Commitments and Contingencies
Lease Commitments
The Company has cancelable and non-cancelable operating lease agreements principally for facilities and for office equipment used in the Company’s operations. Total operating lease rental expense included in administrative expenses on the consolidated statements of operations was $2.9 million, $2.4 million, and $2.3 million for the years ended December 31, 2018, 2017 and 2016, respectively.
Future minimum rental commitments under non-cancelable operating leases having an original term of more than one year as of December 31, 2018 were as follows (in thousands):
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| | | |
Years ending December 31, | |
2019 | $ | 3,234 |
|
2020 | 2,933 |
|
2021 | 2,409 |
|
2022 | 2,041 |
|
2023 | 1,298 |
|
2024 and thereafter | — |
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Total | $ | 11,915 |
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Container Equipment Purchase Commitments
As of December 31, 2018, the Company had commitments to purchase equipment in the amount of $28.2 million payable in 2019.
Contingencies
The Company is party to various pending or threatened legal or regulatory proceedings arising in the ordinary course of its business. Based upon information presently available, the Company does not expect any liabilities arising from these matters to have a material effect on the consolidated financial position, results of operations or cash flows of the Company.
Employment Agreements and Indemnification Agreements
The Company has entered into employment arrangements and indemnification agreements with certain executive officers and with certain employees. The agreements specify various employment-related matters, including annual compensation, performance incentive bonuses, and severance benefits in the event of termination with or without cause.
Retention Bonus Plan
TCIL established a bonus plan in 2011 to award bonuses to certain employees for continued service (the “Retention Bonus Plan”) and in 2015, established an incremental retention bonus plan (the “Plan”) to award bonuses to certain employees for continued service who were not included in the Retention Bonus Plan. In accordance with the terms of the Retention Bonus Plan agreement, specified bonus amounts, plus interest compounded annually, were paid to all participants on the earlier of their termination date or June 2017.
TAL established a bonus plan in 2015 to award bonuses to certain TAL employees for continued service (the “TAL Retention Bonus Plan”). In accordance with the terms of the TAL Retention Bonus Plan agreement, the specified bonus amounts were paid to all participants on the earlier of their termination date or July 2017.
Severance Plan
The Company established severance plans in order to provide severance benefits to eligible employees who are involuntarily terminated for reasons other than cause, or who resign for “good reason”. Employees eligible for benefits under the severance plans would receive a severance award and other benefits based upon their tenure. The following table summarizes changes to the Company's total severance balance (in thousands):
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| | | |
| Total |
Balance at December 31, 2016 | $ | 20,718 |
|
Accrual | 6,023 |
|
Payments | (17,064 | ) |
Balance at December 31, 2017 | 9,677 |
|
Accrual | — |
|
Payments | (8,462 | ) |
Balance at December 31, 2018 | $ | 1,215 |
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About Commitments Disclosures
Commitments and contingencies disclosures catalog a company's off-balance-sheet obligations and legal exposures — purchase commitments, guarantee arrangements, pending litigation, and regulatory proceedings. These items represent potential future cash outflows that may not appear as liabilities on the balance sheet until they become probable and estimable.
Key signals: litigation reserves and disclosed loss ranges quantify management's estimate of legal exposure, but unquantified "reasonably possible" losses often represent the larger risk. Watch for changes in language around pending cases — shifts from "remote" to "reasonably possible" or increases in estimated loss ranges signal deteriorating outcomes. Unconditional purchase obligations and take-or-pay contracts create fixed cost structures that reduce operational flexibility. Guarantee arrangements for subsidiaries or joint ventures can create cascading obligations. Compare the total commitment schedule against projected free cash flow to assess whether the company can meet its obligations without additional financing.