Office Depot 2010 Annual Report Download - page 9

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related to impairment of certain software applications. In the fourth quarter of 2010 it was determined that the
company was no longer going to fund the continued development of this software and the software projects were
abandoned. The charge is presented in Other asset impairments on the Consolidated Statements of Operations.
Other charges recognized during 2010 have been included in Division operating profit or corporate general and
administrative expenses, as appropriate.
The company expects to take additional actions during the coming years in an effort to increase efficiency and
operating results. These actions could include combining, outsourcing or eliminating functions which could lead
to additional charges when the relevant accounting criteria are met. These actions are still being considered.
A summary of the Charges recognized during 2009 and 2008 and the line item presentation of these amounts in
our accompanying Consolidated Statements of Operations is as follows.
(Dollars in millions, except per share amounts) 2009 2008
Cost of goods sold and occupancy costs ................................ $ 13 $ 16
Store and warehouse operating and selling expenses ...................... 188 52
Goodwill and trade name impairments ................................. — 1,270
Other asset impairments ............................................ 26 114
General and administrative expenses .................................. 26 17
Total pre-tax Charges ............................................ 253 1,469
Income tax effect .................................................. (19) (103)
After-tax impact ................................................ $ 234 $ 1,366
Per share impact .................................................. $ 0.86 $ 5.01
Of the $253 million of 2009 Charges, approximately $194 million either have or are expected to require cash
settlement, including longer-term lease obligations that will require cash over multi-year lease terms.
The primary components of Charges include:
•Goodwill and Trade Name Impairments — During 2008, we recorded non-cash Charges of $1.2 billion to
write down goodwill and $57 million related to the impairment of trade names. Our recoverability assessment
of these non-amortizing intangible assets considered company-specific projections, assumptions about market
participant views and the company’s overall market capitalization around the testing period.
•Retail Store Initiatives — As part of the strategic review, we closed 126 stores in North America (six of which
were closed in the fourth quarter of 2008 and the remainder in 2009) and 27 stores in Japan. The stores closed
were underperforming or stores that were no longer a strategic fit for the company. The Charges totaled $122
million and $104 million in 2009 and 2008, respectively. The 2009 Charges were primarily related to lease
accruals, inventory write downs, severance expenses and other facility closure costs. The 2008 Charges related
primarily to asset impairments, inventory write downs and lease accruals.
•Supply Chain Initiatives — During 2009, we closed five DCs and six crossdock facilities in North America
and consolidated our DCs in Europe. Charges related to these actions totaled approximately $57 million in
2009 and related primarily to lease accruals, inventory write downs, severance expenses and other facility
closure costs. The 2008 Charges totaled approximately $22 million and consisted primarily of accelerated
depreciation, severance related costs and lease accruals.
•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.
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