Big Lots 2007 Annual Report Download - page 98

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Our inability, if any, to comply with the terms of the Credit Agreement may have a material adverse effect on
our capital resources, financial condition, results of operations, and liquidity.
We have the ability to borrow funds under the Credit Agreement and we utilize this ability at various times depending
on operating or other cash flow requirements. The Credit Agreement contains financial and other covenants,
including, but not limited to, limitations on indebtedness, liens, and investments, as well as the maintenance of two
financial ratios – a leverage ratio and a fixed charge coverage ratio. A violation of these covenants may permit the
lenders to restrict our ability to further access loans and letters of credit and may require the immediate repayment of
any outstanding loans. If our financial performance is not in compliance with these covenants, it may have a material
adverse effect on our capital resources, financial condition, results of operations, and liquidity.
If we are unable to maintain or upgrade our information systems and software programs or if we are unable
to convert to alternate systems in an efficient and timely manner, our operations may be disrupted or become
less efficient.
We depend on a variety of information systems for the efficient functioning of our business. We rely on certain
software vendors to maintain and periodically upgrade many of these systems so that we can continue to support
our business. The software programs supporting many of our systems were licensed to us by independent
software developers. Costs and potential interruptions associated with the implementation of new or upgraded
systems and technology, including the new point-of-sale system, or with maintenance or adequate support of our
existing systems could disrupt or reduce the efficiency of our business.
If we are unable to successfully execute our SAP® for Retail system implementation, our operations may be
disrupted or become less efficient.
In January 2008, we announced our plans to implement SAP for Retail solutions over the next few years. New
financial systems, including general ledger, accounts payable and fixed assets, are planned for development and
testing during 2008, with plans to place the new financial systems in service in 2009. New core merchandising
systems are planned for development and testing in 2009, with plans to place the new core merchandising
system in service in 2010. The implementation of these systems is expected to have a pervasive impact - not
only on our information systems but also across a significant portion of our general office operations, including
merchandising, technology, and finance. While we believe the implementation of these systems will provide
significant opportunity for us, it also involves significant risk in terms of cost and our ability to successfully
implement these systems while continuing to execute our other business strategies. If we are unable to
successfully implement SAP for Retail, it may have an adverse effect on our capital resources, financial
condition, results of operations, and liquidity.
If we are unable to retain suitable store locations under favorable lease terms, our financial performance
may be negatively affected.
We lease almost all of our stores, and a significant number of these leases expire or are up for renewal each year.
Our strategy to improve our financial performance includes sales growth while managing the occupancy cost of
each of our stores. If we are not able to negotiate favorable lease renewals, including the proper determination of
which leases to renew, our financial position, results of operations, and liquidity may be negatively affected.
If we are unable to secure customer, employee, and company data, our reputation could be damaged and we
could be subject to penalties or lawsuits.
The protection of our customer, employee, and company data is critical to us. The regulatory environment
surrounding information security and privacy is increasingly demanding, with frequent imposition of new and
constantly changing requirements across our business. In addition, our customers have a high expectation that
we will adequately protect their personal information. A significant breach of customer, employee, or company
data could damage our reputation and result in lost sales, fines, and/or lawsuits.
If we lose key personnel, it may have a material adverse impact on our future results of operations.
We believe that we benefit substantially from the leadership and experience of our senior executives. The loss of
services of any of these individuals could have a material adverse impact on our business. Competition for key
personnel in the retail industry is intense and our future success will also depend on our ability to recruit, train,
and retain our senior executives and other qualified personnel.