COMMITMENTS AND CONTINGENCIES

Operating Leases

We lease office space, automobiles and certain equipment under agreements expiring on various dates through 2020. Future minimum lease payments under non-cancellable operating leases that have initial or remaining lease terms in excess of one year as of December 31, 2014 are as follows:



Year of Payment	Amount
2015	$	1,023
2016	1,025
2017	735
2018	375
2019	366
Thereafter	74
Total	$	3,598

For the years ended December 31, 2014, 2013 and 2012, rent expense approximated $1,041, $1,010, and $964, respectively.

We are party to a sublease agreement with American Bailey Corporation (ABC) that obligates ABC to reimburse us for its share of lease and lease-related expenses under our February 1, 2010 lease of executive offices in Stamford, Connecticut. Please refer to Note 11 to the consolidated financial statements for a discussion of our relationship with ABC. The future minimum lease income under this non-cancellable sublease as of December 31, 2014 is as follows:



Year of Payment	Amount
2015	$	155
2016	155
2017	155
2018	155
2019	155
Thereafter	—
Total	$	775

The terms of the Company’s four primary lease arrangements are as follows:


•	The Stamford, Connecticut building lease, for approximately 6,440 square feet, runs from February 1, 2010 to December 31, 2019. The facility houses certain administrative functions such as Investor Relations and certain APC sales functions.


•	The Beijing, China building lease, for approximately 8,000 square feet, runs from September 1, 2014 to August 31, 2017. This facility serves as the operating headquarters for our Beijing Fuel Tech operation.


•	The Durham, North Carolina building lease, for approximately 16,000 square feet, runs from May 1, 2014 to April 30, 2017. This facility houses engineering operations.


•	The Gallarate, Italy building lease, for approximately 1,300 square feet, runs from May 1, 2013 to April 30, 2019. This facility serves as the operating headquarters for our European operations.


•	The Westlake, Ohio building lease, for approximately 5,000 square feet, runs from May 1, 2014 to April 30, 2017. This facility houses engineering operations.

Performance Guarantees

The majority of Fuel Tech’s long-term equipment construction contracts contain language guaranteeing that the performance of the system that is being sold to the customer will meet specific criteria. On occasion, performance surety bonds and bank performance guarantees/letters of credit are issued to the customer in support of the construction contracts as follows:


•	in support of the warranty period defined in the contract; or


•	in support of the system performance criteria that are defined in the contract.

As of December 31, 2014, we had outstanding bank performance guarantees and letters of credit in the amount of $8,620 and performance surety bonds in the amount of $12,389 in support of equipment construction contracts that have not completed their final acceptance test or that are still operating under a warranty period. The performance guarantees expire in dates ranging from January 2015 through September 2016. The expiration dates may be extended if the project completion dates are extended. Our management believes it is probable that these projects will be successfully completed and that there will not be a material adverse impact on our operations from these bank performance guarantees and letters of credit. As a result, no liability has been recorded for these performance guarantees.

Product Warranties

We issue a standard product warranty with the sale of our products to customers. Our recognition of warranty liability is based primarily on analyses of warranty claims experience in the preceding years as the nature of our historical product sales for which we offer a warranty are substantially unchanged. This approach provides an aggregate warranty accrual that is historically aligned with actual warranty claims experienced. Changes in the warranty liability in 2014, 2013 and 2012 are summarized below:



	2014			2013			2012
Aggregate product warranty liability at beginning of year	$	596		$	776		$	313
Net aggregate expense (income) related to product warranties	(311		)	(68		)	1,208
Aggregate reductions for payments	(17		)	(112		)	(745		)
Aggregate product warranty liability at end of year	$	268		$	596		$	776