About Marubeni America Corporation

About Marubeni America Corporation

Branches New York Headquarters 375 Lexington Avenue New York, NY 10017 Tel: (212) 450-0100 Fax: (212) 450-0700 New York Showroom Design Link, 1411 ...

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Branches

New York Headquarters 375 Lexington Avenue New York, NY 10017 Tel: (212) 450-0100 Fax: (212) 450-0700

New York Showroom Design Link, 1411 Broadway, Unit 2545 New York, NY 10018 Tel: (212) 450-0311 Fax: (212) 450-0722 Tosuke Nakamura, Assistant General Manager

Detroit Branch 2000 Town Center, Suite 1390 Southfield, MI 48075 Tel: (248) 353-7060 Fax: (248) 353-0649 Shigeyuki Koike, General Manager

Houston Branch 2800 Post Oak Boulevard, Suite 6000 Houston, TX 77056 Tel: (713) 871-5700 Fax: (713) 871-1726 Akira Takakura, General Manager

Portland Branch 1300 SW Fifth Avenue, Suite 2930 Portland, OR 97201 Tel: (503) 224-3761 Fax: (503) 295-7943 Masaaki Higuchi, General Manager

Silicon Valley Branch 3945 Freedom Circle, Suite 1000 Santa Clara, CA 95054 Tel: (408) 330-0808 Fax: (408) 330-0807 Mitsuaki Yamamoto, General Manager

Washington DC Office 1776 I Street NW, Suite 725 Washington DC 20006 Tel: (202) 331-1167 Fax: (202) 331-1319 Takashi Imamura, General Manager

Marubeni America Corporation Web Address: www.marubeni-usa.com

Los Angeles Branch 515 South Figueroa Street, Suite 2000 Los Angeles, CA 90071 Tel: (213) 972-2700 Fax: (213) 626-1294 Ichiro Igarashi, General Manager

Omaha Branch 1125 South 103rd Street, Suite 475 Omaha, NE 68124 Tel: (402) 934-1060 Fax: (402) 934-1063 Hidefumi Oya, General Manager

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Marubeni America Corporation 2007

Marubeni Corporation (parent) Web Address: www.marubeni.com

President’s Message

I am very pleased to report that in 2007, Marubeni America Corporation (“MAC”), like our parent, Marubeni Corporation, continued its strong upward trend of earning capability and financial strength. With sustained contributions from our “traditional” trading businesses and substantial contributions from our subsidiaries, we have achieved record profits in 2007. With the close of 2007, MAC achieved its medium-term strategic plan for 2006-2007, and we look forward to ongoing contributions from our major subsidiaries in agricultural products, distribution, finance and leasing, and the expansion of our business by a combination of organic growth and acquisition where appropriate. In fiscal year 2008, the 150th Anniversary of

Now, as always, our success depends upon the

Marubeni, we begin our drive to achieve SG2009,

ability of each member of the MAC Group to provide

our next medium-term strategic plan. MAC’s focus

the highest level of value-added services, solution

continues to be on extending the brand of Marubeni

and quality to our customers, clients and business

Group, and building a company with presence in the

partners.

U.S. and Canada, one which can ensure sustainable

We look forward to the exciting opportunities, and

growth. As such, we continue to raise the bar this

challenges, of 2008 and to the continued strength

year and challenge all of our group businesses to be

and prosperity of Marubeni America Corporation.

innovative in meeting aggressive financial objectives, despite the uncertain economic environment in the U.S. At the same time, we challenge all of our staff members to keep an ever-watchful eye on proper risk management, financial planning, internal control, compliance and corporate social responsibility.

Koichi Mochizuki President and Chief Executive Officer

Marubeni America Corporation 2007

3

About Marubeni America Corporation

Marubeni America Corporation is the largest overseas subsidiary of the Japanese “sogo shosha” (general trading

and construction service, and traffic and logistics planning.

company), called Marubeni Corporation. As a general

We also are the holding company or significant investor in a

trading company, we act as an intermediary, facilitator or

number of major corporations within our specialty industries.

broker, in all types of trade between and among business

Marubeni America’s function as an intermediary enables

enterprises and countries. But unlike many other large

us to bridge the gap between supply and demand, at

businesses, a company such as ours has few fixed assets,

times by putting together the suppliers and those seeking

relying instead on the creativity, ingenuity and innovation

their products, and at other times by providing the actual

of our human resources, intensive information gathering

sources of supply or demand.

skills and financial resources and acumen.

Marubeni America is headquartered in New York City,

While Marubeni America trades in a broad range of

with seven other U.S. locations and 39 subsidiary and

commodities, agricultural goods, industrial machinery

affiliated companies. We can also access a network of

and natural resources for our own account, and on behalf

over 125 Marubeni Group offices and about 450 associated

of our clients, we are more than just global traders and

companies worldwide, all of which provide Marubeni

brokers. We also act as major financiers, investors and

offices and affiliates with up-to-the-minute information

large-scale organizers. We play a vital role in the logistics

on commodities, commerce and finance. Through our

of transactions, such as the global movement of products.

extensive global network, Marubeni America Corporation

We assume and manage risk involved in transactions and

is able to facilitate complex projects and transactions, and

act as business consultants, using our vast trade experi-

can assist you in expanding your present business or in

ence in new business development. We provide many

identifying and developing new business opportunities.

specialized services, including sales support, transporta-

4

tion, insurance, storage, financing and leasing, engineering

Marubeni America Corporation 2007

Food Unit

Lifestyle Business Unit

The Food Unit buys and exports grain, meat and other

The Lifestyle Business Unit is new as of 2008, and it

foodstuffs from the U.S. for the Japanese and Asian

handles textile products and general merchandise, includ-

markets; engages in commodities trading through the

ing footwear, hides and rubber.

Intercontinental Exchange and the Chicago Board of Trade;

On the textile side, we primarily engage in designing,

and assists Marubeni Corporation in conducting commod-

sourcing, manufacturing and marketing a wide range of

ity trading with suppliers in North America and Central and

textile products that serve both the U.S. and overseas

South America. For some time now, it has exported wheat,

markets. In addition to supplying fabrics to textile convert-

barley, rice, corn, sorghum, soybeans, canola, beef, pork

ers and finished garments to apparel wholesalers, we also

and other foodstuffs to the Japanese and Asian markets

produce and market various raw materials—mainly yarns

from the U.S., while also importing sugar and grape must

and fibers—to domestic weavers, knitters, paper producers

to the U.S. from Central and South America.

and carpet manufacturers. We also manufacture knitted

The Food Unit has worked to expand its business, espe-

fabric for a leading U.S. automotive interior company

cially in corn and soybeans, by securing its supply base.

which is poised for growth. Like Marubeni America, many

In 2005, it formed a strategic alliance with the major U.S.

of our customers are market leaders in their fields with

grain suppliers when it established the Time Charter Vessel

well-known brand names.

Operation Company with Archer Daniels Midland Company

Looking ahead, we are planning to work with an up-and-

(ADM). Similarly, it sought to ensure a safe and stable

coming U.S. men’s designer, employing our many skills

supply system for meat and other foodstuffs by reinforcing

and global reach to expand this exciting brand.

strong links with U.S. and Central and South American

Recently, we have also entered two new markets. First,

suppliers; for example, with Farmland Foods, Inc. in the

with a large U.S. cosmetics company, we now collaborate

chilled pork trade, with Jamaican Cane Products Sales in

on manufacturing skin care products in Asia. Second,

the U.S.-quota sugar trade, and with a Canadian supplier

from the famous British luggage maker, Globe-Trotter, we

of wheat. The Unit also seeks to increase its trading of

have received distribution rights to market their products

non-genetically modified (non-GMO) grain in Japan.

in the U.S. These beautifully crafted suitcases are found in

Marubeni America’s affiliate, Columbia Grain International, Inc. (CGII), exports nearly 150 million bushels

high-end specialty stores throughout the country. The Footwear Department sells Clarino—one of the

of wheat and barley through its state-of-the-art grain

most advanced synthetic leathers ever made—in the U.S.,

elevator at Terminal-5 in Portland, Oregon. CGII’s facility

Canada, Mexico and South America. In North America, we

ships about 12-13% of all the wheat and barley exported by

also distribute flexible, lightweight Tsukihoshi children’s

the U.S. For more information, please see CGII’s website

shoes to high-end retailers like Nordstrom.

at www.columbiagrain.com. In anticipation of irregular

The Hide Department exports U.S. and Canadian hides

market conditions across the globe, the Food Unit is

to Asian countries including China, Korea, Taiwan and

looking to new areas for supplies of grain, including South

Japan, where they are made into leather for shoes, bags

America.

and automobile interiors. The Rubber Department imports conveyor belts and hoses from mainly Asian countries, including China, Taiwan, Korea and Japan, and distributes them in North America. Marubeni America’s subsidiary, Belterra Corporation, also distributes conveyor belts, mainly in Canada.

Marubeni America Corporation 2007

5

Forest Products Unit

Chemicals Unit

Marubeni America’s (MAC’s) subsidiary, Marubeni Pulp &

The Chemicals Unit handles petrochemicals, plastics,

Paper North America, imports, exports and distributes pulp,

specialty chemicals and electronic materials.

wood chip and paper; while Pan Pacific Fiber collects vari-

The Commodity Chemicals Department is based in

ous waste papers from local markets and sorts, bundles,

Houston at its industry’s center. It trades petrochemical

and ships them worldwide; and Intragrated Resources

products and chlor-alkali related products, such as olefins,

Holdings sells printing paper to catalog houses and pub-

aromatics, carbon black feedstock, vinyl chloride monomer

lishers in the U.S. and also provides consulting services.

(VCM), polyvinyl chloride resin (PVC) and caustic soda, mainly between the U.S., Central and South America and Asia, to meet the increasing demand in Asia and in the U.S. The Plastics & Specialty Chemicals Department meets the increasing challenge of satisfying the chemical industry’s needs. Marubeni America’s (MAC’S) subsidiary, Marubeni Specialty Chemicals, Inc. (MSCI), conducts trading and distribution operations. MSCI’s three divisions serve various constituencies, including the paper coating, paint, adhesive, packaging, automobile, electronics, fiber optics and plastic compounding industries. MSCI is invested in, and seeks further opportunities to invest in, emerging companies that offer cutting-edge technologies. The Electronic Materials Department, located in Santa

These publications buy paper from our subsidiary, Intragrated Resources Holdings

Clara, California, trades materials related to digital products and the semi-conductor industry between the U.S. and Asia, primarily Japan. The Development Department was established in April 2005 to pursue investments in the fields related to the chemical industry and to create trade synergies among the other three departments.

