Big Lots 2008 Annual Report Download - page 86

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The following table compares components of our consolidated statements of operations as a percentage of net
sales:
2008 2007 2006
Net sales ........................................................ 100.0 % 100.0 % 100.0 %
Cost of sales ..................................................... 60.0 60.5 60.1
Gross margin .................................................... 40.0 39.5 39.9
Selling and administrative expenses .................................. 32.8 32.5 34.2
Depreciation expense .............................................. 1.7 1.9 2.1
Operating profit .................................................. 5.5 5.1 3.5
Interest expense .................................................. (0.1) (0.1) (0.0)
Interest and investment income ...................................... 0.0 0.1 0.1
Income from continuing operations before income taxes .................. 5.4 5.1 3.6
Income tax expense ............................................... 2.0 1.9 1.2
Income from continuing operations ................................... 3.3 3.2 2.4
Income (loss) from discontinued operations, net of tax .................... (0.1) 0.2 0.2
Net income ...................................................... 3.3 % 3.4 % 2.6 %
See the discussion and analysis below for additional details of the specific components of our operating results
comparing the 2008 results to 2007 and the 2007 results to 2006.
Selling and administrative expenses in 2007 were reduced by $5.2 million (10 basis points), pretax, for proceeds
we received 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), pretax, for insurance proceeds we
received 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
As discussed in Item 1. Business, under the Seasonality caption, our financial results fluctuate from
quarter to quarter depending on various factors such as timing of new or closed stores, timing and extent of
advertisements and promotions, and timing of holidays. We expect that the Christmas holiday selling season
will continue to result in a significant portion of our sales and operating profits. If our sales performance is
significantly better or worse during this time frame, we would expect a more pronounced impact on our annual
financial results.
The following table sets forth the seasonality of net sales and operating profit for 2008 and 2007 by fiscal
quarter:
First Second Third Fourth
Fiscal Year 2008
Net sales percentage of full year ............................... 24.8% 23.8% 22.0% 29.4%
Operating profit as a percentage of full year ...................... 22.8 17.1 7.9 52.2
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