Big Lots Reports Q3 EPS From Continuing Operations of $0.03, $0.04 on an Adjusted Basis

Earnings per Share

Q3 2016

Q3 2015

YTD 2016

YTD 2015

Continuing operations

$0.03

($0.03)

$1.36

$0.94

Impact of legacy pension costs (1)

$0.01

$0.03

$0.05

$0.06

Impact of non-recurring expense (1)

-

-

-

$0.05

Continuing operations - adjusted basis (1)

$0.04

$0.00

$1.41

$1.05

% Change (2016 vs. 2015)

+34%

(1)  Non-GAAP detailed reconciliation provided below.

Full Year

2016 Guidance (1)

2015 (2)

Adjusted EPS from continuing operations

$3.55  to  $3.60

$3.01

% Change (2016 vs. 2015)

 +18%  to  +20%

(1) Non-GAAP - excludes potential impact of legacy pension costs of approximately $15 million after tax.

(2) Non-GAAP - see attached reconciliation.

BIG LOTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

OCTOBER 29

OCTOBER 31

2016

2015

(Unaudited)

(Recast)

ASSETS

Current assets:

Cash and cash equivalents

$59,743

$61,541

Inventories

1,036,337

1,047,322

Other current assets

112,251

110,184

   Total current assets

1,208,331

1,219,047

Property and equipment - net

540,669

576,563

Deferred income taxes

56,102

54,478

Other assets

42,141

39,209

$1,847,243

$1,889,297

LIABILITIES AND SHAREHOLDERS' EQUITY      

Current liabilities:

Accounts payable

$503,625

$490,049

Property, payroll and other taxes

88,941

81,808

Accrued operating expenses

80,227

76,761

Insurance reserves

42,141

42,661

Accrued salaries and wages

50,243

36,658

Income taxes payable

1,407

862

   Total current liabilities

766,584

728,799

Long-term obligations under bank credit facility

362,900

334,900

Deferred rent

55,291

61,418

Insurance reserves

58,647

57,527

Unrecognized tax benefits

14,639

17,809

Other liabilities

44,107

51,572

Shareholders' equity

545,075

637,272

$1,847,243

$1,889,297

BIG LOTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

13 WEEKS ENDED

13 WEEKS ENDED

OCTOBER 29, 2016

OCTOBER 31, 2015

%

%

(Unaudited)

(Unaudited)

Net sales

$1,105,498

100.0

$1,116,474

100.0

Gross margin

441,992

40.0

440,007

39.4

Selling and administrative expenses 

409,753

37.1

411,994

36.9

Depreciation expense

30,294

2.7

30,171

2.7

Operating profit (loss)

1,945

0.2

(2,158)

(0.2)

Interest expense

(1,665)

(0.2)

(1,272)

(0.1)

Other income (expense)

698

0.1

(673)

(0.1)

Income (loss) from continuing operations before income taxes

978

0.1

(4,103)

(0.4)

Income tax benefit

(378)

(0.0)

(2,400)

(0.2)

Income (loss) from continuing operations

1,356

0.1

(1,703)

(0.2)

Income from discontinued operations, net of tax

   expense of $13 and $118, respectively

20

0.0

195

0.0

Net income (loss)

$1,376

0.1

($1,508)

(0.1)

Earnings (loss) per common share - basic (a)

Continuing operations

$0.03

($0.03)

Discontinued operations

0.00

0.00

Net income (loss)

$0.03

($0.03)

Earnings (loss) per common share - diluted (a)

Continuing operations

$0.03

($0.03)

Discontinued operations

0.00

0.00

Net income (loss)

$0.03

($0.03)

Weighted average common shares outstanding

Basic

44,165

49,057

Dilutive effect of share-based awards

761

-

Diluted

44,926

49,057

Cash dividends declared per common share

$0.21

$0.19

(a)

The earnings (loss) per share for Continuing Operations, Discontinued Operations and Net income (loss) are separately calculated in accordance with accounting pronouncements; therefore, the sum of earnings (loss) per share for Continuing Operations and Discontinued Operations may differ, due to rounding, from the calculated earnings (loss) per share of Net income (loss).

