Costco 2008 Annual Report Download - page 32

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Preopening Expenses
2008 2007 2006
Preopening expenses ......................... $57,383 $55,163 $42,504
Warehouse openings .......................... 34 30 28
Relocations .................................. (10) — (3)
Warehouse openings, net of relocations .......... 24 30 25
Preopening expenses include costs incurred for startup operations related to new warehouses and the
expansion of ancillary operations at existing warehouses. Preopening expenses can vary due to the
timing of the opening relative to our year end, whether the warehouse is owned or leased, whether the
opening is in an existing, new or international market, as well as the number and magnitude of
warehouse remodel projects.
Provision for Impaired Assets and Closing Costs, Net
2008 2007 2006
Warehouse closing expenses ................... $ 9,091 $15,887 $3,762
Impairment of long-lived assets .................. 9,972 — —
Net (gains) / losses on the sale of real property ..... (18,815) (2,279) 1,691
Provision for impaired assets & closing costs, net . . . $ 248 $13,608 $5,453
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 gains or losses resulting
from the sale of real property, largely comprised of former warehouse locations.
2008 vs. 2007
The net provision for impaired assets and closing costs was $0.2 million in 2008, compared to $13.6
million in 2007. The provision in 2008 included charges of $9.1 million for warehouse closing expenses,
and impairment charges of $10.0 million, primarily related to a location in Michigan that was
demolished and is being rebuilt. These charges were offset by $18.8 million of net gains on the sale of
real property, largely former warehouse locations.
2007 vs. 2006
The net provision for impaired assets and closing costs was $13.6 million in 2007, compared to $5.5
million in 2006. In 2007, approximately $13.0 million of this provision related to the acceleration of
depreciation on ten buildings that were relocated in 2008.
The reserve for warehouse closing costs, classified within other current liabilities, at the end of 2008
and 2007 included:
2008 2007
Future lease obligations ..................................... $4,505 $6,086
Other .................................................... 24 737
Reserve for warehouse closing costs .......................... $4,529 $6,823
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