Big Lots Reports Fourth Quarter Results

Company Provides Guidance For Fiscal 2014

Company Announces $125 Million Share Repurchase Program

07 Mar, 2014, 06:00 ET from Big Lots, Inc.

COLUMBUS, Ohio, March 7, 2014 /PRNewswire/ -- Big Lots, Inc. (NYSE: BIG) today reported income from continuing operations of $81.0 million, or $1.39 per diluted share, for the fourth quarter of fiscal 2013 ended February 1, 2014. Excluding a deferred tax benefit of $0.41 per diluted share associated with the loss on our investment in our Canadian operations, adjusted income from continuing operations totaled $57.1 million, or $0.98 per diluted share (see non-GAAP table included later in this release). This compares to guidance issued on December 5, 2013 which called for net income from continuing operations of $0.65 to $0.90 per diluted share for the fourth quarter of fiscal 2013. Income from continuing operations was $120.1 million, or $2.08 per diluted share, for the fourth quarter of fiscal 2012.

FOURTH QUARTER HIGHLIGHTS

  • Adjusted income from continuing U.S. operations of $1.45 per diluted share (non-GAAP), compares to guidance of $1.40 to $1.55 per diluted share and last year's income from continuing U.S. operations of $2.08 per diluted share (non-GAAP)
  • Wind down of Canadian operations remains on schedule and closure activity resulted in a lower loss than originally anticipated

Fourth Quarter Results

U.S. Operations

Net sales for continuing U.S. operations for the fourth quarter of fiscal 2013 decreased 7.3% to $1,571.9 million, compared to $1,696.0 million for the fourth quarter last year. Comparable store sales for U.S. stores open at least fifteen months decreased 3.0% for the quarter, which is consistent with our previously communicated guidance. Excluding the deferred tax benefit associated with the loss on our investment in Canadian operations, adjusted income from continuing U.S. operations totaled $84.1 million, or $1.45 per diluted share (non-GAAP), which compares to our guidance of $1.40 to $1.55 per diluted share, and income from continuing U.S. operations of $119.9 million, or $2.08 per diluted share (non-GAAP), for the same period of fiscal 2012. As a reminder, the fourth quarter of fiscal 2013 had 13 weeks compared to 14 weeks in the fourth quarter last year. We estimate the impact of the extra week last year was approximately $0.05 per diluted share. Also, as anticipated, our wholesale operations closed during the fourth quarter of fiscal 2013 and are now reported as discontinued operations.

Canadian Operations

Net loss for Canadian operations for the fourth quarter of fiscal 2013 totaled $27.0 million, or $0.47 per diluted share (non-GAAP), which compares to our guidance of a net loss of $0.65 to $0.75 per diluted share. The favorable result in the fourth quarter resulted from the higher sell-through of merchandise at better margins, lower operating expenses, and the timing of recognition of lease liability charges and certain asset write downs.

Inventory and Cash Management

On a consolidated basis, Inventory ended the fourth quarter of fiscal 2013 at $915 million, compared to $918 million for the fourth quarter of fiscal 2012. The change in inventory was driven by the liquidation of inventory in Canada associated with store closings, partially offset by an increase in per store inventory in our U.S. stores.

We ended fiscal 2013 with $69 million of Cash and Cash Equivalents and $77 million of borrowings under our credit facility compared to $61 million of Cash and Cash Equivalents and $171 million of borrowings under our credit facility as of the end of fiscal 2012. Our use of cash generated by our U.S. operations during fiscal 2013 was focused on repaying debt.

FISCAL 2013

For the full year of fiscal 2013, consolidated income from continuing operations totaled $124.8 million, or $2.15 per diluted share, which compares to consolidated income from continuing operations of $177.0 million, or $2.93 per diluted share, for fiscal 2012. This year's result includes a deferred tax benefit for the loss on our investment in Canada of $23.9 million, or $0.41 per diluted share, and other non-recurring activity netting to $0.6 million, or $0.01 per diluted share. Excluding these items, adjusted consolidated income from continuing operations for fiscal 2013 totaled $101.5 million, or $1.75 per diluted share (non-GAAP), which compares to adjusted consolidated income from continuing operations for fiscal 2012 of $180.4 million, or $2.98 per diluted share (non-GAAP).

