Express 2013 Annual Report Download - page 50

Table of Contents
As of February 1, 2014, the Company was committed to noncancelable leases with remaining terms from 1 to 16 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 operating leases are as follows (in thousands):
2014 $187,307
2015 155,789
2016 134,459
2017 125,732
2018 115,093
Thereafter 505,529
Total $1,223,909
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In certain lease arrangements, the Company is involved in 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 on the unaudited Consolidated Balance Sheets, including any capitalized interest costs, and related
liabilities in accrued interest and lease financing obligations in other long-term liabilities on the Consolidated Balance Sheets, for the replacement cost of the
Company's portion of the pre-existing building plus the amount of construction costs 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, 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 remaining net book value of the assets and the corresponding lease financing
obligations.The initial lease terms related to these lease arrangements are expected to expire in 2023 and 2030. As of February 1, 2014 and February 2, 2013
there was $63.2 million and $16.2 million, respectively, of landlord funded construction, the replacement cost of pre-existing property, and capitalized
interest in Property and Equipment on the Consolidated Balance Sheets. There was also $63.0 million and $16.2 million of lease financing obligations as of
February 1, 2014 and February 2, 2013, respectively, in Other Long Term Liabilities on the Consolidated Balance Sheets. The transactions involving the
initial recording of these assets and liabilities are classified as non-cash items for purposes of the Consolidated Statements of Cash Flows.
Rent expense relating to the land is recognized on a straight-line basis once construction begins. Once the store opens, the Company will not report rent expense
for the portion of the rent payment determined to be related to the lease obligations which are owned for accounting purposes. Rather, this portion of rent
payment under the lease will be recognized as a reduction of the lease financing obligations and as interest expense.
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