BIG
$53.87
Big Lots
$2.09
4.04%
Earnings Details
3rd Quarter October 2016
Friday, December 02, 2016 6:00:00 AM
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Summary

Big Lots Sees Fourth Quarter Earnings In-line with Estimates

Big Lots (BIG) reported 3rd Quarter October 2016 earnings of $0.04 per share on revenue of $1.1 billion. The consensus estimate was a loss of $0.02 per share on revenue of $1.1 billion. The Earnings Whisper number was for breakeven results. Revenue fell 1.0% compared to the same quarter a year ago.

The company said it expects fourth quarter earnings of $2.18 to $2.23 per share. The current consensus earnings estimate is $2.22 per share for the quarter ending January 31, 2017.

Big Lots Inc operates as a broadline closeout retailer in the United States. It offers products under six merchandising categories: Food, Consumables, Soft Home, Hard Home, Furniture & Home Decor, Seasonal, and Electronics & Accessories.

Results
Reported Earnings
$0.04
Earnings Whisper
$0.00
Consensus Estimate
($0.02)
Reported Revenue
$1.11 Bil
Revenue Estimate
$1.12 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

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

Big Lots, Inc. (BIG) today reported income from continuing operations of $1.4 million, or $0.03 per diluted share, for the third quarter of fiscal 2016 ended October 29, 2016. This result includes an after tax expense of $0.5 million, or $0.01 per diluted share, associated with legacy pension plans which have been terminated. Excluding this expense, adjusted income from continuing operations totaled $1.9 million, or $0.04 per diluted share (see non-GAAP table included later in this release), which compares to our guidance for continuing operations in the range of an adjusted loss of $0.04 per share (non-GAAP) to adjusted income of $0.01 per diluted share (non-GAAP). In the third quarter of fiscal 2015, the adjusted loss from continuing operations totaled $0.2 million, or $0.00 per share (non-GAAP). Comparable store sales were flat for the third quarter of fiscal 2016, compared to our guidance of flat to an increase of 2%. Net sales for the quarter decreased 1.0% to $1,105 million, a result of a lower store count year-over-year.

Commenting on today’s release, David Campisi, Chief Executive Officer and President of Big Lots, stated, "We are pleased to report in a challenging retail environment the team delivered upon our financial commitments. Sales were in line with our communicated guidance while EPS was above our expectations. Jennifer continues to positively respond to our focus on ownable and winnable merchandise categories, improved merchandise presentations and more consistent in-store execution."

THIRD QUARTER HIGHLIGHTS

Adjusted income from continuing operations of $0.04 per diluted share (non-GAAP), compared to an adjusted loss of $0.2 million, or $0.00 per share (non-GAAP) last year

-- Comparable store sales were flat which was in line with guidance

Earnings per Share
Q3 2016
Q3 2015
YTD 2016
YTD 2015
Continuing operations
$0.03
($0.03)
$1.36
$0.94
Impact of legacy pension costs (1)
$0.01
$0.03
$0.05
$0.06
Impact of non-recurring expense (1)
-
-
-
$0.05
Continuing operations - adjusted basis (1)
$0.04
$0.00
$1.41
$1.05
% Change (2016 vs. 2015)
+34%
(1)
Non-GAAP detailed reconciliation provided below.

Inventory and Cash Management Inventory ended the third quarter of fiscal 2016 at $1,036 million, a 1% decrease compared to $1,047 million for the third quarter of fiscal 2015 as Inventory per store was flat to last year coupled with a lower store count year-over-year.

We ended the third quarter of fiscal 2016 with $60 million of Cash and Cash Equivalents and $363 million of borrowings under our credit facility compared of $62 million of Cash and Cash Equivalents and $335 million of borrowings under our credit facility as of the end of the third quarter of fiscal 2015. Our growth in year-over-year borrowings resulted from returning a higher amount of cash to shareholders (dividends and share repurchases) while investing in capital expenditures to support our strategic plan.

Total Cash Returned To Shareholders As announced earlier today in a separate press release, on November 30, 2016, our Board of Directors declared a quarterly cash dividend of $0.21 per common share. This dividend payment of approximately $9 million is payable on December 30, 2016, to shareholders of record as of the close of business on December 16, 2016.

