Commitments and Contingent Liabilities

Operating Leases

Operating lease commitments are primarily for office space and equipment. Certain office space leases provide for rent adjustments relating to changes in real estate taxes and other operating costs.

Rental expense amounted to approximately $19 million in 2017 and $16 million in 2016 and 2015. The increase in rental expense is related to additional costs incurred due to the headquarter redesign and consolidation. The approximate minimum rental commitments as of December 31, 2017 were as follows:



(In thousands)	Amount
2018	$	10,738
2019	7,532
2020	6,153
2021	4,972
2022	4,731
Later years	18,555
Total minimum lease payments	$	52,681

Capital Leases

Future minimum lease payments for all capital leases, and the present value of the minimum lease payments as of December 31, 2017, were as follows:



(In thousands)	Amount
2018	$	552
2019	7,245
2020	—
2021	—
2022	—
Later years	—
Total minimum lease payments	7,797
Less: imputed interest	(992		)
Present value of net minimum lease payments including current maturities	$	6,805

Restricted Cash

We were required to maintain $18.0 million of restricted cash as of December 31, 2017 and $24.9 million as of December 25, 2016, the majority of which is set aside to collateralize workers’ compensation obligations. The decrease reflects the settlement of certain litigation described below.

Newspaper and Mail Deliverers – Publishers’ Pension Fund

In September 2013, the Newspaper and Mail Deliverers-Publishers’ Pension Fund (the “NMDU Fund”) assessed a partial withdrawal liability against the Company in the gross amount of approximately $26 million for the plan years ending May 31, 2012 and 2013 (the “Initial Assessment”), an amount that was increased to a gross amount of approximately $34 million in December 2014, when the NMDU Fund issued a revised partial withdrawal liability assessment for the plan year ending May 31, 2013 (the “Revised Assessment”). The NMDU Fund claimed that when City & Suburban Delivery Systems, Inc., a retail and newsstand distribution subsidiary of the Company and the largest contributor to the NMDU Fund, ceased operations in 2009, it triggered a decline of more than 70% in contribution base units in each of these two plan years.

The Company disagreed with both the NMDU Fund’s determination that a partial withdrawal occurred and the methodology by which it calculated the withdrawal liability, and the parties engaged in arbitration proceedings to resolve the matter. In June 2016, the arbitrator issued an interim award and opinion that supported the NMDU Fund’s determination that a partial withdrawal had occurred, and concluded that the methodology used to calculate the Initial Assessment was correct. However, the arbitrator also concluded that the NMDU Fund’s calculation of the Revised Assessment was incorrect. In July 2017, the arbitrator issued a final award and opinion reflecting the same conclusions, which the Company has appealed.

Due to requirements of the Employee Retirement Income Security Act of 1974 that sponsors make payments demanded by plans during arbitration and any resultant appeals, the Company had been making payments to the NMDU Fund since September 2013 relating to the Initial Assessment and February 2015 relating to the Revised Assessment based on the NMDU Fund’s demand. As a result, as of December 31, 2017, we have paid $15.3 million relating to the Initial Assessment since the receipt of the initial demand letter. We also paid $5.0 million related to the Revised Assessment, which was refunded in July 2016 based on the arbitrator’s ruling. The Company recognized $0.4 million of expense for the fiscal year ended December 31, 2017. The Company recognized $10.7 million of expense (inclusive of a special item of $6.7 million) and $6.8 million for the fiscal years ended December 25, 2016 and December 27, 2015, respectively. The Company had a liability of $6.5 million as of December 31, 2017, related to this matter. Management believes it is reasonably possible that the total loss in this matter could exceed the liability established by a range of zero to approximately $10 million.

NEMG T&G, Inc.

The Company was involved in class action litigation brought on behalf of individuals who, from 2006 to 2011, delivered newspapers at NEMG T&G, Inc., a subsidiary of the Company (“T&G”). T&G was a part of the New England Media Group, which the Company sold in 2013. The plaintiffs asserted several claims against T&G, including a challenge to their classification as independent contractors, and sought unspecified damages. In December 2016, the Company reached a settlement with respect to the claims, which was approved by the court in May 2017. As a result of the settlement, the Company recorded charges of $0.7 million ($0.4 million after tax) and $3.7 million ($2.3 million after tax) for the fiscal years ended December 31, 2017 and December 25, 2016, respectively, within discontinued operations.

Other

We are involved in various legal actions incidental to our business that are now pending against us. These actions are generally for amounts greatly in excess of the payments, if any, that may be required to be made. Although the Company cannot predict the outcome of these matters, it is possible that an unfavorable outcome in one or more matters could be material to the Company’s consolidated results of operations or cash flows for an individual reporting period. However, based on currently available information, management does not believe that the ultimate resolution of these matters, individually or in the aggregate, is likely to have a material effect on the Company’s financial position.

Letter of Credit Commitment

The Company issued $56 million letters of credit in connection with a sub-lease entered into in the fourth quarter of 2017 for approximately four floors of our headquarters building. A portion of the letters of credit will expire prorata through the second quarter of 2019, while the remaining portion of letters of credit will expire upon the Company’s repurchase of the Condo Interest in our headquarters building in 2019. Approximately $63 million of marketable securities were used as collateral for the letters of credit.