Commitments, Contingencies and Related Party Transactions

12 Months Ended

Dec. 31, 2011

Commitments, Contingencies and Related Party Transactions [Abstract]

Commitments, Contingencies and Related Party Transactions

Note 17 — Commitments, Contingencies and Related Party Transactions

Lease Agreements

The Company has non-cancelable operating leases for its numerous retail store sites, as well as for its corporate offices, certain distribution and manufacturing facilities, showrooms, and warehouse equipment that expire on various dates, principally through 2024. These leases generally contain renewal options and require the Company to pay real estate taxes, utilities and related insurance.

At December 31, 2011, future minimum lease payments under all operating leases consisted of the following:

	Future Minimum Operating Lease Payments
2012	$	119,382
2013		88,381
2014		63,615
2015		51,054
2016		40,919
Thereafter		100,709
	$	464,060

We are also an assignor with contingent lease liability for 13 stores sold to franchisees. The potential contingent lease obligations continue until the applicable leases expire in 2016. The maximum amount of the contingent lease obligations may vary, but is limited to the sum of the total amount due under the leases. At December 31, 2011, the maximum amount of the contingent lease obligations was approximately $4,932 and is not included in the table above as such amount is contingent upon certain events occurring, which management has not assessed as probable or estimable at this time.

The future minimum lease payments included in the above table also do not include contingent rent based upon sales volumes or other variable costs, such as maintenance, insurance and taxes.

Rent expense for the years ended December 31, 2011, 2010 and 2009, was $167,791, $144,006, and $136,785, respectively, and included immaterial amounts of rent expense related to contingent rent.

Product Royalty Agreements

The Company has entered into product royalty agreements with various licensors of copyrighted and trademarked characters and designs, that are used on the Company’s products, which require royalty payments based on sales of the Company’s products, and, in some cases, include annual minimum royalties.

At December 31, 2011, the Company’s commitment to pay future minimum product royalties was as follows:

	Future Minimum Royalty Payments
2012	$	11,715
2013		11,980
2014		7,484
2015		4,100
2016		550
Thereafter		550
	$	36,379

Product royalty expense for the years ended December 31, 2011, 2010 and 2009, was $16,812, $14,693, and $8,615, respectively.

During December 2009, the Company entered into a product purchase agreement with a vendor which requires the Company to purchase $9,000 of products annually through 2015.

Legal Proceedings

The Company is a party to certain claims and litigation in the ordinary course of business. The Company does not believe that any of these proceedings will result, individually or in the aggregate, in a material adverse effect upon its financial condition or future results of operations.

Related Party Transactions

Pursuant to the terms of a management agreement, Berkshire Partners LLC and Weston Presidio were paid annual management fees of $833 and $417, respectively, for each of the years ended December 31, 2011, 2010 and 2009. Management fees payable to Berkshire Partners LLC and Weston Presidio totaled $209 and $139, respectively, at December 31, 2011, and 2010 and are included in accrued expenses on the consolidated balance sheet. Although the indenture governing the 8.75% senior subordinated notes will permit the annual payments under the management agreement, such payments will be restricted during an event of default under the notes and will be subordinated in right of payment to all obligations due with respect to the notes in the event of a bankruptcy or similar proceeding of Amscan.