The Company leases facilities under operating lease agreements expiring through November 1, 2031. The Company pays taxes, maintenance and insurance in addition to the lease obligations. Leases may provide for renewal options and rent escalations tied to either increases in the lessor’s operating expenses, fluctuations in the consumer price index in the relevant geographical area, or a percentage of gross sales in excess of a base annual rent. The Company also leases certain equipment and automobiles under operating lease agreements expiring at various dates through May 1, 2021. Rent expense for the years ended December 31, 2017, 2016 and 2015 approximated $223.7 million, $171.0 million and $137.8 million, respectively.

Minimum lease payments, which take into account escalation clauses, are recognized on a straight-line basis over the minimum lease term. Reimbursements for leasehold improvements are recorded as liabilities and are amortized as a reduction to rent expense over the lease term. Lease concessions, usually a free rent period, are considered in the calculation of the minimum lease payments for the minimum lease term.

Future minimum lease payments under noncancellable leases at December 31, 2017 are as follows (in thousands):

The Company finances production activities in part through the use of interest-bearing open purchase arrangements with certain of its international manufacturers. These arrangements currently bear interest at rates between 0.0% and 0.5% for 30- to 60-day financing. The amounts outstanding under these arrangements at December 31, 2017 and 2016 were $177.4 million and $260.7 million, respectively, which are included in accounts payable in the accompanying consolidated balance sheets. Interest expense incurred by the Company under these arrangements amounted to $4.8 million in 2017, $4.4 million in 2016, and $5.4 million in 2015. The Company has open purchase commitments with its foreign manufacturers at December 31, 2017 of $943.4 million, which are not included in the accompanying 2017 consolidated balance sheet.

The Company recognizes legal expense in connection with loss contingencies as incurred.

Personal Injury Lawsuits Involving Shape-ups — As previously reported, on February 20, 2011, Skechers U.S.A., Inc., Skechers U.S.A., Inc. II and Skechers Fitness Group were named as defendants in a lawsuit that alleged, among other things, that Shape-ups were defective and unreasonably dangerous, negligently designed and/or manufactured, and did not conform to representations made by the Company, and that the Company failed to provide adequate warnings of alleged risks associated with Shape-ups. Other personal injury lawsuits involving Shape-ups (some on behalf of multiple plaintiffs) subsequently were filed in various courts, alleging varying injuries but employing similar legal theories and asserting similar claims to those made in the first case, as well as claims for breach of express and implied warranties, loss of consortium, and fraud. Although there are variations in the relief sought, the plaintiffs generally seek compensatory and/or economic damages, exemplary and/or punitive damages, and attorneys’ fees and costs. As detailed below, the Company is named as a defendant in one currently active, pending case.

On December 19, 2011, the Judicial Panel on Multidistrict Litigation issued an order establishing a multidistrict litigation (“MDL”) proceeding in the United States District Court for the Western District of Kentucky entitled  In re Skechers Toning Shoe Products Liability Litigation, case no. 11-md-02308-TBR. Since 2011, a total of 1,235 personal injury cases have been filed in or transferred to the MDL proceeding. The Company has resolved 1,766 personal injury claims in the MDL proceedings, comprised of 1,154 that were filed as formal actions and 612 that were submitted by plaintiff fact sheets. The Company has also settled another 13 claims in principle—8 filed cases and 5 claims submitted by plaintiff fact sheets—either directly or pursuant to a global settlement program that has been approved by the claimants’ attorneys (described in greater detail below). Further, 72 cases in the MDL proceeding have been dismissed either voluntarily or on motions by the Company and 40 unfiled claims submitted by plaintiff fact sheet have been abandoned. Between the consummated settlements and cases subject to the settlement program, all but one of the personal injury cases pending in the MDL have been or are expected to be resolved. Fact discovery in that case has been completed and a court-ordered mediation is scheduled in March 2018. No trial date has been set.

