CHS 2013 Annual Report Download - page 57

collateral for a portion of these contingent obligations. We
have not recorded a liability related to the contingent obli-
In May 2013, we initiated a voluntary recall of certain soy
gations as we do not expect to pay out any cash related to
protein products produced at our Ashdod, Israel facility
them, and the fair values are considered immaterial. The
following one customer’s report to us of a positive test
underlying loans to the counterparties for which we pro-
result for salmonella in product purchased from us. We
vide guarantees are current as of August 31, 2013.
notified applicable food safety regulators, including the
Israel Ministry of Health and the U.S. Food and Drug
Administration, of both the positive test result and our
CHS Capital has commitments to extend credit to cus-
determination to conduct a voluntary recall. We have
tomers as long as there is no violation of any condition
received no reports of salmonella-related illness in rela-
established in the contracts. As of August 31, 2013,
tion to the recalled products. We estimate our range of
CHS Capital’s customers have additional available credit
loss associated with this recall to be between $14.4 mil-
of $1.0 billion.
lion and $39.7 million. During the year ended August 31,
2013, we recorded a reserve of $25.0 million, which is the
amount within the range that we believe is the best esti-
We are committed under operating lease agreements for
mate given the claims experience so far. We maintain
approximately 2,600 rail cars with remaining terms of one
product liability and general liability insurance (which
to 13 years. In addition, we have commitments under
includes product liability coverage), which we believe
other operating leases for various refinery, manufacturing
will offset some related product liability expenses. How-
and transportation equipment, vehicles and office space.
ever, as of August 31, 2013, no insurance recoveries have
Some leases include purchase options at not less than fair
been recorded related to this incident.
market value at the end of the lease terms.
Total rental expense for all operating leases was
We are involved as a defendant in various lawsuits,
$81.5 million, $74.6 million and $66.2 million for the years
claims and disputes, which are in the normal course of
ended August 31, 2013, 2012 and 2011, respectively.
our business. The resolution of any such matters may
affect consolidated net income for any fiscal period;
Minimum future lease payments required under noncan-
however, management believes any resulting liabilities,
celable operating leases as of August 31, 2013 were as
individually or in the aggregate, will not have a material
follows:
effect on our consolidated financial position, results of
operations or cash flows during any fiscal year. EQUIPMENT
RAIL AND
(DOLLARS IN THOUSANDS) CARS VEHICLES OTHER TOTAL
2014 $ 18,875 $ 13,006 $ 45,965 $ 77,846
As of August 31, 2013 and 2012, we stored grain for third
2015 18,331 9,803 35,934 64,068
parties totaling $454.9 million and $441.3 million,
respectively. Such stored commodities and products are 2016 17,310 6,959 29,699 53,968
not our property and, therefore, are not included in our 2017 16,203 4,451 21,906 42,560
inventories on our Consolidated Balance Sheets. 2018 11,608 2,480 13,527 27,615
Thereafter 10,830 685 32,210 43,725
Total minimum
We are a guarantor for lines of credit and performance
future lease
obligations of related companies. Our bank covenants payments $ 93,157 $ 37,384 $ 179,241 $ 309,782
allow maximum guarantees of $1.0 billion, of which
$39.8 million was outstanding on August 31, 2013. We have
62 CHS 2013
THIRTEEN: Commitments and Contingencies, continued
Contingencies
Credit Commitments
Lease Commitments
Other Litigation and Claims
Grain Storage
Guarantees