(8) Commitments and Contingencies


(a)	Operating Leases

The Company conducts a major portion of its retail operations from leased locations. Initial terms of the leases are typically 20 years followed by five year renewal options and may include rent escalation clauses. Minimum rentals represent fixed lease obligations, including insurance and maintenance to the extent they are fixed in the lease. Contingent rentals represent variable lease obligations, including real estate taxes, insurance, maintenance and, for certain locations, additional rentals based on a percentage of sales in excess of stipulated minimums (excess rent). The payment of variable real estate taxes, insurance and maintenance is generally based on the Company’s pro-rata share of total shopping center square footage. The Company recognizes rent expense for operating leases with rent escalation clauses on a straight-line basis over the applicable lease term. The Company estimates excess rent, where applicable, based on annual sales projections and uses the straight-line method to amortize the cost to rent expense. The annual sales projections are reviewed periodically and adjusted if necessary. Additionally, the Company has operating leases for certain transportation and other equipment.

Total rental expense for 2018, 2017 and 2016 was as follows:



	2018			2017		2016
	(Amounts are in thousands)
Minimum rentals	$	449,138		437,403		419,032
Contingent rentals	133,382			126,855		125,406
Sublease rental income	(4,339		)	(4,617	)	(4,577	)
	$	578,181		559,641		539,861

As of December 29, 2018, future minimum rentals for all noncancelable operating leases and related subleases are as follows:



Year	Minimum Rental Commitments			Sublease Rental Income		Net
		(Amounts are in thousands)
2019		$	434,781		2,913	431,868
2020		407,409			365	407,044
2021		371,476			230	371,246
2022		332,785			188	332,597
2023		287,636			188	287,448
Thereafter		1,886,433			690	1,885,743
		$	3,720,520		4,574	3,715,946

In 2019, the Company will adopt the ASU requiring the lease rights and obligations arising from lease contracts, including existing and new arrangements, to be recognized as assets and liabilities on the consolidated balance sheet. The Company estimates it will recognize approximately $2.9 billion of lease rights and obligations.

The Company also owns shopping centers which are leased to tenants for minimum rentals plus contingent rentals. Minimum rentals represent fixed lease obligations, including insurance and maintenance. Contingent rentals represent variable lease obligations, including real estate taxes, insurance, maintenance and, for certain locations, excess rent. Rental income was $183,963,000, $158,121,000 and $133,656,000 for 2018, 2017 and 2016, respectively.

As of December 29, 2018, future minimum rentals to be received for all noncancelable operating leases are as follows:



Year
(Amounts are in thousands)
2019	$	139,159
2020	117,024
2021	91,137
2022	67,107
2023	45,836
Thereafter	162,361
	$	622,624


(b)	Letters of Credit

As of December 29, 2018, the Company had outstanding $5,475,000 in trade letters of credit and $12,950,000 in standby letters of credit to support certain purchase obligations.


(c)	Litigation

The Company is subject from time to time to various lawsuits, claims and charges arising in the normal course of business. The Company believes its recorded reserves are adequate in light of the probable and estimable liabilities. The estimated amount of reasonably possible losses for lawsuits, claims and charges, individually and in the aggregate, is considered to be immaterial. In the opinion of management, the ultimate resolution of these legal proceedings will not have a material adverse effect on the Company’s financial condition, results of operations or cash flows.