President`s Message - MARUBENI AMERICA CORPORATION

Transcription

Branches
New York Headquarters
375 Lexington Avenue
New York, NY 10017
Tel: (212) 450-0100 Fax: (212) 450-0700
New York Showroom
Design Link, 1411 Broadway, Unit 2545
New York, NY 10018
Tel: (212) 450-0311 Fax: (212) 450-0722
Tosuke Nakamura, Assistant General Manager
Detroit Branch
2000 Town Center, Suite 1390
Southfield, MI 48075
Tel: (248) 353-7060 Fax: (248) 353-0649
Shigeyuki Koike, General Manager
Houston Branch
2800 Post Oak Boulevard, Suite 6000
Houston, TX 77056
Tel: (713) 871-5700 Fax: (713) 871-1726
Akira Takakura, General Manager
Portland Branch
1300 SW Fifth Avenue, Suite 2930
Portland, OR 97201
Tel: (503) 224-3761 Fax: (503) 295-7943
Masaaki Higuchi, General Manager
Silicon Valley Branch
3945 Freedom Circle, Suite 1000
Santa Clara, CA 95054
Tel: (408) 330-0808 Fax: (408) 330-0807
Mitsuaki Yamamoto, General Manager
Washington DC Office
1776 I Street NW, Suite 725
Washington DC 20006
Tel: (202) 331-1167 Fax: (202) 331-1319
Takashi Imamura, General Manager
Marubeni America Corporation Web Address:
www.marubeni-usa.com
Los Angeles Branch
515 South Figueroa Street, Suite 2000
Los Angeles, CA 90071
Tel: (213) 972-2700 Fax: (213) 626-1294
Ichiro Igarashi, General Manager
Omaha Branch
1125 South 103rd Street, Suite 475
Omaha, NE 68124
Tel: (402) 934-1060 Fax: (402) 934-1063
Hidefumi Oya, General Manager
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Marubeni America Corporation 2007
Marubeni Corporation (parent) Web Address:
www.marubeni.com
President’s Message
I am very pleased to report that in 2007, Marubeni
America Corporation (“MAC”), like our parent,
Marubeni Corporation, continued its strong upward
trend of earning capability and financial strength.
With sustained contributions from our “traditional”
trading businesses and substantial contributions
from our subsidiaries, we have achieved record
profits in 2007. With the close of 2007, MAC achieved
its medium-term strategic plan for 2006-2007, and
we look forward to ongoing contributions from our
major subsidiaries in agricultural products, distribution, finance and leasing, and the expansion of our
business by a combination of organic growth and
acquisition where appropriate.
In fiscal year 2008, the 150th Anniversary of
Now, as always, our success depends upon the
Marubeni, we begin our drive to achieve SG2009,
ability of each member of the MAC Group to provide
our next medium-term strategic plan. MAC’s focus
the highest level of value-added services, solution
continues to be on extending the brand of Marubeni
and quality to our customers, clients and business
Group, and building a company with presence in the
partners.
U.S. and Canada, one which can ensure sustainable
We look forward to the exciting opportunities, and
growth. As such, we continue to raise the bar this
challenges, of 2008 and to the continued strength
year and challenge all of our group businesses to be
and prosperity of Marubeni America Corporation.
innovative in meeting aggressive financial objectives, despite the uncertain economic environment
in the U.S. At the same time, we challenge all of
our staff members to keep an ever-watchful eye on
proper risk management, financial planning, internal
control, compliance and corporate social responsibility.
Koichi Mochizuki
President and Chief Executive Officer
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About Marubeni America Corporation
Marubeni America Corporation is the largest overseas
subsidiary of the Japanese “sogo shosha” (general trading
and construction service, and traffic and logistics planning.
company), called Marubeni Corporation. As a general
We also are the holding company or significant investor in a
trading company, we act as an intermediary, facilitator or
number of major corporations within our specialty industries.
broker, in all types of trade between and among business
Marubeni America’s function as an intermediary enables
enterprises and countries. But unlike many other large
us to bridge the gap between supply and demand, at
businesses, a company such as ours has few fixed assets,
times by putting together the suppliers and those seeking
relying instead on the creativity, ingenuity and innovation
their products, and at other times by providing the actual
of our human resources, intensive information gathering
sources of supply or demand.
skills and financial resources and acumen.
Marubeni America is headquartered in New York City,
While Marubeni America trades in a broad range of
with seven other U.S. locations and 39 subsidiary and
commodities, agricultural goods, industrial machinery
affiliated companies. We can also access a network of
and natural resources for our own account, and on behalf
over 125 Marubeni Group offices and about 450 associated
of our clients, we are more than just global traders and
companies worldwide, all of which provide Marubeni
brokers. We also act as major financiers, investors and
offices and affiliates with up-to-the-minute information
large-scale organizers. We play a vital role in the logistics
on commodities, commerce and finance. Through our
of transactions, such as the global movement of products.
extensive global network, Marubeni America Corporation
We assume and manage risk involved in transactions and
is able to facilitate complex projects and transactions, and
act as business consultants, using our vast trade experi-
can assist you in expanding your present business or in
ence in new business development. We provide many
identifying and developing new business opportunities.
specialized services, including sales support, transporta-
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tion, insurance, storage, financing and leasing, engineering
Food Unit
Lifestyle Business Unit
The Food Unit buys and exports grain, meat and other
The Lifestyle Business Unit is new as of 2008, and it
foodstuffs from the U.S. for the Japanese and Asian
handles textile products and general merchandise, includ-
markets; engages in commodities trading through the
ing footwear, hides and rubber.
Intercontinental Exchange and the Chicago Board of Trade;
On the textile side, we primarily engage in designing,
and assists Marubeni Corporation in conducting commod-
sourcing, manufacturing and marketing a wide range of
ity trading with suppliers in North America and Central and
textile products that serve both the U.S. and overseas
South America. For some time now, it has exported wheat,
markets. In addition to supplying fabrics to textile convert-
barley, rice, corn, sorghum, soybeans, canola, beef, pork
ers and finished garments to apparel wholesalers, we also
and other foodstuffs to the Japanese and Asian markets
produce and market various raw materials—mainly yarns
from the U.S., while also importing sugar and grape must
and fibers—to domestic weavers, knitters, paper producers
to the U.S. from Central and South America.
and carpet manufacturers. We also manufacture knitted
The Food Unit has worked to expand its business, espe-
fabric for a leading U.S. automotive interior company
cially in corn and soybeans, by securing its supply base.
which is poised for growth. Like Marubeni America, many
In 2005, it formed a strategic alliance with the major U.S.
of our customers are market leaders in their fields with
grain suppliers when it established the Time Charter Vessel
well-known brand names.
Operation Company with Archer Daniels Midland Company
Looking ahead, we are planning to work with an up-and-
(ADM). Similarly, it sought to ensure a safe and stable
coming U.S. men’s designer, employing our many skills
supply system for meat and other foodstuffs by reinforcing
and global reach to expand this exciting brand.
strong links with U.S. and Central and South American
Recently, we have also entered two new markets. First,
suppliers; for example, with Farmland Foods, Inc. in the
with a large U.S. cosmetics company, we now collaborate
chilled pork trade, with Jamaican Cane Products Sales in
on manufacturing skin care products in Asia. Second,
the U.S.-quota sugar trade, and with a Canadian supplier
from the famous British luggage maker, Globe-Trotter, we
of wheat. The Unit also seeks to increase its trading of
have received distribution rights to market their products
non-genetically modified (non-GMO) grain in Japan.
in the U.S. These beautifully crafted suitcases are found in
Marubeni America’s affiliate, Columbia Grain
International, Inc. (CGII), exports nearly 150 million bushels
high-end specialty stores throughout the country.
The Footwear Department sells Clarino—one of the
of wheat and barley through its state-of-the-art grain
most advanced synthetic leathers ever made—in the U.S.,
elevator at Terminal-5 in Portland, Oregon. CGII’s facility
Canada, Mexico and South America. In North America, we
ships about 12-13% of all the wheat and barley exported by
also distribute flexible, lightweight Tsukihoshi children’s
the U.S. For more information, please see CGII’s website
shoes to high-end retailers like Nordstrom.
at www.columbiagrain.com. In anticipation of irregular
The Hide Department exports U.S. and Canadian hides
market conditions across the globe, the Food Unit is
to Asian countries including China, Korea, Taiwan and
looking to new areas for supplies of grain, including South
Japan, where they are made into leather for shoes, bags
America.
and automobile interiors.
The Rubber Department imports conveyor belts and
hoses from mainly Asian countries, including China, Taiwan,
Korea and Japan, and distributes them in North America.
Marubeni America’s subsidiary, Belterra Corporation, also
distributes conveyor belts, mainly in Canada.
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Forest Products Unit
Chemicals Unit
Marubeni America’s (MAC’s) subsidiary, Marubeni Pulp &
The Chemicals Unit handles petrochemicals, plastics,
Paper North America, imports, exports and distributes pulp,
specialty chemicals and electronic materials.
wood chip and paper; while Pan Pacific Fiber collects vari-
The Commodity Chemicals Department is based in
ous waste papers from local markets and sorts, bundles,
Houston at its industry’s center. It trades petrochemical
and ships them worldwide; and Intragrated Resources
products and chlor-alkali related products, such as olefins,
Holdings sells printing paper to catalog houses and pub-
aromatics, carbon black feedstock, vinyl chloride monomer
lishers in the U.S. and also provides consulting services.
(VCM), polyvinyl chloride resin (PVC) and caustic soda,
mainly between the U.S., Central and South America and
Asia, to meet the increasing demand in Asia and in the U.S.
The Plastics & Specialty Chemicals Department
meets the increasing challenge of satisfying the chemical
industry’s needs. Marubeni America’s (MAC’S) subsidiary,
Marubeni Specialty Chemicals, Inc. (MSCI), conducts
trading and distribution operations. MSCI’s three divisions
serve various constituencies, including the paper coating, paint, adhesive, packaging, automobile, electronics,
fiber optics and plastic compounding industries. MSCI is
invested in, and seeks further opportunities to invest in,
emerging companies that offer cutting-edge technologies.
