(7) Commitments and Contingencies

The Company leases office, distribution, retail facilities, and automobiles, under operating lease agreements, which expire through 2024. Some of the leases contain renewal options for approximately one to ten years. Future minimum commitments under the lease agreements are as follows:

Year ending December 31:

2013	$	39,892
2014		35,375
2015		31,773
2016		28,448
2017		26,248
Thereafter		59,867

	$	221,603

Rent expense is recorded using the straight-line method to account for scheduled rental increases or rent holidays. Lease incentives for tenant improvement allowances are recorded as reductions of rent expense over the lease term. The rental payments under some of our retail store leases are based on a minimum rental plus a percentage of the store's sales in excess of stipulated amounts. The following schedule shows the composition of total rental expense.

	Years Ended Decemer 31,

	2012		2011		2010
Minimum rentals	$	37,270	$	26,645	$	18,551
Contingent rentals		9,366		6,085		2,496

	$	46,636	$	32,730	$	21,047

Purchase Obligations. The Company had $335,284 of outstanding purchase orders with its manufacturers as of December 31, 2012. In addition, the Company entered into agreements for promotional activities and other services. Future commitments under these purchase orders and other agreements are as follows:

Year ending December 31:

2013*	$	341,112
2014		1,122

	$	342,234

*: Included in the 2013 amount are remaining commitments, net of deposits, that are also unconditional purchase obligations relating to sheepskin contracts. The Company enters into contracts requiring minimum purchase commitments of sheepskin that Deckers' affiliates, manufacturers, factories, and other agents (each or collectively, a "Buyer") must make on or before a specified target date. Under certain contracts, the Company may pay an advance deposit that shall be repaid to the Company as Buyers purchase goods under the terms of these agreements. Included in other current assets on the consolidated balance sheets is approximately $39,000 and $69,000 of advance deposits as of December 31, 2012 and 2011 respectively. In the event that a Buyer does not purchase certain minimum commitments on or before certain target dates, the supplier may retain a portion of the advance deposit until the amounts of the commitments are fulfilled. All of these agreements may result in unconditional purchase obligations if a Buyer does not meet the minimum purchase requirements. In the event that a Buyer does not purchase such minimum commitments, the Company shall be responsible for compliance with any and all minimum purchase commitments under these contracts. The contracts do not permit net settlement. The Company expects sheepskin purchases by third party factories will eventually exceed the contract levels. Therefore, management believes the likelihood of any non-performance payments under these contractual arrangements is remote and would have an immaterial effect on the consolidated statements of comprehensive income. The Company determined this based upon its projected sales and inventory purchases. Minimum commitments for these contracts as of December 31, 2012 were as follows:

Contract Effective Date	Final Target Date	Advance Deposit	Total Minimum Commitment	Remaining Deposit	Remaining Commitment, Net of Deposit

October 2011	July 31, 2013	$50,000	$270,000	$39,383	$113,216
October 2012	September 30, 2013	$ —	$ 83,000	$ —	$ 79,500

Indemnification and Legal Contingencies. The Company is currently involved in various legal claims arising from the ordinary course of business. Management does not believe that the disposition of these matters will have a material effect on the Company's financial position or results of operations. In addition, 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. Management believes the likelihood of any payments is remote and would be immaterial. The Company determined the risk was low based on a prior history of insignificant claims. The Company is not currently involved in any indemnification matters in regards to its intellectual property.

On May 31, 2012, a purported shareholder class action lawsuit was filed in the United States District Court for the Central District of California against the Company and certain of its officers. On August 1, 2012, a similar purported shareholder class action lawsuit was filed in the United States District Court for the District of Delaware against the Company and certain of its officers. These actions are purportedly brought on behalf of purchasers of the Company's publicly traded securities between October 27, 2011 and April 26, 2012. Plaintiffs in both complaints allege that defendants made false and misleading statements, purport to assert claims for violations of the federal securities laws, and seek unspecified compensatory damages and other relief. The California case has been dismissed with prejudice; the Delaware action remains pending. The Company believes the claim in the Delaware complaint is without merit and intends to defend the action vigorously. While the Company believes there is no legal basis for liability, due to the uncertainty surrounding the litigation process, the Company is unable to reasonably estimate a range of loss, if any, at this time.

On July 17, 2012 and July 26, 2012, purported shareholder derivative lawsuits were filed in the California Superior Court for the County of Santa Barbara against our Board of Directors and several of our officers. The Company is named as nominal defendant. Plaintiffs in the state derivative actions allege that the Board allowed certain officers to make allegedly false and misleading statements. The complaints include claims for violation of the federal securities laws, breach of fiduciary duties, mismanagement, waste of corporate assets, insider trading, unjust enrichment, and violations of the California Corporations Code. The complaints seek compensatory damages, disgorgement, and other relief. The Company believes the claims are without merit and intends to defend the actions vigorously. While the Company believes there is no legal basis for liability, due to the uncertainty surrounding the litigation process, the Company is unable to reasonably estimate a range of loss, if any, at this time.

Contingent Consideration. In July 2011, the Company acquired the Sanuk brand, and the total purchase price included contingent consideration payments. As of December 31, 2012, the remaining contingent consideration payments, which have no maximum, are as follows:

•

51.8% of the Sanuk brand gross profit in 2012, which was $25,450,

•

36.0% of the Sanuk brand gross profit in 2013, and

•

40.0% of the Sanuk brand gross profit in 2015.

As of December 31, 2012 and 2011, contingent consideration for the acquisition of the Sanuk brand of $70,360 and $91,600, respectively, are included within other accrued expenses ($25,450 and $30,000 at December 31, 2012 and 2011, respectively) and long-term liabilities ($44,910 and $61,600 at December 31, 2012 and 2011, respectively) in the consolidated balance sheets. Refer to Note 12 for further information on the contingent consideration amounts.

In September 2012, the Company acquired Hoka, and the total purchase price included contingent consideration payments with a maximum of $2,000. Based on current projections as of December 31, 2012, contingent consideration for the acquisition of the Hoka brand of $1,100 is included within other accrued expenses and long-term liabilities in the consolidated balance sheets. Refer to Note 12 for further information on the contingent consideration amounts.