Big Lots Reports Second Quarter Adjusted Consolidated Income From Continuing Operations of $0.31 Per Diluted Share

Company Provides Updated Outlook for Fiscal 2013

Aug 30, 2013, 06:00 ET from Big Lots, Inc.

COLUMBUS, Ohio, Aug. 30, 2013 /PRNewswire/ -- Big Lots, Inc. (NYSE: BIG) today reported consolidated income from continuing operations of $18.1 million, or $0.31 per diluted share, for the second quarter of fiscal 2013 ended August 3, 2013. This result includes a non-recurring, after tax benefit of $0.4 million, or $0.01 per diluted share, associated with the settlement of a store-related legal contingency. Excluding this non-recurring benefit, adjusted consolidated income from continuing operations totaled $17.7 million, or $0.31 per diluted share (non-GAAP), which compares favorably to our guidance issued on May 30, 2013, of $0.17 to $0.27 per diluted share. Consolidated income from continuing operations for the second quarter of fiscal 2012 was $22.1 million, or $0.36 per diluted share. Consolidated net sales for the second quarter of fiscal 2013 increased 0.6% to $1,225.6 million, compared to $1,218.0 million for the same period of fiscal 2012. Consolidated comparable store sales decreased 1.9% for the quarter, slightly better than our guidance for a decrease of 2% to 4%.

For the year-to-date period ended August 3, 2013, income from continuing operations totaled $50.5 million, or $0.87 per diluted share. Excluding the non-recurring store-related legal settlement activity on a year-to-date basis of $ 2.8 million, after tax, or $0.05 per diluted share, adjusted consolidated income from continuing operations for the year-to-date period ended August 3, 2013 totaled $53.2 million, or $0.92 per diluted share (non-GAAP). This result compared to adjusted consolidated income from continuing operations of $66.3 million, or $1.05 per diluted share (non-GAAP), for the same period in fiscal 2012. Discontinued operations activity was minimal for the second quarter and year-to-date period of fiscal 2013 and the corresponding periods in fiscal 2012. 

EPS From Continuing Operations (1)

Q2 2013

Q2 2012

YTD 2013

YTD 2012

U.S. Operations

$0.38

$0.42

$1.01

$1.15

Impact of non-recurring charges

($0.01)

-

$0.05

$0.05

U.S. Operations - adjusted basis

$0.37

$0.42

$1.06

$1.20

Canadian Operations

($0.07)

($0.05)

($0.14)

($0.15)

Consolidated Operations - adjusted basis

$0.31

$0.36

$0.92

$1.05

 

(1) Non-GAAP. See detailed segment reporting below.

 

SECOND QUARTER HIGHLIGHTS

  • Adjusted consolidated income from continuing operations of $0.31 per diluted share (non-GAAP), compared to consolidated income from continuing operations of $0.36 per diluted share last year
  • Consolidated net sales of $1.2 billion, an increase of 0.6% compared to last year
  • Opened 13 stores in the U.S. and rebranded 2 stores in Canada to Big Lots stores

Second Quarter Results

U.S. Operations

Net sales for U.S. operations for the second quarter of fiscal 2013 increased 0.4% to $1,187.7 million, compared to $1,183.0 million for the same period of fiscal 2012. Comparable store sales for U.S. stores open at least fifteen months decreased 2.2% for the quarter, consistent with our guidance of a 2% to 4% decline. Adjusted income from continuing U.S. operations totaled $21.5 million, or $0.37 per diluted share (non-GAAP), compared to our guidance of $0.27 to $0.32 per diluted share (non-GAAP) and income from continuing U.S. operations of $25.4 million, or $0.42 per diluted share (non-GAAP), for the same period of fiscal 2012.

Canadian Operations

Net sales for Canadian operations for the second quarter of fiscal 2013 increased 8.2% to $37.9 million, and comparable stores sales increased 8.3%, both consistent with our previously communicated guidance. For the second quarter of fiscal 2013, we incurred a net loss of $3.8 million, or $0.07 per diluted share (non-GAAP), compared to our guidance of a net loss of $3 to $6 million, or $0.05 to $0.10 per diluted share (non-GAAP), and a net loss of $3.3 million, or $0.05 per diluted share (non-GAAP) for the same period of fiscal 2012.

Comparable Store Sales

Store Count

Q2 2013

Q2 2012

Q2 2013

Q2 2012

U.S. Operations

-2.2%

-1.9%

1,514

1,463

Canadian Operations (1)

+8.3%

na

79

81

Consolidated Operations

-1.9%

-1.9%

1,593

1,544

(1)  Comparable store sales for Canada for fiscal 2012 do not qualify under our calculation due to an acquisition date of July 2011.

