Black & Decker 2010 Annual Report Download - page 126

The following is a summary of the future commitments for operating lease obligations, material purchase
commitments, outsourcing and other arrangements:
(Millions of Dollars) Total 2011 2012 2013 2014 2015 Thereafter
Operating lease obligations ........... $309.1 $97.0 $72.9 $51.6 $32.7 $19.7 $35.2
Inventory purchase commitments ....... 328.6 328.6 — — — — —
Marketing and other commitments ...... 71.8 55.5 4.7 2.7 1.8 1.8 5.3
Total . . .......................... $709.5 $481.1 $77.6 $54.3 $34.5 $21.5 $40.5
The Company has numerous assets, predominantly vehicles and equipment, under a one-year term U.S. master
personal property lease. Residual value obligations under this master lease were $9.8 million at January 1,
2011 while the fair value of the underlying assets was approximately $11.3 million. The U.S. master personal
property lease obligations are not reflected in the future minimum lease payments since the initial and
remaining term does not exceed one year. The Company routinely exercises various lease renewal options and
from time to time purchases leased assets for fair value at the end of lease terms.
The Company is a party to a synthetic lease for one of its major distribution centers. The program qualifies as
an operating lease for accounting purposes, where only the monthly lease cost is recorded in earnings and the
liability and value of underlying assets are off-balance sheet.
As of January 1, 2011, the estimated fair value of assets and remaining obligation for the property were
$30.0 million and $25.5 million respectively.
GUARANTEES — The following is a summary of guarantees as of January 1, 2011:
(Millions of Dollars) Term
Maximum
Potential
Payment
Carrying
Amount of
Liability
Financial guarantees as of January 1, 2011:
Guarantees on the residual values of leased
properties ........................... One to four years $35.3 $—
Guarantee on the residual value of aircraft ..... Less than nine years 24.2 —
Standby letters of credit .................. Up to three years 59.7 —
Commercial customer financing arrangements . . Up to six years 16.9 12.7
Total................................. $136.1 $12.7
The Company has guaranteed a portion of the residual value arising from its previously mentioned synthetic
lease and U.S. master personal property lease programs. The lease guarantees aggregate $35.3 million while
the fair value of the underlying assets is estimated at $41.3 million. The related assets would be available to
satisfy the guarantee obligations and therefore it is unlikely the Company will incur any future loss associated
with these lease guarantees.
The Company has issued $59.7 million in standby letters of credit that guarantee future payments which may
be required under certain insurance programs.
The Company provides various limited and full recourse guarantees to financial institutions that provide
financing to U.S. and Canadian Mac Tool distributors for their initial purchase of the inventory and truck
necessary to function as a distributor. In addition, the Company provides limited and full recourse guarantees
to financial institutions that extend credit to certain end retail customers of its U.S. Mac Tool distributors. The
gross amount guaranteed in these arrangements is $16.9 million and the $12.7 million carrying value of the
guarantees issued is recorded in debt and other liabilities as appropriate in the consolidated balance sheet.
The Company leases an aircraft under an operating lease that includes a $24.2 million residual value
guarantee. The fair value of that aircraft is estimated at $39.5 million.
The Company provides product and service warranties which vary across its businesses. The types of
warranties offered generally range from one year to limited lifetime, while certain products carry no warranty.
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