CVS CAREMARK CORP | 2013 | FY | 3


Leases
 
The Company leases most of its retail and mail order locations, ten of its distribution centers and certain corporate offices under non-cancelable operating leases, typically with initial terms of 15 to 25 years and with options that permit renewals for additional periods. The Company also leases certain equipment and other assets under noncancelable operating leases, typically with initial terms of 3 to 10 years. Minimum rent is expensed on a straight-line basis over the term of the lease. In addition to minimum rental payments, certain leases require additional payments based on sales volume, as well as reimbursement for real estate taxes, common area maintenance and insurance, which are expensed when incurred.
 
The following table is a summary of the Company’s net rental expense for operating leases for the years ended December 31:
 
In millions
2013
 
2012
 
2011
Minimum rentals
$
2,210

 
$
2,165

 
$
2,087

Contingent rentals
41

 
48

 
49

 
2,251

 
2,213

 
2,136

Less: sublease income
(21
)
 
(20
)
 
(19
)
 
$
2,230

 
$
2,193

 
$
2,117




The following table is a summary of the future minimum lease payments under capital and operating leases as of December 31, 2013:
 
In millions 
Capital
Leases
 
Operating
Leases(1)
2014
$
46

 
$
2,175

2015
46

 
2,129

2016
47

 
2,055

2017
47

 
1,964

2018
47

 
1,853

Thereafter
556

 
16,914

Total future lease payments
789

 
$
27,090

Less: imputed interest
(399
)
 
 

Present value of capital lease obligations
$
390

 
 

 
(1)
Future operating lease payments have not been reduced by minimum sublease rentals of $224 million due in the future under noncancelable subleases.
 
The Company finances a portion of its store development program through sale-leaseback transactions. The properties are generally sold at net book value, which generally approximates fair value, and the resulting leases generally qualify and are accounted for as operating leases. The operating leases that resulted from these transactions are included in the above table. The Company does not have any retained or contingent interests in the stores and does not provide any guarantees, other than a guarantee of lease payments, in connection with the sale-leaseback transactions. Proceeds from sale-leaseback transactions totaled $600 million in 2013, $529 million in 2012 and $592 million in 2011.

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