The Electronic Materials Department, located in Santa
These publications buy paper from our subsidiary,
Intragrated Resources Holdings
Clara, California, trades materials related to digital products and the semi-conductor industry between the U.S. and
Asia, primarily Japan.
The Development Department was established in April
2005 to pursue investments in the fields related to the
chemical industry and to create trade synergies among the
other three departments.
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Helena Unit
Energy Unit
Marubeni America’s (MAC’s) subsidiary, Helena Chemical
The Energy Unit plays a key role in expanding MAC’s trad-
Company (Helena), is one of the largest formulators and
ing portfolios in the oil and gas businesses in the U.S. and
distributors of crop inputs and services in the U.S. Helena
Latin America, while simultaneously exploring opportuni-
offers a variety of crop protection products, agricultural
ties for investment in related mid-downstream businesses
chemicals, seed, fertilizer and related products. Its propri-
in both regions. It plays a lesser role by lending assistance
etary line of products includes adjuvant, seed treatments,
and support to two subsidiary companies—MIECO and
bioscience, nutritional and value-added generics, which are
Energy USA—that MAC owns jointly with Marubeni
distributed in 12 countries. Helena has four plants which
Corporation.
provide toll manufacturing services for it suppliers as well
MAC plans to conduct trading of crude oil and petro-
as manufacturing Helena’s line of private and proprietary
leum products, as well as natural gas, LNG and LPG. With
products. The Company has 16 sales divisions, with about
any of these products, we may be involved in trading them
300 sales outlets and more than 2,500 employees. In
domestically, in importing and exporting them to and
addition to traditional agricultural products, Helena offers
from the U.S., or in trading them offshore. Latin America
services in turf and ornamental products, forestry, aquatic
is another focus of MAC’s efforts to increase trade and to
and vegetation supplies.
invest in related businesses in the mid-downstream.
MIECO, with offices in California, Texas and New Jersey,
conducts trading of petroleum products, petrochemical
feedstocks and natural gas in the American and the Pacific
Rim markets.
Energy USA, with offices in Connecticut and
Washington, D.C., trades natural uranium domestically and
overseas for end-use in the generation of nuclear power.
Helena’s logo and some uses of its products
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aluminum products for the automotive industry, import of
aluminum foil, and metallic powders for sintered automotive parts.
The Silicon Valley Electronic Specialty Products
Department specializes in aluminum and glass substrate
for hard disc drives (HDDs), polishing pad and slurry for
hard disc and semiconductor wafer, compound semiconductor template including Gallium Nitride and Aluminum
Nitride, LEDs for 370nm to 1550nm wavelengths, and laser
inspection machines and screen printing machines for HDD
and semiconductor applications.
We sell Canada’s Alouette Aluminum’s ingots
throughout North America
Transportation Machinery Unit
The Transportation Machinery Unit deals with a variety of
Metals & Mineral Resources Unit
vehicles and equipment and their spare parts. The Unit
The Metals & Mineral Resources Unit is engaged in the
imports, exports and wholesales automobiles, commercial
import, export, domestic and offshore trade of various
trucks, agricultural machinery, construction machinery,
non-ferrous metals and ferrous materials and minerals.
mining equipment and other industrial vehicles and equip-
While its main activities are trading and distribution,
ment. It both invests in and operates a wholesale distribu-
it is intensely involved in a variety of high-technology
tor of cars; an auto parts warehouse for the aftermarket;
related businesses and venture projects for the compound
and retail dealerships for cars, for construction machinery,
semiconductor industry. The Unit has three offices strategi-
and for agricultural machinery. It exports military defense
cally positioned in New York, Detroit and in Santa Clara,
products for Japan, and it leases specialized commercial
California, to oversee its businesses, ensuring reliability
vehicles. The Transportation Machinery Unit is now devel-
and flawless service to all its customers. It anticipates
oping new business in automotive financing and parts, and
further expanding its trade and distribution of existing
in construction and agricultural machinery.
products, such as copper and aluminum products. In addition, it expects to realize some promising venture projects
related to the high-technology industry.
The New York Metals Department specializes in copper
tubing for air conditioners, copper strip for submarine
cable and cellular base stations, Gallium Arsenide substrates and epi-substrates, import and export of aluminum
and copper products, trading of aluminum ingot and billet
in North America and Latin America, import of hot briquetted iron (HBI), and import of high grade Low Carbon Ferro
Chrome.
The Detroit Metals Department specializes in domestic
trading of aluminum wire rod for the steel industry,
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Our Porsche dealership in Huntington, NY
The Power Projects & Infrastructure Department does
business development related to the power industry in
North America. It explores new areas of power generation,
transmission, and delivery of utility-scale and distributed
generation, including Engineering, Procurement and
Construction (EPC), development, financing, ownership,
and operation and maintenance.
The Power Projects & Infrastructure Department also
partners with North American companies to develop and
commercialize new energy technologies and business
models in Asia together with MAC’s parent company in
Japan, Marubeni Corporation. Through its parent, MAC is
able to act as a conduit between North America and Japan
The Nitrogen this plant sends by pipeline to an offshore
for new technologies, products, and business models in
oil field maintains its pressure and its production
the power and energy industries. It continues to support
efficiency for PEMEX, the Mexican state-run oil company
ongoing GE gas turbine component sales to Hitachi, Ltd.
through Marubeni Corporation. It is also developing
Plant, Industrial Machinery, Power Projects &
Infrastructure Unit
The Plant Department within the Unit is responsible for the
business for Hitachi H25 gas turbine generators in North
America.
For new business development, MAC is aggressively
development, coordination, logistics, insurance, manage-
seeking power generation assets for acquisition. Our aim
ment, investment in, and financing of plant-related busi-
is to add value to the acquired assets using our global
ness; for plant and equipment financing; and for import,
experience of EPC and operation and maintenance.
export and third-country plant and equipment transactions.
Notably, it invests in industrial projects on a build-ownoperate basis (“BOO”) in North America, including with
PEMEX, the Mexican state-run oil company.
The Industrial Machinery Department deals with CFB
(Circulated Fluidized Bed) Boiler for renewable energy,
machine tools and parts for photovoltaic cell manufacturers, and pulp and paper machinery.
9
Finance Technology, Logistics Technology, Information
Technology & Innovative Business Unit (FLII)
biotechnology and material sciences. Our specialty is
Marubeni America’s (MAC’s) Finance Technology, Logistics
facilitating the bi-directional flow of technology and
Technology, Information Technology & Innovative Business
business between the U.S. and Japan (and other places in
Unit (FLII) has two targets: the equipment leasing busi-
Asia). Current activities include private equity investment,
ness, and pursuing other new business opportunities and
partnerships, incubation, joint ventures, technology and
investments.
product development sponsorships, and marketing and
In the leasing sector, MAC has strategically invested
in refrigerated transportation, healthcare equipment and
distribution.
Wherever MAC invests, our strategy is to promote
other niche industries in the U.S. since the mid-1990s.
growth by connecting the acquisition to the global network
Our 2000 acquisition, PLM Trailer Leasing, is a top-tier
of business alliances that we and our parent, Marubeni
player specializing in leasing refrigerated trailers to the
Corporation, have cultivated. We seek sound opportunities
foodservice industry and is poised to grow with the
whether in private equity funds, in strategic direct invest-
increasing demand for fresh foods. In 2006, MAC set up
ment, or in middle-market acquisitions.
CoActiv Capital Partners, a provider of private label leasing
service for the healthcare, office technology and banking
industries. We are also co-investing in a railcar leasing
company, Midwest Railcar Corporation, along with our
parent company, Marubeni Corporation.
A refrigerated trailer for lease from our subsidiary,
PLM Trailer Leasing
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MAC also targets growing industries such as healthcare,
Subsidiaries
Belterra Corporation
Industrial conveyor belt. hose, other material and service
Distributor
1638 Fosters Way, Delta, BC, V3M 6S6, Canada
Tel: (604) 540-1950 Fax: (604) 540-4214 www.belterra.ca
Contact: Katsunori Matsuda ([email protected])
Other Locations: 12-branches in total
(BC, Alberta, Manitoba, Ontario, Saskatchewan)
CoActiv Capital Partners LLC
Leasing
Providing vendor lease program, small ticket leasing and
servicing in the U.S.
655 Business Center Drive, Horsham, PA 19044
Tel: (267) 960-4000 Fax: (267) 960-4090 www.coactivcapital.com
Contact: Kenji Funaki ([email protected])
Helena Chemical Company
Agricultural inputs and services
Distributor of agricultural and specialty non-agricultural crop protection
chemicals, seed and fertilizer and related services
Also contract formulation of chemicals, generally for
manufacturers of crop protection chemicals
225 Shilling Blvd., Suite 300, Collierville, TN 38017
Tel: (901) 761-0050 Fax: (901) 683-2960 www.helenachemical.com
Contact: Troy Traxler, Jr. ([email protected])
Other Locations: 350 locations in the U.S.
Intragrated Resources
Holdings, Inc.
Printing & writing paper
Paper distributor and printing consulting
300 Atlantic Street, Stamford, CT 06901
Tel: (203) 658-1200 Fax: (203) 658-1299 www.atclayton.com
Contact: Hiroshi Kashima ([email protected])
Other Locations: Boston, Chicago, Seattle
MAC-ROX, Inc.
Iron oxide production
Marubeni America’s mezzanine company in a partnership, AMROX
375 Lexington Avenue, New York, NY 10017
Tel: (212) 450-0446 Fax: (212) 450-0755
Contact: Toshiaki Natori ([email protected])
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MARCOP II, Inc.
Pulverized coal injection
Marubeni America’s mezzanine company for partnerships
engaged in the pulverized coal business
Tel: (212) 450-0446 Fax: (212) 450-0755
Contact: Toshiaki Natori ([email protected])
Marubeni Canada Ltd.
Machinery, energy, agriculture & marine products,
non-ferrous metals, coal and chemicals
Import / exporter and distribution of above materials
Suite 1630, Bentall Centre, 505 Burrard, St., Vancouver, BC V7X 1E5
Tel: (604) 443-3800 Fax: (604) 681-0498
Contact: Vinh Le ([email protected])
Other Locations: Toronto, Canada
Marubeni Montreal
Sporting Club Corporation
Real Estate
Involved with the sports club Midtown Le Sporting
Club Sanctuaire in Montreal, Canada
c/o Marubeni America Corporation
Tel: (212) 450-0294 Fax: (212) 450-0157
Contact: Justin Yoo ([email protected])
Marubeni Motor
Holdings, Inc.
