Dollar General 2014 Annual Report Download - page 147

10-K
DOLLAR GENERAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
8. Commitments and contingencies
Leases
As of January 30, 2015, the Company was committed under operating lease agreements for most
of its retail stores. Many of the Company’s stores are subject to build-to-suit arrangements with
landlords which typically carry a primary lease term of up to 15 years with multiple renewal options.
The Company also has stores subject to shorter-term leases and many of these leases have renewal
options. Certain of the Company’s leased stores have provisions for contingent rentals based upon a
specified percentage of defined sales volume.
The land and buildings of the Company’s DCs in Fulton, Missouri and Indianola, Mississippi are
subject to operating lease agreements and the leased Ardmore, Oklahoma DC is subject to a financing
arrangement. The entities involved in the ownership structure underlying these leases meet the
accounting definition of a Variable Interest Entity (‘‘VIE’’). The Company is not the primary
beneficiary of these VIEs and, accordingly, has not included these entities in its consolidated financial
statements. Certain leases contain restrictive covenants that, individually, are not material to the
Company. As of January 30, 2015, the Company is not aware of any material violations of such
covenants.
In January 2014, the Company sold 233 store locations for cash and concurrent with the sale
transaction, the Company leased the properties back for a period of 15 years. The transaction resulted
in cash proceeds of approximately $281.6 million and a deferred gain of $67.2 million which is being
recognized as a reduction of rent expense over the 15-year initial lease term of the properties.
In January 1999, the Company sold its DC located in Ardmore, Oklahoma for cash and concurrent
with the sale transaction, the Company leased the property back for a period of 23 years. The
transaction is accounted for as a financing obligation rather than a sale as a result of, among other
things, the lessor’s ability to put the property back to the Company under certain circumstances. The
property and equipment, along with the related lease obligation associated with this transaction are
recorded in the consolidated balance sheets. In August 2007, the Company purchased a secured
promissory note (the ‘‘Ardmore Note’’) from an unrelated third party with a face value of $34.3 million
at the date of purchase which approximated the remaining financing obligation. The Ardmore Note
represents debt issued by the third party entity from which the Company leases the Ardmore DC and
therefore the Company holds the debt instrument pertaining to its lease financing obligation. Because a
legal right of offset exists, the Company is accounting for the Ardmore Note as a reduction of its
outstanding financing obligation in its consolidated balance sheets.
Future minimum payments as of January 30, 2015 for operating leases are as follows:
(In thousands)
2015 .................................................. $ 793,274
2016 .................................................. 751,044
2017 .................................................. 703,892
2018 .................................................. 648,120
2019 .................................................. 584,508
Thereafter ............................................. 3,145,663
Total minimum payments ................................... $6,626,501
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