Charles Schwab 2008 Annual Report Download - page 72

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THE CHARLES SCHWAB CORPORATION
Notes to Consolidated Financial Statements
(Tabular Amounts in Millions, Except Per Share Data, Option Price Amounts, Ratios, or as Noted)
- 58 -
To manage short-term liquidity, Schwab maintains uncommitted, unsecured bank credit lines with a group of six banks
totaling $1.1 billion at December 31, 2008. CSC has access to $1.0 billion of these credit lines. The amount available to CSC
under these lines is lower than the amount available to Schwab because the credit line provided by one of these banks is only
available to Schwab. There were no borrowings outstanding under these lines at December 31, 2008 and 2007.
To satisfy the margin requirement of client option transactions with the Options Clearing Corporation (OCC), Schwab has
unsecured standby letter of credit (LOCs) agreements with seven banks in favor of the OCC aggregating $550 million at
December 31, 2008. In connection with its securities lending activities, Schwab is required to provide collateral to certain
brokerage clients. Schwab satisfies the collateral requirements by arranging LOCs, in favor of these brokerage clients, which
are issued by multiple banks. At December 31, 2008, the aggregate face amount of these LOCs totaled $100 million. No funds
were drawn under any of these LOCs at December 31, 2008 and 2007.
13. Commitments and Contingent Liabilities
Operating leases and other commitments: The Company has noncancelable operating leases for office space and equipment.
Future minimum rental commitments under these leases, net of committed subleases, at December 31, 2008 are as follows:
Operating
Leases (1) Subleases (1) Net
2009 $ 161 $ (43) $ 118
2010 150 (35) 115
2011 127 (28) 99
2012 84 (24) 60
2013 66 (22) 44
Thereafter 208 (84) 124
Total $ 796 $ (236) $ 560
(1) Amounts include facilities under the Company’s past restructuring initiatives.
Certain leases contain provisions for renewal options, purchase options, and rent escalations based on increases in certain
costs incurred by the lessor. Rent expense was $186 million in 2008, $180 million in 2007, and $166 million in 2006.
Purchase Obligations: The Company has purchase obligations for services such as advertising and marketing,
telecommunications, professional services, and hardware- and software-related agreements. At December 31, 2008, the
Company has purchase obligations as follows:
2009 $ 214
2010 85
2011 21
2012 2
2013 1
Thereafter -
Total $ 323
Guarantees: The Company recognizes, at the inception of a guarantee, a liability for the estimated fair value of the obligation
undertaken in issuing the guarantee. The fair values of the obligations relating to standby LOCs are estimated based on fees
charged to enter into similar agreements, considering the creditworthiness of the counterparties. The fair values of the
obligations relating to other guarantees are estimated based on transactions for similar guarantees or expected present value
measures.