Annual report pursuant to Section 13 and 15(d)

Commitments And Contingencies (Note)

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Commitments And Contingencies (Note)
 12 Months Ended
Dec. 31, 2012
Commitments And Contingencies [Abstract]  
Commitments And Contingencies
COMMITMENTS AND CONTINGENCIES
In the ordinary course of business, HSNi is a party to various audits and lawsuits. These audits or litigation may relate to claims involving property, personal injury, contract, intellectual property (including patent infringement), sales tax, regulatory compliance and other claims. HSNi has established reserves for specific legal or tax compliance matters that it has determined the likelihood of an unfavorable outcome is probable and the loss is reasonably estimable. Management has also identified certain other legal matters where it believes an unfavorable outcome is not probable and, therefore, no reserve is established. Although management currently believes that an unfavorable resolution of claims against HSNi, including claims where an unfavorable outcome is reasonably possible, will not have a material impact on its liquidity, results of operations, financial condition or cash flows, these matters are subject to inherent uncertainties and management’s view of these matters may change in the future and an unfavorable resolution of such a proceeding could have a material impact. Moreover, any claims or regulatory actions against HSNi, whether meritorious or not, could be time-consuming, result in costly litigation, require significant amounts of management time and result in the diversion of significant operational resources.
HSNi leases satellite transponders, computers, warehouse and office space, equipment and services used in connection with its operations under various operating leases, many of which contain escalation clauses.
Future minimum payments under operating lease agreements are as follows (in thousands):

Years Ending December 31,
 
2013
$
23,578

2014
19,888

2015
18,292

2016
14,343

2017
13,027

Thereafter
26,559

Total
$
115,687


 
Expenses charged to continuing operations under these agreements were $22.1 million, $20.8 million, and $20.6 million for the years ended December 31, 2012, 2011 and 2010, respectively.
HSNi also has funding commitments that could potentially require its performance in the event of demands by third parties or contingent events, as follows (in thousands):

 
 
Amount of Commitments Expiration Per Period
 
 
Total Amounts
Committed
 
Less Than
1 Year
 
1 - 3 Years
 
3 - 5 Years
 
More Than
5 Years
Letters of credit and surety bonds
 
$
32,674

 
$
32,624

 
$
50

 
$
—

 
$
—

Purchase obligations
 
99,337

 
83,467

 
15,729

 
141

 
—

Total commercial commitments
 
$
132,011

 
$
116,091

 
$
15,779

 
$
141

 
$
—


The letters of credit (“LOCs”) primarily consist of trade LOCs, which are used for inventory purchases. Trade LOCs are guarantees of payment based upon the delivery of goods. The surety bonds primarily consist of customs bonds, which relate to the import of merchandise into the United States.
The purchase obligations primarily relate to cable contracts and include obligations for future cable distribution and commission guarantees.