In 2014, we entered into a number of significant transactions in furtherance of our business strategy. On July 15, 2014 we acquired 100% of the capital stock of Buckley Scott Holdings Limited ("Buckley Scott"), a U.K. based international construction and engineering adjusting firm, for $3.8 million, plus a potential future earnout payment. The acquisition of Buckley Scott is expected to enable us to significantly expand our construction and engineering capabilities in the U.K. and elsewhere. The results of operations of Buckley Scott, which are not material to our consolidated results of operations, are reported in our EMEA/AP segment, and have been included in our consolidated results of operations since the acquisition date.
Legal Settlement Administration expenses other than reimbursements, direct compensation, fringe benefits, and non-employee labor increased 2.5% to $29.8 million in 2014 from $29.1 million in 2013, and increased as a percent of related segment revenues before reimbursements to 17.5% in 2014 from 13.2% in 2013. The dollar amount of these expenses increased as a result of higher rent expense resulting from additional office space and higher depreciation and amortization expense associated with the purchase of new computer equipment and software. The increase as a percent of revenues before reimbursements was because expenses such as rent and deprecation, included in this category, are more fixed in nature and did not decline as revenues declined. During 2014, we reduced a contingent consideration liability from a previous acquisition by $2.0 million after concluding the consideration will not be paid. We also impaired and expensed the $1.3 million net book value of a customer list obtained in that acquisition.
Stock option expense, a component of stock-based compensation, is comprised of non-cash expenses related to stock options granted under our various stock option and employee stock purchase plans. Stock option expense is not allocated to our operating segments. Stock option expense of $0.9 million, $0.9 million and $0.4 million was recognized during 2014, 2013, and 2012, respectively. Other stock-based compensation expense related to our Executive Stock Bonus Plan (pursuant to which we have authority to grant performance shares and restricted shares) is charged to our operating segments and included in the determination of segment operating earnings or loss.
For goodwill impairment testing purposes, in 2014 we analyzed two reporting units of the Americas operating segment; a) U.S. Contractor Connection and b) Americas excluding U.S. Contractor Connection. Based on the relative estimated fair values of these two reporting units, determined by a discounted cash flow analysis, the Americas excluding U.S. Contractor Connection has $12.9 million of goodwill associated with it that is at risk of potential impairment. Prior to 2014, U.S. Contractor Connection was tested within the Americas reporting unit. The EMEA/AP segment, which has $72.1 million of goodwill associated with it, is also exposed to potential impairment. Holding all other assumptions constant, both the EMEA/AP segment and Americas excluding U.S. Contractor Connection component would have to achieve more than approximately 60-65.0% of their forecasted operating earnings to avoid the Company being required to proceed to Step 2 of the goodwill impairment test. The EMEA/AP analysis did not include any impact of the GAB Robins acquisition, since the test was performed prior to the acquisition date. We intend to continue to monitor the performance of the Americas and EMEA/AP segments. Should actual operating earnings consistently fall below forecasted operating earnings, we will perform an interim goodwill impairment analysis.
Both the Americas segment and the EMEA/AP segment earn revenues by providing field investigation and evaluation of property and casualty claims for insurance companies and self-insured entities and by providing access to Company-owned networks of direct repair service providers. The Company’s Broadspire segment earns revenues by providing field investigation and claims evaluation of workers’ compensation and liability claims, initial loss reporting services for its clients' claimants, loss mitigation services such as medical bill review, medical case management and vocational rehabilitation, administration of trust funds established to pay claims, and risk management information services. The Legal Settlement Administration segment earns revenues by providing administration services related to settlements of securities cases, product liability cases, Chapter 11 bankruptcy noticing and distribution, and other legal settlements by identifying and qualifying class members, determining and dispensing settlement payments, and administering settlement funds.
For financial reporting purposes, the provision for income taxes is the sum of income taxes both currently payable and payable on a deferred basis. Currently payable income taxes represent the liability related to the income tax returns for the current year, while the net deferred tax expense or benefit represents the change in the balance of deferred income tax assets or liabilities as reported on the Company’s Consolidated Balance Sheets that are not related to balances in "Accumulated other comprehensive loss." The changes in deferred income tax assets and liabilities are determined based upon changes in the differences between the basis of assets and liabilities for financial reporting purposes and the basis of assets and liabilities for income tax purposes, measured by the enacted statutory tax rates in effect for the year in which the Company estimates these differences will reverse. The Company must estimate the timing of the reversal of temporary differences, as well as whether taxable income in future periods will be sufficient to fully recognize any gross deferred tax assets. A valuation allowance is provided when it is deemed more-likely-than-not that some portion or all of a deferred tax asset will not be realized.
Short-term borrowings under the Credit Facility totaled $2,002,000 and $35,000,000 at December 31, 2014 and 2013, respectively. The Company expects, but is not required, to repay all of such short-term borrowings at December 31, 2014 in 2015.
The Company’s capital leases are primarily comprised of equipment leases with terms ranging from 24 to 60 months.
Principal repayments of long-term debt, including current portions and capital leases, as of December 31, 2014 are expected to be as follows:
Effective August 1, 2006, the Company entered into an 11-year operating lease for approximately 160,000 square feet of office space in Atlanta, Georgia for use as the Company’s corporate headquarters. Included in the future minimum lease payments noted above are total lease payments of $12,277,000 related to this lease. Additionally, the Company is responsible for certain related property operating expenses, which are excluded from the table above.
The Company sponsors a qualified defined benefit pension plan in the U.S. (the "U.S. Qualified Plan") and three defined benefit pension plans in the U.K. (the "U.K. Plans"). Effective December 31, 2002, the Company elected to freeze its U.S. Qualified Plan. Benefits payable under the Company’s U.S. Qualified Plan are generally based on career compensation; however, no additional benefits have accrued on this plan since December 31, 2002. The Company’s U.K. Plans were closed to new participants as of October 31, 1997, but existing participants may still accrue additional limited benefits based on salary amounts in effect at the time the relevant plan was closed. Benefits payable under the U.K. Plans are generally based on an employee’s final salary at the time the plan was closed. Benefits paid under the U.K. Plans are also subject to adjustments for the effects of inflation. The actuarial present value of the projected benefit payments under the U.K. Plans are based on the employees' expected dates of separation by retirement.
In addition, the Company sponsors two frozen nonqualified, unfunded defined benefit pension plans for certain employees and retirees, which are based on career compensation. These plans were frozen effective December 31, 2002. The liabilities of these plans, which equal their projected benefit obligations, are included in "Other accrued liabilities" and "Other noncurrent liabilities" based on these expected timing of funding these obligations, since they are funded as needed from Company assets.
The Company has granted nonqualified and incentive stock options to key employees and directors. All stock options were for shares of CRDA. Option awards were granted with an exercise price equal to the fair market value of the Company’s stock on the date of grant. The Company’s stock option plans have been approved by shareholders, and the Company’s Board of Directors is authorized to make specific grants of stock options under active plans. Employee stock options typically are subject to graded vesting over three years (33% each year) and have a typical life of ten years. Compensation cost for stock options is recognized on a straight-line basis over the requisite service period for the entire award. For the years ended December 31, 2014, 2013, and 2012, compensation expense of $474,000, $640,000, and $0, respectively, was recognized for employee stock option awards.
The total fair value of the performance shares that vested in 2014, 2013, and 2012 was $1,057,000, $1,693,000, and $1,849,000, respectively.