Commitments and Contingencies

Operating Lease Commitments

The Company leases office, distribution and retail facilities, and automobiles, under operating lease agreements which continue in effect through January 2029. Some of the leases contain renewal options of anywhere from 1 to 15 years. Since the terms of these arrangements meet the accounting definition of operating lease arrangements, the aggregate sum of future minimum lease payments are not reflected in the consolidated balance sheets.

In June 2017, the Company entered into an addendum to the original lease agreement relating to its warehouse and distribution center located in Moreno Valley, California. Pursuant to the addendum, the Company exercised its option to lease additional square footage and extended the expiration date of the lease to June 2028.

Future minimum commitments under existing operating lease agreements at March 31, 2018 are as follows:



Years Ending March 31,	Future Minimum Lease Commitments
2019	$	54,836
2020	52,256
2021	44,468
2022	38,435
2023	34,341
Thereafter	112,209
Total	$	336,545

The following schedule shows the composition of total rent expense:



	Years Ended March 31,
	2018		2017		2016
Minimum rentals	$	59,531	$	63,050	$	61,227
Contingent rentals	15,924		15,281		16,067
Total	$	75,455	$	78,331	$	77,294

Purchase Obligations

Product. The Company had $455,228 of outstanding purchase orders or other obligations with its manufacturers at March 31, 2018. The Company has an extended design and manufacturing process, which requires it to forecast production volumes and estimate inventory requirements many months before consumers make a decision to purchase its products. The Company generally orders product four to nine months in advance of the anticipated shipment dates based primarily on orders received from wholesale customers and through the DTC reportable operating segment. Accordingly, the aggregate amount reflects purchase commitments for products that the Company reasonably expects to fulfill in the ordinary course of business. However, a significant portion of the purchase commitments can be cancelled by the Company under certain circumstances, though the occurrence of such circumstances is generally limited. As a result, the amount does not necessarily reflect the dollar amount of the Company's binding commitments or minimum purchase commitments, and instead reflects an estimate of its future payment commitments based on information currently available.

Sheepskin. The Company had an aggregate of $106,852 of purchase commitments for sheepskin at March 31, 2018. These commitments generally arise under two-year supply agreements. The aggregate amount reflects the remaining commitments under these purchase orders. The Company enters into contracts requiring purchase commitments of sheepskin that its affiliates, manufacturers, factories, and other agents (each or collectively, a Buyer) must make on or before a specified target date. These agreements may result in unconditional purchase commitments if a Buyer does not meet the minimum purchase requirements. In the event that a Buyer does not purchase such minimum commitments by the target dates, the Company would be responsible for compliance with any and all minimum purchase commitments under these contracts, and the Company would make additional deposit payments towards the purchase of the remaining minimum commitments and such additional deposits would be returned as the Buyer purchases the remaining minimum commitments. The contracts do not permit net settlement. There were no additional deposits on remaining minimum commitments as of March 31, 2018. Included in other current assets on the consolidated balance sheets are approximately $900 and $12,200 of additional deposits related to prior sheepskin contracts as of March 31, 2018 and 2017, respectively.

Minimum commitments for these contracts at March 31, 2018 were as follows:



Contract Effective Date	Final Target Date	Contract Value		Remaining Commitment
October 2016	September 2018	$	53,700	$	15,601
July 2017	September 2018	29,600		16,920
September 2017	September 2018	43,200		21,731
July 2017	September 2019	52,600		52,600
Total		$	179,100	$	106,852

The Company expects that purchases made under these agreements in the ordinary course of business will eventually exceed the minimum commitment levels, and that any deposits will become fully refundable or will be reflected as a credit against purchases.

Subsequent to March 31, 2018, the Company entered into additional sheepskin purchase commitments totaling $85,750 with targeted dates between September 2019 and September 2020.

Other. The Company had an aggregate of $48,082 of other purchase commitments at March 31, 2018, which generally consisted of material commitments for future capital expenditures, commitments under service contracts, and requirements to pay promotional expenses. Future capital expenditures primarily relate to continued build-out and expansion of the warehouse and distribution center located in Moreno Valley, California.

Litigation

From time to time, the Company is involved in various legal proceedings and claims arising in the ordinary course of business. Although the results of legal proceedings and claims cannot be predicted with certainty, the Company currently believes that the final outcome of these ordinary course matters will not, individually or in the aggregate, have a material adverse effect on its business, operating results, financial condition or cash flows. However, regardless of the outcome, litigation can have an adverse impact on the Company because of legal costs, diversion of management time and resources, and other factors.

Contingent Consideration

The purchase price for the Sanuk brand, acquired in July 2011, included contingent consideration payments. The final contingent consideration payment of approximately $19,700 was paid during the year ended March 31, 2017.

The purchase price for the Hoka brand, acquired in September 2012, included contingent consideration through calendar year 2017, with a maximum contingent amount payable of $2,000. The conditions for payment were met during the year ended March 31, 2016; $1,700 was paid as of March 31, 2016, and the remaining contingent consideration payment of $300 was made as of March 31, 2017.

Indemnification

The Company has agreed to indemnify certain of its licensees, distributors, and promotional partners in connection with claims related to the use of the Company's intellectual property. The terms of such agreements range up to five years initially and generally do not provide for a limitation on the maximum potential future payments. From time to time, the Company also agrees to indemnify it licensees, distributors, and promotional partners in connection with claims that the Company's products infringe on the intellectual property rights of third parties. These agreements may or may not be made pursuant to a written contract. In addition, from time to time, the Company also agrees to standard indemnification provisions in commercial agreements in the ordinary course of business.

Management believes the likelihood of any payments under any of these arrangements is remote and would be immaterial. This determination is made based on a prior history of insignificant claims and related payments. There are currently no pending claims relating to indemnification matters involving the Company's intellectual property.