Big Lots 2012 Annual Report Download - page 92

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If we are unable to secure company, employee, and customer data, our systems could be compromised, our
reputation could be damaged, and we could be subject to penalties or lawsuits.
The protection of our company, employee, and customer data is critical to us. Potential breaches of our systems
could cause significant operational issues or disrupt the allocation or flow of merchandise to our stores. In
addition, our customers have a high expectation that we will adequately protect their personal information. The
regulatory environment surrounding information security and privacy is increasingly demanding, with frequent
imposition of new and constantly changing requirements across our business. A significant breach of company,
employee, or customer data could damage our reputation and result in lost sales, fines, and/or lawsuits.
The price of our common shares as traded on the New York Stock Exchange may be volatile.
Our stock price may fluctuate substantially as a result of factors beyond our control, including but not limited
to, general economic and stock market conditions, risks relating to our business and industry as discussed
above, strategic actions by us or our competitors, variations in our quarterly operating performance, our future
sales or purchases of our common shares, and investor perceptions of the investment opportunity associated
with our common shares relative to other investment alternatives.
The bankruptcy of our formerly owned KB Toys business may adversely affect our financial performance.
In December 2000, we sold the KB Toys business to KB Acquisition Corporation. On January 14, 2004, KB
Acquisition Corporation and certain affiliated entities (collectively “KB-I”) filed for bankruptcy protection
pursuant to Chapter 11 of title 11 of the United States Code. On August 30, 2005, in connection with the
acquisition by an affiliate of Prentice Capital Management of majority ownership of KB-I, KB-I emerged
from their January 14, 2004 bankruptcy (the KB Toys business that emerged from bankruptcy is hereinafter
referred to as “KB-II”). On December 11, 2008, KB-II filed for bankruptcy protection pursuant to Chapter
11 of title 11 of the United States Code. Based on information we have received subsequent to the December
11, 2008 bankruptcy filing, we believe we still may have indemnification and guarantee obligations (“KB-II
Bankruptcy Lease Obligations”) with respect to 29 KB Toys store leases. Because of uncertainty inherent in
the assumptions used to estimate this liability, our estimated liability could ultimately prove to be understated
and could result in a material adverse impact on our financial condition, results of operations, and liquidity.
For additional information regarding the KB Toys bankruptcies, see note 13 to the accompanying consolidated
financial statements.
We also may be subject to a number of other factors which may, individually or in the aggregate, materially
or adversely affect our business. These factors include, but are not limited to:
x Changes in governmental laws and regulations, including matters related to taxation;
x Events or circumstances could occur which could create bad publicity for us or for types of
merchandise offered in our stores which may negatively impact our business results including sales;
x Infringement of our intellectual property, including the Big Lots trademarks, could dilute our value;
x Our ability to establish effective advertising, marketing, and promotional programs; and
x Other risks described from time to time in our filings with the SEC.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
Retail Operations
All of our stores are located in North America, predominantly in strip shopping centers, and have an average
store size of approximately 30,100 square feet, of which an average of 21,800 is selling square feet. The average
cost to open a new store in a leased facility during 2012 was approximately $1.2 million, including cost of
inventory. Except for 56 owned sites in our U.S. segment, all of our stores are leased. In 2012, we acquired two