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Commitments and Contingencies | 12 Months Ended
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Dec. 31, 2014
Commitments and Contingencies |
Commitments and Contingencies | 7. Commitments and Contingencies Surety Bonds In the normal course of business, we are required to post bid, performance and garnishment bonds. The majority of the surety bonds posted relate to our aviation and land segments. As of December 31, 201 4 and 201 3, we had outstanding bonds that were arranged in order to satisfy various security requirements of $38.7 million and $34.1 million, respectively. Most of these bonds provide financial security for obligations which have already been recorded as liabilities. Lease Commitments As of December 31, 2014, our future minimum lease payments under non‑cancelable operating leases were as follows (in thousands):
Year Ended December 31, |  |  |
2015 |  | $ | 37,766
2016 |  |  | 31,949
2017 |  |  | 22,790
2018 |  |  | 16,645
2019 |  |  | 13,592
Thereafter |  |  | 36,558
|  | $ | 159,300
We incurred rental expense for all properties and equipment of $29.2 million, $24.7 million and $27.3 million for 201 4, 2013 and 2012, respectively. Minimum payments have not been reduced by minimum sublease rentals of $31.5 million due in the future under non-cancelable subleases. Sales and Purchase Commitments As of December 31, 201 4, fixed sales and purchase commitments under our derivative programs amounted to $266.7 million and $56.6 million, respectively. Additionally, as of December 31, 2014, we had entered into certain other fixed price sales commitments with corresponding fixed price purchase commitments, the majority of which were satisfied within one week. These sales and purchase commitments were made in the normal course of business. Agreements with Executive Officers and Key Employees We have an agreement with our Chairman, President and Chief Executive Officer, Michael J. Kasbar, for his continued employment with the Company which provides for an annual base salary as determined by our Compensation Committee in its sole discretion (currently $750,000), termination severance benefits, and such incentives and other compensation and amounts as our Compensation Committee may determine from time to time in its sole discretion. The Kasbar agreement, as amended, expires on December 31, 2016, unless terminated earlier, and will automatically extend for successive one year terms unless either party provides written notice to the other at least one year prior to the expiration of the term that such party does not want to extend the term. Pursuant to his amended agreement, Mr. Kasbar is entitled to receive cash severance payments if: (a) we terminate his employment without cause following a change of control or for any reason other than death, disability or cause; (b) he resigns for good reason (generally a reduction in his responsibilities or compensation, or a breach by us), or resigns following a change of control; or (c) either he elects or we elect not to extend the term of the agreement, as amended. The severance payments are equal to $5.0 million for a termination following a change of control and $3.0 million in the other scenarios described above, a portion of which will be payable two years after the termination of Mr. Kasbar’s employment. All of Mr. Kasbar’s outstanding SSAR Awards, restricted stock and RSUs (collectively, “outstanding equity awards”) will immediately vest in each scenario described in (a) and (b) above following a change of control, except for awards assumed or substituted by a successor company, in which case, such awards shall continue to vest in accordance with their applicable terms. In each scenario described in (a), (b) or (c) above where there has not been a change of control, Mr. Kasbar’s outstanding equity awards will generally vest over a two year period following termination of his employment, with any remaining unvested awards vesting on the last day of such two year period. For each scenario described above, awards with multiple annual performance conditions must satisfy certain other requirements in order to have their vesting terms accelerated. We have also entered into employment agreements or separation agreements with certain of our other executive officers and key employees. These agreements provide for minimum salary levels, and, in most cases, bonuses which are payable if specified performance goals are attained. Some executive officers and key employees are also entitled to severance b enefits upon termination or non-renewal of their contracts under certain circumstances. As of December 31, 2014, the approximate future minimum commitments under these agreements, excluding discretionary and performance bonuses, are as follows (in thousands):
Year Ended December 31, |  |  |
2015 |  | $ | 5,815
2016 |  |  | 1,540
2017 |  |  | 750
2018 |  |  | 2,250
|  | $ | 10,355
