COMMITMENTS AND CONTINGENCIES

MEDICAL INSURANCE

The Company self-insures employees for employee medical benefits under the Company’s group health plan. As of February 1, 2014, the Company maintains stop loss coverage for individual medical claims in excess of $125,000 and for annual Company medical claims which exceed approximately $5.2 million in the aggregate. While the ultimate amount of claims incurred are dependent on future developments, in management’s opinion, recorded accruals are adequate to cover the future payment of claims incurred as of February 1, 2014. However, it is possible that recorded accruals may not be adequate to cover the future payment of claims. Adjustments, if any, to estimates recorded resulting from ultimate claim payments will be reflected in operations in the periods in which such adjustments are determined. The self-insurance accrual at February 1, 2014 and February 2, 2013 was approximately $0.6 million and $0.4 million, respectively, which is included in accrued expenses and other liabilities in the accompanying consolidated balance sheets.

LEASES AND RETAIL STORE RENT

Total rent expense for warehouse space and equipment charged to operations for fiscal 2013 and fiscal 2012 was $4.4 million and $4.3 million, respectively. This includes payments of warehouse rent to Quality King.

In January 2008, the Company began subleasing office and warehouse facility from Quality King in Bellport, New York at a rate which is currently $2.6 million per year with an annual escalation of 3%. This sublease expires December 2027. The Company assumed leases on a warehouse facility in Keasby, New Jersey and administrative office space in Ft. Lauderdale, Florida as a result of the Parlux acquisition. These leases expire in August 2015 and January 2016, respectively. The Company also leases administrative office space in New York City. This lease expires in February 2021.

The Company leases space for its retail stores. The lease terms vary from month to month leases to ten year leases, in some cases with options to renew for longer periods. Various leases contain clauses which adjust the base rental rate by the prevailing Consumer Price Index, as well as requiring additional contingent rent based on a percentage of gross sales in excess of a specified amount.

Retail store rent expense in fiscal 2013 and 2012 were as follows (in thousands):



	Fiscal Year Ended February 1, 2014		Fiscal Year Ended February 2, 2013
Minimum rentals	$	30,040	$	29,822
Contingent rentals	1,870		1,748
Total	$	31,910	$	31,570

Aggregate future minimum rental payments under the above operating leases at February 1, 2014 are payable as follows (in thousands):



Fiscal Year
2014	$	31,098
2015	28,108
2016	24,524
2017	20,758
2018	14,273
Thereafter	46,063
	$	164,824

The Company’s capitalized leases are for a building in Sunrise, Florida, and computer hardware and software. The lease for the Florida building expires December 2017 with monthly rent of approximately $104,000 during the remaining term of the lease. See Note 6 for a discussion of impairment charges related to this building. The following is a schedule of future minimum lease payments under capital leases together with the present value of the net minimum lease payments, at February 1, 2014 (in thousands):



Fiscal Year
2014	$	1,401
2015	1,327
2016	1,327
2017	1,216
Total future minimum lease payments (1)	5,271
Less: Amount representing interest	(1,215		)
Present value of minimum lease payments	4,056
Less: Current portion	(894		)
	$	3,162


(1)	Minimum payments have not been reduced by minimum sublease rentals of approximately $2.3 million due in the future under noncancelable subleases.

ADVERTISING AND ROYALTY OBLIGATIONS

The Company is party to license agreements with unaffiliated licensors. Obligations under license agreements relate to royalty payments and required advertising and promotional spending levels for the Company's products bearing the licensed trademark. Royalty payments are typically made based on contractually defined net sales. However, certain licenses require minimum guaranteed royalty payments regardless of sales levels. Minimum guaranteed royalty payments and required minimums for advertising and promotional spending have been included in the table below. Actual royalty payments and advertising and promotional spending could be higher. Furthermore, early termination of any of these license agreements could result in potential cash outflows that have not been reflected below. Royalty expense was $15.5 million and $12.1 million for fiscal 2013 and fiscal 2012, respectively and is included in selling, general and administrative expenses on the accompanying consolidated statements of operations. The aggregate future minimum payments under these licensing agreements at February 1, 2014 are payable as follows (in thousands):



Fiscal Year	Royalty Payments		Advertising Obligations		Total
2014	$	13,308	$	27,317	$	40,625
2015	14,749		24,582		39,331
2016	10,801		15,342		26,143
2017	10,290		16,518		26,808
2018	5,681		6,193		11,874
Thereafter	—		—		—
	$	54,829	$	89,952	$	144,781

LITIGATION

The Company is involved in legal proceedings in the ordinary course of business. Management cannot presently predict the outcome of these matters, although management believes that the ultimate resolution of these matters will not have a materially adverse effect on the Company's financial position, operations or cash flows.