Staples 2014 Annual Report Download - page 155

APPENDIX C
STAPLES C-23
STAPLES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
and lease commitments for eleven retail stores not yet
opened at January 31, 2015) and equipment leases under
non-cancelable operating leases are as follows (in thousands):
Fiscal Year: Total
2015 $703,905
2016 599,304
2017 479,441
2018 348,146
2019 254,085
Thereafter 545,640
$2,930,521
Future minimum lease commitments exclude the impact
of $33.3 million of minimum rentals due under non-
cancelable subleases.
Rent expense was $767.5 million, $801.4 million and
$838.9 million for 2014, 2013 and 2012, respectively.
As of January 31, 2015, Staples had contractual purchase
obligations that are not reflected in the Company’s consolidated
balance sheets totaling $656.3 million. Many of the Company’s
purchase commitments may be canceled by the Company
without advance notice or payment and, accordingly, the
Company has excluded such commitments from the following
schedule. Contracts that may be terminated by the Company
without cause or penalty, 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. Expected payments related to such
purchase obligations are as follows (in thousands):
Fiscal Year: Total
2015 $485,240
2016 70,127
2017 49,570
2018 15,389
2019 33,161
Thereafter 2,843
$656,330
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 31,
2015, Staples had open standby letters of credit totaling
$100.7 million.
Contingencies
On December 19, 2014, the Company announced that the
investigation into its previously announced data security
incident had determined that malware deployed by criminals
to some point of sale systems at 115 of the Company’s
more than 1,400 U.S. retail stores may have allowed access
to transaction data at those affected stores. As a result,
cardholder names, payment card numbers, expiration dates,
and card verification codes for approximately 1.16 million
payment cards may have been affected. Upon detection, the
Company immediately took action to eradicate the malware
and commenced an investigation into the incident, working
closely with payment card companies and law enforcement
and with the assistance of outside data security experts. The
Company also has taken steps to further enhance the security
of its point of sale systems, including the use of new encryption
tools. The Company continues to evaluate cybersecurity
policies and practices to mitigate the risk of future incidents.
Expenses incurred to date related to this incident have not
been material. It is reasonably possible that the Company
may incur additional expenses or losses in connection with
the incident; however, at this time the Company is unable to
reasonably estimate any such additional expenses or losses. In
addition, the Company maintains network-security insurance
coverage, which it expects would help mitigate any material
financial impact.
From time to time, the Company is involved in litigation
arising from the operation of its business that is considered
routine and incidental to its business. The company estimates
exposures and establishes reserves for amounts that are
probable and can be reasonably estimated. However,
litigation is inherently unpredictable and the outcome of legal
proceedings and other contingencies could be unexpected or
differ from the Company’s reserves. The Company does not
believe it is reasonably possible that a loss in excess of the
amounts recognized in the consolidated financial statements
as of January 31, 2015 would have a material adverse effect
on its business, results of operations or financial condition.