Based on today’s announcement and including year-to-date activity for fiscal 2016, we will return $288 million to shareholders through our share repurchase investments ($250 million) and quarterly dividend payments ($38 million).

FISCAL Q4 2016 GUIDANCE

Affirms Q4 guidance for adjusted income from continuing operations in the range of $2.18 to $2.23 per diluted share (non-GAAP), compared to adjusted income from continuing operations of $2.01 per diluted share (non-GAAP) for the same period last year

-- Affirms Q4 guidance for comparable store sales in the range of flattish to +2%

For the fourth quarter of fiscal 2016, we estimate adjusted income from continuing operations will be in the range of $2.18 to $2.23 per diluted share (non-GAAP), compared to adjusted income from continuing operations of $2.01 per diluted share (non-GAAP) for the fourth quarter of fiscal 2015. This guidance is based on estimated comparable store sales in the range of flattish to +2% compared to a 0.7% comparable store sales increase in Q4 of fiscal 2015.

FISCAL 2016 GUIDANCE

Increases guidance for fiscal 2016 adjusted income from continuing operations to be in the range of $3.55 to $3.60 per diluted share (non-GAAP), representing an 18% to 20% increase compared to fiscal 2015 adjusted income from continuing operations of $3.01 per diluted share (non-GAAP)

Affirms guidance for fiscal 2016 comparable store sales increase in the range of 1% to 2%

-- Updates guidance for fiscal 2016 cash flow to $195 million

Based on operating results for the first three quarters and our expectations for the fourth quarter of fiscal 2016 noted above, we now estimate fiscal 2016 adjusted income from continuing operations to be in the range of $3.55 to $3.60 per diluted share (non-GAAP), compared to our previous guidance of $3.45 to $3.55 per diluted share. This compares to adjusted income from continuing operations of $3.01 per diluted share (non-GAAP) for fiscal 2015. This outlook is based on a comparable store sales increase in the range of +1% to +2% and total sales up slightly.

In addition, we now expect to complete the process of terminating legacy pension plans during the fourth quarter of fiscal 2016 with cash payouts totaling approximately $15 million. Including the impact of these payouts, we now estimate full year cash flow of approximately $195 million.

Full Year
2016 Guidance (1)
2015 (2)
Adjusted EPS from continuing operations
$3.55
to
$3.60
$3.01
% Change (2016 vs. 2015)
+18%
to
+20%
(1) Non-GAAP - excludes potential impact of legacy pension costs of approximately $15 million after tax.
(2) Non-GAAP - see attached reconciliation.

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 2016. 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 after 12:00 noon today and will remain available through midnight on Friday, December 16, 2016. A replay of this call will also be available beginning today at 12:00 noon through December 16 by dialing 1.888.203.1112 (Toll Free USA and Canada) or 1.719.457.0820 (International), and entering Replay Passcode 4545762. All times are Eastern Time.

Headquartered in Columbus, Ohio, Big Lots, Inc. (BIG) is a unique, non-traditional, discount retailer operating 1,445 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.

