Big Lots 2007 Annual Report Download - page 143

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BIG LOTS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Note 3 — Long-Term Obligations (Continued)
A violation of these covenants could result in a default under the Credit Agreement, which would permit the
lenders to restrict our ability to further access the Credit Agreement for loans and letters of credit, and require
the immediate repayment of any outstanding borrowings under the Credit Agreement. We were in compliance
with these amended financial covenants at February 2, 2008.
On December 22, 2006, we entered into an amendment to the Credit Agreement in order to permit us to acquire
investments rated by an additional rating agency. On October 25, 2005, we entered into an amendment to the
Credit Agreement in order to eliminate the impact on the covenant calculations of the estimated charges related
to the store closings discussed in note 11 to the accompanying consolidated financial statements.
The Credit Agreement permits, at our option, borrowings at various interest rate options based on the prime
rate or the London InterBank Offering Rate plus applicable margin. The Credit Agreement also permits, as
applicable, borrowings at various interest rate options mutually agreed upon by us and the lenders. Whenever
our liquidity position requires us to borrow funds under the Credit Agreement, we typically repay and/or borrow
on a daily basis. The daily activity is a net result of our liquidity position, which is generally driven by: 1) cash
inflows such as cash or credit card receipts collected from stores for merchandise sales and other miscellaneous
deposits; and 2) cash outflows such as check clearings for the acquisition of merchandise and payroll, wire and
other electronic transactions, and other miscellaneous disbursements.
In addition to revolving credit loans, the Credit Agreement includes a $30.0 million swing loan sub-limit, a
$50.0 million bid loan sub-limit, and a $150.0 million letter of credit sub-limit. At February 2, 2008, we had
$163.7 million of borrowings outstanding under the Credit Agreement. The weighted average interest rate
on these borrowings was 4.6% as of February 2, 2008. At February 3, 2007, we did not have any borrowings
outstanding under the Credit Agreement. The borrowings available under the Credit Agreement, after taking
into account the outstanding borrowings and the reduction of availability resulting from outstanding letters of
credit totaling $58.4 million, were $277.9 million at February 2, 2008.
Note 4 — Sales of Real Estate
In September 2006, under the threat of eminent domain, we sold a company-owned and operated store in
California for an approximate gain of $12.8 million. As part of the sale, we entered into a lease which permitted
us to occupy and operate the store through January 2009 in exchange for $1 per year rent plus the cost of taxes,
insurance, and common area maintenance. We may vacate the property at any time without liability. Due to our
continuing involvement with the property at below market rent, the sale was recognized as a finance obligation
under the provisions of SFAS No. 66, Accounting for Sales of Real Estate. As a result, the gain on the sale was
deferred until the end of the lease. The net sales proceeds of approximately $13.3 million were recorded as a long-
term real estate liability included in other liabilities on our consolidated balance sheets as of February 2, 2008 and
February 3, 2007.
See note 11 to the accompanying consolidated financial statements for discussion of the sale of the Pittsfield,
Massachusetts distribution center (formerly owned by the KB Toys business) in 2006.
Note 5 — Leases
Leased property consisted primarily of 1,301 of our retail stores, certain warehouse space, certain transportation
equipment, and certain information technology and other office equipment. Many of the store leases obligate us
to pay for our applicable portion of real estate taxes, CAM, and property insurance. Certain store leases provide
for contingent rents, have rent escalations, and have tenant allowances or other lease incentives. Many of our
leases contain provisions for options to renew or extend the original term for additional periods.