Office Depot 2009 Annual Report Download - page 73

In connection with the expensing of the fair value of employee stock options, we have elected to calculate our
pool of excess tax benefits under the alternative, or “short-cut” method. At adoption, this pool of benefits was
approximately $55.3 million and was approximately $101.1 million as of December 26, 2009. This pool may
increase in future periods if tax benefits realized are in excess of those based on grant date fair values or may
decrease if used to absorb future tax deficiencies determined for financial reporting purposes.
NOTE H — COMMITMENTS AND CONTINGENCIES
Operating Leases: We lease retail stores and other facilities and equipment under operating lease agreements
with initial lease terms expiring in various years through 2032. In addition to minimum rentals, there are certain
executory costs such as real estate taxes, insurance and common area maintenance on most of our facility leases.
Many lease agreements contain tenant improvement allowances, rent holidays, and/or rent escalation clauses. For
purposes of recognizing incentives and minimum rental expenses on a straight-line basis over the terms of the
leases, we use the date of initial possession to begin amortization.
We recognize a deferred rent liability for tenant improvement allowances and rent holidays and amortize these
amounts over the terms of the related leases as a reduction of rent expense. Rent related accruals totaled
approximately $270 million and $298 million at December 26, 2009 and December 27, 2008, respectively. The
short-term and long-term components of these liabilities are included in accrued expenses and other long-term
liabilities, respectively, on the Consolidated Balance Sheets. For scheduled rent escalation clauses during the
lease terms or for rental payments commencing at a date other than the date of initial occupancy, we record
minimum rental expenses on a straight-line basis over the terms of the leases.
Certain leases contain provisions for additional rent to be paid if sales exceed a specified amount, though such
payments have been immaterial during the years presented.
The table below shows future minimum lease payments due under the non-cancelable portions of our leases as of
December 26, 2009. These minimum lease payments include facility leases that were accrued as store closure
costs. Additional information including optional lease renewals follows this table.
(Dollars in thousands)
2010 ..................................................... $ 533,488
2011 ..................................................... 455,564
2012 ..................................................... 396,982
2013 ..................................................... 342,783
2014 ..................................................... 280,630
Thereafter ................................................ 946,383
2,955,830
Less sublease income ....................................... 44,226
Total .................................................... $2,911,604
We determine the lease term at inception to be the non-cancelable rental period plus any renewal options that are
considered reasonably assured. Leasehold improvements are depreciated over the shorter of their estimated
useable lives or the identified lease term. Lease payments for the next five years and thereafter that include both
the non-cancelable amounts from above, plus the renewal options included in our projected lease term are, $537
million for 2010; $481 million for 2011; $438 million for 2012; $401 million for 2013; $367 million for 2014
and $1,964 million thereafter, for a total of $4,188 million, $4,144 million net of sublease income.
Rent expense, including equipment rental, was $498.6 million, $525.8 million and $519.1 million in 2009, 2008,
and 2007, respectively. Rent expense was reduced by sublease income of $2.9 million in 2009, $3.1 million in
2008 and $2.8 million in 2007.
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