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BIG LOTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
OCTOBER 29
OCTOBER 31
2016
2015
(Unaudited)
(Recast)
ASSETS
Current assets:
Cash and cash equivalents
$59,743
$61,541
Inventories
1,036,337
1,047,322
Other current assets
112,251
110,184
Total current assets
1,208,331
1,219,047
Property and equipment - net
540,669
576,563
Deferred income taxes
56,102
54,478
Other assets
42,141
39,209
$1,847,243
$1,889,297
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable
$503,625
$490,049
Property, payroll and other taxes
88,941
81,808
Accrued operating expenses
80,227
76,761
Insurance reserves
42,141
42,661
Accrued salaries and wages
50,243
36,658
Income taxes payable
1,407
862
Total current liabilities
766,584
728,799
Long-term obligations under bank credit facility
362,900
334,900
Deferred rent
55,291
61,418
Insurance reserves
58,647
57,527
Unrecognized tax benefits
14,639
17,809
Other liabilities
44,107
51,572
Shareholders’ equity
545,075
637,272
$1,847,243
$1,889,297
BIG LOTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
13 WEEKS ENDED
13 WEEKS ENDED
OCTOBER 29, 2016
OCTOBER 31, 2015
%
%
(Unaudited)
(Unaudited)
Net sales
$1,105,498
100.0
$1,116,474
100.0
Gross margin
441,992
40.0
440,007
39.4
Selling and administrative expenses
409,753
37.1
411,994
36.9
Depreciation expense
30,294
2.7
30,171
2.7
Operating profit (loss)
1,945
0.2
(2,158)
(0.2)
Interest expense
(1,665)
(0.2)
(1,272)
(0.1)
Other income (expense)
698
0.1
(673)
(0.1)
Income (loss) from continuing operations before income taxes
978
0.1
(4,103)
(0.4)
Income tax benefit
(378)
(0.0)
(2,400)
(0.2)
Income (loss) from continuing operations
1,356
0.1
(1,703)
(0.2)
Income from discontinued operations, net of tax
expense of $13 and $118, respectively
20
0.0
195
0.0
Net income (loss)
$1,376
0.1
($1,508)
(0.1)
Earnings (loss) per common share - basic (a)
Continuing operations
$0.03
($0.03)
Discontinued operations
0.00
0.00
Net income (loss)
$0.03
($0.03)
Earnings (loss) per common share - diluted (a)
Continuing operations
$0.03
($0.03)
Discontinued operations
0.00
0.00
Net income (loss)
$0.03
($0.03)
Weighted average common shares outstanding
Basic
44,165
49,057
Dilutive effect of share-based awards
761
-
Diluted
44,926
49,057
Cash dividends declared per common share
$0.21
$0.19
(a)
The earnings (loss) per share for Continuing Operations, Discontinued Operations and Net income (loss) are separately calculated in accordance with accounting pronouncements; therefore, the sum of earnings (loss) per share for Continuing Operations and Discontinued Operations may differ, due to rounding, from the calculated earnings (loss) per share of Net income (loss).
BIG LOTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
39 WEEKS ENDED
39 WEEKS ENDED
OCTOBER 29, 2016
OCTOBER 31, 2015
%
%
(Unaudited)
(Unaudited)
Net sales
$3,621,228
100.0
$3,606,615
100.0
Gross margin
1,446,096
39.9
1,419,957
39.4
Selling and administrative expenses
1,251,905
34.6
1,246,545
34.6
Depreciation expense
90,750
2.5
92,388
2.6
Operating profit
103,441
2.9
81,024
2.2
Interest expense
(3,793)
(0.1)
(2,737)
(0.1)
Other income (expense)
1,000
0.0
(2,387)
(0.1)
Income from continuing operations before income taxes
100,648
2.8
75,900
2.1
Income tax expense
37,942
1.0
27,584
0.8
Income from continuing operations
62,706
1.7
48,316
1.3
Income from discontinued operations, net of tax
expense of $28 and $10, respectively
44
0.0
25
0.0
Net income
$62,750
1.7
$48,341
1.3
Earnings per common share - basic (a)
Continuing operations
$1.37
$0.95
Discontinued operations
0.00
0.00
Net income
$1.37
$0.95
Earnings per common share - diluted (a)
Continuing operations
$1.36
$0.94
Discontinued operations
0.00
0.00
Net income
$1.36
$0.94
Weighted average common shares outstanding
Basic
45,678
50,992
Dilutive effect of share-based awards
578
540
Diluted
46,256
51,532
Cash dividends declared per common share
$0.63
$0.57
(a)
The earnings per share for Continuing Operations, Discontinued Operations and Net Income are separately calculated in accordance with accounting pronouncements; therefore, the sum of earnings per share for Continuing Operations and Discontinued Operations may differ, due to rounding, from the calculated earnings per share of Net Income.
BIG LOTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
13 WEEKS ENDED
13 WEEKS ENDED
OCTOBER 29, 2016
OCTOBER 31, 2015
(Unaudited)
(Unaudited)
Net cash used in operating activities
($67,964)
($64,345)
