Sears 2008 Annual Report Download - page 86

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SEARS HOLDINGS CORPORATION
Notes to Consolidated Financial Statements—(Continued)
recorded in cost of sales and a $41 million reserve recorded in selling and administrative expenses for store
closing and severance costs. We expect to record a charge of approximately $24 million during the first half of
2009 as these stores wind down operations.
NOTE 15—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 2008 2007 2006
Minimum rentals ................................................ $890 $904 $900
Percentage rentals ............................................... 28 39 42
Less—Sublease rentals ........................................... (54) (60) (53)
Total ......................................................... $864 $883 $889
Minimum lease obligations, excluding taxes, insurance and other expenses payable directly by us, for leases
in effect as of January 31, 2009, were as follows:
Minimum
Lease
Commitments
millions Capital Operating
As of January 31, 2009
2009 ............................................................ $ 130 $ 821
2010 ............................................................ 126 737
2011 ............................................................ 121 652
2012 ............................................................ 118 561
2013 ............................................................ 111 475
Later years ....................................................... 556 3,317
Total minimum lease payments(1) ..................................... 1,162 6,563
Less—minimum sublease income ..................................... (304)
Net minimum lease payments ........................................ $6,259
Less:
Estimated executory costs ....................................... (142)
Interest at a weighted average rate of 7.8% .......................... (356)
Capital lease obligations ............................................ 664
Less current portion of capital lease obligations .......................... (59)
Long-term capital lease obligations .................................... $ 605
(1) Sears Canada: Total operating minimum lease payments of $444 million.
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