Big Lots Reports Third Quarter Results

COLUMBUS, OhioDec. 7, 2018 /PRNewswire/ — Big Lots, Inc. (NYSE: BIG) today reported a loss of $6.6 million, or $0.16per share, for the third quarter of fiscal 2018 ended November 3, 2018. This result compares to our guidance in the range of income of $0.04 per diluted share to a loss of $0.06 per share, and to last year’s third quarter adjusted income of $2.5 million, or $0.06 per diluted share (see non-GAAP table included later in this release). Comparable store sales for the third quarter of fiscal 2018 increased 3.4% compared to our guidance of +2% to +4%. Net sales for the third quarter of fiscal 2018 were $1,149.4 million, an increase of 3.6% compared to $1,109.2 million for the same period last year with the increase in comparable store sales and a favorable impact from the fiscal calendar shift partially offset by a lower store count year-over-year.

Commenting on today’s release, Bruce Thorn, President and Chief Executive Officer of Big Lots, stated, “In terms of third quarter, we were pleased to achieve our second consecutive quarter of positive comps, but our bottom line results fell short of our expectations.  While we expect near-term results to be challenging this holiday season, we have a strong brand, great people, and we are working swiftly to enhance our current strategy, identify new growth opportunities, and position our business for profitable expansion well into the future.”

Mr. Thorn continued, “I’m excited to have recently joined the Big Lots’ family at this point in its journey and I am optimistic about the future of our Company.  In my first 60 days with the Company, I have invested time with my executive team to better understand our business and the opportunities, and I have met with many of our business leaders and associates through roadshows, town halls, and store and distribution center visits.  We have great people and I have been particularly impressed with their passion and energy as we prepare to serve Jennifer this holiday season.”

Inventory ended the third quarter of fiscal 2018 at $1,074 million, compared to $1,038 million for the third quarter of fiscal 2017, with the increase in inventory primarily driven by the shift and timing of our retail calendar compared to last year, partially offset by a lower store count year over year.

We ended the third quarter of fiscal 2018 with $62 million of Cash and Cash Equivalents and $488 million of borrowings under our credit facility compared to $58 million of Cash and Cash Equivalents and $372 million of borrowings under our credit facility as of the end of the third quarter of fiscal 2017. Cash flow (cash provided by operating activities less capital expenditures) over the last 12 months has been focused on investing in strategic initiatives designed to support future growth, such as our store of the future remodel program and our California distribution center scheduled to open in fiscal 2019.

Total Cash Returned To Shareholders
As announced in a separate press release earlier today, on December 4, 2018, our Board of Directors declared a quarterly cash dividend of $0.30 per common share. This dividend payment of approximately $12 million is payable on December 28, 2018 to shareholders of record as of the close of business on December 14, 2018. Year to date, approximately $139 million has been returned to shareholders in the form of share repurchases and dividend payments.

FISCAL Q4 2018 GUIDANCE

  • Updates Q4 guidance for comparable store sales in the range of flat to an increase of 2%
  • Updates Q4 guidance for income of $2.20 to $2.40 per diluted share, compared to adjusted income of $2.57 per diluted share (non-GAAP) for the same period last year

For the fourth quarter of fiscal 2018, we estimate income will be in the range of $2.20 to $2.40 per diluted share, compared to adjusted income of $2.57 per diluted share (non-GAAP) for the fourth quarter of fiscal 2017. This guidance is based on a comparable store sales in the range of flat to an increase of 2%.

FISCAL 2018 GUIDANCE

  • Affirms guidance for fiscal 2018 comparable store sales increase of approximately 1%
  • Updates guidance for fiscal 2018 adjusted income to be in the range of $3.55 to $3.75 per diluted share (non-GAAP), compared to fiscal 2017 adjusted income of $4.45 per diluted share (non-GAAP)

Based on operating results for the first three quarters and our expectations for the fourth quarter of fiscal 2018 noted above, we now estimate fiscal 2018 adjusted income in the range of $3.55 to $3.75 per diluted share (non-GAAP). This compares to adjusted income of $4.45 per diluted share (non-GAAP) for fiscal 2017. This annual guidance is based on a comparable store sales increase of approximately 1%.

Full Year

2018 Guidance 

2017

Earnings per diluted share – adjusted basis (1)

$3.55  –  $3.75

$4.45

(1)  Non-GAAP detailed reconciliation provided in our statements below.

Conference Call/Webcast

We will host a conference call today at 8:00 a.m. to discuss our financial results for the third quarter of fiscal 2018 and provide commentary on our outlook for fiscal 2018. 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 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 21, 2018. A replay of this call will also be available beginning today at 12:00 noon through December 21 by dialing 1.888.203.1112 (Toll Free USA and Canada) or 1.719.457.0820 (International) and entering Replay Passcode 3446862. All times are Eastern Time.

