Big Lots 2007 Annual Report Download - page 142

54
BIG LOTS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Note 2 — Property and Equipment — Net
Property and equipment – net consist of:
February 2,
2008
February 3,
2007
(In thousands)
Land and land improvements .......................................... $ 39,813 $ 38,714
Buildings and leasehold improvements................................... 663,086 656,161
Fixtures and equipment ............................................... 597,643 592,829
Computer software costs .............................................. 66,428 63,866
Transportation equipment ............................................. 22,647 21,397
Construction-in-progress.............................................. 7,685 1,093
Property and equipment - cost .................................... 1,397,302 1,374,060
Less accumulated depreciation and amortization...................... 915,936 868,413
Property and equipment - net ..................................... $ 481,366 $ 505,647
Property and equipment - cost includes $3.1 million at February 2, 2008 to recognize assets from capital leases.
Accumulated depreciation and amortization includes $0.6 million at February 2, 2008 related to capital leases.
We incurred $0.8 million, $7.7 million, and $2.0 million in asset impairment charges in 2007, 2006, and 2005,
respectively. These charges principally related to the write-down of long lived assets at three, 26, and 14 stores
in 2007, 2006, and 2005, respectively. Asset impairment charges are included in selling and administrative
expenses in our accompanying consolidated statements of operations. Assets were reviewed for impairment
at the store level in accordance with our impairment policy. Stores with a history of operating losses were
reviewed for impairment. We compared the net book value of long-lived assets at stores identified by this
review, to estimated future cash flows of each specific store in order to determine whether impairment existed.
If the assets were not recoverable by the estimated future cash flows, an impairment was recognized to write-
down the long-lived assets to fair value. We estimated the fair value of our long-lived assets using readily
available market information for similar assets.
Upon the successful completion of a pilot program in 32 of our stores in 2006 and the decision to move forward
with the implementation of a new point-of-sale register system in all of our stores, we reduced the remaining
estimated service life on approximately $6.9 million of certain point-of-sale equipment. This service life
reduction resulted in the recognition of depreciation expense of approximately $2.3 million in the fourth quarter
of 2006 and $4.1 million in 2007. The estimated remaining service life was based on our projected roll out
schedule to all remaining stores, approximately one-half in each of 2007 and 2008. As of February 2, 2008, we
have implemented the new point-of-sale register system in approximately 700 of our stores. The remaining book
value of the old register system equipment is $0.5 million and will be depreciated in 2008 upon the completion
of the register system implementation.
In 2005, depreciation expense for the 130 closed stores reported in discontinued operations was $12.2 million.
Note 3 — Long-Term Obligations
On October 29, 2004, we entered into the $500.0 million Credit Agreement. The Credit Agreement is scheduled
to terminate on October 28, 2009. The proceeds of the Credit Agreement are available for general corporate
purposes, working capital, and initially to repay certain of our indebtedness.
The pricing and fees related to the Credit Agreement may fluctuate based on our credit rating. Borrowings
obtained by us under the Credit Agreement may be prepaid without penalty. The Credit Agreement contains
financial and other covenants, including, but not limited to, limitations on indebtedness, liens, and investments,
as well as the maintenance of two financial ratios – a leverage ratio and a fixed charge coverage ratio.