Commitments and Contingencies

12 Months Ended

Jan. 28, 2012

Commitments and Contingencies

Commitments and Contingencies

Note 6. Commitments and Contingencies

        We have operating lease agreements for retail space, warehouses and sales and administrative offices as well as equipment with varying terms. As of January 28, 2012, the aggregate minimum base rental commitments for all non-cancelable operating real property leases with original terms in excess of one year are $42.3 million, $41.6 million, $38.8 million, $33.2 million, $26.0 million and $104.9 million for fiscal 2012, fiscal 2013, fiscal 2014, fiscal 2015, fiscal 2016 and thereafter, respectively. Total rent expense, excluding the reduction in rent expense associated with the write-off of deferred rent amounts upon the exit or decision to exit retail stores, under all leases was $49.5 million, $43.3 million and $42.0 million in fiscal 2011, fiscal 2010 and fiscal 2009, respectively. Most leases provide for payments of real estate taxes, insurance and other operating expenses applicable to the property and many retail leases provide for contingent rent based on retail sales, which are included in total rent expense above. These payments for real estate taxes, insurance, other operating expenses and contingent rent are included in rent expense, but are not included in the aggregate minimum rental commitments above, as the amounts payable in future periods are generally not specified in the lease agreement and are dependent on future events. The total amount of such charges included in total rent expense above were $12.5 million, $11.3 million and $10.3 million in fiscal 2011, fiscal 2010 and fiscal 2009, respectively, which includes $1.2 million, $0.9 million and $0.6 million, of percentage rent during fiscal 2011, fiscal 2010 and fiscal 2009, respectively.

        We are also currently obligated under certain apparel license and design agreements to make future minimum royalty and advertising payments of $4.8 million, $4.6 million, $4.4 million and $3.2 million for fiscal 2012, fiscal 2013, fiscal 2014 and fiscal 2015, respectively, and none thereafter. These amounts do not include amounts, if any, that exceed the minimums required pursuant to the agreements.

        In connection with our acquisition of the Lilly Pulitzer brand and operations on December 21, 2010, as discussed in Note 14, we entered into a contingent consideration agreement pursuant to which we will be obligated to pay cash payments of up to $2.5 million subsequent to each of the four years following the closing of the acquisition and an additional $10 million subsequent to the end of the fourth year, each contingent upon Lilly Pulitzer's achievement of certain financial targets. The fair value of the contingent consideration liability totaling $13.1 million and $10.7 million as of January 28, 2012 and January 29, 2011, respectively, is included in non-current contingent consideration and contingent consideration earned and payable in our consolidated balance sheets. This fair value determination assumes that the $20 million contingent consideration is earned and paid in full, but discounted to fair value as of the balance sheet date. The $2.5 million contingent on fiscal 2011 Lilly Pulitzer operating results, which is included in contingent consideration earned and payable, was earned in full and is expected to be paid in the first half of fiscal 2012, with the excess earnings from fiscal 2011 reducing the earnings thresholds for fiscal 2012.

        During the 1990s, we discovered the presence of hazardous waste on one of our properties. We believe that remedial action will be required, including continued investigation, monitoring and treatment of groundwater and soil, although the timing of such remedial action is uncertain. As of January 28, 2012 and January 29, 2011, the reserve for the remediation of this site was approximately $1.9 million, which is included in other non-current liabilities in our consolidated balance sheets. The amount recorded represents our estimate of the costs, on an undiscounted basis, to clean up this site, based on currently available information. This estimate may change in future periods as more information on the remediation activities required and timing of those activities become known. During fiscal 2010, the reserve for the remediation of this site decreased by $2.2 million primarily due to a reduction in our estimate of the costs required to remediate the property. The change in estimate was included as a reduction of SG&A in our consolidated statement of earnings for fiscal 2010. No other significant amounts related to this reserve were recorded in the statements of earnings in fiscal 2011, fiscal 2010 or fiscal 2009.