 

Q4

Full Year

EPS from Continuing Operations (non-GAAP)

2013

2012

2013

2012

U.S. Operations

$1.86

$2.08

$2.85

$3.15

Impact of deferred tax benefit for investment in Canada

($0.41)

-

($0.41)

-

Impact of other non-recurring charges

-

-

$0.01

$0.06

U.S. Operations - adjusted basis

$1.45

$2.08

$2.45

$3.21

Canadian Operations (1)

($0.47)

$0.00

($0.70)

($0.22)

Consolidated - adjusted basis

$0.98

$2.08

$1.75

$2.98

(1)  2013 includes costs associated with the wind down of our Canadian operations

 

SHARE REPURCHASE PROGRAM

On March 4, 2014, our Board of Directors approved a share repurchase program ("2014 share repurchase program") providing for the repurchase of up to $125 million of our common shares. The $125 million authorization is expected to be utilized 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 2014 share repurchase program will be available to meet obligations under equity compensation plans and for general corporate purposes. The 2014 share repurchase program is eligible to begin on March 11, 2014 and will continue until exhausted.

2014 GUIDANCE

  • Forecasting fiscal 2014 income from continuing U.S. operations to be $2.25 to $2.45 per diluted share (non-GAAP), compared to fiscal 2013 adjusted income from continuing U.S. operations of $2.45 per diluted share (non-GAAP)
  • Forecasting U.S. comparable store sales in the range of flat to +2% for fiscal 2014
  • Forecasting cash flow from continuing U.S. operations of $165 million and consolidated cash flow of approximately $140 million after the impact of the wind down of our Canadian discontinued operations

U.S. Operations

We estimate fiscal 2014 income from continuing U.S. operations will be in the range of $2.25 to $2.45 per diluted share (non-GAAP), compared to adjusted income from continuing U.S. operations of $2.45 per diluted share (non-GAAP) for fiscal 2013. This guidance is based on U.S. comparable store sales in a range of flat to up 2% and total U.S. sales in the range of flat to slightly down. From a real estate perspective, we expect to open 30 new stores and close 50 existing locations in the U.S. during fiscal 2014. We estimate this financial performance will result in cash flow (defined as cash provided by operating activities less cash used in investing activities) of approximately $165 million.

Fiscal Q1 2014 Guidance

For the first quarter of fiscal 2014, we estimate income from continuing U.S. operations in the range of $0.40 to $0.45 per diluted share (non-GAAP), compared to last year's adjusted income from continuing U.S. operations of $0.70 per diluted share (non-GAAP). This guidance assumes U.S. comparable store sales are in a range of slightly positive to slightly negative.

Discontinued Canadian Operations

With the closure of all Canadian stores by the end of February 2014, we will report our former Canadian business as discontinued operations beginning with the first quarter of fiscal 2014. We estimate a first quarter loss from our discontinued Canadian operations in the range of $37 to $41 million, or $0.64 to $0.71 per diluted share, as we continue our wind down efforts. This estimate includes charges related to lease liabilities, severance and asset impairment. We estimate approximately $25 million of cash outflow to satisfy our obligations could occur as early as first quarter of fiscal 2014.

 

Q1

Full Year

EPS from Continuing Operations (non-GAAP)

2014 Guidance

2013

2014 Guidance

2013

U.S. Operations

$0.40  -  $0.45

$0.64

$2.25  -  $2.45

$2.85

Impact of deferred tax benefit for investment in Canada

-

-

-

($0.41)

Impact of other non-recurring charges

-

$0.06

-

$0.01

U.S. Operations - adjusted basis

$0.40  -  $0.45

$0.70

$2.25  -  $2.45

$2.45

EPS from Discontinued Operations (1)

($0.71) - ($0.64)

($0.08)

($0.71) - ($0.64)

($0.70)

(1) Includes our Canadian operations and wholesale operations

 

Conference Call/Webcast

We will host a conference call today at 8:00 a.m. to discuss our financial results for the fourth quarter and provide commentary on our outlook for fiscal 2014. We invite you to listen to the webcast of the conference call through the Investor Relations section of our website http://www.biglots.com.