BIG LOTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

39 WEEKS ENDED

39 WEEKS ENDED

OCTOBER 29, 2016

OCTOBER 31, 2015

%

%

(Unaudited)

(Unaudited)

Net sales

$3,621,228

100.0

$3,606,615

100.0

Gross margin

1,446,096

39.9

1,419,957

39.4

Selling and administrative expenses 

1,251,905

34.6

1,246,545

34.6

Depreciation expense

90,750

2.5

92,388

2.6

Operating profit

103,441

2.9

81,024

2.2

Interest expense

(3,793)

(0.1)

(2,737)

(0.1)

Other income (expense)

1,000

0.0

(2,387)

(0.1)

Income from continuing operations before income taxes

100,648

2.8

75,900

2.1

Income tax expense 

37,942

1.0

27,584

0.8

Income from continuing operations

62,706

1.7

48,316

1.3

Income from discontinued operations, net of tax

   expense of $28 and $10, respectively

44

0.0

25

0.0

Net income 

$62,750

1.7

$48,341

1.3

Earnings per common share - basic (a)

Continuing operations

$1.37

$0.95

Discontinued operations

0.00

0.00

Net income 

$1.37

$0.95

Earnings per common share - diluted (a)

Continuing operations

$1.36

$0.94

Discontinued operations

0.00

0.00

Net income 

$1.36

$0.94

Weighted average common shares outstanding

Basic

45,678

50,992

Dilutive effect of share-based awards

578

540

Diluted

46,256

51,532

Cash dividends declared per common share

$0.63

$0.57

(a)

The earnings per share for Continuing Operations, Discontinued Operations and Net Income are separately calculated in accordance with accounting pronouncements; therefore, the sum of earnings per share for Continuing Operations and Discontinued Operations may differ, due to rounding, from the calculated earnings per share of Net Income.

BIG LOTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

13 WEEKS ENDED

13 WEEKS ENDED

OCTOBER 29, 2016

OCTOBER 31, 2015

 (Unaudited) 

 (Unaudited) 

  Net cash used in operating activities 

($67,964)

($64,345)

  Net cash used in investing activities

(26,812)

(33,996)

  Net cash provided by financing activities

96,150

102,519

Increase in cash and cash equivalents

1,374

4,178

Cash and cash equivalents:

  Beginning of period

58,369

57,363

  End of period

$59,743

$61,541

BIG LOTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

39 WEEKS ENDED

39 WEEKS ENDED

OCTOBER 29, 2016

OCTOBER 31, 2015

 (Unaudited) 

 (Unaudited) 

  Net cash provided by operating activities 

$43,536

$52,318

  Net cash used in investing activities

(71,842)

(98,298)

  Net cash provided by financing activities

33,905

55,260

Increase in cash and cash equivalents

5,599

9,280

Cash and cash equivalents:

  Beginning of period

54,144

52,261

  End of period

$59,743

$61,541

BIG LOTS, INC. AND SUBSIDIARIES

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(In thousands, except per share data)

(Unaudited)

The following tables reconcile: (1) selling and administrative expenses, selling and administrative expense rate, operating profit (loss), operating profit (loss) rate, income tax expense (benefit), effective income tax rate, income (loss) from continuing operations, net income (loss), diluted earnings (loss) per share from continuing operations, and diluted earnings (loss) per share for the third quarter of 2016, the year-to-date 2016, the third quarter of 2015, the year-to-date 2015, the fourth quarter of 2015, and the full year 2015 (GAAP financial measures) to adjusted selling and administrative expenses, adjusted selling and administrative expense rate, adjusted operating profit (loss), adjusted operating profit (loss) rate, adjusted income tax expense (benefit), adjusted effective income tax rate, adjusted income (loss) from continuing operations, adjusted net income (loss), adjusted diluted earnings (loss) per share from continuing operations, and adjusted diluted earnings (loss) per share (non-GAAP financial measures).

Third quarter of 2016 - Thirteen weeks ended October 29, 2016 

 As Reported 

 Adjustment toexclude pensioncosts 

 As Adjusted (non-GAAP) 

 Selling and administrative expenses 

$             409,753

$                      (863)

$            408,890

 Selling and administrative expense rate 

37.1%

(0.1%)

37.0%

 Operating profit 

1,945

863

2,808

 Operating profit rate 

0.2%

0.1%

0.3%

 Income tax benefit 

(378)

342

(36)

 Effective income tax rate 

-38.7%

36.7%

-2.0%

 Income from continuing operations 

1,356

521

1,877

 Net income 

1,376

521

1,897

 Diluted earnings per share from  

      continuing operations 

$                    0.03

$                      0.01

$                  0.04

 Diluted earnings per share  

$                    0.03

$                      0.01

$                  0.04

The above adjusted selling and administrative expenses, adjusted selling and administrative expense rate, adjusted operating profit, adjusted operating profit rate, adjusted income tax benefit, adjusted effective income tax rate, adjusted income from continuing operations, adjusted net income, adjusted diluted earnings per share from continuing operations, and adjusted diluted earnings per share are "non-GAAP financial measures" as that term is defined by Rule 101 of Regulation G (17 CFR Part 244) and Item 10 of Regulation S-K (17 CFR Part 229). These non-GAAP financial measures exclude from the most directly comparable financial measures calculated and presented in accordance with accounting principles generally accepted in the United States of America ("GAAP") all costs associated with the Company's pension plans, as the Company froze benefits and began termination activities for its pension plans in 2015 with the intentions of completing the termination and distributing all plan assets during 2016, which totaled $863 ($521, net of tax).  The pension costs encompass all items associated with net periodic benefit costs, including curtailment and settlement charges, and professional fees associated with the plan and plan termination proceedings.

