KR » Topics » Related Items: Lease Liabilities - Store Closing Plans

This excerpt taken from the KR 10-K filed Apr 13, 2005.

Related Items: Lease Liabilities – Store Closing Plans

 

In connection with the 2001 asset impairment review described above, the Company recorded pre-tax operating, general and administrative expenses of $20 in 2001 for the present value of lease liabilities for stores identified for closure. In 2000, the Company also recorded pre-tax expenses $67 for the present value of lease liabilities for similar store closings. The 2000 liabilities pertained primarily to stores acquired in the Fred Meyer merger, or to stores operated prior to the merger that were in close proximity to stores acquired in the merger, that were identified as under-performing stores. In both years, liabilities were recorded for the planned closings of the stores.

 

Due to operational changes, performance improved at five stores that had not yet closed. As a result of this improved performance, in the first quarter of 2003 the Company modified its original plans and determined that these five locations will remain open. Additionally, closing and exit costs at other locations included in the original plans were less costly than anticipated. In total, in the first quarter of 2003, the Company recorded pre-tax income of $10 to adjust these liabilities to reflect the outstanding lease commitments through 2020 at the locations remaining under the plans. The following table summarizes the changes in the balances of the liabilities:

 

Balances at January 29, 2000

   $ —    

Lease liabilities recorded

     67  

Payments

     (10 )
    


Balances at February 3, 2001

     57  

Lease liabilities recorded

     20  

Payments

     (13 )
    


Balances at February 2, 2002

     64  

Payments

     (4 )
    


Balances at February 1, 2003

     60  

Lease liabilities reversed

     (10 )

Payments, including $12 related to the synthetic lease buyout

     (18 )
    


Balances at January 31, 2004

   $ 32  
    



No charges were recorded in 2003 for the present value of lease liabilities for stores considered in the 2003 asset impairment review. In accordance with SFAS No. 146, which is effective for all exit and disposal activities initiated after December 31, 2002, such liabilities will be recorded when these locations are closed. Most of the locations are expected to close during 2004. As a result, the Company expects to record pre-tax charges totaling approximately $25 to $32 during 2004.

 

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