COMMITMENTS AND CONTINGENCIES
|12 Months Ended|
Dec. 31, 2017
|COMMITMENTS AND CONTINGENCIES [Abstract]|
|COMMITMENTS AND CONTINGENCIES||
NOTE 15 - COMMITMENTS AND CONTINGENCIES
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 currently through June 2022. 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, 2017, and 2016 was 305.0 million and 310.0 million Saudi Riyals (US$81.3 million and $82.7 million), respectively.
During 2017, AMAK did not make certain scheduled payments on their loan. AMAK obtained a waiver from SIDF regarding the missed payments and is currently working with SIDF to renegotiate the terms and repayment schedule of the loan agreement. We do not believe that these events will result in any performance under our guarantee.
Operating Lease Commitments –
We have operating leases for the rental of approximately 335 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 $17.8 million over the next 9 years.
We also have an operating lease for our office space in Sugar Land, TX. The expiration date for this lease is January 2018. The total amount of the commitment is less than $10,000. We are in the process of negotiating a new lease for the same space. 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 less than $50,000.
Future minimum property and equipment lease payments under the non-cancelable operating leases at December 31, 2017, are as follows:
Rental expense for these operating leases for the years ended December 31, 2017, 2016, and 2015 was $4.4 million, $4.2 million and $4.2 million, respectively.
From time to time, we may become party to litigation or other legal proceedings that we consider to be a part of the ordinary course of our business. We are not currently involved in any legal proceedings that we believe could reasonably be expected to have a material adverse effect on our business, prospects, financial condition or results of operations. We may become involved in material legal proceedings in the future.
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. On September 1, 2016, the Trial Court dismissed all of Mr. El Khalidi's claims and causes of action with prejudice. On November 9, 2017, the 9th Court of Appeals affirmed the Trial Court's dismissal. Mr. El Khalidi filed a petition for review with the Supreme Court of Texas on January 23, 2018. 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.
Supplier Agreements –
From time to time, we may incur shortfall fees due to feedstock purchases being below the minimum amounts as prescribed by our agreements with our suppliers. The shortfall fee expenses were not significant for the years ended December 31, 2017, 2016, and 2015.
Environmental Remediation -
Amounts charged to expense for various activities related to environmental monitoring, compliance, and improvements were approximately $593,000 in 2017, $622,000 in 2016 and $604,000 in 2015.
The entire disclosure for commitments and contingencies.
Reference 1: http://www.xbrl.org/2003/role/presentationRef