Headquartered in Columbus, Ohio, Big Lots, Inc. (NYSE: BIG) is a community retailer operating 1,423 BIG LOTS stores in 47 states, dedicated to friendly service, trustworthy value, and affordable solutions in every season and category – furniture, food, décor, and more. We exist to serve everyone like family, providing a better 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)

NOVEMBER 3

OCTOBER 28

2018

2017

(Unaudited)

(Unaudited)

ASSETS

Current assets:

Cash and cash equivalents

$61,938

$58,012

Inventories

1,073,885

1,038,156

Other current assets

141,424

118,822

   Total current assets

1,277,247

1,214,990

Property and equipment – net

782,771

537,563

Deferred income taxes

22,923

47,027

Other assets

50,075

46,529

$2,133,016

$1,846,109

LIABILITIES AND SHAREHOLDERS’ EQUITY      

Current liabilities:

Accounts payable

$479,634

$493,097

Property, payroll and other taxes

85,775

87,007

Accrued operating expenses

112,458

77,683

Insurance reserves

38,070

41,561

Accrued salaries and wages

28,342

31,563

Income taxes payable

1,295

865

   Total current liabilities

745,574

731,776

Long-term obligations under bank credit facility

488,000

371,900

Deferred rent

61,054

56,622

Insurance reserves

55,769

56,948

Unrecognized tax benefits

12,738

15,732

Synthetic lease obligation

131,644

Other liabilities

45,505

47,467

Shareholders’ equity

592,732

565,664

$2,133,016

$1,846,109

BIG LOTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

13 WEEKS ENDED

13 WEEKS ENDED

NOVEMBER 3, 2018

OCTOBER 28, 2017

%

%

(Unaudited)

(Unaudited)

Net sales

$1,149,402

100.0

$1,109,184

100.0

Gross margin

459,174

39.9

443,626

40.0

Selling and administrative expenses 

436,826

38.0

408,314

36.8

Depreciation expense

31,911

2.8

29,508

2.7

Operating (loss) profit

(9,563)

(0.8)

5,804

0.5

Interest expense

(3,138)

(0.3)

(2,077)

(0.2)

Other income (expense)

59

0.0

405

0.0

(Loss) income before income taxes

(12,642)

(1.1)

4,132

0.4

Income tax benefit

(6,086)

(0.5)

(240)

(0.0)

Net (loss) income

($6,556)

(0.6)

$4,372

0.4

Earnings (loss) per common share

Basic

($0.16)

$0.10

Diluted

($0.16)

$0.10

Weighted average common shares outstanding

Basic

40,021

41,967

Dilutive effect of share-based awards

557

Diluted

40,021

42,524

Cash dividends declared per common share

$0.30

$0.25

BIG LOTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

39 WEEKS ENDED

39 WEEKS ENDED

NOVEMBER 3, 2018

OCTOBER 28, 2017

%

%

(Unaudited)

(Unaudited)

Net sales

$3,639,554

100.0

$3,623,751

100.0

Gross margin

1,462,551

40.2

1,460,401

40.3

Selling and administrative expenses 

1,301,523

35.8

1,239,440

34.2

Depreciation expense

90,936

2.5

87,489

2.4

Operating profit

70,092

1.9

133,472

3.7

Interest expense

(7,121)

(0.2)

(4,705)

(0.1)

Other income (expense)

716

0.0

323

0.0

Income before income taxes

63,687

1.7

129,090

3.6

Income tax expense

14,840

0.4

44,086

1.2

Net income

$48,847

1.3

$85,004

2.3

Earnings per common share

Basic

$1.19

$1.97

Diluted

$1.19

$1.95

Weighted average common shares outstanding

Basic

41,065

43,155

Dilutive effect of share-based awards

138

409

Diluted

41,203

43,564

Cash dividends declared per common share

$0.90

$0.75

BIG LOTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

13 WEEKS ENDED

13 WEEKS ENDED

NOVEMBER 3, 2018

OCTOBER 28, 2017

 (Unaudited) 

 (Unaudited) 

  Net cash used in operating activities 

($70,140)

($70,890)

  Net cash used in investing activities

(109,607)

(41,602)

  Net cash provided by financing activities

183,228

114,495

Increase in cash and cash equivalents

3,481

2,003

Cash and cash equivalents:

  Beginning of period

58,457

56,009

  End of period

$61,938

$58,012

BIG LOTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

39 WEEKS ENDED

39 WEEKS ENDED

NOVEMBER 3, 2018

OCTOBER 28, 2017

 (Unaudited) 

 (Unaudited) 

  Net cash provided by operating activities 

$40,420

$29,072

  Net cash used in investing activities

(281,033)

(93,293)

  Net cash provided by financing activities

251,375

71,069

Increase in cash and cash equivalents

10,762

6,848

Cash and cash equivalents:

  Beginning of period

51,176

51,164

  End of period

$61,938

$58,012

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

The following tables reconcile: selling and administrative expenses, selling and administrative expense rate, operating profit, operating profit rate, income tax expense (benefit), effective income tax rate, net income, and diluted earnings per share for the year-to-date 2018, the third quarter of 2017, the year-to-date 2017, the fourth quarter of 2017 and the full year 2017 (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 (benefit), adjusted effective income tax rate, adjusted net income, and adjusted diluted earnings per share (non-GAAP financial measures).

