Big Lots 2010 Annual Report Download - page 100

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openings in 2009), and increased repair costs primarily associated with our store refresh program. Advertising
expense decreased primarily due to lower printing and distribution costs along with more efficient spending on
our broadcast promotions.
Selling and administrative expenses as a percentage of net sales were 31.8% in 2010 compared to 32.4% in
2009. The decrease of 0.6% was primarily due to the effect of the increase in sales of 4.8% as selling and
administrative expense dollars only increased 2.9% as discussed above. Our future selling and administrative
expense as a percentage of net sales rate is dependent upon many factors including our level of net sales, our
ability to implement additional efficiencies, principally in our store and distribution center operations, and
fluctuating commodity prices, such as diesel fuel, which directly affects our outbound transportation cost.
In 2011, we expect expense leverage based on company-specific initiatives to lower costs and the leveraging
impact of our estimated comparable store sales increase of 1% to 2%. We expect expense dollars to decrease, on
a per store basis, in the areas of advertising, based on certain program changes, and utilities, based on our recent
investments in energy management systems. We estimate dollars will increase in store payroll and distribution
and transportation; however, the increase is forecasted to be at a lower rate than our estimated total sales growth
of 5% to 6%. Additionally, we are forecasting slight deleverage in the areas of occupancy and share-based
compensation expenses.
Depreciation Expense
Depreciation expense increased $3.7 million, or 4.9%, to $78.6 million in 2010 compared to $74.9 million for
2009. Depreciation expense as a percentage of sales was flat compared to 2009 at 160 basis points. The increase
in depreciation expense was primarily related to our stores and was principally due to new store openings.
During 2010, the Company opened 80 new stores, including relocations.
For 2011, we expect capital expenditures of approximately $125 million to $130 million, which includes opening
90 new stores. Using this assumption and the run rate of depreciation on our existing property and equipment,
we expect 2011 depreciation expense to be $90 million to $95 million, which would represent an increase from
the $78.6 million of depreciation expense in 2010.
Interest Expense
Interest expense increased $0.8 million to $2.6 million in 2010 compared to $1.8 million in 2009. The increase
in interest expense was principally due to higher average borrowings (including capital leases) of $24.0 million
in 2010 compared to average borrowings of $8.6 million in 2009. The higher average borrowings was primarily
driven by the timing of share repurchases under the 2010 Repurchase Program.
Interest and Investment Income
Interest and investment income increased $0.4 million in 2010 to $0.6 million compared to $0.2 million in 2009.
The increase in interest and investment income was caused by the increase in funds available to invest in 2010
compared to 2009, partly offset by a decrease in investment yield. Our average invested amount in 2010 was
$132.9 million compared to $68.9 million in 2009. In 2010, we invested primarily in deposits with financial
institutions and highly liquid investments, including money market funds and variable rate demand notes. We
held $126.1 million of investments at the end of 2010.
Income Taxes
Our effective income tax rate on income from continuing operations was 37.4% for 2010 compared to 37.7%
for 2009. The lower rate in 2010 was principally due to the recognition of benefits resulting primarily from
the recording of a deferred tax asset for net state credits, principally obtained during the third quarter of 2010,
partially offset by (1) lower year-over-year tax benefits related to the settlement of uncertain tax positions and
(2) the release of a valuation allowance on unrealized capital losses in 2009.
We anticipate our 2011 effective income tax rate to be within a range of 38.0% to 39.0%.