2016 ANNUAL REPORT
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OUR MISSION
Guided by an understanding of our core
customer Jennifer, our mission is simple:
Surprises in every aisle, every day.
OUR VISION
Recognized for providing an outstanding
shopping experience for our customers,
valuing and developing our associates, and
creating growth for our shareholders.
OUR CORE
CUSTOMER: JENNIFER
Jennifer is one of the most
popular names in our
Big Lots Buzz Club Rewards®
program. So it’s the name
we’ve chosen to represent
our target audience —the
person most likely to shop
often at Big Lots!
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DEAR SHAREHOLDERS
David J. Campisi | (cid:38)(cid:75)(cid:76)(cid:72)(cid:73) (cid:40)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:89)(cid:72) (cid:50)(cid:605)(cid:70)(cid:72)(cid:85) and President
Big Lots reached an important milestone in 2016, one many companies
may never experience. We celebrated our 30-year anniversary listed on the
New York Stock Exchange, highlighted by our Executive Leadership Team
closing the NYSE at a bell ringing ceremony in late September. It was a thrill
for me and a good reminder of the importance of staying relevant in today’s
highly competitive retail environment.
In the most recent year, many well-known retailers closed stores or ceased operations altogether despite a
history of success and growth. I believe this highlights the ever-changing competitive landscape in brick-and-
mortar retail today. It further emphasizes how critical it is to evolve, adapt, and keep pace with the industry as
it reacts to the pressures from new technologies or shifts in customer buying trends. Companies such as ours
can’t “hope” to stay relevant … hope is not a strategy. Our strategy, which we call the SPP or Strategic Planning
Process, is built on the three pillars of Jennifer (our target customer), our Associates, and our Shareholders.
Over the last three years, the SPP focused on the fundamentals of our business — stabilizing and improving the
consistency of our operating performance by:
• Fixing the merchandising model through “Edit to Amplify” and QBFV (Quality, Brand, Fashion, Value)
• Increasing marketing messaging on digital channels and social media, where Jennifer gets her information
• Developing and launching an e-commerce platform—because Jennifer told us online shopping is important to her
• Strengthening in-store execution to improve the shopping experience for Jennifer through the tools of the
Store Revolution
• Investing in and developing our most valuable asset— our associates—35,000 strong across the country
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expense growth below sales growth
Big Lots, Inc. | 2016 Annual Report
Our results over the three-year period suggest the
strategy is working with 12 consecutive quarters of
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operating margin expansion, record EPS in 2016,
and the return of over $800 million of cash to you,
our shareholders.
I am very proud of what has been accomplished
and our team’s ability to deliver on what we said we
would do. But I believe we are still at the beginning
of the beginning … and staying relevant for the next
30 years requires raising our game (cid:87)(cid:82) (cid:71)(cid:76)(cid:909)(cid:72)(cid:85)(cid:72)(cid:81)(cid:87)(cid:76)(cid:68)(cid:87)(cid:72) (cid:87)(cid:75)(cid:72)
Big Lots shopping experience from any other in retail.
OWNABLE AND WINNABLE CATEGORIES
Our merchandising strategy has evolved to a clear
focus on our OWNABLE and WINNABLE merchandise
categories. The disciplines of “Edit to Amplify” and
QBFV have been fully integrated into our culture, and
the teams are looking to the future and how we will
go to market, change, and stay relevant.
Ownable
The OWNABLE categories of Furniture and Seasonal
(Lawn & Garden and Christmas Trim) create relevance
with trend-right, tasteful assortments serving as
a destination for Jennifer. We have meaningful
opportunities for sales growth potential in the future,
market share gains, and an overall enhancement to
our brand image. For example, the Bigger, Better
Furniture Department has new choices in upholstery
and mattresses, furniture vignettes, and lifestyle
photography displaying assortments with decorating
solutions from multiple merchandise categories, a
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and an extended warranty program through the Big
Coverage Plan. Jennifer has responded positively
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undertaking for our team, and I truly appreciate the
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was involved and contributed.
Winnable
The WINNABLE categories of Soft Home, Food,
and Consumables allow us to be relevant with an
enhanced quality and value message. We recognize
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assortments or expertise in closeouts, giving us
sustainable advantages to “win” in each.
BRAND IDENTITY
It pains me to hear friends or colleagues refer to our
Company with brand names from the past … Odd
Lots, Pic 'N' Save, and Mac Frugal’s, just to name a
few. They represent a historical paradigm that doesn’t
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improvements and strategic evolution have not
fully resonated with customers. For instance, even
today, many Jennifers are surprised to learn we sell
Furniture —an OWNABLE category and our largest
business. This is a huge opportunity and a good
example of why we are still at the beginning of
the beginning. We engaged the help of an outside
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understanding of Jennifer and how she shops, and
help us understand what she
thinks about Big Lots. This is not
just retail speak… it’s about how
we talk to her, how we create an
environment where she is part of
our family, and how we make an
emotional connection with her.
STORE OF THE FUTURE
In addition, we’ve enlisted the
talents of a second company
to further our thinking on in-
store design and the shopping
experience for Jennifer.
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crowded, overstored, retail environment, and we
believe there is an opportunity to create a fun,
engaging shopping experience. The two companies
are working together to help us understand the
“store of the future” and what it might look like.
