Pallet-Management-Services - AFM

US $0.8 million was recorded for estimated future legal defense
costs. During July 2006, one of the Company’s subsidiaries
was notified of a lawsuit filed by the city of Chicago against
one of the Company’s subsidiaries requesting that it demolish
or otherwise repair the Chicago drum property to a condition
suitable to the city of Chicago. Although the Company is still
in discussions with the city of Chicago regarding this claim,
approximately US $0.5 million was accrued during 2006,
representing estimated demolition and other costs which might
ultimately be associated with these claims. See footnote on
Discontinued Operations.
ING Barings Limited has claimed the reimbursement of
approximately US $1.6 million in expenses incurred during the
Company’s financial restructuring in 2001 and 2002. During
2005 the District Court of Amsterdam awarded ING’s claim and
the Company paid €1.2 million (US $1.4 million). The Company
filed an appeal in November 2005. The respective court hearing
took place on February 7, 2007.
On April 19, 2006, a number of sites and facilities of certain
U.S. subsidiaries of the Company were searched by agents
from the U.S. Immigration and Customs Enforcement (‘ICE’), the
investigative arm of the U.S. Department of Homeland Security
(‘DHS’). Also on that date, certain of the facilities of these
U.S. subsidiaries of the Company were searched by warrant
and consent; less than 10 past and present employees were
arrested; documents were seized; and ICE detained employees
alleged to be illegal aliens working for affiliates of the Company.
The arrests of the past and present employees were prompted
by suspicion that these employees were involved in the hiring,
at one facility in upstate New York, of illegal aliens not eligible
for employment in the United States under U.S. immigration
laws. The Company and its subsidiaries have not been named
in any criminal complaint or indictment. U.S. subsidiaries of the
Company are, however, the subject of an on-going investigation
to determine whether these suspected hiring practices occurred
elsewhere or were known to or condoned by management. The
U.S. government has not indicated that any of the Company’s
or its subsidiaries’ directors, officers or employees (other than
those arrested on April 19, 2006) are targets or subjects of the
investigation. The Company and its subsidiaries have indicated
their willingness to cooperate fully with the U.S. government’s
investigation into these matters. As of December 31, 2006 a
provision of US $1.6 million was recorded for legal defense costs.
| FINANCIAL REPORTING | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
The Company is a defendant in various other legal matters
arising in the normal course of business. In the opinion of
management, after consultation with legal counsel, the ultimate
resolution of these matters is not expected to have a material
effect on the accompanying consolidated financial statements.
Insurance
The Company carries a broad range of insurance, including
general and business auto liability, directors and officers,
commercial property, business interruption and a general
umbrella policy.
IFCO SYSTEMS North America is self-insured for certain
medical claims up to US $0.1 million per person per year and
is self-insured for workers compensation claims up to
US $0.3 million per incident per year. Provisions for expected
future payments are accrued based on IFCO SYSTEMS North
America’s estimate of its aggregate liability for all open and
unreported claims. Management has accrued US $3.8 million
and US $2.8 million as of December 31, 2006 and 2005,
respectively, and believes this amount is adequate to cover
known and unreported medical and workers compensation
claims.
Leasing arrangements
The Company leases certain facilities and machinery under
noncancellable operating leases. Lease payments are expensed
on a straight-line basis over the term of the lease. Minimum
future rental payments under these leases as of December 31,
2006, are as follows:
US $ in thousands Amount
2006 2005
2006 – 16,842
2007 20,894 12,488
2008 15,450 8,298
2009 10,170 5,068
2010 6,820 3,196
2011 4,895 –
Thereafter 4,094 2,774
62,323 48,666
Expenses under operating leases were approximately
US $21.3 million and US $21.2 million for 2006 and 2005,
respectively.
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