 Year-to-date 2016 - Thirty-nine weeks ended October 29, 2016 

 As Reported 

 Adjustment to exclude pensioncosts 

 As Adjusted(non-GAAP) 

 Selling and administrative expenses 

$          1,251,905

$                  (4,073)

$        1,247,832

 Selling and administrative expense rate 

34.6%

(0.1%)

34.5%

 Operating profit 

103,441

4,073

107,514

 Operating profit rate 

2.9%

0.1%

3.0%

 Income tax expense 

37,942

1,612

39,554

 Effective income tax rate 

37.7%

0.1%

37.8%

 Income from continuing operations 

62,706

2,461

65,167

 Net income 

62,750

2,461

65,211

 Diluted earnings per share from  

      continuing operations 

$                    1.36

$                      0.05

$                 1.41

 Diluted earnings per share  

$                    1.36

$                      0.05

$                 1.41

The above adjusted selling and administrative expenses, adjusted selling and administrative expense rate, adjusted operating profit, adjusted operating profit rate, adjusted income tax expense, adjusted effective income tax rate, adjusted income from continuing operations, adjusted net income, adjusted diluted earnings per share from continuing operations, and adjusted diluted earnings per share are "non-GAAP financial measures" as that term is defined by Rule 101 of Regulation G (17 CFR Part 244) and Item 10 of Regulation S-K (17 CFR Part 229). These non-GAAP financial measures exclude from the most directly comparable financial measures calculated and presented in accordance with GAAP all costs associated with the Company's pension plans, as the Company froze benefits and began termination activities for its pension plans in 2015 with the intentions of completing the termination and distributing all plan assets during 2016, which totaled $4,073 ($2,461, net of tax).  The pension costs encompass all items associated with net periodic benefit costs, including curtailment and settlement charges, and professional fees associated with the plan and plan termination proceedings.

 Third quarter of 2015 - Thirteen weeks ended October 31, 2015 

 As Reported 

 Adjustment to exclude pension costs 

 As Adjusted (non-GAAP) 

 Selling and administrative expenses 

$             411,994

$                     (2,560)

$             409,434

 Selling and administrative expense rate 

36.9%

(0.2%)

36.7%

 Operating (loss) profit 

(2,158)

2,560

402

 Operating (loss) profit rate 

(0.2%)

0.2%

0.0%

 Income tax benefit 

(2,400)

1,012

(1,388)

 Effective income tax rate 

58.5%

31.5%

90.0%

 Loss from continuing operations 

(1,703)

1,548

(155)

 Net (loss) income 

(1,508)

1,548

40

 Diluted earnings (loss) per share from  

      continuing operations 

$                  (0.03)

$                         0.03

$                    0.00

 Diluted earnings (loss) per share  

$                  (0.03)

$                         0.03

$                    0.00

The above adjusted selling and administrative expenses, adjusted selling and administrative expense rate, adjusted operating (loss) profit, adjusted operating (loss) profit rate, adjusted income tax benefit, adjusted effective income tax rate, adjusted loss from continuing operations, adjusted net (loss) income, adjusted diluted earnings (loss) per share from continuing operations, and adjusted diluted earnings (loss) per share are "non-GAAP financial measures" as that term is defined by Rule 101 of Regulation G (17 CFR Part 244) and Item 10 of Regulation S-K (17 CFR Part 229). These non-GAAP financial measures exclude from the most directly comparable financial measures calculated and presented in accordance with GAAP all costs associated with the Company's pension plans, as the Company froze benefits and began termination activities for its pension plans in 2015 with the intentions of completing the termination and distributing all plan assets during 2016, which totaled $2,560 ($1,548, net of tax).  The pension costs encompass all items associated with net periodic benefit costs, including curtailment and settlement charges, and professional fees associated with the plan and plan termination proceedings.

