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2006 Annual Report

 

Obligations and Commitments

We have contractual obligations to make future payments on debt and lease agreements. Additionally, in the normal course of business, we enter into contractual arrangements whereby we commit to future purchases of products or services from unaffiliated parties. Obligations that are legally binding agreements whereby we agree to purchase products or services with a specific minimum quantity defined at a fixed, minimum or variable price over a specified period of time are defined as purchase obligations. Included in purchase obligations are vendor contracts of $6.3 billion, commitments to purchase securities of $9.1 billion and commitments to purchase loans of $43.3 billion. The most significant of our vendor contracts include communication services, processing services and software contracts. Other long-term liabilities include our obligations related to the Qualified Pension Plans, Nonqualified Pension Plans and Postretirement Health and Life Plans (the Plans) as well as amounts accrued for cardholder reward agreements. Obligations to the Plans are based on the current and projected obligations of the Plans, performance of the Plans' assets and any participant contributions, if applicable. During 2006 and 2005, we contributed $2.6 billion and $1.1 billion to the Plans, and we expect to make at least $192 million of contributions during 2007. Debt, lease and other obligations are more fully discussed in Note 12 and Note 13 of the Consolidated Financial Statements.

Table 8 presents total long-term debt and other obligations at December 31, 2006.

Table 8 Long-term Debt and Other Obligations (1)
December 31, 2006
(Dollars in millions) Due in 1 year
or less
Due after 1 year
through 3 years
Due after 3 years
through 5 years
Due after 5
years
Total
Long-term debt and capital leases
$
17,194
$
44,962
$
20,799
$
63,045
$
146,000
Purchase obligations (2) 23,918 22,578 11,234 1,005 58,735
Operating lease obligations 1,375 2,410 1,732 5,951 11,468
Other long-term liabilities 464 676 290 835 2,265
Total
$
42,951
$
70,626
$
34,055
$
70,836
$
218,468
Footnote (1) This table does not include the obligations associated with the Corporation's Deposits. For more information on Deposits, see Note 11 of the Consolidated Financial Statements.
Footnote (2) Obligations that are legally binding agreements whereby we agree to purchase products or services with a specific minimum quantity defined at a fixed, minimum or variable price over a specified period of time are defined as purchase obligations.

Many of our lending relationships contain funded and unfunded elements. The funded portion is reflected on our balance sheet. The unfunded component of these commitments is not recorded on our balance sheet until a draw is made under the credit facility; however, a reserve is established for probable losses. These commitments, as well as guarantees, are more fully discussed in Note 13 of the Consolidated Financial Statements.

The following table summarizes the total unfunded, or off-balance sheet, credit extension commitment amounts by expiration date. At December 31, 2006, charge cards (nonrevolving card lines) to individuals and government entities guaranteed by the U.S. government in the amount of $9.6 billion (related outstandings of $193 million) were not included in credit card line commitments in the table below.

Table 9 Credit Extension Commitments
December 31, 2006
(Dollars in millions) Expires in 1 year
or less
Expires after 1
year through 3
years
Expires after 3
years through
5 years
Expires after 5
years
Total
Loan commitments (1)
$
151,604
$
60,660
$
90,988
$
34,953
$
338,205
Home equity lines of credit 1,738 1,801 2,742 91,919 98,200
Standby letters of credit and financial
guarantees
29,213 10,712 6,744 6,337 53,006
Commercial letters of credit 3,880 180 27 395 4,482
Legally binding commitments 186,435 73,353 100,501 133,604 493,893
Credit card lines (2) 840,215 13,377 853,592
Total
$
1,026,650
$
86,730
$
100,501
$
133,604
$
1,347,485
Footnote (1) Included at December 31, 2006, are equity commitments of $2.8 billion related to obligations to further fund equity investments.
Footnote (2) As part of the MBNA merger, on January 1, 2006, the Corporation acquired $588.4 billion of unused credit card lines.