Commitments represent obligations, such as those for future purchases of goods or services that are yet recorded on the balance sheet as liabilities. We record liabilities for commitments when incurred (i.e., when the goods or services are received).

 

 

We lease real property and equipment under various operating lease agreements expiring at various times through Of the Company operated retail design centers, of the properties were leased as of Leases covering these retail design center locations and other equipment require, in addition to stated minimums, contingent rentals based on retail sales or equipment usage. Generally, the leases provide for renewal for various periods at stipulated rates.

 

Total minimum rental payments associated with our leases are recorded as rent expense (a component of   ) on a straight-line basis over the periods of the respective non-cancelable lease terms. Future minimum lease payments under non-cancelable operating leases for each of the fiscal years subsequent to and thereafter are shown in the table below. Also shown are minimum future rentals from subleases, which will partially offset lease payments in the aggregate (in thousands):

 

		Future Minimum				Future Minimum
Fiscal Year Ended June 30,		Lease Payments				Sublease Rentals
2020		$	33,761			$	1,800
2021			30,534				1,611
2022			26,443				1,491
2023			20,276				1,055
2024			15,345				403
2025 and thereafter			43,500				721
Total		$	169,859			$	7,081

 

 

Total rent expense for each of the past fiscal years ended was as follows (in thousands):

 

		2019				2018				2017
Basic rentals under operating leases		$	34,378			$	33,734			$	33,033
Contingent rentals under operating leases			76				133				142
Basic and contingent rentals			34,454				33,867				33,175
Less: sublease rent			(2,060	)			(1,853	)			(1,824	)
Total rent expense		$	32,394			$	32,014			$	31,351

 

 

Deferred rent credits and deferred lease incentives are reflected in the consolidated balance sheets under the caption , and are amortized over the respective underlying lease terms on a straight-line basis as a reduction of rent expense. Amounts recorded at are as follows (in thousands):

 

		2019				2018
Deferred rent credits		$	11,987			$	13,488
Deferred lease incentives			5,143				4,532
		$	17,130			$	18,020

 

 

Purchase obligations are defined as agreements that are enforceable and legally binding that specify all significant terms, including fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. We do, in the normal course of business, regularly initiate purchase orders for the procurement of (i) selected finished goods sourced from -party suppliers, (ii) lumber, fabric, leather and other raw materials used in production, and (iii) certain outsourced services. All purchase orders are based on current needs and are fulfilled by suppliers within short time periods. At our open purchase orders with respect to such goods and services totaled million and are to be paid in less than year. Other purchase commitments included within this table represent payment due for other services such as telecommunication, computer-related software, royalties, web development, insurance and other maintenance contracts. There were material changes in our purchase commitments with suppliers during fiscal

 

 

We are routinely party to various legal proceedings, including investigations or as a defendant in litigation, in the ordinary course of business. We are also subject to various federal, state and local environmental protection laws and regulations and are involved, from time to time, in investigations and proceedings regarding environmental matters. Such investigations and proceedings typically concern air emissions, water discharges, and/or management of solid and hazardous wastes. Under these laws, we and/or our subsidiaries are, or be, required to remove or mitigate the effects on the environment of the disposal or release of certain hazardous materials.

 

Regulations issued under the Clean Air Act Amendments of required the industry to reformulate certain furniture finishes or institute process changes to reduce emissions of volatile organic compounds. Compliance with many of these requirements has been facilitated through the introduction of high solids coating technology and alternative formulations. In addition, we have instituted a variety of technical and procedural controls, including reformulation of finishing materials to reduce toxicity, implementation of high velocity low pressure spray systems, development of storm water protection plans and controls, and further development of related inspection/audit teams, all of which have served to reduce emissions per unit of production. We remain committed to implementing new waste minimization programs and/or enhancing existing programs with the objective of (i) reducing the total volume of waste, (ii) limiting the liability associated with waste disposal, and (iii) continuously improving environmental and job safety programs on the factory floor which serve to minimize emissions and safety risks for employees. To reduce the use of hazardous materials in the manufacturing process, we will continue to evaluate the most appropriate, cost-effective control technologies for finishing operations and production methods. We believe that our facilities are in material compliance with all such applicable laws and regulations. Our currently anticipated capital expenditures for environmental control facility matters are material.

 

On a quarterly basis, we review our litigation activities and determine if an unfavorable outcome to us is considered “remote”, “reasonably possible” or “probable” as defined by ASC Where we determine an unfavorable outcome is probable and is reasonably estimable, we accrue for potential litigation losses. The liability we ultimately incur with respect to such litigation matters, in the event of a negative outcome, be in excess of amounts currently accrued, if any; however, we do expect that the reasonably possible outcome of these litigation matters would, individually or in the aggregate, have a material adverse effect on our financial condition, results of operations or cash flows. Where we determine an unfavorable outcome is probable or reasonably estimable, we do accrue for any potential litigation loss.

 

Although the outcome of the various claims and proceedings against us cannot be predicted with certainty, management believes that the likelihood is remote that any existing claims or proceedings, individually or in the aggregate, will have a material adverse effect on our financial position, results of operations or cash flows.

 

 

As permitted or required under Delaware law and to the maximum extent allowable under that law, the Company has certain obligations to indemnify its current and former officers and directors for certain events or occurrences while the officer or director is, or was serving, at our request in such capacity. These indemnification obligations are valid as long as the director or officer acted in good faith and in a manner the person reasonably believed to be in, or opposed to, the best interests of the Company, and with respect to any criminal action or proceeding, had reasonable cause to believe his or her conduct was unlawful. The maximum potential amount of future payments Ethan Allen could be required to make under these indemnification obligations is unlimited; however, the Company has a director and officer insurance policy that it believes mitigates our exposure and enable us to recover a portion of any future amounts paid. We believe the estimated fair value of these indemnification obligations is immaterial.