Big Lots 2013 Annual Report Download - page 164

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The following table compares components of our consolidated statements of operations as a percentage of net sales:
2013 2012 2011
N
et sales 100.0% 100.0% 100.0%
Cost of sales (exclusive of depreciation expense shown separately
below) 61.0 60.6 60.0
Gross margin 39.0 39.4 40.0
Selling and administrative expenses 33.2 31.8 31.6
Depreciation expense 2.2 2.0 1.7
Operating
p
rofit 3.6 5.6 6.7
Interest expense (0.1) (0.1) (0.1)
Other income (expense) (0.0)0.0 (0.0)
Income from continuing operations before income taxes 3.5 5.5 6.6
Income tax expense 1.2 2.2 2.6
Income from continuing operations 2.4 3.3 4.0
Loss from discontinued operations, net of tax 0.0 0.0 0.0
N
et income 2.4% 3.3% 4.0%
See the discussion below under the captions “2013 Compared To 2012” and “2012 Compared To 2011” for additional details
regarding the specific components of our operating results.
In December 2013, we announced the Canadian Wind Down would begin in the fourth quarter of 2013 and continue through
the first quarter of 2014. During 2013, we recorded $19.7 million in charges associated with the impairment of the property
and equipment, goodwill, and certain intangible assets relating to our Canadian segment, $2.7 million in severance charges
associated with the closing of our Canadian distribution centers and certain functions within our Canadian administrative
offices, and $1.3 million in contract termination costs associated with the operating leases of our distribution centers. Please
see note 13 to the accompanying consolidated financial statements for a more detailed discussion regarding the Canadian Wind
Down activities. Additionally, in 2013, we recorded a $23.9 million U.S. deferred tax benefit associated with the excess tax
basis related to our investment in our Canadian segment.
In 2013, our selling and administrative expenses include a $4.4 million charge associated with the settlement of a legal matter,
which was partially offset by a $3.6 million gain on the sale of a company-owned property in California.
In 2012, the cost of sales increase included a charge of $5.6 million (0.1% of net sales) due to a change in accounting principle
resulting from our successful implementation of new retail inventory management systems. This non-cash charge reduced both
income from continuing operations and net income by $3.4 million, or 10 basis points. Please see note 1 to the accompanying
consolidated financial statements for a more detailed discussion regarding this change in accounting principle.
Seasonality
As discussed in “Item 1. Business - Seasonality” of this Form 10-K, our financial results fluctuate from quarter to quarter
depending on various factors such as the timing of new or closed stores, the timing and extent of advertisements and
promotions, and the timing of holidays. We expect the Christmas holiday selling season to continue to produce a significant
portion of our sales and operating profits. If our sales performance is significantly better or worse during the Christmas holiday
selling season, we would expect a more pronounced impact on our annual financial results than if our sales performance is
significantly better or worse in a different season.