[Filing Information](index=1&type=section&id=Filing%20Information) [Form 10-Q Details](index=1&type=section&id=Form%2010-Q%20Details) This Form 10-Q quarterly report for Big Lots, Inc covers the period ended November 2, 2019 - The report is a Quarterly Report on Form 10-Q for the period ended **November 2, 2019**[1](index=1&type=chunk) - Big Lots, Inc is incorporated in Ohio and its common shares are registered on the New York Stock Exchange under the trading symbol **BIG**[1](index=1&type=chunk) - The registrant is classified as a **large accelerated filer**[2](index=2&type=chunk) - As of December 6, 2019, the number of common shares outstanding was **39,042,767**[2](index=2&type=chunk) [Part I. Financial Information](index=2&type=section&id=Part%20I.%20Financial%20Information) [Item 1. Financial Statements](index=2&type=section&id=Item%201.%20Financial%20Statements) This section presents unaudited consolidated financial statements and notes for the periods ended November 2, 2019 [a) Consolidated Statements of Operations and Comprehensive Income](index=2&type=section&id=a)%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income) Net income and operating profit increased significantly due to a substantial gain on the sale of a distribution center Consolidated Statements of Operations and Comprehensive Income (Unaudited) | Metric (in thousands, except per share) | Thirteen Weeks Ended Nov 2, 2019 | Thirteen Weeks Ended Nov 3, 2018 | Thirty-Nine Weeks Ended Nov 2, 2019 | Thirty-Nine Weeks Ended Nov 3, 2018 | |:----------------------------------------|:-----------------------------------|:-----------------------------------|:------------------------------------|:------------------------------------| | Net sales | $1,167,988 | $1,149,402 | $3,716,198 | $3,639,554 | | Gross margin | $463,386 | $459,174 | $1,480,663 | $1,462,551 | | Selling and administrative expenses | $436,714 | $436,826 | $1,352,345 | $1,301,523 | | Depreciation expense | $34,752 | $31,911 | $97,572 | $90,936 | | Gain on sale of distribution center | $(178,534) | — | $(178,534) | — | | Operating profit (loss) | $170,454 | $(9,563) | $209,280 | $70,092 | | Interest expense | $(5,359) | $(3,138) | $(13,657) | $(7,121) | | Income (loss) before income taxes | $164,773 | $(12,642) | $195,422 | $63,687 | | Net income (loss) | $126,982 | $(6,556) | $148,700 | $48,847 | | Basic EPS | $3.25 | $(0.16) | $3.78 | $1.19 | | Diluted EPS | $3.25 | $(0.16) | $3.77 | $1.19 | | Cash dividends declared per common share| $0.30 | $0.30 | $0.90 | $0.90 | - Net sales increased by **$18.6 million (1.6%)** for the thirteen weeks and **$76.6 million (2.1%)** for the thirty-nine weeks ended November 2, 2019, compared to the prior year periods[4](index=4&type=chunk) - Operating profit significantly improved to **$170.5 million** for the thirteen weeks and **$209.3 million** for the thirty-nine weeks ended November 2, 2019, primarily due to a **$178.5 million gain** on the sale of a distribution center[4](index=4&type=chunk) [b) Consolidated Balance Sheets](index=3&type=section&id=b)%20Consolidated%20Balance%20Sheets) Total assets and liabilities increased significantly due to the adoption of the new lease accounting standard (ASC 842) Consolidated Balance Sheets (Unaudited) | Metric (in thousands) | November 2, 2019 | February 2, 2019 | |:----------------------------------|:-----------------|:-----------------| | **ASSETS** | | | | Cash and cash equivalents | $61,794 | $46,034 | | Inventories | $1,117,263 | $969,561 | | Total current assets | $1,261,552 | $1,128,003 | | Operating lease right-of-use assets | $1,233,558 | — | | Property and equipment - net | $860,659 | $822,338 | | Total assets | $3,421,746 | $2,023,347 | | **LIABILITIES AND SHAREHOLDERS' EQUITY** | | | | Accounts payable | $475,995 | $396,903 | | Current operating lease liabilities | $205,390 | — | | Total current liabilities | $977,244 | $638,560 | | Long-term debt | $501,115 | $374,100 | | Noncurrent operating lease liabilities | $1,067,529 | — | | Total liabilities and shareholders' equity | $3,421,746 | $2,023,347 | | Total shareholders' equity | $762,324 | $693,041 | - Total assets increased by **$1,398.4 million** from February 2, 2019, to November 2, 2019, primarily due to the recognition of **$1,233.6 million** in operating lease right-of-use assets upon adoption of ASC 842[6](index=6&type=chunk)[23](index=23&type=chunk) - Total liabilities increased by **$1,390.0 million**, driven by the recognition of **$1,272.9 million** in operating lease liabilities and an increase in long-term debt to **$501.1 million**[6](index=6&type=chunk)[28](index=28&type=chunk)[38](index=38&type=chunk) [c) Consolidated Statements of Shareholders' Equity](index=4&type=section&id=c)%20Consolidated%20Statements%20of%20Shareholders'%20Equity) Shareholders' equity increased due to comprehensive income, partially offset by dividends and share repurchases Consolidated Statements of Shareholders' Equity (Unaudited) - Key Changes (in thousands) | Metric | Thirty-Nine Weeks Ended Nov 2, 2019 | |:----------------------------------------|:------------------------------------| | Balance - February 2, 2019 | $693,041 | | Comprehensive income | $148,700 | | Dividends declared ($0.90 per share) | $(36,356) | | Purchases of common shares | $(55,342) | | Share-based employee compensation expense | $11,738 | | Balance - November 2, 2019 | $762,324 | - Total shareholders' equity increased by **$69.3 million** from February 2, 2019, to November 2, 2019[6](index=6&type=chunk)[10](index=10&type=chunk) - Comprehensive income for the thirty-nine weeks ended November 2, 2019, was **$148.7 million**[10](index=10&type=chunk) - The company declared **$0.90 per share** in dividends, totaling **$36.4 million**, and repurchased **$55.3 million** in common shares during the thirty-nine weeks ended November 2, 2019[10](index=10&type=chunk)[43](index=43&type=chunk) [d) Consolidated Statements of Cash Flows](index=5&type=section&id=d)%20Consolidated%20Statements%20of%20Cash%20Flows) Operating cash flow increased, investing cash use decreased from a property sale, and financing cash use increased Consolidated Statements of Cash Flows (Unaudited) (in thousands) | Activity | Thirty-Nine Weeks Ended Nov 2, 2019 | Thirty-Nine Weeks Ended Nov 3, 2018 | |:------------------------------------------|:------------------------------------|:------------------------------------| | Net cash provided by operating activities | $80,548 | $40,420 | | Net cash used in investing activities | $(41,231) | $(281,033) | | Net cash (used in) provided by financing activities | $(23,557) | $251,375 | | Increase in