If you are unable to join the live webcast, an archive of the call will be available through the Investor Relations section of our website http://www.biglots.com/after 12:00 noon today and will remain available through midnight on Friday, March 21, 2014. A replay of this call will also be available beginning today at 12:00 noon through March 21 by dialing 1.888.203.1112 (Toll Free USA and Canada) or 1.719.457.0820 (International), and entering Replay Passcode 2138376. All times are Eastern Time.

Big Lots is America's largest broadline closeout retailer, operating 1,495 BIG LOTS stores in 48 states. For more information, visit www.biglots.com.

Cautionary Statement Concerning Forward-Looking Statements

Certain statements in this release are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, and such statements are intended to qualify for the protection of the safe harbor provided by the Act. The words "anticipate," "estimate," "expect," "objective," "goal," "project," "intend," "plan," "believe," "will," "should," "may," "target," "forecast," "guidance," "outlook" and similar expressions generally identify forward-looking statements. Similarly, descriptions of our objectives, strategies, plans, goals or targets are also forward-looking statements. Forward-looking statements relate to the expectations of management as to future occurrences and trends, including statements expressing optimism or pessimism about future operating results or events and projected sales, earnings, capital expenditures and business strategy. Forward-looking statements are based upon a number of assumptions concerning future conditions that may ultimately prove to be inaccurate. Forward-looking statements are and will be based upon management's then-current views and assumptions regarding future events and operating performance, and are applicable only as of the dates of such statements. Although we believe the  expectations expressed in forward-looking statements are based on reasonable assumptions within the bounds of our knowledge, forward-looking statements, by their nature, involve risks, uncertainties and other factors, any one or a combination of which could materially affect our business, financial condition, results of operations or liquidity.

Forward-looking statements that we make herein and in other reports and releases are not guarantees of future performance and actual results may differ materially from those discussed in such forward-looking statements as a result of various factors, including, but not limited to, current economic and credit conditions, the cost of goods, our inability to successfully execute strategic initiatives, competitive pressures, economic pressures on our customers and us, the availability of brand name closeout merchandise, trade restrictions, freight costs, the risks discussed in the Risk Factors section of our most recent Annual Report on Form 10-K, and other factors discussed from time to time in our other filings with the SEC, including Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. This release should be read in conjunction with such filings, and you should consider all of these risks, uncertainties and other factors carefully in evaluating forward-looking statements.

You are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date thereof. We undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise. You are advised, however, to consult any further disclosures we make on related subjects in our public announcements and SEC filings.

 

BIG LOTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

FEBRUARY 1

FEBRUARY 2

2014

2013

(Unaudited)

ASSETS

Current assets:

Cash and cash equivalents

$68,629

$60,581

Inventories

914,965

918,023

Deferred income taxes

59,781

37,696

Other current assets

77,686

74,330

   Total current assets

1,121,061

1,090,630

Property and equipment - net

569,682

593,562

Deferred income taxes

5,106

0

Goodwill

0

13,522

Other assets

43,750

55,912

$1,739,599

$1,753,626

LIABILITIES AND SHAREHOLDERS' EQUITY      

Current liabilities:

Accounts payable

$365,772

$393,652

Property, payroll and other taxes

73,334

74,973

Accrued operating expenses

57,167

53,788

Insurance reserves

37,607

36,861

KB bankruptcy lease obligation

0

3,069

Accrued salaries and wages

29,175

26,753

Income taxes payable

14,392

40,538

   Total current liabilities

577,447

629,634

Long-term obligations under bank credit facility

77,000

171,200

Deferred income taxes

0

2,693

Deferred rent

76,364

73,658

Insurance reserves

55,755

63,332

Unrecognized tax benefits

17,975

16,335

Other liabilities

33,631

38,632

Shareholders' equity

901,427

758,142

$1,739,599

$1,753,626

 

BIG LOTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

13 WEEKS ENDED

14 WEEKS ENDED

FEBRUARY 1, 2014

FEBRUARY 2, 2013

%

%

(Unaudited)

