Memorex 2013 Annual Report Download - page 97

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
On May 22, 2013, Imation was sued in U.S. District Court for the District of Delaware by five entities: One-Blue, LLC
(One-Blue), which is an entity with licensing authority for a pool of patents relating to Blu-ray discs, and four members of One-
Blue, Koninklijke Philips N.V., Panasonic Corporation, Pioneer Corporation and Sony Corporation. The plaintiffs allege that
Imation’s sales of certain Blu-ray discs infringe six patents and seek unspecified damages, treble damages, and attorney’s
fees. On June 13, 2013, Imation filed an Answer, Affirmative Defenses, and Counterclaims, naming various defenses
including that plaintiffs are barred, in whole or in part, from any recovery or relief by their refusal to license the patents-in-suit
under fair, reasonable, and nondiscriminatory terms. Imation intends to vigorously defend the case. This matter is now in the
discovery phase for issues relating to determination of a fair, reasonable, and nondiscriminatory royalty rate. In addition,
Imation has a dispute with One-Blue regarding One-Blue’s refusal to license its Japanese Blu-ray patents under fair,
reasonable, and nondiscriminatory terms in Japan, where Imation’s sales of Blu-ray discs are substantially greater than in the
U.S. Imation Corporation Japan, Imation’s Japanese subsidiary, has sued One-Blue in Japan regarding its unlawful
interference with certain of our customer relationships. Imation has notified its manufacturers of their indemnity obligations
that it believes cover a portion of its liability, if any, to One-Blue and the other plaintiffs.
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:
2013 2012 2011
(In millions)
Minimum lease payments .............................................. $8.5 $6.1 $8.7
Contingent rentals ................................................... 3.8 6.1 4.5
Rental income ...................................................... (8.4) (3.4) (3.1)
Sublease income .................................................... (0.5) (0.7) (0.8)
Total rental expense ................................................ $3.4 $8.1 $9.3
Minimum lease payments and contingent rental expenses associated with agreements with warehouse providers are
included as a component of cost of goods sold in our Consolidated Statements of Operations. The minimum lease payments
under such arrangements were $0.9 million, $0.8 million and $0.8 million in 2013, 2012 and 2011, respectively. The
contingent rental expenses under such arrangements were $2.8 million, $1.8 million and $1.7 million in 2013, 2012 and 2011,
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, 2013:
2014 2015 2016 2017 2018 Thereafter Total
(In millions)
Minimum lease payments ................. $6.9 $5.3 $2.3 $1.4 $0.7 $1.5 $18.1
Environmental Matters
Our operations are subject to a wide range of federal, state and local environmental laws. Environmental remediation
costs are accrued when a probable liability has been determined and the amount of such liability has been reasonably
estimated. These accruals are reviewed periodically as remediation and investigatory activities proceed and are adjusted
accordingly. Compliance with environmental regulations has not had a material adverse effect on our financial results. As of
December 31, 2013, we had environmental-related accruals totaling $0.2 million recorded in other liabilities and we have
minor remedial activities underway at one of our prior manufacturing facilities. We believe that our accruals are adequate,
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