cash and cash equivalents | $15,760 | $10,762 | | Cash and cash equivalents, End of period | $61,794 | $61,938 | - Net cash provided by operating activities increased by **$40.1 million** to **$80.5 million**, driven by higher net income and cash inflows from inventories[12](index=12&type=chunk)[119](index=119&type=chunk) - Net cash used in investing activities decreased by **$239.8 million** to **$41.2 million**, primarily due to **$190.7 million** in cash proceeds from the sale of property and equipment[12](index=12&type=chunk)[120](index=120&type=chunk) - Net cash used in financing activities increased by **$274.9 million** to **$23.6 million**, mainly due to decreased net proceeds from long-term debt and increased payments of finance lease obligations[12](index=12&type=chunk)[121](index=121&type=chunk) [e) Notes to Consolidated Financial Statements](index=6&type=section&id=e)%20Notes%20to%20Consolidated%20Financial%20Statements) These notes detail accounting policies, debt, leases, equity, and other key financial statement components [NOTE 1 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=7&type=section&id=NOTE%201%20%E2%80%93%20BASIS%20OF%20PRESENTATION%20AND%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note outlines key accounting policies and the significant balance sheet impact of adopting the new lease standard - Big Lots, Inc is a discount retailer operating **1,418 stores** in 47 states as of November 2, 2019[13](index=13&type=chunk) - The company's fiscal year ends on the Saturday nearest to January 31; the third quarter of 2019 and 2018 were both 13 weeks, and year-to-date periods were 39 weeks[15](index=15&type=chunk) - Selling and administrative expenses include store, warehousing, distribution, outbound transportation, advertising, purchasing, insurance, and non-income taxes; warehousing, distribution, and outbound transportation costs were **$48.8 million** (Q3 2019) and **$137.1 million** (YTD 2019)[16](index=16&type=chunk) - Advertising expenses were **$18.2 million** (Q3 2019) and **$57.9 million** (YTD 2019)[17](index=17&type=chunk) - The company uses derivative instruments (collar/swap contracts) to mitigate diesel fuel price risk, which are marked-to-market with gains/losses recognized in other income (expense)[18](index=18&type=chunk) Supplemental Cash Flow Information (in thousands) | Metric | Thirty-Nine Weeks Ended Nov 2, 2019 | Thirty-Nine Weeks Ended Nov 3, 2018 | |:------------------------------------------|:------------------------------------|:------------------------------------| | Cash paid for interest | $13,828 | $6,494 | | Cash paid for income taxes | $28,379 | $59,600 | | Cash paid for operating lease liabilities | $217,935 | — | | Operating lease right-of-use assets obtained in exchange for operating lease liabilities | $1,489,449 | — | - In 2019, the company changed the estimated service lives for leasehold improvements (new stores: 5 to 10 years, renovated stores: 5 to 7 years) and fixtures/equipment (5 to 7 years) to better reflect remaining lease terms and renovation cycles[20](index=20&type=chunk) - Adoption of ASU 2016-02 (ASC 842) on February 3, 2019, resulted in the recognition of **$1,110 million** in right-of-use assets and **$1,138 million** in lease liabilities for operating leases[22](index=22&type=chunk)[23](index=23&type=chunk) [NOTE 2 – DEBT](index=9&type=section&id=NOTE%202%20%E2%80%93%20DEBT) The company's debt consists of a $700 million credit facility and a $70 million term note - The 2018 Credit Agreement is a **$700 million** five-year unsecured credit facility expiring on August 31, 2023[25](index=25&type=chunk) - As of November 2, 2019, **$447.3 million** was outstanding under the 2018 Credit Agreement, with **$245.8 million** available after accounting for outstanding letters of credit[26](index=26&type=chunk) - The 2019 Term Note is a **$70 million** secured term note, expiring May 7, 2024, with an interest rate of **3.3%**[27](index=27&type=chunk) Debt Breakdown (in thousands) | Instrument | November 2, 2019 | February 2, 2019 | |:---------------------|:-----------------|:-----------------| | 2019 Term Note | $67,726 | — | | 2018 Credit Agreement| $447,300 | $374,100 | | Total debt | $515,026 | $374,100 | | Long-term debt | $501,115 | $374,100 | [NOTE 3 – FAIR VALUE MEASUREMENTS](index=9&type=section&id=NOTE%203%20%E2%80%93%20FAIR%20VALUE%20MEASUREMENTS) Fair value measurements relate to Level 1 mutual fund investments and Level 2 long-term debt obligations - Mutual fund investments of **$32.5 million** (Nov 2, 2019) are classified as **Level 1** valuations due to quoted market values in active markets[29](index=29&type=chunk) - Fair values of long-term obligations under the 2018 Credit Agreement and 2019 Term Note are classified as **Level 2**, approximating their carrying values due to variable rates and short maturities[30](index=30&type=chunk)[32](index=32&type=chunk) [NOTE 4 – LEASES](index=10&type=section&id=NOTE%204%20%E2%80%93%20LEASES) The adoption of ASC 842 resulted in the recognition of significant operating lease assets and liabilities - The company's leased property includes retail stores, distribution centers, store security, and office equipment[33](index=33&type=chunk) - A synthetic lease for a new California distribution center, previously a capital lease, is now classified as an operating lease under ASC 842[34](index=34&type=chunk) Leases Recorded in Consolidated Balance Sheets (in thousands) | Asset/Liability | November 2, 2019 | |:--------------------------------|:-----------------| | Operating lease right-of-use assets | $1,233,558 | | Finance right-of-use assets | $8,755 | | Total right-of-use assets | $1,242,313 | | Current operating lease liabilities | $205,390 | | Noncurrent operating lease liabilities | $1,067,529 | | Total lease liabilities | $1,282,325 | Components of Lease Costs (in thousands) | Lease Cost Component | Third Quarter 2019 | Year-to-date 2019 | |:--------------------------------|:-------------------|:------------------| | Operating lease cost | $71,721 | $214,771 | | Finance lease cost (amortization) | $1,427 | $3,403 | | Finance lease cost (interest) | $598 | $850 | | Short-term lease cost | $1,304 | $4,386 | | Variable lease cost | $17 | $237 | | Total lease cost | $75,067 | $223,647 | - As of November 2, 2019, the weighted average remaining lease term for operating leases was **6.4 years**, with a weighted average discount rate of **4.2%**[39](index=39&type=chunk) [NOTE 5 – SHAREHOLDERS' EQUITY](index=12&type=section&id=NOTE%205%20%E2%80%93%20SHAREHOLDERS'%20EQUITY) This note details earnings per share calculations, share