(Recast)

Net sales

$1,636,277

100.0

$1,744,583

100.0

Gross margin

625,663

38.2

693,316

39.7

Selling and administrative expenses 

487,286

29.8

469,262

26.9

Depreciation expense

30,152

1.8

27,397

1.6

Operating profit

108,225

6.6

196,657

11.3

Interest expense

(841)

(0.1)

(1,470)

(0.1)

Other income (expense)

(802)

(0.0)

6

0.0

Income from continuing operations before income taxes

106,582

6.5

195,193

11.2

Income tax expense

25,603

1.6

75,054

4.3

Income from continuing operations

80,979

4.9

120,139

6.9

Income from discontinued operations, net of tax

   expense of $2,198 and $159, respectively

3,374

0.2

148

0.0

Net Income

$84,353

5.2

$120,287

6.9

Earnings per common share - basic (a)

Continuing operations

$1.41

$2.10

Discontinued operations

0.06

0.00

Net Income

$1.47

$2.10

Earnings per common share - diluted (a)

Continuing operations

$1.39

$2.08

Discontinued operations

0.06

0.00

Net Income

$1.45

$2.09

Weighted average common shares outstanding

Basic

57,513

57,266

Dilutive effect of share-based awards

546

418

Diluted

58,059

57,684

(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 OPERATIONS

(In thousands, except per share data)

52 WEEKS ENDED

53 WEEKS ENDED

FEBRUARY 1, 2014

FEBRUARY 2, 2013

%

%

(Unaudited)

(Recast)

Net sales

$5,301,912

100.0

$5,367,165

100.0

Gross margin

2,065,306

39.0

2,112,328

39.4

Selling and administrative expenses 

1,759,745

33.2

1,708,160

31.8

Depreciation expense

115,122

2.2

106,137

2.0

Operating profit

190,439

3.6

298,031

5.6

Interest expense

(3,339)

(0.1)

(4,192)

(0.1)

Other income (expense)

(1,213)

(0.0)

51

0.0

Income from continuing operations before income taxes

185,887

3.5

293,890

5.5

Income tax expense 

61,118

1.2

116,921

2.2

Income from continuing operations

124,769

2.4

176,969

3.3

Income from discontinued operations, net of tax

   expense of $351 and $195, respectively

526

0.0

152

0.0

Net income 

$125,295

2.4

$177,121

3.3

Earnings per common share - basic (a)

Continuing operations

$2.17

$2.96

Discontinued operations

0.01

0.00

Net income 

$2.18

$2.96

Earnings per common share - diluted (a)

Continuing operations

$2.15

$2.93

Discontinued operations

0.01

0.00

Net income 

$2.16

$2.93

Weighted average common shares outstanding

Basic

57,415

59,852

Dilutive effect of share-based awards

543

624

Diluted

57,958

60,476

(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

SEGMENT OPERATING PERFORMANCE

(In thousands, except per share data)

13 WEEKS ENDED

14 WEEKS ENDED

13 WEEKS ENDED

14 WEEKS ENDED

FEBRUARY 1, 2014

FEBRUARY 2, 2013

FEBRUARY 1, 2014

FEBRUARY 2, 2013

U.S.

U.S.

Canada

Canada

(Unaudited)

(Recast)

(Unaudited)

(Unaudited)

Net sales

$1,571,912

$1,696,021

$64,365

$48,562

Gross margin

609,632

674,422

16,031

18,894

Selling and administrative expenses 

444,968

451,160

42,318

18,102

Depreciation expense

29,835

26,657

317

740

Operating profit (loss)

134,829

196,605

(26,604)

52

Interest expense

(804)

(1,469)

(37)

(1)

Other income (expense)

0

0

(802)

6

Income (loss) from continuing operations before income taxes

134,025

195,136

(27,443)

57

Income tax expense (benefit)

26,029

75,192

(426)

(138)

Income (loss) from continuing operations

107,996

119,944

(27,017)

195

Diluted earnings (loss) per common share from continuing operations (a)

$1.86

$2.08

($0.47)

$0.00

52 WEEKS ENDED

53 WEEKS ENDED

52 WEEKS ENDED

53 WEEKS ENDED

FEBRUARY 1, 2014

FEBRUARY 2, 2013

FEBRUARY 1, 2014

FEBRUARY 2, 2013

U.S.

