Big Lots Reports Third Quarter Adjusted Results Consistent With Guidance

COMPARABLE STORE SALES INCREASE 2.6%

COMPANY UPDATES OUTLOOK FOR FISCAL 2015

04 Dec, 2015, 06:00 ET from Big Lots, Inc.

COLUMBUS, Ohio, Dec. 4, 2015 /PRNewswire/ -- Big Lots, Inc. (NYSE: BIG) today reported a loss from continuing operations of $1.7 million, or $0.03 per share, for the third quarter of fiscal 2015 ended October 31, 2015. This result includes an after tax expense of $1.0 million, or $0.02 per share, associated with the termination of a legacy pension plan. Excluding this expense, adjusted loss from continuing operations totaled $0.7 million, or $0.01 per share (see non-GAAP table included later in this release), which compares to our guidance in the range of a loss of $0.04 per share to income of $0.01 per diluted share. This result compares to a loss from continuing operations of $0.06 per share for the third quarter of fiscal 2014. Comparable store sales for stores open at least fifteen months increased 2.6% for the third quarter of fiscal 2015, compared to our guidance of an increase of 2% to 3%. Net sales for the third quarter of fiscal 2015 increased 0.8% to $1,116.5 million, as our comparable store sales increase was partially offset by a lower store count compared to last year.

For the year-to-date period ended October 31, 2015, income from continuing operations totaled $48.3 million, or $0.94 per diluted share. Excluding year-to-date non-recurring legal expense and legacy pension termination costs, adjusted income from continuing operations for the year-to-date period ended October 31, 2015, totaled $52.0 million, or $1.01 per diluted share (non-GAAP). This result represents a 33% increase compared with income from continuing operations of $42.7 million, or $0.76 per diluted share, for the same period in fiscal 2014.

Commenting on today's release, David Campisi, Chief Executive Officer and President of Big Lots, stated, "I'm pleased with the results we reported today as Jennifer continues to respond positively to our strategic improvements in merchandising, marketing, and in-store execution. For the seventh consecutive quarter, our sales comps were positive with notable strength in our ownable and winnable merchandise categories and we delivered upon our financial commitments. Our inventory levels were lean and on forecast to end Q3 and we are well-positioned by merchandise category for the all-important Q4 selling season."

THIRD QUARTER HIGHLIGHTS

  • Adjusted loss from continuing operations of $0.01 per share (non-GAAP), compared to a loss from continuing operations of $0.06 per share last year
  • Comparable store sales increase of 2.6% representing the seventh consecutive quarter of comp store sales growth

Earnings per Share

Q3 2015

Q3 2014

YTD 2015

YTD 2014

Continuing operations

($0.03)

($0.06)

$0.94

$0.76

Impact of non-recurring legal expense

-

-

$0.05

-

Impact of legacy pension termination

$0.02

-

$0.02

-

Continuing operations - adjusted basis (1)

($0.01)

($0.06)

$1.01

$0.76

(1)  Non-GAAP

Inventory and Cash Management

Inventory ended the third quarter of fiscal 2015 at $1,047 million, compared to $1,075 million for the third quarter of fiscal 2014. Inventory levels per store were flat to last year with the overall $28 million reduction directly attributable to a lower overall store count.

We ended the third quarter of fiscal 2015 with $62 million of Cash and Cash Equivalents and $335 million of borrowings under our credit facility compared to $62 million of Cash and Cash Equivalents and $283 million of borrowings under our credit facility as of the end of the third quarter of fiscal 2014. Our growth in year-over-year borrowings resulted from returning a higher amount of cash to shareholders (dividends and share repurchases) and investing in capital expenditures to support our strategic plan.

Total Cash Returned To Shareholders

As announced in a separate press release earlier today, on December 2, 2015, our Board of Directors declared a quarterly cash dividend of $0.19 per common share. This dividend payment of approximately $9.3 million is payable on December 31, 2015, to shareholders of record as of the close of business on December 17, 2015.