repurchases, and dividends declared - Antidilutive stock options (**0.1 million** for Q3 2019 and YTD 2019) and restricted/performance share units (**0.5 million** for Q3 2019 and **0.4 million** for YTD 2019) were excluded from diluted EPS calculations[41](index=41&type=chunk) - The company exhausted its **$50 million** 2019 Repurchase Program during the second quarter of 2019, acquiring approximately **1.3 million** common shares[42](index=42&type=chunk) Cash Dividends Declared and Paid (in thousands) | Period | Dividends Per Share | Amount Declared | Amount Paid | |:------------------|:--------------------|:----------------|:------------| | 2019: First quarter | $0.30 | $12,206 | $13,197 | | Second quarter | $0.30 | $12,196 | $11,718 | | Third quarter | $0.30 | $11,954 | $11,792 | | Total | $0.90 | $36,356 | $36,707 | [NOTE 6 – SHARE-BASED PLANS](index=13&type=section&id=NOTE%206%20%E2%80%93%20SHARE-BASED%20PLANS) This note details the company's share-based compensation plans, including stock options, RSUs, and PSUs - Share-based compensation expense was **$3.2 million** for Q3 2019 (down from $4.5 million in Q3 2018) and **$11.7 million** for YTD 2019 (down from $21.7 million in YTD 2018)[44](index=44&type=chunk) Non-vested Restricted Stock Units Activity (Year-to-Date 2019) | Activity | Number of Shares | Fair Value Per Share | |:------------------------------------------|:-----------------|:---------------------| | Outstanding at February 2, 2019 | 483,182 | $46.50 | | Granted | 414,720 | (various) | | Vested | (201,330) | (various) | | Forfeited | (62,125) | (various) | | Outstanding at November 2, 2019 | 634,447 | $39.09 | Performance Share Units (PSUs) Activity (Year-to-Date 2019) | Activity | Number of Units | Weighted Average Grant-Date Fair Value Per Share | |:------------------------------------------|:----------------|:-------------------------------------------------| | Outstanding at February 2, 2019 | 282,083 | $55.67 | | Granted | 217,518 | $31.89 | | Vested | (282,083) | $55.67 | | Forfeited | (32,739) | $31.89 | | Outstanding at November 2, 2019 | 184,779 | $31.89 | Stock Option Activity (Year-to-Date 2019) | Activity | Number of Options | Weighted Average Exercise Price Per Share | |:------------------------------------------|:------------------|:------------------------------------------| | Outstanding at February 2, 2019 | 237,501 | $38.30 | | Exercised | (6,250) | $32.04 | | Forfeited | (82,500) | (various) | | Outstanding at November 2, 2019 | 148,751 | $35.93 | - Total unearned compensation cost for share-based awards (excluding 2018/2019 PSUs) was approximately **$16.3 million** at November 2, 2019, expected to be recognized through October 2022[55](index=55&type=chunk) [NOTE 7 – INCOME TAXES](index=16&type=section&id=NOTE%207%20%E2%80%93%20INCOME%20TAXES) The company estimates a net decrease of approximately $4.0 million in unrecognized tax benefits over the next 12 months - The estimated net decrease in unrecognized tax benefits for the next 12 months is approximately **$4.0 million**[56](index=56&type=chunk) [NOTE 8 – CONTINGENCIES](index=16&type=section&id=NOTE%208%20%E2%80%93%20CONTINGENCIES) The company recorded a $7.3 million charge in Q1 2019 related to California wage and hour class actions - The company is defending against California wage and hour class actions and individual representative actions[57](index=57&type=chunk) - A **$7.3 million charge** was recorded in Q1 2019 for these matters, and tentative settlements have been reached in the class actions[57](index=57&type=chunk) [NOTE 9 – RESTRUCTURING COSTS](index=17&type=section&id=NOTE%209%20%E2%80%93%20RESTRUCTURING%20COSTS) A transformational restructuring initiative incurred costs of $38.4 million year-to-date for severance and consultancy fees - A transformational restructuring initiative was announced in March 2019 to drive sales growth and reduce costs[59](index=59&type=chunk) - Costs incurred for the initiative were **$15.3 million** (Q1 2019), **$19.5 million** (Q2 2019), and **$3.6 million** (Q3 2019), totaling **$38.4 million** YTD[60](index=60&type=chunk)[102](index=102&type=chunk) Severance and Postemployment Benefits Liabilities (in thousands) | Period | Balance at Feb 2, 2019 | Charges | Payments | Other | Balance at Nov 2, 2019 | |:--------------------------|:-----------------------|:--------|:---------|:------|:-----------------------| | Year-to-Date 2019 | $0 | $14,597 | $(7,961) | $(1,529) | $5,107 | [NOTE 10 – BUSINESS SEGMENT DATA](index=17&type=section&id=NOTE%2010%20%E2%80%93%20BUSINESS%20SEGMENT%20DATA) Net sales are reported across seven merchandise categories, with Furniture showing the strongest growth - The company uses seven merchandise categories for internal management and reporting: Food, Consumables, Soft Home, Hard Home, Furniture, Seasonal, and Electronics, Toys, & Accessories[62](index=62&type=chunk) Net Sales by Merchandise Category (in thousands) | Category | Q3 2019 Net Sales | Q3 2018 Net Sales | YTD 2019 Net Sales | YTD 2018 Net Sales | |:-----------------------------|:------------------|:------------------|:-------------------|:-------------------| | Furniture | $344,103 | $313,450 | $1,031,357 | $941,022 | | Soft Home | $206,493 | $203,328 | $606,397 | $585,850 | | Consumables | $198,467 | $194,480 | $581,925 | $573,215 | | Food | $180,687 | $185,641 | $530,970 | $549,576 | | Seasonal | $94,225 | $90,824 | $523,822 | $508,397 | | Hard Home | $79,833 | $92,275 | $243,584 | $271,916 | | Electronics, Toys, & Accessories | $64,180 | $69,404 | $198,143 | $209,578 | | **Total Net Sales** | **$1,167,988** | **$1,149,402** | **$3,716,198** | **$3,639,554** | [NOTE 11 – DERIVATIVE INSTRUMENTS](index=18&type=section&id=NOTE%2011%20%E2%80%93%20DERIVATIVE%20INSTRUMENTS) The company uses diesel fuel collar contracts to mitigate price risk, resulting in a net liability of $812 thousand - The company uses diesel fuel collar contracts to mitigate risk from market fluctuations in diesel fuel prices[65](index=65&type=chunk) - As of November 2, 2019, outstanding derivative contracts covered **4.5 million gallons** of diesel fuel[66](index=66&type=chunk) Fair Value of Derivative Instruments (in thousands) | Derivative Instrument | November 2, 2019 | February 2, 2019 | |:----------------------|:-----------------|:-----------------| | Diesel fuel collars | $(812) | $(685) | Effect of Derivative Instruments on Operations (in thousands) | Type | Q3 2019 Gain (Loss) | Q3 2018 Gain (Loss) | YTD 2019 Gain (Loss) | YTD 2018 Gain (Loss) | |:-----------|:--------------------|:--------------------|:---------------------|:---------------------| | Realized | $(47) | $154 | $(71) | $279 | | Unrealized | $(278) | $(102) | $(126) | $460 | | Total | $(325) | $52 | $(197) | $739 | [NOTE 12 – GAIN ON SALE OF DISTRIBUTION CENTER](index=19&type=section&id=NOTE%2012%20%E2%80%93%20GAIN%20ON%20SALE%20OF%20DISTRIBUTION%20CENTER) The sale of a California distribution center generated net proceeds of $190.3 million and a gain of $178.5 million - The company sold its Rancho Cucamonga, California distribution center on October 30, 2019[68](index=68&type=chunk) - Net proceeds from the sale were **$190.3 million**, resulting in a gain of **$178.5 million**[68](index=68&type=chunk) - Proceeds were used to pay down outstanding debt under the 2018 Credit Agreement and the remainder of a finance lease obligation for the corporate headquarters[90](index=90&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=19&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on financial performance, condition, and liquidity for the third quarter of 2019 [CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS](index=19&type=section&id=CAUTIONARY%20STATEMENT%20CONCERNING%20FORWARD-LOOKING%20STATEMENTS) This section advises that forward-looking statements involve risks and uncertainties that could cause actual results to differ - The report contains forward-looking statements, identified by words like 'anticipate,' 'estimate,' 'expect,' and 'project,' which are subject to risks and uncertainties[70](index=70&type=chunk) - Actual results may differ materially due to factors such as economic conditions, cost of goods, execution of strategic initiatives, competitive pressures, and trade restrictions (including tariffs)[71](index=71&type=chunk) [OVERVIEW](index=20&type=section&id=OVERVIEW) Q3 2019 saw a 1.6% sales increase and significantly improved operating profit, driven by a distribution center sale Key Operating Performance Indicators (Q3 2019 vs. Q3 2018) | Metric | Q3 2019 Performance | Change vs. Q3 2018 | |:----------------------------------------|:--------------------|:-------------------| | Net sales | Increased $18.6M | +1.6% | | Comparable store sales | Decreased $1.4M | -0.1% | | Gross margin dollars | Increased $4.2M | +0.9% | | Gross margin rate | 39.7% | -20 bps | | Selling and administrative expenses | Decreased $0.1M | -0.0% | | S&A expenses as % of net sales | 37.4% | -60 bps | | Gain on sale of distribution center | $178.5M | N/A | | Operating profit rate | 14.6% | +15.4 ppt | | Diluted earnings per share | $3.25 | From $(0.16) | | Inventory | $1,117.3M | +4.0% | | Quarterly cash dividend per common share| $0.30 | Unchanged | [STORES](index=20&type=section&id=STORES) The company ended the period with 1,418 stores, a net increase of 17 stores year-to-date Store Activity (Year-to-Date) | Metric | 2019 | 2018 | |:----------------------------------------|:------|:------| | Stores open at beginning of fiscal year | 1,401 | 1,416 | | Stores opened during the period | 50 | 20 | | Stores closed during the period | (33) | (21) | | Stores open at end of the period | 1,418 | 1,415 | - The company expects to open **54 stores** and close approximately **50 stores** during 2019[76](index=76&type=chunk) [RESULTS OF OPERATIONS](index=21&type=section&id=RESULTS%20OF%20OPERATIONS) Operating profit rate increased significantly in Q3 and YTD 2019 due to the gain on sale of a distribution center Consolidated Statements of Operations as % of Net Sales | Metric | Q3 2019 | Q3 2018 | YTD 2019 | YTD 2018 | |:----------------------------------------|:--------|:--------|:---------|:---------| | Net sales | 100.0 % | 100.0 % | 100.0 % | 100.0 % | | Cost of sales | 60.3 | 60.1 | 60.2 | 59.8 | | Gross margin | 39.7 | 39.9 | 39.8 | 40.2 | | Selling and administrative expenses | 37.4 | 38.0 | 36.4 | 35.8 | | Depreciation expense | 3.0 | 2.8 | 2.6 | 2.5 | | Gain on sale of distribution center | (15.3) | 0.0 | (4.8) | 0.0 | | Operating profit (loss) | 14.6 | (0.8) | 5.6 | 1.9 | | Interest expense | (0.5) | (0.3) | (0.4) | (0.2) | | Income (loss) before income taxes | 14.1 | (1.1) | 5.3 | 1.7 | | Income tax expense (benefit) | 3.2 | (0.5) | 1.3 | 0.4 | | Net income (loss) | 10.9 % | (0.6)% | 4.0 % | 1.3 % | [THIRD QUARTER OF 2019 COMPARED TO THIRD QUARTER OF 2018](index=21&type=section&id=THIRD%20QUARTER%20OF%202019%20COMPARED%20TO%20THIRD%20QUARTER%20OF%202018) Q3 2019 net sales increased 1.6% despite a 0.1% decline in comparable store sales, with operating profit boosted by a property sale [Net Sales](index=21&type=section&id=Net%20Sales_Q3) Q3 2019 net sales increased 1.6% to $1,168.0 million, driven by new stores, while comparable sales decreased 0.1% Net Sales by Merchandise Category (Q3 2019 vs. Q3 2018) | Category | Q3 2019 Net Sales | Q3 2019 % of Total | Q3 2018 Net Sales | Q3 2018 % of Total | Change ($) | Change (%) | Comps (%) | |:-----------------------------|:------------------|:-------------------|:------------------|:-------------------|:-----------|:-----------|:----------| | Furniture | $344,103 | 29.4% | $313,450 | 27.3% | $30,653 | 9.8% | 6.4% | | Soft Home | $206,493 | 17.7% | $203,328 | 17.7% | $3,165 | 1.6% | (0.2)% | | Consumables | $198,467 | 17.0% | $194,480 | 16.9% | $3,987 | 2.1% | 1.4% | | Food | $180,687 | 15.5% | $185,641 | 16.2% | $(4,954) | (2.7)% | (3.7)% | | Seasonal | $94,225 | 8.1% | $90,824 | 7.9% | $3,401 | 3.7% | 2.2% | | Hard Home | $79,833 | 6.8% | $92,275 | 8.0% | $(12,442) | (13.5)% | (14.2)% | | Electronics, Toys, & Accessories | $64,180 | 5.5% | $69,404 | 6.0% | $(5,224) | (7.5)% | (9.5)% | | **Net sales** | **$1,167,988** | **100.0%** | **$1,149,402** | **100.0%** | **$18,586**| **1.6%** | **(0.1)%**| - Furniture sales benefited from a new mattress assortment and strong upholstery comps; Seasonal sales were driven by summer, lawn & garden, and Halloween departments; Consumables improved due to new everyday assortments and branded products[82](index=82&type=chunk) - Food sales decreased due to competitive pressures; Hard Home and Electronics, Toys, & Accessories declined due to intentionally narrowed assortments and space reduction from 'store of the future' conversions[84](index=84&type=chunk) [Gross Margin](index=22&type=section&id=Gross%20Margin_Q3) Q3 2019 gross margin rate decreased by 20 basis points to 39.7% due to a higher markdown rate - Gross margin dollars increased by **$4.2 million (0.9%)** to **$463.4 million** in Q3 2019[85](index=85&type=chunk) - Gross margin as a percentage of net sales decreased by **20 basis points** to **39.7%** in Q3 2019[85](index=85&type=chunk) - The decrease in gross margin rate was primarily due to a **higher markdown rate** from promotional