Rite Aid 2014 Annual Report Download - page 74

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RITE AID CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the Years Ended March 1, 2014, March 2, 2013 and March 3, 2012
(In thousands, except per share amounts)
3. Lease Termination and Impairment Charges (Continued)
Additionally, the Company takes into consideration that certain operating stores are executing
specific improvement plans which are monitored quarterly to recoup recent capital investments, such as
an acquisition of an independent pharmacy, which it has made to respond to specific competitive or
local market conditions, or have specific programs tailored towards a specific geography or market.
The Company recorded impairment charges of $13,077 in fiscal 2014, $24,892 in fiscal 2013 and
$51,998 in fiscal 2012. The Company’s methodology for recording impairment charges has not changed
materially, and has been consistently applied in the periods presented.
At March 1, 2014, $1.927 billion of the Company’s long-lived assets, including intangible assets,
were associated with 4,587 active operating stores.
If an operating store’s estimated future undiscounted cash flows are not sufficient to cover its
carrying value, its carrying value is reduced to fair value which is its estimated future discounted cash
flows. The discount rate is commensurate with the risks associated with the recovery of a similar asset.
An impairment charge is recorded in the period that the store does not meet its original return on
investment and/or has an operating loss for the last 2 years and its projected cash flows do not exceed
its current asset carrying value. The amount of the impairment charge is the entire difference between
the current asset carrying value and the estimated fair value of the assets using discounted future cash
flows. Most stores are fully impaired in the period that the impairment charge is originally recorded.
The Company recorded impairment charges for active stores of $11,748 in fiscal 2014, $23,973 in
fiscal 2013 and $43,353 in fiscal 2012.
The Company reviews key performance results for active stores on a quarterly basis and approves
certain stores for closure. Impairment for closed stores, if any (many stores are closed on lease
expiration), are recorded in the quarter the closure decision is made and approved. Closure decisions
are made on an individual store or regional basis considering all of the macro-economic, industry and
other factors discussed above, in addition to, the active store’s individual operating results. The
Company currently has no plans to close a significant number of operating stores in future periods. In
the next fiscal year, the Company currently expects to close fewer than 40 stores, primarily as a result
of lease expirations. The Company recorded impairment charges for closed facilities of $1,329 in fiscal
2014, $919 in fiscal 2013 and $8,645 in fiscal 2012.
Included in the impairment charges noted above, the Company recorded charges of $798 in fiscal
2014, $594 in fiscal 2013 and $5,863 in fiscal 2012 for existing owned surplus property. Assets to be
disposed of are evaluated quarterly to determine if an additional impairment charge is required. Fair
value estimates are provided by independent brokers who operate in the local markets where the assets
are located.
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