Big Lots Reports Second Quarter Income From Continuing Operations Of $0.31 Per Diluted Share

COMPARABLE STORE SALES INCREASE 1.7%

COMPANY UPDATES OUTLOOK FOR FISCAL 2014

COMPANY ANNOUNCES NEW $125 MILLION SHARE REPURCHASE PROGRAM

Aug 29, 2014, 06:15 ET from Big Lots, Inc.

COLUMBUS, Ohio, Aug. 29, 2014 /PRNewswire/ -- Big Lots, Inc. (NYSE: BIG) today reported income from continuing operations of $17.2 million, or $0.31 per diluted share, for the second quarter of fiscal 2014 ended August 2, 2014. This result compares to our guidance of $0.24 to $0.30 per diluted share affirmed on June 25, 2014 and to adjusted income from continuing U.S. operations of $21.5 million, or $0.37 per diluted share (non-GAAP), for the second quarter of fiscal 2013. Net sales for continuing operations for the second quarter of fiscal 2014 increased 1.2% to $1,195.4 million, compared to net sales from continuing U.S. operations of $1,180.9 million for the same period of fiscal 2013. Comparable store sales increased 1.7% for the quarter, compared to our guidance of +1% to +3%. A reconciliation of all non-GAAP amounts to the most comparable GAAP amounts is provided later in this release.

For the year-to-date period ended August 2, 2014, income from continuing operations totaled $45.8 million, or $0.81 per diluted share, which compares to adjusted income from continuing U.S. operations of $61.8 million, or $1.07 per diluted share (non-GAAP), for the same period in fiscal 2013.

Commenting on today's earnings release, David Campisi, Chief Executive Officer and President of Big Lots, stated, "I'm very pleased with the results we reported today. For the second consecutive quarter, our comps were positive and comfortably within the guidance range we provided, and our earnings were above the high end of our range. We believe this is an indication that our core customer, Jennifer, is responding to our improved merchandising strategies and marketing execution."

SECOND QUARTER HIGHLIGHTS

  • Income from continuing operations of $0.31 per diluted share, compared to adjusted income from continuing U.S. operations of $0.37 per diluted share (non-GAAP) last year
  • Net sales of $1.2 billion, an increase of 1.2% compared to last year
  • Comparable store sales increase of 1.7%
  • Returned $52 million of cash to shareholders in the form of share repurchases and dividend payments

 

Earnings per Share

Q2 2014

Q2 2013 (1)

YTD 2014

YTD 2013 (1)

Continuing U.S. Operations

$0.31

$0.38

$0.81

$1.02

Add back non-recurring charges

-

($0.01)

-

$0.05

Continuing U.S. Operations - adjusted basis

$0.31

$0.37

$0.81

$1.07

Discontinued Operations

$0.05

($0.07)

($0.40)

($0.15)

(1)  Non-GAAP detailed reporting provided below.

Discontinued Operations

Income from discontinued operations for the second quarter of fiscal 2014 totaled $2.7 million, or $0.05 per diluted share, compared to our guidance of an immaterial net loss. The income was a result of tax benefits that were generated with the wind down of our Canadian operations, which was only partially offset by miscellaneous expenses incurred in the quarter associated with the wind down.

Inventory and Cash Management

Inventory ended the second quarter of fiscal 2014 at $799 million, compared to $914 million for the second quarter of fiscal 2013. The reduction in inventory was driven by a 6% decrease in inventory per store (U.S. stores), lower store count, and the strategic decisions to liquidate our Canadian business and our wholesale operations.

We ended the second quarter of fiscal 2014 with $62 million of Cash and Cash Equivalents and $57 million of borrowings under our credit facility compared to $64 million of Cash and Cash Equivalents and $142 million of borrowings under our credit facility as of the end of the second quarter of fiscal 2013. Our use of cash generated by our U.S. operations was focused on returning cash to our shareholders, lowering debt levels, and funding the closure of our Canadian operations.

Quarterly Dividend Program

During the second quarter of fiscal 2014, the Board of Directors unanimously approved the establishment of our first-ever quarterly dividend program. The second quarter dividend of $0.17 per share was paid on July 29, 2014 to shareholders of record as of the close of business on July 11, 2014.

