Annual report pursuant to Section 13 and 15(d)

Commitments and Contingencies

v2.4.1.9
Commitments and Contingencies
12 Months Ended
Dec. 31, 2014
Commitments and Contingencies [Abstract]  
Commitments and Contingencies
(10)  Commitments and Contingencies

(a)  Leases and Other Commitments

We have various non-cancelable operating leases for facilities, equipment, and software with terms between two and 15 years. The terms of the facilities leases typically provide for certain minimum payments as well as increases in lease payments based upon the operating cost of the facility and the consumer price index.  Rent expense is recognized on a straight-line basis for rent agreements having escalating rent terms. Lease expense for the years ended December 31, 2014, 2013 and 2012 were as follows (in thousands):

 
 
Operating
Lease
Expense
   
Sublease
Income
   
Net
Expense
 
2014
 
$
6,576
   
$
119
   
$
6,457
 
2013
 
$
9,826
   
$
531
   
$
9,295
 
2012
 
$
11,544
   
$
671
   
$
10,873
 

Future minimum annual non-cancelable commitments as of  December 31, 2014 are as follows (in thousands):

 
 
Operating Leases
 
 
 
Lease
Commitments
   
Sublease
Income
   
Net
Commitments
 
2015
 
$
3,859
   
$
246
   
$
3,613
 
2016
   
2,367
     
-
     
2,367
 
2017
   
1,939
     
-
     
1,939
 
2018
   
871
     
-
     
871
 
2019
   
316
     
-
     
316
 
Thereafter
   
-
     
-
     
-
 
Total
 
$
9,352
   
$
246
   
$
9,106
 

We signed a lease in 2009 for a building to serve as our headquarters with a rent commencement date of May 1, 2012. Certain terms in the lease agreement resulted in the capitalization of construction costs due to specific accounting rules. We recorded a construction asset and corresponding long-term liability of approximately $27.3 million on May 1, 2012, which represents the construction costs incurred by the landlord as of that date. According to accounting rules, we have forms of continuing involvement that require us to account for this transaction as a financing lease upon commencement of the lease period. The building and building improvements will remain on our consolidated balance sheet and will be depreciated over a 15-year period. Payments made under the lease agreement are applied to service the financing obligation and interest expense based on an imputed interest rate amortizing the obligation over the life of the lease agreement.

Future minimum annual non-cancelable commitments under our headquarters lease as of December 31, 2014, which are not included in the table above, are as follows (in thousands):

 
 
Lease Commitments
 
2015
 
$
3,985
 
2016
   
4,104
 
2017
   
4,221
 
2018
   
4,336
 
2019
   
4,456
 
Thereafter
   
36,447
 
Total
 
$
57,549
 

(b)  Contingencies

We are one of the primary defendants in a multiple plaintiff wrongful death action in Hawaii related to a fireworks explosion that occurred in April 2011 at a facility operated by one of our subcontractors, which resulted in the death of five subcontractor employees. The litigation is expected to proceed to trial in 2016. While the results of litigation cannot be predicted with certainty, we do not anticipate that this litigation will have a material adverse effect on our results of operations or financial position.

On or about March 8, 2013, a lawsuit, Anchorage v. Integrated Concepts and Research Corporation, et al., was filed in the Superior Court for the State of Alaska at Anchorage by the Municipality of Anchorage, Alaska against our wholly owned subsidiary Integrated Concepts and Research Corporation ("ICRC") and two former subcontractors of ICRC.  With respect to ICRC, the lawsuit asserts, among other things, breach of contract, professional negligence and negligence in respect of work and services ICRC rendered under the Port of Anchorage Intermodal Expansion Contract with the Maritime Administration, a federal agency with the United States Department of Transportation.  In April 2013,  ICRC removed the case to the United States District Court for the District of Alaska.  ICRC's contract with the Maritime Administration expired on May 31, 2012. ICRC did not have a contract with the municipality of Anchorage. The litigation is expected to proceed to trial in 2016. Currently we cannot currently predict whether this litigation will have a material adverse effect on our results of operations or financial position.

In addition to the above-referenced litigation, we have, in the normal course of business, certain claims against us and against other parties and we may be subject to various governmental investigations.  In our opinion, the resolution of these claims and investigations will not have a material adverse effect on our results of operations or financial position. However, the results of any legal proceedings cannot be predicted with certainty.