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COMMITMENTS, CONTINGENCIES AND OTHER MATTERS | 12 Months Ended
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Dec. 31, 2016
COMMITMENTS, CONTINGENCIES AND OTHER MATTERS [Abstract] |
COMMITMENTS, CONTINGENCIES AND OTHER MATTERS |
11. | COMMITMENTS, CONTINGENCIES AND OTHER MATTERS
Leases - The Company is obligated under operating lease agreements for the rental of certain office and warehouse facilities and equipment which expire at various dates through August 2032. The Company currently leases its headquarters office/warehouse facility in New York from an entity owned by the Company’s three principal shareholders and senior executive officers. The Company also acquires certain computer, communications equipment, and machinery and equipment pursuant to capital lease obligations. At December 31, 2016, the future minimum annual lease payments for capital leases and related and third-party operating leases were as follows (in millions):
|  |  | Capital Leases |  |  | Operating Leases |  |  | Total |
2017 |  |  |  | 0.1 |  |  | $ | 23.0 |  |  | $ | 23.1 |
2018 |  |  |  | 0.1 |  |  |  | 21.1 |  |  |  | 21.2 |
2019 |  |  |  | - |  |  |  | 20.0 |  |  |  | 20.0 |
2020 |  |  |  | - |  |  |  | 16.6 |  |  |  | 16.6 |
2021 |  |  |  | - |  |  |  | 12.2 |  |  |  | 12.2 |
2022-2026 |  |  |  | - |  |  |  | 44.2 |  |  |  | 44.2 |
2027-2031 |  |  |  | - |  |  |  | 19.8 |  |  |  | 19.8 |
Thereafter |  |  |  | - |  |  |  | 1.8 |  |  |  | 1.8 |
Total minimum lease payments |  |  |  | 0.2 |  |  |  | 158.7 |  |  |  | 158.9 |
Less: sublease rental income |  |  |  | - |  |  |  | 10.9 |  |  |  | 10.9 |
Lease obligation net of subleases |  |  |  | 0.2 |  |  | $ | 147.8 |  |  |  | 148.0 |
Less: amount representing interest |  |  |  | 0.0 |  |  |  |  |  |  |  |  |
Present value of minimum capital lease payments (including current portion of $0.2) |  |  | $ | 0.2 |  |  |  |  |  |  |  |  |
Annual rent expense aggregated approximately $17.7 million, $26.4 million and $31.5 million in 2016, 2015 and 2014, respectively. Included in rent expense was $0.9 million in 2016, $1.0 million in 2015, $0.9 million in 2014, to related parties. Rent expense is net of sublease income of $0.4 million for 2016, $0.1 million for 2015, and $0.0 million for 2014, respectively. NATG operations annual rent expense totaled approximately $1.3 million, $10.7 million and $18.3 million for 2016, 2015 and 2014, respectively. The operating lease agreements generally provide for rental payments on a graduated basis and for options to renew, which could increase future minimum lease payments if exercised. The Company recognizes rent expense on a straight‑line basis over the lease period and has accrued for rent expense incurred but not paid. Deferred rent represents the difference between actual operating lease payments due and straight‑line rent expense. The excess is recorded as a deferred rent liability in the early periods of the lease, when cash payments are generally lower than straight‑line rent expense, and are reduced in the later periods of the lease when payments begin to exceed the straight‑line expense. The Company also accounts for leasehold improvement incentives within its deferred rent liability. Other Matters The Company and its subsidiaries are from time to time involved in various lawsuits, claims, investigations and proceedings which may include commercial, employment, customer, personal injury and health and safety law matters, as well as VAT tax disputes in European jurisdictions, and which are handled and defended in the ordinary course of business. In addition, the Company is from time to time subjected to various assertions, claims, proceedings and requests for damages and/or indemnification concerning intellectual property matters, including patent infringement suits involving technologies that are incorporated in a broad spectrum of products the Company sells or that are incorporated in the Company’s e-commerce sales channels. The Company is also audited by (or has initiated voluntary disclosure agreements with) numerous governmental agencies in various countries, including U.S. Federal and state authorities, concerning potential income tax, sales tax and unclaimed property liabilities. These matters are in various stages of investigation, negotiation and/or litigation. The Company is also being audited by an entity representing 43 states seeking recovery of “unclaimed property”. The Company is complying with the unclaimed property audit and is providing requested information. The Company intends to vigorously defend these matters and believes it has strong defenses. Although the Company