Office Depot 2010 Annual Report Download - page 46

•Asset Sales and Sale-Leaseback Transactions — As a result of the strategic review and to enhance liquidity,
we entered into multiple sale and sale-leaseback transactions. Total proceeds from these transactions were
approximately $150 million and are included in the investing section on our Consolidated Statement of Cash
Flows. Losses on these transactions are included in the Charges and totaled approximately $22 million in
2009. Gains have been deferred and will reduce rent expense over the related leaseback periods.
•Headcount Reductions and Other Restructuring Activities — Severance and termination benefit costs
associated with actions to centralize activities and eliminate geographic redundancies 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. 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.
Although we do not expect to recognize new Charges under the 2009 and earlier programs, positive and negative
adjustments to previously accrued amounts as well as accretion on discounted long-term accruals such as lease
obligations will continue to impact our results in future periods. We currently estimate accretion of
approximately $10 million for 2011 and declining amounts in subsequent periods. All such amortizations and
settlements or adjustments to related accruals will be included in store and warehouse operating and selling
expenses and recognized at the corporate level, outside of Division operating profit.
Exit cost accruals related to the activities described above are as follows:
(Dollars in millions)
Beginning
Balance
Charges
Incurred
Cash
Payments
Non-cash
settlements
Currency
and Other
Adjustments
Ending
Balance
2010
Termination benefits ....................... $ 13 $ 6 $ (12) $ — $ (3) $ 4
Asset impairments and accelerated
depreciation ............................ — 1 — (1) — —
Lease and contract obligations ................ 162 5 (64) 14 (4) 113
Total .................................... $175 $ 12 $ (76) $ 13 $ (7) $117
2009
Cost of goods sold ......................... $ — $ 13 $ — $(13) $— $ —
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
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.
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