Year-to-date for fiscal 2015, we have returned $229 million to shareholders in the form of a prior share repurchase program ($200 million) and quarterly dividend payments ($29 million).

FISCAL Q4 2015 GUIDANCE

  • Affirms Q4 guidance for adjusted income from continuing operations of $1.95 to $2.00 per diluted share (non-GAAP), an 11% to 14% increase compared to income from continuing operations of $1.76 per diluted share for the same period last year
  • Affirms Q4 guidance for comparable store sales increase in the range of 1% to 2%

For the fourth quarter of fiscal 2015, we estimate adjusted income from continuing operations will be in the range of $1.95 to $2.00 per diluted share (non-GAAP), compared to income from continuing operations of $1.76 per diluted share for the fourth quarter of fiscal 2014. This guidance is based on an estimated comparable store sales increase in the 1% to 2% range compared to a 2.9% comparable store sales increase in the fourth quarter of fiscal 2014. We expect operating profit improvement driven by higher sales, a flat gross margin rate, and a lower adjusted expense rate.

FISCAL 2015 GUIDANCE

  • Updates outlook for fiscal 2015 adjusted income from continuing operations to be in the range of $2.95 to $3.00 per diluted share (non-GAAP), representing a 20% to 22% increase compared to fiscal 2014 income from continuing operations of $2.46 per diluted share
  • Affirms comparable store sales in the range of a low single digit increase for fiscal 2015
  • Affirms cash flow of $175 million for fiscal 2015

Based on operating results for the first three quarters and our expectations for the fourth quarter of fiscal 2015 noted above, we now estimate fiscal 2015 adjusted income from continuing operations to be in the range of $2.95 to $3.00 per diluted share (non-GAAP) compared to our previous guidance of $2.90 to $3.00 per diluted share (non-GAAP) and income from continuing operations of $2.46 per diluted share for fiscal 2014. This outlook is based on a comparable store sales increase in the low single digit range, total sales approximately flat, a slightly higher gross margin rate, and a lower adjusted expense rate. We estimate this financial performance will result in cash flow (cash provided by operating activities less cash used in investing activities) of approximately $175 million.

Full Year

Earnings per Share

2015 Guidance

2014

Continuing operations (1)

$2.88  -  $2.93

$2.46

Impact of non-recurring legal expense

$0.05

-

Impact of legacy pension termination (1)

$0.02

-

Continuing operations - adjusted basis (2)

$2.95  -  $3.00

$2.46

(1)  Excludes future costs associated with legacy pension termination

(2)  Non-GAAP

Conference Call/Webcast

We will host a conference call today at 8:00 a.m. to discuss our financial results for the third quarter and provide commentary on our outlook for fiscal 2015. 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, December 18, 2015. A replay of this call will also be available beginning today at 12:00 noon through December 18 by dialing 1.888.203.1112 (Toll Free USA and Canada) or 1.719.457.0820 (International), and entering Replay Passcode 409848. All times are Eastern Time.

Headquartered in Columbus, Ohio, Big Lots, Inc. (NYSE: BIG) is a unique, non-traditional, discount retailer operating 1,463 BIG LOTS stores in 47 states with product assortments in the merchandise categories of Food, Consumables, Furniture, 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. Big Lots supports the communities it serves through the Big Lots Foundation, a charitable organization focused on four areas of need: hunger, housing, healthcare, and education. For more information about the Company, 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)

OCTOBER 31

NOVEMBER 1

2015

2014

(Unaudited)

(Unaudited)

ASSETS

Current assets:

Cash and cash equivalents

$61,541

$62,488

Inventories

1,047,322

1,075,429

Deferred income taxes

48,231

48,553

Other current assets

110,184

126,252

   Total current assets

1,267,278

1,312,722

Property and equipment - net

576,563

566,889

Deferred income taxes

6,247

12,512

Other assets

39,209

41,788

$1,889,297

$1,933,911

LIABILITIES AND SHAREHOLDERS' EQUITY      

Current liabilities:

