Freddie Mac 2006 Annual Report Download - page 67

Table 33 Ì Contractual Obligations by Year at December 31, 2006
Total 2007 2008 2009 2010 2011 Thereafter
(in millions)
Long-term debt securities(1) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $609,083 $117,972 $ 98,313 $63,231 $46,681 $55,208 $227,678
Short-term debt securities(1) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 178,887 178,887 ÌÌÌÌ Ì
Interest payable(2)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 140,167 26,095 20,878 17,029 14,516 11,589 50,060
Other liabilities reÖected on our consolidated balance sheet:
Due to Participation CertiÑcate investors ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 11,123 11,123 ÌÌÌÌ Ì
Other contractual liabilities(3)(4) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,704 1,711 556 178 78 41 140
Purchase obligations:
Purchase commitments(5) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 9,856 9,856 ÌÌÌÌ Ì
Other purchase obligations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 418 247 82 35 19 14 21
Operating lease obligations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 114 18 16 13 12 7 48
Total speciÑed contractual obligations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $952,352 $345,909 $119,845 $80,486 $61,306 $66,859 $277,947
(1) Represents par value. Callable debt is included in this table at its contractual maturity. For additional information about our debt securities, see
""NOTE 8: DEBT SECURITIES AND SUBORDINATED BORROWINGS'' to our consolidated Ñnancial statements.
(2) Includes estimated future interest payments on our short-term and long-term debt securities. Also includes accrued interest payable recorded on our
consolidated balance sheet, which consists primarily of the accrual of interest on short-term and long-term debt as well as the accrual of periodic cash
settlements of derivatives, netted by counterparty.
(3) Other contractual liabilities primarily represents future cash payments due under our contractual obligations to make delayed equity contributions to
low-income housing tax credit partnerships that are unconditional and legally binding.
(4) Accrued obligations related to our deÑned beneÑt plans, deÑned contribution plans and executive deferred compensation plan are included in the Total
and 2007 columns. However, the timing of payments due under these obligations is uncertain. See ""NOTE 15: EMPLOYEE BENEFITS'' to our
consolidated Ñnancial statements for additional information.
(5) Purchase commitments represents our obligations to purchase mortgage loans and mortgage-related securities from third parties. The majority of
purchase commitments included in this caption are accounted for as derivatives in accordance with SFAS No. 133, ""Accounting for Derivative
Instruments and Hedging Activities,'' or SFAS 133.
Capital Resources
Capital Management
Our primary objective in managing capital is preserving our safety and soundness. We also seek to have suÇcient capital
to support our business and mission at attractive long-term returns. See ""NOTE 10: REGULATORY CAPITAL'' to our
consolidated Ñnancial statements for more information regarding our regulatory capital requirements and OFHEO's capital
monitoring framework. As appropriate, we will consider opportunities to return excess capital to shareholders (through
dividends and share repurchases) and optimize our capital structure to lower our cost of capital.
We assess and project our capital adequacy relative to our regulatory requirements as well as our economic risks. This
includes targeting a level of additional capital above each of our capital requirements to help support ongoing compliance
and to accommodate future uncertainties. We evaluate the adequacy of our targeted additional capital in light of changes in
our business and risk exposures.
We develop an annual capital plan that is approved by our board of directors and updated periodically. This plan
provides projections of capital adequacy, taking into consideration our business plans, forecasted earnings, economic risks
and regulatory requirements.
Capital Adequacy
We estimate as of December 31, 2006 that we exceeded each of our regulatory capital requirements, including the
30 percent mandatory target capital surplus, based on our most recent submissions to OFHEO. See ""NOTE 10:
REGULATORY CAPITAL'' to our consolidated Ñnancial statements for further information regarding our regulatory
capital requirements and OFHEO's capital monitoring framework.
Core Capital
During 2006 and 2005, we added approximately $0.2 billion and $1.0 billion, respectively, to Core capital primarily from
Net income of $2.2 billion and $2.1 billion, respectively, partly oÅset by the payment of common and preferred stock
dividends totaling $1.6 billion and $1.3 billion, respectively. In addition, during 2006, we repurchased $2.0 billion of
outstanding shares of common stock and issued $1.5 billion of non-cumulative, perpetual preferred stock in connection with
a plan to replace $2.0 billion of common stock with an equal amount of preferred stock. During the Ñrst quarter of 2007, we
issued $1.1 billion of non-cumulative, perpetual preferred stock, including $500 million to complete the planned issuance
described above and $600 million to replace higher-cost preferred stock that we redeemed in 2007. In accordance with
OFHEO's capital monitoring framework, we obtained OFHEO's approval for both the common stock repurchases and
preferred stock redemption described above. Also, during the Ñrst quarter of 2007, we received approval from OFHEO and
our board of directors to repurchase up to an additional $1 billion in common stock in conjunction with the issuance of up to
$1 billion in preferred stock.
55 Freddie Mac