Charles Schwab 2010 Annual Report Download - page 85

THE CHARLES SCHWAB CORPORATION
Notes to Consolidated Financial Statements
(Tabular Amounts in Millions, Except Per Share Data, Option Price Amounts, Ratios, or as Noted)
14. Commitments and Contingent Liabilities
Operating leases and other commitments: The Company has non-cancelable operating leases for office space and equipment. Future
annual minimum rental commitments under these leases, net of contractual subleases, at December 31, 2010, are as follows:
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 $168 million, $213 million, and $186 million in 2010, 2009, and 2008, respectively. Rent
expense in 2009 included charges of $37 million relating to the Company’s cost reduction measures.
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, 2010, the Company has purchase obligations
as follows:
Guarantees and indemnifications: In the normal course of business, the Company provides certain indemnifications (i.e., protection
against damage or loss) to counterparties in connection with the disposition of certain of its assets. Such indemnifications are
generally standard contractual terms with various expiration dates and typically relate to title to the assets transferred, ownership of
intellectual property rights (e.g., patents), accuracy of financial statements, compliance with laws and regulations, failure to pay,
satisfy or discharge any liability, or to defend claims, as well as errors, omissions, and misrepresentations. The maximum potential
future liability under these indemnifications cannot be estimated. The Company has not recorded a liability for these indemnifications
and believes that the occurrence of events that would trigger payments under these agreements is remote.
Separately, the Company has provided indemnifications related to facility leases to a counterparty in connection with the disposition
of certain of its assets. At December 31, 2010, the Company’s maximum potential future liability under this agreement was
approximately $45 million. The Company has not recorded a liability for these indemnifications and believes that the occurrence of
events that would trigger payments under this agreement is remote. In the second quarter of 2010, the Company terminated its
guarantee of certain payments in the event of termination of certain mutual fund sub-advisor agreements, related to the adoption of
AXA Rosenberg LLC’s U.S. family of mutual funds, known as the Laudus Funds .
The Company has clients that sell (i.e., write) listed option contracts that are cleared by various clearing houses. The clearing houses
establish margin requirements on these transactions. The Company partially satisfies the margin requirements by arranging unsecured
standby LOCs, in favor of the clearing houses, which are issued by multiple banks. At December 31, 2010, the aggregate face amount
of these LOCs totaled $445 million. In connection with its securities lending activities,
-66 -
Operating
Leases Subleases Net
2011 $136 $35 $101
2012
97 31 66
2013 77 26 51
2014
67 24 43
2015 60 24 36
Thereafter
147 42 105
Total $ 584 $ 182 $ 402
2011 $132
2012
55
2013 25
2014
21
2015 22
Thereafter
—
Total $ 255
®