U.S.

Canada

Canada

(Unaudited)

(Recast)

(Unaudited)

(Unaudited)

Net sales

$5,124,755

$5,212,318

$177,157

$154,847

Gross margin

2,007,369

2,054,686

57,937

57,642

Selling and administrative expenses 

1,664,232

1,639,816

95,513

68,344

Depreciation expense

113,228

103,146

1,894

2,991

Operating profit (loss)

229,909

311,724

(39,470)

(b)

(13,693)

Interest expense

(3,293)

(4,190)

(46)

(2)

Other income (expense)

(12)

2

(1,201)

49

Income (loss) from continuing operations before income taxes

226,604

307,536

(40,717)

(13,646)

Income tax expense 

61,544

117,059

(426)

(138)

Income (loss) from continuing operations

165,060

190,477

(40,291)

(13,508)

Diluted earnings (loss) per common share from continuing operations (a)

$2.85

$3.15

($0.70)

($0.22)

(a)

The diluted earnings (loss) per share from continuing operations by segment are separately calculated; therefore, the sum of diluted earnings (loss) per share from continuing operations by segment may differ, due to rounding, from the calculated consolidated diluted (loss) earnings per share from continuing operations.  Diluted earnings (loss) per share from continuing operations by segment is a "non-GAAP financial measure," 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), which our management believes is useful information to investors.

(b)

The operating loss for the Canadian operating segment of $39,470 for the 52 weeks ended February 1, 2014 equates to $41,748 in Canadian dollars.

 

BIG LOTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

13 WEEKS ENDED

14 WEEKS ENDED

FEBRUARY 1, 2014

FEBRUARY 2, 2013

 (Unaudited) 

 (Unaudited) 

  Net cash provided by operating activities 

$269,432

$317,038

  Net cash used in investing activities

(20,887)

(30,743)

  Net cash used in financing activities

(246,380)

(291,992)

    Impact of foreign currency on cash

(1,262)

21

Increase (decrease) in cash and cash equivalents

903

(5,676)

Cash and cash equivalents:

  Beginning of period

67,726

66,257

  End of period

$68,629

$60,581

 

BIG LOTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

52 WEEKS ENDED

53 WEEKS ENDED

FEBRUARY 1, 2014

FEBRUARY 2, 2013

 (Unaudited) 

  Net cash provided by operating activities 

$198,334

$281,133

  Net cash used in investing activities

(97,495)

(130,357)

  Net cash used in financing activities

(91,196)

(158,274)

    Impact of foreign currency on cash

(1,595)

(468)

Increase (decrease) in cash and cash equivalents

8,048

(7,966)

Cash and cash equivalents:

  Beginning of period

60,581

68,547

  End of period

$68,629

$60,581

 

BIG LOTS, INC. AND SUBSIDIARIES RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (In thousands, except per share data) (Unaudited)

The following tables reconcile gross margin, selling and administrative expenses, operating profit, income tax expense, income from continuing operations, net income, diluted earnings per share from continuing operations, diluted earnings per share, and effective income tax rate for each of the fourth quarter of 2013, the year-to-date 2013, and the year-to-date 2012 (GAAP financial measures) to adjusted gross margin, adjusted selling and administrative expenses, adjusted operating profit, adjusted income tax expense, adjusted income from continuing operations, adjusted net income, adjusted diluted earnings per share from continuing operations, adjusted diluted earnings per share, and adjusted effective income tax rate (non-GAAP financial measures).

