COMMITMENTS AND CONTINGENCIES

Operating Leases

During 2013 the Company leased office facilities, filming locations, and equipment under operating lease agreements. Leases for the Company’s offices and facilities expire between 2015 and 2018, and some of these leases are subject to the Company’s renewal. Total rent expense charged to operations for all such leases, was approximately $9.7 million, $12.3 million and $13.5 million for 2013, 2012, and 2011, respectively, net of sublease income of $0.7 million and $1.3 million in 2012 and 2011, respectively. There was no sublease income recognized in 2013. The Company’s 2012 and 2011 operating leases included its television production facilities and television administrative offices, which were terminated during 2012. Rent expense for operating leases, which may include free rent or fixed escalation amounts in addition to minimum lease payments, is recognized on a straight-line basis over the duration of each lease term.

The following is a schedule of future minimum payments under operating leases at December 31, 2013. The table includes total minimum lease payment commitments which include rent and other charges:



(in thousands)	Operating Lease Payments		Sublease Receipts *		Net Operating Lease Payments
2014	$	8,673	$	429	$	8,244
2015	8,580		433		8,147
2016	8,581		439		8,142
2017	7,621		—		7,621
2018	555		—		555
Total	$	34,010	$	1,301	$	32,709

* The Company subleased certain properties at a loss. These losses were recognized at the time the sublease was executed and accordingly, the Company does not recognize any rent expense or offsetting sublease receipts for the remainder of the sublease agreements. The table above provides the total minimum cash lease payments and cash receipts for future periods.

During February 2014, in an effort to reduce overhead expenses and more efficiently utilize our office space, we vacated 47,592 square feet at our principal office facility. Future reductions in minimum lease payment commitments of $6.3 million associated with the vacating of this space are not included in the table above as the related lease termination was not effective until mid- February 2014.

Legal Matters

On January 23, 2012, Macy's Inc. and Macy's Merchandising Group, Inc. (collectively, “Macy’s”) filed a lawsuit against the Company in the Supreme Court of the State of New York, County of New York titled Macy's, Inc. and Macy's Merchandising Group, Inc. v. Martha Stewart Living Omnimedia, Inc. In such lawsuit, Macy's claimed that the Company's planned activities under the Company's commercial agreement with J.C. Penney materially breached the agreement between the Company and Macy's Merchandising Group, Inc. dated April 3, 2006 (the “Agreement”). Macy's sought a declaratory judgment, preliminary and permanent injunctive relief, and incidental and other damages. The Court entered a preliminary injunction on July 31, 2012 which limited the Company's activities with J.C. Penney in certain respects. In November 2012, Macy's amended its complaint to assert a second claim which alleged additional breaches of the Agreement. In January 2013, the lawsuit was consolidated with an action titled Macy's Inc. and Macy's Merchandising Group, Inc. v. J.C. Penney Corporation, Inc. The trial of the consolidated cases began on February 20, 2013 and concluded on August 1, 2013.

On October 21, 2013, the Company and J.C. Penney entered into an amendment to their commercial agreement, narrowing the range of product categories covered by the commercial agreement and shortening the term of the commercial agreement. On December 31, 2013, the Company and Macy’s entered into a settlement agreement and release; the terms of which are not material to the Company's financial statements. As part of the settlement agreement and release, the parties jointly sought an order from the Court, which was entered on January 13, 2014, ordering a stipulation of discontinuance with prejudice, dismissing all claims made by Macy’s against the Company in the lawsuit.

The Company is party to legal proceedings in the ordinary course of business, including product liability claims for which the Company is indemnified by its licensees. None of these proceedings is deemed material.

Unclaimed property

In August 2013, the Company entered into an agreement with agents of the State of Delaware (“the State”) who will assist in administrating the State’s abandoned property reporting outreach program (“VDA Program”) in which the Company is enrolled and under which the Company will disclose information regarding its compliance with certain abandoned property procedures. As the VDA Program is in its early stages, the Company cannot quantify the State’s findings, if any, on its consolidated results of operations, financial condition, or liquidity. In the normal course of conduct, the Company records amounts due for abandoned property.

Other

See Note 7, Credit Facilities, for discussion of the Company’s line of credit with Bank of America.