Commitments And Contingencies

12 Months Ended

Dec. 31, 2011

Commitments And Contingencies [Abstract]

H. Commitments and Contingencies

We lease certain of our warehousing, sales and office facilities, automobiles and equipment under non-cancelable long-term operating leases. Certain of the leases provide renewal options ranging from one to ten years and escalation clauses covering increases in various costs. Total rental expense amounted to $2,372,000 and $2,362,000 in 2011 and 2010, respectively.

Future minimum lease payments under non-cancelable operating leases as of December 31, 2011 are as follows:


(Dollars in thousands)
2012	$	1,420
2013		1,405
2014		1,337
2015		1,285
2016		1,250
Thereafter		3,020
Total minimum payments	$	9,717

We have exclusive licenses to various patents, trademarks, trade names and copyrights in the United States and, in some instances, in certain other jurisdictions. Our "Kenneth Cole", "Tommy Hilfiger", "Nautica", "Geoffrey Beene", "Tumi", "Guess?", "Chaps", "Pierre Cardin", "Donald Trump", "Buffalo David Bitton", and "US Polo Association" licenses collectively may be considered material to our business. At December 31, 2011, we are obligated to pay minimum royalty and advertising under certain license agreements as follows: 2012 - $10,011,000; 2013 - $9,899,000; - 2014 - $6,591,000; and 2015 - $769,000. In connection with the Merger, we entered into an amendment to our license agreement with Nautica, effective upon the completion of the Merger, pursuant to which, among other things, the

Nautica license will be extended to December 31, 2016. Our license agreements generally require us to provide various forms of advertising and promotional support determined as a percentage of annual net sales of licensed merchandise and licensors generally retain audit rights for a specified period. We also pay a percentage of net sales to a consulting firm controlled by one of our directors in connection with license agreements which that firm introduced to us. Royalty payments made by us in connection with this agreement were approximately $51,000 and $98,000 for the years ended December 31, 2011 and 2010, respectively. We regularly assess the status of our license agreements and anticipate renewing those contracts expiring in 2012, subject to the negotiation of terms and conditions satisfactory to us.

On June 7, 1990, we received notice from the United States Environmental Protection Agency ("EPA") that we, along with fifteen others, had been identified as a Potentially Responsible Party (collectively, the "PRPs") in connection with the release of hazardous substances at the Shpack Superfund site located in Norton and Attleboro, Massachusetts (the "Site"). We, along with six other PRPs, subsequently entered into an administrative order by consent pursuant to which, inter alia, we and they undertook to conduct a remedial investigation/feasibility study (the "RI/FS") with respect to the alleged contamination at the Site.

The RI/FS of the Site was completed and EPA prepared its record of decision. On August 15, 2006, we received a Special Notice letter from EPA indicating that EPA expected us, and others, to perform the Remedial Design/Remedial Action ("RD/RA") for the Shpack site. A number of parties, including us, submitted a good faith offer letter to EPA in response to the Special Notice, and began discussions with EPA regarding the Site. We and twelve other parties (the "PRP Group"), along with the United States Department of Energy ("USDOE"), signed a judicial consent decree relating to the Site, which was lodged on December 9, 2008 with the United States District Court for the District of Massachusetts, Eastern Division. The PRP Group members have agreed in the consent decree, jointly and severally, to perform remediation activities at the Site in accordance with a statement of work agreed to between EPA, on the one hand, and, on the other hand, the PRP Group and USDOE. In addition, the PRP Group members have agreed on a cost sharing allocation and procedures for the funding and performance of the consent decree obligations. In accordance with this agreement, we would not be responsible for increased costs of remediation at the Site due to the presence of radiological contamination. As among the PRP Group members, certain members, but not the Company, have agreed to be responsible for the increased costs. In addition, USDOE has agreed in the consent decree to be responsible for one-half of those costs.

EPA estimates the total cost of remediation at the Site to be approximately $43,000,000, which includes two response actions at the site. The first action, managed by the U.S. Army Corps of Engineers and which is in process, is designed to remove radiological contamination. The second action, led by EPA, is designed to remove non-radioactive contamination. The PRP Group members that did not generate radioactive materials, including us, should not be responsible for participating, financially or otherwise, in the first response action. The second phase of the remediation would commence after the first phase has been completed (which we expect no earlier than the fourth quarter of 2012). Based on information we have received from the PRP Group, the expected costs to complete the RD/RA will be in the range of $13,000,000 to $18,000,000. We believe that this matter will not have a material adverse effect on our operating results, financial condition or cash flow, and that we have adequately reserved for the potential costs associated with this site. At December 31, 2011 we had accrued $1,518,000 for potential costs associated with this site.

In September 1991, we signed a judicial consent decree relating to the Western Sand and Gravel site located in Burrillville and North Smithfield, Rhode Island. The consent decree was entered on August 28, 1992 by the United States District Court for the District of Rhode Island. The most likely scenario for remediation of the ground water at this site is through natural attenuation, which will be monitored until 2017. The estimated cost of remediation by natural attenuation through 2017 is approximately $1,500,000. Based on current participation, the Company's share of these costs is

approximately $134,000 with a remaining liability of approximately $68,000 which is accrued as of December 31, 2011. We believe that the cost of remediation of this site will not have any material adverse effect on our operating results, financial condition or cash flow based on the results of periodic tests conducted at the site, and that we have adequately reserved for the potential costs associated with this site.

The estimated liability for costs associated with environmental sites is included in long-term obligations in the accompanying balance sheets (See Note E), exclusive of currently payable amounts of approximately $1,435,000 and $234,000 included in other current liabilities in 2011 and 2010, respectively. These amounts have not been discounted. We believe that the accompanying financial statements include adequate provision for environmental exposures.

In the ordinary course of business, we may, from time to time, be contingently liable for performance under letters of credit. No letters of credit were outstanding at either December 31, 2011 or December 31, 2010. We are required to pay a monthly fee presently equal to 2.0% per annum on the outstanding letter of credit.

We are also a party to employment agreements with certain of our executive officers that provide for the payment of compensation and other benefits during the term of each executive's employment and, under certain circumstances, for a period of time following their termination.

We are subject to legal proceedings and claims which arise in the ordinary course of our business. Although there can be no assurance as to the disposition of these proceedings, we do not anticipate that these matters will have a material impact on our results of operations or financial condition.

- Definition

The entire disclosure for commitments and contingencies.

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+ Details

Swank, Inc. 10-K