Big Lots 2011 Annual Report Download - page 121

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differences caused by product availability, climate, and customer preferences. In addition, we use in-store
promotional materials, including in-store signage, to emphasize special bargains and significant values offered
to our customers.
Since the date we acquired Liquidation World Inc., our marketing efforts in Canada have been limited to
in-store promotional materials. Our focus in Canada has been on building inventory assortments to optimal
levels and enhancing the presentation of our stores. Once these goals are accomplished, we will evaluate which
marketing strategies (e.g., branding and promotional advertising) best fit our operational goals.
Our customer list, which we refer to as the Buzz Club® in the U.S., is an important marketing tool which allows
us to communicate in a cost effective manner with our customers, including e-mail delivery of our circulars.
In addition to the Buzz Club®, in August of 2009, we started the Buzz Club Rewards® program (“Rewards”),
which has grown rapidly from 1.2 million members at the end of 2009 to 11.5 million members at the end
of 2011. Members of the Buzz Club Rewards® program use a membership card when making purchases and
earn discounts on future purchases when they meet certain thresholds. Buzz Club Rewards® members may
also receive other targeted promotions. We continue to use our website (www.biglots.com) as a key avenue to
communicate with our customers through special catalogs and online advertising, attracting approximately
1.3 million unique visitors each week. Total advertising expense as a percentage of total net sales was 1.9%
in 2011, 1.9% in 2010, and 2.0% in 2009.
Seasonality
We have historically experienced, and expect to continue to experience, seasonal fluctuations in our sales
and profitability, with a larger percentage of our net sales and operating profit realized in the fourth fiscal
quarter. In addition, our quarterly net sales and operating profits 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 as a percentage of sales in the third fiscal quarter in anticipation of
increased sales activity during the fourth fiscal quarter. The fourth fiscal quarter typically includes a leveraging
effect on operating results because net sales are higher and certain of our costs, such as rent and depreciation,
are fixed and do not vary as sales levels escalate.
The seasonality of our net sales and related merchandise inventory requirements influences our availability of
and demand for cash or access to credit. We historically have drawn upon our credit facility to assist in funding
our working capital requirements, which typically peak near the end of our third fiscal quarter. We historically
have higher net sales, operating profits, and cash flow provided by operations in the fourth fiscal quarter
which allows us to substantially repay our seasonal borrowings. In 2011, our total indebtedness (outstanding
borrowings and letters of credit) peaked in early December 2011 at approximately $400 million under our
$700 million unsecured credit facility entered into in July 2011 (“2011 Credit Agreement”). At January 28, 2012,
our total indebtedness under the 2011 Credit Agreement was $121.1 million, which included $65.9 million in
borrowings and $55.2 million in outstanding letters of credit. We expect that borrowings will vary throughout
2012 depending on various factors, including our seasonal need to acquire merchandise inventory prior to peak
selling seasons, the timing and amount of sales to our customers, the working capital needs of our Canadian
segment, and the potential impact of shares repurchased under our authorized share repurchase program. For
additional information on our current share repurchase program, the 2011 Credit Agreement, and a discussion
of our sources and uses of funds, see “Item 5. Market for Registrant’s Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities” and the discussion under the caption “Capital Resources and
Liquidity” in the accompanying MD&A, in this Form 10-K.
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”).