Staples 2005 Annual Report Download - page 102

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STAPLES, INC. AND SUBSIDIARIES
Notes To Consolidated Financial Statements (Continued)
C-17
NOTE G Commitments and Contingencies (Continued)
Other long-term obligations at January 28, 2006 include $101.9 million relating to future rent escalation clauses and
lease incentives under certain existing store operating lease arrangements. These rent expenses are recognized on a
straight-line basis over the respective terms of the leases. Future minimum lease commitments due for retail and support
facilities (including lease commitments for 54 retail stores not yet opened at January 28, 2006) and equipment leases
under non-cancelable operating leases are as follows (in thousands):
Fiscal Year: Total
2006 ................................................ $ 617,021
2007 ................................................ 593,176
2008 ................................................ 558,355
2009 ................................................ 526,981
2010 ................................................ 491,310
Thereafter........................................... 2,460,031
$5,246,874
Future minimum lease commitments do not include $65.4 million of minimum rentals due under non-cancelable
subleases.
Rent expense approximated $566.1 million, $524.0 million and $480.0 million for fiscal years 2005, 2004 and 2003,
respectively.
As of January 28, 2006, Staples had purchase obligations of $468.8 million. Many of the Company’s purchase
commitments may be canceled by the Company without payment, and the Company has excluded such commitments,
along with intercompany commitments. Contracts that may be terminated by the Company without cause or pernalty, but
that require advance notice for termination are valued on the basis of an estimate of what the Company would owe
under the contract upon providing notice of termination. Such purchase obligations will arise as follows (in thousands):
Fiscal Year: Total
2006 ................................................. $363,703
2007 through2008..................................... 65,777
2009 through2010..................................... 22,453
Thereafter............................................ 16,857
$468,790
Import letters of credit are issued by Staples during the ordinary course of business through major financial
institutions as required by certain vendor contracts. As of January 28, 2006, Staples had open letters of credit totaling
$50.9 million.
The Company is involved from time to time in litigation arising from the operation of its business. Various class action
lawsuits have been brought against Staples for alleged violations of what is known as California’s “wage and hour” law.
The plaintiffs have alleged that the Company improperly classified both general and assistant managers as exempt under
the California wage and hour law, making such managers ineligible for overtime wages. The plaintiffs are seeking to
require the Company to pay overtime wages to the putative class for the period October 21, 1995 to the present. The
court has granted class certification to the plaintiffs. The court’s ruling is procedural only and does not address the merits
of the plaintiffs’ allegations. The Company believes that the class was improperly certified. If the case goes to trial, the
Company believes it has meritorious defenses in the litigation and expects to prevail. If, however, there is an adverse
judgment from which there is no successful appeal, damages could range from $10 million to $150 million, excluding
interest and attorneys’ fees.