As announced in a separate press release earlier today, on August 28, 2014, the Board of Directors declared a quarterly cash dividend for the third quarter of fiscal 2014 of $0.17 per common share payable on September 26, 2014, to shareholders of record as of the close of business on September 12, 2014.

Share Repurchase Update

As a reminder, in March 2014, our Board of Directors authorized a share repurchase program ("March 2014 Share Repurchase Program") providing for the repurchase of up to $125 million of our common shares. As previously reported, we exhausted our March 2014 Share Repurchase Program during May 2014 by investing $42.5 million to repurchase 1.1 million shares at an average price of $38.38. In total, we invested $125 million to repurchase 3.3 million shares at an average price of $38.12.

Yesterday, on August 28, 2014, our Board of Directors approved a new share repurchase program ("August 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. The August 2014 Share Repurchase Program is eligible to begin on September 3, 2014 and will continue until exhausted.

Common shares acquired through the share repurchase programs will be available to meet obligations under equity compensation plans and for general corporate purposes.

2014 OUTLOOK

  • Updates outlook for fiscal 2014 income from continuing operations to $2.40 to $2.50 per diluted share, compared to fiscal 2013 adjusted income from continuing U.S. operations of $2.45 per diluted share (non-GAAP)
  • Affirms comparable store sales range of +1% to +2% for fiscal 2014
  • Increases estimate of cash flow from continuing U.S. operations to $250 million

Based on operating results for the first two quarters and our expectations for the third and fourth quarters of fiscal 2014, we now estimate our fiscal 2014 income from continuing operations to be in the range of $2.40 to $2.50 per diluted share compared to adjusted income from continuing U.S. operations of $2.45 per diluted share for fiscal 2013 (non-GAAP). This outlook is based on comparable store sales in the range of +1% to +2%. 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 $250 million from continuing U.S. operations.

Full Year

EPS from Continuing Operations

2014 Guidance

2013 (1)

U.S. Operations

$2.40  -  $2.50

$2.44

Impact of other non-recurring charges

-

$0.01

U.S. Operations - adjusted basis

$2.40  -  $2.50

$2.45

EPS from Discontinued Operations

Approx. ($0.40)

($0.29)

(1) Non-GAAP detailed reporting provided below.

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 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, September 12, 2014. A replay of this call will also be available beginning today at 12:00 noon through September 12 by dialing 1.888.203.1112 (Toll Free USA and Canada) or 1.719.457.0820 (International), and entering Replay Passcode 3761105. All times are Eastern Time.

Headquartered in Columbus, Ohio, Big Lots (NYSE: BIG) is a unique, non-traditional, discount retailer operating 1,495 BIG LOTS stores in 48 states with product assortments in the merchandise categories of Food, Consumables, Furniture & Home Decor, Seasonal, Soft Home, Hard Home, and Electronics & Accessories. Our vision is to be recognized for providing an outstanding shopping experience for our customers, valuing and developing our associates, and creating growth for our shareholders. 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)

AUGUST 2

AUGUST 3

2014

2013

(Unaudited)

(Unaudited)

ASSETS

Current assets:

Cash and cash equivalents

$62,033

$63,810

Inventories

799,479

913,687

Deferred income taxes

53,464

42,524

Other current assets

121,801

111,341

   Total current assets

1,036,777

1,131,362

Property and equipment - net

551,452

592,945

Deferred income taxes

12,937

7,482

Goodwill

0

12,991

Other assets

41,226

56,531

$1,642,392

$1,801,311

LIABILITIES AND SHAREHOLDERS' EQUITY      

Current liabilities:

Accounts payable

$379,992

$427,243

Property, payroll and other taxes

78,136

77,685

Accrued operating expenses

60,235

70,420

Insurance reserves

37,609

36,440

KB bankruptcy lease obligation

0

3,069

Accrued salaries and wages

33,167

26,827

Income taxes payable

1,552

1,792

   Total current liabilities

590,691

643,476

Long-term obligations under bank credit facility

56,500

141,700

Deferred rent

71,064

79,309

Insurance reserves

55,840

63,107

Unrecognized tax benefits

17,985

17,168

Other liabilities

27,691

38,931

Shareholders' equity

822,621

817,620

$1,642,392

$1,801,311

 

BIG LOTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

13 WEEKS ENDED

13 WEEKS ENDED

AUGUST 2, 2014

AUGUST 3, 2013

%

%

(Unaudited)