activities, partially offset by a higher initial mark-up[85](index=85&type=chunk) [Selling and Administrative Expenses](index=22&type=section&id=Selling%20and%20Administrative%20Expenses_Q3) Q3 2019 S&A expenses were flat but decreased as a percentage of sales due to lower payroll and bonus expenses - Selling and administrative expenses decreased by **$0.1 million** to **$436.7 million** in Q3 2019[86](index=86&type=chunk) - As a percentage of net sales, S&A expenses decreased by **60 basis points** to **37.4%**[87](index=87&type=chunk) - Key decreases: store-related payroll (**$6.8M**), accrued bonus (**$2.6M**), corporate payroll (**$1.7M**), store repairs (**$1.7M**)[86](index=86&type=chunk) - Key increases: store-related occupancy costs (**$5.0M**), distribution and transportation (**$3.3M**), restructuring initiative costs (**$3.6M**), advertising (**$1.8M**)[86](index=86&type=chunk) [Depreciation Expense](index=23&type=section&id=Depreciation%20Expense_Q3) Q3 2019 depreciation expense increased by $2.9 million due to investments in the 'store of the future' concept - Depreciation expense increased by **$2.9 million** to **$34.8 million** in Q3 2019[89](index=89&type=chunk) - As a percentage of sales, depreciation expense increased by **20 basis points**[89](index=89&type=chunk) - The increase was driven by investments in the 'store of the future' concept (remodels and new stores), partially offset by extended estimated service lives for leasehold improvements, fixtures, and equipment[89](index=89&type=chunk) [Gain on Sale of Distribution Center](index=23&type=section&id=Gain%20on%20Sale%20of%20Distribution%20Center_Q3) A gain of $178.5 million was recognized in Q3 2019 from the sale of a California distribution center - A gain of **$178.5 million** was recorded in Q3 2019 from the sale of the Rancho Cucamonga, California distribution center[90](index=90&type=chunk) - Proceeds were used to pay down outstanding debt under the 2018 Credit Agreement and the remainder of the finance lease obligation for the corporate headquarters[90](index=90&type=chunk) [Interest Expense](index=23&type=section&id=Interest%20Expense_Q3) Q3 2019 interest expense increased by $2.3 million due to higher average borrowings and interest rates - Interest expense increased to **$5.4 million** in Q3 2019 from $3.1 million in Q3 2018[91](index=91&type=chunk) - The increase was due to higher total average borrowings (**$536.0 million** in Q3 2019 vs **$393.2 million** in Q3 2018) and increased interest rates[91](index=91&type=chunk) - Increased borrowings were driven by a higher starting debt balance and the new 2019 Term Note, primarily funding elevated capital expenditures[91](index=91&type=chunk) [Other Income (Expense)](index=23&type=section&id=Other%20Income%20(Expense)_Q3) Other income shifted to a net expense of $(0.3) million in Q3 2019 due to losses on diesel fuel derivatives - Other income (expense) was **$(0.3) million** in Q3 2019, compared to $0.1 million in Q3 2018[92](index=92&type=chunk) - The change was driven by losses on diesel fuel derivatives due to a slight increase in diesel fuel pricing trends[92](index=92&type=chunk) [Income Taxes](index=23&type=section&id=Income%20Taxes_Q3) The Q3 2019 effective tax rate was an expense of 22.9%, compared to a benefit of 48.1% in Q3 2018 - The effective income tax rate was an expense rate of **22.9%** in Q3 2019, compared to a benefit rate of **48.1%** in Q3 2018[93](index=93&type=chunk) - Key factors for the change include comparing income (2019) to a loss (2018) before taxes, a lower effective tax rate on the distribution center sale gain, and a decrease in favorable federal and state settlements[93](index=93&type=chunk) [YEAR-TO-DATE 2019 COMPARED TO YEAR-TO-DATE 2018](index=24&type=section&id=YEAR-TO-DATE%202019%20COMPARED%20TO%20YEAR-TO-DATE%202018) YTD 2019 net sales increased 2.1% and operating profit grew substantially, driven by a distribution center sale [Net Sales](index=24&type=section&id=Net%20Sales_YTD) YTD net sales increased 2.1% to $3,716.2 million, with comparable store sales growing by 0.9% Net Sales by Merchandise Category (YTD 2019 vs. YTD 2018) | Category | YTD 2019 Net Sales | YTD 2019 % of Total | YTD 2018 Net Sales | YTD 2018 % of Total | Change ($) | Change (%) | Comps (%) | |:-----------------------------|:-------------------|:--------------------|:-------------------|:--------------------|:-----------|:-----------|:----------| | Furniture | $1,031,357 | 27.7% | $941,022 | 25.8% | $90,335 | 9.6% | 7.0% | | Seasonal | $523,822 | 14.1% | $508,397 | 14.0% | $15,425 | 3.0% | 2.1% | | Soft Home | $606,397 | 16.3% | $585,850 | 16.1% | $20,547 | 3.5% | 2.2% | | Consumables | $581,925 | 15.7% | $573,215 | 15.7% | $8,710 | 1.5% | 1.3% | | Food | $530,970 | 14.3% | $549,576 | 15.1% | $(18,606) | (3.4)% | (3.7)% | | Hard Home | $243,584 | 6.6% | $271,916 | 7.5% | $(28,332) | (10.4)% | (10.9)% | | Electronics, Toys, & Accessories | $198,143 | 5.3% | $209,578 | 5.8% | $(11,435) | (5.5)% | (7.3)% | | **Net sales** | **$3,716,198** | **100.0%** | **$3,639,554** | **100.0%** | **$76,644**| **2.1%** | **0.9%** | - Furniture sales benefited from upholstery, mattresses, case goods, and lease-to-own finance offerings; Soft Home, Seasonal, and Consumables saw increases due to improved quality, assortment, value, and promotional activities[96](index=96&type=chunk) - Food sales declined due to competitive pressures; Hard Home and Electronics, Toys, & Accessories decreased due to intentional space reduction as part of 'store of the future' conversions and the liquidation of greeting cards[98](index=98&type=chunk) - For Q4 2019, comparable sales are expected to increase slightly, with net sales increasing by a greater amount due to new store openings[99](index=99&type=chunk) [Gross Margin](index=25&type=section&id=Gross%20Margin_YTD) YTD gross margin rate decreased by 40 basis points to 39.8% due to inventory impairment and higher markdowns - Gross margin dollars increased by **$18.1 million (1.2%)** to **$1,480.7 million** for YTD 2019[100](index=100&type=chunk) - Gross margin as a percentage of net sales decreased by **40 basis points** to **39.8%** for YTD 2019[100](index=100&type=chunk) - The decrease was primarily due to a **$6.0 million inventory impairment** in the greeting cards department and higher markdown rates from increased promotional activities[100](index=100&type=chunk) - For Q4 2019, the gross margin rate is expected to decrease due to absorbing tariff impacts and anticipated higher promotional selling[101](index=101&type=chunk) [Selling and Administrative