6

Marubeni America Corporation 2007

Helena Unit

Energy Unit

Marubeni America’s (MAC’s) subsidiary, Helena Chemical

The Energy Unit plays a key role in expanding MAC’s trad-

Company (Helena), is one of the largest formulators and

ing portfolios in the oil and gas businesses in the U.S. and

distributors of crop inputs and services in the U.S. Helena

Latin America, while simultaneously exploring opportuni-

offers a variety of crop protection products, agricultural

ties for investment in related mid-downstream businesses

chemicals, seed, fertilizer and related products. Its propri-

in both regions. It plays a lesser role by lending assistance

etary line of products includes adjuvant, seed treatments,

and support to two subsidiary companies—MIECO and

bioscience, nutritional and value-added generics, which are

Energy USA—that MAC owns jointly with Marubeni

distributed in 12 countries. Helena has four plants which

Corporation.

provide toll manufacturing services for it suppliers as well

MAC plans to conduct trading of crude oil and petro-

as manufacturing Helena’s line of private and proprietary

leum products, as well as natural gas, LNG and LPG. With

products. The Company has 16 sales divisions, with about

any of these products, we may be involved in trading them

300 sales outlets and more than 2,500 employees. In

domestically, in importing and exporting them to and

addition to traditional agricultural products, Helena offers

from the U.S., or in trading them offshore. Latin America

services in turf and ornamental products, forestry, aquatic

is another focus of MAC’s efforts to increase trade and to

and vegetation supplies.

invest in related businesses in the mid-downstream. MIECO, with offices in California, Texas and New Jersey, conducts trading of petroleum products, petrochemical feedstocks and natural gas in the American and the Pacific Rim markets. Energy USA, with offices in Connecticut and Washington, D.C., trades natural uranium domestically and overseas for end-use in the generation of nuclear power.

Helena’s logo and some uses of its products

Marubeni America Corporation 2007

7

aluminum products for the automotive industry, import of aluminum foil, and metallic powders for sintered automotive parts. The Silicon Valley Electronic Specialty Products Department specializes in aluminum and glass substrate for hard disc drives (HDDs), polishing pad and slurry for hard disc and semiconductor wafer, compound semiconductor template including Gallium Nitride and Aluminum Nitride, LEDs for 370nm to 1550nm wavelengths, and laser inspection machines and screen printing machines for HDD and semiconductor applications.

We sell Canada’s Alouette Aluminum’s ingots throughout North America

Transportation Machinery Unit The Transportation Machinery Unit deals with a variety of

Metals & Mineral Resources Unit

vehicles and equipment and their spare parts. The Unit

The Metals & Mineral Resources Unit is engaged in the

imports, exports and wholesales automobiles, commercial

import, export, domestic and offshore trade of various

trucks, agricultural machinery, construction machinery,

non-ferrous metals and ferrous materials and minerals.

mining equipment and other industrial vehicles and equip-

While its main activities are trading and distribution,

ment. It both invests in and operates a wholesale distribu-

it is intensely involved in a variety of high-technology

tor of cars; an auto parts warehouse for the aftermarket;

related businesses and venture projects for the compound

and retail dealerships for cars, for construction machinery,

semiconductor industry. The Unit has three offices strategi-

and for agricultural machinery. It exports military defense

cally positioned in New York, Detroit and in Santa Clara,

products for Japan, and it leases specialized commercial

California, to oversee its businesses, ensuring reliability

vehicles. The Transportation Machinery Unit is now devel-

and flawless service to all its customers. It anticipates

oping new business in automotive financing and parts, and

further expanding its trade and distribution of existing

in construction and agricultural machinery.

products, such as copper and aluminum products. In addition, it expects to realize some promising venture projects related to the high-technology industry. The New York Metals Department specializes in copper tubing for air conditioners, copper strip for submarine cable and cellular base stations, Gallium Arsenide substrates and epi-substrates, import and export of aluminum and copper products, trading of aluminum ingot and billet in North America and Latin America, import of hot briquetted iron (HBI), and import of high grade Low Carbon Ferro Chrome. The Detroit Metals Department specializes in domestic trading of aluminum wire rod for the steel industry,

8

Marubeni America Corporation 2007

Our Porsche dealership in Huntington, NY

The Power Projects & Infrastructure Department does business development related to the power industry in North America. It explores new areas of power generation, transmission, and delivery of utility-scale and distributed generation, including Engineering, Procurement and Construction (EPC), development, financing, ownership, and operation and maintenance. The Power Projects & Infrastructure Department also partners with North American companies to develop and commercialize new energy technologies and business models in Asia together with MAC’s parent company in Japan, Marubeni Corporation. Through its parent, MAC is able to act as a conduit between North America and Japan

The Nitrogen this plant sends by pipeline to an offshore

for new technologies, products, and business models in

oil field maintains its pressure and its production

the power and energy industries. It continues to support

efficiency for PEMEX, the Mexican state-run oil company

ongoing GE gas turbine component sales to Hitachi, Ltd. through Marubeni Corporation. It is also developing

Plant, Industrial Machinery, Power Projects & Infrastructure Unit The Plant Department within the Unit is responsible for the

business for Hitachi H25 gas turbine generators in North America. For new business development, MAC is aggressively

development, coordination, logistics, insurance, manage-

seeking power generation assets for acquisition. Our aim

ment, investment in, and financing of plant-related busi-

is to add value to the acquired assets using our global

ness; for plant and equipment financing; and for import,

experience of EPC and operation and maintenance.

export and third-country plant and equipment transactions. Notably, it invests in industrial projects on a build-ownoperate basis (“BOO”) in North America, including with PEMEX, the Mexican state-run oil company. The Industrial Machinery Department deals with CFB (Circulated Fluidized Bed) Boiler for renewable energy, machine tools and parts for photovoltaic cell manufacturers, and pulp and paper machinery.

Marubeni America Corporation 2007

9

Finance Technology, Logistics Technology, Information Technology & Innovative Business Unit (FLII)

biotechnology and material sciences. Our specialty is

Marubeni America’s (MAC’s) Finance Technology, Logistics

facilitating the bi-directional flow of technology and

Technology, Information Technology & Innovative Business

business between the U.S. and Japan (and other places in

Unit (FLII) has two targets: the equipment leasing busi-

Asia). Current activities include private equity investment,

ness, and pursuing other new business opportunities and

partnerships, incubation, joint ventures, technology and

investments.

product development sponsorships, and marketing and

In the leasing sector, MAC has strategically invested in refrigerated transportation, healthcare equipment and

distribution. Wherever MAC invests, our strategy is to promote

other niche industries in the U.S. since the mid-1990s.

growth by connecting the acquisition to the global network

Our 2000 acquisition, PLM Trailer Leasing, is a top-tier

of business alliances that we and our parent, Marubeni

player specializing in leasing refrigerated trailers to the

Corporation, have cultivated. We seek sound opportunities

foodservice industry and is poised to grow with the

whether in private equity funds, in strategic direct invest-

increasing demand for fresh foods. In 2006, MAC set up

ment, or in middle-market acquisitions.

CoActiv Capital Partners, a provider of private label leasing service for the healthcare, office technology and banking industries. We are also co-investing in a railcar leasing company, Midwest Railcar Corporation, along with our parent company, Marubeni Corporation.

A refrigerated trailer for lease from our subsidiary, PLM Trailer Leasing

10

MAC also targets growing industries such as healthcare,

Marubeni America Corporation 2007

Subsidiaries

Belterra Corporation

Industrial conveyor belt. hose, other material and service Distributor 1638 Fosters Way, Delta, BC, V3M 6S6, Canada Tel: (604) 540-1950 Fax: (604) 540-4214 www.belterra.ca Contact: Katsunori Matsuda ([email protected]) Other Locations: 12-branches in total (BC, Alberta, Manitoba, Ontario, Saskatchewan)

CoActiv Capital Partners LLC

Leasing Providing vendor lease program, small ticket leasing and servicing in the U.S. 655 Business Center Drive, Horsham, PA 19044 Tel: (267) 960-4000 Fax: (267) 960-4090 www.coactivcapital.com Contact: Kenji Funaki ([email protected])

Helena Chemical Company

Agricultural inputs and services Distributor of agricultural and specialty non-agricultural crop protection chemicals, seed and fertilizer and related services Also contract formulation of chemicals, generally for manufacturers of crop protection chemicals 225 Shilling Blvd., Suite 300, Collierville, TN 38017 Tel: (901) 761-0050 Fax: (901) 683-2960 www.helenachemical.com Contact: Troy Traxler, Jr. ([email protected]) Other Locations: 350 locations in the U.S.

Intragrated Resources Holdings, Inc.

Printing & writing paper Paper distributor and printing consulting 300 Atlantic Street, Stamford, CT 06901 Tel: (203) 658-1200 Fax: (203) 658-1299 www.atclayton.com Contact: Hiroshi Kashima ([email protected]) Other Locations: Boston, Chicago, Seattle

MAC-ROX, Inc.

Iron oxide production Marubeni America’s mezzanine company in a partnership, AMROX 375 Lexington Avenue, New York, NY 10017 Tel: (212) 450-0446 Fax: (212) 450-0755 Contact: Toshiaki Natori ([email protected])

Marubeni America Corporation 2007

11

12

MARCOP II, Inc.

Pulverized coal injection Marubeni America’s mezzanine company for partnerships engaged in the pulverized coal business 375 Lexington Avenue, New York, NY 10017 Tel: (212) 450-0446 Fax: (212) 450-0755 Contact: Toshiaki Natori ([email protected])

Marubeni Canada Ltd.

Machinery, energy, agriculture & marine products, non-ferrous metals, coal and chemicals Import / exporter and distribution of above materials Suite 1630, Bentall Centre, 505 Burrard, St., Vancouver, BC V7X 1E5 Tel: (604) 443-3800 Fax: (604) 681-0498 Contact: Vinh Le ([email protected]) Other Locations: Toronto, Canada

Marubeni Montreal Sporting Club Corporation

Real Estate Involved with the sports club Midtown Le Sporting Club Sanctuaire in Montreal, Canada c/o Marubeni America Corporation 375 Lexington Avenue, New York, NY 10017 Tel: (212) 450-0294 Fax: (212) 450-0157 Contact: Justin Yoo ([email protected])

Marubeni Motor Holdings, Inc.

