World Fuel Services 2015 Annual Report Download - page 74

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We offer a non-qualified deferred compensation (“NQDC”) plan to certain eligible employees, excluding our named
executive officers, whereby the participants may defer a portion of their compensation. We do not match any participant
deferrals under the NQDC plan. Participants can elect from a variety of investment choices for their deferred compensation
and gains and losses on these investments are credited to their respective accounts. The deferred compensation payable
amount under this NQDC plan is subject to the claims of our general creditors and was $3.3 million and $2.3 million as of
December 31, 2015 and December 31, 2014, respectively, which was included in other long-term liabilities in the
accompanying consolidated balance sheets.
In connection with our acquisition of Watson Petroleum, we assumed their defined benefit pension plan (the “Watson Plan”),
which provides participants benefits based on salary at retirement or an earlier date of leaving service. As part of the
allocation of the estimated purchase price to assets acquired and liabilities assumed for Watson Petroleum, we recorded
an assumed pension exit obligation of £9.6 million ($16.0 million). During 2015, we completed the pension buy-out,
therefore, as of December 31, 2015 there are no other assets or liabilities on our consolidated balance sheet related to the
Watson Plan. Additionally, the expenses for the Watson Plan recorded in our consolidated statements of income and
comprehensive income for 2015 were not significant.
Environmental and Other Liabilities; Uninsured Risks
We provide various services to customers, including into-plane fueling at airports, fueling of vessels in-port and at-sea, and
transportation and storage of fuel and fuel products. We are therefore subject to possible claims by customers, regulators
and others who may be injured by a fuel spill or other accident. In addition, we may be held liable for damages to the
environment arising out of such events. Although we generally maintain liability insurance for these types of events, such
insurance may be inadequate. If we are held liable for any damages, and the liability is not adequately covered by insurance
and is of sufficient magnitude, our financial position and results of operations will be adversely affected.
Compliance with existing and future environmental laws regulating underground storage tanks located at the retail gasoline
stations that we operate may require significant capital expenditures and increased operating and maintenance costs. The
remediation costs and other costs required to clean up or treat contaminated sites could be substantial. We pay tank
registration fees and other taxes to state trust funds established in our operating areas and maintain private insurance
coverage in support of future remediation obligations. These state trust funds or other responsible third parties including
insurers are expected to pay or reimburse us for remediation expenses less a deductible. To the extent third parties do not
pay for remediation as we anticipate, we will be obligated to make these payments. These payments could materially
adversely affect our financial condition, results of operations and cash flows. Reimbursements from state trust funds will be
dependent on the maintenance and continued solvency of the various funds.
Although we continuously review the adequacy of our insurance coverage, we may lack adequate coverage for various
risks, including environmental claims. Furthermore, our ability to obtain and maintain adequate insurance and the cost of
such insurance may be affected by significant claims, such as the Lac-Mégantic derailment described below, and conditions
in the insurance market over which we have no control. An uninsured or under-insured claim arising out of our activities, if
successful and of sufficient magnitude, will have a material adverse effect on our financial position, results of operations
and cash flows.
Legal Matters
Lac-Mégantic, Quebec
We, on behalf of DPTS Marketing, LLC (“DPM”), a crude oil marketing joint venture in which we previously owned a 50%
membership interest, purchased crude oil from various producers in the Bakken region of North Dakota. Dakota Petroleum
Transport Solutions, LLC (“DPTS”), a crude oil transloading joint venture in which we also previously owned a 50%
membership interest, arranged for the transloading of the crude oil for DPM into tank cars at its facility in New Town, North
Dakota (the “Pioneer Terminal”). We leased the tank cars used in the transloading from a number of third party lessors and
subleased these tank cars to DPM (the “Railcar Subleases”). We, on behalf of DPM, contracted with Canadian Pacific
Railway (“CPR”) for the transportation of the tank cars and the crude oil from New Town, North Dakota to a customer in
New Brunswick, Canada. CPR subcontracted a portion of that route to Montreal, Maine and Atlantic Railway (“MMA”). On
July 6, 2013, the freight train operated by MMA with tank cars carrying approximately 50,000 barrels of crude oil derailed in
Lac-Mégantic, Quebec (the “Derailment”). The Derailment resulted in significant loss of life, damage to the environment
from spilled crude oil and extensive property damage.
Between 2013 and 2015, we, certain of our subsidiaries, DPM and DPTS, along with a number of third parties, were sued
in various actions in both the United States and Canada, by multiple third parties seeking economic, compensatory and