Express 2012 Annual Report Download - page 65

4. Leased Facilities and Commitments
Annual store rent consists of a fixed minimum amount and/or contingent rent based on a percentage of sales
exceeding a stipulated amount.
Rent expense is summarized as follows:
2012 2011 2010
(in thousands)
Store rent:
Fixed minimum .......................... $180,577 $163,057 $156,779
Contingent .............................. 8,180 8,375 6,995
Total store rent 188,757 171,432 163,774
Home office, distribution center, other ........ 4,859 3,789 6,920
Total rent expense ............................ $193,616 $175,221 $170,694
As of February 2, 2013, the Company was committed to noncancelable leases with remaining terms from 1 to
17 years. A substantial portion of these commitments consist of store leases, generally with an initial term of
10 years. Store lease terms typically require additional payments covering real estate taxes, common area
maintenance costs, and certain other landlord charges, which are excluded from the following table.
Minimum rent commitments under noncancelable leases are as follows (in thousands):
2013 ........................................... $ 202,548
2014 ........................................... 169,217
2015 ........................................... 141,371
2016 ........................................... 118,979
2017 ........................................... 108,855
Thereafter ...................................... 514,831
Total .......................................... $1,255,801
5. Lease Financing Obligations
In certain lease arrangements, the Company is involved with the construction of the building. To the extent the
Company is involved in the construction of structural improvements or takes construction risk prior to
commencement of a lease, it is deemed the owner of the project for accounting purposes. Therefore, the
Company records an asset in property and equipment, including any capitalized interest costs, and a related
financing obligation for the replacement cost of the Company’s portion of the pre-existing building plus the
amount of construction-in-progress incurred by the landlord as of the balance sheet date. Once construction is
complete, the Company considers the requirements for sale-leaseback treatment, including the transfer of all risks
of ownership back to the landlord, and whether the Company has any continuing involvement in the leased
property. If the arrangement does not qualify for sale-leaseback treatment, the building assets subject to these
obligations remain on the Company’s Consolidated Balance Sheets at their historical cost, and such assets are
depreciated over their remaining useful lives. The replacement cost of the pre-existing building as well as the
costs of construction paid by the landlord are recorded as lease financing obligations in other long-term liabilities
on the Consolidated Balance Sheets, and a portion of the lease payments are applied as payments of principal and
interest. The interest rate selected for lease financing obligations is evaluated at lease inception based on the
Company’s incremental borrowing rate. At the end of the initial lease term, should the Company decide not to
renew the lease, the Company would reverse equal amounts of the net book value of the assets and the
corresponding lease finance obligations. The initial lease terms related to these lease arrangements are expected
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