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Commitments and Contingencies
12 Months Ended
Dec. 31, 2013
Commitments and Contingencies [Abstract]  
Commitments and Contingencies

10. Commitments and Contingencies

 

In the ordinary course of business, the Company is subject to various claims and legal proceedings, workers’ compensation and product liability disputes.  The Company is of the opinion that the ultimate resolution of these matters will not have a material adverse affect on the results of operations, cash flows or the financial position of the Company.

 

As a result of environmental studies performed at the Company’s former facility located in Sarasota, Florida, the Company became aware of soil and groundwater contamination at the Company site.  The Company engaged an environmental engineering consultant to assess the level of contamination and to develop a remediation and monitoring plan for the site.  Soil remediation at the site was completed during the year ended December 31, 2010Ground water remediation will begin  in the first quarter of 2014,  in accordance with a remedial action plan approved by the Florida Department of Environmental Protection.  During the years ended December 31, 2013 and 2012, environmental remediation costs incurred were immaterial.  At December 31, 2013 and 2012, the Company had accrued an undiscounted liability of $944 and $1,340, respectively, related to future remediation. The decrease in the accrual is related to changes in assumptions used in the remedial action plan.  At December 31, 2013 and 2012, $683 and $733, respectively, were recorded as a component of accrued expenses and other current liabilities on the consolidated balance sheets while the remaining amounts were recorded as a component of other long-term liabilities.  A majority of the costs associated with the recorded liability will be incurred at the start of the groundwater remediation, with the balance relating to monitoring costs to be incurred over multiple years.  The recorded liability is based on assumptions in the remedial action plan.   In December 2011, the Company sold the Sarasota facility and related property.  However, the liability to remediate the site contamination remains the responsibility of the Company.  Due to the ongoing site remediation, the closing terms of the sale agreement included a requirement for the Company to maintain a $2,000 letter of credit for the benefit of the buyer.

 

On May 24, 2013, the State Revenue Services of São Paulo issued a tax deficiency notice against PST, our 74% owned consolidated subsidiary, claiming that the vehicle tracking and monitoring services it provides should be classified as communication services, and therefore subject to the State Value Added Tax – ICMS. The State Revenue Services assessment imposed the 25.0% ICMS tax on all revenues of PST related to the vehicle tracking and monitoring services during the period from January 2009 through December 2010. The Brazilian real (“R$”) and (U.S. dollar equivalent “$”) of the aggregate tax assessment is approximately R$92,500 ($39,500) which is comprised of Value Added Tax – ICMS of R$13,200 ($5,600), interest of R$11,400 ($4,900) and penalties of R$67,900 ($29,000).

 

The Company’s vehicle tracking and monitoring services are non-communication services, as defined under Brazilian tax law, subject to the municipal ISS tax, not communication services subject to state ICMS tax as claimed by the State Revenue Services of São Paulo. PST has, and will continue to collect the municipal ISS tax on the vehicle tracking and monitoring services in compliance with Brazilian tax law and will defend its tax position. PST has received a legal opinion that the merits of the case are favorable to PST, determining among other things that the imposition on the subsidiary of the State ICMS by the State Revenue Services of São Paulo is not in accordance with the Brazilian tax code.   Management believes, based on the legal opinion of PST’s Brazilian legal counsel and the results of the Brazil Administrative Court's ruling in favor of another vehicle tracking and monitoring company related to the tax deficiency notice it received, the likelihood of loss is not probable although it may take years to resolve.   As a result of the above, as of December 31, 2013, no provision has been made with respect to this tax assessment.   An unfavorable judgment on this issue for the years assessed and for subsequent years could result in significant costs to PST and adversely affect its results of operations.

 

In addition, PST has civil, labor and tributary contingencies for which the likelihood of loss is deemed to be reasonably possible, but not probable, by its legal advisors.  As a result, no provision has been made with respect to these contingencies, which amount to $11,469 and $11,925 at December, 2013 and 2012, respectively.  An unfavorable outcome on this issue could result in significant cost to PST and adversely affect its results of operations.