Dollar General 2015 Annual Report Download - page 124

10-K
DOLLAR GENERAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1. Basis of presentation and accounting policies (Continued)
Insurance liabilities
The Company retains a significant portion of risk for its workers’ compensation, employee health,
general liability, property and automobile claim exposures. Accordingly, provisions are made for the
Company’s estimates of such risks. The undiscounted future claim costs for the workers’ compensation,
general liability, and health claim risks are derived using actuarial methods and are recorded as
self-insurance reserves pursuant to Company policy. To the extent that subsequent claim costs vary from
those estimates, future results of operations will be affected as the reserves are adjusted.
Ashley River Insurance Company (‘‘ARIC’’), a South Carolina-based wholly owned captive
insurance subsidiary of the Company, charges the operating subsidiary companies premiums to insure
the retained workers’ compensation and non-property general liability exposures. Pursuant to South
Carolina insurance regulations, ARIC maintains certain levels of cash and cash equivalents related to
its self-insured exposures. ARIC currently insures no unrelated third-party risk.
Operating leases and related liabilities
Rent expense is recognized over the term of the lease. The Company records minimum rental
expense on a straight-line basis over the base, non-cancelable lease term commencing on the date that
the Company takes physical possession of the property from the landlord, which normally includes a
period prior to the store opening to make necessary leasehold improvements and install store fixtures.
When a lease contains a predetermined fixed escalation of the minimum rent, the Company recognizes
the related rent expense on a straight-line basis and records the difference between the recognized
rental expense and the amounts payable under the lease as deferred rent. Tenant allowances, to the
extent received, are recorded as deferred incentive rent and are amortized as a reduction to rent
expense over the term of the lease. The difference between the calculated expense and the amounts
paid result in a liability, with the current portion in Accrued expenses and other and the long-term
portion in Other liabilities in the consolidated balance sheets, and totaled approximately $57.9 million
and $54.6 million at January 29, 2016 and January 30, 2015, respectively.
The Company recognizes contingent rental expense when the achievement of specified sales targets
is considered probable. The amount expensed but not paid as of January 29, 2016 and January 30, 2015
was approximately $4.0 million and $4.8 million, respectively, and is included in Accrued expenses and
other in the consolidated balance sheets.
Other liabilities
Noncurrent Other liabilities consist of the following:
January 29, January 30,
(In thousands) 2016 2015
Insurance ...................................... $137,798 $140,916
Deferred rent ................................... 57,017 53,975
Deferred gain on sale leaseback ...................... 53,737 58,215
Other ......................................... 26,731 32,203
$275,283 $285,309
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