Big Lots 2009 Annual Report Download - page 172

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BIG LOTS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Note 2 — Property and Equipment — Net (Continued)
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 $4.1 million in 2007, and
$0.5 million in 2008.
Note 3 — Bank Credit Facility
On April 28, 2009, we entered into our 2009 Credit Agreement, a $500 million three-year unsecured credit
facility. The 2009 Credit Agreement replaced our 2004 Credit Agreement, a $500 million five-year unsecured
credit facility we entered into on October 29, 2004. The 2004 Credit Agreement was scheduled to expire on
October 28, 2009, but was terminated concurrently with the 2009 Credit Agreement becoming effective on
April 28, 2009. We did not incur any material early termination penalties in connection with the termination of
the 2004 Credit Agreement.
The 2009 Credit Agreement expires on April 28, 2012. In connection with our entry into the 2009 Credit
Agreement, we paid bank fees and other expenses in the aggregate amount of $5.6 million, which are being
amortized over the term of the agreement. Proceeds from borrowings under the 2009 Credit Agreement are
available for general corporate purposes, working capital, and to repay certain of our indebtedness. The 2009
Credit Agreement includes a $150 million letter of credit sublimit and a $30 million swing loan sublimit.
The interest rates, pricing and fees under the 2009 Credit Agreement fluctuate based on our debt rating. The
2009 Credit Agreement allows us to select our interest rate for each borrowing from two different interest
rate options. The interest rate options are generally derived from the prime rate or LIBOR. We may prepay
revolving loans made under the 2009 Credit Agreement. The 2009 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. A violation of any of
the covenants could result in a default under the 2009 Credit Agreement that would permit the lenders to restrict
our ability to further access the 2009 Credit Agreement for loans and letters of credit and require the immediate
repayment of any outstanding loans under the 2009 Credit Agreement. As of January 30, 2010, we were in
compliance with the covenants of the 2009 Credit Agreement.
Note 4 — Sales of Real Estate
In September 2006, to avoid litigation 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. Subsequently, this lease was modified to allow us
to occupy this space through September 2009 under substantially the same terms. Because of the favorable lease
terms, we deferred recognition of the gain until we no longer held a continuing involvement in the property. As
a result, the gain on the sale was deferred until the end of the lease and 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 sheet as of January 31, 2009. In the third fiscal quarter of 2009, after attempts to further extend the
lease term were unsuccessful, we closed the store, ending our continuing involvement with this property, and
recognized a pretax gain on sale of real estate of $13.0 million.