 

Fourth quarter of 2013 - Thirteen weeks ended February 1, 2014 

Consolidated Results 

 As reported 

 U.S. tax benefit of Canadian wind down 

 As Adjusted

(non-GAAP) 

 Net sales 

$   1,636,277

100.0%

$                    -

$   1,636,277

100.0%

 Gross margin 

625,663

38.2

-

625,663

38.2

Selling and administrative expenses 

487,286

29.8

-

487,286

29.8

 Depreciation expense 

30,152

1.8

-

30,152

1.8

 Operating profit 

108,225

6.6

-

108,225

6.6

 Income tax expense 

25,603

1.6

23,899

49,502

3.0

 Income from continuing operations 

80,979

4.9

(23,899)

57,080

3.5

 Income from discontinued operations 

3,374

0.2

-

3,374

0.2

 Net income 

$        84,353

5.2%

$       (23,899)

$        60,454

3.7%

 Diluted earnings per share from  

      continuing operations 

$             1.39

$            (0.41)

$             0.98

 Diluted earnings per share  

$             1.45

$            (0.41)

$             1.04

 Effective income tax rate 

24.0%

46.4%

 U.S. Segment Results 

 As reported 

 U.S. tax benefit of Canadian wind down 

 As Adjusted (non-GAAP) 

 Net sales 

$   1,571,912

100.0%

$                    -

$   1,571,912

100.0%

 Gross margin 

609,632

38.8

-

609,632

38.8

 Selling and administrative expenses 

444,968

28.3

-

444,968

28.3

 Depreciation expense 

29,835

1.9

-

29,835

1.9

 Operating profit 

134,829

8.6

-

134,829

8.6

 Income tax expense 

26,029

1.7

23,899

49,928

3.2

 Income from continuing operations 

$      107,996

6.9%

$       (23,899)

$        84,097

5.3%

 Diluted earnings per share from  

      continuing operations 

$             1.86

$            (0.41)

$             1.45

 Effective income tax rate 

19.4%

37.3%

 

The above adjusted gross margin, adjusted selling and administrative expenses, adjusted operating profit, adjusted income tax expense, adjusted income from continuing operations, adjusted net income, adjusted diluted earnings per share from continuing operations, adjusted diluted earnings per share, and adjusted effective income tax rate 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") the impact of a U.S. tax benefit associated with the wind down of the operations of our Canadian segment of $23,899.

 

Year-to-date 2013 - Fifty-two weeks ended February 1, 2014 

Consolidated Results 

 As reported 

 Adjustment to loss contingency accrual 

 Gain on sale of real estate 

 U.S. tax benefit of Canadian wind down 

 As Adjusted (non-GAAP) 

 Net sales 

$   5,301,912

100.0%

$                    -

$                 -

$                    -

$   5,301,912

100.0%

 Gross margin 

2,065,306

39.0

-

-

-

2,065,306

39.0

 Selling and administrative expenses 

1,759,745

33.2

(4,375)

3,579

-

1,758,949

33.2

 Depreciation expense 

115,122

2.2

-

-

-

115,122

2.2

 Operating profit 

190,439

3.6

4,375

(3,579)

-

191,235

3.6

 Income tax expense 

61,118

1.2

1,615

(1,400)

23,899

85,232

1.6

 Income from continuing operations 

124,769

2.4

2,760

(2,179)

(23,899)

101,451

1.9

 Income from discontinued operations 

526

0.0

-

-

-

526

0.0

 Net income 

$      125,295

2.4%

$           2,760

$      (2,179)

$       (23,899)

$      101,977

1.9%

 Diluted earnings per share from  

      continuing operations 

$             2.15

$             0.05

$        (0.04)

$            (0.41)

$             1.75

 Diluted earnings per share  

$             2.16

$             0.05

$        (0.04)

$            (0.41)

$             1.76

 Effective income tax rate 

32.9%

36.9%

39.1%

45.7%

 U.S. Segment Results 

 As reported 

 Adjustment to loss contingency accrual 

 Gain on sale of real estate 

 U.S. tax benefit of Canadian wind down 

 As Adjusted (non-GAAP) 

 Net sales 

$   5,124,755

100.0%

$                    -

$                 -

$                    -

$   5,124,755

100.0%

 Gross margin 

2,007,369

39.2

-

-

-

2,007,369

39.2

 Selling and administrative expenses 

1,664,232

32.5

(4,375)