Holding company of auto leasing / financing group Investing in auto leasing / financing companies 375 Lexington Avenue, New York, NY 10017 Tel: (212) 450-0400 Fax: (212) 450-0755 Contact: Hisamichi Koga ([email protected])

Marubeni Pulp & Paper North America

Forest products International trading of forest products (pulp, paper and wood chips) 375 Lexington Avenue, New York, NY 10017 Tel: (212) 450-0190 Fax: (212) 450-0199 Contact: Koji Yamanaka ([email protected]) Other Locations: Los Angeles Branch, Appleton (WI) Branch, Subsidiary in Vancouver (Marubeni Pulp & Paper Canada Ltd.)

Marubeni America Corporation 2007

Marubeni Specialty Chemicals, Inc.

Chemicals Chemical supplier 10 Bank Street Suite 740, White Plains, NY 10606 Tel: (914) 428-8900 Fax: (914) 428-8859 www.chemdot.com Contact: Paul Lupo ([email protected])

PLM Trailer Leasing, LLC

Rental, lease, service & sales Refrigerated trailer leasing 100 Paragon Drive, Montvale, NJ 07645 Tel: (201) 505-0011 Fax: (201) 334-5199 www.plmtrailer.com Contact: Robert Sukovich ([email protected])

Prime Automotive Warehouse, Inc.

Aftermarket automotive parts Leading catalog wholesale distributor of aftermarket automotive parts, chemicals, tools and accessories through distribution of its monthly catalog and telemarketing primarily to independent automotive parts stores and warehouses. 8631-1 A Polk Lane, Olive Branch, MS 38654 Tel: (662) 890-6145 Fax: (800) 329-9312 www.primeautomotive.com Contact: Shinya Sasaki ([email protected])

Train Trailer Rentals Limited

Rental, lease, service & sales Trailer leasing business 400 Annagem Blvd., Mississauga, Ontario, Canada Tel: (905) 564-7247 Fax: (905) 564-7498 www.traintrailer.com Contact: Hiroki Yamaji ([email protected]) Other Locations: Calgary, Ottawa

Marubeni America Corporation 2007

13

Consolidated Balance Sheets Marubeni America Corporation At December 31, 2006 and 2007 (In Thousands)

2007

2006

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 228,732

$ 156,497

Short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

382

288

Accounts and notes receivable – customers, net of allowance for doubtful accounts of $6,567 in 2007 and $3,845 in 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

404,414

320,600

Receivables from parent and affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

363,387

374,069

Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

683,942

505,117

Advance payments to suppliers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

266,760

151,072

Other current assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

97,661

90,881

Total current assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,045,278

1,598,524

Affiliated companies, at equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

65,895

60,514

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

69,445

69,410

Long-term accounts and notes receivable – customers, net of allowance for doubtful accounts of $5,515 in 2007 and $361 in 2006 . . . . . .

220,113

109,852

Total investments and long-term receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

355,453

239,776

Due from parent and affiliates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

88,279

59,245

Property, plant, equipment and leasehold improvements, at cost, less accumulated depreciation and amortization of $166,822 in 2007 and $163,092 in 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

352,888

268,169

Assets Current assets:

Investments and long-term receivables: Investments:

Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

104,123

34,746

Intangible assets and other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

38,306

7,488

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

14

7,245

Marubeni America Corporation 2007

$2,984,327

$ 2,215,193

Consolidated Balance Sheets Marubeni America Corporation At December 31, 2006 and 2007 (In Thousands)

2007

2006

Short-term loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 223,557

$ 134,742

Acceptances payable to banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7,075

6,509

Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

652,118

403,414

Advance payments from customers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

192,716

172,411

Payables to parent and affiliates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

322,773

319,795

Accrued expenses and other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

261,813

177,891

Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3,697

3,309

Long-term debt due within one year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

66,165

80,201

Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,729,914

1,298,272

Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

605,173

360,524

Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

20,188

Other noncurrent liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

48,336

69,755

Minority interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

77,850

46,311

Common stock, without par value; 5,000 shares authorized, 3,533 shares issued and outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

353,273

353,273

Additional paid-in capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

18,277

19,999

Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

139,312

87,162

Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(7,996)

(20,103)

Total shareholder’s equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

502,866

440,331

Total liabilities and shareholder’s equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,984,327

$ 2,215,193

Liabilities and shareholder’s equity Current liabilities:

Commitments and contingencies Shareholder’s equity:

See accompanying notes.

Marubeni America Corporation 2007

15

Consolidated Statements of Income Marubeni America Corporation At December 31, 2006 and 2007 (In Thousands)

2006

2007 Revenues (total volume of trading transactions: $9,667,268 in 2007 and $8,213,060 in 2006) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

3,460,564

$ 2,532,540

Cost of revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,776,486

1,992,744

Gross trading profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

684,078

539,796

Equity in net income of affiliated companies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6,611

8,490

690,689

548,286

Interest expense – net of interest income of $21,817 in 2007 and $21,703 in 2006 . . .

35,357

14,629

Other expense – net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

21,533

29,953

Selling, general and administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

530,849

442,518

587,739

487,100

Income before provision for income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

102,950

61,186

Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

50,800

28,300

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 52,150

See accompanying notes.

16

Marubeni America Corporation 2007

$

32,886

Consolidated Statements of Shareholder’s Equity Marubeni America Corporation At December 31, 2006 and 2007 (In Thousands)

Balance at December 31, 2005 . . . . . . . . . . . .

Common Stock

Additional Paid-in Capital

$ 344,000

$ 24,183

Retained Accumulated Earnings Other (Accumulated Comprehensive Deficit) Income (Loss) $ 54,276

$

435

Total $422,894

Comprehensive income: Net income . . . . . . . . . . . . . . . . . . . . . . . . . . .

32,886

32,886

Other comprehensive income: Unrealized gains on available-for-sale securities, net of income tax. . . . . . . . . . .

3,468

3,468

Change in fair value of derivative financial instruments, net of income tax . . . . . . . .

(1,573)

(1,573)

Translation adjustment . . . . . . . . . . . . . . . .

77

77

Unfunded pension gain, net of income tax

455

455

Other comprehensive income . . . . . . . . . . . . .

2,427

Comprehensive income . . . . . . . . . . . . . . . . . .

35,313

Issuance of 93 shares of common stock . . . . .

9,273

Loss on sale of investments to parent . . . . . .

9,273 (4,184)

(4,184)

Cumulative effect of change in accounting principle in accordance with the transition adjustment, net of tax, under SFAS No. 158 (Notes 12 and 13) . . . . . . . . . . . . . . . . . . . . . . Balance at December 31, 2006 . . . . . . . . . . . .

353,273

19,999

87,162

(22,965)

(22,965)

(20,103)

440,331

Comprehensive income: Net income . . . . . . . . . . . . . . . . . . . . . . . . . . .

52,150

52,150

Other comprehensive income: Unrealized losses on available-for-sale securities, net of income tax . . . . . . . . . . . .

(2,957)

(2,957)

Change in fair value of derivative financial instruments, net of income tax. . . . . . . . . .

(351)

(351)

Translation adjustment . . . . . . . . . . . . . . . . .

5,071

5,071

Change in pension and postretirement funded status, net of income tax . . . . . . . .

10,344

10,344

Other comprehensive income . . . . . . . . . . . . .

12,107

Comprehensive income . . . . . . . . . . . . . . . . . .

64,257

Loss on sale of investments to parent . . . . . . Balance at December 31, 2007 . . . . . . . . . . . .

(1,722) $ 353,273

$ 18,277

(1,722) $ 139,312

$ (7,996)

$ 502,866

2006

2007 Disclosure of reclassification amount: Unrealized gains arising during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

Less reclassification adjustment for gains included in net income . . . . . . . . . . . . . . . Net unrealized (losses) gains on available-for-sale securities . . . . . . . . . . . . . . . . . . . .

1,788

$

(36)

(4,745) $

(2,957)

3,504

$

3,468

See accompanying notes.

Marubeni America Corporation 2007

17

Consolidated Statements of Cash Flows Marubeni America Corporation At December 31, 2006 and 2007 (In Thousands)

2006

2007 Cash flows from operating activities Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 52,150

$

32,886

Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

31,776

32,824

Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

14,700

(54,700)

Bad debt expense and other noncash charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

17,777

37,633

Net gain on sale of investments and businesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3,062)

(7,526)

Net loss (gain) on sale of property, plant and equipment . . . . . . . . . . . . . . . . . . . . . .

4,863

(2,010)

Equity in net income of affiliated companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(6,611)

(8,490)

Accounts and notes receivable – customers and affiliates . . . . . . . . . . . . . . . . . . . .

(28,588)

(218,238)

Inventory. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(159,193)

(4,064)

Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(131,403)

50,362

Accounts payable – customers and affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

137,297

54,029

Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

91,889

(3,599)

Net cash provided by (used in) operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . .

21,595

(90,893)

Net increase in investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(6,024)

(8,657)

Net decrease (increase) in short-term notes receivable . . . . . . . . . . . . . . . . . . . . . . . . .

18,301

(43,902)

Increase in long-term accounts and notes receivable— customers and affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(250,780)

(58,306)

Changes in operating assets and liabilities:

Cash flows from investing activities

Collection of long-term accounts and notes receivable— customers and affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

102,636

37,105

Acquisition of property, plant, equipment and leasehold improvements . . . . . . . . . . .

(84,500)

(87,478)

Proceeds from sale of property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . .

16,352

6,278

Proceeds from sale of investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4,644

202,958

Business acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(106,188)

(35,418)

Net cash (used in) provided by investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(305,559)

12,580

Cash flows from financing activities Net increase in short-term loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

159,195

92,689

Long-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

300,864

148,327

Repayments of long-term debt to third parties and affiliates . . . . . . . . . . . . . . . . . . . . .

(103,860)

(223,403)

Net cash provided by financing activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

356,199

17,613

Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . .

72,235

(60,700)

Cash and cash equivalents at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

156,497

217,197

Cash and cash equivalents at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 228,732

$ 156,497

Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 61,354

$

40,736

Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 24,444

$

90,256

Supplemental disclosures of cash flow information Cash paid during the year for:

See accompanying notes.

