Annual report pursuant to Section 13 and 15(d)

Properties and Leases

v2.4.0.8
Properties and Leases
12 Months Ended
Feb. 01, 2014
Property Plant and Equipment and Leases of Lessee [Abstract]  
Properties and Leases
Properties and Leases
 
 
February 1,
2014
 
February 2,
2013
 
(millions)
Land
$
1,696

 
$
1,736

Buildings on owned land
5,405

 
5,398

Buildings on leased land and leasehold improvements
2,041

 
2,057

Fixtures and equipment
4,811

 
4,909

Leased properties under capitalized leases
43

 
43

 
13,996

 
14,143

Less accumulated depreciation and amortization
6,066

 
5,947

 
$
7,930

 
$
8,196



In connection with various shopping center agreements, the Company is obligated to operate certain stores within the centers for periods of up to twenty years. Some of these agreements require that the stores be operated under a particular name.
The Company leases a portion of the real estate and personal property used in its operations. Most leases require the Company to pay real estate taxes, maintenance and other executory costs; some also require additional payments based on percentages of sales and some contain purchase options. Certain of the Company’s real estate leases have terms that extend for significant numbers of years and provide for rental rates that increase or decrease over time. In addition, certain of these leases contain covenants that restrict the ability of the tenant (typically a subsidiary of the Company) to take specified actions (including the payment of dividends or other amounts on account of its capital stock) unless the tenant satisfies certain financial tests.
Minimum rental commitments (excluding executory costs) at February 1, 2014, for noncancellable leases are:
 
 
Capitalized
Leases
 
Operating
Leases
 
Total
 
(millions)
Fiscal year
 
 
 
 
 
2014
$
4

 
$
282

 
$
286

2015
3

 
253

 
256

2016
3

 
224

 
227

2017
3

 
202

 
205

2018
3

 
184

 
187

After 2018
46

 
1,775

 
1,821

Total minimum lease payments
62

 
$
2,920

 
$
2,982

Less amount representing interest
30

 
 
 
 
Present value of net minimum capitalized lease payments
$
32

 
 
 
 


Capitalized leases are included in the Consolidated Balance Sheets as property and equipment while the related obligation is included in short-term ($2 million) and long-term ($30 million) debt. Amortization of assets subject to capitalized leases is included in depreciation and amortization expense. Total minimum lease payments shown above have not been reduced by minimum sublease rentals of $34 million on operating leases.
The Company is a guarantor with respect to certain lease obligations associated with The May Department Stores Company and previously disposed subsidiaries or businesses. The leases, one of which includes potential extensions to 2070, have future minimum lease payments aggregating $334 million and are offset by payments from existing tenants and subtenants. In addition, the Company is liable for other expenses related to the above leases, such as property taxes and common area maintenance, which are also payable by existing tenants and subtenants. Potential liabilities related to these guarantees are subject to certain defenses by the Company. The Company believes that the risk of significant loss from the guarantees of these lease obligations is remote.
Rental expense consists of:
 
 
2013
 
2012
 
2011
 
(millions)
Real estate (excluding executory costs)
 
 
 
 
 
Capitalized leases –
 
 
 
 
 
Contingent rentals
$

 
$

 
$

Operating leases –
 
 
 
 
 
Minimum rentals
256

 
248

 
242

Contingent rentals
22

 
21

 
19

 
278

 
269

 
261

Less income from subleases –
 
 
 
 
 
Operating leases
(10
)
 
(11
)
 
(18
)
 
$
268

 
$
258

 
$
243

Personal property – Operating leases
$
11

 
$
11

 
$
10



Included as a reduction to the expense above is deferred rent amortization of $8 million, $7 million and $8 million for 2013, 2012 and 2011, respectively, related to contributions received from landlords.