Expenses](index=25&type=section&id=Selling%20and%20Administrative%20Expenses_YTD) YTD S&A expenses increased by $50.8 million, driven by restructuring costs and new lease accounting impacts - Selling and administrative expenses increased by **$50.8 million** to **$1,352.3 million** for YTD 2019[102](index=102&type=chunk) - As a percentage of net sales, S&A expenses increased by **60 basis points** to **36.4%**[102](index=102&type=chunk) - Key increases: transformational restructuring initiative costs (**$38.3M**), store-related occupancy costs (**$19.1M**), accrued bonus expense (**$9.6M**), California wage and hour claims (**$7.3M**), distribution and transportation expense (**$6.0M**), advertising expense (**$3.4M**)[102](index=102&type=chunk) - Key decreases: self-insurance costs (**$6.9M**), share-based compensation expense (**$5.8M**), store repairs and maintenance (**$5.7M**), store-related payroll (**$5.6M**)[102](index=102&type=chunk) - For Q4 2019, S&A expenses are anticipated to be higher than Q4 2018 due to bonus accruals and new California distribution center transition costs, partially offset by restructuring savings[103](index=103&type=chunk) [Depreciation Expense](index=26&type=section&id=Depreciation%20Expense_YTD) YTD depreciation expense increased by $6.7 million due to investments in stores and a new headquarters - Depreciation expense increased by **$6.7 million** to **$97.6 million** for YTD 2019[105](index=105&type=chunk) - As a percentage of sales, depreciation expense increased by **10 basis points**[105](index=105&type=chunk) - The increase was due to investments in the 'store of the future' concept and new headquarters, partially offset by extended estimated service lives for leasehold improvements, fixtures, and equipment[105](index=105&type=chunk) - Q4 2019 depreciation expense is expected to be higher than Q4 2018 due to continued investments and the opening of the Apple Valley, California distribution center[106](index=106&type=chunk) [Gain on Sale of Distribution Center](index=26&type=section&id=Gain%20on%20Sale%20of%20Distribution%20Center_YTD) A $178.5 million gain was recognized YTD 2019 from the sale of a California distribution center - A gain of **$178.5 million** was recorded for YTD 2019 from the sale of the Rancho Cucamonga, California distribution center[107](index=107&type=chunk) - The sale was in preparation for the opening of the new Apple Valley, California distribution center[107](index=107&type=chunk) [Interest Expense](index=26&type=section&id=Interest%20Expense_YTD) YTD interest expense increased by $6.6 million due to higher average borrowings and interest rates - Interest expense increased to **$13.7 million** for YTD 2019 from $7.1 million for YTD 2018[108](index=108&type=chunk) - The increase was due to higher average interest rates and increased average borrowings (**$490.3 million** in YTD 2019 vs **$300.0 million** in YTD 2018)[108](index=108&type=chunk) - Increased borrowings were driven by elevated capital expenditures for the 'store of the future' concept and equipment for the new California distribution center, plus the 2019 Term Note[108](index=108&type=chunk) - Q4 2019 interest expense is expected to be slightly higher than Q4 2018[109](index=109&type=chunk) [Other Income (Expense)](index=26&type=section&id=Other%20Income%20(Expense)_YTD) YTD other income shifted to a net expense of $(0.2) million due to changes in diesel fuel pricing trends - Other income (expense) was **$(0.2) million** for YTD 2019, compared to $0.7 million for YTD 2018[110](index=110&type=chunk) - The net increase in expense was driven by a change in diesel fuel pricing trends[110](index=110&type=chunk) [Income Taxes](index=26&type=section&id=Income%20Taxes_YTD) The YTD 2019 effective tax rate was 23.9%, a slight increase from 23.3% in the prior year - The effective income tax rate was **23.9%** for YTD 2019, compared to **23.3%** for YTD 2018[111](index=111&type=chunk) - Factors for the increase include decreased favorable federal/state settlements, absence of a prior-year Tax Cuts and Jobs Act adjustment, and higher nondeductible executive compensation[111](index=111&type=chunk) - This was partially offset by a lower effective income tax rate on the gain from the distribution center sale[111](index=111&type=chunk) [Capital Resources and Liquidity](index=27&type=section&id=Capital%20Resources%20and%20Liquidity) Liquidity is derived from operations and a $700 million credit facility, with $245.8 million available as of November 2, 2019 - Primary liquidity sources are cash flows from operations and the **$700 million** 2018 Credit Agreement[114](index=114&type=chunk) - As of November 2, 2019, **$447.3 million** was outstanding under the 2018 Credit Agreement, with **$245.8 million** available[114](index=114&type=chunk) - The company entered into a **$70 million** 2019 Term Note, secured by equipment at its new California distribution center[115](index=115&type=chunk) - The **$50 million** 2019 Share Repurchase Program was exhausted, acquiring approximately **1.3 million** common shares[116](index=116&type=chunk) - Cash dividends of **$0.30 per common share** were declared for Q4 2019, consistent with 2018[117](index=117&type=chunk) Cash Flow Components (YTD 2019 vs. YTD 2018) (in thousands) | Cash Flow Component | YTD 2019 | YTD 2018 | Change | |:----------------------------------------|:------------|:------------|:------------| | Net cash provided by operating activities | $80,548 | $40,420 | $40,128 | | Net cash used in investing activities | $(41,231) | $(281,033) | $239,802 | | Net cash (used in) provided by financing activities | $(23,557) | $251,375 | $(274,932) | - Operating cash flow increased due to higher net income and inventory inflows; investing cash flow decreased due to **$190.3 million** from property sales; financing cash flow shifted to a net use due to decreased debt proceeds and increased finance lease payments[119](index=119&type=chunk)[120](index=120&type=chunk)[121](index=121&type=chunk) [CRITICAL ACCOUNTING POLICIES AND ESTIMATES](index=29&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES%20AND%20ESTIMATES) The adoption of the new lease accounting standard (ASC 842) in Q1 2019 significantly impacted financial reporting - Financial statements require management estimates, judgments, and assumptions based on historical experience and current trends[123](index=123&type=chunk) - The company adopted ASU 2016-02, Leases (Topic 842), in Q1 2019, using the optional transition method and making a cumulative-effect adjustment[123](index=123&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=29&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to