, reflected in the consolidated balance sheet where both the timing and amount of payment
streams are known. Amounts include: payments for certain environmental remediation liabilities, payments for deferred compensation, payouts under acquisition
agreements and payments for certain asset retirement obligations. Amounts do not include: payments for pension contributions and payments for various postretire-
ment welfare benefit plans and postemployment benefit plans.
(6) The estimated FIN 48 tax liabilities will be settled as a result of expiring statutes, audit activity, competent authority proceedings related to transfer pricing, or final deci-
sions in matters that are the subject of litigation in various taxing jurisdictions in which we operate. The timing of any particular settlement will depend on the length
of the tax audit and related appeals process, if any, or an expiration of statute. If a liability is settled due to a statute expiring or a favorable audit result, the settlement
of the FIN 48 tax liability would not result in a cash payment.