Rite Aid 2010 Annual Report Download - page 89

RITE AID CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the Years Ended February 27, 2010, February 28, 2009 and March 1, 2008
(In thousands, except per share amounts)
12. Leases
The Company leases most of its retail stores and certain distribution facilities under noncancellable
operating and capital leases, most of which have initial lease terms ranging from five to 22 years. The
Company also leases certain of its equipment and other assets under noncancellable operating leases
with initial terms ranging from 3 to 10 years. In addition to minimum rental payments, certain store
leases require additional payments based on sales volume, as well as reimbursements for taxes,
maintenance and insurance. Most leases contain renewal options, certain of which involve rent
increases. Total rental expense, net of sublease income of $11,027, $11,141, and $10,331, was $961,519,
$962,840 and $863,801 in fiscal 2010, 2009, and 2008, respectively. These amounts include contingent
rentals of $27,260, $31,605 and $35,932 in fiscal 2010, 2009, and 2008, respectively.
During fiscal 2010, the Company sold a total of 3 owned properties to independent third parties.
Net proceeds from these sales were $7,967. Concurrent with these sales, the Company entered into
agreements to lease the stores back from the purchasers over minimum lease terms of 10 to 20 years.
The Company accounted for all of these leases as operating leases. A gain on the sale of these stores
of $5,301 was deferred and is being recorded over the minimum term of these leases.
During fiscal 2009, the Company sold 72 owned stores to several independent third parties.
Proceeds from these sales totaled $192,819. The Company entered into agreements to lease these stores
back from the purchasers over minimum lease terms of 20 years. Sixty-seven leases were accounted for
as operating leases and five were accounted for under the financing method as of February 28, 2009, as
these lease agreements contain a clause that allows the buyer to force the Company to repurchase the
property under certain conditions. Gains on these transactions of $5,157 have been deferred and are
being recorded over the related minimum lease terms. Losses of $501, which relate to certain stores in
these transactions, were recorded as losses on the sale of assets for the year ended February 28, 2009.
Subsequent to February 28, 2009, the clause that allowed the buyer to force the Company to
repurchase the properties lapsed on three of the five leases. Therefore, these leases are now accounted
for as operating leases. The Company recorded a financing lease obligation of $6,564 related to the
remaining leases.
During fiscal 2008, the Company sold 22 owned stores to several independent third parties.
Proceeds from these sales totaled $93,252. The Company entered into agreements to lease these stores
back from the purchasers over minimum lease terms of 20 years. Fourteen leases were accounted for as
operating leases and eight were accounted for under the financing method as of March 1, 2008, as
these lease agreements contain a clause that allows the buyer to force the Company to repurchase the
property under certain conditions. Subsequent to March 1, 2008, the clause that allowed the buyer to
force the Company to repurchase the properties lapsed on all of the eight leases and these are now
accounted for as operating leases.
The net book values of assets under capital leases and sale-leasebacks accounted for under the
financing method at February 27, 2010 and February 28, 2009 are summarized as follows:
2010 2009
Land .......................................... $ 7,528 $ 12,793
Buildings ....................................... 152,973 166,460
Leasehold improvements ............................ 1,652 6,491
Equipment ...................................... 23,120 34,712
Accumulated depreciation ........................... (95,941) (97,649)
$ 89,332 $122,807
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