Big Lots 2014 Annual Report Download - page 148

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NOTE 11 – 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 year $ 13,522 $ 12,282
Goodwill adjustments — 1,191
Foreign currency impact (818) 49
Impairment loss (12,704) —
End of year $ — $ 13,522
The goodwill adjustments in 2012 were associated with our acquisition of Big Lots Canada, Inc. 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 was related to our acquisition of Big Lots Canada, Inc.
During the third and fourth quarters of 2013, our senior management team conducted certain strategic planning activities. As a
result of those planning activities in the fourth quarter of 2013, we announced our intentions to wind down the operations of
Big Lots Canada, Inc. The decision to wind down was considered a triggering event for the performance of an impairment
review, as the wind down would result in the elimination of future cash flows from Big Lots Canada, Inc. Therefore, in the
fourth quarter of 2013, we determined that our goodwill had been impaired and we recorded an impairment charge of $12.7
million. Please see the Canadian Operations section of note 12 to the consolidated financial statements for further discussion.
NOTE 12 - COSTS ASSOCIATED WITH WIND DOWN ACTIVITIES
Canadian Operations
During the fourth quarter of 2013, we announced our intention to wind down our Canadian operations. At that time, we
conducted detailed evaluations of our long range strategic objectives as well as performed a preliminary review of our 2014
financial plan. As a result of that evaluation and review, we determined our Canadian operations did not fit into our strategic
plan for maximizing long-term shareholder returns based on our expectations of the required investments necessary to improve
the financial performance of our Canadian operations, both in the near and long-term. During the fourth quarter of 2013, we
began a markdown strategy with the intent to liquidate our inventory prior to closing our stores. At February 1, 2014, we re-
valued our inventory at our net realizable value based on estimated cash proceeds prior to closing, which represents our
estimate of its market value. We, also, conducted a review of our long-lived assets. We determined that the elimination of
future cash flows from our operations beyond the first quarter of 2014 resulted in the impairment of our property and
equipment and our tradename intangible assets; therefore, we recorded a $6.5 million impairment charge for property and
equipment, in order to reduce its value to estimated salvage value, and recorded a $0.5 million charge to fully impair our
Canadian tradenames. Please see note 2 to the consolidated financial statements for further discussion. Additionally, we
conducted an impairment review of our goodwill associated with our Canadian operations, determined that the goodwill had
been impaired, and we recorded a $12.7 million impairment charge. Please see note 11 to the consolidated financial statements
for further discussion.
The wind down of our Canadian operations was separated into two phases: our distribution centers and our stores. During the
fourth quarter of 2013, we ceased the operations in our distribution centers, as receiving, processing, and distributing activities
were completed. Associated with the closure of our distribution centers and certain administrative activities, we recorded both
an employee severance charge and contract termination costs related to leased distribution centers. During the first quarter of
2014, we ceased all operations in Canada by closing all stores and terminating all remaining Canadian employees, which
resulted in additional severance charges and contract termination costs.