The Company invests these funds in high grade money market instru- ments. Prior to 2003 the plan was not funded. The discount rates at  fiscal year-end 2003, 2002, and 2001 were 6.0%, 6.5%, and 6.5%,  respectively. The Company payment for these benefits has reached the  maximum amounts per the plan; therefore, healthcare trend rates have  no impact on company cost.  In December 2003, the United States enacted into law the  Medicare Prescription Drug, Improvement and Modernization Act of  2003 (the “Act”). The Act established a prescription drug benefit under  Medicare, known as “Medicare Part D,” and a federal subsidy to spon- sors of retiree health care benefit plans that provide a benefit that is at  least actuarially equivalent to Medicare Part D. In January 2004, the FASB issued FASB Staff Position  No. 106-1, “Accounting and Disclosure Requirements Related to the  Medicare Prescription Drug, Improvement and Modernization Act of  2003” (“FSP 106-1”). The Company has elected to defer accounting for  the economic effects of the Act, as permitted by FSP 106-1. Therefore,  in accordance with FSP 106-1, the accumulated postretirement benefit  obligation or net period postretirement benefit cost included in the  consolidated financial statements and disclosed above do not reflect the  effects of the Act. Specific authoritative guidance on accounting for the  federal subsidy is pending. The final issued guidance could require a  change to previously reported information. The Company leases certain warehouses. Commitments for minimum  rentals under noncancelable leases at the end of 2003 are as follows: Property, plant, and equipment at year-end include the following  amounts for capitalized leases: Rent expense for the years 2003, 2002, and 2001 amounted to approx- imately $13,592,000, $13,683,000, and $13,387,000, respectively.  Contingent rent expense under both capitalized and operating leases  (generally based on mileage of transportation equipment) amounted to  $313,000, $787,000, and $869,000 for the years 2003, 2002, and  2001, respectively. During the second quarter ended June 28, 2003, the Company entered  into a one-year financial agreement for the benefit of one of its distribu- tion chain partners. The maximum financial exposure assumed by the  Company as a result of this arrangement totals $3 million of which over  75% is secured by collateral. In accordance with the provisions of FIN  45, the Company has recorded the fair value of this guarantee, which is  estimated to be less than $0.1 million. The Company utilizes letters of credit in the amount of  $24 million to back certain financing instruments, insurance policies,  and payment obligations. The letters of credit reflect fair value as a  condition of their underlying purpose and are subject to fees competi- tively determined. The Company is contingently liable for future minimum pay- ments totaling $9.7 million under a transportation service contract.  The transportation agreement is for a three-year period and is auto- matically renewable for periods of one year unless either party gives  sixty days’ written notice of its intent to terminate at the end of the  original three-year term or any subsequent term. The minimum pay- ments are $4.8 million in 2004, and $4.9 million in 2005. The Company has guaranteed a contractual lease obligation  of an independent contract furniture dealership. The related term  expires in the fourth quarter of 2004. As of January 3, 2004, the  remaining unpaid lease payments subject to this guarantee totaled  approximately $69,000. In accordance with the provisions of FIN 45  no liability has been recorded, as the Company entered into this agree- ment prior to December 31, 2002. 52 Leases Guarantees, Commitments, and Contingencies (In thousands) 2003 2002  2001 Buildings $ 3,299 $ 3,299  $ 3,299 Machinery and equipment  196 196   15,805 Office equipment  761 –  – 4,256 3,495   19,104 Less: allowances for depreciation  2,879 2,514   17,052 $ 1,377 $  981  $ 2,052  Capitalized  Operating (In thousands) Leases   Leases 2004  $ 523  $ 13,012  2005 515  10,742 2006  284  8,424 2007 215  5,430 2008  211  4,080 Thereafter 590  9,062 Total minimum lease payments  $ 2,338 $ 50,750 Less: amount representing interest  487  Present value of net minimum lease payments,  including current maturities of $415  $ 1,851 H O N I N D U S T R I E S I n c . a n d S U B S I D I A R I E S