Big Lots 2007 Annual Report Download - page 107

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19
(c) We adopted SFAS No. 123(R), Accounting for Share-Based Compensation, in the first quarter of 2006,
under the modified prospective adoption method, the impact of which is more fully described in notes
1 and 7 to the accompanying consolidated financial statements. We adopted the funding recognition
provisions of SFAS No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement
Plans in 2006, the impact of which is more fully described in notes 1 and 8 to the accompanying
consolidated financial statements.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Overview
The discussion and analysis presented below should be read in conjunction with the accompanying consolidated
financial statements and related notes. Please refer to Item 1A of this Form 10-K for a discussion of forward-
looking statements and certain risk factors that may have a material effect on our business, financial condition,
results of operations, and liquidity.
Our fiscal year ends on the Saturday nearest to January 31, which results in some fiscal years with 52 weeks
and some with 53 weeks. Fiscal year 2006 was comprised of 53 weeks. Fiscal years 2007 and 2005 each were
comprised of 52 weeks.
Operating Results Summary
The following are the results from 2007 (52 weeks) that we believe are key indicators of our operating
performance when compared to our operating performance in 2006 (53 weeks).
• Comparable store sales for stores open at least two years at the beginning of 2007 increased 2.0%.
• Sales per selling square foot were $158 in both 2007 and 2006. Net sales declined 1.8%.
• Gross margin as a percent of sales decreased 40 basis points to 39.5% of sales from 39.9% of sales in
2006. Gross margin dollars were lower by 2.7%.
• Average inventory levels were lower throughout 2007 compared to 2006 and, combined with the
2.0% increase in comparable store sales, resulted in a higher turnover rate of 3.5 times in 2007
compared to 3.4 times in 2006.
• Selling and administrative expenses as a percent of sales decreased 170 basis points to 32.5% of sales
from 34.2% of sales in 2006.
• Depreciation expense as a percent of sales decreased 20 basis points to 1.9% of sales from 2.1% of
sales in 2006.
• Diluted earnings per share from continuing operations improved to $1.47 per share compared to
$1.01 per share in 2006.
• Cash provided by operating activities was $307.9 million in 2007 compared to $381.5 million in
2006.
• We acquired 30.0 million of our common shares under our publicly-announced repurchase programs
for a total cost of $712.5 million, while having outstanding debt at the end of 2007 of $163.7 million.
In 2006, we acquired 9.4 million of our common shares under publicly announced repurchase
programs for a total cost of $150.0 million.