18

Marubeni America Corporation 2007

Notes to Consolidated Financial Statements Marubeni America Corporation At December 31, 2006 and 2007 (In Thousands)

1

l

Summary of Significant Accounting Policies

Basis of Presentation The accompanying consolidated financial statements

The total volume of trading transactions, which is

include the accounts of Marubeni America Corporation

disclosed in the accompanying consolidated statements

and all of its majority-owned subsidiaries (collectively, the

of income, includes the sales value of all transactions in

“Company”). All significant intercompany accounts and

which the Company participates, regardless of the form of

transactions have been eliminated in consolidation. The

such transaction.

equity method of accounting is used for investments in

In acting as principal, the Company recognizes revenue

companies in which the Company has an interest of 50%

when the delivery conditions are met. These conditions are

or less and for which the Company has significant influence

considered to have been met when the goods are received

over operating and financial policies.

by the customer or title to the goods is transferred to the

The preparation of consolidated financial statements in

customer. In acting as agent, the Company recognizes

conformity with accounting principles generally accepted

commissions when contracted services are fully rendered

in the United States requires management to make estimates

to the customers.

and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during

Shipping and Handling Costs Shipping and handling costs are included in cost of revenues in the accompanying consolidated statements of income.

the reporting period. Actual results could differ from those

Cash and Cash Equivalents

estimates.

The Company considers all highly liquid financial instruments

Revenue Recognition and Total Volume of Transactions The Company conducts export, import and domestic and

with a maturity of three months or less when purchased to be cash equivalents.

offshore trading of a wide variety of industrial, agricultural

Sales of Accounts Receivable

and consumer products and also is involved in the related

The Company enters into transactions to sell certain of

production process from planning, investment and

its trade accounts receivable and retains a subordinated

research and development to production, distribution and

interest and servicing rights. Gains or losses on the sale of

marketing.

receivables are based on the carrying value of the assets

Transactions to which the Company is a party take

sold, allocated in proportion to their fair value. Retained

many forms depending upon local practice, preferences

interests are carried at fair value and are included in other

of the parties and legal considerations. Such transactions

current assets in the accompanying consolidated balance

consist of sales in which the Company acts as principal and

sheets. The Company generally estimates fair value based

transactions in which the Company acts as agent.

on the present value of expected future cash flows of the

Although the Company legally acts as a principal, certain

underlying receivables less management’s best estimates

transactions are reported net, as commissions, when the

of uncollectible accounts receivable. The Company

margins thereon are in substance considered commissions

maintains an allowance for doubtful accounts receivable

in accordance with the consensus reached in the Financial

based upon the collectability of all trade receivables.

Accounting Standards Board (“FASB”) Emerging Issue

The allowance is reviewed regularly and adjusted for

Task Force Issue 99-19, Reporting Revenue Gross as a

accounts deemed uncollectible by the Company. Expenses

Principal versus Net as an Agent. When the Company is

and losses associated with such sales are included in other

not the primary obligor and does not have inventory risk,

expense – net in the accompanying consolidated statements

it generally presents the transaction net. The presentation

of income.

may change according to changes in form or substance of transactions.

Marubeni America Corporation 2007

19

Notes to Consolidated Financial Statements Marubeni America Corporation At December 31, 2006 and 2007 (In Thousands)

Inventory Inventory consists of commodities and merchandise and

of Liabilities, a Replacement of FASB Statement 125, the

is valued at the lower of cost or market. Cost is based

Company surrenders control over the transferred assets

principally on either the first-in, first-out method, specific

and accounts for the transaction as a sale to the extent

identification, or average unit prices.

that consideration other than beneficial interests in the

Investment in Equity Securities The Company has investments in marketable equity securities which are classified as available-for-sale securities and cost-method investments. Investments classified as available-for-sale are carried at fair value, with the unrealized gains and losses, net of tax, reported as other comprehensive income within shareholder’s equity. The

generally does not retain any interest in the investments in leases. A gain is recognized at the time of the sale, equal to the excess of the fair value of the assets obtained over the allocated cost of the assets sold, including deferred direct costs and vendor acquisition fees associated with the respective leases sold.

cost-method investments are stated at cost, adjusted for

Depreciation and Amortization

any declines in value judged to be other-than-temporary.

Property, plant, equipment and leasehold improvements

The cost of securities sold is based on the weighted-average

are stated at cost. Depreciation of property, plant and

method. The fair value of the Company’s cost-method

equipment (including equipment leased to others) is

investments is not readily determinable. In 2007, the

computed using the straight-line method over the estimated

Company recognized nonmonetary transaction gains of

useful lives of the assets. Amortization of leasehold

approximately $7,100 arising from the exchange of cost-

improvements is provided on the straight-line method over

method investment securities for publicly traded securities.

the terms of the related leases.

Investment in Direct Financing Leases and Operating Leases The Company has investment in direct financing leases which consist of the minimum lease payments and the unguaranteed residual value, less unearned income. Unearned income from direct financing leases is credited to income based upon a constant periodic rate of return on the net investment in the lease. The current portion of the investment in direct financing leases is included in accounts and notes receivable – customers, and the noncurrent portion of the investment in direct financing leases is included in long-term accounts and notes receivable – customers in the accompanying consolidated balance sheets. Rental revenue on operating leases is recognized on a straight-line basis over the related lease terms. Expenses,

20

transferred assets is received in exchange. The Company

Rental equipment under operating ng leases with customers, which consists mainly of trailers, is depreciated on a straight-line basis over the estimated useful lives of 12.5 or 15 years. Depreciation of trailer rental equipment under operating leases is charged against cost of revenues in the accompanying consolidated statements of income. Leased property under capital leases, which consists of trailers, is recorded at its inception at the lower of fair value of the leased property or the present value of the minimum lease payments, with an equivalent liability categorized as obligations under capital leases. Leased property under capital leases is depreciated on the same basis as rental equipment and any finance charges are amortized over the lease term. Depreciation of leased property under capital leases is charged against cost of revenues in the accompanying consolidated statements of income.

including depreciation and repairs, are charged against in-

Allowance for Doubtful Accounts

come as incurred. The Company periodically sells portfolios

The Company estimates allowances for doubtful accounts

of investments in leases structured as sales in an effort to

based upon historical payment patterns, aging of accounts

generate capital and/or manage exposure and generally

receivable and actual write-off history, as well as assessment

retains servicing responsibilities for the leases sold. In

of customers’ creditworthiness. Changes in the financial

accordance with SFAS No. 140, Accounting for Transfers

condition of customers could have an effect on the allowance

and Servicing of Financial Assets and Extinguishments

balance required and a related charge or credit to earnings.

Marubeni America Corporation 2007

Notes to Consolidated Financial Statements Marubeni America Corporation At December 31, 2006 and 2007 (In Thousands)

Impairment of Long-Lived Assets Long-lived assets to be held and used are reviewed for

carrying amount of the intangible asset over its fair value.

impairment whenever events or changes in circumstances

During the years ended 2007 and 2006, no impairment

indicate that the carrying amount of an asset may not be

occurred.

recoverable. If such a review indicates that the carrying amount of an asset exceeds the sum of its expected future cash flows, on an undiscounted basis and without interest charges, the asset’s carrying value is written down to fair value. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less cost to sell. The Company assessed the recoverability of the carrying value of certain fixed assets, which resulted in impairment losses of $906 and $3,806 in 2007 and 2006, respectively. These losses reflect the amounts by which the carrying values exceed their fair values determined by estimated future discounted cash flows. The impairment loss is included in other expense – net in the accompanying consolidated statements of income.

Derivatives and Hedging Activities The Company uses derivative financial instruments for purposes of hedging exposures to fluctuations in interest rates, foreign currency exchange rates and commodity prices. The Company does not hold or issue derivative financial instruments for trading purposes. The Company recognizes derivative instruments on the consolidated balance sheets at fair value. Changes in the fair value of those instruments are reported in earnings or other comprehensive income depending on the use of the derivative and whether it qualifies for hedge accounting. Accounting for gains and losses associated with changes in the fair value of the derivative and the effect on the consolidated financial statements will depend on the

Goodwill and Intangible Assets

transaction’s hedge designation and whether the hedge

Goodwill represents the excess of purchase price over

is highly effective in achieving offsetting changes in the

the fair value of acquired companies or businesses. The

fair value of cash flows or the asset or liability hedged.

Company tests goodwill for impairment by reporting

Gains and losses related to qualifying hedges or firm

unit using the two-step processes at least annually. The

commitments or anticipated transactions are deferred

first step is a screen for potential impairment, while the

and recognized in earnings or as adjustments of carrying

second step measures the amount of impairment, if any.

amounts when the hedged transaction occurs.

The Company applies the discounted cash flow valuation

The Company enters into interest rate only and

model to determine the fair value of each of the reporting

cross-currency interest rate swap agreements to hedge its

units. During 2006, the Company recognized a goodwill

exposure to foreign currency exchange rate and/or interest

impairment of $2,798, due to changing market conditions

rate risks. Interest rate swap contracts generally represent

affecting the future cash flows of the reporting units which

the contractual exchange of fixed and floating rate pay-

originally generated the goodwill. The Company did not

ments of a single currency, based on a notional amount

recognize any goodwill impairments during 2007.

and an interest reference rate. Interest rate swap agree-

Intangible assets represent trade names which are not

ments mature at the time the related receivables and debt

amortized and noncompete agreements and customer

mature and effectively manage the Company’s interest rate

relationships which are amortized on a straight-line basis

exposure.

over the term of the agreements or estimated useful lives.

Cross-currency interest rate swap agreements hedge the

Intangible assets are reviewed for impairment if indicators

Company’s exposure to both interest and foreign exchange

of impairment arise. The evaluation of the impairment is

rate risks. Cross-currency swap contracts generally represent

based upon a comparison of the carrying amount of the

the contractual exchange of fixed and floating rate payments

intangible asset to the future undiscounted net cash flows

between two currencies. The cross-currency interest rate

expected to be generated by the asset. If estimated future

swap agreements mature at the time the related debt

undiscounted cash flows are less than the carrying amount

matures, and effectively manage the Company’s foreign

of the asset, the asset is considered impaired. An impair-

exchange and interest rate exposure. The differential to be

ment loss would be calculated based on the excess of the

paid or received on interest rate swaps is recognized

Marubeni America Corporation 2007

21

Notes to Consolidated Financial Statements Marubeni America Corporation At December 31, 2006 and 2007 (In Thousands)

as an adjustment to interest expense. Gains and losses

On December 31, 2006, the Company adopted the recogni-

on hedges of existing assets or liabilities are included in

tion and disclosure provisions of SFAS No. 158. The effect

the carrying amounts of those assets or liabilities and are

of adopting SFAS No. 158 on the Company’s financial

ultimately recognized in earnings.

condition at December 31, 2006 has been included in the

The Company uses foreign currency denominated

accompanying consolidated financial statements. SFAS

debt to hedge the value of its investments in a foreign

No. 158’s provisions regarding the change in the measure-

subsidiary in Canada. Unrealized gains and losses from the

ment date of these plans are effective for the year ending

hedging instrument are not included in the consolidated

December 31, 2008. The Company will adopt the measure-

statement of income, but included in the translation

ment date provision in fiscal 2008. See Notes 12 and 13 for

adjustment in accumulated other comprehensive income.

further discussion of the effect of adopting SFAS No. 158

Environmental Costs Liabilities are recorded when environmental assessments are probable, and the cost can be reasonably estimated. Generally, the timing of these accruals coincides with the earlier of completion of a feasibility study or the Company’s commitment to a plan of action based on the then known facts.

on the Company’s consolidated financial statements. In July 2006, the FASB issued FIN 48, which clarifies the accounting and disclosure for uncertain tax positions, as defined. The interpretation prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those

Statements of Cash Flows

benefits to be recognized, a tax position must be more-

The Company enters into numerous transactions involving

likely-than-not to be sustained upon examination by taxing

the purchase and sale of securities and other investments

authorities. The amount recognized is measured as the

and the borrowing and repayment of short-term loans.

largest amount of benefit that is greater than 50% likely of

These amounts have been netted for the purposes of the

being realized upon ultimate settlement. The interpretation

accompanying consolidated statements of cash flows.

seeks to reduce the diversity in practice associated with

Vendor Rebates

certain aspects of the recognition and measurement related

The Company applies the guidance pursuant to Emerging

to accounting for income taxes. The Company adopted

Issues Task Force Issue No. 02-16, Accounting by a

FIN 48 on January 1, 2007 and the effect of this adoption

Customer (Including a Reseller) for Certain Consideration

has been included in the consolidated financial statements.