market risks from changes in interest rates and diesel fuel prices - The company is subject to market risk from changes in interest rates on its variable-rate borrowings under the 2018 Credit Agreement (**$447.3 million** outstanding at Nov 2, 2019)[125](index=125&type=chunk) - A **1% increase** in the variable interest rate could increase interest expense by approximately **$4.5 million**[125](index=125&type=chunk) - The company is also subject to cross-default provisions related to the synthetic lease for its new California distribution center, where a **1% increase** could affect rent expense by approximately **$1.5 million**[125](index=125&type=chunk) - Market risk from diesel fuel price changes is mitigated by derivative instruments (collars) covering **4.5 million gallons**[126](index=126&type=chunk) - A **10% difference** in the forward curve for diesel fuel prices could affect unrealized gains (losses) by approximately **$1.3 million**[127](index=127&type=chunk) [Item 4. Controls and Procedures](index=29&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of November 2, 2019 - Disclosure controls and procedures were evaluated and deemed **effective** as of November 2, 2019[128](index=128&type=chunk) - **No material changes** in internal control over financial reporting occurred during the most recent fiscal quarter[129](index=129&type=chunk) [Part II. Other Information](index=30&type=section&id=Part%20II.%20Other%20Information) [Item 1. Legal Proceedings](index=30&type=section&id=Item%201.%20Legal%20Proceedings) A discussion of certain litigated matters is provided in Note 8 to the consolidated financial statements - For a discussion of certain litigated matters, refer to Note 8 to the accompanying consolidated financial statements[131](index=131&type=chunk) [Item 1A. Risk Factors](index=30&type=section&id=Item%201A.%20Risk%20Factors) New material risk factors include reliance on foreign manufacturers and the adverse impact of international trade risks like tariffs - The company relies on foreign manufacturers, including China (**21%** of direct overseas purchases in 2018), for significant amounts of merchandise[133](index=133&type=chunk)[134](index=134&type=chunk) - International trade risks, such as increased shipping costs, import duties, quotas, currency fluctuations, and trade restrictions (tariffs), could **materially adversely affect** the business[134](index=134&type=chunk) - U.S. tariffs on Chinese imports (Lists 1 through 4) currently impact the **majority** of the company's products and components sourced from China[135](index=135&type=chunk)[137](index=137&type=chunk) - The company is evaluating mitigation strategies, including reviewing sourcing options, exploring first sale valuation, and filing exclusion requests, but the impact of tariffs remains **uncertain and potentially significant**[139](index=139&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=31&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company acquired 18,809 common shares to satisfy tax withholdings on vested employee stock units Shares Purchased for Tax Withholdings (September-November 2019) | Period | Total Number of Shares Purchased | Average Price Per Share | |:-------------------------------------|:---------------------------------|:------------------------| | September 1, 2019 - September 28, 2019 | 11 | $22.72 | | September 29, 2019 - November 2, 2019 | 7 | $21.99 | | Total | 18 | $22.45 | - In September and October 2019, **18,809 common shares** were acquired to satisfy minimum statutory income tax withholdings related to the vesting of restricted stock units and performance share units[140](index=140&type=chunk) [Item 3. Defaults Upon Senior Securities](index=31&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities - **No defaults** upon senior securities were reported[141](index=141&type=chunk) [Item 4. Mine Safety Disclosures](index=31&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) The company reported no mine safety disclosures - **No mine safety disclosures** were reported[141](index=141&type=chunk) [Item 5. Other Information](index=31&type=section&id=Item%205.%20Other%20Information) The company reported no other information - **No other information** was reported[141](index=141&type=chunk) [Item 6. Exhibits](index=32&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including officer certifications and XBRL documents - Exhibits include certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 (31.1, 31.2, 32.1, 32.2)[143](index=143&type=chunk) - XBRL Taxonomy Definition, Presentation, Labels, Calculation, and Schema Linkbase Documents (101.Def, 101.Pre, 101.Lab, 101.Cal, 101.Sch) and the Cover Page Interactive Data File (104) are also filed[143](index=143&type=chunk) [Signature](index=32&type=section&id=Signature) The report was duly signed by the Executive Vice President, Chief Financial and Administrative Officer - The report was signed by Jonathan E Ramsden, Executive Vice President, Chief Financial and Administrative Officer, on **December 11, 2019**[145](index=145&type=chunk)

Big Lots, Inc. (NYSE:BIG) Q3 2019 Results Conference Call December 6, 2019 8:00 AM ET Company Participants Andy Regrut - VP, IR Bruce Thorn - President and CEO Lisa Bachmann - EVP, CMO and COO Jonathan Ramsden - EVP, CFO and CAO Conference Call Participants Brad Thomas - KeyBanc Capital Markets Peter Keith - Piper Jaffray Joseph Feldman - Telsey Advisory Group Renato Basanta - Barclays Paul Trussell - Deutsche Bank Jason Haas - Bank of America Merrill Lynch Operator Greetings and welcome to the Big Lots Q3 ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended August 3, 2019 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission File Number 001-08897 BIG LOTS INC (Exact name of registrant as specified in its charter) Ohio 06-1119097 (State or ...

Big Lots, Inc. (NYSE:BIG) Q2 2019 Earnings Conference Call August 30, 2019 8:00 AM ET Â Â Company Participants Andy Regrut - Vice President, Investor Relations Bruce Thorn - President and Chief Executive Officer Lisa Bachmann - EVP, Chief Merchandising and Operating Officer Jonathan Ramsden - EVP, Chief Financial and Administrative Officer Conference Call Participants Brad Thomas - KeyBanc Capital Markets Joseph Feldman - Telsey Advisory Group Paul Trussell - Deutsche Bank Bobby Friedner - Piper Jaffray Chr ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended May 4, 2019 or o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission File Number 1-8897 BIG LOTS INC (Exact name of registrant as specified in its charter) Ohio 06-1119097 (State or Other ...

