Big Lots 2007 Annual Report Download - page 94

6
elements of strategic branding and promotion. These same elements are then used in all other consumer
touchpoints. Our highly targeted broadcast media placement uses national cable as the foundation of our buys
which is then supplemented with local broadcast in key markets. Our marketing program utilizes printed
advertising circulars in all markets that are served by our stores. In 2007 and 2006, we distributed multi-page
circulars covering 26 weeks. In 2008, we expect to distribute circulars covering 27 weeks, with the incremental
week included in the fourth quarter of 2008. The circular distribution was performed by a combination of
newspaper insertions and mailings. These circulars were designed by us and were distributed regionally to
take advantage of market differences caused by product availability, climate, and customer preferences. In
addition to circulars, store promotional materials, including in-store signage, emphasize special bargains and
significant values offered to customers. We continue to use our website (www.biglots.com) in order to improve
the efficiency of communicating with our customers using the internet. In 2006, we overhauled and re-launched
our website. Our on-line customer list, which we refer to as the Buzz Club, has grown from just over one
million members at the end of 2006 to in excess of two million members at the end of 2007. This is an important
marketing tool which allows us to communicate in a cost effective manner with our core customer base.
Over the past five fiscal years, total advertising expense as a percentage of total net sales has ranged from 2.2%
to 2.6%. In 2007, advertising expense as a percentage of total net sales was 2.2%.
Seasonality
We have historically experienced, and expect to continue to experience, seasonal fluctuations, with a larger
percentage of our net sales and operating profit 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 timing of television
and circular advertising, and the timing of certain holidays. We historically receive a higher proportion of
merchandise, carry higher inventory levels, and incur higher outbound shipping and payroll expenses in the
third fiscal quarter in anticipation of increased sales activity during the fourth fiscal quarter. The increased
sales activity in the fourth fiscal quarter typically has a leveraging effect on operating results in the fourth fiscal
quarter as a result of certain fixed costs such as rent and depreciation.
The seasonality of our business influences our demand for seasonal borrowings. We historically have drawn
upon our credit facilities to fund seasonal working capital needs and have substantially repaid these borrowings
during the fourth fiscal quarter. In 2007, our borrowings were primarily driven by seasonal working capital
needs and the execution of the $600.0 million share repurchase program authorized by our Board of Directors in
March 2007 (“March 2007 Repurchase Program”) and the $150.0 million share repurchase program authorized
by our Board of Directors in November 2007 (“November 2007 Repurchase Program”). We expect that
borrowings will vary throughout 2008 under our $500.0 million unsecured credit facility (“Credit Agreement”)
depending on various factors, including our seasonal need to acquire merchandise inventory prior to peak
selling seasons and the timing and amount of sales to our customers.
Available Information
We make available, free of charge, through the “Investor Relations” section of our website (www.biglots.com)
under the “SEC Filings” caption, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current
Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended (“Exchange Act”) as soon as reasonably practicable after we file
such material with, or furnish it to, the Securities and Exchange Commission (“SEC”).
In this Form 10-K, we incorporate by reference certain information from parts of our Proxy Statement for our
2008 Annual Meeting of Shareholders (“2008 Proxy Statement”).
Information relating to our corporate governance, including: Corporate Governance Standards; charters of
our Board of Director’s Audit, Compensation, and Nominating/Corporate Governance Committees; Code of
Business Conduct and Ethics; Code of Ethics for Financial Professionals; Chief Executive Officer and Chief
Financial Officer certifications related to our SEC filings; the means by which shareholders may communicate
with our Board of Directors; and transactions in our securities by our directors and executive officers may be
found in the “Investor Relations” section of our website (www.biglots.com) under the “Corporate Governance”
and “SEC Filings” captions. The Code of Business Conduct and Ethics is applicable to all of our associates,
including our directors and our principal executive officer, principal financial officer, and principal accounting