Accounts payable

$490,049

$529,793

Property, payroll and other taxes

81,808

81,831

Accrued operating expenses

76,761

72,678

Insurance reserves

42,661

38,325

Accrued salaries and wages

36,658

32,829

Income taxes payable

862

868

   Total current liabilities

728,799

756,324

Long-term obligations under bank credit facility

334,900

283,400

Deferred rent

61,418

68,752

Insurance reserves

57,527

57,091

Unrecognized tax benefits

17,809

17,498

Other liabilities

51,572

37,262

Shareholders' equity

637,272

713,584

$1,889,297

$1,933,911

 

 

BIG LOTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

13 WEEKS ENDED

13 WEEKS ENDED

OCTOBER 31, 2015

NOVEMBER 1, 2014

%

%

(Unaudited)

(Unaudited)

Net sales

$1,116,474

100.0

$1,107,095

100.0

Gross margin

440,007

39.4

430,942

38.9

Selling and administrative expenses 

411,994

36.9

404,732

36.6

Depreciation expense

30,171

2.7

30,267

2.7

Operating loss

(2,158)

(0.2)

(4,057)

(0.4)

Interest expense

(1,272)

(0.1)

(756)

(0.1)

Other income (expense)

(673)

(0.1)

0

0.0

Loss from continuing operations before income taxes

(4,103)

(0.4)

(4,813)

(0.4)

Income tax benefit

(2,400)

(0.2)

(1,698)

(0.2)

Loss from continuing operations

(1,703)

(0.2)

(3,115)

(0.3)

Income (loss) from discontinued operations, net of tax

   (expense) benefit of ($118) and $207, respectively

195

0.0

(326)

(0.0)

Net loss

($1,508)

(0.1)

($3,441)

(0.3)

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

Continuing operations

($0.03)

($0.06)

Discontinued operations

0.00

(0.01)

Net loss

($0.03)

($0.06)

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

Continuing operations

($0.03)

($0.06)

Discontinued operations

0.00

(0.01)

Net loss

($0.03)

($0.06)

Weighted average common shares outstanding

Basic

49,057

54,850

Dilutive effect of share-based awards

-

-

Diluted

49,057

54,850

Cash dividends declared per common share

$0.19

$0.17

(a)

The earnings per share for Continuing Operations, Discontinued Operations and Net 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 Loss.

 

 

BIG LOTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

39 WEEKS ENDED

39 WEEKS ENDED

OCTOBER 31, 2015

NOVEMBER 1, 2014

%

%

(Unaudited)

(Unaudited)

Net sales

$3,606,615

100.0

$3,583,729

100.0

Gross margin

1,419,957

39.4

1,394,025

38.9

Selling and administrative expenses 

1,246,545

34.6

1,234,420

34.4

Depreciation expense

92,388

2.6

88,535

2.5

Operating profit

81,024

2.2

71,070

2.0

Interest expense

(2,737)

(0.1)

(1,616)

(0.0)

Other income (expense)

(2,387)

(0.1)

0

0.0

Income from continuing operations before income taxes

75,900

2.1

69,454

1.9

Income tax expense 

27,584

0.8

26,776

0.7

Income from continuing operations

48,316

1.3

42,678

1.2

Income (loss) from discontinued operations, net of tax

   (expense) benefit of ($10) and $13,003, respectively

25

0.0

(22,833)

(0.6)

Net income 

$48,341

1.3

$19,845

0.6

Earnings per common share - basic (a)

Continuing operations

$0.95

$0.77

Discontinued operations

0.00

(0.41)

Net income 

$0.95

$0.36

Earnings per common share - diluted (a)

Continuing operations

$0.94

$0.76

Discontinued operations

0.00

(0.41)

