Annual report pursuant to Section 13 and 15(d)

COMMITMENTS AND CONTINGENCIES

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COMMITMENTS AND CONTINGENCIES
12 Months Ended
Dec. 31, 2016
COMMITMENTS AND CONTINGENCIES [Abstract]  
COMMITMENTS AND CONTINGENCIES
NOTE 15 - COMMITMENTS AND CONTINGENCIES

Guarantees

On October 24, 2010, we executed a limited guarantee in favor of the Saudi Industrial Development Fund (“SIDF”) whereby we agreed to guaranty up to 41% of the SIDF loan to AMAK in the principal amount of 330.0 million Saudi Riyals (US$88.0 million) (the “Loan”). The term of the loan is through June 2019.  As a condition of the Loan, SIDF required all shareholders of AMAK to execute personal or corporate guarantees; as a result, the Company’s guarantee is for approximately 135.3 million Saudi Riyals (US$36.1 million). The loan was necessary to continue construction of the AMAK facilities and provide working capital needs.  Our current assessment is that the probability of contingent performance is remote based on our analysis of the contingent portion of the guarantee which included but was not limited to the following:  (1) the SIDF has historically not called guarantees, (2) the value of the assets exceeds the amount of the loan (3) the other shareholders have indicated that they would prioritize their personal guarantees ahead of the corporate guarantee, and (4) according to Saudi Arabian legal counsel, assets outside of Saudi Arabia are protected from the Saudi Court System.  We received no consideration in connection with extending the guarantee and did so to maintain and enhance the value of our investment.  Our non-contingent and immediate obligation to stand ready to make payments if the events of default under the guarantee occur was not material to the financial statements.  The total amount outstanding to the SIDF at December 31, 2016, and 2015, was 310.0 million Saudi Riyals (US$82.7 million).

On July 17, 2016, we, along with some existing shareholders of AMAK, executed a document in favor of the Chairman of AMAK agreeing to provide a stock bonus to him upon successful completion of financial and operational goals.  We will contribute 250,000 shares of our AMAK stock and other shareholders will also contribute 250,000 shares for the award upon his success in reaching the goals by the end of 2017.

Operating Lease Commitments

We have operating leases for the rental of over 340 railcars for shipping purposes with expiration dates through 2026.  Invoices are received and paid on a monthly basis.  The total amount of the commitment is approximately $21.2 million over the next 10 years.

We also have an operating lease for our office space in Sugar Land, TX.  The expiration date for this lease is 2018.  The total amount of the commitment is approximately $0.1 million.  In addition, we are required to make periodic payments for property taxes, utilities and common area operating expenses.

In addition, we have operating leases for other equipment such as forklifts and copiers with varying expiration dates through 2020.  The total amount of the commitment is approximately $0.1 million.

Future minimum property and equipment lease payments under the non-cancelable operating leases at December 31, 2016, are as follows:

Year Ending December 31,
 
Long-Term Debt
 
   
(thousands of dollars)
 
2017
 
$
3,595
 
2018
   
3,393
 
2019
   
3,341
 
2020
   
3,250
 
2021
   
3,120
 
Thereafter
   
4,675
 
Total
 
$
21,374
 

Rental expense for these operating leases for the years ended December 31, 2016, 2015, and 2014 was $4.2 million, $4.2 million and $2.5 million, respectively.

Litigation -

On March 21, 2011, Mr. El Khalidi filed suit against the Company in Texas alleging breach of contract and other claims.  The 88th Judicial District Court of Hardin County, Texas dismissed all claims and counterclaims for want of prosecution in this matter on July 24, 2013.  The Ninth Court of Appeals subsequently affirmed the dismissal for want of prosecution and the Supreme Court of Texas denied Mr. El Khalidi’s petition for review.  On May 1, 2014, Mr. El Khalidi refiled his lawsuit against the Company for breach of contract and defamation in the 356th Judicial District Court of Hardin County, Texas.  The case was transferred to the 88th Judicial District Court of Hardin County, Texas where it is currently pending.  On September 1, 2016, the Court dismissed all of Mr. El Khalidi’s claims and causes of action with prejudice.  Mr. El Khalidi has filed a notice of appeal.  Liabilities of approximately $1.0 million remain recorded, and the options will continue to accrue in accordance with their own terms until all matters are resolved.

On April 30, 2015, TC and TREC received notice of a lawsuit filed in the 152nd Judicial District Court of Harris County, Texas.  The suit alleges that the plaintiff, an independent contractor employee, was injured while working on a product line at TC.  On March 31, 2016, plaintiff agreed to settle all claims against TC and TREC for an insignificant amount. 

On or about August 3, 2015, SHR received notice of a lawsuit filed in the 14th Judicial District Court of Calcasieu Parish, Louisiana.  The suit alleges that the plaintiff became ill from exposure to benzene.  SHR placed its insurers on notice.  Its insurers retained a law firm based in Louisiana to defend SHR.

On or about March 18, 2016, SHR received notice of a lawsuit filed in the 172nd Judicial District Court of Jefferson County, Texas.  The suit alleges that the plaintiff became ill from exposure to benzene.  SHR placed its insurers on notice.   Its insurers retained a law firm based in Texas to defend SHR.

On or about August 2, 2016, SHR received notice of a lawsuit filed in the 58th Judicial District Court of Jefferson County, Texas.  The suit alleges that the plaintiff became ill from exposure to benzene.  SHR placed its insurers on notice.  Its insurers retained a law firm based in Texas to defend SHR.

On or about November 5, 2016, SHR received notice of a lawsuit filed in the 172nd Judicial District Court of Jefferson County, Texas.  The suit alleges that the plaintiff became ill from exposure to benzene.  SHR placed its insurers on notice.  Its insurers retained a law firm based in Texas to defend SHR.

Environmental Remediation -

Amounts charged to expense for various activities related to environmental monitoring, compliance, and improvements were approximately $622,000 in 2016, $604,000 in 2015 and $414,000 in 2014.