 

Inventory and Cash Management

On a consolidated basis, Inventory ended the second quarter of fiscal 2013 at $914 million, compared to $881 million for the second quarter of fiscal 2012. The growth in inventory was driven by an increase in U.S. store count, and a 1% increase in inventory per store in our U.S. stores.

We ended the second quarter of fiscal 2013 with $64 million of Cash and Cash Equivalents and $142 million of borrowings under our credit facility compared to $62 million of Cash and Cash Equivalents and $243 million of borrowings under our credit facility as of the end of the second quarter of fiscal 2012. Our use of cash generated by our U.S. operations during the last 12 months was focused on repaying debt, share repurchase activity, and funding our Canadian operations.

2013 OUTLOOK

  • Updates outlook for fiscal 2013 adjusted consolidated income from continuing operations to $2.80 to $3.05 per diluted share (non-GAAP), compared to fiscal 2012 adjusted consolidated income from continuing operations of $2.99 per diluted share (non-GAAP)
  • Outlook for Cash Flow of $175 million (defined as operating activities less investing activities)

Based on operating results for the first two quarters and our expectations for the third and fourth quarters of fiscal 2013, we now estimate our fiscal 2013 adjusted consolidated income from continuing operations to be in the range of $2.80 to $3.05 per diluted share (non-GAAP, see reconciliation below) compared to adjusted consolidated income from continuing operations of $2.99 per diluted share for fiscal 2012 (non-GAAP). This outlook excludes the previously mentioned non-recurring activity from the first and second quarters, and is based on estimated consolidated net sales in the range of flat to +1% for fiscal 2013 and consolidated comparable store sales in the range of flat to -1% (see table below). We estimate this financial performance will result in cash flow of approximately $175 million in fiscal 2013.

U.S. Operations

We are forecasting adjusted income from continuing U.S. operations to be in the range of $3.05 to $3.20 per diluted share (non-GAAP), compared to fiscal 2012 adjusted income from continuing U.S. operations of $3.21 per diluted share (non-GAAP). This outlook excludes the previously mentioned non-recurring activity from the first and second quarters, and is based on estimated net sales for U.S. operations in the range of flat to +1% and comparable store sales for U.S. operations in the range of flat to -1%.

Canadian Operations

Canadian net sales are expected to be in the range of $165 to $173 million for fiscal 2013, resulting in a net loss in the range of $9 to $14 million, or $0.15 to $0.25 per diluted share (non-GAAP). This compares to a net loss for fiscal 2012 of $13.5 million, or $0.22 per diluted share (non-GAAP). Our outlook for fiscal 2013 is based on a Canadian net sales increase in the range of 7% to 12% and a comparable store sales increase in the range of 7% to 12%. From a real estate perspective, we expect to open 2 new stores in Canada under the Big Lots banner during fiscal 2013.

EPS from Continuing Operations(non-GAAP)

Full Year

2013 Guidance

2012

U.S. Operations

$3.00 - $3.15

$3.15

 

Impact of non-recurring charges

$0.05

$0.06

U.S. Operations - adjusted basis

$3.05 - $3.20

$3.21

Canadian Operations

($0.15) - ($0.25)

($0.22)

Consolidated Operations - adjusted basis

$2.80 - $3.05

$2.99

 

Sales Guidance

Full Year 2013

Total Sales

Comp

U.S. Operations

0% to +1%

0% to -1%

 

Canadian Operations

+7% to +12%

+7% to +12%

Consolidated Operations

0% to +1%

0% to -1%

 

Conference Call/Webcast

We will host a conference call today at 8:00 a.m. to discuss our financial results for the second quarter and provide commentary on our outlook for fiscal 2013. We invite you to listen to the webcast of the conference call through the Investor Relations section of our website (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 (www.biglots.com) beginning two hours after the call ends and will remain available through midnight on Friday, September 13. A replay of the call will be available beginning today at 12:00 noon through September 13 at midnight by dialing: 1.888.203.1112 (United States and Canada) or 1.719.457.0820 (International). The Replay Confirmation Code is 6565635.  All times are Eastern Time.

