Big Lots 2009 Annual Report Download - page 188

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BIG LOTS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Note 10 — Commitments, Contingencies and Legal Proceedings (Continued)
We have purchase obligations for outstanding purchase orders for merchandise issued in the ordinary course
of our business that are valued at $478.5 million, the entirety of which represents obligations due within one
year of January 30, 2010. In addition, we have a purchase commitment for future inventory purchases totaling
$138.5 million at January 30, 2010. We paid $28.9 million, $31.5 million, and $28.3 million related to this
commitment during 2009, 2008, and 2007, respectively. We are not required to meet any periodic minimum
purchase requirements under this commitment. The term of the commitment extends until the purchase
requirement is satisfied. We have additional purchase obligations in the amount of $222.6 million primarily
related to distribution and transportation, information technology, print advertising, energy procurement, and
other store security, supply, and maintenance commitments.
Note 11 — Discontinued Operations
Our discontinued operations for 2009, 2008, and 2007, were comprised of the following:
2009 2008 2007
(In thousands)
Closed stores .................................................. $ (48) $ (439) $ (905)
KB Toys matters ............................................... (1,609) (4,928) 12,912
Total income (loss) from discontinued operations, pretax ............ $(1,657) $(5,367) $12,007
Closed Stores
In 2005, we determined that the results of 130 stores closed in 2005 should be reported as discontinued
operations for all periods presented. For 2009, 2008, and 2007, the closed stores’ operating loss is comprised
of exit-related costs, utilities, and security expenses on leased properties with remaining terms and accretion
on the lease termination obligations of $0.1 million, $0.1 million, and $0.2 million, respectively. At fiscal year
end 2009, 2008, and 2007, we had accrued exit-related liabilities of $0.5 million, $0.9 million, and $2.5 million,
respectively, as a result of the 130 store closures in 2005. The decrease in liabilities is due to payments of the
exit-related amounts. Included in payments is sublease income of $0.2 million in 2009 and $0.3 million in 2008
and 2007. As of January 30, 2010, we had three closed stores with leases that had not yet been terminated or
subleased. Future cash outlays under these store closure obligations are anticipated to be $0.4 million in 2010
and $0.1 million in 2011.
KB Toys Matters
We acquired the KB Toys business from Melville Corporation (now known as CVS New York, Inc., and
together with its subsidiaries “CVS”) in May 1996. As part of that acquisition, we provided, among other
things, an indemnity to CVS with respect to any losses resulting from KB Toys’ failure to pay all monies due
and owing under any KB Toys lease or mortgage obligation. While we controlled the KB Toys business, we
provided guarantees with respect to a limited number of additional KB Toys store leases. We sold the KB
Toys business to KB Acquisition Corp. (“KBAC”), an affiliate of Bain Capital, pursuant to a Stock Purchase
Agreement. KBAC similarly agreed to indemnify us with respect to all lease and mortgage obligations. These
guarantee and lease obligations are collectively referred to as the “KB Lease Obligations.”
On January 14, 2004, KBAC and certain affiliated entities (collectively referred to as “KB-I”) filed for
bankruptcy protection pursuant to Chapter 11 of title 11 of the United States Code. In connection with the
2004 bankruptcy, KB-I rejected 226 store leases and two distribution center leases for which we believed we
may have guarantee or indemnification obligations (collectively referred to as the “KB-I Bankruptcy Lease
Obligations”). We recorded pretax charges for estimated KB-I Bankruptcy Lease Obligations in loss from