Staples 2003 Annual Report Download - page 82

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STAPLES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE H Commitments and Contingencies
Staples leases certain retail and support facilities under long-term noncancellable lease agreements. Most lease
agreements contain renewal options and rent escalation clauses, require Staples to pay real estate taxes in excess of
specified amounts, and, in some cases, allow termination within a certain number of years with notice and a fixed
payment. Certain agreements provide for contingent rental payments based on sales.
Other long-term obligations at February 1, 2003 include $82.1 million relating to future rent escalation clauses and
lease incentives under certain existing store operating lease arrangements. These rent expenses are recognized on the
straight-line basis over the respective terms of the leases. Future minimum lease commitments due for retail and support
facilities (including lease commitments for 26 retail stores not yet opened at February 1, 2003) and equipment leases
under noncancellable operating leases are as follows (in thousands):
Fiscal Year: Total
2003 ............................................................ $ 462,722
2004 ............................................................ 440,490
2005 ............................................................ 412,695
2006 ............................................................ 380,408
2007 ............................................................ 360,053
Thereafter ....................................................... 2,358,680
$4,415,048
Rent expense approximated $445.2 million, $419.8 million, and $384.5 million for fiscal years 2002, 2001 and 2000,
respectively.
Letters of credit are issued by Staples during the ordinary course of business through major financial institutions as
required by certain vendor contracts. As of February 1, 2003, Staples had open letters of credit totaling $46.7 million.
The Company fully guaranteed loans taken by certain executives used to exercise the options of Staples.com Stock
granted to them in fiscal year 1999. The options were subsequently converted to Staples, Inc. Stock in connection with
the Recapitalization completed in April 2000 (see Note K). All of the loans were repaid in full by the end of fiscal year
2002. The principal and interest payable on the loans were with full recourse to the individuals. As collateral for the loan,
each of these persons entered into a pledge agreement with the bank under which they pledged the shares of Staples, Inc.
Stock received upon exercise of the options.
The Company is involved from time to time in litigation arising from the operation of its business. The Company
does not believe that any such litigation, either alone or in the aggregate, will have a material adverse effect on the
Company’s financial position or results of operations.
C-19