Rite Aid 2016 Annual Report Download - page 109

Download and view the complete annual report

Please find page 109 of the 2016 Rite Aid annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 165

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154
  • 155
  • 156
  • 157
  • 158
  • 159
  • 160
  • 161
  • 162
  • 163
  • 164
  • 165

RITE AID CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the Years Ended February 27, 2016, February 28, 2015 and March 1, 2014
(In thousands, except per share amounts)
5. Lease Termination and Impairment Charges (Continued)
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.’’ The Company calculates the 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 or favorable lease terminations. The
Company evaluates these assumptions each quarter and adjusts the liability accordingly.
In fiscal 2016, 2015 and 2014, the Company recorded lease termination charges of $31,204, $27,507
and $28,227, respectively. These charges related to changes in future assumptions, interest accretion
and provisions for 23 stores in fiscal 2016, 10 stores in fiscal 2015, and 15 stores in fiscal 2014.
As part of its ongoing business activities, the Company assesses stores and distribution centers for
potential closure. 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. The following table reflects the closed store and distribution
center charges that relate to new closures, changes in assumptions and interest accretion:
Year Ended
February 27, February 28, March 1,
2016 2015 2014
(52 Weeks) (52 Weeks) (52 Weeks)
Balance—beginning of year ............... $241,047 $284,270 $323,757
Provision for present value of noncancellable
lease payments of closed stores ......... 9,709 1,661 11,646
Changes in assumptions about future sublease
income, terminations and change in interest
rates ............................ 5,655 7,560 (4,343)
Interest accretion ..................... 16,463 18,988 21,250
Cash payments, net of sublease income ..... (64,453) (71,432) (68,040)
Balance—end of year .................... $208,421 $241,047 $284,270
The Company’s revenues and income before income taxes for fiscal 2016, 2015, and 2014 included
results from stores that have been closed or are approved for closure as of February 27, 2016. The
109