3,579

-

1,663,436

32.5

 Depreciation expense 

113,228

2.2

-

-

-

113,228

2.2

 Operating profit 

229,909

4.5

4,375

(3,579)

-

230,705

4.5

 Income tax expense 

61,544

1.2

1,615

(1,400)

23,899

85,658

1.7

 Income from continuing operations 

$      165,060

3.2%

$           2,760

$      (2,179)

$       (23,899)

$      141,742

2.8%

 Diluted earnings per share from  

      continuing operations 

$             2.85

$             0.05

$        (0.04)

$            (0.41)

$             2.45

 Effective income tax rate 

27.2%

36.9%

39.1%

37.7%

 

The above adjusted gross margin, adjusted selling and administrative expenses, adjusted operating profit, adjusted income tax expense, adjusted income from continuing operations, adjusted net income, adjusted diluted earnings per share from continuing operations, adjusted diluted earnings per share, and adjusted effective income tax rate 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"): (1) a pretax charge related to the settlement of a legal matter of $4,375 ($2,760, net of tax); (2) a pretax adjustment for the gain on the sale of real estate of $3,579 ($2,179, net of tax); and (3) the impact of a U.S. tax benefit associated with the wind down of the operations of our Canadian segment of $23,899.

 

Year-to-date 2012 - Fifty-three weeks ended February 2, 2013 

Consolidated Results 

 As Recast 

 Adjustment to exclude change in inventory accounting principle 

 As Adjusted (non-GAAP) 

 Net sales 

$   5,367,165

100.0%

$                                   -

$   5,367,165

100.0%

 Gross margin 

2,112,328

39.4

5,574

2,117,902

39.5

 Selling and administrative expenses 

1,708,160

31.8

-

1,708,160

31.8

 Depreciation expense 

106,137

2.0

-

106,137

2.0

 Operating profit 

298,031

5.6

5,574

303,605

5.7

 Income tax expense 

116,921

2.2

2,186

119,107

2.2

 Income from continuing operations 

176,969

3.3

3,388

180,357

3.4

 Income from discontinued operations 

152

0.0

-

152

0.0

 Net income 

$      177,121

3.3%

$                          3,388

$      180,509

3.4%

 Diluted earnings per share from  

      continuing operations 

$             2.93

$                             0.06

$             2.98

 Diluted earnings per share  

$             2.93

$                             0.06

$             2.98

 Effective income tax rate 

39.8%

39.2%

39.8%

 U.S. Segment Results 

 As Recast 

 Adjustment to exclude change in inventory accounting principle 

 As Adjusted (non-GAAP) 

 Net sales 

$   5,212,318

100.0%

$                                   -

$   5,212,318

100.0%

 Gross margin 

2,054,686

39.4

5,574

2,060,260

39.5

 Selling and administrative expenses 

1,639,816

31.5

-

1,639,816

31.5

 Depreciation expense 

103,146

2.0

-

103,146

2.0

 Operating profit 

311,724

6.0

5,574

317,298

6.1

 Income tax expense 

117,059

2.2

2,186

119,245

2.3

 Income from continuing operations 

$      190,477

3.7%

$                          3,388

$      193,865

3.7%

 Diluted earnings per share from  

      continuing operations 

$             3.15

$                             0.06

$             3.21

 Effective income tax rate 

38.1%

39.2%

38.1%

 

The above adjusted gross margin, adjusted selling and administrative expenses, adjusted operating profit, adjusted income tax expense, adjusted income from continuing operations, adjusted net income, adjusted diluted earnings per share from continuing operations, adjusted diluted earnings per share, and adjusted effective income tax rate 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") a pretax charge for a change in an accounting principle associated with our implementation of new inventory management information systems of $5,574 ($3,388, net of tax).

Our management believes that the disclosure of these non-GAAP financial measures provides useful information to investors because the non-GAAP financial measures present an alternative method for measuring our operating performance, excluding special items included in the most directly comparable GAAP financial measures, that management believes is more indicative of our on-going operating results and financial condition. Our management uses these non-GAAP financial measures, along with the most directly comparable GAAP financial measures, in evaluating our operating performance.

 

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SOURCE Big Lots, Inc.



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