Annual report pursuant to Section 13 and 15(d)

Leases

v3.8.0.1
Leases
12 Months Ended
Feb. 03, 2018
Leases [Abstract]  
Leases
Leases, Financing Obligation and Note Payable
 
We conduct a major part of our operations from leased premises that include retail stores, store distribution centers, warehouses, offices and other facilities. Almost all leases will expire during the next 20 years; however, most leases will be renewed, primarily through an option exercise, or replaced by leases on other premises. We also lease data processing equipment and other personal property under operating leases of primarily three to five years. Rent expense, net of sublease income, was as follows:
($ in millions)
 
2017
 
2016
 
2015
Real property base rent and straight-lined step rent expense
 
$
177

 
$
214

 
$
221

Real property contingent rent expense (based on sales)
 
8

 
7

 
7

Personal property rent expense
 
29

 
31

 
39

Total rent expense
 
$
214

 
$
252

 
$
267

Less: sublease income (1)
 
(11
)
 
(11
)
 
(11
)
Net rent expense
 
$
203

 
$
241

 
$
256


(1)
Sublease income is reported in Real estate and other, net.










As of February 3, 2018, future minimum lease payments for non-cancelable operating leases, including lease renewals determined to be reasonably assured and capital leases, including our note payable, were as follows:  
($ in millions)
 
2018
$
211

2019
187

2020
169

2021
150

2022
132

Thereafter
1,686

Less: sublease income
(51
)
Total minimum lease payments
$
2,484



On December 29, 2016, the Company executed a sale-leaseback transaction for its Home Office where the related real estate was sold for $273 million and the Company leased back approximately 65% of the building for an initial term of 15 years and three options to renew the lease for five-year increments. The sale price of the building encompassed net cash proceeds of $216 million, after the payment of $7 million in related closing costs, and seller-financing of $50 million, that is due to the Company in four years along with interest at an annual rate of 5%. The seller-financing portion of the transaction created a form of continuing involvement which precludes sale-leaseback accounting until the related note is paid in full. Accordingly, the Company accounted for the sale-leaseback as a financing transaction with the Home Office remaining on our books at its then carrying value, the net cash proceeds received being reflected as a financing obligation, and the future rental payments to the landlord being treated as debt service and applied to interest and principal over the initial 15 year term.

As of February 3, 2018, future minimum lease payments for capital leases and payments related to our financing obligation and note payable were as follows:  
($ in millions)
 
2018
$
21

2019
21

2020
19

2021
19

2022
19

Thereafter
186

Total payments
285

Plus: amount representing residual asset balance
77

Less: amounts representing interest
(142
)
Present value of net minimum lease obligations, financing obligation and note payable
$
220