Office Depot 2009 Annual Report Download - page 65

•Headcount Reductions and Other Restructuring Activities — Each of the Divisions, as well as Corporate
eliminated positions in an effort to centralize activities and eliminate geographic redundancies. Total severance
and termination benefit costs associated with these actions totaled approximately $22 million and $13 million
during 2009 and 2008, respectively. During 2009, we also recorded charges for contract terminations on
certain leased assets totaling approximately $17 million and for other restructuring activities totaling
approximately $7 million. Additionally, we recognized a non-cash loss of approximately $6 million in
conjunction with the disposition of other assets during 2009. This loss is reflected in other associated costs in
the table below. Charges for other restructuring activities in 2008 totaled approximately $60 million and
related primarily to asset write downs and costs associated with the restructuring of our back office operations
and call centers in Europe.
As previously disclosed, in 2005, we announced a series of activities to restructure operations and recognized
charges associated with exit costs, as well as other asset impairments. Associated pre-tax Charges in 2007 totaled
$40 million and related primarily to the consolidation of warehouses and distribution centers in North America
and Europe as well as management restructuring and call center consolidation in Europe.
Exit cost accruals related to the activities described above are as follows:
(Dollars in millions)
Beginning
Balance
Charges
Incurred
Cash
Payments
Non-cash
settlements Adjustments
Ending
Balance
2009
Cost of goods sold ........................ $ — $ 13 $ — $ (13) $ — $ —
One-time termination benefits ............... 14 34 (33) — (2) 13
Asset impairments and accelerated
depreciation ........................... — 39 — (39) — —
Lease and contract obligations ............... 33 149 (57) 36 1 162
Other associated costs ..................... — 18 (12) (7) 1 —
Total ................................... $ 47 $253 $ (102) $ (23) $ — $ 175
2008
Cost of goods sold ........................ $ — $ 16 $ — $ (16) $ — $ —
One-time termination benefits ............... 13 32 (28) (3) — 14
Asset impairments and accelerated
depreciation ........................... — 124 — (124) — —
Lease and contract obligations ............... 17 21 (6) — 1 33
Other associated costs ..................... — 6 (4) (2) — —
Total ................................... $ 30 $199 $ (38) $ (145) $ 1 $ 47
Lease accruals on closed facilities reflect the company’s best estimate of its obligations under these long-term
arrangements, net of sublease assumptions, discounted at the company’s estimated unsecured borrowing rate at
the time of each location closure. This accrued liability may be adjusted in future periods as actual sublease
activity is better or worse than estimated. It is currently expected that any such adjustments, as well as accretion
of this liability will be reflected as a component of store and warehouse operating and selling expenses and
recognized at the corporate level, outside of Division operating profit, in future periods.
Other asset impairments
In addition to the exit costs discussed above, during 2008, we recognized other material charges because of the
downturn in our business. Those charges include goodwill and trade name impairment charges, as well as
material asset impairments relating to stores and charges to impair amortizing customer relationship intangible
assets.
We perform our annual review of goodwill and other non-amortizing intangible assets during the fourth quarter.
As a result of this review for 2008, we recorded non-cash charges of $1,213 million to write down goodwill and
$57 million related to the impairment of trade names. Our recoverability assessment of these non-amortizing
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