Executive Non-Renewal Charge In connection with the non-renewal of the employment agreement between the Company and Mr. Stebbins, the former Executive Chairman of the Board of Directors, we recorded an executive non-renewal charge totaling $4.8 million in May 2014, which included non-cash expenses of $1.1 million related to previously awarded stock compensation. As of December 31, 2014, $0.9 million of the cash portion of the executive non-renewal charge was included in accrued expenses and other current liabilities and $ 2.3 million was included in other long-term liabilities in the accompanying consolidated balance sheets. Deferred Compensation Plans and Pension We maintain a 401(k) defined contribution plan which covers all U.S. employees who meet minimum requirements and elect to participate. We are currently making a match contributions of 50% for each 1% of the participants' contributions up to 6% of the participants' contributions. Annual contributions by us are made at our sole discretion, as approved by the Compensation Committee. Additionally, certain of our foreign subsidiaries have defined contribution plans, which allow for voluntary contributions by the employees. In some cases, we make employer contributions on behalf of the employees. The expenses for our contributions under these plans were not significant during each of the years presented on the consolidated statements of income and comprehensive income. We offer a non-qualified deferred compensation (“NQDC”) plan to certain eligible employees, excluding our named executive officers, whereby the participants may defer a portion of their compensation. We do not match any participant deferrals under the NQDC plan. Participants can elect from a variety of investment choices for their deferred compensation and gains and losses on these investments are credited to their respective accounts. The deferred compensation payable amount under this NQDC plan is subject to the claims of our general creditors and was $2.3 million and $0.9 million as of December 31, 2014 and December 31, 2013, r espectively, which was included in other long-term liabilities in the accompanying consolidated balance sheets. In connection with our acquisition of Watson Petroleum, we assumed their defined benefit pension plan (the “Watson Plan”), which provides participants benefits based on salary at retirement or an earlier date of leaving service. As part of the allocation of the estimated purchase price to assets acquired and liabilities assumed for Watson Petroleum, we recorded an assumed pension exit obligation of £9.8 million ($16.3 million). As of December 31, 2014, we have remaining an assumed exit pension obligation of £1.0 million ($1.5 million), which is included in accrued expenses and other current liabilities in the accompanying consolidated balance sheets. We expect to settle this amount in 2015. There are no other assets or liabilities on our consolidated balance sheet as of December 31, 2014 related to the Watson Plan. Additionally, the expenses for the Watson Plan recorded in our consolidated statements of income and comprehensive income for 2014 were not significant. As of December 31, 2014, the Watson Plan, through its Trustee, ha d assets comprised of a buy-in policy with an insurance company, which fully matches its estimated benefit obligations of £32.0 million ($49.8 million). The completion of our exit from the Watson Plan is anticipated to occur in the latter half of 2015 via buy-out policies between the insurance company and each individual participant. Environmental and Other Liabilities; Uninsured Risks We provide various services to customers, including into‑plane fueling at airports, fueling of v essels in‑port and at‑sea, and transportation and storage of fuel and fuel products. We are therefore subject to possible claims by customers, regulators and others who may be injured by a fuel spill or other accident. In addition, we may be held liable for damages to the environment arising out of such events. Although we generally maintain liability insurance for these types of events, such insurance may be inadequate. If we are held liable for any damages, and the liability is not adequately covered by insurance and is of sufficient magnitude, our financial position and results of operations will be adversely affected. We have exited several businesses w hich handled hazardous and non‑hazardous waste. We treated and/or transported this waste to various disposal facilities. We may be held liable as a potentially responsible party for the clean‑up of such disposal facilities or be required to clean up facilities previously operated by us, pursuant to current U.S. federal and state laws and regulation. In addition, compliance with existing and future environmental laws regulating underground storage tanks located at the retail gasoline stations that we operate may require significant capital expenditures and increased operating and maintenance costs. The remediation costs and other costs required to clean up or treat contaminated sites could be substantial. We pay tank registration fees and other taxes to state trust funds established in our operating areas and maintain private insurance coverage in support of future remediation obligations. These state trust funds or other responsible third parties including insurers are expected to pay or reimburse us for remediation expenses less a deductible. To the extent third parties do not pay for remediation as we anticipate, we will be obligated to make these payments. These payments could materially adversely affect our financial condition, results of operations and cash