Net cash used in investing activities
(26,812)
(33,996)
Net cash provided by financing activities
96,150
102,519
Increase in cash and cash equivalents
1,374
4,178
Cash and cash equivalents:
Beginning of period
58,369
57,363
End of period
$59,743
$61,541
BIG LOTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
39 WEEKS ENDED
39 WEEKS ENDED
OCTOBER 29, 2016
OCTOBER 31, 2015
(Unaudited)
(Unaudited)
Net cash provided by operating activities
$43,536
$52,318
Net cash used in investing activities
(71,842)
(98,298)
Net cash provided by financing activities
33,905
55,260
Increase in cash and cash equivalents
5,599
9,280
Cash and cash equivalents:
Beginning of period
54,144
52,261
End of period
$59,743
$61,541
BIG LOTS, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(In thousands, except per share data)
(Unaudited)
The following tables reconcile: (1) selling and administrative expenses, selling and administrative expense rate, operating profit (loss), operating profit (loss) rate, income tax expense (benefit), effective income tax rate, income (loss) from continuing operations, net income (loss), diluted earnings (loss) per share from continuing operations, and diluted earnings (loss) per share for the third quarter of 2016, the year-to-date 2016, the third quarter of 2015, the year-to-date 2015, the fourth quarter of 2015, and the full year 2015 (GAAP financial measures) to adjusted selling and administrative expenses, adjusted selling and administrative expense rate, adjusted operating profit (loss), adjusted operating profit (loss) rate, adjusted income tax expense (benefit), adjusted effective income tax rate, adjusted income (loss) from continuing operations, adjusted net income (loss), adjusted diluted earnings (loss) per share from continuing operations, and adjusted diluted earnings (loss) per share (non-GAAP financial measures).
Third quarter of 2016 - Thirteen weeks ended October 29, 2016
As Reported
Adjustment to
As Adjusted
exclude pension
(non-GAAP)
costs
Selling and administrative expenses
$
409,753
$
(863)
$
408,890
Selling and administrative expense rate
37.1%
(0.1%)
37.0%
Operating profit
1,945
863
2,808
Operating profit rate
0.2%
0.1%
0.3%
Income tax benefit
(378)
342
(36)
Effective income tax rate
-38.7%
36.7%
-2.0%
Income from continuing operations
1,356
521
1,877
Net income
1,376
521
1,897
Diluted earnings per share from
continuing operations
$
0.03
$
0.01
$
0.04
Diluted earnings per share
$
0.03
$
0.01
$
0.04
The above adjusted selling and administrative expenses, adjusted selling and administrative expense rate, adjusted operating profit, adjusted operating profit rate, adjusted income tax benefit, adjusted effective income tax rate, adjusted income from continuing operations, adjusted net income, adjusted diluted earnings per share from continuing operations, and adjusted diluted earnings per share are "non-GAAP financial measures" as that term is defined by Rule 101 of Regulation G (17 CFR Part 244) and Item 10 of Regulation S-K (17 CFR Part 229). These non-GAAP financial measures exclude from the most directly comparable financial measures calculated and presented in accordance with accounting principles generally accepted in the United States of America ("GAAP") all costs associated with the Company’s pension plans, as the Company froze benefits and began termination activities for its pension plans in 2015 with the intentions of completing the termination and distributing all plan assets during 2016, which totaled $863 ($521, net of tax).
The pension costs encompass all items associated with net periodic benefit costs, including curtailment and settlement charges, and professional fees associated with the plan and plan termination proceedings.
Year-to-date 2016 - Thirty-nine weeks ended October 29, 2016
As Reported
Adjustment to
As Adjusted
exclude pension
(non-GAAP)
costs
Selling and administrative expenses
$
1,251,905
$
(4,073)
$
1,247,832
Selling and administrative expense rate
34.6%
(0.1%)
34.5%
Operating profit
103,441
4,073
107,514
Operating profit rate
2.9%
0.1%
3.0%
Income tax expense
37,942
1,612
39,554
Effective income tax rate
37.7%
0.1%
37.8%
Income from continuing operations
62,706
2,461
65,167
Net income
62,750
2,461
65,211
Diluted earnings per share from
continuing operations
$
1.36
$
0.05
$
1.41
Diluted earnings per share
$
1.36
$
0.05
$
1.41