(Recast)

Net sales

$1,195,363

100.0

$1,180,905

100.0

Gross margin

469,527

39.3

464,115

39.3

Selling and administrative expenses 

412,142

34.5

400,088

33.9

Depreciation expense

29,443

2.5

27,534

2.3

Operating profit

27,942

2.3

36,493

3.1

Interest expense

(510)

(0.0)

(730)

(0.1)

Other income (expense)

0

0.0

(11)

(0.0)

Income from continuing operations before income taxes

27,432

2.3

35,752

3.0

Income tax expense

10,220

0.9

13,808

1.2

Income from continuing operations

17,212

1.4

21,944

1.9

Income (loss) from discontinued operations, net of tax

   benefit (expense) of $3,841 and ($28), respectively

2,726

0.2

(3,818)

(0.3)

Net income

$19,938

1.7

$18,126

1.5

Earnings per common share - basic (a)

Continuing operations

$0.31

$0.38

Discontinued operations

0.05

(0.07)

Net income

$0.36

$0.32

Earnings per common share - diluted (a)

Continuing operations

$0.31

$0.38

Discontinued operations

0.05

(0.07)

Net income

$0.36

$0.31

Weighted average common shares outstanding

Basic

54,991

57,382

Dilutive effect of share-based awards

698

542

Diluted

55,689

57,924

Cash dividends declared per common share

$0.17

$0.00

(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 2, 2014

AUGUST 3, 2013

%

%

(Unaudited)

(Recast)

Net sales

$2,476,634

100.0

$2,447,925

100.0

Gross margin

963,083

38.9

966,310

39.5

Selling and administrative expenses 

829,688

33.5

813,990

33.3

Depreciation expense

58,268

2.4

54,379

2.2

Operating profit

75,127

3.0

97,941

4.0

Interest expense

(860)

(0.0)

(1,456)

(0.1)

Other income (expense)

0

0.0

(11)

(0.0)

Income from continuing operations before income taxes

74,267

3.0

96,474

3.9

Income tax expense 

28,474

1.1

37,465

1.5

Income from continuing operations

45,793

1.8

59,009

2.4

Loss from discontinued operations, net of tax

   benefit of $12,796 and $142, respectively

(22,507)

(0.9)

(8,550)

(0.3)

Net income 

$23,286

0.9

$50,459

2.1

Earnings per common share - basic (a)

Continuing operations

$0.82

$1.03

Discontinued operations

(0.40)

(0.15)

Net income 

$0.42

$0.88

Earnings per common share - diluted (a)

Continuing operations

$0.81

$1.02

Discontinued operations

(0.40)

(0.15)

Net income 

$0.41

$0.87

Weighted average common shares outstanding

Basic

56,001

57,344

Dilutive effect of share-based awards

630

540

Diluted

56,631

57,884

Cash dividends declared per common share

$0.17

$0.00

(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

AUGUST 2, 2014

AUGUST 3, 2013

 (Unaudited) 

 (Unaudited) 

  Net cash provided by operating activities 

$55,003

$21,835

  Net cash used in investing activities

(22,124)

(34,278)

  Net cash (used in) provided by financing activities

(37,888)

4,802

    Impact of foreign currency on cash

(119)

(218)

Decrease in cash and cash equivalents

(5,128)

(7,859)

Cash and cash equivalents:

  Beginning of period

67,161

71,669

  End of period

$62,033

$63,810

 

BIG LOTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

26 WEEKS ENDED

26 WEEKS ENDED

AUGUST 2, 2014

AUGUST 3, 2013

 (Unaudited) 

 (Unaudited) 

  Net cash provided by operating activities 

$157,169

$82,018

  Net cash used in investing activities

(37,608)

(50,101)

  Net cash used in financing activities

(131,296)

(28,362)

    Impact of foreign currency on cash

5,139

(326)

(Decrease) increase in cash and cash equivalents

(6,596)

3,229

Cash and cash equivalents:

  Beginning of period

68,629

60,581

  End of period

$62,033

$63,810

 

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 second quarter of 2013, the year-to-date 2013, the third quarter of 2013, and the full year of 2013 (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).