Holding company of auto leasing / financing group
Investing in auto leasing / financing companies
Tel: (212) 450-0400 Fax: (212) 450-0755
Contact: Hisamichi Koga ([email protected])
Marubeni Pulp & Paper
North America
Forest products
International trading of forest products (pulp, paper and wood chips)
Tel: (212) 450-0190 Fax: (212) 450-0199
Contact: Koji Yamanaka ([email protected])
Other Locations: Los Angeles Branch, Appleton (WI) Branch,
Subsidiary in Vancouver (Marubeni Pulp & Paper Canada Ltd.)
Marubeni Specialty
Chemicals, Inc.
Chemicals
Chemical supplier
10 Bank Street Suite 740, White Plains, NY 10606
Tel: (914) 428-8900 Fax: (914) 428-8859 www.chemdot.com
Contact: Paul Lupo ([email protected])
PLM Trailer Leasing, LLC
Rental, lease, service & sales
Refrigerated trailer leasing
100 Paragon Drive, Montvale, NJ 07645
Tel: (201) 505-0011 Fax: (201) 334-5199 www.plmtrailer.com
Contact: Robert Sukovich ([email protected])
Prime Automotive
Warehouse, Inc.
Aftermarket automotive parts
Leading catalog wholesale distributor of
aftermarket automotive parts, chemicals, tools and accessories
through distribution of its monthly catalog and telemarketing
primarily to independent automotive parts stores and warehouses.
8631-1 A Polk Lane, Olive Branch, MS 38654
Tel: (662) 890-6145 Fax: (800) 329-9312 www.primeautomotive.com
Contact: Shinya Sasaki ([email protected])
Train Trailer Rentals Limited
Rental, lease, service & sales
Trailer leasing business
400 Annagem Blvd., Mississauga, Ontario, Canada
Tel: (905) 564-7247 Fax: (905) 564-7498 www.traintrailer.com
Contact: Hiroki Yamaji ([email protected])
Other Locations: Calgary, Ottawa
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Consolidated Balance Sheets
Marubeni America Corporation
At December 31, 2006 and 2007
(In Thousands)
2007
2006
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 228,732
$ 156,497
Short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
382
288
Accounts and notes receivable – customers, net of allowance for doubtful
accounts of $6,567 in 2007 and $3,845 in 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
404,414
320,600
Receivables from parent and affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
363,387
374,069
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
683,942
505,117
Advance payments to suppliers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
266,760
151,072
Other current assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
97,661
90,881
Total current assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,045,278
1,598,524
Affiliated companies, at equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
65,895
60,514
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
69,445
69,410
Long-term accounts and notes receivable – customers,
net of allowance for doubtful accounts of $5,515 in 2007 and $361 in 2006 . . . . . .
220,113
109,852
Total investments and long-term receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
355,453
239,776
Due from parent and affiliates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
88,279
59,245
Property, plant, equipment and leasehold improvements, at cost,
less accumulated depreciation and amortization of $166,822 in 2007
and $163,092 in 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
352,888
268,169
Assets
Current assets:
Investments and long-term receivables:
Investments:
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
104,123
34,746
Intangible assets and other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
38,306
7,488
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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7,245
$2,984,327
$ 2,215,193
Consolidated Balance Sheets
(In Thousands)
2007
2006
Short-term loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 223,557
$ 134,742
Acceptances payable to banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,075
6,509
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
652,118
403,414
Advance payments from customers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
192,716
172,411
Payables to parent and affiliates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
322,773
319,795
Accrued expenses and other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
261,813
177,891
Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,697
3,309
Long-term debt due within one year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
66,165
80,201
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,729,914
1,298,272
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
605,173
360,524
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
20,188
Other noncurrent liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
48,336
69,755
Minority interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
77,850
46,311
Common stock, without par value; 5,000 shares authorized, 3,533 shares
issued and outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
353,273
353,273
Additional paid-in capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
18,277
19,999
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
139,312
87,162
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(7,996)
(20,103)
Total shareholder’s equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
502,866
440,331
Total liabilities and shareholder’s equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,984,327
$ 2,215,193
Liabilities and shareholder’s equity
Current liabilities:
Commitments and contingencies
Shareholder’s equity:
See accompanying notes.
15
Consolidated Statements of Income
(In Thousands)
2006
2007
Revenues (total volume of trading transactions:
$9,667,268 in 2007 and $8,213,060 in 2006) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
3,460,564
$ 2,532,540
Cost of revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,776,486
1,992,744
Gross trading profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
684,078
539,796
Equity in net income of affiliated companies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6,611
8,490
690,689
548,286
Interest expense – net of interest income of $21,817 in 2007 and $21,703 in 2006 . . .
35,357
14,629
Other expense – net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
21,533
29,953
Selling, general and administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
530,849
442,518
587,739
487,100
Income before provision for income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
102,950
61,186
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
50,800
28,300
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 52,150
16
$
32,886
Consolidated Statements of Shareholder’s Equity
(In Thousands)
Balance at December 31, 2005 . . . . . . . . . . . .
Common
Stock
Additional
Paid-in
Capital
$ 344,000
$ 24,183
Retained
Accumulated
Earnings
Other
(Accumulated Comprehensive
Deficit)
Income (Loss)
$ 54,276
$
435
Total
$422,894
Comprehensive income:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . .
32,886
32,886
Other comprehensive income:
Unrealized gains on available-for-sale
securities, net of income tax. . . . . . . . . . .
3,468
3,468
Change in fair value of derivative financial
instruments, net of income tax . . . . . . . .
(1,573)
(1,573)
Translation adjustment . . . . . . . . . . . . . . . .
77
77
Unfunded pension gain, net of income tax
455
455
Other comprehensive income . . . . . . . . . . . . .
2,427
Comprehensive income . . . . . . . . . . . . . . . . . .
35,313
Issuance of 93 shares of common stock . . . . .
9,273
Loss on sale of investments to parent . . . . . .
9,273
(4,184)
(4,184)
Cumulative effect of change in accounting
principle in accordance with the transition
adjustment, net of tax, under SFAS No. 158
(Notes 12 and 13) . . . . . . . . . . . . . . . . . . . . . .
353,273
19,999
87,162
(22,965)
(22,965)
(20,103)
440,331
Comprehensive income:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . .
52,150
52,150
Other comprehensive income:
Unrealized losses on available-for-sale
securities, net of income tax . . . . . . . . . . . .
(2,957)
(2,957)
Change in fair value of derivative financial
instruments, net of income tax. . . . . . . . . .
(351)
(351)
Translation adjustment . . . . . . . . . . . . . . . . .
5,071
5,071
Change in pension and postretirement
funded status, net of income tax . . . . . . . .
10,344
10,344
Other comprehensive income . . . . . . . . . . . . .
12,107
Comprehensive income . . . . . . . . . . . . . . . . . .
64,257
Loss on sale of investments to parent . . . . . .
(1,722)
$ 353,273
$ 18,277
(1,722)
$ 139,312
$ (7,996)
$ 502,866
2006
2007
Disclosure of reclassification amount:
Unrealized gains arising during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
Less reclassification adjustment for gains included in net income . . . . . . . . . . . . . . .
Net unrealized (losses) gains on available-for-sale securities . . . . . . . . . . . . . . . . . . . .
1,788
$
(36)
(4,745)
$
(2,957)
3,504
$
3,468
17
Consolidated Statements of Cash Flows
(In Thousands)
2006
2007
Cash flows from operating activities
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 52,150
$
32,886
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
31,776
32,824
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14,700
(54,700)
Bad debt expense and other noncash charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
17,777
37,633
Net gain on sale of investments and businesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3,062)
(7,526)
Net loss (gain) on sale of property, plant and equipment . . . . . . . . . . . . . . . . . . . . . .
4,863
(2,010)
Equity in net income of affiliated companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(6,611)
(8,490)
Accounts and notes receivable – customers and affiliates . . . . . . . . . . . . . . . . . . . .
(28,588)
(218,238)
Inventory. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(159,193)
(4,064)
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(131,403)
50,362
Accounts payable – customers and affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
137,297
54,029
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
91,889
(3,599)
Net cash provided by (used in) operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
21,595
(90,893)
Net increase in investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(6,024)
(8,657)
Net decrease (increase) in short-term notes receivable . . . . . . . . . . . . . . . . . . . . . . . . .
18,301
(43,902)
Increase in long-term accounts and notes receivable—
customers and affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(250,780)
(58,306)
Changes in operating assets and liabilities:
Cash flows from investing activities
Collection of long-term accounts and notes receivable—
customers and affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
102,636
37,105
Acquisition of property, plant, equipment and leasehold improvements . . . . . . . . . . .
(84,500)
(87,478)
Proceeds from sale of property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . .
16,352
6,278
Proceeds from sale of investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,644
202,958
Business acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(106,188)
(35,418)
Net cash (used in) provided by investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(305,559)
12,580
Cash flows from financing activities
Net increase in short-term loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
159,195
92,689
Long-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
300,864
148,327
Repayments of long-term debt to third parties and affiliates . . . . . . . . . . . . . . . . . . . . .
(103,860)
(223,403)
Net cash provided by financing activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
356,199
17,613
Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . .
