Costco 2011 Annual Report Download - page 33

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Provision for Impaired Assets and Closing Costs, Net
2011 2010 2009
Warehouse closing expenses ................................ $8 $6 $ 9
Impairment of long-lived assets .............................. 1 2 8
Provision for impaired assets & closing costs, net ................ $9 $8 $17
This provision primarily includes costs related to: impairment of long-lived assets; future lease
obligations, including contract termination costs, of warehouses that have been closed or relocated to
new facilities; and accelerated depreciation, based on the shortened useful life through the expected
closing date, on buildings to be demolished or sold and that are not otherwise impaired. The
impairment charge in 2009 primarily related to the closing of our two Costco Home locations.
At the end of 2011 and 2010, the reserve for warehouse closing costs was $5, and primarily related to
future lease obligations and other contractual obligations associated with exiting the properties.
Interest Expense
2011 2010 2009
Interest expense ..................................... $116 $111 $108
Interest expense primarily relates to our $900 of 5.3% and $1,100 of 5.5% Senior Notes (2007 Senior
Notes) issued in fiscal 2007. The 5.3% Senior Notes are due March 15, 2012.
Interest Income and Other, Net
2011 2010 2009
Interest income.......................................... $41 $23 $27
Earnings of affiliates and other, net ......................... 19 65 31
Interest income and other, net .......................... $60 $88 $58
2011 vs. 2010
The increase in interest income year-over-year was attributable to increases in our cash and cash
equivalents, including short-term investments, slightly higher interest rates, and the consolidation of our
Mexico operations. The decrease in earnings of affiliates and other, net is primarily due to the
previously discussed change in the accounting treatment of Mexico (see discussion in Note 1 to the
consolidated financial statements included in this Report). In addition, there were net gains from
foreign currency transactions and from derivative forward foreign currency contracts of $9 and $14
during 2011 and 2010, respectively. See Derivatives section in Note 1 to the consolidated financial
statements included in this Report.
2010 vs. 2009
The decrease in interest income was due to lower interest rates on our cash and cash equivalents and
short-term investment balances. Interest income also includes a $12 other-than-temporary impairment
loss recognized on certain securities within our investment portfolio in 2009. No impairment was
recognized in 2010.
The increase in earnings of affiliates and other was primarily due to an increase in earnings from
Mexico, which increased due to stronger sales and the Mexican peso strengthening against the U.S.
dollar. In addition, there were net gains (losses) from foreign currency transactions and from derivative
forward foreign currency contracts of $14 and ($5) in 2010 and 2009, respectively.
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