Sears 2007 Annual Report Download - page 91

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SEARS HOLDINGS CORPORATION
Notes to Consolidated Financial Statements—(Continued)
NOTE 15—REAL ESTATE TRANSACTIONS
Gain on Sale of Assets
We recognized $38 million, $82 million, and $39 million in gains on sales of assets during fiscal 2007,
fiscal 2006, and fiscal 2005, respectively. These gains were primarily a function of several large real estate
transactions. During fiscal 2007, the gain on sale of assets included a $21 million pre-tax gain on the sale of our
Sears fashion center in Los Angeles. During fiscal 2006, the gain on sale of assets included a $41 million pre-tax
gain on the sale of our former Kmart corporate headquarters.
In August 2007, Sears Canada sold its headquarters office building and adjacent land in Toronto, Ontario for
proceeds of $81 million Canadian, net of closing costs. Sears Canada is currently leasing back the property under
a leaseback agreement for a period up to 36 months, and incurring its current level of occupancy costs, until it
relocates all head office operations to currently underutilized space in the Toronto Eaton Centre, Ontario. The
carrying value of the property was approximately $35 million as of February 2, 2008. Given the terms of the
leaseback, the excess of proceeds received over the carrying value of the associated property has been deferred,
and the resulting gain will be recognized at the end of the leaseback period when Sears Canada is no longer
utilizing the associated property.
We classify a portion of our property as held for sale when a sales transaction has been entered into but has
not been closed. Property held for sale at February 2, 2008 totaled $42 million. We did not have any property
held for sale as of February 3, 2007.
Property Acquisitions
During fiscal 2007, fiscal 2006, and fiscal 2005, we purchased 28, 8 and 19 previously leased operating
properties for $109 million, $26 million, and $98 million, respectively. In the normal course of business, we
consider opportunities to purchase leased operating properties, as well as offers to sell owned, or assign leased,
operating and non-operating properties. These transactions may, individually or in the aggregate, result in
material proceeds or outlays of cash. In addition, we review leases that will expire in the short-term in order to
determine the appropriate action to take with respect to them.
NOTE 16—LEASES
We lease certain stores, office facilities, warehouses, computers and transportation equipment.
Operating and capital lease obligations are based upon contractual minimum rents and, for certain stores,
amounts in excess of these minimum rents are payable based upon specified percentages of sales. Contingent rent
is accrued over the lease term, provided that the achievement of the specified sales level that triggers the
contingent rental is probable. Certain leases include renewal or purchase options.
Rental Expense for operating leases was as follows:
millions 2007 2006 2005
Minimum rentals ........................................ $904 $900 $901
Percentage rentals ....................................... 39 42 43
Less—Sublease rentals ................................... (60) (53) (53)
Total ................................................. $883 $889 $891
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