does not expect, based on currently available information, that the outcome in any of these matters, individually or collectively, will have a material adverse effect on its financial position or results of operations, the ultimate outcome is inherently unpredictable. Therefore, judgments could be rendered or settlements entered, that could adversely affect the Company’s operating results or cash flows in a particular period. The Company regularly assesses all of its litigation and threatened litigation as to the probability of ultimately incurring a liability, and records its best estimate of the ultimate loss in situations where it assesses the likelihood of loss as probable and estimable. In this regard, the Company establishes accrual estimates for its various lawsuits, claims, investigations and proceedings when it is probable that an asset has been impaired or a liability incurred at the date of the financial statements and the loss can be reasonably estimated. At December 31, 2016 the Company has established accruals for certain of its various lawsuits, claims, investigations and proceedings based upon estimates of the most likely outcome in a range of loss or the minimum amounts in a range of loss if no amount within a range is a more likely estimate. The Company does not believe that at December 31, 2016 any reasonably possible losses in excess of the amounts accrued would be material to the financial statements. Following the previously reported independent investigation of Gilbert Fiorentino and Carl Fiorentino by our Audit Committee in 2011 (in response to a whistleblower report) for a variety of improper acts, the subsequent termination of their employment and the entering into by Gilbert Fiorentino of a settlement agreement with the Securities and Exchange Commission, on November 20, 2014 the United States Attorney’s Office (“USAO”) for the Southern District of Florida announced that Gilbert Fiorentino and Carl Fiorentino had been charged with mail fraud, wire fraud and money laundering in connection with a scheme to defraud the Company. Specifically, the charges set forth a scheme to obtain kickbacks and other benefits, and to conceal this illicit income from the IRS, all while Gilbert Fiorentino and Carl Fiorentino were employed as senior executives at the Company’s NATG business. On December 2, 2014, the United States Attorney’s Office announced that Gilbert Fiorentino and Carl Fiorentino had pled guilty to various charges, and on March 3, 2015, Gilbert Fiorentino and Carl Fiorentino were sentenced to sixty and eighty months’ imprisonment, respectively. Following completion of their sentences, each is to be placed on supervised release for a period of thirty-six months. On March 1, 2016, the United States District Court for the Southern District of Florida awarded the Company approximately $36 million in restitution from Gilbert and Carl Fiorentino, which the Company will utilize all available means to collect. Judgment liens have been established on certain property and assets of each of Gilbert and Carl Fiorentino. The Company is working with the USAO to obtain forfeiture proceeds from the sale of certain seized assets. During the third quarter of 2016 the Company received a partial restitution payment of approximately $1.3 million. The Company is also continuing to seek a civil judgment against Carl Fiorentino. The Company's Audit Committee, with the assistance of independent outside counsel, cooperated with a request by the USAO that it assist the USAO’s investigation into allegations arising from the Fiorentino investigation regarding possible executive officer conflicts of interest and internal controls and books and records violations. The Company’s Audit Committee, along with the Audit Committee’s independent outside counsel, conducted an investigation of the allegations and its counsel presented the Audit Committee’s findings to the USAO in July 2015. The Company was advised that the Audit Committee investigation found no evidence of executive officer conflicts of interest, and no material evidence of internal controls violations or books and records violations. The Audit Committee considers its investigation to be closed at this time and the Company has been advised there has been no further contact from the USAO. Notwithstanding, it is not possible at this time to predict if or when the USAO will conclude its investigation; what subject(s) will be investigated; what actions, if any, may be taken by the government as a result of its investigation; or whether any of these matters will have a material adverse impact on the Company.

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