Received from a Vendor. Accordingly, all vendor rebates

See Note 15 for further discussion of the effect of adopting

are recognized as a reduction to cost of revenues as

FIN 48.

inventories are sold. As a result, some portion of the

Recently Issued Accounting Pronouncement

vendor rebates based on purchases remains in inventory

In September 2006, the FASB issued SFAS No. 157, Fair

at year-end. The Company estimates that $22,430 and

Value Measures. SFAS No. 157 defines fair value, estab-

$15,137 of vendor rebates for purchases in 2007 and 2006,

lishes a framework for measuring fair value and enhances

respectively, relate to inventories still on hand, therefore

disclosures about fair value measures required under other

reducing inventory by these amounts at December 31, 2007

accounting pronouncements, but does not change existing

and 2006.

guidance as to whether or not an instrument is carried at

Change in Accounting

fair value. SFAS No. 157 is effective for fiscal years begin-

In September 2006, the FASB issued FASB SFAS No. 158,

ning after November 15, 2007. The Company is currently

which requires plan sponsors of defined benefit pension

reviewing the provisions of SFAS No. 157 to determine

and other postretirement benefit plans to recognize the

the impact on its consolidated operating results, financial

funded status of these plans in the statement of financial

position and cash flows.

position, measure the fair value of plan assets and benefit

In February 2007, the FASB issued SFAS No. 159,

obligations as of the date of the fiscal year-end statement

The Fair Value Option for Financial Assets and Financial

of financial position, and provide additional disclosures.

Liabilities. SFAS No. 159 permits entities to choose to measure eligible items at fair value at specified election

22

Marubeni America Corporation 2007

Notes to Consolidated Financial Statements Marubeni America Corporation At December 31, 2006 and 2007 (In Thousands)

dates and to report unrealized gains and losses on items

acquired. Also in December 2007, the FASB issued SFAS

for which the fair value option has been elected in earnings

No. 160, Noncontrolling Interests in Consolidated Financial

at each subsequent reporting date. SFAS No. 159 is effective

Statements. (“SFAS 160”). SFAS 160 provides accounting

for fiscal years beginning after November 15, 2007. The

and reporting standards for a noncontrolling interest in

Company is currently reviewing the provisions of SFAS

a subsidiary and for the deconsolidation of a subsidiary

No. 159 to determine the impact on its consolidated

if certain conditions exist. SFAS No. 141(R) and SFAS

operating results, financial position and cash flows.

160 are effective for fiscal years beginning on or after

In December 2007, the FASB issued SFAS No. 141(R),

December 15, 2008. Early adoption is prohibited. The

Business Combinations. SFAS No. 141(R) provides

Company is currently reviewing the provisions of SFAS

guidance regarding the allocation of purchase price in

No. 141(R) and SFAS 160 to determine the impact of these

business combinations, measurement of assets acquired

statements on its consolidated operating results, financial

and liabilities assumed as well as other intangible assets

position and cash flows.

2

l

Related Party Transaction

The Company is a wholly owned subsidiary of Marubeni

Included in operating cash flows for 2007 and 2006 were

Corporation (the “Parent”), a Japanese corporation which

cash outflows of $19,388 and cash inflows of $55,337,

operates in Japan and, either directly or through subsidiar-

respectively.

ies and affiliates, throughout the world. Substantial portions of the total volume of transactions

At December 31, 2007 and 2006, the Company was contingently liable for drafts discounted of approximately

result from transactions to which the Parent or affiliates

$231,000 and $99,000, respectively, substantially all of

are parties. The terms of these transactions are mutually

which were drawn on the Parent.

agreed upon between the parties. For the years ended

In March 2006, the Company acquired an additional

December 31, 2007 and 2006, the total volume of these

49% of Marubeni Canada, Ltd. (“MCL”) from the Parent and,

transactions with the Parent or affiliates was approximately

in exchange, issued 93 common shares of the Company

$3,946,000 and $3,080,000, respectively.

to the Parent. As a result of such acquisition, the Company

The Company serves as a treasury center to certain affiliates whereby these affiliates will deposit their excess

owns 100% of MCL. In December 2006, the Company sold to the Parent its

cash with the Company. The balance of cash that the

70.62% interest in Columbia Grain, Inc., which owns and

Company pays to and receives from nonconsolidated af-

operates a grain elevator facility in Oregon. The net of the

filiates is included in receivables from Parent and affiliates

cash consideration received less its carrying value, net of

and payables to Parent and affiliates in the consolidated

the related income taxes, was charged to additional paid-in

balance sheets, respectively. The Company receives and

capital since the transaction was between entities under

pays interest on a portion of these receivable and payable

common control. In 2007, the sales price was adjusted

balances. The change in the payable balance is included

and the adjustment charged to additional paid-in-capital

in operating activities in the statements of cash flows.

accordingly.

Marubeni America Corporation 2007

23

Notes to Consolidated Financial Statements Marubeni America Corporation At December 31, 2006 and 2007 (In Thousands)

l Concentration of Credit Risk

3

The financial instruments which potentially subject the

Company has a large domestic and international customer

Company to significant concentrations of credit risk consist

base extending across many different industries. The

principally of trade accounts receivable, investments, loans

Company’s policy is to review a customer’s financial condi-

and notes receivable and derivative financial instruments.

tion prior to extending credit and, in certain circumstances,

Potential concentrations of credit risk are limited as the

4

l

to require collateral.

Long-Term Accounts and Notes Receivable

Long-term accounts and notes receivable at December 31, 2007 mature at various dates. A substantial portion of such long-term receivables is collateralized by capital equipment.

5

l

Short-Term Loans and Long-Term Debt

At December 31, 2007 and 2006, short-term loans consist of notes payable to banks. Long-term debt consists of the following:

2007

2006

$ 671,338

$ 440,725

Long-term debt due within one year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

66,165

80,201

Long-term debt due after one year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 605,173

$ 360,524

Notes payable to banks and financial institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less:

The Company has many long-term financing agreements

outstanding under these lines totaled $21,300 and $29,000

with numerous banks, other financial institutions and

as of December 31, 2007 and 2006, respectively. Several

private placement investors at both fixed and floating

of such agreements with banks totaling approximately

interest rates. The Parent guarantees long-term debt of

$37,000 are secured by receivables and other assets.

approximately $228,000. The range of interest rates at

24

Notes payable at December 31, 2007 mature at

December 31, 2007 and 2006 under these agreements

various dates through 2027. The approximate aggregate

were from 2.36% to 9.00%. The Company has secured and

maturities of long-term debt are as follows: 2008 – $66,165;

unsecured credit lines with banks with an aggregate bor-

2009 – $125,382; 2010 –$209,559; 2011 – $133,417; 2012 –

rowing limit of $245,000 as of December 31, 2007. Amounts

$80,524; and thereafter – $56,291.

Marubeni America Corporation 2007

Notes to Consolidated Financial Statements Marubeni America Corporation At December 31, 2006 and 2007 (In Thousands)

6

l

Derivatives and Other Financial Instruments

All of the Company’s existing derivative positions qualified

market prices. At December 31, 2007 and 2006, the fair

for hedge accounting under the provisions of SFAS No. 133,

value of these securities was $22,422 and $7,051, respec-

Accounting for Derivative Instruments and Hedging Activities,

tively. It was not practicable to estimate the fair value of

as amended thereafter by SFAS No. 138. Cross-currency

the investments other than marketable equity securities

swap agreements and commodity futures are primarily

without incurring excessive costs. The carrying amount of

classified as fair value hedges, while the Company’s

the portion of the portfolio for which fair value could not

interest rate swaps and foreign currency forward contract

be estimated was $47,405 and $62,647 at December 31,

hedges are primarily cash flow hedges.

2007 and 2006, respectively, and represents the cost of this

These financial instruments, along with cash and cash

portion of the portfolio. Short-term notes, loans receivable and loans payable:

equivalents and accounts and notes receivable, expose the Company to credit risk. In addition, such instruments

The carrying amount of short-term notes, loans receivable

may at times be concentrated with certain counterparties.

and loans payable approximates fair value because of the

However, counterparties are principally large financial

short maturity of the instruments. Long-term accounts and notes receivable: The carrying

institutions, and the creditworthiness of counterparties is subject to continuing review. Consequently, full perfor-

amount of long-term receivables with floating interest rates

mance is anticipated.

approximates fair value. It was not practicable to estimate

The following methods and assumptions were used by the Company in estimating its fair value disclosures for

the fair value of the long-term accounts and notes receivable with fixed rates without incurring excessive costs. Long-term debt: The carrying amount of long-term loans

financial instruments: Cash and cash equivalents: The carrying amount of cash

payable with floating rates approximates fair value. For

and cash equivalents approximates fair value because of

loans payable with fixed rates, fair value is estimated using

the short maturity of the instruments.

discounted cash flow analyses based on the Company’s

Investments in marketable equity securities: The fair value of marketable equity securities is based on quoted

current incremental borrowing rate for similar types of borrowing arrangements.

