Commitments and Contingencies

Leases

The Company operates most of its retail stores under various leasing arrangements. The Company also occupies various office and warehouse facilities and uses certain equipment under numerous lease agreements. Such leasing arrangements are accounted for as either operating leases or capital leases. In this context, capital leases include leases whereby the Company is considered to have the substantive risks of ownership during construction of a leased property. Information on the Company's operating and capital leasing activities is set forth below.

Operating Leases

The Company is typically required to make minimum rental payments, and often contingent rental payments, under its operating leases. Many of the Company's retail store leases provide for contingent rental payments based upon sales, and certain rental agreements require payment based solely on a percentage of sales. Terms of the Company's leases generally contain renewal options, rent escalation clauses, and landlord incentives. Rent expense, net of sublease income, was approximately $455 million, $430 million, and $427 million in Fiscal 2014, Fiscal 2013, and Fiscal 2012, respectively. Such amounts include contingent rental charges of approximately $176 million, $174 million, and $182 million in Fiscal 2014, Fiscal 2013, and Fiscal 2012, respectively. In addition to such amounts, the Company is normally required to pay taxes, insurance, and certain occupancy costs relating to the leased real estate properties.

As of March 29, 2014, future minimum rental payments under noncancelable operating leases with lease terms in excess of one year were as follows:



	Minimum Operating Lease Payments^(a)(b)
	(millions)
Fiscal 2015	$	336
Fiscal 2016	315
Fiscal 2017	290
Fiscal 2018	271
Fiscal 2019	247
Fiscal 2020 and thereafter	927
Total minimum rental payments	$	2,386


^(a)	Net of sublease income, which is not significant in any period.


^(b)	Includes a $74 million operating lease obligation related to the land portion of the build-to-suit lease agreement for a new Polo flagship store on Fifth Avenue in New York City entered into in Fiscal 2014, as further described below.

Capital Leases

Assets under capital leases, including build-to-suit leases, amounted to approximately $259 million and $33 million at the end of Fiscal 2014 and Fiscal 2013, respectively, net of accumulated amortization of approximately $19 million and $16 million, respectively. Such assets are classified within property and equipment, net in the consolidated balance sheets based on their nature. As of March 29, 2014, future minimum rental payments under noncancelable capital leases, including build-to-suit leases, with lease terms in excess of one year were as follows:



	Minimum Capital Lease Payments^(a)(b)
	(millions)
Fiscal 2015	$	24
Fiscal 2016	24
Fiscal 2017	24
Fiscal 2018	23
Fiscal 2019	23
Fiscal 2020 and thereafter	98
Total	216
Less: amount representing interest	(46		)
Present value of net minimum rental payments	$	170


^(a)	Net of sublease income, which is not significant in any period.

^(b)

Includes lease payments related to the Company's build-to-suit lease agreement for a new Polo flagship store on Fifth Avenue in New York City entered into in Fiscal 2014. The total commitment related to this lease is $235 million, comprised of a $74 million operating lease obligation related to the land portion of the lease (included in the minimum operating lease payments table above) and a $161 million obligation related to the building portion of the lease (included in the minimum capital lease payments table above).

Employee Agreements

The Company has employment agreements with certain executives in the normal course of business which provide for compensation and certain other benefits. These agreements also provide for severance payments under certain circumstances.

Other Commitments

Other off-balance sheet firm commitments amounted to approximately $1.381 billion as of March 29, 2014, including inventory purchase commitments of approximately $1.106 billion, outstanding letters of credit of approximately $9 million, interest payments related to the Company's 2.125% Senior Notes of approximately $29 million, and other commitments of approximately $237 million, comprised of the Company's legally-binding obligations under sponsorship, licensing, and other marketing and advertising agreements, distribution-related agreements, information technology-related service agreements, and pension-related obligations.

Litigation

Wathne Imports Litigation

On August 19, 2005, Wathne Imports, Ltd. ("Wathne"), the Company's then domestic licensee for luggage and handbags, filed a complaint in the U.S. District Court in the Southern District of New York against the Company and Mr. Ralph Lauren, its Chairman and Chief Executive Officer, asserting, among other things, federal trademark law violations, breach of contract, breach of obligations of good faith and fair dealing, fraud, and negligent misrepresentation. The complaint originally sought, among other relief, injunctive relief, compensatory damages in excess of $250 million, and punitive damages of not less than $750 million. On September 13, 2005, Wathne withdrew this complaint from the U.S. District Court and filed a complaint in the Supreme Court of the State of New York, New York County, making substantially the same allegations and claims (excluding the federal trademark claims), and seeking similar relief. On February 1, 2006, the Court granted the Company's motion to dismiss all of the causes of action, including the cause of action against Mr. Lauren, except for breach of contract related claims, and denied Wathne's motion for a preliminary injunction. Following some discovery, the Company moved for summary judgment on the remaining claims and Wathne cross-moved for partial summary judgment. In an April 11, 2008 Decision and Order, the Court granted the Company's summary judgment motion to dismiss most of the claims against the Company, and denied Wathne's cross-motion for summary judgment. Wathne appealed the dismissal of its claims to the Appellate Division of the Supreme Court. Following a hearing on May 19, 2009, the Appellate Division issued a Decision and Order on June 9, 2009 which, in large part, affirmed the lower Court's ruling. Since then, Wathne has made various attempts to expand the scope of its claim and the damages sought by making various motions and pursuing several intermediate appeals.

At this time, Wathne's principle remaining claim is that the Company required that Wathne discontinue the use of the Polo Sport brand on handbags in violation of its contract. A trial date has not been scheduled and the Company intends to continue to contest the remaining claims and dispute any alleged damages in this lawsuit vigorously. Management does not expect that the ultimate resolution of this matter will have a material adverse effect on the Company's consolidated financial statements.

Other Matters

The Company is otherwise involved, from time to time, in litigation, other legal claims, and proceedings involving matters associated with or incidental to its business, including, among other things, matters involving credit card fraud, trademark and other intellectual property, licensing, and employee relations. The Company believes that the resolution of currently pending matters will not individually or in the aggregate have a material adverse effect on its financial statements. However, the Company's assessment of the current litigation or other legal claims could change in light of the discovery of facts not presently known or determinations by judges, juries, or other finders of fact which are not in accord with management's evaluation of the possible liability or outcome of such litigation or claims.

In the normal course of business, the Company enters into agreements that provide general indemnifications. The Company has not made any significant indemnification payments under such agreements in the past, and does not currently anticipate incurring any material indemnification payments.