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COMMITMENTS AND CONTINGENCIES | 12 Months Ended
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Dec. 31, 2014
COMMITMENTS AND CONTINGENCIES |
COMMITMENTS AND CONTINGENCIES | NOTE 9: COMMITMENTS AND CONTINGENCIES Lawsuits — The Company is a defendant in certain lawsuits which allege that plaintiffs have been damaged as a result of the use of the Company’s products. The Company is vigorously contesting these actions. Management, after consultation with legal counsel, is of the opinion that the outcome of these lawsuits will not have a material adverse effect on the financial position, results of operations or liquidity of Marine Products. Dealer Floor Plan Financing — To assist dealers in obtaining financing for the purchase of its boats for inventory, the Company has entered into agreements with various dealers and selected third-party floor plan lenders to guarantee varying amounts of qualifying dealers’ debt obligations. The Company’s obligation under these guarantees becomes effective in the case of a default under the financing arrangement between the dealer and the third party lender. The agreements provide for the return of repossessed boats to the Company in new and unused condition subject to normal wear and tear as defined, in exchange for the Company’s assumption of specified percentages of the debt obligation on those boats, up to certain contractually determined dollar limits by lender. As a result of dealer defaults, the Company became contractually obligated to repurchase inventory for approximately $1.1 million during the fourth quarter of 2014, none of which remains outstanding as of December 31, 2014. The Company recorded costs in connection with these repurchases of approximately $75 thousand during 2014 as a reduction of net sales. As of December 31, 2014, there were no repossessed boats remaining in inventory as the Company redistributed all of these boats among existing and replacement dealers. There were no material repurchases of inventory under contractual agreements during 2013. Management continues to monitor the risk of additional defaults and resulting repurchase obligations based in part on information provided by the third-party floor plan lenders and will adjust the guarantee liability at the end of each reporting period based on information reasonably available at that time. The Company currently has an agreement with one of the floor plan lenders whereby the contractual repurchase limit is to not exceed 16 percent of the average net receivables financed by the floor plan lender for dealers during the prior 12 month period, which was $8.2 million as of December 31, 2014. The Company has contractual repurchase agreements with additional lenders with an aggregate maximum repurchase obligation of approximately $4.5 million, with various expiration and cancellation terms of less than one year, for an aggregate repurchase obligation with all financing institutions of approximately $12.7 million as of December 31, 2014. This repurchase obligation risk is mitigated by the value of the boat repurchased. Lease Obligations — In June 2001, the Company entered into a lease transaction for existing boat manufacturing space located in Valdosta, Georgia. This lease was accounted for as a capital lease and was paid in full in 2012, and is reflected in the financing section of the statement of cash flows. Minimum annual operating lease obligations with terms in excess of one year, in effect at December 31, 2014, are summarized in the following table:
(in thousands) |  |  |
2015 |  | $ | 157 |
2016 |  |  | 161 |
2017 |  |  | 144 |
2018 |  |  | 134 |
2019 |  |  | —- |
Thereafter |  |  | —- |
Total rental commitments |  | $ | 596 |
Total rent expense charged to operations was approximately $118,000 in 2014, $140,000 in 2013 and $106,000 in 2012. Income Taxes — The amount of income taxes the Company pays is subject to ongoing audits by federal and state tax authorities, which often result in proposed assessments. Other long-term liabilities included the Company’s estimated liabilities for these probable assessments and totaled approximately $44,000 as of December 31, 2014 and $45,000 as of December 31, 2013. Employment Agreements — The Company has agreements with two employees, which provide for a monthly payment to each of the employees equal to 10 percent of profits (defined as pretax income before goodwill adjustments and certain allocated corporate expenses) in addition to a base salary. The expense under these agreements totaled approximately $4,225,000 in 2014, $3,421,000 in 2013 and $3,294,000 in 2012 and is included in selling, general and administrative expenses in the accompanying consolidated statements of operations.

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