72,235
(60,700)
Cash and cash equivalents at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
156,497
217,197
Cash and cash equivalents at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 228,732
$ 156,497
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 61,354
$
40,736
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 24,444
$
90,256
Supplemental disclosures of cash flow information
Cash paid during the year for:
18
Notes to Consolidated Financial Statements
(In Thousands)
1
l
Summary of Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements
The total volume of trading transactions, which is
include the accounts of Marubeni America Corporation
disclosed in the accompanying consolidated statements
and all of its majority-owned subsidiaries (collectively, the
of income, includes the sales value of all transactions in
“Company”). All significant intercompany accounts and
which the Company participates, regardless of the form of
transactions have been eliminated in consolidation. The
such transaction.
equity method of accounting is used for investments in
In acting as principal, the Company recognizes revenue
companies in which the Company has an interest of 50%
when the delivery conditions are met. These conditions are
or less and for which the Company has significant influence
considered to have been met when the goods are received
over operating and financial policies.
by the customer or title to the goods is transferred to the
The preparation of consolidated financial statements in
customer. In acting as agent, the Company recognizes
conformity with accounting principles generally accepted
commissions when contracted services are fully rendered
in the United States requires management to make estimates
to the customers.
and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and
liabilities at the date of the consolidated financial statements
and the reported amounts of revenues and expenses during
Shipping and Handling Costs
Shipping and handling costs are included in cost of revenues
in the accompanying consolidated statements of income.
the reporting period. Actual results could differ from those
Cash and Cash Equivalents
estimates.
The Company considers all highly liquid financial instruments
Revenue Recognition and Total Volume of Transactions
The Company conducts export, import and domestic and
with a maturity of three months or less when purchased to
be cash equivalents.
offshore trading of a wide variety of industrial, agricultural
Sales of Accounts Receivable
and consumer products and also is involved in the related
The Company enters into transactions to sell certain of
production process from planning, investment and
its trade accounts receivable and retains a subordinated
research and development to production, distribution and
interest and servicing rights. Gains or losses on the sale of
marketing.
receivables are based on the carrying value of the assets
Transactions to which the Company is a party take
sold, allocated in proportion to their fair value. Retained
many forms depending upon local practice, preferences
interests are carried at fair value and are included in other
of the parties and legal considerations. Such transactions
current assets in the accompanying consolidated balance
consist of sales in which the Company acts as principal and
sheets. The Company generally estimates fair value based
transactions in which the Company acts as agent.
on the present value of expected future cash flows of the
Although the Company legally acts as a principal, certain
underlying receivables less management’s best estimates
transactions are reported net, as commissions, when the
of uncollectible accounts receivable. The Company
margins thereon are in substance considered commissions
maintains an allowance for doubtful accounts receivable
in accordance with the consensus reached in the Financial
based upon the collectability of all trade receivables.
Accounting Standards Board (“FASB”) Emerging Issue
The allowance is reviewed regularly and adjusted for
Task Force Issue 99-19, Reporting Revenue Gross as a
accounts deemed uncollectible by the Company. Expenses
Principal versus Net as an Agent. When the Company is
and losses associated with such sales are included in other
not the primary obligor and does not have inventory risk,
expense – net in the accompanying consolidated statements
it generally presents the transaction net. The presentation
of income.
may change according to changes in form or substance of
transactions.
19
(In Thousands)
Inventory
Inventory consists of commodities and merchandise and
of Liabilities, a Replacement of FASB Statement 125, the
is valued at the lower of cost or market. Cost is based
Company surrenders control over the transferred assets
principally on either the first-in, first-out method, specific
and accounts for the transaction as a sale to the extent
identification, or average unit prices.
that consideration other than beneficial interests in the
Investment in Equity Securities
The Company has investments in marketable equity
securities which are classified as available-for-sale securities
and cost-method investments. Investments classified
as available-for-sale are carried at fair value, with the
unrealized gains and losses, net of tax, reported as other
comprehensive income within shareholder’s equity. The
generally does not retain any interest in the investments in
leases. A gain is recognized at the time of the sale, equal
to the excess of the fair value of the assets obtained over
the allocated cost of the assets sold, including deferred
direct costs and vendor acquisition fees associated with the
respective leases sold.
cost-method investments are stated at cost, adjusted for
Depreciation and Amortization
any declines in value judged to be other-than-temporary.
Property, plant, equipment and leasehold improvements
The cost of securities sold is based on the weighted-average
are stated at cost. Depreciation of property, plant and
method. The fair value of the Company’s cost-method
equipment (including equipment leased to others) is
investments is not readily determinable. In 2007, the
computed using the straight-line method over the estimated
Company recognized nonmonetary transaction gains of
useful lives of the assets. Amortization of leasehold
approximately $7,100 arising from the exchange of cost-
improvements is provided on the straight-line method over
method investment securities for publicly traded securities.
the terms of the related leases.
Investment in Direct Financing Leases
and Operating Leases
The Company has investment in direct financing leases
which consist of the minimum lease payments and the
unguaranteed residual value, less unearned income.
Unearned income from direct financing leases is credited
to income based upon a constant periodic rate of return
on the net investment in the lease. The current portion
of the investment in direct financing leases is included
in accounts and notes receivable – customers, and the
noncurrent portion of the investment in direct financing
leases is included in long-term accounts and notes
receivable – customers in the accompanying consolidated
balance sheets.
Rental revenue on operating leases is recognized on a
straight-line basis over the related lease terms. Expenses,
20
transferred assets is received in exchange. The Company
Rental equipment under operating
ng leases with customers, which consists mainly of trailers, is depreciated on a
straight-line basis over the estimated useful lives of 12.5
or 15 years. Depreciation of trailer rental equipment under
operating leases is charged against cost of revenues in the
accompanying consolidated statements of income.
Leased property under capital leases, which consists of
trailers, is recorded at its inception at the lower of fair value
of the leased property or the present value of the minimum
lease payments, with an equivalent liability categorized as
obligations under capital leases. Leased property under
capital leases is depreciated on the same basis as rental
equipment and any finance charges are amortized over the
lease term. Depreciation of leased property under capital
leases is charged against cost of revenues in the accompanying consolidated statements of income.
including depreciation and repairs, are charged against in-
Allowance for Doubtful Accounts
come as incurred. The Company periodically sells portfolios
The Company estimates allowances for doubtful accounts
of investments in leases structured as sales in an effort to
based upon historical payment patterns, aging of accounts
generate capital and/or manage exposure and generally
receivable and actual write-off history, as well as assessment
retains servicing responsibilities for the leases sold. In
of customers’ creditworthiness. Changes in the financial
accordance with SFAS No. 140, Accounting for Transfers
condition of customers could have an effect on the allowance
and Servicing of Financial Assets and Extinguishments
balance required and a related charge or credit to earnings.
(In Thousands)
Impairment of Long-Lived Assets
Long-lived assets to be held and used are reviewed for
carrying amount of the intangible asset over its fair value.
impairment whenever events or changes in circumstances
During the years ended 2007 and 2006, no impairment
indicate that the carrying amount of an asset may not be
occurred.
recoverable. If such a review indicates that the carrying
amount of an asset exceeds the sum of its expected future
cash flows, on an undiscounted basis and without interest
charges, the asset’s carrying value is written down to fair
value. Long-lived assets to be disposed of are reported at
the lower of carrying amount or fair value less cost to sell.
The Company assessed the recoverability of the
carrying value of certain fixed assets, which resulted in
impairment losses of $906 and $3,806 in 2007 and 2006,
respectively. These losses reflect the amounts by which
the carrying values exceed their fair values determined by
estimated future discounted cash flows. The impairment
loss is included in other expense – net in the accompanying consolidated statements of income.
Derivatives and Hedging Activities
The Company uses derivative financial instruments for
purposes of hedging exposures to fluctuations in interest
rates, foreign currency exchange rates and commodity prices. The Company does not hold or issue derivative financial
instruments for trading purposes. The Company recognizes
derivative instruments on the consolidated balance sheets
at fair value. Changes in the fair value of those instruments
are reported in earnings or other comprehensive income
depending on the use of the derivative and whether it
qualifies for hedge accounting.
Accounting for gains and losses associated with
changes in the fair value of the derivative and the effect on
the consolidated financial statements will depend on the
Goodwill and Intangible Assets
transaction’s hedge designation and whether the hedge
Goodwill represents the excess of purchase price over
is highly effective in achieving offsetting changes in the
the fair value of acquired companies or businesses. The
fair value of cash flows or the asset or liability hedged.
Company tests goodwill for impairment by reporting
Gains and losses related to qualifying hedges or firm
unit using the two-step processes at least annually. The
commitments or anticipated transactions are deferred
first step is a screen for potential impairment, while the
and recognized in earnings or as adjustments of carrying
second step measures the amount of impairment, if any.
amounts when the hedged transaction occurs.
The Company applies the discounted cash flow valuation
The Company enters into interest rate only and
model to determine the fair value of each of the reporting
cross-currency interest rate swap agreements to hedge its
units. During 2006, the Company recognized a goodwill
exposure to foreign currency exchange rate and/or interest
impairment of $2,798, due to changing market conditions
rate risks. Interest rate swap contracts generally represent
affecting the future cash flows of the reporting units which
the contractual exchange of fixed and floating rate pay-
originally generated the goodwill. The Company did not
ments of a single currency, based on a notional amount
recognize any goodwill impairments during 2007.
and an interest reference rate. Interest rate swap agree-
Intangible assets represent trade names which are not
ments mature at the time the related receivables and debt
amortized and noncompete agreements and customer
mature and effectively manage the Company’s interest rate
relationships which are amortized on a straight-line basis
exposure.
over the term of the agreements or estimated useful lives.
Cross-currency interest rate swap agreements hedge the
Intangible assets are reviewed for impairment if indicators
Company’s exposure to both interest and foreign exchange
of impairment arise. The evaluation of the impairment is
rate risks. Cross-currency swap contracts generally represent
based upon a comparison of the carrying amount of the
the contractual exchange of fixed and floating rate payments
intangible asset to the future undiscounted net cash flows
between two currencies. The cross-currency interest rate
expected to be generated by the asset. If estimated future
swap agreements mature at the time the related debt
undiscounted cash flows are less than the carrying amount
matures, and effectively manage the Company’s foreign
of the asset, the asset is considered impaired. An impair-
exchange and interest rate exposure. The differential to be
ment loss would be calculated based on the excess of the
paid or received on interest rate swaps is recognized
21
(In Thousands)
as an adjustment to interest expense. Gains and losses
On December 31, 2006, the Company adopted the recogni-
on hedges of existing assets or liabilities are included in
tion and disclosure provisions of SFAS No. 158. The effect
the carrying amounts of those assets or liabilities and are
of adopting SFAS No. 158 on the Company’s financial
ultimately recognized in earnings.
condition at December 31, 2006 has been included in the
The Company uses foreign currency denominated
accompanying consolidated financial statements. SFAS
debt to hedge the value of its investments in a foreign
No. 158’s provisions regarding the change in the measure-
subsidiary in Canada. Unrealized gains and losses from the
ment date of these plans are effective for the year ending
hedging instrument are not included in the consolidated
December 31, 2008. The Company will adopt the measure-
statement of income, but included in the translation
ment date provision in fiscal 2008. See Notes 12 and 13 for
adjustment in accumulated other comprehensive income.
further discussion of the effect of adopting SFAS No. 158
Environmental Costs
Liabilities are recorded when environmental assessments
are probable, and the cost can be reasonably estimated.
