Big Lots Reports Second Quarter Adjusted Consolidated Income From Continuing Operations of $0.31 Per Diluted Share

COLUMBUS, Ohio, Aug. 30, 2013 /PRNewswire/ -- Big Lots, Inc. (NYSE: BIG) today reported consolidated income from continuing operations of $18.1 million, or $0.31 per diluted share, for the second quarter of fiscal 2013 ended August 3, 2013. This result includes a non-recurring, after tax benefit of $0.4 million, or $0.01 per diluted share, associated with the settlement of a store-related legal contingency. Excluding this non-recurring benefit, adjusted consolidated income from continuing operations totaled $17.7 million, or $0.31 per diluted share (non-GAAP), which compares favorably to our guidance issued on May 30, 2013, of $0.17 to $0.27 per diluted share. Consolidated income from continuing operations for the second quarter of fiscal 2012 was $22.1 million, or $0.36 per diluted share. Consolidated net sales for the second quarter of fiscal 2013 increased 0.6% to $1,225.6 million, compared to $1,218.0 million for the same period of fiscal 2012. Consolidated comparable store sales decreased 1.9% for the quarter, slightly better than our guidance for a decrease of 2% to 4%.

For the year-to-date period ended August 3, 2013, income from continuing operations totaled $50.5 million, or $0.87 per diluted share. Excluding the non-recurring store-related legal settlement activity on a year-to-date basis of $ 2.8 million, after tax, or $0.05 per diluted share, adjusted consolidated income from continuing operations for the year-to-date period ended August 3, 2013 totaled $53.2 million, or $0.92 per diluted share (non-GAAP). This result compared to adjusted consolidated income from continuing operations of $66.3 million, or $1.05 per diluted share (non-GAAP), for the same period in fiscal 2012. Discontinued operations activity was minimal for the second quarter and year-to-date period of fiscal 2013 and the corresponding periods in fiscal 2012. 

SECOND QUARTER HIGHLIGHTS

• Adjusted consolidated income from continuing operations of $0.31 per diluted share (non-GAAP), compared to consolidated income from continuing operations of $0.36 per diluted share last year
• Consolidated net sales of $1.2 billion, an increase of 0.6% compared to last year
• Opened 13 stores in the U.S. and rebranded 2 stores in Canada to Big Lots stores

Second Quarter Results

U.S. Operations

Net sales for U.S. operations for the second quarter of fiscal 2013 increased 0.4% to $1,187.7 million, compared to $1,183.0 million for the same period of fiscal 2012. Comparable store sales for U.S. stores open at least fifteen months decreased 2.2% for the quarter, consistent with our guidance of a 2% to 4% decline. Adjusted income from continuing U.S. operations totaled $21.5 million, or $0.37 per diluted share (non-GAAP), compared to our guidance of $0.27 to $0.32 per diluted share (non-GAAP) and income from continuing U.S. operations of $25.4 million, or $0.42 per diluted share (non-GAAP), for the same period of fiscal 2012.

Canadian Operations

Net sales for Canadian operations for the second quarter of fiscal 2013 increased 8.2% to $37.9 million, and comparable stores sales increased 8.3%, both consistent with our previously communicated guidance. For the second quarter of fiscal 2013, we incurred a net loss of $3.8 million, or $0.07 per diluted share (non-GAAP), compared to our guidance of a net loss of $3 to $6 million, or $0.05 to $0.10 per diluted share (non-GAAP), and a net loss of $3.3 million, or $0.05 per diluted share (non-GAAP) for the same period of fiscal 2012.

Inventory and Cash Management

On a consolidated basis, Inventory ended the second quarter of fiscal 2013 at $914 million, compared to $881 million for the second quarter of fiscal 2012. The growth in inventory was driven by an increase in U.S. store count, and a 1% increase in inventory per store in our U.S. stores.

We ended the second quarter of fiscal 2013 with $64 million of Cash and Cash Equivalents and $142 million of borrowings under our credit facility compared to $62 million of Cash and Cash Equivalents and $243 million of borrowings under our credit facility as of the end of the second quarter of fiscal 2012. Our use of cash generated by our U.S. operations during the last 12 months was focused on repaying debt, share repurchase activity, and funding our Canadian operations.

2013 OUTLOOK

• Updates outlook for fiscal 2013 adjusted consolidated income from continuing operations to $2.80 to $3.05 per diluted share (non-GAAP), compared to fiscal 2012 adjusted consolidated income from continuing operations of $2.99 per diluted share (non-GAAP)
• Outlook for Cash Flow of $175 million (defined as operating activities less investing activities)

Based on operating results for the first two quarters and our expectations for the third and fourth quarters of fiscal 2013, we now estimate our fiscal 2013 adjusted consolidated income from continuing operations to be in the range of $2.80 to $3.05 per diluted share (non-GAAP, see reconciliation below) compared to adjusted consolidated income from continuing operations of $2.99 per diluted share for fiscal 2012 (non-GAAP). This outlook excludes the previously mentioned non-recurring activity from the first and second quarters, and is based on estimated consolidated net sales in the range of flat to +1% for fiscal 2013 and consolidated comparable store sales in the range of flat to -1% (see table below). We estimate this financial performance will result in cash flow of approximately $175 million in fiscal 2013.