The following table is a summary of carrying values and fair values of financial instruments at December 31:

2007 Carrying Fair Value Value

2006 Carrying Fair Value Value

Investments: Available-for-sale securities. . . . . . . . . . . . . . . . . . . . . . . .

$ 22,040

$ 22,040

Short-term loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

223,557

223,557

134,742

134,742

Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

671,338

674,434

440,725

441,806

4,651

4,651

13,777

13,777

Interest rate swap agreements and currency swap agreements liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

6,763 $

6,763

Marubeni America Corporation 2007

25

Notes to Consolidated Financial Statements Marubeni America Corporation At December 31, 2006 and 2007 (In Thousands)

7

l

Leased Property Under Capital Leases

A subsidiary is involved in various sale-leaseback arrangements. These leasebacks have been accounted for as capital leases. The following is a summary of the leased property under capital leases as of December 31:

2006

2007 Leased property under capital leases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

Less accumulated amortization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7,404

$

4,118 82

487 $

6,917

$

4,036

Obligations under capital leases due within one year are included in accrued expenses and other in the accompanying consolidated balance sheets, and obligations under capital leases due after one year are included in other noncurrent liabilities in the accompanying consolidated balance sheets. The following is a summary of the future minimum lease payments under capital leases together with the present value of the net minimum lease payments as of December 31, 2007: Year ending December 31:

2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 1,124

2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,124

2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,124

2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,124

2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,124

Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,220

Total minimum lease payments . . . . . . . . . . . . . . . . . . . . . .

7,840

Less amount representing interest . . . . . . . . . . . . . . . . . . . .

1,327

Present value of net minimum lease payments . . . . . . . . .

$ 6,513

The leases that are accounted for as capital leases provide for purchase options that represent a bargain value of the property as compared to the estimated fair market value of the property at the expiration of the lease term.

8

l

Investment in Direct Financing Leases

The following is a summary of the components of the Company’s net investment in direct financing leases at December 31:

2006

2007

26

Total minimum lease payments to be received. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 220,884

Less unearned income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

36,605

Net investment in direct financing leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 184,279

Marubeni America Corporation 2007

$

92,427 17,925

$

74,502

Notes to Consolidated Financial Statements Marubeni America Corporation At December 31, 2006 and 2007 (In Thousands)

At December 31, 2007, total minimum lease payments are due in the following contractual installments:

2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 73,903

2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

59,209

2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

44,871

2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

27,843

2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

12,342

Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,716 $220,884

During the year ended December 31, 2007, the Company

charges, insurance income, termination income and other

sold lease receivables having an aggregate book value of

fee income. The Company estimates that this servicing

approximately $53,000. In connection with these sales,

income will approximate 1.41% annually from the portfo-

the Company recognized net gains of $2,970. In addition,

lios sold. At December 31, 2007, the total portfolio balance

the Company entered into servicing agreements with the

sold and being serviced was approximately $83,000, and

institutions that these portfolios were sold to. In connec-

the Company recorded servicing income related to all

tion with these servicing agreements, the Company will

portfolios sold of approximately $892 in 2007.

continue to earn fee income, from such sources as late

9

l

Rental Equipment

The following is a summary of rental equipment as of December 31, 2007 and 2006, which is included under property, plant and equipment and leasehold improvements and excludes the leased property in Note 7:

2007

2006

Trailers and vehicles, at cost . . . . . . . . . . . . . . . . . . . . . . . .

$ 236,776

$ 157,359

Less accumulated depreciation. . . . . . . . . . . . . . . . . . . . . .

35,492

34,577

$ 201,284

$ 122,782

At December 31, 2007, minimum future revenues from long-term leases are as follows: 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 30,160

2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

20,729

2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

13,800

2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8,689

2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5,517

Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7,019 $ 85,914

Marubeni America Corporation 2007

27

Notes to Consolidated Financial Statements Marubeni America Corporation At December 31, 2006 and 2007 (In Thousands)

10

l

Goodwill

The changes in the net carrying amount of goodwill for the years ended December 31, 2007 and 2006 are as follows:

2006

2007 Goodwill, beginning of year . . . . . . . . . . . . . . . . . . . . . . . .

34,746

$ 31,698

Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

68,193

5,846

Impairment losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .



(2,798)

Adjustments to purchase price allocation . . . . . . . . . . . . .

1,184



Goodwill, end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 104,123

11

l

$

$

34,746

Intangible Assets and Other, Net

Intangible assets and other, net includes intangible assets of $30,273 and $5,732, and other, net of $8,033 and $1,756 as of December 31, 2007 and 2006, respectively. Intangible assets are comprised of the following at December 31:

2006

2007 Non-compete agreements . . . . . . . . . . . . . . . . . . . . . . . . .

$

5,274

$

2,337

Customer relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . .

12,215

3,000

Customer lists . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,090

727

Trade name. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

14,399

800

Total gross carrying amount . . . . . . . . . . . . . . . . . . . . . . . .

32,978

6,864

Less accumulated amortization . . . . . . . . . . . . . . . . . . . . .

2,705

1,132

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

30,273

$

5,732

The Company recorded amortization expenses of $2,388 and $340 for years ended December 31, 2007 and 2006, respectively. The weighted-average total amortization periods for the finite-lived intangible assets as of December 31, 2007 are as follows (in years):

Non-compete agreements. . . . . . . . . . . . . . . . . . . . . . 5.5 Customer relationships . . . . . . . . . . . . . . . . . . . . . . . . 11.0 Customer lists. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.0 Estimated amortization expense over the next five years is as follows: 2008. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 2,198

2009. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,132

2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,039

2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,965

2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,785

Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5,755 $ 15,874

28

Marubeni America Corporation 2007

Notes to Consolidated Financial Statements Marubeni America Corporation At December 31, 2006 and 2007 (In Thousands)

12

l

Pensions

The Company and certain of its domestic subsidiaries have

Company’s funding policy for the plans is to make the

noncontributory pension plans covering substantially all

actuarially computed minimum required contributions.

domestic employees. Benefits are based primarily upon

The investments of the plans consist primarily of debt and

years of service and average compensation levels. The

equity securities as well as fixed income securities.

Valuation dates for two of the plans are as of October 31, and the valuation date for one plan is as of December 31. Change in projected benefit obligation, plan assets and accumulated benefit obligation of the pension plans at 2007 and 2006 are as follows:

2007

2006

Projected benefit obligation at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 200,876

$ 172,851

Service cost. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8,211

7,277

Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

11,662

10,247

Actuarial (gain) loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(8,402)

15,788

Curtailment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(418)

Settlement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

676

Transfer to annuity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5,950)

Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5,625)

(5,287)

Projected benefit obligation at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 201,030

$ 200,876

Fair value of plan assets at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 171,474

$ 144,791

Actual return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

20,046

20,945

Employer contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

13,486

11,025

Transfer to annuity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5,950)

Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5,625)

(5,287)

Fair value of plan assets at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 193,431

$ 171,474

Accumulated benefit obligation at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 178,038

$ 176,670

Change in projected benefit obligation

Change in plan assets

Marubeni America Corporation 2007

29

Notes to Consolidated Financial Statements Marubeni America Corporation At December 31, 2006 and 2007 (In Thousands)

On December 31, 2006, the Company adopted the recogni-

of Financial Accounting Standards No. 87, Employers’

tion and disclosure provisions of SFAS No. 158. SFAS No.

Accounting for Pensions (“SFAS No. 87”). These amounts

158 required the Company to recognize the funded status

will be subsequently recognized as net periodic pension

(i.e., the difference between the fair value of plan assets

cost pursuant to the Company’s historical accounting

and the projected benefit obligations) of its benefit plans in

policy for amortizing such amounts. Further, actuarial

the December 31, 2006 consolidated balance sheet, with a

gains and losses that arise in subsequent periods and are

corresponding adjustment to accumulated other compre-

not recognized as net periodic pension cost in the same

hensive income, net of tax. The adjustment to accumulated

periods will be recognized as a component of other com-

other comprehensive income at adoption represents the

prehensive income. Those amounts will be subsequently

net unrecognized actuarial losses and unrecognized prior

recognized as a component of net periodic pension cost on

service costs, all of which were previously netted against

the same basis as the amounts recognized in accumulated

the plan’s funded status in the Company’s consolidated

other comprehensive income at adoption of SFAS No. 158.

balance sheets pursuant to the provisions of Statement The following table shows the calculation of the accrued pension liabilities and prepaid pension cost recognized in the accompanying consolidated balance sheets at December 31, 2007 and 2006, respectively:

2006

2007 Funded status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

(7,599)

$ (29,402)

Employer contributions between measurement date and fiscal year end . . . . . . . . . Accrued pension liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,000 $ (7,599)

$ (28,402)

Accrued pension liability is included in other non-current liabilities in the accompanying consolidated balance sheets. Amounts recognized in accumulated other comprehensive loss in the accompanying consolidated balance sheets at December 31, 2007 and 2006 are as follows:

2006

2007 Actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (33,139)

$ (53,065)

Prior service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(226)

(375)

Accumulated other comprehensive loss before minority interests and tax effect. . .

(33,365)

(53,440)

Cumulative employer contribution in excess of net periodic pension cost . . . . . . . .

25,766

25,038

Net amount recognized in consolidated balance sheets after SFAS No. 158 . . . . . . .

$ (7,599)

$ (28,402)

The actuarial loss and prior service cost included in accumulated other comprehensive income and expected to be recognized in net periodic pension cost during the year ending December 31, 2008 is $1,583 and $131, respectively.

30

Marubeni America Corporation 2007

Notes to Consolidated Financial Statements Marubeni America Corporation At December 31, 2006 and 2007 (In Thousands)

The net periodic pension cost for the years ended December 31, 2007 and 2006 consists of the following:

2006

2007 Service cost. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

8,211

$

7,277

Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

11,662

10,247

Expected return on plan assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(13,790)

(11,606)

Amortization of prior service cost. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

136

139

Settlement loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,546



Curtailment loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

12



Recognized actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3,980

3,960

Total net periodic pension cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 11,757

$

10,017

The aggregate projected benefit obligation and aggregate fair value of plan assets for pension plans with projected benefit obligations in excess of plan assets are as follows:

`

2007

2006

Aggregate projected benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 193,127

$ 193,387

Aggregate fair value of plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

184,116

163,468

2007

2006

The aggregate accumulated benefit obligation and aggregate fair value of plan assets for pension plans with accumulated benefit obligations in excess of plan assets are as follows:

Aggregate accumulated benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

37,404

Aggregate fair value of plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

33,937

$

42,711 36,590

Weighted-average assumptions used in the computation of benefit obligations are as follows:

2007

2006

Assumed discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6.30%

5.90%

Rate of increase in compensation levels . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3.20% - 6.00%

3.20% - 6.00%

Weighted-average assumptions used in the computation of net periodic pension cost are as follows:

2007

2006

Assumed discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5.90%

6.00%

Rate of increase in compensation levels . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3.20% - 6.00%

3.20% - 6.00%

Expected long-term rate of return on plan assets . . . . . . . . . . . . . . . . . . . . .

