Costco 2007 Annual Report Download - page 31

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2007 vs. 2006
Preopening expenses totaled $55.2 million in fiscal 2007 compared to $42.5 million in fiscal 2006. This
increase is primarily due to increased warehouse remodel activity and international openings.
2006 vs. 2005
Preopening expenses totaled $42.5 million in fiscal 2006 compared to $53.2 million in fiscal 2005.
During fiscal 2005, we adjusted our method of accounting for leases (entered into over the previous
twenty years), primarily related to ground leases at certain owned warehouse locations that did not
require rental payments during the period of construction. We recorded a cumulative pre-tax, non-cash
charge of $16.0 million to preopening expenses in the second quarter of fiscal 2005. Excluding this
charge, preopening expenses increased year over year, due to the increase in warehouse openings.
Provision for Impaired Assets and Closing Costs, net
Fiscal 2007 Fiscal 2006 Fiscal 2005
Provision for impaired assets and
closing costs, net:
Warehouse closing expenses .... $15,887 $3,762 $11,619
Impairment of long-lived assets . . . — — 3,893
Net (gains) losses on the sale of
real property ................ (2,279) 1,691 881
Total ..................... $13,608 $5,453 $16,393
The provision primarily includes costs related to impairment of long-lived assets, future lease
obligations of warehouses that have been relocated to new facilities, accelerated depreciation on
buildings to be demolished or sold and that are not otherwise impaired, and losses or gains resulting
from the sale of real property.
2007 vs. 2006
The net provision for impaired assets and closing costs was $13.6 million in fiscal 2007, compared to
$5.5 million in fiscal 2006. In fiscal 2007, approximately $13.0 million of this provision related to the
acceleration of depreciation on ten buildings expected to be relocated in fiscal 2008.
2006 vs. 2005
The net provision for impaired assets and closing costs was $5.5 million in fiscal 2006, compared to
$16.4 million in fiscal 2005. The provision for fiscal 2006 included charges of $3.8 million for
warehouse closing expenses and $1.7 million for net losses on the sale of real property. The provision
for fiscal 2005 included charges of $11.6 million for warehouse closing expenses, primarily related to
lease obligations and accelerated building depreciation, $3.9 million for impairment of long-lived
assets, and $0.9 million for net losses on the sale of real property.
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