U.S. Operations

We are forecasting adjusted income from continuing U.S. operations to be in the range of $3.05 to $3.20 per diluted share (non-GAAP), compared to fiscal 2012 adjusted income from continuing U.S. operations of $3.21 per diluted share (non-GAAP). This outlook excludes the previously mentioned non-recurring activity from the first and second quarters, and is based on estimated net sales for U.S. operations in the range of flat to +1% and comparable store sales for U.S. operations in the range of flat to -1%.

Canadian Operations

Canadian net sales are expected to be in the range of $165 to $173 million for fiscal 2013, resulting in a net loss in the range of $9 to $14 million, or $0.15 to $0.25 per diluted share (non-GAAP). This compares to a net loss for fiscal 2012 of $13.5 million, or $0.22 per diluted share (non-GAAP). Our outlook for fiscal 2013 is based on a Canadian net sales increase in the range of 7% to 12% and a comparable store sales increase in the range of 7% to 12%. From a real estate perspective, we expect to open 2 new stores in Canada under the Big Lots banner during fiscal 2013.

Conference Call/Webcast

We will host a conference call today at 8:00 a.m. to discuss our financial results for the second quarter and provide commentary on our outlook for fiscal 2013. We invite you to listen to the webcast of the conference call through the Investor Relations section of our website (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 (www.biglots.com) beginning two hours after the call ends and will remain available through midnight on Friday, September 13. A replay of the call will be available beginning today at 12:00 noon through September 13 at midnight by dialing: 1.888.203.1112 (United States and Canada) or 1.719.457.0820 (International). The Replay Confirmation Code is 6565635.  All times are Eastern Time.

Big Lots is North America's largest broadline closeout retailer. As of the end of the second quarter of fiscal 2013, we operated 1,514 BIG LOTS stores in the 48 contiguous United States, 3 BIG LOTS stores in Canada, and 76 LIQUIDATION WORLD and LW stores in Canada. Wholesale operations are conducted through BIG LOTS WHOLESALE, CONSOLIDATED INTERNATIONAL, and WISCONSIN TOY and with online sales at www.biglotswholesale.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, the 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
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, operating profit rate, income tax expense, effective income tax rate, income from continuing operations, net income, diluted earnings per share from continuing operations, and diluted earnings per share for both the second quarter of 2013 and the year-to-date 2013 (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, 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 (non-GAAP financial measures); and (2) gross margin, gross margin rate, operating profit, operating profit rate, income tax expense, effective income tax rate, income from continuing operations, net income, diluted earnings per share from continuing operations, and diluted earnings per share for the year-to-date 2012 (GAAP financial measures) to adjusted gross margin, adjusted gross margin 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 (non-GAAP financial measures).

The above adjusted selling and administrative expenses, adjusted selling and administrative expense rate, adjusted operating profit, adjusted operating profit rate, adjusted income tax expense, adjusted effective income tax rate, adjusted income from continuing operations, adjusted net income, adjusted diluted earnings per share from continuing operations, and adjusted diluted earnings per share are "non-GAAP financial measures" as that term is defined by Rule 101 of Regulation G (17 CFR Part 244) and Item 10 of Regulation S-K (17 CFR Part 229). These non-GAAP financial measures exclude from the most directly comparable financial measures calculated and presented in accordance with accounting principles generally accepted in the United States of America ("GAAP") a pretax adjustment for settlement of a legal matter of $677 ($430, net of tax).

The above adjusted selling and administrative expenses, adjusted selling and administrative expense rate, adjusted operating profit, adjusted operating profit rate, adjusted income tax expense, adjusted effective income tax rate, adjusted income from continuing operations, adjusted net income, adjusted diluted earnings per share from continuing operations, and adjusted diluted earnings per share are "non-GAAP financial measures" as that term is defined by Rule 101 of Regulation G (17 CFR Part 244) and Item 10 of Regulation S-K (17 CFR Part 229). These non-GAAP financial measures exclude from the most directly comparable financial measures calculated and presented in accordance with accounting principles generally accepted in the United States of America ("GAAP") a pretax accrual of a loss contingency related to a legal matter of $5,052 ($3,190, net of tax) combined with a pretax adjustment for settlement of the related legal matter, which resulted in a reduction of the accrual of $677 ($430, net of tax) for a total adjustment of $4,375 ($2,760, net of tax).

The above adjusted gross margin, adjusted gross margin rate, adjusted operating profit, adjusted operating profit rate, adjusted income tax expense, adjusted effective income tax rate, adjusted income from continuing operations, adjusted net income, adjusted diluted earnings per share from continuing operations, and adjusted diluted earnings per share are "non-GAAP financial measures" as that term is defined by Rule 101 of Regulation G (17 CFR Part 244) and Item 10 of Regulation S-K (17 CFR Part 229). These non-GAAP financial measures exclude from the most directly comparable financial measures calculated and presented in accordance with accounting principles generally accepted in the United States of America ("GAAP") a pretax charge for a change in an accounting principle associated with our implementation of new inventory management information systems of $5,574 ($3,388, net of tax).

Our management believes that the disclosure of these non-GAAP financial measures provides useful information to investors because the non-GAAP financial measures present an alternative and more relevant method for measuring our operating performance, excluding special items included in the most directly comparable GAAP financial measures, that management believes is more indicative of our on-going operating results and financial condition. Our management uses these non-GAAP financial measures, along with the most directly comparable GAAP financial measures, in evaluating our operating performance.

SOURCE Big Lots, Inc.