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(dollars in thousands, except per share amounts.)
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The Company and certain of its subsidiaries are parties to a number of legal proceedings that have arisen in the ordinary course of business. While the outcome of these proceedings cannot be predicted with certainty, management does not expect these matters to have a material adverse effect on the consolidated financial position, results of operations or cash flows of the Company.
The Company carries insurance with coverages and coverage limits that it believes to be adequate. Although there can be no assurance that such insurance is sufficient to protect the Company against all contingencies, management believes that its insurance protection is reasonable in view of the nature and scope of the Company’s operations.
As of October 31, 2001, the Company had advanced approximately $1,631, including accrued interest, to fund premiums on a split-dollar “second-to-die” life insurance policy on behalf of the Company’s Chairman, Mr. Frank B. Stewart, Jr., and Mrs. Stewart. The advances are collateralized by the assignment of other insurance policies and the pledge of Class A common stock of the Company. In 1992, the Company agreed to continue to advance such premiums for a twelve-year period and will be repaid at the earliest of (a) the surrender of the policy, (b) the deaths of Mr. and Mrs. Stewart or (c) 60 days following payment in full of all premiums on the policy.
The Company has noncancellable operating leases, primarily for land and buildings, that expire over the next 1 to 18 years, except for nine leases that expire between 2032 and 2072. Rent expense under these leases was $8,323, $9,527 and $8,042 for the years ended October 31, 2001, 2000 and 1999, respectively. Through July 2000, the Company leased office space from an affiliated company. Rental payments to the affiliated company were approximately $479 and $534 for the years ended October 31, 2000 and 1999, respectively. The Company now leases a smaller portion of the office space from a non-affiliated company. Rental payments to the non-affiliated company were $322 and $132 for the years ended October 31, 2001 and 2000, respectively.
The Company’s domestic future minimum lease payments as of October 31, 2001 are $5,810, $4,878, $4,209, $3,324, $2,918 and $28,016 for the years ending October 31, 2002, 2003, 2004, 2005, 2006 and later years, respectively. The Company’s foreign future minimum lease payments are $714, $261, $113, $100, $78 and $0 for the years ended October 31, 2002, 2003, 2004, 2005, 2006 and later years, respectively, although the Company’s foreign operations are currently held for sale. Additionally, the Company has entered into non-compete agreements with prior owners of acquired subsidiaries that expire through 2012. During fiscal year 2001, the Company decided to relieve some of the prior owners and key employees of their obligations not to compete; however, it will continue to make the payments in accordance with the contract terms. The Company’s future non-compete payments as of October 31, 2001 for the same periods are $6,320, $5,611, $4,431, $3,075, $2,035 and $3,803, respectively.
The Company is required to maintain a bond ($41,061 as of October 31, 2001) to guarantee its obligations relating to funds the Company withdrew from its preneed funeral trusts in Florida. This amount would become senior debt if the Company was to borrow funds under the revolving credit facility to extinguish the bond obligation by returning to the trusts the amounts it previously withdrew that relate to the remaining preneed contracts.
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