Express 2014 Annual Report Download - page 59

Rent expense is summarized as follows:
2014 2013 2012
(in thousands)
Store rent:
Fixed minimum ........................ $209,323 $201,477 $180,577
Contingent ............................ 6,398 5,942 8,180
Total store rent ............................. 215,721 207,419 188,757
Home office, distribution center, other ...... 5,609 5,400 4,859
Total rent expense .......................... $221,330 $212,819 $193,616
As of January 31, 2015, the Company was committed to noncancelable leases with remaining terms from 1 to 15
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):
2015 $ 222,562
2016 176,521
2017 161,606
2018 148,011
2019 132,948
Thereafter 566,285
Total $1,407,933
5. Lease Financing Obligations
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 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
January 31, 2015 and February 1, 2014 there was $71.0 million and $63.2 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 $70.9 million and $63.0 million of lease
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