Commitments and Contingencies

12 Months Ended

Dec. 29, 2012

Commitments and Contingencies

(8)    Commitments and Contingencies

(a) Operating Leases

The Company conducts a major portion of its retail operations from leased premises. Initial terms of the leases are typically 20 years, followed by renewal options at five year intervals, and may include rent escalation clauses. Minimum rentals represent fixed lease obligations, including insurance and maintenance to the extent they are fixed in the lease. Contingent rentals represent payment of variable lease obligations, including real estate taxes, insurance, maintenance and, for certain premises, additional rentals based on a percentage of sales in excess of stipulated minimums (excess rent). The payment of variable real estate taxes, insurance and maintenance is generally based on the Company’s pro-rata share of total shopping center square footage. The Company recognizes rent expense for operating leases with rent escalation clauses on a straight-line basis over the applicable lease term. The Company estimates excess rent, where applicable, based on annual sales projections and uses the straight-line method to amortize this cost to rent expense. The annual sales projections are reviewed periodically and adjusted if necessary. Additionally, the Company has operating leases for certain transportation and other equipment.

Total rental expense for 2012, 2011 and 2010 is as follows:

	2012			2011			2010
	(Amounts are in thousands)
Minimum rentals	$	432,450			410,590			410,390
Contingent rentals		112,819			110,900			117,249
Sublease rental income		(4,564	)		(4,699	)		(5,912	)
	$	540,705			516,791			521,727

As of December 29, 2012, future minimum lease payments for all noncancelable operating leases and related subleases are as follows:

Year	Minimum Rental Commitments		Sublease Rental Income		Net
	(Amounts are in thousands)
2013		$   431,438		4,773		426,665
2014		407,895		4,031		403,864
2015		379,976		1,668		378,308
2016		355,038		1,062		353,976
2017		328,927		634		328,293
Thereafter		2,325,425		1,075		2,324,350
		$4,228,699		13,243		4,215,456

The Company also owns shopping centers which are leased to tenants for minimum monthly rentals plus, in certain instances, contingent rentals. Minimum rentals represent fixed lease commitments, including insurance and maintenance. Contingent rentals represent variable lease obligations including real estate taxes, insurance, maintenance and, in certain instances, excess rent. Rental income was $40,367,000, $36,057,000 and $32,576,000 for 2012, 2011 and 2010, respectively. The amounts of minimum future rental payments to be received under noncancelable operating leases are $34,458,000, $28,830,000, $22,516,000, $17,202,000 and $12,268,000 for the years 2013 through 2017, respectively, and $53,672,000 thereafter.

(b) Letters of Credit

As of December 29, 2012, the Company had $7,544,000 outstanding in trade letters of credit and $10,233,000 in standby letters of credit to support certain purchase obligations.

(c) Litigation

The Company is a party in various legal claims and actions considered in the normal course of business. The Company believes its recorded reserves are adequate in light of the probable and estimable liabilities. The estimated amount of reasonably possible losses for claims, individually and in the aggregate, is considered to be immaterial. In the opinion of management, the ultimate resolution of these legal proceedings will not have a material adverse effect on the Company’s financial condition, results of operations or cash flows.