Big Lots is North America's largest broadline closeout retailer. As of the end of the second quarter of fiscal 2013, we operated 1,514 BIG LOTS stores in the 48 contiguous United States, 3 BIG LOTS stores in Canada, and 76 LIQUIDATION WORLD and LW stores in Canada. Wholesale operations are conducted through BIG LOTS WHOLESALE, CONSOLIDATED INTERNATIONAL, and WISCONSIN TOY and with online sales at www.biglotswholesale.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, the 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)

AUGUST 3

JULY 28

2013

2012

(Unaudited)

(Unaudited)

ASSETS

Current assets:

Cash and cash equivalents

$63,810

$61,679

Inventories

913,687

881,090

Deferred income taxes

42,524

42,840

Other current assets

111,341

91,167

   Total current assets

1,131,362

1,076,776

Property and equipment - net

592,945

587,515

Deferred income taxes

7,482

6,146

Goodwill

12,991

13,428

Other assets

56,531

41,780

$1,801,311

$1,725,645

LIABILITIES AND SHAREHOLDERS' EQUITY      

Current liabilities:

Accounts payable

$427,243

$409,578

Property, payroll and other taxes

77,685

79,520

Accrued operating expenses

70,420

70,239

Insurance reserves

36,440

36,297

KB bankruptcy lease obligation

3,069

3,069

Accrued salaries and wages

26,827

23,262

Income taxes payable

1,792

670

   Total current liabilities

643,476

622,635

Long-term obligations under bank credit facility

141,700

242,800

Deferred rent

79,309

65,078

Insurance reserves

63,107

50,400

Unrecognized tax benefits

17,168

16,159

Other liabilities

38,931

38,565

Shareholders' equity

817,620

690,008

$1,801,311

$1,725,645

BIG LOTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

13 WEEKS ENDED

13 WEEKS ENDED

AUGUST 3, 2013

JULY 28, 2012

%

%

(Unaudited)

(Unaudited)

Net sales

$1,225,572

100.0

$1,218,037

100.0

Gross margin

479,455

39.1

477,835

39.2

Selling and administrative expenses 

418,495

34.1

412,220

33.8

Depreciation expense

28,149

2.3

26,271

2.2

Operating profit

32,811

2.7

39,344

3.2

Interest expense

(733)

(0.1)

(895)

(0.1)

Other income (expense)

(118)

(0.0)

(38)

(0.0)

Income from continuing operations before income taxes

31,960

2.6

38,411

3.2

Income tax expense

13,835

1.1

16,321

1.3

Income from continuing operations

18,125

1.5

22,090

1.8

Income (Loss) from discontinued operations, net of tax

   expense (benefit) of $1 and ($10), respectively

1

0.0

(15)

(0.0)

Net income

$18,126

1.5

$22,075

1.8

Earnings per common share - basic (a)

Continuing operations

$0.32

$0.37

Discontinued operations

0.00

0.00

Net income

$0.32

$0.37

Earnings per common share - diluted (a)

Continuing operations

$0.31

$0.36

Discontinued operations

0.00

0.00

Net income

$0.31

$0.36

Weighted average common shares outstanding

Basic

57,382

60,466

Dilutive effect of share-based awards

542

531

Diluted

57,924

60,997

(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)

26 WEEKS ENDED

26 WEEKS ENDED

AUGUST 3, 2013

JULY 28, 2012

%

%

(Unaudited)

(Unaudited)

Net sales

$2,536,910

100.0

$2,512,518

100.0

Gross margin

996,084

39.3

990,283

39.4

Selling and administrative expenses 

850,962

33.5

830,538

33.1

Depreciation expense

55,619

2.2

51,559

2.1

Operating profit

89,503

3.5

108,186

4.3

Interest expense

(1,459)

(0.1)

(1,231)

(0.0)

Other income (expense)

(264)

(0.0)

(1)

(0.0)

Income from continuing operations before income taxes

87,780

3.5

106,954

4.3

Income tax expense 

37,322

1.5

44,084

1.8

Income from continuing operations

50,458

2.0

62,870

2.5

Income (Loss) from discontinued operations, net of tax

   expense (benefit) of $0 and ($32), respectively

1

0.0

(49)

(0.0)

Net income 

$50,459

2.0

$62,821

2.5

Earnings per common share - basic (a)

Continuing operations

$0.88

$1.01

Discontinued operations

0.00

0.00

Net income 

$0.88

$1.01

Earnings per common share - diluted (a)

Continuing operations

$0.87

$1.00

Discontinued operations

0.00

0.00

Net income 

$0.87

$1.00

Weighted average common shares outstanding

Basic

57,344

62,292

Dilutive effect of share-based awards

540

779

Diluted

57,884

63,071

(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

AUG 3, 2013

JULY 28, 2012

AUG 3, 2013

JULY 28, 2012

U.S.

