Note M – Leases

The Company leases some of its retail stores, distribution centers, facilities, land and equipment, including vehicles. Other than vehicle leases, most of the leases are operating leases, which include renewal options made at the Company’s election, options to purchase and provisions for percentage rent based on sales. Rental expense was $229.4 million in fiscal 2012, $213.8 million in fiscal 2011, and $195.6 million in fiscal 2010. Percentage rentals were insignificant.

The Company has a fleet of vehicles used for delivery to its commercial customers and stores and travel for members of field management. The majority of these vehicles are held under capital lease. At August 25, 2012, the Company had capital lease assets of $104.2 million, net of accumulated amortization of $36.4 million, and capital lease obligations of $102.3 million, of which $29.8 million is classified as Accrued expenses and other as it represents the current portion of these obligations. At August 27, 2011, the Company had capital lease assets of $86.6 million, net of accumulated amortization of $30.2 million, and capital lease obligations of $86.7 million, of which $25.3 million was classified as Accrued expenses and other.

The Company records rent for all operating leases on a straight-line basis over the lease term, including any reasonably assured renewal periods and the period of time prior to the lease term that the Company is in possession of the leased space for the purpose of installing leasehold improvements. Differences between recorded rent expense and cash payments are recorded as a liability in Accrued expenses and other and Other long-term liabilities in the accompanying Consolidated Balance Sheets, based on the terms of the lease. The deferred rent approximated $86.9 million on August 25, 2012, and $77.6 million on August 27, 2011.

Future minimum annual rental commitments under non-cancelable operating leases and capital leases were as follows at the end of fiscal 2012:


(in thousands)	Operating Leases		Capital Leases
2013	$	217,844	$	29,842
2014		209,300		28,859
2015		192,296		24,520
2016		174,844		17,181
2017		157,691		5,002
Thereafter		958,435		—

Total minimum payments required	$	1,910,410		105,404

Less: Interest				(3,148	)

Present value of minimum capital lease payments			$	102,256

In connection with the Company’s December 2001 sale of the TruckPro business, the Company subleased some properties to the purchaser for an initial term of not less than 20 years. The Company’s remaining aggregate rental obligation at August 25, 2012 of $17.3 million is included in the above table, but the obligation is entirely offset by the sublease rental agreement.