Black & Decker 2011 Annual Report Download - page 103

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The following is a summary of the Company’s future commitments which span more than one future fiscal year:
(Millions of Dollars)
Total
2012
2013
2014
2015
2016
Thereafter
Operating lease obligations…………………………….
$ 423.9 $ 123.0 $ 89.6 $ 64.5 $ 44.5
$ 29.7 $ 72.6
Marketing commitments……………………………….
61.9 33.7 12.5 6.8 3.2
1.9 3.8
Total……………………………………………………
$ 485.8 $ 156.7 $ 102.1 $ 71.3 $ 47.7
$ 31.6 $ 76.4
The Company has numerous assets, predominantly real estate, vehicles and equipment, under various lease arrangements. Residual
value obligations under this master lease were $4.4 million at December 31, 2011 while the fair value of the underlying assets was
approximately $5.0 million. 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 December 31, 2011, the estimated fair value of assets and remaining obligation for the property were
$30.5 million and $27.2 million respectively.
GUARANTEES — The following is a summary of guarantees as of December 31, 2011:
(Millions of Dollars)
Term
Maximum
Potential
Payment
Carrying
Amount of
Liability
Financial guarantees as of December 31, 2011:
Guarantees on the residual values of leased properties
One to four years
$ 31.6 $ —
Guarantee on the residual value of aircraft
Less than nine years 24.2 —
Standby letters of credit
Up to three years
66.5 —
Commercial customer financing arrangements
Up to six years
17.6 12.8
Total
$ 139.9 $ 12.8
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 $31.6 million while the fair value of the underlying assets is
estimated at $35.6 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 $66.5 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 $17.6 million and the $12.8 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. Further, the Company sometimes incurs
discretionary costs to service its products in connection with product performance issues. Historical warranty and service claim
experience forms the basis for warranty obligations recognized. Adjustments are recorded to the warranty liability as new information
becomes available.