8.00%

8.00%

To develop the expected long-term rate of return on assets assumption, the Company considered the historical returns and the future expectations for returns for each asset class, as well as the target asset allocation of the pension portfolio.

Marubeni America Corporation 2007

31

Notes to Consolidated Financial Statements Marubeni America Corporation At December 31, 2006 and 2007 (In Thousands)

Expected benefit payments for all plans over the next ten years are as follows:

Fiscal year ending: 2008. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

6,587

2009. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7,254

2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8,154

2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9,223

2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10,215

Five years thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

69,145

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 110,578

The pension plans’ investment policy is to actively manage certain asset classes where potential exists to outperform the broader market, as defined by specific benchmarks for each of those asset classes. The pension plans’ weighted-average asset allocation at December 31, 2007 and 2006, by asset category, are as follows:

Asset Category

2007

2006

Domestic equity securities . . . . . . . . . . . . . . . . . . . . . . . . .

52%

52%

International equity securities. . . . . . . . . . . . . . . . . . . . . . .

2

2

Debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

39

38

Real estate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6

6

Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1

2

Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

100%

100%

The Company expects to contribute $12,671 to its pension plans in 2008. No plan assets are expected to be returned to the Company during the year ending December 31, 2008.

13

l

Postretirement Benefits

A subsidiary of the Company provides certain medical

deemed actuarially equivalent to the Medicare Part D

eligible for these benefits upon reaching age 55 while work-

prescription drug benefit offered by the government

ing for the subsidiary and meeting certain service require-

under the Medicare Prescription Drug, Improvement and

ments. The Company amended the eligibility requirements

Modernization Act of 2003 (the “Act”). For the years ended

of its retiree medical benefit plan effective January 1, 2006.

December 31, 2007 and 2006, the subsidiary elected to

The amendment affected the years of service requirement

take the governmental subsidy offered under the Act and

and the retiree’s cost for medical benefits under the plan.

reflect this impact in expense. All calculations are based on

In addition, effective January 1, 2007, new employees are

recognizing the subsidy.

no longer eligible to participate in the Company’s retiree medical benefit plan.

32

The subsidiary’s Medicare-eligible drug benefit was

benefits for retired employees. Employees may become

Marubeni America Corporation 2007

Notes to Consolidated Financial Statements Marubeni America Corporation At December 31, 2006 and 2007 (In Thousands)

The change in the accumulated postretirement benefit obligation as of October 31, 2007and 2006 and funded status of postretirement benefits at December 31, 2007 and 2006 are as follows:

2006

2007 Change in benefit obligation Benefit obligation at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 24,092

Service cost. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

902

898

Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,475

1,310

Plan participants’ contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

293

214

Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .



(11,327)

Actuarial (gain) loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(1,163)

2,333

Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(179)

(987)

Benefit obligation at end of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 25,420

$

Funded status. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (25,420)

$ (24,092)

Employer contributions between measurement date and fiscal year-end . . . . . . . . .

120

207

Net amount accrued. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (25,300)

$ (23,885)

Accrued postretirement benefit is included in other

$

31,651

24,092

The medical benefit plan’s benefits are funded on a cash

non-current liabilities in the accompanying consolidated

basis as benefits are paid. No assets have been segregated

balance sheets.

and restricted to provide medical benefits.

Amounts recognized in accumulated other comprehensive income in the accompanying consolidated balance sheets at December 31, 2007 and 2006 are as follows:

2006

2007 Actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (3,612)

$

(4,012)

Prior service credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7,287

8,097

Accumulated other comprehensive income before minority interests and tax effect. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3,675

4,085

Cumulative net periodic pension cost in excess of employer contribution . . . . . . . .

(28,975)

(27,970)

Net amount recognized in consolidated balance sheets after SFAS No. 158 . . . . . .

$ (25,300)

$ (23,885)

The actuarial loss and prior service credit included in accumulated other comprehensive income and expected to be recognized in net periodic pension cost during the year ending December 31, 2008 is $86 and $(810), respectively.

Marubeni America Corporation 2007

33

Notes to Consolidated Financial Statements Marubeni America Corporation At December 31, 2006 and 2007 (In Thousands)

Net periodic postretirement benefit cost included the following:

2006

2007 Service cost. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

902

$

898

Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,475

1,310

Amortization of prior service credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(810)

(810)

Recognized actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

221

112

Total postretirement benefit cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

1,788

$

1,510

Weighted-average assumed discount rates of 5.90% and

rates of 6.3% and 5.90% were used as of December 31,

6.00% were used for the years ended December 31, 2007

2007 and 2006, respectively, in determining the postretire-

and 2006, respectively, in determining the net postretire-

ment benefit obligation.

ment benefit cost. Weighted-average assumed discount

The assumed health care cost trend rates related to the medical benefit plan are as follows:

2006

2007 Health care cost trend rate assumed for next year . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7.50%

8.00%

Rate to which the cost trend is assumed to decline (the ultimate trend rate). . . . . . .

5.25

5.25

Year that the rate reaches the ultimate trend rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2012

2011

Assumed health care cost trend rates have a significant

obligation by $4,348 at December 31, 2007. A 1% decrease

effect on the amounts reported for the medical benefit

in the assumed health care cost trend rate would have

plan. A 1% increase in the assumed health care cost trend

decreased the cost during 2007 of postretirement benefits

rate would have increased the cost during 2007 of post-

by $375 and the accumulated benefit obligation by $3,504

retirement benefits by $477 and the accumulated benefit

at December 31, 2007.

The estimated gross amounts of receipts from the Medicare Part D Prescription drug benefit subsidy are netted with the medical benefit plan’s expected benefit payments. Expected benefit payments for the plan over the next ten years are as follows:

Gross Expected Benefit Payments

Fiscal year ending: 2008. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

932

$

$

(70)

862

2009. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,052

(81)

971

2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,192

(94)

1,098

2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,323

(110)

1,213

2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,440

(128)

1,312

Five years thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9,306

(918)

8,388

(1,401)

$ 13,844

Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

34

$

Medicare Subsidy

Net Expected Benefit Payments

Marubeni America Corporation 2007

$

15,245

$

Notes to Consolidated Financial Statements Marubeni America Corporation At December 31, 2006 and 2007 (In Thousands)

14

l

Defined Contribution Plan

The Company has various defined contribution plans. The Company made contributions to the plans for the years ended December 31, 2007 and 2006 in the amount of $3,319 and $2,987, respectively.

15

l

Income Taxes

Deferred income taxes included in the accompanying

related to differences in accounting for certain accrued

consolidated balance sheets reflect the net tax effects of

items. At December 31, 2007 and 2006, the Company has

temporary differences between the carrying amount of

gross deferred tax liabilities of approximately $90,000 and

assets and liabilities for financial reporting purposes and

$71,000, respectively, related primarily to differences in

the amounts used for income tax purposes. The Company

depreciation, investment in partnerships and accounting

has gross deferred tax assets of approximately $66,000

for inventory.

and $75,000 at December 31, 2007 and 2006, respectively, The provision for income taxes from continuing operations consists of the following:

2006

2007 Current: Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 23,100

$

67,200

State and local . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

13,000

15,800

Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

12,200

(46,400)

State and local . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,500

(8,300)

Deferred:

$ 50,800

$

28,300

For the years ended December 31, 2007 and 2006, the

tax return be recognized in the financial statements when it

difference between the provision for income taxes and the

is more likely than not (i.e., a likelihood of more than 50%)

provision computed at the statutory federal income tax rate

that the position would be sustained upon examination by

is due to state and local taxes and certain non-deductible

tax authorities. The implementation of FIN 48 had no effect

expenses.

on the Company’s statement of financial position as of

On January 1, 2007, the Company adopted FIN 48, which

January 1, 2007.

requires that a position taken or expected to be taken on a A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows:

Balance at January 1, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

443

Additions based on tax positions related to the current year . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

187

Additions for tax positions of prior years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

155

Reductions due to lapse in statute of limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(135)

Balance at December 31, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

650

Marubeni America Corporation 2007

35

Notes to Consolidated Financial Statements Marubeni America Corporation At December 31, 2006 and 2007 (In Thousands)

The Company recognizes interest accrued and penalties,

Revenue Service (“IRS”) commenced an examination of

which were minimal for 2007, related to unrecognized

the Company’s U.S. income tax returns for 2003 through

tax benefits in income taxes. The Company recognized

2005 in the fourth quarter of 2006 that is anticipated to

approximately $100 related to state deductions for which

be completed by the end of 2008. Some states are also

deductibility is uncertain.

under examination. As of December 31, 2007, the IRS and

The Company files income tax returns in the U.S. federal jurisdiction and in various states. The Internal

16

l

states have not indicated any significant adjustment to the Company’s tax position.

Other Comprehensive income

The amount of income tax expense or benefit allocated to each component of other comprehensive income (loss) for the years ended December 31, 2007 and 2006 is as follows:

2007 Before-Tax Amount Unrealized losses on available-for-sale securities arising during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

(4,735)

Tax Benefit (Expense) $

1,778

Net-of-Tax Amount $

(2,957)

Change in fair value of derivative financial instruments . . . . . . . .

(632)

281

Translation adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5,071



5,071

Change in pension and postretirement funded status . . . . . . . . . .

17,831

(7,487)

10,344

Other comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

17,535

$

(5,428)

(351)

$

12,107

2006 Before-Tax Amount Unrealized gains on available-for-sale securities arising during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

Change in fair value of derivative financial instruments . . . . . . . .

$

(2,765)

(1,627)

Net-of-Tax Amount $

1,192

3,468 (1,573)

Translation adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

77



77

Unfunded pension gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

709

(254)

455

Other comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

36

5,095

Tax Benefit (Expense)

Marubeni America Corporation 2007

$

3,116

$

(689)

$

2,427

Notes to Consolidated Financial Statements Marubeni America Corporation At December 31, 2006 and 2007 (In Thousands)

The accumulated balance of each component of accumulated other comprehensive income (loss) at December 31, 2007 and 2006 is as follows:

Unrealized Fair Value of Change in Accumulated Gain (Loss) on Derivative Pension and Other Available-forFinancial Translation Postretirement Comprehensive Sale Securities Instruments Adjustment Funded Status Income (Loss) Balance at December 31, 2005 . . . . . . . . . . .