Generally, the timing of these accruals coincides with the
earlier of completion of a feasibility study or the Company’s
commitment to a plan of action based on the then known facts.
on the Company’s consolidated financial statements.
In July 2006, the FASB issued FIN 48, which clarifies
the accounting and disclosure for uncertain tax positions,
as defined. The interpretation prescribes a recognition
threshold and a measurement attribute for the financial
statement recognition and measurement of tax positions
taken or expected to be taken in a tax return. For those
Statements of Cash Flows
benefits to be recognized, a tax position must be more-
The Company enters into numerous transactions involving
likely-than-not to be sustained upon examination by taxing
the purchase and sale of securities and other investments
authorities. The amount recognized is measured as the
and the borrowing and repayment of short-term loans.
largest amount of benefit that is greater than 50% likely of
These amounts have been netted for the purposes of the
being realized upon ultimate settlement. The interpretation
accompanying consolidated statements of cash flows.
seeks to reduce the diversity in practice associated with
Vendor Rebates
certain aspects of the recognition and measurement related
The Company applies the guidance pursuant to Emerging
to accounting for income taxes. The Company adopted
Issues Task Force Issue No. 02-16, Accounting by a
FIN 48 on January 1, 2007 and the effect of this adoption
Customer (Including a Reseller) for Certain Consideration
has been included in the consolidated financial statements.
Received from a Vendor. Accordingly, all vendor rebates
See Note 15 for further discussion of the effect of adopting
are recognized as a reduction to cost of revenues as
FIN 48.
inventories are sold. As a result, some portion of the
Recently Issued Accounting Pronouncement
vendor rebates based on purchases remains in inventory
In September 2006, the FASB issued SFAS No. 157, Fair
at year-end. The Company estimates that $22,430 and
Value Measures. SFAS No. 157 defines fair value, estab-
$15,137 of vendor rebates for purchases in 2007 and 2006,
lishes a framework for measuring fair value and enhances
respectively, relate to inventories still on hand, therefore
disclosures about fair value measures required under other
reducing inventory by these amounts at December 31, 2007
accounting pronouncements, but does not change existing
and 2006.
guidance as to whether or not an instrument is carried at
Change in Accounting
fair value. SFAS No. 157 is effective for fiscal years begin-
In September 2006, the FASB issued FASB SFAS No. 158,
ning after November 15, 2007. The Company is currently
which requires plan sponsors of defined benefit pension
reviewing the provisions of SFAS No. 157 to determine
and other postretirement benefit plans to recognize the
the impact on its consolidated operating results, financial
funded status of these plans in the statement of financial
position and cash flows.
position, measure the fair value of plan assets and benefit
In February 2007, the FASB issued SFAS No. 159,
obligations as of the date of the fiscal year-end statement
The Fair Value Option for Financial Assets and Financial
of financial position, and provide additional disclosures.
Liabilities. SFAS No. 159 permits entities to choose to
measure eligible items at fair value at specified election
22
(In Thousands)
dates and to report unrealized gains and losses on items
acquired. Also in December 2007, the FASB issued SFAS
for which the fair value option has been elected in earnings
No. 160, Noncontrolling Interests in Consolidated Financial
at each subsequent reporting date. SFAS No. 159 is effective
Statements. (“SFAS 160”). SFAS 160 provides accounting
for fiscal years beginning after November 15, 2007. The
and reporting standards for a noncontrolling interest in
Company is currently reviewing the provisions of SFAS
a subsidiary and for the deconsolidation of a subsidiary
No. 159 to determine the impact on its consolidated
if certain conditions exist. SFAS No. 141(R) and SFAS
operating results, financial position and cash flows.
160 are effective for fiscal years beginning on or after
In December 2007, the FASB issued SFAS No. 141(R),
December 15, 2008. Early adoption is prohibited. The
Business Combinations. SFAS No. 141(R) provides
Company is currently reviewing the provisions of SFAS
guidance regarding the allocation of purchase price in
No. 141(R) and SFAS 160 to determine the impact of these
business combinations, measurement of assets acquired
statements on its consolidated operating results, financial
and liabilities assumed as well as other intangible assets
position and cash flows.
2
l
Related Party Transaction
The Company is a wholly owned subsidiary of Marubeni
Included in operating cash flows for 2007 and 2006 were
Corporation (the “Parent”), a Japanese corporation which
cash outflows of $19,388 and cash inflows of $55,337,
operates in Japan and, either directly or through subsidiar-
respectively.
ies and affiliates, throughout the world.
Substantial portions of the total volume of transactions
At December 31, 2007 and 2006, the Company was
contingently liable for drafts discounted of approximately
result from transactions to which the Parent or affiliates
$231,000 and $99,000, respectively, substantially all of
are parties. The terms of these transactions are mutually
which were drawn on the Parent.
agreed upon between the parties. For the years ended
In March 2006, the Company acquired an additional
December 31, 2007 and 2006, the total volume of these
49% of Marubeni Canada, Ltd. (“MCL”) from the Parent and,
transactions with the Parent or affiliates was approximately
in exchange, issued 93 common shares of the Company
$3,946,000 and $3,080,000, respectively.
to the Parent. As a result of such acquisition, the Company
The Company serves as a treasury center to certain
affiliates whereby these affiliates will deposit their excess
owns 100% of MCL.
In December 2006, the Company sold to the Parent its
cash with the Company. The balance of cash that the
70.62% interest in Columbia Grain, Inc., which owns and
Company pays to and receives from nonconsolidated af-
operates a grain elevator facility in Oregon. The net of the
filiates is included in receivables from Parent and affiliates
cash consideration received less its carrying value, net of
and payables to Parent and affiliates in the consolidated
the related income taxes, was charged to additional paid-in
balance sheets, respectively. The Company receives and
capital since the transaction was between entities under
pays interest on a portion of these receivable and payable
common control. In 2007, the sales price was adjusted
balances. The change in the payable balance is included
and the adjustment charged to additional paid-in-capital
in operating activities in the statements of cash flows.
accordingly.
23
(In Thousands)
l Concentration of Credit Risk
3
The financial instruments which potentially subject the
Company has a large domestic and international customer
Company to significant concentrations of credit risk consist
base extending across many different industries. The
principally of trade accounts receivable, investments, loans
Company’s policy is to review a customer’s financial condi-
and notes receivable and derivative financial instruments.
tion prior to extending credit and, in certain circumstances,
Potential concentrations of credit risk are limited as the
4
l
to require collateral.
Long-Term Accounts and Notes Receivable
Long-term accounts and notes receivable at December 31, 2007 mature at various dates.
A substantial portion of such long-term receivables is collateralized by capital equipment.
5
l
Short-Term Loans and Long-Term Debt
At December 31, 2007 and 2006, short-term loans consist of notes payable to banks.
Long-term debt consists of the following:
2007
2006
$ 671,338
$ 440,725
Long-term debt due within one year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
66,165
80,201
Long-term debt due after one year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 605,173
$ 360,524
Notes payable to banks and financial institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less:
The Company has many long-term financing agreements
outstanding under these lines totaled $21,300 and $29,000
with numerous banks, other financial institutions and
as of December 31, 2007 and 2006, respectively. Several
private placement investors at both fixed and floating
of such agreements with banks totaling approximately
interest rates. The Parent guarantees long-term debt of
$37,000 are secured by receivables and other assets.
approximately $228,000. The range of interest rates at
24
Notes payable at December 31, 2007 mature at
December 31, 2007 and 2006 under these agreements
various dates through 2027. The approximate aggregate
were from 2.36% to 9.00%. The Company has secured and
maturities of long-term debt are as follows: 2008 – $66,165;
unsecured credit lines with banks with an aggregate bor-
2009 – $125,382; 2010 –$209,559; 2011 – $133,417; 2012 –
rowing limit of $245,000 as of December 31, 2007. Amounts
$80,524; and thereafter – $56,291.
(In Thousands)
6
l
Derivatives and Other Financial Instruments
All of the Company’s existing derivative positions qualified
market prices. At December 31, 2007 and 2006, the fair
for hedge accounting under the provisions of SFAS No. 133,
value of these securities was $22,422 and $7,051, respec-
Accounting for Derivative Instruments and Hedging Activities,
tively. It was not practicable to estimate the fair value of
as amended thereafter by SFAS No. 138. Cross-currency
the investments other than marketable equity securities
swap agreements and commodity futures are primarily
without incurring excessive costs. The carrying amount of
classified as fair value hedges, while the Company’s
the portion of the portfolio for which fair value could not
interest rate swaps and foreign currency forward contract
be estimated was $47,405 and $62,647 at December 31,
hedges are primarily cash flow hedges.
2007 and 2006, respectively, and represents the cost of this
These financial instruments, along with cash and cash
portion of the portfolio.
Short-term notes, loans receivable and loans payable:
equivalents and accounts and notes receivable, expose
the Company to credit risk. In addition, such instruments
The carrying amount of short-term notes, loans receivable
may at times be concentrated with certain counterparties.
and loans payable approximates fair value because of the
However, counterparties are principally large financial
short maturity of the instruments.
Long-term accounts and notes receivable: The carrying
institutions, and the creditworthiness of counterparties is
subject to continuing review. Consequently, full perfor-
amount of long-term receivables with floating interest rates
mance is anticipated.
approximates fair value. It was not practicable to estimate
The following methods and assumptions were used by
the Company in estimating its fair value disclosures for
the fair value of the long-term accounts and notes receivable
with fixed rates without incurring excessive costs.