 Year-to-date 2018 – Thirty-nine weeks ended November 3, 2018 

 As Reported 

Adjustment to
exclude CEO
retirement costs

Adjustment to
exclude
shareholder
litigation matter

As Adjusted
(non-GAAP)

 Selling and administrative expenses 

$            1,301,523

$                      (7,018)

$                      (3,500)

$            1,291,005

 Selling and administrative expense rate 

35.8%

(0.2%)

(0.1%)

35.5%

 Operating profit 

70,092

7,018

3,500

80,610

 Operating profit rate 

1.9%

0.2%

0.1%

2.2%

 Income tax expense 

14,840

895

879

16,614

 Effective income tax rate 

23.3%

(0.6%)

(0.3%)

22.4%

 Net income 

48,847

6,123

2,621

57,591

 Diluted earnings per share  

$                     1.19

$                         0.15

$                         0.06

$                     1.40

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 net income, 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) the costs associated with the retirement of our former CEO of $7,018 ($6,123, net of tax); and (2) a pretax charge related to the settlement in principle of shareholder litigation matters of $3,500 ($2,621, net of tax).

Third quarter of 2017 – Thirteen weeks ended October 28, 2017

 As Reported

Adjustment to 
exclude gain on 
insurance
recoveries

As Adjusted
(non-GAAP)

 Selling and administrative expenses

$              408,314

$                      3,000

$              411,314

 Selling and administrative expense rate

36.8%

0.3%

37.1%

 Operating profit

5,804

(3,000)

2,804

 Operating profit rate

0.5%

(0.3%)

0.3%

 Income tax benefit

(240)

(1,149)

(1,389)

 Effective income tax rate

(5.8%)

(116.9%)

(122.7%)

 Net income

4,372

(1,851)

2,521

 Diluted earnings per share 

$                    0.10

$                       (0.04)

$                    0.06

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 net income, 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 a pretax gain on insurance recoveries associated with merchandise-related legal matters of $3,000 ($1,851, net of tax).

 Year-to-date 2017 – Thirty-nine weeks ended October 28, 2017 

As Reported 

Adjustment to 
exclude gain on
insurance
recoveries

As Adjusted
(non-GAAP)

 Selling and administrative expenses 

$           1,239,440

$                      3,000

$           1,242,440

 Selling and administrative expense rate 

34.2%

0.1%

34.3%

 Operating profit 

133,472

(3,000)

130,472

 Operating profit rate 

3.7%

(0.1%)

3.6%

 Income tax expense 

44,086

(1,149)

42,937

 Effective income tax rate 

34.2%

(0.1%)

34.1%

 Net income 

85,004

(1,851)

83,153

 Diluted earnings per share  

$                    1.95

$                       (0.04)

$                    1.91

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 net income, 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 a pretax gain on insurance recoveries associated with merchandise-related legal matters of $3,000 ($1,851, net of tax).

 Fourth quarter of 2017 – Fourteen weeks ended February 3, 2018 

 As Reported 

 Impact on deferred 
taxes resulting 
from U.S. tax 
reform 

 As Adjusted 
(non-GAAP) 

 Selling and administrative expenses 

$              484,556

$                             –

$             484,556

 Selling and administrative expense rate 

29.5%

29.5%

 Operating profit 

167,881

167,881

 Operating profit rate 

10.2%

10.2%

 Income tax expense 

61,436

(4,517)

56,919

 Effective income tax rate 

37.0%

(2.7%)

34.2%

 Net income 

104,828

4,517

109,345

 Diluted earnings per share  

$                    2.46

$                         0.11

$                    2.57

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 net income, 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 the impact to deferred taxes resulting from the U.S. Tax Cuts and Jobs Act of 2017 of $4,517.

 Full Year 2017 – Fifty-three weeks ended February 3, 2018 

 As Reported 

 Adjustment to 
exclude gain on 
insurance 
recoveries 

 Impact on deferred 
taxes resulting 
from U.S. tax 
reform 

 As Adjusted 
(non-GAAP) 

 Selling and administrative expenses 

$           1,723,996

$                      3,000

$                               –

$           1,726,996

 Selling and administrative expense rate 

32.7%

0.1%

32.8%

 Operating profit 

301,353

(3,000)

298,353

 Operating profit rate 

5.7%

(0.1%)

5.7%

 Income tax expense 

105,522

(1,149)

(4,517)

99,856

 Effective income tax rate 

35.7%

(0.0%)

(1.5%)

34.2%

 Net income 

189,832

(1,851)

4,517

192,498

 Diluted earnings per share  

$                    4.38

$                       (0.04)

$                         0.10

$                    4.45

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 net income, 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 gain on insurance recoveries associated with merchandise-related legal matters of $3,000 ($1,851, net of tax); and (2) the impact to deferred taxes resulting from the U.S. Tax Cuts and Jobs Act of 2017 of $4,517.

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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