Office Depot 2010 Annual Report Download - page 10

•Headcount Reductions and Other Restructuring Activities — Severance and termination benefit costs
associated with actions to centralize activities and eliminate geographic redundancies totaled approximately
$22 million and $13 million during 2009 and 2008, respectively. During 2009, we also recorded Charges for
contract terminations on certain leased assets totaling approximately $17 million and for other restructuring
activities totaling approximately $7 million. Additionally, we recognized a non-cash loss of approximately $6
million in conjunction with the disposition of other assets during 2009. Charges for other restructuring
activities in 2008 totaled approximately $60 million and related primarily to asset write downs and costs
associated with the restructuring of our back office operations and call centers in Europe.
Although we do not expect to recognize new Charges under the 2009 or earlier programs, positive and negative
adjustments to previously accrued amounts as well as accretion on discounted long-term accruals such as lease
obligations will continue to impact our results in future periods. We currently estimate accretion of
approximately $10 million for 2011 and declining amounts in subsequent periods. All such amortizations and
settlements or adjustments to related accruals will be included in store and warehouse operating and selling
expenses and recognized at the corporate level, outside of Division operating profit.
In addition to the Charges that relate to the strategic reviews, during 2008, we recognized other material charges
because of the downturn in our business. Those charges include material asset impairments relating to stores we
continue to operate, charges to impair amortizing customer relationship intangible assets, as well as an increase
in our allowance for bad debts related to our private label credit card portfolio and certain other accounts
receivable balances to reflect the economic downturn. As these charges are considered reflective of operating an
ongoing business in difficult times, they were included in the 2008 Division operating results.
General and Administrative Expenses
Total general and administrative expenses (“G&A”) decreased to $659 million in 2010 from $723 million in
2009. The portion of G&A expenses considered directly or closely related to division activity is included in the
measurement of Division operating profit. The company continues to evaluate G&A and other expense
allocations across the Divisions and may refine methodologies in future periods. Other companies may charge
more or less G&A expenses and other costs to their segments, and our results therefore may not be comparable to
similarly titled measures used by other companies. The remainder of the total G&A expenses are considered
corporate expenses. A breakdown of G&A is provided in the following table:
(Dollars in millions) 2010 2009 2008
Division G&A ..................................... $ 342.2 $ 361.7 $ 394.6
Corporate G&A .................................... 316.6 361.4 348.6
Total G&A ...................................... 658.8 $ 723.1 $ 743.2
% of sales ......................................... 5.7% 6.0% 5.1%
Corporate G&A includes Charges of approximately $26 million and $17 million in 2009 and 2008, respectively.
After considering these amounts, corporate G&A expenses decreased $19 million in 2010 and increased $4
million in 2009. The decrease in 2010 was driven by lower variable pay, legal fees and a litigation settlement,
partially offset by approximately $13 million of compensation-related costs following the departure of our former
CEO and higher software amortization. The change in 2009 primarily reflects increased depreciation expense and
higher levels of performance-based variable pay. The increase in depreciation expense resulted primarily from
the capital lease associated with our new corporate campus as well as the company’s implementation of a new
enterprise software system which was placed in service at the beginning of the third quarter of 2009. The
increases were offset partially by reduction in legal and professional fees as well as lower payroll-related costs.
Corporate G&A for 2009 also includes approximately $9 million from the effect of accelerated vesting of certain
employee stock grants following approval of the redeemable preferred stock issuance.
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