Long-term debt: The carrying amount of long-term loans
financial instruments:
Cash and cash equivalents: The carrying amount of cash
payable with floating rates approximates fair value. For
and cash equivalents approximates fair value because of
loans payable with fixed rates, fair value is estimated using
the short maturity of the instruments.
discounted cash flow analyses based on the Company’s
Investments in marketable equity securities: The fair
value of marketable equity securities is based on quoted
current incremental borrowing rate for similar types of
borrowing arrangements.
The following table is a summary of carrying values and fair values of financial instruments at December 31:
2007
Carrying
Fair
Value
Value
2006
Carrying
Fair
Value
Value
Investments:
Available-for-sale securities. . . . . . . . . . . . . . . . . . . . . . . .
$ 22,040
$ 22,040
Short-term loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
223,557
223,557
134,742
134,742
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
671,338
674,434
440,725
441,806
4,651
4,651
13,777
13,777
Interest rate swap agreements and currency swap
agreements liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
6,763 $
6,763
25
(In Thousands)
7
l
Leased Property Under Capital Leases
A subsidiary is involved in various sale-leaseback arrangements. These leasebacks have been accounted for as
capital leases.
The following is a summary of the leased property under capital leases as of December 31:
2006
2007
Leased property under capital leases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
Less accumulated amortization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,404
$
4,118
82
487
$
6,917
$
4,036
Obligations under capital leases due within one year are included in accrued expenses and other in the accompanying
consolidated balance sheets, and obligations under capital leases due after one year are included in other noncurrent
liabilities in the accompanying consolidated balance sheets.
The following is a summary of the future minimum lease payments under capital leases together with the present value of
the net minimum lease payments as of December 31, 2007:
Year ending December 31:
2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 1,124
2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,124
2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,124
2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,124
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,124
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,220
Total minimum lease payments . . . . . . . . . . . . . . . . . . . . . .
7,840
Less amount representing interest . . . . . . . . . . . . . . . . . . . .
1,327
Present value of net minimum lease payments . . . . . . . . .
$ 6,513
The leases that are accounted for as capital leases provide for purchase options that represent a bargain value of the
property as compared to the estimated fair market value of the property at the expiration of the lease term.
8
l
Investment in Direct Financing Leases
The following is a summary of the components of the Company’s net investment in direct financing leases at December 31:
2006
2007
26
Total minimum lease payments to be received. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 220,884
Less unearned income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
36,605
Net investment in direct financing leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 184,279
$
92,427
17,925
$
74,502
(In Thousands)
At December 31, 2007, total minimum lease payments are due in the following contractual installments:
2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 73,903
2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
59,209
2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
44,871
2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
27,843
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12,342
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,716
$220,884
During the year ended December 31, 2007, the Company
charges, insurance income, termination income and other
sold lease receivables having an aggregate book value of
fee income. The Company estimates that this servicing
approximately $53,000. In connection with these sales,
income will approximate 1.41% annually from the portfo-
the Company recognized net gains of $2,970. In addition,
lios sold. At December 31, 2007, the total portfolio balance
the Company entered into servicing agreements with the
sold and being serviced was approximately $83,000, and
institutions that these portfolios were sold to. In connec-
the Company recorded servicing income related to all
tion with these servicing agreements, the Company will
portfolios sold of approximately $892 in 2007.
continue to earn fee income, from such sources as late
9
l
Rental Equipment
The following is a summary of rental equipment as of December 31, 2007 and 2006, which is included
under property, plant and equipment and leasehold improvements and excludes the leased property in Note 7:
2007
2006
Trailers and vehicles, at cost . . . . . . . . . . . . . . . . . . . . . . . .
$ 236,776
$ 157,359
Less accumulated depreciation. . . . . . . . . . . . . . . . . . . . . .
35,492
34,577
$ 201,284
$ 122,782
At December 31, 2007, minimum future revenues from long-term leases are as follows:
2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 30,160
2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
20,729
2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13,800
2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8,689
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,517
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,019
$ 85,914
27
(In Thousands)
10
l
Goodwill
The changes in the net carrying amount of goodwill for the years ended December 31, 2007 and 2006 are as follows:
2006
2007
Goodwill, beginning of year . . . . . . . . . . . . . . . . . . . . . . . .
34,746
$ 31,698
Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
68,193
5,846
Impairment losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
(2,798)
Adjustments to purchase price allocation . . . . . . . . . . . . .
1,184
—
Goodwill, end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 104,123
11
l
$
$
34,746
Intangible Assets and Other, Net
Intangible assets and other, net includes intangible assets of $30,273 and $5,732, and other, net of $8,033 and $1,756
as of December 31, 2007 and 2006, respectively. Intangible assets are comprised of the following at December 31:
2006
2007
Non-compete agreements . . . . . . . . . . . . . . . . . . . . . . . . .
$
5,274
$
2,337
Customer relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12,215
3,000
Customer lists . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,090
727
Trade name. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14,399
800
Total gross carrying amount . . . . . . . . . . . . . . . . . . . . . . . .
32,978
6,864
Less accumulated amortization . . . . . . . . . . . . . . . . . . . . .
2,705
1,132
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
30,273
$
5,732
The Company recorded amortization expenses of $2,388 and $340 for years ended December 31, 2007
and 2006, respectively.
The weighted-average total amortization periods for the finite-lived intangible assets as of December 31, 2007 are as
follows (in years):
Non-compete agreements. . . . . . . . . . . . . . . . . . . . . . 5.5
Customer relationships . . . . . . . . . . . . . . . . . . . . . . . . 11.0
Customer lists. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.0
Estimated amortization expense over the next five years is as follows:
2008. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 2,198
2009. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,132
2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,039
2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,965
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,785
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,755
$ 15,874
28
(In Thousands)
12
l
Pensions
The Company and certain of its domestic subsidiaries have
Company’s funding policy for the plans is to make the
noncontributory pension plans covering substantially all
actuarially computed minimum required contributions.
domestic employees. Benefits are based primarily upon
The investments of the plans consist primarily of debt and
years of service and average compensation levels. The
equity securities as well as fixed income securities.
Valuation dates for two of the plans are as of October 31, and the valuation date for one plan is as of December 31. Change
in projected benefit obligation, plan assets and accumulated benefit obligation of the pension plans at 2007 and 2006
are as follows:
2007
2006
Projected benefit obligation at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 200,876
$ 172,851
Service cost. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8,211
7,277
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11,662
10,247
Actuarial (gain) loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(8,402)
15,788
Curtailment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(418)
Settlement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
676
Transfer to annuity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(5,950)
Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(5,625)
(5,287)
Projected benefit obligation at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 201,030
$ 200,876
Fair value of plan assets at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 171,474
$ 144,791
Actual return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
20,046
20,945
Employer contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13,486
11,025
Transfer to annuity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(5,950)
Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(5,625)
(5,287)
Fair value of plan assets at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 193,431
$ 171,474
Accumulated benefit obligation at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 178,038
$ 176,670
Change in projected benefit obligation
Change in plan assets
29
(In Thousands)
On December 31, 2006, the Company adopted the recogni-
of Financial Accounting Standards No. 87, Employers’
tion and disclosure provisions of SFAS No. 158. SFAS No.
Accounting for Pensions (“SFAS No. 87”). These amounts
158 required the Company to recognize the funded status
will be subsequently recognized as net periodic pension
(i.e., the difference between the fair value of plan assets
cost pursuant to the Company’s historical accounting
and the projected benefit obligations) of its benefit plans in
policy for amortizing such amounts. Further, actuarial
the December 31, 2006 consolidated balance sheet, with a
gains and losses that arise in subsequent periods and are
corresponding adjustment to accumulated other compre-
not recognized as net periodic pension cost in the same
hensive income, net of tax. The adjustment to accumulated
periods will be recognized as a component of other com-
other comprehensive income at adoption represents the
prehensive income. Those amounts will be subsequently
net unrecognized actuarial losses and unrecognized prior
recognized as a component of net periodic pension cost on
service costs, all of which were previously netted against
the same basis as the amounts recognized in accumulated
the plan’s funded status in the Company’s consolidated
other comprehensive income at adoption of SFAS No. 158.
balance sheets pursuant to the provisions of Statement
The following table shows the calculation of the accrued pension liabilities and prepaid pension cost recognized in the
accompanying consolidated balance sheets at December 31, 2007 and 2006, respectively:
2006
2007
Funded status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
(7,599)
$ (29,402)
Employer contributions between measurement date and fiscal year end . . . . . . . . .
Accrued pension liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,000
$ (7,599)
$ (28,402)
Accrued pension liability is included in other non-current liabilities in the accompanying consolidated balance sheets.
Amounts recognized in accumulated other comprehensive loss in the accompanying consolidated balance sheets at
December 31, 2007 and 2006 are as follows:
2006
2007
Actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (33,139)
$ (53,065)
Prior service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(226)
(375)
Accumulated other comprehensive loss before minority interests and tax effect. . .
(33,365)
(53,440)
Cumulative employer contribution in excess of net periodic pension cost . . . . . . . .
25,766
25,038
Net amount recognized in consolidated balance sheets after SFAS No. 158 . . . . . . .
$ (7,599)
$ (28,402)
The actuarial loss and prior service cost included in accumulated other comprehensive income and expected to be
recognized in net periodic pension cost during the year ending December 31, 2008 is $1,583 and $131, respectively.
30
(In Thousands)
The net periodic pension cost for the years ended December 31, 2007 and 2006 consists of the following:
2006
2007
Service cost. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
8,211
$
7,277
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11,662
10,247
Expected return on plan assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(13,790)
(11,606)
Amortization of prior service cost. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
136
139
Settlement loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,546
—
Curtailment loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12
—
Recognized actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,980
3,960
Total net periodic pension cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 11,757
$
10,017
The aggregate projected benefit obligation and aggregate fair value of plan assets for pension
plans with projected benefit obligations in excess of plan assets are as follows:
`
2007
2006
Aggregate projected benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 193,127
$ 193,387
Aggregate fair value of plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
184,116
163,468
2007
2006
The aggregate accumulated benefit obligation and aggregate fair value of plan assets for
pension plans with accumulated benefit obligations in excess of plan assets are as follows:
Aggregate accumulated benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
37,404
Aggregate fair value of plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
33,937
$
42,711
36,590
Weighted-average assumptions used in the computation of benefit obligations are as follows:
2007
2006
Assumed discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.30%
5.90%
Rate of increase in compensation levels . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.20% - 6.00%
3.20% - 6.00%
Weighted-average assumptions used in the computation of net periodic pension cost are as follows:
2007
2006
Assumed discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.90%
6.00%
Rate of increase in compensation levels . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.20% - 6.00%
3.20% - 6.00%
Expected long-term rate of return on plan assets . . . . . . . . . . . . . . . . . . . . .