Financial Data and Key Metrics Changes - Total sales for Q1 2019 were $1.296 billion, an increase of 2.2% compared to $1.268 billion in the previous year [30] - Comparable store sales increased by 1.5%, aligning with guidance for low single-digit growth [30] - Adjusted EPS for Q1 was $0.92, exceeding the guidance range of $0.65 to $0.75 [32] - Adjusted gross margin rate was 40.5%, up 10 basis points from the previous year [33] - Adjusted income for the quarter was $37 million, compared to $40 million in the same period last year [32] Business Line Data and Key Metrics Changes - Furniture sales increased by mid-single digits, driven by case goods, upholstery, and mattresses [17] - Soft Home also saw mid-single digit growth, marking 21 consecutive quarters of such performance [21] - Seasonal products experienced mid-single digit growth, with sales accelerating in March and April [22] - Consumables grew by low single digits, while food sales declined due to intense competition [24][25] - Hard Home and Electronics, Toys & Accessories categories saw planned declines as the company shifted focus to more profitable categories [26] Market Data and Key Metrics Changes - The company opened nine new stores and closed six, resulting in a total of 1,404 stores [37] - Inventory levels increased to $927 million, up from $850 million last year, attributed to tariffs and strategic inventory commitments [36] - The e-commerce business had its best quarter since launching, contributing to overall sales growth [15] Company Strategy and Development Direction - The company is focused on the "Store of the Future" initiative, remodeling over 200 stores and opening approximately 50 new stores in this format [54] - The "Operation Northstar" project aims to reposition the business for long-term success through various growth work streams [51] - The company is transitioning its in-store mattress assortments to Sealy, aiming to enhance product quality and customer perception [19][20] - The loyalty program saw an increase to 17.7 million active members, a 16% year-over-year growth [14] Management's Comments on Operating Environment and Future Outlook - Management noted that the delayed income tax refunds negatively impacted Q1 sales but saw a rebound in March and April [89] - The company expects adjusted income for Q2 to be in the range of $0.35 to $0.45 per diluted share, reflecting a cautious outlook due to weather impacts [43] - Management is optimistic about the performance of new stores and the ongoing success of the Store of the Future initiative [96] Other Important Information - The company plans to increase capital expenditures to $77 million for strategic investments, including the Store of the Future and a new distribution center [38] - The board declared a quarterly cash dividend of $0.30 per share, payable on June 28, 2019 [42] Q&A Session Summary Question: Can you provide more color on expenses and the $100 million cost target? - Management expressed satisfaction with Q1 expense performance, noting good control over store operations and other controllable expenses [62][64] Question: What prompted the decision to change the mattress category to Sealy? - The company highlighted the strong brand recognition of Sealy and its innovative products as key reasons for the transition [68][69] Question: How are merchandise categories being evaluated for potential shifts? - Management confirmed a focus on Furniture, Soft Home, and Seasonal categories while also addressing the importance of food and consumables [70][72] Question: What impact do tariffs have on pricing and consumer reaction? - The company acknowledged that tariffs have influenced pricing strategies, but efforts are being made to manage costs and maintain value [74][102] Question: Can you provide an update on the buy online, pickup in store rollout? - The pilot for BOPIS has launched successfully, with expectations for a full rollout by the end of summer [86][87]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended February 2, 2019 or o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission File Number 1-8897 BIG LOTS, INC. (Exact name of registrant as specified in its charter) Ohio 06-1119097 (State or other ...

Financial Data and Key Metrics Changes - Net sales for Q4 2018 were $1.599 billion, a decrease from $1.641 billion in the previous year, attributed to a lower store count and an extra week of operations in last year's results [22][24] - Comparable store sales increased by 3.1%, exceeding guidance of flat to plus 2% [22][24] - Income for Q4 was $108 million or $2.68 per diluted share, surpassing the previously communicated EPS guidance of $2.20 to $2.40 [23][24] - Gross margin rate for Q4 was 41.2%, a decline of 40 basis points from the previous year [24][25] Business Line Data and Key Metrics Changes - Six out of seven merchandising categories posted positive comps in Q4, with Soft Home leading at high single-digit growth [14][15] - Furniture also saw high single-digit growth across all departments, driven by new assortments and lease-to-purchase business [15] - Consumables achieved low single-digit growth, marking the best quarterly comp in four years, driven by health and beauty and holiday gifting [16] - Food experienced its first positive comp in three years, aided by event-driven assortments [18] Market Data and Key Metrics Changes - Sales trends accelerated in December and January, with both months up comfortably in the mid-single digits [23] - The first year after store remodels showed sales growth in the high single to low double-digit range in major markets [11] Company Strategy and Development Direction - The company is focusing on enhancing its current strategy and launching new initiatives to accelerate sales and reduce costs [32][38] - Key platforms for growth include strengthening the home category, increasing traffic drivers, and focusing on life's occasions [37][40] - The acquisition of Broyhill is expected to enhance the company's furniture offerings and quality perception [38][77] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the sales momentum and the impact of tax refund delays on purchasing behavior [67][68] - The company anticipates a low single-digit sales increase for fiscal 2019, with adjusted income expected to decrease by 7% to 12% [47][48] - Management is committed to a $100 million cost reduction over the next three years to fund growth initiatives [51][53] Other Important Information - The company ended fiscal 2018 with $970 million in inventory, a 12% increase per store compared to the previous year [27] - Capital expenditures for fiscal 2018 were approximately $232 million, with plans for $260 million to $270 million in 2019 [28][57] - A quarterly cash dividend of $0.30 per common share was declared, payable on April 5, 2019 [30][59] Q&A Session Summary Question: Can you provide insight on the treasure hunt concept? - Management noted that customers enjoy the treasure aspect more than the hunt, indicating a positive reception to the Store of the Future format [62] Question: How has the delayed tax refund impacted trends? - The delay affected big-ticket purchases, but management remains optimistic about March and April trends [66][68] Question: What contribution did the Store of the Future make to Q4 comps? - The Store of the Future contributed slightly less than a full point to Q4 comps, with expectations for at least a full point in 2019 [70] Question: What are the expectations for SG&A dollars? - SG&A is expected to grow mid to high singles in Q1 and mid-singles for the year, with various factors influencing this growth [72] Question: What categories show the most potential for growth? - Management sees significant opportunities in the home destination and furniture categories, along with traffic drivers in food and consumables [74]