Skechers U.S.A., Inc., Skechers U.S.A., Inc. II and Skechers Fitness Group also have been named as defendants in a total of 72 personal injury actions filed in various Superior Courts of the State of California that were brought on behalf of 920 individual plaintiffs (360 of whom also submitted MDL court-approved questionnaires for mediation purposes in the MDL proceeding). Of those cases, 68 were originally filed in the Superior Court for the County of Los Angeles (the “LASC cases”). On August 20, 2014, the Judicial Council of California granted a petition by the Company to coordinate all personal injury actions filed in California that relate to Shape-ups with the LASC cases (collectively, the “LASC Coordinated Cases”). On October 6, 2014, three cases that had been pending in other counties were transferred to and coordinated with the LASC Coordinated Cases. On April 17, 2015, an additional case was transferred to and coordinated with the LASC Coordinated Cases.

Fifty-seven actions brought on behalf of a total of 647 plaintiffs have been settled and fully dismissed in the LASC Coordinated Cases. Twelve actions have been partially dismissed, with the claims of 224 plaintiffs in those actions having been fully resolved and dismissed. The claim of one other plaintiff from these partially settled multi-plaintiff lawsuits has been settled in principle and should be dismissed in the short term. One single-plaintiff lawsuit and the claims of 28 additional plaintiffs in multi-plaintiff lawsuits have been dismissed entirely, either voluntarily or on motion by the Company. The claims of 21 additional persons have been dismissed in part, either voluntarily or on motions by the Company.

Fourteen cases—two single-plaintiff actions and 12 partially dismissed, multi-plaintiff actions—remain pending in the LASC Coordinated Cases.  The two single-plaintiff cases have been settled in principle and should be dismissed in the short term.  With respect to the 12 multi-plaintiff actions, the claims of only 17 individual plaintiffs remain. Skechers has moved to dismiss the claims of 16 of those 17 individual plaintiffs for violation of court orders and failure to prosecute their claims, and anticipates bringing a similar motion relating to the last individual plaintiff in the near future.  No discovery has been taken in any of those actions and no trial dates have been set.  If the two settlements are consummated and the 17 individual plaintiffs’ claims are dismissed for failure to prosecute, then there will be no more claims pending LASC Coordinated Cases.

In other state courts, a total of 12 personal injury actions (some on behalf of numerous plaintiffs) have been filed that have not been removed to federal court and transferred to the MDL. All of those actions have been resolved and dismissed.

With respect to the global settlement programs referenced above, the personal injury cases in the MDL and LASC Coordinated Cases and in other state courts were largely solicited and handled by the same plaintiffs law firms. Accordingly, mediations to discuss potential resolution of the various lawsuits brought by these firms were held on May 18, June 18, and July 24, 2015. At the conclusion of those mediations, the parties reached an agreement in principle on a global settlement program that is expected to resolve all or substantially all of the claims by persons represented by those firms. A master settlement agreement was executed as of March 24, 2016 and the parties are in the process of completing individual settlements. To the extent that the settlements with individual claimants are not finalized or otherwise consummated such that the litigation proceeds, it is too early to predict the outcome of any case, whether adverse results in any single case or in the aggregate would have a material adverse impact on our operations or financial position, and whether insurance coverage will be adequate to cover any losses. The settlements have been reached for business purposes in order to end the distraction of litigation, and the Company continues to believe it has meritorious defenses and intends to defend any remaining cases vigorously. In addition, it is too early to predict whether there will be future personal injury cases filed which are not covered by the global settlement program, whether adverse results in any single case or in the aggregate would have a material adverse impact on the Company’s operations or financial position, and whether insurance coverage will be available and/or adequate to cover any losses.

In accordance with U.S. GAAP, the Company records a liability in its consolidated financial statements for loss contingencies when a loss is known or considered probable and the amount can be reasonably estimated. When determining the estimated loss or range of loss, significant judgment is required to estimate the amount and timing of a loss to be recorded. Estimates of probable losses resulting from litigation and governmental proceedings are inherently difficult to predict, particularly when the matters are in the procedural stages or with unspecified or indeterminate claims for damages, potential penalties, or fines. Accordingly, the Company cannot determine the final amount, if any, of its liability beyond the amount accrued in the consolidated financial statements as of December 31, 2017, nor is it possible to estimate what litigation-related costs will be in the future; however, the Company believes that the likelihood that claims related to litigation would result in a material loss to the Company, either individually or in the aggregate, is remote.