Big Lots 2013 Annual Report Download - page 213

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We have purchase obligations for outstanding purchase orders for merchandise issued in the ordinary course of our business
that are valued at $464.6 million, the entirety of which represents obligations due within one year of February 1, 2014. In
addition, we have a purchase commitment for future inventory purchases totaling $49.0 million at February 1, 2014. We paid
$21.7 million, $19.9 million, and $28.0 million related to this commitment during 2013, 2012, and 2011, 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 $115.3 million
primarily related to distribution and transportation, information technology, print advertising, energy procurement, and other
store security, supply, and maintenance commitments.
NOTE 11 – ACQUISITION
On July 18, 2011, we completed our acquisition of Liquidation World Inc. Under the terms of our acquisition agreement, we
invested approximately $1.9 million in cash to purchase all outstanding shares of Liquidation World Inc. As part of the
acquisition, we assumed the liabilities and acquired all assets and leasehold rights of Liquidation World Inc. On July 19, 2011,
we changed the name of Liquidation World Inc. to Big Lots Canada, Inc. (“Big Lots Canada”). The results of Big Lots Canada
since the acquisition date are included in our consolidated financial statements.
NOTE 12 – GOODWILL
The changes in the carrying amount of goodwill, which is generally not deductible for income tax purposes, for the fiscal years
2013 and 2012 were as follows:
(In thousands) 2013 2012
Beginning of yea
r
$13,522 $ 12,282
Goodwill adjustments
—
1,191
Foreign currency impact (818)49
Impairment loss (12,704)
—
End of yea
r
$
—
$ 13,522
The goodwill adjustments in 2012 were associated with our acquisition of Big Lots Canada in the second quarter of 2011, and
primarily related to fair value adjustments on our intangible assets and liabilities associated with the acquired operating leases.
Our entire balance of goodwill related to our Canadian segment.
In the second quarter of 2013, we performed our annual impairment review of goodwill, which resulted in no impairment.
During the third and fourth quarters of 2013, our senior management team conducted certain strategic planning activities. As a
result of these planning activities, we announced our intentions to wind down the operations of our Canadian segment in the
fourth quarter of 2013. The decision to the wind down was considered a triggering event for the performance of an impairment
review. As the wind down will result in the elimination of future cash flows from our Canadian segment, we determined that
our goodwill had been impaired; therefore, we recorded an impairment charge of $12.7 million in the fourth quarter of 2013.
Please see the Canadian Segment section of note 13 to the consolidated financial statements for further discussion.
NOTE 13 - COSTS ASSOCIATED WITH WIND DOWN ACTIVITIES
Wholesale Business
During the third quarter of 2013, we announced our intention to wind down the operations of our wholesale business, within
our U.S. segment, during the fourth quarter of 2013. In conjunction with our decision to wind down the operations of our
wholesale business, we reviewed the valuation of the inventory associated with the wholesale business and based on the
composition of the merchandise, we recorded an impairment of $3.7 million, which reduced the value of the inventory to our
estimate of its market value. Additionally, we recorded a severance charge for this exit activity of approximately $1.1 million.
The severance accrual was adjusted during the fourth quarter based on the final execution of severance agreements.