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79
2015 Annual Report
7 | Leases
The Company leases most of its retail and mail order locations, ten of its distribution centers and certain corporate
offices under noncancelable operating leases, typically with initial terms of 15 to 25 years and with options that
permit renewals for additional periods. The Company also leases certain equipment and other assets under
noncancelable operating leases, typically with initial terms of 3 to 10 years. In December 2015, in connection with
the acquisition of the pharmacy and clinic businesses of Target, the Company entered into lease agreements with
Target for the pharmacy and clinic space within Target stores. Given that the noncancelable contractual term of
the pharmacy lease arrangement exceeds the remaining estimated economic life of the buildings being leased, the
Company concluded for accounting purposes that the lease term was the remaining economic life of the buildings.
Consequently, most of the individual pharmacy leases are capital leases. Approximately $0.3 billion of capital lease
obligations were recorded in connection with this transaction.
Minimum rent on operating leases is expensed on a straight-line basis over the term of the lease. In addition to
minimum rental payments, certain leases require additional payments based on sales volume, as well as reimburse-
ment for real estate taxes, common area maintenance and insurance, which are expensed when incurred.
The following table is a summary of the Company’s net rental expense for operating leases for the years ended
December 31:
IN MILLIONS 2015 2014 2013
Minimum rentals
$ 2,317
$ 2,320 $ 2,210
Contingent rentals
34
36 41
2,351
2,356 2,251
Less: sublease income
(22)
(21) (21)
$ 2,329
$ 2,335 $ 2,230
The following table is a summary of the future minimum lease payments under capital and operating leases as of
December 31, 2015:
Capital Operating
IN MILLIONS Leases Leases (1)
2016 $ 52 $ 2,405
2017 94 2,321
2018 70 2,197
2019 69 2,044
2020 69 1,877
Thereafter 970 16,837
Total future lease payments (2) 1,324 $ 27,681
Less: imputed interest (679)
Present value of capital lease obligations $ 645
(1) Future operating lease payments have not been reduced by minimum sublease rentals of $180 million due in the future under noncancelable
subleases.
(2) The Company leases pharmacy and clinic space from Target. Amounts related to such capital and operating leases are reflected above. Amounts
due in excess of the remaining estimated economic life of the buildings of approximately $1.7 billion are not reflected herein since the estimated
economic life of the buildings is shorter than the contractual term of the lease arrangement.