The above adjusted selling and administrative expenses, adjusted selling and administrative expense rate, adjusted operating profit, adjusted operating profit rate, adjusted income tax expense, adjusted effective income tax rate, adjusted income from continuing operations, adjusted net income, adjusted diluted earnings per share from continuing operations, and adjusted diluted earnings per share are "non-GAAP financial measures" as that term is defined by Rule 101 of Regulation G (17 CFR Part 244) and Item 10 of Regulation S-K (17 CFR Part 229). These non-GAAP financial measures exclude from the most directly comparable financial measures calculated and presented in accordance with GAAP all costs associated with the Company’s pension plans, as the Company froze benefits and began termination activities for its pension plans in 2015 with the intentions of completing the termination and distributing all plan assets during 2016, which totaled $4,073 ($2,461, net of tax).
The pension costs encompass all items associated with net periodic benefit costs, including curtailment and settlement charges, and professional fees associated with the plan and plan termination proceedings.
Third quarter of 2015 - Thirteen weeks ended October 31, 2015
As Reported
Adjustment to exclude pension costs
As Adjusted (non-GAAP)
Selling and administrative expenses
$
411,994
$
(2,560)
$
409,434
Selling and administrative expense rate
36.9%
(0.2%)
36.7%
Operating (loss) profit
(2,158)
2,560
402
Operating (loss) profit rate
(0.2%)
0.2%
0.0%
Income tax benefit
(2,400)
1,012
(1,388)
Effective income tax rate
58.5%
31.5%
90.0%
Loss from continuing operations
(1,703)
1,548
(155)
Net (loss) income
(1,508)
1,548
40
Diluted earnings (loss) per share from
continuing operations
$
(0.03)
$
0.03
$
0.00
Diluted earnings (loss) per share
$
(0.03)
$
0.03
$
0.00
The above adjusted selling and administrative expenses, adjusted selling and administrative expense rate, adjusted operating (loss) profit, adjusted operating (loss) profit rate, adjusted income tax benefit, adjusted effective income tax rate, adjusted loss from continuing operations, adjusted net (loss) income, adjusted diluted earnings (loss) per share from continuing operations, and adjusted diluted earnings (loss) per share are "non-GAAP financial measures" as that term is defined by Rule 101 of Regulation G (17 CFR Part 244) and Item 10 of Regulation S-K (17 CFR Part 229). These non-GAAP financial measures exclude from the most directly comparable financial measures calculated and presented in accordance with GAAP all costs associated with the Company’s pension plans, as the Company froze benefits and began termination activities for its pension plans in 2015 with the intentions of completing the termination and distributing all plan assets during 2016, which totaled $2,560 ($1,548, net of tax).
The pension costs encompass all items associated with net periodic benefit costs, including curtailment and settlement charges, and professional fees associated with the plan and plan termination proceedings.
Year-to-date 2015 - Thirty-nine weeks ended October 31, 2015
As Reported
Adjustment to
Adjustment to
As Adjusted
exclude loss
exclude pension
(non-GAAP)
contingency
costs
Selling and administrative expenses
$
1,246,545
$
(4,487)
$
(4,685)
$
1,237,373
Selling and administrative expense rate
34.6%
(0.1%)
(0.1%)
34.3%
Operating profit
81,024
4,487
4,685
90,196
Operating profit rate
2.2%
0.1%
0.1%
2.5%
Income tax expense
27,584
1,776
1,848
31,208
Effective income tax rate
36.3%
0.2%
(0.6%)
36.7%
Income from continuing operations
48,316
2,711
2,837
53,864
Net income
48,341
2,711
2,837
53,889
Diluted earnings per share from
continuing operations
$
0.94
$
0.05 $
0.06
$
1.05
Diluted earnings per share
$
0.94
$
0.05 $
0.06
$
1.05
The above adjusted selling and administrative expenses, adjusted selling and administrative expense rate, adjusted operating profit, adjusted operating profit rate, adjusted income tax expense, adjusted effective income tax rate, adjusted income from continuing operations, adjusted net income, adjusted diluted earnings per share from continuing operations, and adjusted diluted earnings per share are "non-GAAP financial measures" as that term is defined by Rule 101 of Regulation G (17 CFR Part 244) and Item 10 of Regulation S-K (17 CFR Part 229). These non-GAAP financial measures exclude from the most directly comparable financial measures calculated and presented in accordance with GAAP: (1) a pretax accrual of a loss contingency associated with merchandise-related legal matters of $4,487 ($2,711, net of tax); and (2) all costs associated with the Company’s pension plans, as the Company froze benefits and began termination activities for its pension plans in 2015 with the intentions of completing the termination and distributing all plan assets during 2016, which totaled $4,685 ($2,837, net of tax).
