Memorex 2012 Annual Report Download - page 94

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Consequently, as of December 31, 2012, we are unable to reasonably estimate the ultimate aggregate amount of any
monetary liability or financial impact that we may incur with respect to these matters. It is reasonably possible that the ultimate
resolution of these matters could materially affect our operating results.
On January 11, 2011, we signed a patent cross-license agreement with SanDisk Corporation (SanDisk) to settle two
patent cases filed by SanDisk in Federal District Court against our flash memory products, including USB drives and solid
state disk (SSD) drives. Under the terms of the cross-license, we will pay SanDisk royalties on certain flash memory products
that were previously not licensed. The specific terms of the cross-license are confidential. The cross-license agreement
required us to make a one-time payment of $2.6 million in 2011, which was included in litigation settlement expense in the
Consolidated Statements of Operations during 2010.
On June 19, 2009 Advanced Research Corp. (ARC) sued Imation in Ramsey County District Court for breach of contract
relating to a supply agreement under which we purchased magnetic heads to write servo patterns on magnetic tape,
requesting the court to order that Imation pay damages and return the purchased heads to ARC. In September 2011 we
agreed to a settlement of $2.0 million, which is included in litigation settlement expense in the Consolidated Statements of
Operations as of December 31, 2011 and was paid during 2012.
In 2009 we entered into a confidential settlement agreement ending all legal disputes with Philips Electronics N.V.,
U.S. Philips Corporation and North American Philips Corporation (collectively, Philips). We had been involved in a complex
series of disputes in multiple jurisdictions regarding cross-licensing and patent infringement related to recordable optical
media. The settlement provided resolution of all claims and counterclaims filed by the parties without any finding or admission
of liability or wrongdoing by any party. As a term of the settlement, we agreed to pay Philips $53.0 million over a period of
three years. Based on the present value of these settlement payments, we recorded a charge of $49.0 million in 2009. We
made payments of $16.5 million, $8.3 million, $8.2 million and $20.0 million in 2012, 2011, 2010 and 2009, respectively, in full
satisfaction of this settlement. Interest accretion of $0.5 million, $1.2 million and $1.5 million was recorded in 2012, 2011 and
2010, respectively. The interest accretion is included in the interest expense on our Consolidated Statements of Operations.
At December 31, 2012, the settlement was paid in full.
Operating Leases
We incur rent expense under operating leases, which primarily relate to equipment and office space. Most long-term
leases include one or more options to renew at the then fair rental value for a period of approximately one to three years. The
following table sets forth the components of net rent expense for the years ended December 31:
2012 2011 2010
(In millions)
Minimum lease payments ............................................. $6.1 $8.7 $ 9.6
Contingent rentals ................................................... 6.1 4.5 7.2
Rental income ...................................................... (3.4) (3.1) (2.9)
Sublease income .................................................... (0.7) (0.8) (0.5)
Total rental expense ................................................. $8.1 $9.3 $13.4
Minimum lease payments and contingent rental expenses associated with agreements with warehouse providers are
included as a component of cost of goods sold in the Consolidated Statements of Operations. The minimum lease payments
under such arrangements were $0.8 million, $0.8 million and $2.0 million in 2012, 2011 and 2010, respectively. The contingent
rental expenses under such arrangements were $1.8 million, $1.7 million and $3.6 million in 2012, 2011 and 2010, respectively.
The following table sets forth the minimum rental payments under operating leases with non-cancelable terms in excess
of one year as of December 31, 2012:
2013 2014 2015 2016 2017 Thereafter Total
(In millions)
Minimum lease payments ...................... $8.0 $4.9 $2.1 $1.3 $0.9 $1.6 $18.8
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