Big Lots 2007 Annual Report Download - page 108

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The following table compares components of our consolidated statements of operations as a percentage of
net sales:
2007 2006 2005
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0 % 100.0 % 100.0 %
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60.5 60.1 60.9
Gross margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39.5 39.9 39.1
Selling and administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32.5 34.2 36.0
Depreciation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.9 2.1 2.5
Operating profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1 3.5 0.6
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.1) (0.0) (0.1)
Interest and investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.1 0.1 0.0
Income from continuing operations before income taxes . . . . . . . . . . . . 5.1 3.6 0.5
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.9 1.2 0.1
Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2 2.4 0.4
Income (loss) from discontinued operations, net of tax . . . . . . . . . . . . . . 0.2 0.2 (0.6)
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.4 % 2.6 % (0.2)%
See the discussion and analysis below for additional details of the specific components of our operating results
comparing the 2007 results to 2006 and the 2006 results to 2005.
Selling and administrative expenses in 2007 were reduced by $5.2 million (10 basis points) of proceeds from
the KB Toys bankruptcy trust (see note 11 to the accompanying consolidated financial statements for additional
information) and $4.9 million (10 basis points) of insurance proceeds as recovery for 2005 hurricane insurance
claims.
In 2006, we reached tentative settlements of two employment-related civil class actions brought against us.
We recorded, in 2006, pretax charges of $9.7 million (20 basis points) included in selling and administrative
expenses for the estimated settlement liability for these matters. See note 10 to the accompanying consolidated
financial statements for additional detail on these matters.
In 2006, we recorded pretax income of $2.6 million (less than 10 basis points) in selling and administrative
expenses upon receipt of our portion of the Visa/MasterCard antitrust litigation settlement funds that
compensate merchants for the excessive fees paid for certain Visa and MasterCard transactions.
Seasonality
We historically have experienced, and we expect to continue to experience, seasonal fluctuations, with a larger
percentage of our net sales and operating profit being realized in the fourth fiscal quarter. In addition, our
quarterly results can be affected by the timing of new store openings and store closings, the amount of sales
contributed by new and existing stores, the timing of television and circular advertising, and the timing of
certain holidays. We purchase substantial amounts of inventory and incur higher shipping and payroll costs as a
percent of sales in the third fiscal quarter in anticipation of the increased sales activity during the fourth fiscal
quarter.
The following table sets forth the seasonality of net sales and operating profit by fiscal quarter:
First Second Third Fourth
Fiscal Year 2007
Net sales percentage of full year . . . . . . . . . . . . . . . . . . . . . . 24.2% 23.3% 22.1% 30.4%
Operating profit as a percentage of full year ............. 18.0 14.1 9.6 58.3
Fiscal Year 2006
Net sales percentage of full year . . . . . . . . . . . . . . . . . . . . . . 23.0% 22.3% 22.1% 32.6%
Operating profit as a percentage of full year ............. 12.7 4.3 1.4 81.6