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As of April 27, 2011, the Company was a party to two operating leases for buildings and
equipment under which the Company has guaranteed supplemental payment obligations of
approximately $135 million at the termination of these leases. The Company believes, based on
current facts and circumstances, that any payment pursuant to these guarantees is remote.
The Company acted as servicer for $29 million and $84 million of U.S. trade receivables sold
through an accounts receivable securitization program that are not recognized on the balance sheet
as of April 27, 2011 and April 28, 2010, respectively. In addition, the Company acted as servicer for
approximately $146 million and $126 million of trade receivables which were sold to unrelated third
parties without recourse as of April 27, 2011 and April 28, 2010, respectively.
No significant credit guarantees existed between the Company and third parties as of April 27,
2011.
Market Risk Factors
The Company is exposed to market risks from adverse changes in foreign exchange rates,
interest rates, commodity prices and production costs. As a policy, the Company does not engage in
speculative or leveraged transactions, nor does the Company hold or issue financial instruments for
trading purposes.
Foreign Exchange Rate Sensitivity: The Company’s cash flow and earnings are subject to
fluctuations due to exchange rate variation. Foreign currency risk exists by nature of the Company’s
global operations. The Company manufactures and sells its products on six continents around the
world, and hence foreign currency risk is diversified.
The Company may attempt to limit its exposure to changing foreign exchange rates through both
operational and financial market actions. These actions may include entering into forward contracts,
option contracts, or cross currency swaps to hedge existing exposures, firm commitments and
forecasted transactions. The instruments are used to reduce risk by essentially creating
offsetting currency exposures.
The following table presents information related to foreign currency contracts held by the
Company:
Aggregate Notional Amount Net Unrealized Gains/(Losses)
April 27, 2011 April 28, 2010 April 27, 2011 April 28, 2010
(Dollars in millions)
Purpose of Hedge:
Intercompany cash flows. . . . . . $1,031 $ 726 $ 29 $ (5)
Forecasted purchases of raw
materials and finished goods
and foreign currency
denominated obligations . . . . 726 814 (32) (17)
Forecasted sales and foreign
currency denominated
assets . . . . . . . . . . . . . . . . . . . 104 98 12 22
$1,861 $1,638 $ 9 $ —
As of April 27, 2011, the Company’s foreign currency contracts mature within three years.
Contracts that meet qualifying criteria are accounted for as either foreign currency cash flow hedges,
fair value hedges or net investment hedges of foreign operations. Any gains and losses related to
contracts that do not qualify for hedge accounting are recorded in current period earnings in other
income and expense.
Substantially all of the Company’s foreign business units’ financial instruments are
denominated in their respective functional currencies. Accordingly, exposure to exchange risk on
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