U.S.

Canada

Canada

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

Net sales

$1,187,677

$1,183,023

$37,895

$35,014

Gross margin

465,287

465,422

14,168

12,413

Selling and administrative expenses 

401,173

397,327

17,322

14,893

Depreciation expense

27,570

25,468

579

803

Operating profit (loss)

36,544

42,627

(3,733)

(3,283)

Interest expense

(730)

(895)

(3)

0

Other income (expense)

(11)

0

(107)

(38)

Income (loss) from continuing operations before income taxes

35,803

41,732

(3,843)

(3,321)

Income tax expense

13,835

16,321

0

0

Income (loss) from continuing operations

21,968

25,411

(3,843)

(3,321)

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

$0.38

$0.42

($0.07)

($0.05)

26 WEEKS ENDED

AUGUST 3, 2013

JULY 28, 2012

AUGUST 3, 2013

JULY 28, 2012

U.S.

U.S.

Canada

Canada

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

Net sales

$2,462,421

$2,445,258

$74,489

$67,260

Gross margin

968,377

966,366

27,707

23,917

Selling and administrative expenses 

816,393

798,852

34,569

31,686

Depreciation expense

54,450

49,892

1,169

1,667

Operating profit (loss)

97,534

117,622

(8,031)

(9,436)

Interest expense

(1,456)

(1,231)

(3)

0

Other income (expense)

(11)

0

(253)

(1)

Income (loss) from continuing operations before income taxes

96,067

116,391

(8,287)

(9,437)

Income tax expense 

37,322

44,084

0

0

Income (loss) from continuing operations

58,745

72,307

(8,287)

(9,437)

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

$1.01

$1.15

($0.14)

($0.15)

(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 earnings (loss) 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.

 

BIG LOTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

13 WEEKS ENDED

13 WEEKS ENDED

AUGUST 3, 2013

JULY 28, 2012

 (Unaudited) 

 (Unaudited) 

  Net cash provided by (used in) operating activities 

$21,835

($34,345)

  Net cash used in investing activities

(34,278)

(44,772)

  Net cash provided by financing activities

4,802

58,453

    Impact of foreign currency on cash

(218)

(228)

Decrease in cash and cash equivalents

(7,859)

(20,892)

Cash and cash equivalents:

  Beginning of period

71,669

82,571

 

  End of period

$63,810

$61,679

 

BIG LOTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

26 WEEKS ENDED

26 WEEKS ENDED

AUGUST 3, 2013

JULY 28, 2012

 (Unaudited) 

 (Unaudited) 

  Net cash provided by operating activities 

$82,018

$88,749

  Net cash used in investing activities

(50,101)

(60,273)

  Net cash used in financing activities

(28,362)

(35,195)

    Impact of foreign currency on cash

(326)

(149)

Increase (decrease) in cash and cash equivalents

$3,229

($6,868)

Cash and cash equivalents:

  Beginning of period

60,581

68,547

 

  End of period

$63,810

$61,679

 

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, operating profit rate, income tax expense, effective income tax rate, income from continuing operations, net income, diluted earnings per share from continuing operations, and diluted earnings per share for both the second quarter of 2013 and the year-to-date 2013 (GAAP financial measures) to 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 (non-GAAP financial measures); and (2) gross margin, gross margin rate, operating profit, operating profit rate, income tax expense, effective income tax rate, income from continuing operations, net income, diluted earnings per share from continuing operations, and diluted earnings per share for the year-to-date 2012 (GAAP financial measures) to adjusted gross margin, adjusted gross margin 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 (non-GAAP financial measures).

 

 Second quarter of 2013 - Thirteen weeks ended August 3, 2013 

 Consolidated Results 

 As reported 

 Adjustment to loss contingency accrual

As Adjusted (non-GAAP)

 Selling and administrative expenses 

$      418,495

$                              677

$          419,172

 Selling and administrative expense rate 

34.1%

0.1%

34.2%

 Operating profit 

32,811

(677)

32,134

 Operating profit rate 

2.7%

(0.1%)

2.6%

 Income tax expense 

13,835

(247)

13,588

 Effective income tax rate 

43.3%

0.1%

43.4%

 Income from continuing operations 

18,125

(430)

17,695

 Net income 

18,126

(430)