 Year-to-date 2015 - Thirty-nine weeks ended October 31, 2015 

 As Reported 

 Adjustment to exclude losscontingency 

 Adjustment to exclude pension costs 

 As Adjusted (non-GAAP) 

 Selling and administrative expenses 

$          1,246,545

$                  (4,487)

$                    (4,685)

$        1,237,373

 Selling and administrative expense rate 

34.6%

(0.1%)

(0.1%)

34.3%

 Operating profit 

81,024

4,487

4,685

90,196

 Operating profit rate 

2.2%

0.1%

0.1%

2.5%

 Income tax expense 

27,584

1,776

1,848

31,208

 Effective income tax rate 

36.3%

0.2%

(0.6%)

36.7%

 Income from continuing operations 

48,316

2,711

2,837

53,864

 Net income 

48,341

2,711

2,837

53,889

 Diluted earnings per share from  

      continuing operations 

$                    0.94

$                      0.05

$                        0.06

$                  1.05

 Diluted earnings per share  

$                    0.94

$                      0.05

$                        0.06

$                  1.05

The above adjusted selling and administrative expenses, adjusted selling and administrative expense rate, adjusted operating profit, adjusted operating profit rate, adjusted income tax expense, adjusted effective income tax rate, adjusted income from continuing operations, adjusted net income, adjusted diluted earnings per share from continuing operations, and adjusted diluted earnings per share are "non-GAAP financial measures" as that term is defined by Rule 101 of Regulation G (17 CFR Part 244) and Item 10 of Regulation S-K (17 CFR Part 229). These non-GAAP financial measures exclude from the most directly comparable financial measures calculated and presented in accordance with GAAP: (1) a pretax accrual of a loss contingency associated with merchandise-related legal matters of $4,487 ($2,711, net of tax); and (2) all costs associated with the Company's pension plans, as the Company froze benefits and began termination activities for its pension plans in 2015 with the intentions of completing the termination and distributing all plan assets during 2016, which totaled $4,685 ($2,837, net of tax).  The pension costs encompass all items associated with net periodic benefit costs, including curtailment and settlement charges, and professional fees associated with the plan and plan termination proceedings.

 Fourth quarter of 2015 - Thirteen weeks ended January 30, 2016 

 As Reported 

 Adjustment to exclude pension costs 

 As Adjusted(non-GAAP) 

 Selling and administrative expenses 

$             462,172

$                    (8,247)

$             453,925

 Selling and administrative expense rate 

29.2%

(0.5%)

28.7%

 Operating profit 

154,708

8,247

162,955

 Operating profit rate 

9.8%

0.5%

10.3%

 Income tax expense 

56,528

3,264

59,792

 Effective income tax rate 

37.3%

0.3%

37.6%

 Income from continuing operations 

94,692

4,983

99,675

 Net income 

94,532

4,983

99,515

 Diluted earnings per share from  

      continuing operations 

$                    1.91

$                        0.10

$                  2.01

 Diluted earnings per share  

$                    1.91

$                        0.10

$                  2.01

The above adjusted selling and administrative expenses, adjusted selling and administrative expense rate, adjusted operating profit, adjusted operating profit rate, adjusted income tax expense, adjusted effective income tax rate, adjusted income from continuing operations, adjusted net income, adjusted diluted earnings per share from continuing operations, and adjusted diluted earnings per share are "non-GAAP financial measures" as that term is defined by Rule 101 of Regulation G (17 CFR Part 244) and Item 10 of Regulation S-K (17 CFR Part 229). These non-GAAP financial measures exclude from the most directly comparable financial measures calculated and presented in accordance with accounting principles generally accepted in the United States of America ("GAAP") all costs associated with the Company's pension plans, as the Company froze benefits and began termination activities for its pension plans in 2015 with the intentions of completing the termination and distributing all plan assets during 2016, which totaled $8,247 ($4,983, net of tax).  The pension costs encompass all items associated with net periodic benefit costs, including curtailment and settlement charges, and professional fees associated with the plan and plan termination proceedings.

 Full Year 2015 - Fifty-two weeks ended January 30, 2016 

 As Reported 

 Adjustment to exclude loss contingency 

 Adjustment to exclude pension costs 

 As Adjusted (non-GAAP) 

 Selling and administrative expenses 

$          1,708,717

$                   (4,487)

$                   (12,932)

$          1,691,298

 Selling and administrative expense rate 

32.9%

(0.1%)

(0.2%)

32.6%

 Operating profit 

235,732

4,487

12,932

253,151

 Operating profit rate 

4.5%

0.1%

0.2%

4.9%

 Income tax expense 

83,842

1,776

5,112

90,730

 Effective income tax rate 

37.0%

0.0%

0.1%

37.1%

 Income from continuing operations 

143,008

2,711

7,820

153,539

 Net income 

142,873

2,711

7,820

153,404

 Diluted earnings per share from  

      continuing operations 

$                    2.81

$                       0.05

$                         0.15

$                    3.01

 Diluted earnings per share  

$                    2.80

$                       0.05

$                         0.15

$                    3.01