Rite Aid 2011 Annual Report Download - page 90

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RITE AID CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the Years Ended February 26, 2011, February 27, 2010 and February 28, 2009
(In thousands, except per share amounts)
11. Leases (Continued)
leases require additional payments based on sales volume, as well as reimbursements for taxes,
maintenance and insurance. Most leases contain renewal options, certain of which involve rent
increases. Total rental expense, net of sublease income of $9,662, $11,027, and $11,141, was $965,665,
$961,519 and $962,840 in fiscal 2011, 2010, and 2009, respectively. These amounts include contingent
rentals of $23,336, $27,260 and $31,605 in fiscal 2011, 2010, and 2009, respectively.
During fiscal 2011, the Company had no sale-leaseback transactions.
During fiscal 2010, the Company sold a total of 3 owned properties to independent third parties.
Net proceeds from these sales were $7,967. Concurrent with these sales, the Company entered into
agreements to lease the stores back from the purchasers over minimum lease terms of 10 to 20 years.
The Company accounted for all of these leases as operating leases. A gain on the sale of these stores
of $5,301 was deferred and is being recorded over the minimum term of these leases.
During fiscal 2009, the Company sold 72 owned stores to several independent third parties.
Proceeds from these sales totaled $192,819. The Company entered into agreements to lease these stores
back from the purchasers over minimum lease terms of 20 years. Sixty-seven leases were accounted for
as operating leases and five were accounted for under the financing method as of February 28, 2009, as
these lease agreements contain a clause that allows the buyer to force the Company to repurchase the
property under certain conditions. Gains on these transactions of $5,157 have been deferred and are
being recorded over the related minimum lease terms. Losses of $501, which relate to certain stores in
these transactions, were recorded as losses on the sale of assets for the year ended February 28, 2009.
Subsequent to February 28, 2009, the clause that allowed the buyer to force the Company to
repurchase the properties lapsed on three of the five leases. Therefore, these leases are now accounted
for as operating leases. The Company recorded a financing lease obligation of $6,564 related to the
remaining leases.
The net book values of assets under capital leases and sale-leasebacks accounted for under the
financing method at February 26, 2011 and February 27, 2010 are summarized as follows:
2011 2010
Land.......................................... $ 7,528 $ 7,528
Buildings ....................................... 148,262 152,973
Leasehold improvements ........................... 1,639 1,652
Equipment ..................................... 22,515 23,120
Accumulated depreciation .......................... (100,561) (95,941)
$ 79,383 $ 89,332
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