17,696

 Diluted earnings per share from  

      continuing operations 

$             0.31

$                            (0.01)

$                 0.31

 Diluted earnings per share  

$             0.31

$                            (0.01)

$                 0.31

 U.S. Segment Results 

 As reported 

 Adjustment to loss contingency accrual

As Adjusted (non-GAAP)

 Selling and administrative expenses 

$      401,173

$                              677

$          401,850

 Selling and administrative expense rate 

33.8%

0.1%

33.8%

 Operating profit 

36,544

(677)

35,867

 Operating profit rate 

3.1%

(0.1%)

3.0%

 Income tax expense 

13,835

(247)

13,588

 Effective income tax rate 

38.6%

0.1%

38.7%

 Income from continuing operations 

21,968

(430)

21,538

 Diluted earnings per share from  

     continuing operations 

$             0.38

$                            (0.01)

$                 0.37

 

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") a pretax adjustment for settlement of a legal matter of $677 ($430, net of tax).

 

 Year-to-date 2013 - Twenty-six weeks ended August 3, 2013 

 Consolidated Results 

 As reported 

 Adjustment to exclude loss contingency 

As Adjusted (non-GAAP)

 Selling and administrative expenses 

$      850,962

$                         (4,375)

$          846,587

 Selling and administrative expense rate 

33.5%

(0.2%)

33.4%

 Operating profit 

89,503

4,375

93,878

 Operating profit rate 

3.5%

0.2%

3.7%

 Income tax expense 

37,322

1,615

38,937

 Effective income tax rate 

42.5%

(0.2%)

42.3%

 Income from continuing operations 

50,458

2,760

53,218

 Net income 

50,459

2,760

53,219

 Diluted earnings per share from  

      continuing operations 

$             0.87

$                             0.05

$                 0.92

 Diluted earnings per share  

$             0.87

$                             0.05

$                 0.92

 U.S. Segment Results 

 As reported 

 Adjustment to exclude loss contingency 

As Adjusted (non-GAAP)

 Selling and administrative expenses 

$      816,393

$                         (4,375)

$          812,018

 Selling and administrative expense rate 

33.2%

(0.2%)

33.0%

 Operating profit 

97,534

4,375

101,909

 Operating profit rate 

4.0%

0.2%

4.1%

 Income tax expense 

37,322

1,615

38,937

 Effective income tax rate 

38.8%

0.0%

38.8%

 Income from continuing operations 

58,745

2,760

61,505

 Diluted earnings per share from  

     continuing operations 

$             1.01

$                             0.05

$                 1.06

 

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") a pretax accrual of a loss contingency related to a legal matter of $5,052 ($3,190, net of tax) combined with a pretax adjustment for settlement of the related legal matter, which resulted in a reduction of the accrual of $677 ($430, net of tax) for a total adjustment of $4,375 ($2,760, net of tax).

 Year-to-date 2012 - Twenty-six weeks ended July 28, 2012 

 Consolidated Results 

 As reported 

 Adjustment to

exclude change in

inventory accounting

principle 

As Adjusted

(non-GAAP) 

 Gross margin 

$      990,283

$                           5,574

$           995,857

 Gross margin rate 

39.4%

0.2%

39.6%

 Operating profit 

108,186

5,574

113,760

 Operating profit rate 

4.3%

0.2%

4.5%

 Income tax expense 

44,084

2,186

46,270

 Effective income tax rate 

41.2%

(0.1%)

41.1%

 Income from continuing operations 

62,870

3,388

66,258

 Net income 

62,821

3,388

66,209

 Diluted earnings per share from  

      continuing operations 

$             1.00

$                             0.05

$                  1.05

 Diluted earnings per share  

$             1.00

$                             0.05

$                  1.05

 U.S. Segment Results 

 As reported 

 Adjustment to

exclude change in

inventory accounting

principle 

As Adjusted

(non-GAAP)

 Gross margin 

$      966,366

$                           5,574

$           971,940

 Gross margin rate 

39.5%

0.2%

39.7%

 Operating profit 

117,622

5,574

123,196

 Operating profit rate 

4.8%

0.2%

5.0%

 Income tax expense 

44,084

2,186

46,270

 Effective income tax rate 

37.9%

0.0%

37.9%

 Income from continuing operations 

72,307

3,388

75,695

 Diluted earnings per share from  

      continuing operations 

$             1.15

$                             0.05

$                  1.20

The above adjusted gross margin, adjusted gross margin 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") 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 and more relevant 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.

SOURCE Big Lots, Inc.



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