8.00%
8.00%
To develop the expected long-term rate of return on assets assumption, the Company considered the historical returns
and the future expectations for returns for each asset class, as well as the target asset allocation of the pension portfolio.
31
(In Thousands)
Expected benefit payments for all plans over the next ten years are as follows:
Fiscal year ending:
2008. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
6,587
2009. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,254
2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8,154
2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9,223
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10,215
Five years thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
69,145
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 110,578
The pension plans’ investment policy is to actively manage certain asset classes where potential exists to outperform the
broader market, as defined by specific benchmarks for each of those asset classes. The pension plans’ weighted-average
asset allocation at December 31, 2007 and 2006, by asset category, are as follows:
Asset Category
2007
2006
Domestic equity securities . . . . . . . . . . . . . . . . . . . . . . . . .
52%
52%
International equity securities. . . . . . . . . . . . . . . . . . . . . . .
2
2
Debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
39
38
Real estate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6
6
Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1
2
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
100%
100%
The Company expects to contribute $12,671 to its pension plans in 2008. No plan assets
are expected to be returned to the Company during the year ending December 31, 2008.
13
l
Postretirement Benefits
A subsidiary of the Company provides certain medical
deemed actuarially equivalent to the Medicare Part D
eligible for these benefits upon reaching age 55 while work-
prescription drug benefit offered by the government
ing for the subsidiary and meeting certain service require-
under the Medicare Prescription Drug, Improvement and
ments. The Company amended the eligibility requirements
Modernization Act of 2003 (the “Act”). For the years ended
of its retiree medical benefit plan effective January 1, 2006.
December 31, 2007 and 2006, the subsidiary elected to
The amendment affected the years of service requirement
take the governmental subsidy offered under the Act and
and the retiree’s cost for medical benefits under the plan.
reflect this impact in expense. All calculations are based on
In addition, effective January 1, 2007, new employees are
recognizing the subsidy.
no longer eligible to participate in the Company’s retiree
medical benefit plan.
32
The subsidiary’s Medicare-eligible drug benefit was
benefits for retired employees. Employees may become
(In Thousands)
The change in the accumulated postretirement benefit obligation as of October 31, 2007and 2006
and funded status of postretirement benefits at December 31, 2007 and 2006 are as follows:
2006
2007
Change in benefit obligation
Benefit obligation at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 24,092
Service cost. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
902
898
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,475
1,310
Plan participants’ contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
293
214
Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
(11,327)
Actuarial (gain) loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,163)
2,333
Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(179)
(987)
Benefit obligation at end of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 25,420
$
Funded status. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (25,420)
$ (24,092)
Employer contributions between measurement date and fiscal year-end . . . . . . . . .
120
207
Net amount accrued. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (25,300)
$ (23,885)
Accrued postretirement benefit is included in other
$
31,651
24,092
The medical benefit plan’s benefits are funded on a cash
non-current liabilities in the accompanying consolidated
basis as benefits are paid. No assets have been segregated
balance sheets.
and restricted to provide medical benefits.
Amounts recognized in accumulated other comprehensive income in the accompanying consolidated balance sheets at
December 31, 2007 and 2006 are as follows:
2006
2007
Actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (3,612)
$
(4,012)
Prior service credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,287
8,097
Accumulated other comprehensive income before
minority interests and tax effect. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,675
4,085
Cumulative net periodic pension cost in excess of employer contribution . . . . . . . .
(28,975)
(27,970)
Net amount recognized in consolidated balance sheets after SFAS No. 158 . . . . . .
$ (25,300)
$ (23,885)
The actuarial loss and prior service credit included in accumulated other comprehensive income and expected to be
recognized in net periodic pension cost during the year ending December 31, 2008 is $86 and $(810), respectively.
33
(In Thousands)
Net periodic postretirement benefit cost included the following:
2006
2007
Service cost. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
902
$
898
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,475
1,310
Amortization of prior service credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(810)
(810)
Recognized actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
221
112
Total postretirement benefit cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
1,788
$
1,510
Weighted-average assumed discount rates of 5.90% and
rates of 6.3% and 5.90% were used as of December 31,
6.00% were used for the years ended December 31, 2007
2007 and 2006, respectively, in determining the postretire-
and 2006, respectively, in determining the net postretire-
ment benefit obligation.
ment benefit cost. Weighted-average assumed discount
The assumed health care cost trend rates related to the medical benefit plan are as follows:
2006
2007
Health care cost trend rate assumed for next year . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.50%
8.00%
Rate to which the cost trend is assumed to decline (the ultimate trend rate). . . . . . .
5.25
5.25
Year that the rate reaches the ultimate trend rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2012
2011
Assumed health care cost trend rates have a significant
obligation by $4,348 at December 31, 2007. A 1% decrease
effect on the amounts reported for the medical benefit
in the assumed health care cost trend rate would have
plan. A 1% increase in the assumed health care cost trend
decreased the cost during 2007 of postretirement benefits
rate would have increased the cost during 2007 of post-
by $375 and the accumulated benefit obligation by $3,504
retirement benefits by $477 and the accumulated benefit
at December 31, 2007.
The estimated gross amounts of receipts from the Medicare Part D Prescription drug benefit subsidy are netted with the
medical benefit plan’s expected benefit payments. Expected benefit payments for the plan over the next ten years are as follows:
Gross
Expected
Benefit
Payments
Fiscal year ending:
2008. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
932
$
$
(70)
862
2009. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,052
(81)
971
2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,192
(94)
1,098
2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,323
(110)
1,213
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,440
(128)
1,312
Five years thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9,306
(918)
8,388
(1,401)
$ 13,844
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
34
$
Medicare
Subsidy
Net
Expected
Benefit
Payments
$
15,245
$
(In Thousands)
14
l
Defined Contribution Plan
The Company has various defined contribution plans. The Company made contributions to the plans
for the years ended December 31, 2007 and 2006 in the amount of $3,319 and $2,987, respectively.
15
l
Income Taxes
Deferred income taxes included in the accompanying
related to differences in accounting for certain accrued
consolidated balance sheets reflect the net tax effects of
items. At December 31, 2007 and 2006, the Company has
temporary differences between the carrying amount of
gross deferred tax liabilities of approximately $90,000 and
assets and liabilities for financial reporting purposes and
$71,000, respectively, related primarily to differences in
the amounts used for income tax purposes. The Company
depreciation, investment in partnerships and accounting
has gross deferred tax assets of approximately $66,000
for inventory.
and $75,000 at December 31, 2007 and 2006, respectively,
The provision for income taxes from continuing operations consists of the following:
2006
2007
Current:
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 23,100
$
67,200
State and local . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13,000
15,800
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12,200
(46,400)
State and local . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,500
(8,300)
Deferred:
$ 50,800
$
28,300
For the years ended December 31, 2007 and 2006, the
tax return be recognized in the financial statements when it
difference between the provision for income taxes and the
is more likely than not (i.e., a likelihood of more than 50%)
provision computed at the statutory federal income tax rate
that the position would be sustained upon examination by
is due to state and local taxes and certain non-deductible
tax authorities. The implementation of FIN 48 had no effect
expenses.
on the Company’s statement of financial position as of
On January 1, 2007, the Company adopted FIN 48, which
January 1, 2007.
requires that a position taken or expected to be taken on a
A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows:
Balance at January 1, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
443
Additions based on tax positions related to the current year . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
187
Additions for tax positions of prior years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
155
Reductions due to lapse in statute of limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(135)
Balance at December 31, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
650
35
(In Thousands)
The Company recognizes interest accrued and penalties,
Revenue Service (“IRS”) commenced an examination of
which were minimal for 2007, related to unrecognized
the Company’s U.S. income tax returns for 2003 through
tax benefits in income taxes. The Company recognized
2005 in the fourth quarter of 2006 that is anticipated to
approximately $100 related to state deductions for which
be completed by the end of 2008. Some states are also
deductibility is uncertain.
under examination. As of December 31, 2007, the IRS and
The Company files income tax returns in the U.S.
federal jurisdiction and in various states. The Internal
16
l
states have not indicated any significant adjustment to the
Company’s tax position.
Other Comprehensive income
The amount of income tax expense or benefit allocated to each component of other comprehensive income (loss) for the
years ended December 31, 2007 and 2006 is as follows:
2007
Before-Tax
Amount
Unrealized losses on available-for-sale securities
arising during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
(4,735)
Tax Benefit
(Expense)
$
1,778
Net-of-Tax
Amount
$
(2,957)
Change in fair value of derivative financial instruments . . . . . . . .
(632)
281
Translation adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,071
—
5,071
Change in pension and postretirement funded status . . . . . . . . . .
17,831
(7,487)
10,344
Other comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
17,535
$
(5,428)
(351)
$
12,107
2006
Before-Tax
Amount
Unrealized gains on available-for-sale securities
arising during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
Change in fair value of derivative financial instruments . . . . . . . .
$
(2,765)
(1,627)
Net-of-Tax
Amount
$
1,192
3,468
(1,573)
Translation adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
77
—
77
Unfunded pension gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
709
(254)
455
Other comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
36
5,095
Tax Benefit
(Expense)
$
3,116
$
(689)
$
2,427
(In Thousands)
The accumulated balance of each component of accumulated other comprehensive income (loss) at
December 31, 2007 and 2006 is as follows:
Unrealized
Fair Value of
Change in
Accumulated
Gain (Loss) on
Derivative
Pension and
Other
Available-forFinancial Translation Postretirement Comprehensive
Sale Securities Instruments Adjustment Funded Status Income (Loss)
Balance at December 31, 2005 . . . . . . . . . . .
$
922
$
1,249
$
2,241
$
(3,977)
$
435
Change in 2006. . . . . . . . . . . . . . . . . . . . . . . .