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

 As Recast 

 Adjustment to loss contingency 

 As Adjusted (non-GAAP) 

 Selling and administrative expenses 

$   400,088

$                                               677

$                          400,765

 Selling and administrative expense rate 

33.9%

0.1%

33.9%

 Operating profit 

36,493

(677)

35,816

 Operating profit rate 

3.1%

(0.1%)

3.0%

 Income tax expense 

13,808

(247)

13,561

 Effective income tax rate 

38.6%

0.0%

38.7%

 Income from continuing operations 

21,944

(430)

21,514

 Net income 

18,126

(430)

17,696

 Diluted earnings per share from  

      continuing operations 

$         0.38

$                                             (0.01)

$                                0.37

 Diluted earnings per share  

$         0.31

$                                             (0.01)

$                                0.31

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") an adjustment for the settlement of a pretax accrual of a loss contingency related to legal matters of $677 ($430, net of tax). 

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

 As Recast 

 Adjustment to loss contingency 

 As Adjusted (non-GAAP) 

 Selling and administrative expenses 

$   813,990

$                                           (4,375)

$                          809,615

 Selling and administrative expense rate 

33.3%

(0.2%)

33.1%

 Operating profit 

97,941

4,375

102,316

 Operating profit rate 

4.0%

0.2%

4.2%

 Income tax expense 

37,465

1,615

39,080

 Effective income tax rate 

38.8%

(0.1%)

38.8%

 Income from continuing operations 

59,009

2,760

61,769

 Net income 

50,459

2,760

53,219

 Diluted earnings per share from  

      continuing operations 

$         1.02

$                                              0.05

$                                1.07

 Diluted earnings per share  

$         0.87

$                                              0.05

$                                0.92

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).

 Third quarter of 2013 - Thirteen weeks ended November 2, 2013 

 As Recast 

 Gain on sale of real estate 

 As Adjusted (non-GAAP) 

 Selling and administrative expenses 

$   405,279

$                                   3,579

$                          408,858

 Selling and administrative expense rate 

36.7%

0.3%

37.0%

 Operating loss 

(2,865)

(3,579)

(6,444)

 Operating loss rate 

(0.3%)

(0.3%)

(0.6%)

 Income tax benefit 

(1,951)

(1,400)

(3,351)

 Effective income tax rate 

50.0%

(5.2%)

44.8%

 Loss from continuing operations 

(1,948)

(2,179)

(4,127)

 Net loss 

(9,517)

(2,179)

(11,696)

 Diluted earnings (loss) per share from  

      continuing operations 

$       (0.03)

$                                   (0.04)

$                               (0.07)

 Diluted earnings (loss) per share  

$       (0.17)

$                                   (0.04)

$                               (0.20)

The above adjusted selling and administrative expenses, adjusted selling and administrative expense rate, adjusted operating loss, adjusted operating loss rate, adjusted income tax benefit, adjusted effective income tax rate, adjusted loss from continuing operations, adjusted net loss, 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 accounting principles generally accepted in the United States of America ("GAAP") a pretax adjustment for the gain on the sale of real estate of $3,579 ($2,179, net of tax).  

 Full-year 2013 - Fifty-two weeks ended February 1, 2014 

 As Recast 

 Adjustment to exclude loss contingency 

 Gain on sale of real estate 

 As Adjusted (non-GAAP) 

 Selling and administrative expenses 

$ 1,664,031

$           (4,375)

$           3,579

$         1,663,235

 Selling and administrative expense rate 

32.5%

(0.1%)

0.1%

32.5%

 Operating profit 

230,110

4,375

(3,579)

230,906

 Operating profit rate 

4.5%

0.1%

(0.1%)

4.5%

 Income tax expense 

85,515

1,615

(1,400)

85,730

 Effective income tax rate 

37.7%

0.0%

(0.0%)

37.7%

 Income from continuing operations 

141,290

2,760

(2,179)

141,871

 Net income 

125,295

2,760

(2,179)

125,876

 Diluted earnings per share from  

      continuing operations 

$          2.44

$              0.05

$            (0.04)

$                  2.45

 Diluted earnings per share  

$          2.16

$              0.05

$            (0.04)

$                  2.17

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"): (1) a pretax charge related to the settlement of a legal matter of $4,375 ($2,760, net of tax); and (2) a pretax adjustment for the gain on the sale of real estate of $3,579 ($2,179, 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. 

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SOURCE Big Lots, Inc.



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