Big Lots 2015 Annual Report Download - page 107

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Capital Resources and Liquidity
On July 22, 2011, we entered into a $700 million five-year unsecured credit facility, which was first amended on May 30, 2013.
On May 28, 2015, we entered into an additional amendment of the credit facility that among other things extended its term to
May 30, 2020 (as amended, the “2011 Credit Agreement”). In connection with our original entry into the 2011 Credit
Agreement, we paid bank fees and other expenses in the aggregate amount of $3.0 million, which are being amortized over the
term of the agreement. In connection with the second amendment of the 2011 Credit Agreement, we paid bank fees and other
expenses in the amount of $0.8 million, which are being amortized over the term of the agreement. Borrowings under the 2011
Credit Agreement are available for general corporate purposes and working capital. The 2011 Credit Agreement includes a $30
million swing loan sublimit and a $150 million letter of credit sublimit. The interest rates, pricing and fees under the 2011
Credit Agreement fluctuate based on our debt rating. The 2011 Credit Agreement allows us to select our interest rate for each
borrowing from multiple interest rate options. The interest rate options are generally derived from the prime rate or LIBOR.
We may prepay revolving loans made under the 2011 Credit Agreement. The 2011 Credit Agreement contains financial and
other covenants, including, but not limited to, limitations on indebtedness, liens and investments, as well as the maintenance of
two financial ratios – a leverage ratio and a fixed charge coverage ratio. A violation of any of the covenants could result in a
default under the 2011 Credit Agreement that would permit the lenders to restrict our ability to further access the 2011 Credit
Agreement for loans and letters of credit and require the immediate repayment of any outstanding loans under the 2011 Credit
Agreement. At January 30, 2016, we were in compliance with the covenants of the 2011 Credit Agreement.
We use the 2011 Credit Agreement, as necessary, to provide funds for ongoing and seasonal working capital, capital
expenditures, share repurchase programs, and other expenditures. In addition, we use the 2011 Credit Agreement to provide
letters of credit for various operating and regulatory requirements, and if needed, letters of credit required to cover our self-
funded insurance programs. Given the seasonality of our business, the amount of borrowings under the 2011 Credit Agreement
may fluctuate materially depending on various factors, including our operating financial performance, the time of year, and our
need to increase merchandise inventory levels prior to the peak selling season. Generally, our working capital requirements
peak late in our third fiscal quarter or early in our fourth fiscal quarter. We have typically funded those requirements with
borrowings under our credit facility. In 2015, our total indebtedness (outstanding borrowings and letters of credit) under the
2011 Credit Agreement peaked at approximately $383 million in November. At January 30, 2016, we had $62.3 million in
outstanding borrowings under the 2011 Credit Agreement and $634.5 million in borrowings available under the 2011 Credit
Agreement, after taking into account the reduction in availability resulting from outstanding letters of credit totaling $3.2
million. Working capital was $316.0 million at January 30, 2016.
The primary source of our liquidity is cash flows from operations and, as necessary, borrowings under the 2011 Credit
Agreement. Our net income and, consequently, our cash provided by operations are impacted by net sales volume, seasonal
sales patterns, and operating profit margins. Our net sales are typically highest during the nine-week Christmas selling season
in our fourth fiscal quarter.
Whenever our liquidity position requires us to borrow funds under the 2011 Credit Agreement, we typically repay and/or
borrow on a daily basis. The daily activity is a net result of our liquidity position, which is generally driven by the following
components of our operations: (1) cash inflows such as cash or credit card receipts collected from stores for merchandise sales
and other miscellaneous deposits; and (2) cash outflows such as check clearings, wire transfers and other electronic transactions
for the acquisition of merchandise and for payment of payroll and other operating expenses, income and other taxes, employee
benefits, and other miscellaneous disbursements.
On March 4, 2015, our Board of Directors authorized a share repurchase program providing for the repurchase of $200 million
of our common shares (“2015 Repurchase Program”). During 2015, we exhausted this program by purchasing approximately
4.4 million of our outstanding common shares at an average price of $45.82.
On March 1, 2016, our Board of Directors authorized a share repurchase program providing for the repurchase of $250 million
of our common shares. Pursuant to the 2016 Repurchase Program, we are authorized to repurchase shares in the open market
and/or in privately negotiated transactions at our discretion, subject to market conditions and other factors. Common shares
acquired through the 2016 Repurchase Program will be available to meet obligations under our equity compensation plans and
for general corporate purposes. The 2016 Repurchase Program has no scheduled termination date and will be funded with cash
and cash equivalents, cash generated from operations and by drawing on the 2011 Credit Agreement.