3,468
(1,573)
77
455
Cumulative effect change under
SFAS No. 158 (Note 1) . . . . . . . . . . . . . . . . .
—
—
—
(22,965)
(22,965)
4,390
(324)
2,318
(26,487)
(20,103)
Change in 2007. . . . . . . . . . . . . . . . . . . . . . . .
(2,957)
(351)
5,071
10,344
12,107
7,389
$ (16,143)
17
l
$
1,433
$
(675)
$
2,427
$
(7,996)
Commitments and Contingencies
At December 31, 2007 and 2006, the Company has
Total rent expense amounted to approximately $69,000
guaranteed the indebtedness of certain affiliates and third
and $62,000 for the years ended December 31, 2007 and
parties amounting to approximately $51,000 and $46,000,
2006, respectively.
respectively.
The minimum commitment for the rental of office
As of December 31, 2006, a subsidiary has entered
into commitments to purchase components of trailers for
facilities and equipment under noncancelable operating
approximately $20,200. There are no such commitments as of
leases at December 31, 2007 was $274,274 payable as
December 31, 2007.
follows: 2008 – $59,384; 2009 – $35,572; 2010 – $28,252;
2011 – $23,425; 2012 – $22,759 and thereafter – $104,882.
The outstanding letters of credit at December 31, 2007
and 2006 are $14,892 and $6,517, respectively.
The Company is also responsible for rent escalations based
upon increases in real estate taxes and other building
operating costs.
18
l
Litigations
In the normal course of business, the Company is subject to certain claims and litigation, including unasserted claims.
The Company is of the opinion that, based on information presently available, such legal matters will not have a material
adverse effect on the consolidated financial position, results of operations or cash flow of the Company.
37
(In Thousands)
19
l
Sale of Accounts Receivable
A subsidiary of the Company has an agreement to sell, on
the fair value of the retained interest are management’s
an ongoing basis, a pool of receivables to a wholly owned
estimate of uncollectible accounts receivable and the
bankruptcy-remote special-purpose funding subsidiary (the
payment rate which is derived from the average life of the
“funding subsidiary”). The funding subsidiary is a distinct
accounts receivable of approximately 60 days. As of
legal entity that engages in no trade or business in order
December 31, 2007 and 2006, management of the subsidiary
to make remote the possibility that the entity would enter
estimated uncollectible accounts receivable of $12,196 and
bankruptcy or other receivership. The subsidiary sells the
$10,260, respectively. Total accounts receivable that the
pool of receivables to the funding subsidiary for a purchase
subsidiary manages as of December 31, 2007 and 2006
price equal to the fair market value of the pool. The funding
amounted to $247,573 and $191,388, respectively.
subsidiary, subject to certain conditions, sells an undivided
were $3,882 and $1,088, respectively. Any change in
an unrelated company (the “securitization company”), for
management’s estimate of uncollectible accounts receivable
which there are no repurchase agreements. The proceeds
will have an inversely corresponding impact on the estimate
received by the funding subsidiary from the sale to the
of the fair value of the retained interest.
securitization company are immediately remitted to the
Additionally, under the terms of the agreement, new
subsidiary to satisfy the funding subsidiary’s obligation
receivables are added to the pool as collections reduce
to the subsidiary. During 2007 and 2006, in accordance
previously sold receivables. The subsidiary services,
with SFAS No. 140, Accounting for Transfers of Servicing
administers and collects the receivables on behalf of the
of Financial Assets and Extinguishments of Liabilities, the
funding subsidiary and the securitization company. The net
subsidiary recorded losses on the sale of receivables of
proceeds from the sale of receivables were used for the
$12,940 and $9,513, respectively.
reduction of other short-term obligations and are reflected
The estimated fair value of the retained interest was
38
Credit losses, net of recoveries, during 2007 and 2006
fractional ownership interest in the pool of receivables to
as operating and financing cash flows in the accompanying
$48,209 and $51,498 at December 31, 2007 and 2006,
consolidated statements of cash flows, respectively. The
respectively, which is included in other current assets.
assets derecognized as of December 31, 2007 and 2006 as
Based on the nature of the subsidiary’s securitization
a result of the securitization totaled $178,759 and $136,608,
transactions, the two key assumptions used in determining
respectively.
(In Thousands)
20
l
Sale of Loans Receivable
The Company has an agreement to sell, on an ongo-
agrees to pay the financial institution for 100% of the loan
ing basis, specific loans receivable to a wholly owned
loss experienced after the financial institution reaches its
bankruptcy-remote special-purpose subsidiary (the “SP
loan loss limit. The loan loss limit assumed by the financial
subsidiary”) of the Company. The SP subsidiary is a distinct
institution is equal to one percent of the aggregate principal
legal entity that engages in no trade or business in order
amount of loans included in the pool for the year. Loans
to make remote the possibility that the entity would enter
under this program totaled $62,384 and $56,625 at
bankruptcy or other receivership.
December 31, 2007 and 2006, respectively.
The Company originates loans subject to certain
Under the second program with the same financial
predefined underwriting criteria and sells participations in
institution, the Company sells 100% participation in loans
such loans to a financial institution pursuant to a participa-
originated by the Company with 20% recourse. The loans
tion agreement (the “Program”). The Company then sells
are approved by the Company and the financial institu-
such loans receivable and its rights and obligations under
tion, and then originated by the Company. The Company
participation agreements to the SP subsidiary in exchange
then sells 100% participation to the financial institution
for payment in the amount of the fair market value of such
with a 20% recourse obligation in the event of default.
loans receivable and related rights and obligations. The
Simultaneously, the Company sells such loans receivable
participation proceeds received by the SP subsidiary from
and its rights under the participation agreements to the
the financial institution are immediately remitted to
SP subsidiary. The Company records its retained interest
the Company to satisfy the SP subsidiary’s obligation to
in the SP subsidiary as an asset in other current assets
the Company. Any remaining unsatisfied amount of the
in its consolidated balance sheets. At December 31, 2007
obligation from the SP subsidiary to the Company is evidenced
and 2006, loans under this program totaled $19,968 and
by a subordinated promissory note issued by the SP
$19,722, respectively. At December 31, 2007 and 2006,
subsidiary, the outstanding balance of which is reflected as
the limit of liability of the SP subsidiary for these two
part of retained interest on the Company’s balance sheet.
programs is $8,976 and $6,476, respectively.
The financial institution services, administers, and collects
the loans on behalf of the SP subsidiary.
The Program is made up of two different loan participa-
The net proceeds from the Program are used for the
reduction of other short-term obligations and are reflected
as operating cash flows in the accompanying consolidated
tion programs. Under the first program, the SP subsidiary
statements of cash flows. Assets derecognized as a result
guarantees, on a limited basis, the loan participations. The
of the securitization under the first program totaled $62,384
loans under the program are assigned to a pool based
and $56,625 at December 31, 2007 and 2006, respectively.
on the crop year to which they relate. Each year that the
Assets derecognized under the second program totaled
agreement remains effective, the pool will have a term
$19,919 and $19,656 at December 31, 2007 and 2006,
beginning on September 1 and ending on August 31 of the
respectively.
following year. For each pool of loans, the SP subsidiary
39
(In Thousands)
21
l
Business Acquisition
During 2007, the Company paid $106,188 to acquire various companies through stock and asset purchases and significant
acquired businesses as follows:
Name of acquired company
Ownership
percentage
Business descriptions
Belterra Corporation
Industrial conveyor belt distributor in Canada
60%
Intragrated Resources Holdings, Inc.
U.S. paper distributor and a printing production consultant
80%
Prime Automotive Warehouse, Inc.
U.S. distributor of aftermarket auto parts, chemicals and tools
80%
Train Trailer Rentals, Ltd.
Trailer rental, leasing and service company in Canada
100%
During 2006, the Company paid $35,418 to acquire 64% of Advantage Funding Management Co., Inc., the assets of Partner
Equity Capital Company LLC and assets of nine businesses.
The purchase for the acquisitions was accounted for under the purchase method and the following table summarizes the
estimated fair value of the assets acquired and liabilities assumed at the dates of acquisition:
2006
2007
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
19,632
$
6,184
Accounts and notes receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
62,308
118,082
Property, plant and equipment and leasehold improvements . . . . . . . . . . . . . . . . . . .
52,168
14,972
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
68,193
5,845
Intangibles assets and other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
26,575
5,964
Accounts payables and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(77,462)
(11,298)
Loan payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(45,226)
(104,331)
Net assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 106,188
$
35,418
The purchase price of each business acquired was
December 31, 2007 consolidated balance sheet includes
determined based on the expected future cash flows the
preliminary allocations of the purchase price for the 2007
purchased assets will generate. The excess of the purchase
acquisition. The Company has not yet obtained all informa-
price over the fair value of the identifiable net assets
tion required to complete the purchase price allocations
acquired was recorded as goodwill. The significant factors
related to these acquisitions. The final allocations will be
that contributed to the determination of each purchase
completed in 2008. The operating results of businesses
price that resulted in the recognition of goodwill are due
acquired have been included in the consolidated financial
to the consideration of synergistic and strategic benefits
statements from the date of acquisition.
from these operations in the future. The accompanying
40
$
Report of Independent Auditors
The Board of Directors and Shareholder
We have audited the accompanying consolidated balance sheets of Marubeni America
Corporation (the “Company”) as of December 31, 2007 and 2006, and the related consolidated
statements of income, shareholder’s equity and cash flows for the years then ended.
These financial statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in
the United States. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement.
We were not engaged to perform an audit of the Company’s internal control over financial
reporting. Our audits included consideration of internal control over financial reporting as
a basis for designing audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the Company’s internal
control over financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all
material respects, the consolidated financial position of the Company at December 31, 2007
and 2006, and the consolidated results of its operations and its cash flows for the years then
ended in conformity with accounting principles generally accepted in the United States.
As discussed in Note 1 to the consolidated financial statements, the Company adopted
FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes – an interpretation
of FASB Statement No. 109 (“FIN 48”), effective January 1, 2007 and Statement of Financial
Accounting Standard No. 158, Employers Accounting for Defined Benefit Pension and Other
Postretirement Plans (“SFAS No. 158”), effective December 31, 2006.
April 21, 2008
41

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