flows. Reimbursements from state trust funds will be dependent on the maintenance and continued solvency of the various funds. Although we continuously review the adequacy of our insurance coverage, we may lack adequate coverage for various risks, including environmental claims. Furthermore, our ability to obtain and maintain adequate insurance and the cost of such insurance may be affected by signi ficant claims, such as the Lac‑Mégantic derailment described below, and conditions in the insurance market over which we have no control. An uninsured or under‑insured claim arising out of our activities, if successful and of sufficient magnitude, will have a material adverse effect on our financial position, results of operations and cash flows. Legal Matters Lac‑Mégantic, Quebec We, on behalf of DPTS Marketing LLC ("DPM"), a crude oil marketing joint venture in which we owned a 50% membership interest, purchased crude oil from various producers in the Bakken region of North Dakota. Dakota Petroleum Transport Solutions, LLC ("DPTS"), a crude oil transloading joint venture in which we also owned a 50% membership interest, arranged for the transloading of the crude oil for DPM into tank cars at the joint venture's facility in New Town, North Dakota. We leased the tank cars used in the transloading from a number of third party lessors and subleased these tank cars to DPM. We, on behalf of DPM, contracted with Canadian Pacific Railway ("CPR") for the transportation of the tank cars and the crude oil from New Town, North Dakota to a customer in New Brunswick, Canada. CPR subcontracted a portion of that route to Montreal, Maine and Atlantic Railway ("MMA"). On July 6, 2013, the freight train operated by MMA with tank cars carrying approximately 50,000 barrels of the crude oil derailed in Lac-Mégantic, Quebec. The derailment resulted in significant loss of life, damage to the environment from spilled crude oil and extensive property damage. For additional information regarding the legal proceedings relating to this incident described below, see Part I — Item 3 of this 2014 10-K Report. In 2013, we, certain of our subsidiaries, DPM and DPTS, along with a number of third parties, including MMA and certain of its affiliates, as well as several manufacturers and lessors of tank cars, were named as defendants in twenty complaints filed in the state of Illinois. The complaints generally allege wrongful death and negligence in the failure to provide for the proper and safe transportation of crude oil and seek economic and compensatory damages, as well as costs. In addition, in 2013, we, certain of our subsidiaries, DPM and DPTS, along with a number of other third parties, including CPR, MMA and certain of its affiliates, several manufacturers and lessors of tank cars, as well as the intended purchaser and certain suppliers of the crude oil, were named as defendants in a motion filed in Quebec Superior Court to authorize the bringing of a class-action lawsuit seeking economic, compensatory and punitive damages, as well as costs. The motion generally alleges wrongful death and negligence in the failure to provide for the proper and safe transportation of crude oil. Furthermore, in 2013, an order was issued by the government of Quebec against MMA and us, which was subsequently modified and added CPR as a party. The orders require MMA, CPR and us to recover the spilled crude oil caused by the incident and to otherwise fully remediate the impact of the incident on the environment. We have filed a contestation of these orders before the Tribunal administratif du Québec, an administrative body responsible for hearing such proceedings, challenging the legality and validity of the orders on various grounds. In January 2014, the Trustee for MMA’s U.S. bankruptcy estate (the “Trustee”) filed an adversary proceeding against us, and certain of our subsidiaries, in the United States Bankruptcy Court for the District of Maine alleging negligence in the failure to provide for the proper and safe transportation of crude oil, and seeking economic damages, as well as costs and expenses associated with MMA’s lawsuits arising from the incident. The Trustee and the monitor in MMA’s Canadian bankruptcy (the “Monitor”) are continuing to explore a potential global settlement of all third party claims arising out of the incident. The Monitor has represented in court filings that those discussions have resulted in firm commitments from certain third parties of settlement funds totaling approximately C$200.0 million ($170.0 million). The Trustee and the Monitor continue to discuss global settlement with various other parties, including us. In addition to these proceedings, we have received demands for indemnification from certain tank car lessors pursuant to our lease agreements with such parties and three lessors subsequently filed declaratory judgment actions against us in connection with such indemnification demands during 2014. We are currently assessing the merits of these demands as well as of the underlying claims for which such indemnification is sought. Additional claims, lawsuits, proceedings, investigations and orders may be filed, commenced or issued with respect to the incident, which may involve civil claims for damages or governmental investigative, regulatory