Big Lots 2013 Annual Report Download - page 148

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In all markets served by our U.S. stores, we design and distribute printed advertising circulars, through a combination of
newspaper insertions and mailings. In 2013, we distributed multi-page circulars constituting 30 weeks of advertising coverage,
which was consistent with promotions in multi-page circulars in 2012. We create regional versions of these circulars to tailor
our advertising message to market differences caused by product availability, climate, and customer preferences. Another key
element of our U.S. marketing efforts is our television campaign which combines elements of strategic branding and
promotion. These same elements are also used in most of our other marketing media. Our highly-targeted media placement
strategy uses national cable as the foundation of our television advertising. In addition, we use in-store promotional materials,
including in‑store signage, to emphasize special bargains and significant values offered to our customers. As part of our overall
strategic planning process coinciding with management transition, plans have been developed to shift a portion of our focus and
advertising spend to social and digital media opportunities which began in the fourth quarter of 2013 and will be expanded
further in 2014.
Our customer database, which we refer to as the Buzz Club® in the U.S., is an important marketing tool that 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®, we operate the Buzz Club Rewards® program (“Rewards”), which allows us to send specialized promotions to targeted
customer groups with the intention of reinforcing and expanding their desire to shop at our stores. Total advertising expense as
a percentage of total net sales was 1.9% in each of 2013, 2012, and 2011.
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 our 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 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 our third fiscal quarter in anticipation of increased
sales activity during our fourth fiscal quarter. Performance of our fourth fiscal quarter typically reflects a leveraging effect
which has a favorable impact on our 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 2013, our total indebtedness (outstanding borrowings and letters of credit) peaked in November 2013 at
approximately $358 million under our five-year $700 million unsecured credit facility entered into in July 2011 (“2011 Credit
Agreement”). At February 1, 2014, our total indebtedness under the 2011 Credit Agreement was $82.6 million, which included
$77.0 million in borrowings and $5.6 million in outstanding letters of credit. We expect that borrowings will vary throughout
2014 depending on various factors, including our seasonal need to acquire merchandise inventory prior to the peak selling
season, the timing and amount of sales to our customers, and the cash needs of winding down the operations of our Canadian
segment. For 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”).
In this Form 10-K, we incorporate by reference certain information from parts of our Proxy Statement for our 2014 Annual
Meeting of Shareholders (“2014 Proxy Statement”).