$

922

$

1,249

$

2,241

$

(3,977)

$

435

Change in 2006. . . . . . . . . . . . . . . . . . . . . . . .

3,468

(1,573)

77

455

Cumulative effect change under SFAS No. 158 (Note 1) . . . . . . . . . . . . . . . . .







(22,965)

(22,965)

Balance at December 31, 2006 . . . . . . . . . . .

4,390

(324)

2,318

(26,487)

(20,103)

Change in 2007. . . . . . . . . . . . . . . . . . . . . . . .

(2,957)

(351)

5,071

10,344

12,107

7,389

$ (16,143)

Balance at December 31, 2007 . . . . . . . . . . .

17

l

$

1,433

$

(675)

$

2,427

$

(7,996)

Commitments and Contingencies

At December 31, 2007 and 2006, the Company has

Total rent expense amounted to approximately $69,000

guaranteed the indebtedness of certain affiliates and third

and $62,000 for the years ended December 31, 2007 and

parties amounting to approximately $51,000 and $46,000,

2006, respectively.

respectively. The minimum commitment for the rental of office

As of December 31, 2006, a subsidiary has entered into commitments to purchase components of trailers for

facilities and equipment under noncancelable operating

approximately $20,200. There are no such commitments as of

leases at December 31, 2007 was $274,274 payable as

December 31, 2007.

follows: 2008 – $59,384; 2009 – $35,572; 2010 – $28,252; 2011 – $23,425; 2012 – $22,759 and thereafter – $104,882.

The outstanding letters of credit at December 31, 2007 and 2006 are $14,892 and $6,517, respectively.

The Company is also responsible for rent escalations based upon increases in real estate taxes and other building operating costs.

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Litigations

In the normal course of business, the Company is subject to certain claims and litigation, including unasserted claims. The Company is of the opinion that, based on information presently available, such legal matters will not have a material adverse effect on the consolidated financial position, results of operations or cash flow of the Company.

Marubeni America Corporation 2007

37

Notes to Consolidated Financial Statements Marubeni America Corporation At December 31, 2006 and 2007 (In Thousands)

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Sale of Accounts Receivable

A subsidiary of the Company has an agreement to sell, on

the fair value of the retained interest are management’s

an ongoing basis, a pool of receivables to a wholly owned

estimate of uncollectible accounts receivable and the

bankruptcy-remote special-purpose funding subsidiary (the

payment rate which is derived from the average life of the

“funding subsidiary”). The funding subsidiary is a distinct

accounts receivable of approximately 60 days. As of

legal entity that engages in no trade or business in order

December 31, 2007 and 2006, management of the subsidiary

to make remote the possibility that the entity would enter

estimated uncollectible accounts receivable of $12,196 and

bankruptcy or other receivership. The subsidiary sells the

$10,260, respectively. Total accounts receivable that the

pool of receivables to the funding subsidiary for a purchase

subsidiary manages as of December 31, 2007 and 2006

price equal to the fair market value of the pool. The funding

amounted to $247,573 and $191,388, respectively.

subsidiary, subject to certain conditions, sells an undivided

were $3,882 and $1,088, respectively. Any change in

an unrelated company (the “securitization company”), for

management’s estimate of uncollectible accounts receivable

which there are no repurchase agreements. The proceeds

will have an inversely corresponding impact on the estimate

received by the funding subsidiary from the sale to the

of the fair value of the retained interest.

securitization company are immediately remitted to the

Additionally, under the terms of the agreement, new

subsidiary to satisfy the funding subsidiary’s obligation

receivables are added to the pool as collections reduce

to the subsidiary. During 2007 and 2006, in accordance

previously sold receivables. The subsidiary services,

with SFAS No. 140, Accounting for Transfers of Servicing

administers and collects the receivables on behalf of the

of Financial Assets and Extinguishments of Liabilities, the

funding subsidiary and the securitization company. The net

subsidiary recorded losses on the sale of receivables of

proceeds from the sale of receivables were used for the

$12,940 and $9,513, respectively.

reduction of other short-term obligations and are reflected

The estimated fair value of the retained interest was

38

Credit losses, net of recoveries, during 2007 and 2006

fractional ownership interest in the pool of receivables to

as operating and financing cash flows in the accompanying

$48,209 and $51,498 at December 31, 2007 and 2006,

consolidated statements of cash flows, respectively. The

respectively, which is included in other current assets.

assets derecognized as of December 31, 2007 and 2006 as

Based on the nature of the subsidiary’s securitization

a result of the securitization totaled $178,759 and $136,608,

transactions, the two key assumptions used in determining

respectively.

Marubeni America Corporation 2007

Notes to Consolidated Financial Statements Marubeni America Corporation At December 31, 2006 and 2007 (In Thousands)

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Sale of Loans Receivable

The Company has an agreement to sell, on an ongo-

agrees to pay the financial institution for 100% of the loan

ing basis, specific loans receivable to a wholly owned

loss experienced after the financial institution reaches its

bankruptcy-remote special-purpose subsidiary (the “SP

loan loss limit. The loan loss limit assumed by the financial

subsidiary”) of the Company. The SP subsidiary is a distinct

institution is equal to one percent of the aggregate principal

legal entity that engages in no trade or business in order

amount of loans included in the pool for the year. Loans

to make remote the possibility that the entity would enter

under this program totaled $62,384 and $56,625 at

bankruptcy or other receivership.

December 31, 2007 and 2006, respectively.

The Company originates loans subject to certain

Under the second program with the same financial

predefined underwriting criteria and sells participations in

institution, the Company sells 100% participation in loans

such loans to a financial institution pursuant to a participa-

originated by the Company with 20% recourse. The loans

tion agreement (the “Program”). The Company then sells

are approved by the Company and the financial institu-

such loans receivable and its rights and obligations under

tion, and then originated by the Company. The Company

participation agreements to the SP subsidiary in exchange

then sells 100% participation to the financial institution

for payment in the amount of the fair market value of such

with a 20% recourse obligation in the event of default.

loans receivable and related rights and obligations. The

Simultaneously, the Company sells such loans receivable

participation proceeds received by the SP subsidiary from

and its rights under the participation agreements to the

the financial institution are immediately remitted to

SP subsidiary. The Company records its retained interest

the Company to satisfy the SP subsidiary’s obligation to

in the SP subsidiary as an asset in other current assets

the Company. Any remaining unsatisfied amount of the

in its consolidated balance sheets. At December 31, 2007

obligation from the SP subsidiary to the Company is evidenced

and 2006, loans under this program totaled $19,968 and

by a subordinated promissory note issued by the SP

$19,722, respectively. At December 31, 2007 and 2006,

subsidiary, the outstanding balance of which is reflected as

the limit of liability of the SP subsidiary for these two

part of retained interest on the Company’s balance sheet.

programs is $8,976 and $6,476, respectively.

The financial institution services, administers, and collects the loans on behalf of the SP subsidiary. The Program is made up of two different loan participa-

The net proceeds from the Program are used for the reduction of other short-term obligations and are reflected as operating cash flows in the accompanying consolidated

tion programs. Under the first program, the SP subsidiary

statements of cash flows. Assets derecognized as a result

guarantees, on a limited basis, the loan participations. The

of the securitization under the first program totaled $62,384

loans under the program are assigned to a pool based

and $56,625 at December 31, 2007 and 2006, respectively.

on the crop year to which they relate. Each year that the

Assets derecognized under the second program totaled

agreement remains effective, the pool will have a term

$19,919 and $19,656 at December 31, 2007 and 2006,

beginning on September 1 and ending on August 31 of the

respectively.

following year. For each pool of loans, the SP subsidiary

Marubeni America Corporation 2007

39

Notes to Consolidated Financial Statements Marubeni America Corporation At December 31, 2006 and 2007 (In Thousands)

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Business Acquisition

During 2007, the Company paid $106,188 to acquire various companies through stock and asset purchases and significant acquired businesses as follows:

Name of acquired company

Ownership percentage

Business descriptions

Belterra Corporation

Industrial conveyor belt distributor in Canada

60%

Intragrated Resources Holdings, Inc.

U.S. paper distributor and a printing production consultant

80%

Prime Automotive Warehouse, Inc.

U.S. distributor of aftermarket auto parts, chemicals and tools

80%

Train Trailer Rentals, Ltd.

Trailer rental, leasing and service company in Canada

100%

During 2006, the Company paid $35,418 to acquire 64% of Advantage Funding Management Co., Inc., the assets of Partner Equity Capital Company LLC and assets of nine businesses. The purchase for the acquisitions was accounted for under the purchase method and the following table summarizes the estimated fair value of the assets acquired and liabilities assumed at the dates of acquisition:

2006

2007 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

19,632

$

6,184

Accounts and notes receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

62,308

118,082

Property, plant and equipment and leasehold improvements . . . . . . . . . . . . . . . . . . .

52,168

14,972

Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

68,193

5,845

Intangibles assets and other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

26,575

5,964

Accounts payables and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(77,462)

(11,298)

Loan payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(45,226)

(104,331)

Net assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 106,188

$

35,418

The purchase price of each business acquired was

December 31, 2007 consolidated balance sheet includes

determined based on the expected future cash flows the

preliminary allocations of the purchase price for the 2007

purchased assets will generate. The excess of the purchase

acquisition. The Company has not yet obtained all informa-

price over the fair value of the identifiable net assets

tion required to complete the purchase price allocations

acquired was recorded as goodwill. The significant factors

related to these acquisitions. The final allocations will be

that contributed to the determination of each purchase

completed in 2008. The operating results of businesses

price that resulted in the recognition of goodwill are due

acquired have been included in the consolidated financial

to the consideration of synergistic and strategic benefits

statements from the date of acquisition.

from these operations in the future. The accompanying

40

$

Marubeni America Corporation 2007

Report of Independent Auditors

The Board of Directors and Shareholder Marubeni America Corporation We have audited the accompanying consolidated balance sheets of Marubeni America Corporation (the “Company”) as of December 31, 2007 and 2006, and the related consolidated statements of income, shareholder’s equity and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company at December 31, 2007 and 2006, and the consolidated results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States. As discussed in Note 1 to the consolidated financial statements, the Company adopted FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109 (“FIN 48”), effective January 1, 2007 and Statement of Financial Accounting Standard No. 158, Employers Accounting for Defined Benefit Pension and Other Postretirement Plans (“SFAS No. 158”), effective December 31, 2006.

April 21, 2008

Marubeni America Corporation 2007

41