NOTE 6
LEASES AND OTHER COMMITMENTS
LEASES AND OTHER COMMITMENTS
The Company’s leases are generally for equipment and
warehouse space. Rent expense on all operating leases was (in
millions):
2007–$135;
2006–$123;
2005–$115.
Additionally, the Company was subject to a residual value
guarantee on one operating lease of approximately
$13 million, which was scheduled to expire in July 2007.
During the first quarter of 2007, the Company recognized a
liability in connection with this guarantee of approximately
$5 million, which was recorded in cost of goods sold within
the Company’s North America operating segment. During the
second quarter of 2007, the Company terminated the lease
agreement and purchased the facility for approximately
$16 million, which discharged the residual value guarantee
obligation. During 2007, 2006 and 2005, the Company entered into
approximately $5 million, $2 million and
$3 million, respectively, in capital lease agreements to
finance the purchase of equipment.
At December 29, 2007, future minimum annual lease
commitments under noncancelable operating and capital leases
were as follows:
|
Operating |
Capital |
|||||||
| (millions) | leases | leases | ||||||
|
2008
|
$ | 159 | $ | 1 | ||||
|
2009
|
137 | 1 | ||||||
|
2010
|
112 | 1 | ||||||
|
2011
|
83 | 1 | ||||||
|
2012
|
56 | 1 | ||||||
|
2013 and beyond
|
183 | 3 | ||||||
|
Total minimum payments
|
$ | 730 | $ | 8 | ||||
|
Amount representing interest
|
(1 | ) | ||||||
|
Obligations under capital leases
|
7 | |||||||
|
Obligations due within one year
|
(1 | ) | ||||||
|
Long-term obligations under capital leases
|
$ | 6 | ||||||
One of the Company’s subsidiaries was guarantor on loans to
independent contractors for the purchase of DSD route
franchises. In July 2007, we exited these agreements. Refer to
Note 3 for further information.
The Company has provided various standard indemnifications in
agreements to sell and purchase business assets and lease
facilities over the past several years, related primarily to
pre-existing
tax, environmental, and employee benefit obligations. Certain of
these indemnifications are limited by agreement in either amount
and/or term
and others are unlimited. The Company has also provided various
“hold harmless” provisions within certain service type
agreements. Because the Company is not currently aware of any
actual exposures associated with these indemnifications,
management is unable to estimate the maximum potential future
payments to be made. At December 29, 2007, the Company had
not recorded any liability related to these indemnifications.
