|
NOTE 10. COMMITMENTS AND CONTINGENCIES Lease Commitments Del Monte leases certain property and equipment and office and plant facilities. At June 30, 2000, the aggregate minimum rental payments required under operating leases that have initial or remaining terms in excess of one year were as follows:
Minimum payments have not been reduced by minimum sublease rentals of $0.4 due through 2002 under noncancelable subleases. Rent expense was $33.7, $29.6 and $28.3 for the fiscal years ended June 30, 2000, 1999 and 1998, respectively. Rent expense includes contingent rentals on certain equipment based on usage. Grower Commitments Del Monte has entered into noncancelable agreements with growers, with terms ranging from two to ten years, to purchase certain quantities of raw products. Total purchases under these agreements were $69.1, $68.2 and $66.5 for the years ended June 30, 2000, 1999 and 1998. At June 30, 2000, aggregate future payments under such purchase commitments (priced at the June 30, 2000 estimated cost) are estimated as follows:
In connection with the sale of Del Monte’s 50.1% interest in Del Monte Philippines, a joint venture operating primarily in the Philippines, on March 29, 1996, Del Monte signed an eight-year supply agreement whereby Del Monte must source substantially all of its pineapple requirements from Del Monte Philippines over the agreement term. Del Monte expects to purchase $42.9 in fiscal 2001 under this supply agreement for pineapple products. During the year ended June 30, 2000, Del Monte purchased $40.8 under the supply agreement. Supply Agreement Effective December 21, 1993, Del Monte sold substantially all of the assets and certain related liabilities of its can manufacturing operations in the United States to Silgan Containers Corporation (“Silgan”). In connection with the sale to Silgan, Del Monte entered into a ten-year supply agreement under which Silgan, effective immediately after the sale, began supplying substantially all of Del Monte’s metal container requirements for foods and beverages in the United States. Purchases under the agreement during the year ended June 30, 2000 amounted to $172.9. Del Monte believes the supply agreement provides it with a long-term supply of cans at competitive prices that adjust over time for normal manufacturing cost increases or decreases. Information Systems Agreement On November 1, 1992, Del Monte entered into an agreement with Electronic Data Systems Corporation to provide services and administration to Del Monte in support of its information services functions for all domestic operations. Payments under the terms of the agreement are based on scheduled monthly base charges subject to various adjustments such as system usage and inflation. Total payments for the years ended June 30, 2000, 1999 and 1998 were $17.0, $17.9 and $16.3, respectively. The agreement expires in November 2002 with optional successive one-year extensions. At June 30, 2000, base payments under the agreement are as follows:
Union Contracts Del Monte has a concentration of labor supply in employees working under union collective bargaining agreements, which represent approximately 83% of its hourly and seasonal work force. Of these represented employees, 9% of employees are under agreements that will expire in calendar 2001. Legal Proceedings Del Monte is a defendant in an action brought by PPI Enterprises (U.S.), Inc. in the U.S. District Court for the Southern District of New York on May 25, 1999. The plaintiff has alleged that Del Monte breached certain purported contractual and fiduciary duties and made misrepresentations and failed to disclose material information to the plaintiff about the value of Del Monte and its prospects for sale. The plaintiff also alleges that it relied on Del Monte’s alleged statements in selling its preferred and common stock interest in Del Monte to a third party at a price lower than that which the plaintiff asserts it could have received absent Del Monte’s alleged conduct. The complaint seeks compensatory damages of at least $24 million, plus punitive damages. This case continues to be in the early stages of procedural motions and Del Monte cannot at this time reasonably estimate a range of exposure, if any. Del Monte believes that this proceeding is without merit and plans to defend it vigorously. Del Monte is also defending various other claims and legal actions that arise from its normal course of business, including certain environmental actions. While it is not feasible to predict or determine the ultimate outcome of these matters, in the opinion of management none of these claims and actions, individually or in the aggregate, will have a material effect on Del Monte’s financial position. |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||