Rite Aid 2015 Annual Report Download - page 36

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To the extent that actual future cash flows may differ from our projections materially certain stores
that are either not impaired or partially impaired in the current period may be further impaired in
future periods. A 50 basis point decrease in our future sales assumptions as of February 28, 2015 would
have resulted in an additional fiscal 2015 impairment charge of $1.4 million. A 50 basis point increase
in our future sales assumptions as of February 28, 2015 would have reduced the fiscal 2015 impairment
charge by $0.6 million. A 100 basis point decrease in our future sales assumptions as of February 28,
2015 would have resulted in an additional fiscal 2015 impairment charge of $3.1 million. A 100 basis
point increase in our future sales assumptions as of February 28, 2015 would have reduced the fiscal
2015 impairment charge by $0.9 million.
Lease Termination Charges: Charges to close a store, which principally consist of continuing lease
obligations, are recorded at the time the store is closed and all inventory is liquidated, pursuant to the
guidance set forth in ASC 420, ‘‘Exit or Disposal Cost Obligations.’’ We calculate our liability for
closed stores on a store-by-store basis. The calculation includes the discounted effect of future
minimum lease payments and related ancillary costs, from the date of closure to the end of the
remaining lease term, net of estimated cost recoveries that may be achieved through subletting
properties or through favorable lease terminations. We evaluate these assumptions each quarter and
adjust the liability accordingly. As part of our ongoing business activities, we assess stores and
distribution centers for potential closure and relocation. Decisions to close or relocate stores or
distribution centers in future periods would result in lease termination charges for lease exit costs and
liquidation of inventory, as well as impairment of assets at these locations.
In fiscal 2015, 2014 and 2013, we recorded lease termination charges of $27.5 million, $28.2 million
and $46.0 million, respectively. These charges related to changes in future assumptions, interest
accretion and provisions for 10 stores in fiscal 2015, 15 stores in fiscal 2014 and 14 stores in fiscal 2013.
Of the approximate 40 store closures for fiscal 2016, we anticipate 10 will require a store lease closing
provision.
Interest Expense
In fiscal 2015, 2014, and 2013, interest expense was $397.6 million, $424.6 million and
$515.4 million, respectively. The decrease in interest expense was a result of the redemption of our
outstanding $270.0 million aggregate principal amount of 10.25% senior notes due October 2019 in the
third quarter of fiscal 2015 and refinancing activities during the first quarter of fiscal 2015 and the first
and second quarters of fiscal 2014. The reduction in interest expense in fiscal 2014 compared to fiscal
2013 is primarily the result of refinancing during the fourth quarter of fiscal 2013 and the first and
second quarters of fiscal 2014.
The annual weighted average interest rates on our indebtedness in fiscal 2015, 2014 and 2013 were
5.7%, 6.4% and 7.1%, respectively.
Income Taxes
Income tax benefit of $1,682.4 million, income tax expense of $0.8 million and income tax benefit
of $110.6 million, has been recorded for fiscal 2015, 2014 and 2013, respectively. Net income for fiscal
2015 included income tax benefit of $1,841.3 million attributable to the reduction of the deferred tax
valuation allowance.
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