Net income 

$0.94

$0.35

Weighted average common shares outstanding

Basic

50,992

55,617

Dilutive effect of share-based awards

540

603

Diluted

51,532

56,220

Cash dividends declared per common share

$0.57

$0.34

(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 31, 2015

NOVEMBER 1, 2014

 (Unaudited) 

 (Unaudited) 

  Net cash used in operating activities 

($64,345)

($94,791)

  Net cash used in investing activities

(33,996)

(34,300)

  Net cash provided by financing activities

102,519

129,546

    Impact of foreign currency on cash

-

-

Increase in cash and cash equivalents

4,178

455

Cash and cash equivalents:

  Beginning of period

57,363

62,033

  End of period

$61,541

$62,488

 

 

BIG LOTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

39 WEEKS ENDED

39 WEEKS ENDED

OCTOBER 31, 2015

NOVEMBER 1, 2014

 (Unaudited) 

 (Unaudited) 

  Net cash provided by operating activities 

$52,318

$62,378

  Net cash used in investing activities

(98,298)

(71,908)

  Net cash provided by (used in) financing activities

55,260

(1,750)

    Impact of foreign currency on cash

-

5,139

Increase (decrease) in cash and cash equivalents

9,280

(6,141)

Cash and cash equivalents:

  Beginning of period

52,261

68,629

  End of period

$61,541

$62,488

 

 

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 2015 and the year-to-date 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 2015 - Thirteen weeks ended October 31, 2015 

 As Reported 

 Adjustment to exclude pension termination costs 

 As Adjusted (non-GAAP) 

 Selling and administrative expenses 

$             411,994

$                     (1,619)

$             410,375

 Selling and administrative expense rate 

36.9%

(0.1%)

36.8%

 Operating loss 

(2,158)

1,619

(539)

 Operating loss rate 

(0.2%)

0.1%

0.0%

 Income tax benefit 

(2,400)

641

(1,759)

 Effective income tax rate 

58.5%

12.3%

70.8%

 Loss from continuing operations 

(1,703)

978

(725)

 Net loss 

(1,508)

978

(530)

 Diluted earnings (loss) per share from  

      continuing operations 

$                  (0.03)

$                         0.02

$                  (0.01)

 Diluted earnings (loss) per share  

$                  (0.03)

$                         0.02

$                  (0.01)

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") items associated with the Company's decision to freeze benefits and terminate the qualified defined benefit pension plan, including curtailment and settlement charges and professional fees in support of the  actions to facilitate the plan termination, which totaled $1,619 ($978, net of tax).

 

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

 As Reported 

 Adjustment to exclude loss contingency 

 Adjustment to exclude pension termination costs 

 As Adjusted (non-GAAP) 

 Selling and administrative expenses 

$          1,246,545

$                (4,487)

$                     (1,619)

$          1,240,439

 Selling and administrative expense rate 

34.6%

(0.1%)

(0.0%)

34.4%

 Operating profit 

81,024

4,487

1,619

87,130

 Operating profit rate 

2.2%

0.1%

0.0%

2.4%

 Income tax expense 

27,584

1,776

641

30,001

 Effective income tax rate 

36.3%

0.2%

0.1%

36.6%

 Income from continuing operations 

48,316

2,711

978

52,005

 Net income 

48,341

2,711

978

52,030

 Diluted earnings per share from  

      continuing operations 

$                    0.94

$                    0.05

$                         0.02

$                    1.01

 Diluted earnings per share  

$                    0.94

$                    0.05

$                         0.02

$                    1.01

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"): (1) a pretax accrual of a loss contingency associated with merchandise-related legal matters of $4,487 ($2,711, net of tax); and (2) items associated with the Company's decision to freeze benefits and terminate the qualified defined benefit pension plan, including curtailment and settlement charges and professional fees in support of the  actions to facilitate the plan termination, which totaled $1,619 ($978, 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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