CompUSA 2010 Annual Report Download - page 99

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48
10. COMMITMENTS, CONTINGENCIES AND OTHER MATTERS
Leases - The Company is obligated under operating lease agreements for the rental of certain office and warehouse facilities and
equipment which expire at various dates through October 2026. The Company currently leases its headquarters office/warehouse
facility in New York from an entity owned by the Company’ s three principal shareholders and senior executive officers. The
Company believes that these payments were no higher than would be paid to an unrelated lessor for comparable space. The
Company also acquires certain computer, communications equipment, and machinery and equipment pursuant to capital lease
obligations.
At December 31, 2010, the future minimum annual lease payments for capital leases and related and third-party operating leases
were as follows (in thousands):
Capital
Leases
Operating
Leases Total
2011 $ 3,343 $ 26,311 $ 29,654
2012 2,901 25,925 28,826
2013 2,716 23,793 26,509
2014 2,342 20,614 22,956
2015 2,286 19,846 22,132
2016-2020 6,257 75,541 81,798
2021-2025 17,914 17,914
Thereafter 10,709 10,709
Total minimum lease payments 19,845 220,653 240,498
Less: sublease rental income 283 283
Lease obligation net of subleases 19,845 $ 220,370 $ 240,215
Less amount representing interest 2,754
Present value of minimum capital lease payments
(including current portion of $2,655) $ 17,091
Annual rent expense aggregated approximately $31.1 million, $27.1 million and $25.0 million in 2010, 2009 and 2008,
respectively. Included in rent expense was $0.9 million, $0.9 million and $0.9 million in 2010, 2009 and 2008, respectively, to
related parties. Rent expense is net of sublease income of $0.2 million, $0.1 million and $0.4 million for 2010, 2009 and 2008,
respectively.
Other Matters
The Company and its subsidiaries are involved in various lawsuits, claims, investigations and proceedings including commercial,
employment, consumer, personal injury and health and safety law matters, which are being handled and defended in the ordinary
course of business. In addition, the Company is subject to various assertions, claims, proceedings and requests for
indemnification concerning intellectual property, including patent infringement suits involving technologies that are incorporated
in a broad spectrum of products the Company sells. The Company is also audited by (or has initiated voluntary disclosure
agreements with) numerous governmental agencies in various countries, including U.S. Federal and state authorities, concerning
potential income tax, sales tax and unclaimed property liabilities. These matters are in various stages of investigation, negotiation
and/or litigation, and are being vigorously defended. Although the Company does not expect, based on currently available
information, that the outcome in any of these matters, individually or collectively, will have a material adverse effect on its
financial condition or results of operations, the ultimate outcome is inherently unpredictable. Therefore, judgments could be
rendered or settlements entered, that could adversely affect the Company’ s operating results or cash flows in a particular
period. Additionally, our Audit Committee, with the assistance of independent counsel, is conducting an independent
investigation into certain anonymous whistleblower allegations concerning our Miami, Florida operations. While the investigation
is not yet complete, it does not appear that there is any material impact on our reported consolidated financial statements. The
Company routinely assesses all of its litigation and threatened litigation as to the probability of ultimately incurring a liability, and
records its best estimate of the ultimate loss in situations where it assesses the likelihood of loss as probable and estimable.