Big Lots 2010 Annual Report Download - page 106

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order to account for our contractual obligations relative to CAM, real estate taxes, and property insurance.
Those assumptions and estimates include, but are not limited to: use of historical data to estimate our
future obligations; calculation of our obligations based on comparable store averages where no historical
data is available for a particular leasehold; and assumptions related to average expected increases over
historical data. The remaining lease obligation of $12.6 million relates primarily to operating leases for
computer and other business equipment, including data center related costs.
(4) For purposes of the lease and purchase obligation disclosures, we have assumed that we will make all
payments scheduled or reasonably estimated to be made under those obligations that have a determinable
expiration date, and we disregarded the possibility that such obligations may be prematurely terminated
or extended, whether automatically by the terms of the obligation or by agreement between us and the
counterparty, due to the speculative nature of premature termination or extension. Where an operating
lease or purchase obligation is subject to a month-to-month term or another automatically renewing
term, we included in the table our minimum commitment under such obligation, such as one month in
the case of a month-to-month obligation and the then-current term in the case of another automatically
renewing term, due to the uncertainty of future decisions to exercise options to extend or terminate any
existing leases.
(5) Purchase obligations include outstanding purchase orders for merchandise issued in the ordinary course
of our business that are valued at $470.3 million, the entirety of which represents obligations due within
one year of January 29, 2011. In addition, we have a purchase commitment for future inventory purchases
totaling $108.8 million at January 29, 2011. While we are not required to meet any periodic minimum
purchase requirements under this commitment, we have included, for purposes of this tabular disclosure,
the value of the purchases that we anticipate making during each of the reported periods as purchases
that will count toward our fulfillment of the aggregate obligation. The remaining $291.6 million of
purchase obligations is primarily related to distribution and transportation, information technology, print
advertising, energy procurement, and other store security, supply, and maintenance commitments.
(6) Other long-term liabilities include $30.3 million for expected contributions to the Pension Plan and
our nonqualified, unfunded supplemental defined benefit pension plan (“Supplemental Pension Plan”),
$20.2 million for obligations related to our nonqualified deferred compensation plan, $5.5 million for
unrecognized tax benefits, and $0.5 million for closed store lease termination costs related to stores closed
in 2009 and 2010. Pension contributions are equal to expected benefit payments for the nonqualified
plan plus expected contributions to the qualified plan using actuarial estimates and assuming that we
only make the minimum required contributions (see note 8 to the accompanying consolidated financial
statements for additional information about our employee benefit plans). We have estimated the payments
due by period for the nonqualified deferred compensation plan based on an average of historical
distributions. We have included unrecognized tax benefits of $3.6 million for payments expected in 2011
and $1.9 million of timing-related income tax uncertainties anticipated to reverse in 2011. Unrecognized
tax benefits in the amount of $18.9 million have been excluded from the table because we are unable to
make a reasonably reliable estimate of the timing of future payments. Our closed store lease termination
cost payments are based on contractual terms.
(7) The obligations disclosed in this table are exclusive of the contingent liabilities, guarantees, and
indemnities related to the KB Toys business. For further discussion, see note 11 to the accompanying
consolidated financial statements.
Off-Balance Sheet Arrangements
For a discussion of the KB Bankruptcy Lease Obligations, see note 11 to the accompanying consolidated
financial statements. Because the KB Toys business filed for bankruptcy again in December 2008 and
liquidated all of its store operations, we accrued a contingent liability on our balance sheet at January 30,
2010, in the amount of $4.8 million for 31 KB Toys store leases for which we may have an indemnification or
guarantee obligation and a former KB Toys corporate office lease for which we took an assignment in 2009. At
January 29, 2011, our contingent liability related to this matter was $3.6 million. Because of uncertainty inherent
in the assumptions used to estimate this liability, our estimated liability could ultimately prove to be understated
and could result in a material adverse impact on our financial condition, results of operations, and liquidity.