8.Commitments and Contingencies

 

Our future contractual obligations consist principally of long-term debt, operating leases, minimum commitments regarding third-party warehouse operations services, forward purchase agreements and remaining minimum royalty payments due licensors pursuant to brand licensing agreements.

 

Leases

 

During the years ended December 27, 2014, December 28, 2013 and December 29, 2012, the rental expense from operating leases was $2.6 million, $1.8 million and $1.6 million, respectively.  As of December 27, 2014, minimum rental commitments under non-cancellable operating leases were (in thousands):

 

 

Purchase agreements

 

In order to mitigate the risks of volatility in commodity markets to which we are exposed, we have entered into forward purchase agreements with certain suppliers based on market prices, forward price projections and expected usage levels.  Our purchase commitments for certain ingredients, packaging materials and energy are generally less than 12 months.

 

Licensing

 

We produce T.G.I. Friday’s® brand snacks, Tato Skins® brand potato crisps and Boulder Canyon® Authentic Foods Rice and Bean snacks utilizing a sheeting and frying process that includes technology that we license from a third party.  Pursuant to the license agreement between us and the third party, we have a royalty-bearing, exclusive right license to use the technology in the United States, Canada, and Mexico until such time the parties mutually agree to terminate the agreement.  Even though the patents for this technology expired in December 2006, in consideration for the use of this technology, we are required to make royalty payments on sales of products manufactured utilizing the technology until such termination date.  However, should products substantially similar to Tato Skins®, O’Boisies® and Pizzarias® become available for any reason in the marketplace by any manufacturer other than us which results in a sales decline of 10% or more, any royalty obligation for the respective products shall cease.

 

We license the T.G.I. Friday’s® brand snacks trademark from T.G.I. Friday’s Inc. under a license agreement with a term expiring in December 2019.  Pursuant to the license agreement, we are required to make royalty payments on sales of T.G.I. Friday’s® brand snack products and are required to achieve certain minimum sales levels by certain dates during the contract term.

 

We license the Jamba® brand trademark from Jamba Juice Company under a license agreement with a term expiring in 2035.  Pursuant to the license agreement, we are required to make royalty payments on sales of Jamba® products, and are required to achieve certain minimum sales levels by certain dates during the contract term.

 

We license the Nathan’s Famous® brand trademark from Nathan’s Famous Corporation under a license agreement with a term expiring in 2031.  Pursuant to the license agreement, we are required to make royalty payments on sales of Nathan’s Famous® products, and are required to achieve certain minimum sales levels by certain dates during the contract term.

 

We license the Vidalia® brand trademark from Vidalia Brands, Inc. under a license agreement with a term expiring January 2019.  Pursuant to the license agreement, we are required to make royalty payments on sales of Vidalia® brand products during the contract term.

 

We license the Seattle’s Best Coffee® brand trademark from Seattle’s Best Coffee LLC under a license agreement with a term expiring November 2017, which automatically extends for a five-year period upon meeting certain minimum sales targets.  Pursuant to the license agreement, we are required to make royalty payments on sales of Seattle’s Best Coffee®  brand products during the contract term.

 

Legal Proceedings

 

We are periodically a party to various lawsuits arising in the ordinary course of business.  Management believes, based on discussions with legal counsel, that the resolution of any such lawsuits, individually and in the aggregate, will not have a material adverse effect on our financial position or results of operations.  See Note 12, “Litigation.”