Slide 1: Big Lots Conference Call February 25, 2004
Big Lots Conference Call February 25, 2004
Slide 2: Safe Harbor Statement on Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 (the "Act") provides a "safe harbor" for forward-looking statements to encourage companies to provide prospective information, so long as those statements are identified as forward-looking and are accompanied by meaningful cautionary statements id
Slide 3: Cautionary Statement Concerning Forward-Looking Statements (continued)
Cautionary Statement Concerning Forward-Looking Statements (continued) competitive pressures and pricing pressures; the Company's ability to comply with the terms of its credit facilities (or obtain waivers for non-compliance); interest rate fluctuations; the creditworthiness of the purchaser of the
Slide 4: Agenda for this morning's call
Agenda for this morning's call: Opening Comments KB Toys Update Financial Review - Fourth Quarter, 2003 2004 Key Business Initiatives 2004 Financial Plan / Guidance Closing Comments
Slide 5: Significant progress to position the Company for long-term sustainable growth
Significant progress in the last 3 years to position the Company for long-term sustainable growth Remodeled 645 stores. Approximately 70% of our store base is new or has been remodeled in the last 5 years Major shift in marketing mix Launched national advertising campaign Reduced dependence on weekl
Slide 6: BIG: 2003 Non-GAAP Adjustments
BIG: 2003 Non-GAAP Adjustments Quarter ended Year ended (8000, except per diluted share deta) 1131104 1131104 Net Incorne $85,328 $0.73 $81,175 $0.69 Excluding impact of discontinued operations charges (benefits) KB Toys lease guarantee obligations QTE 012 ee 02 KB Toys advertising practices settlem
Slide 7: 2003 Financial Highlights
2003 Financial Highlights Comparable store sales increase 3.4% Customer transaction increase of 1.7% with growth in all four quarters Average basket increase of 1.7% Reduced net debt by $26 million in addition to funding the construction of our Durant DC Inventory turnover increased to a record 3.0
Slide 8: KB Toys relationship to Big Lots
KB Toys (KB) relationship to Big Lots 1996 Purchased KB from Melville Corporation 2000 Sold KB in December $258 million Cash $45 million Note Warrant to acquire 2.5% of the common stock 2004 KB declares Chapter 11 bankruptcy
Slide 9: Reviewing KB's bankruptcy petition and assessing financial impact
Currently reviewing KB's bankruptcy petition and assessing the financial impact to Big Lots Engaged independent investment advisory firm to assist in estimating the fair value of a Note and a Warrant Engaged independent real estate valuation firm to assist in assessing potential liability related to
Slide 10: Charge related to estimated impact of KB bankruptcy
Recorded $3.7 million charge related to the estimated impact of KB bankruptcy $10.6 million benefit with write-down of note and warrant $14.3 million charge related to lease obligations rejected by KB
Slide 11: Summary of Fourth Quarter Results
Summary of Fourth Quarter Results
Slide 12: Closeout store count and furniture departments added during 2003
Closeout store count increased by a net of 54 stores and 157 furniture departments were added during 2003
Slide 13: 2004 Key Business Initiatives
2004 Key Business Initiatives National television advertising campaign enters second year Further progress on key supply chain initiatives Continued expansion of our furniture business by completing the removal of hanging apparel from all stores by the fall of 2004 Remodel 68 existing Big Lots store
Slide 14: National television advertising enters second year
National television advertising enters second year 2004 National TV advertising to begin in late March 25 weeks of advertising coverage, similar to 2003 Expect positive comp impact of approximately 1% Expect incremental sales in new TV markets to leverage advertising expense for the year
Slide 15: Focus on supply chain processes in 2004
With information, infrastructure, and the team in place, we will focus on supply chain processes in 2004 SCOPE (Supply Chain Operational Performance Enhancements) Planning and allocation system which allows us to build merchandise plans and allocation strategies at the class and sub- class level Abi
Slide 16: Durant DC on target to begin shipping in April 2004
Durant DC is on target to begin shipping merchandise to stores in April 2004 State of the art facility built specifically for our unique business model Year 1 (2004) plan modeled after the successful opening of our Tremont facility in 2001 Total capital investment of $70M is on plan DC infrastructur
Slide 17: Columbus DC Re-engineering
Columbus DC Re-engineering Updating conveyor systems and reconfiguring entire building to increase productivity levels. Current carton throughput is 15- 20% below any of our other DCs. Moved 170 stores from Columbus to relieve stress on facility and ensure service to stores during the project Antici
Slide 18: Leasing a distribution facility to support furniture growth
In 2004, we will lease a distribution facility to support furniture growth to the West Coast Today, furniture is a merchandising strategy primarily limited to the eastern portion of the country Capital investment of $5 million necessary for interior racking and build out of the leased space Expect i
Slide 19: Over 74% of closeout stores to have a furniture department by end of 2004
By the end of 2004, over 74% of all closeout stores will have a furniture department
Slide 20: Store remodel plan calls for fewer remodels than prior years
The store remodel plan calls for significantly fewer remodels than prior years Store specific strategy for 2004 (vs. entire market approach in 2003) Expect remodel program to be slightly additive to comps with a breakeven EPS impact in 2004
Slide 21: UPC and Debit Card implementations will lead to SG&A leverage
UPC and Debit Card implementations will lead to SG&A leverage in the back half of 2004 UPC More efficient use of store payroll Targeting high velocity departments Debit Debit card usage is growing as a percent of tender and is nearly 1/2 the cost of a credit transaction Installing debit card readers
Slide 22: Full year 2004 guidance
Full year 2004 guidance 2004 Guidance Low High Net Income @ mitions) $94 $102 EPS $0.80 $0.86 Comps Mid-single digit GM rate 41.3% 41.7% SG&A rate 37.8% 37.4% 2003 Actual * $86 $0.73 34% 41.8% 38.3% * Excludes KB Toys matters and the Company's California wage and hour settlement
Slide 23: 2004 Guidance - Range of Expectations
2004 Guidance - Range of Expectations
Slide 24: Planning $80-$100 million of free cash flow
Planning $80 - $100 million of free cash flow based on improving operating results, increasing inventory turns, and lower capital spending
Slide 25: Big Lots Conference Call February 25, 2004
Big Lots Conference Call February 25, 2004