Walgreens 2014 Annual Report Download - page 77

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Minimum rental commitments at August 31, 2014, under all leases having an initial or remaining non-cancelable
term of more than one year are shown below (in millions):
Financing
Obligation
Capital
Lease
Operating
Lease
2015 $ 18 $ 43 $ 2,569
2016 18 41 2,533
2017 18 39 2,493
2018 18 38 2,407
2019 18 38 2,295
Later 1,328 665 22,168
Total minimum lease payments $1,418 $864 $34,465
The capital and finance lease amounts include $1.5 billion of imputed interest and executory costs. Total
minimum lease payments have not been reduced by minimum sublease rentals of approximately $141 million on
leases due in the future under non-cancelable subleases.
The Company provides for future costs related to closed locations. The liability is based on the present value of
future rent obligations and other related costs (net of estimated sublease rent) to the first lease option date. In
fiscal 2014, 2013 and 2012, the Company recorded charges of $177 million, $43 million and $20 million,
respectively, for facilities that were closed or relocated under long-term leases, including stores closed through
the Company’s store optimization plan. These charges are reported in selling, general and administrative
expenses on the Consolidated Statements of Earnings.
The changes in reserve for facility closings and related lease termination charges include the following (in
millions):
Year Ended
August 31,
2014 2013
Balance – beginning of period $123 $117
Provision for present value of non-cancellable lease payments of closed facilities 171 34
Assumptions about future sublease income, terminations and changes in interest rates (8) (6)
Interest accretion 14 15
Cash payments, net of sublease income (43) (37)
Balance – end of period $257 $123
The Company remains secondarily liable on 20 assigned leases. The maximum potential undiscounted future
payments are $33 million at August 31, 2014. Lease option dates vary, with some extending to 2041.
Rental expense, which includes common area maintenance, insurance and taxes, was as follows (in millions):
2014 2013 2012
Minimum rentals $2,687 $2,644 $2,585
Contingent rentals 5 6 6
Less: Sublease rental income (22) (22) (20)
$2,670 $2,628 $2,571
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