The pension costs encompass all items associated with net periodic benefit costs, including curtailment and settlement charges, and professional fees associated with the plan and plan termination proceedings.
Fourth quarter of 2015 - Thirteen weeks ended January 30, 2016
As Reported
Adjustment to
As Adjusted
exclude pension
(non-GAAP)
costs
Selling and administrative expenses
$
462,172
$
(8,247)
$
453,925
Selling and administrative expense rate
29.2%
(0.5%)
28.7%
Operating profit
154,708
8,247
162,955
Operating profit rate
9.8%
0.5%
10.3%
Income tax expense
56,528
3,264
59,792
Effective income tax rate
37.3%
0.3%
37.6%
Income from continuing operations
94,692
4,983
99,675
Net income
94,532
4,983
99,515
Diluted earnings per share from
continuing operations
$
1.91
$
0.10
$
2.01
Diluted earnings per share
$
1.91
$
0.10
$
2.01
The above adjusted selling and administrative expenses, adjusted selling and administrative expense rate, adjusted operating profit, adjusted operating profit rate, adjusted income tax expense, adjusted effective income tax rate, adjusted income from continuing operations, adjusted net income, adjusted diluted earnings per share from continuing operations, and adjusted diluted earnings per share are "non-GAAP financial measures" as that term is defined by Rule 101 of Regulation G (17 CFR Part 244) and Item 10 of Regulation S-K (17 CFR Part 229). These non-GAAP financial measures exclude from the most directly comparable financial measures calculated and presented in accordance with accounting principles generally accepted in the United States of America ("GAAP") all costs associated with the Company’s pension plans, as the Company froze benefits and began termination activities for its pension plans in 2015 with the intentions of completing the termination and distributing all plan assets during 2016, which totaled $8,247 ($4,983, net of tax).
The pension costs encompass all items associated with net periodic benefit costs, including curtailment and settlement charges, and professional fees associated with the plan and plan termination proceedings.
Full Year 2015 - Fifty-two weeks ended January 30, 2016
As Reported
Adjustment to
Adjustment to
As Adjusted
exclude loss
exclude pension
(non-GAAP)
contingency
costs
Selling and administrative expenses
$
1,708,717
$
(4,487)
$
(12,932)
$
1,691,298
Selling and administrative expense rate
32.9%
(0.1%)
(0.2%)
32.6%
Operating profit
235,732
4,487
12,932
253,151
Operating profit rate
4.5%
0.1%
0.2%
4.9%
Income tax expense
83,842
1,776
5,112
90,730
Effective income tax rate
37.0%
0.0%
0.1%
37.1%
Income from continuing operations
143,008
2,711
7,820
153,539
Net income
142,873
2,711
7,820
153,404
Diluted earnings per share from
continuing operations
$
2.81
$
0.05 $
0.15
$
3.01
Diluted earnings per share
$
2.80
$
0.05 $
0.15
$
3.01

The above adjusted selling and administrative expenses, adjusted selling and administrative expense rate, adjusted operating profit, adjusted operating profit rate, adjusted income tax expense, adjusted effective income tax rate, adjusted income from continuing operations, adjusted net income, adjusted diluted earnings per share from continuing operations, and adjusted diluted earnings per share are "non-GAAP financial measures" as that term is defined by Rule 101 of Regulation G (17 CFR Part 244) and Item 10 of Regulation S-K (17 CFR Part 229). These non-GAAP financial measures exclude from the most directly comparable financial measures calculated and presented in accordance with GAAP: (1) a pretax accrual of a loss contingency associated with merchandise-related legal matters of $4,487 ($2,711, net of tax); and (2) all costs associated with the Company’s pension plans, as the Company froze benefits and began termination activities for its pension plans in 2015 with the intentions of completing the termination and distributing all plan assets during 2016, which totaled $12,932 ($7,820, net of tax). The pension costs encompass all items associated with net periodic benefit costs, including curtailment and settlement charges, and professional fees associated with the plan and plan termination proceedings.

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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