Staples 2013 Annual Report Download - page 154

STAPLES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
C-23
In October 2011, the Company entered into a foreign currency swap designed to convert a 118.3 million intercompany
loan denominated in Canadian dollars into a fixed U.S. dollar amount. The intercompany loan had a fixed interest rate of 1.8%.
The agreement was accounted for as a fair value hedge. No amounts were included in the consolidated statement of income related
to ineffectiveness associated with this cash flow hedge. Upon maturity of the agreement in December 2011, Staples paid $112.1
million and recognized a gain of $2.2 million.
Also in October 2011, the Company entered into a foreign currency swap designed to convert a 79.5 million intercompany
loan denominated in Canadian dollars into a fixed Euro amount. The intercompany loan had a fixed interest rate of 1.32%. The
agreement was accounted for as a fair value hedge. No amounts were included in the consolidated statement of income related
to ineffectiveness associated with this cash flow hedge. Upon maturity of the agreement in December 2011, Staples paid 79.5
million Canadian dollars and recognized a loss of $2.1 million.
In December 2011, the Company entered into a foreign currency forward designed to convert a series of intercompany
loans denominated in Canadian dollars into a fixed U.S. dollar amount. The loans totaled 750 million Canadian dollars in the
aggregate and matured at various dates between October 2012 and October 2013. Staples, upon full maturity of the agreements
in October 2013, had collected $720 million and paid 750 million Canadian dollars per the terms of the contracts. The forward
agreements were accounted for as a fair value hedge. In 2012, the Company settled 500 million Canadian dollars of the notional
amount relating to this forward, realizing a loss of $24.2 million which was recorded within Other income (expense), net. In 2013,
the Company settled the remaining 250 million Canadian dollars of notional amount relating to this forward, realizing a loss of
$4.2 million, which was recorded within Other income (expense), net. During 2013, 2012 and 2011, unrealized gains (losses) of
$5.8 million, $12.2 million and $(22.0) million, respectively, were recognized in Other income (expense), net related to the
outstanding portion of this fair value hedge. No amounts were included in the consolidated statements of income related to
ineffectiveness associated with this fair value hedge. At February 2, 2013, the outstanding portion of the foreign currency forward
had a fair value loss of $10.0 million which was included in other long-term obligations.
In 2012, the Company entered into a series of short-term foreign currency forwards with notional amounts of 150 million
Canadian dollars that were designated as foreign currency hedges on Staples’ net investment in Euro-denominated subsidiaries.
Upon settlement of these forwards, the Company recognized a net gain of $2.8 million in 2012 which was recorded as a foreign
currency translation gain within other comprehensive income. No amounts were included in the consolidated statements of income
related to ineffectiveness associated with these net investment hedges. These forwards were fully settled as of February 2, 2013.
Note I — Commitments and Contingencies
Staples leases certain retail and support facilities under long-term non-cancelable lease agreements. Most lease agreements
contain renewal options and rent escalation clauses and, in some cases, allow termination within a certain number of years with
notice and a fixed payment. Certain agreements provide for contingent rental payments based on sales.
Other long-term obligations at February 1, 2014 include $94.9 million relating to future rent escalation clauses and lease
incentives under certain existing operating lease arrangements. These rent obligations are recognized on a straight-line basis over
the respective terms of the leases. Future minimum lease commitments due for retail, distribution, fulfillment and support facilities
(including restructured facilities and lease commitments for two retail stores not yet opened at February 1, 2014) and equipment
leases under non-cancelable operating leases are as follows (in thousands):
Fiscal Year: Total
2014 $ 799,591
2015 690,828
2016 572,597
2017 450,745
2018 316,086
Thereafter 778,068
$ 3,607,915
Future minimum lease commitments exclude the impact of $43.0 million of minimum rentals due under non-cancelable
subleases.
Rent expense was $801.4 million, $838.9 million and $839.6 million for 2013, 2012 and 2011, respectively.