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Notes to Consolidated Financial Statements
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20. Commitments and
Contingencies
The Company leases various equipment and real properties under long-term
operating leases. Total rental expense was $51.7 million in 2003,
$44.4 million in 2002 and $34.8 million in 2001. Most of the leases
require payment of operating expenses applicable to the leased assets.
Management expects that in the normal course of business most leases
that expire will be renewed or replaced by other leases.
Minimum lease commitments under noncancelable operating leases at
December 31, 2003 total $117.0 million composed of $31.7 million for
2004, $28.4 million for 2005, $20.0 million for 2006, $14.4 million
for 2007, $12.1 million for 2008 and $10.4 million for later years.
At December 31, 2003, the Company had $110.0 million in obligations
under capital lease, which represents the present value of the future
minimum lease payments for the leases of CPI and MoArk. CPI leases
the real property and certain equipment relating to its cheese manufacturing
and whey processing plant in Tulare, CA. CPI had a lease balance of
$99.2 million at December 31, 2003. The entire lease balance of $108.3
million at December 31, 2002 was classified as a current liability
as CPI was in default of covenants at that time. MoArk leases land,
buildings and equipment at various locations. MoArk had a lease balance
of $10.8 million at December 31, 2003.
Minimum commitments for obligations under capital lease at December
31, 2003 total $110.0 million composed of $10.4 million for 2004,
$10.1 million for 2005, $10.2 million for 2006, $10.2 million for
2007, $10.2 million for 2008 and $58.9 million for later years.
At December 31, 2003, Land O’Lakes had capital commitments of
$7.6 million for equipment and construction in progress at the CPI
facility.
The Company is currently and from time to time involved in litigation
and environmental claims incidental to the conduct of business. The
damages claimed in some of these cases are substantial. Although the
amount of liability that may result from these matters cannot be ascertained,
the Company does not currently believe that, in the aggregate, they
will result in liabilities material to the Company’s consolidated
financial condition, future results of operations or cash flows.
In the third quarter of 2003, three separate lawsuits were filed against
the Company by Ohio alpaca producers in which it is alleged that the
Company manufactured and sold animal feed that caused the death of,
or damage to, certain of the producers’ alpacas. It is possible
that additional lawsuits or claims relating to this matter could be
brought against the Company. Although the amount of the liability
that may result from these matters cannot be ascertained, we do not
currently believe that, in the aggregate, they will result in liabilities
material to our consolidated financial condition, future results of
operations or cash flows.
In a letter dated January 18, 2001, the Company was identified by
the United States Environmental Protection Agency (“EPA”)
as a potentially responsible party for the hazardous waste located
at the Hudson Refinery Superfund Site in Cushing, Oklahoma. The letter
invited the Company to enter into negotiations with the EPA for the
performance of a remedial investigation and feasibility study in connection
with the site, and also demanded that the Company reimburse the EPA
approximately $8.9 million for remediation expenses already incurred
at the site. The Company responded to the EPA in March 2001 denying
any responsibility. No further communication has been received from
the EPA.
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