or enforcement actions against us. In December 2014, we sold our 50% interest in DPM and DPTS to certain subsidiaries of Dakota Plains Holdings, Inc. (“DAKP”), our partner in the joint ventures. In connection with the sale transaction, we agreed to indemnify DAKP and certain of its affiliates, including DPM and DPTS, for third party claims for bodily injury or property damage arising from the derailment. Pursuant to the agreement, we will control the defense of DAKP and the joint ventures for claims associated with the derailment. In addition, DAKP assigned to us all recoveries from third parties and under applicable insurance policies held by DAKP and the joint ventures for claims arising out of the derailment. Finally, DAKP also agreed to indemnify us for certain costs and expenses arising out of the derailment up to $10.0 million. While we, DPM and DPTS, maintain insurance to mitigate the costs of environmental releases as well as other results of unexpected events, including loss of life, property damage and defense costs, there can be no guarantee that our insurance will be adequate to cover all liabilities that may be incurred as a result of this incident. We are separately evaluating potential claims that we may assert against third parties to recover costs and other liabilities that may be incurred as a result of this incident. We can provide no guarantee that any such claims, if brought by us, will be successful or, if successful, that the responsible parties will have the financial resources to address any such claims. We are currently unable to determine the probability of loss, or reasonably estimate a range of potential losses related to the proceedings arising from the train derailment. Accordingly, we have not made any provision for these potential losses in our consolidated financial statements. However, based on estimated losses related to the value of the tank cars involved in the incident, as well as legal and other costs incurred in connection with the incident, which we believe are probable and for which a reasonable estimate can be made, we have recorded total liabilities of $40.9 million. We believe that a substantial portion of these liabilities are covered by insurance and have recorded total receivables of $38.6 million. As of December 31, 2014, the remaining unpaid liabilities of $14.8 million are included primarily in accrued expenses and other current liabilities and the remaining uncollected receivable of $28.9 million is included in other current assets in the accompanying consolidated balance sheets. Other Matters In connection with a theft of fuel product valued at approximately $18.0 million, we recorded an insurance receivable for the full amount of the loss, which is included in other current assets in the accompanying consolidated balance sheets. On July 31, 2014, our insurer, AGCS Marine Insurance Company (“AGCS”), filed a declaratory judgment action against us in the United States District Court for the Southern District of New York seeking a court ruling that the loss is not covered un der our policy. During the quarter ended December 31, 2014, we filed an answer to the AGCS complaint and counterclaims against AGCS for declaratory judgment and breach of contract seeking a court ruling that the loss is covered under the policy, an award of damages equal to the full amount of our loss plus interest, as well as fees and costs. We believe AGCS’ position is without merit and we intend to vigorously pursue our rights. However, due to the complexities and uncertainties inherent in litigation, we can provide no assurance that we will recover the full amount of the loss. We are a party to various claims, complaints and proceedings arising in the ordinary course of our business including, but not limited to, environmental claims, commercial and governmental contract claims, such as property damage, demurrage, billing and fuel quality claims, as well as bankruptcy preference claims and tax and administrative claims. We have established loss provisions for these ordinary course claims as well as other matters in which losses are probable and can be reasonably estimated. As of December 31, 2014, we had recorded certain reserves which were not significant. For those matters where a reserve has not been established and for which we believe a loss is reasonably possible, as well as for matters where a reserve has been recorded but for which an exposure to loss in excess of the amount accrued is reasonably possible, we believe that such losses will not have a material adverse effect on our consolidated financial statements. However, any adverse resolution of one or more such claims, complaints or proceedings during a particular period could have a material adverse effect on our consolidated financial statements or disclosures for that period. Our estimates regarding potential losses and materiality are based on our judgment and assessment of the claims utilizing currently available information. Although we will continue to reassess our reserves and estimates based on future developments, our objective assessment of the legal merits of such claims may not always be predictive of the outcome and actual results may vary from our current estimates.

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