COMMITMENTS AND CONTINGENCIES

MEDICAL INSURANCE

The Company self-insures employees for employee medical benefits under the Company’s group health plan. As of January 31, 2015, the Company maintains stop loss coverage for individual medical claims in excess of $125,000 and for annual Company medical claims which exceed approximately $4.5 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 January 31, 2015. 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 January 31, 2015 and February 1, 2014 was approximately $0.5 million and $0.6 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 both fiscal 2014 and fiscal 2013 was $4.4 million. 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 $2.7 million per year with an annual escalation of 3%. This sublease expires December 2027. The Company also leases a warehouse facility in Keasby, New Jersey and administrative office space in Ft. Lauderdale, Florida. The lease in Keasby was scheduled to expire in August 2015 and has been extended through September 2020. The Ft. Lauderdale lease expires in January 2016. Management is currently negotiating an extension of this lease through January 2022. 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 2014 and 2013 were as follows (in thousands):



	Fiscal Year Ended January 31, 2015		Fiscal Year Ended February 1, 2014
Minimum rentals	$	30,356	$	30,040
Contingent rentals	1,481		1,870
Total	$	31,837	$	31,910

Aggregate future minimum rental payments under the above operating leases at January 31, 2015 are payable as follows (in thousands):



Fiscal Year
2015	$	31,748
2016	28,597
2017	24,895
2018	18,787
2019	12,684
Thereafter	47,401
	$	164,112

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. 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 January 31, 2015 (in thousands):



Fiscal Year
2015	$	1,506
2016	1,506
2017	1,195
Total future minimum lease payments (1)	4,207
Less: Amount representing interest	(644		)
Present value of minimum lease payments	3,563
Less: Current portion	(1,104		)
	$	2,459


(1)	Minimum payments have not been reduced by minimum sublease rentals of approximately $1.7 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 $16.4 million and $15.5 million for fiscal 2014 and fiscal 2013, 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 January 31, 2015 are payable as follows (in thousands):



Fiscal Year	Royalty Payments		Advertising Obligations		Total
2015	$	15,031	$	24,632	$	39,663
2016	11,783		15,344		27,127
2017	11,203		16,520		27,723
2018	5,860		6,193		12,053
2019	700		—		700
	$	44,577	$	62,689	$	107,266

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.