We know we want to “showcase” our OWNABLE
and WINNABLE merchandise categories, but we’re
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BIG experience and enhance our brand identity. Our
goal is to test ideas in a couple of markets in 2017
and measure the response and feedback from our
boss — Jennifer. Not all stores are created equal.
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etc. We’re looking for options to understand where
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sales, and category standpoint. The tests will be read
carefully before moving forward. It’s a multi-multi-
year project, but we’re excited to get started.
IT’S FOR THE KIDS
Early in the development of our SPP, the
Big Lots Foundation was launched with a goal
of strengthening the Company’s philanthropic
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The Foundation focuses on four key needs of our
community: hunger, housing, healthcare, and
education. We believe this focus aligns with our
Company values and supports basic needs of
families and children. In just two short years, the
passion of our associates and customers, along
with the generosity of our supplier partners, has
enabled us to raise over $10 million through national
point of sale campaigns and our Big Lots Golf Classic.
Since its launch, our Foundation has supported
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including such organizations as Nationwide
Children’s Hospital, YWCA, Mid-Ohio Food Bank,
KIPP Columbus, and the American Heart Association
to name just a few. But our most distinguishing
Foundation moment to date occurred in August 2016
when we announced a $50 million commitment
to Nationwide Children’s Hospital to support their
ground-breaking plans for research, treatment, and
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to support pediatric behavioral health and with our
support, the Big Lots Behavioral Health Pavilion at
Nationwide Children’s Hospital is slated to open in
early 2020.
ONE TEAM, ONE GOAL
We have worked very hard to create an environment
that attracts, engages, and develops the best and
brightest talent in the industry. Again this year, we
completed our annual Associate Survey to measure
progress and create a path to building upon
our already strong company culture. The team’s
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last year’s record response and well above retail
norms. Our engagement scores continue to rise, and
the Company’s culture has never been stronger.
I truly appreciate the candor and transparency from
the team. Their honest and direct feedback allows
us to improve with the goal of making Big Lots an
employer of choice. It’s clear our associates are highly
engaged and understand the strategy.
I want to thank our associates in our stores,
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are “One Team with One Goal,” and 2016 is another
great example of how we are winning together. And
to our shareholders, I want to thank you for your
support on behalf of the entire Big Lots organization,
our Board of Directors, and our associates.
y
Sincerely,
David J. Campisi
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Big Lots, Inc. | 2016 Annual Report
FINANCIAL HIGHLIGHTS
(Unaudited Adjusted Results)
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2016
FISCAL YEAR
2015
2014
Earnings from
continuing operations
per share – diluted (a)
EARNINGS DATA
Net sales
Net sales increase
$5,200,439
$5,190,582
$5,177,078
0.2%
0.3%
1.0%
4
6
.
3
$
Income from continuing operations (a)
$167,162
$153,539
$136,661
Income from continuing operations increase (decrease) (a)
Earnings from continuing operations per share - diluted (a)
Earnings from continuing operations per share -
diluted increase (a)
Dividends declared per share (e)
Average diluted common shares outstanding (000's)
Gross margin - % of net sales
Selling and administrative expenses - % of net sales (a)
Depreciation expense - % of net sales
(cid:50)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74) (cid:83)(cid:85)(cid:82)(cid:564)(cid:87) (cid:16) (cid:8) (cid:82)(cid:73) (cid:81)(cid:72)(cid:87) (cid:86)(cid:68)(cid:79)(cid:72)(cid:86) (a)
Non-operating expense, including interest - % of net sales
Income from continuing operations - % of net sales (a)
8.9%
$3.64
20.9%
$0.84
45,974
40.4%
32.8%
2.3%
5.2%
(0.1)%
3.2%
12.4%
$3.01
22.4%
$0.76
50,964
39.8%
32.6%
2.4%
4.9%
(0.2)%
3.0%
(3.7)%
$2.46
0.4%
$0.51
55,552
39.5%
32.8%
2.3%
4.3%
(0.0)%
2.6%
BALANCE SHEET DATA AND FINANCIAL RATIOS
Cash and cash equivalents
Inventories
Property and equipment - net
Total assets
Borrowings under bank credit facility
Shareholders’ equity
Working capital
Current ratio
Inventory turnover
Bank borrowings to total capitalization
Return on assets - continuing operations (a)
Return on invested capital - continuing operations (a)
CASH FLOW DATA
Cash provided by operating activities (b)
Cash used in investing activities (c)
(cid:38)(cid:68)(cid:86)(cid:75) (cid:565)(cid:82)(cid:90) (d)
Cash paid for dividends (e)
$51,164
858,689
525,851
$54,144
849,982
559,924
$52,261
851,669
550,555
1,607,707
1,640,370
1,635,891
106,400
650,630
$315,784
1.5
3.5
14.1%
10.3%
21.7%
$311,925
(84,701)
227,224
(38,466)
62,300
720,470
62,100
789,550
$315,984
$411,446
1.5
3.5
8.0%
9.4%
18.8%
1.7
3.5
7.3%
8.1%
14.9%
$342,352
(113,193)
229,159
(38,530)
$318,562
(90,749)
227,813
(27,828)
Cash used in share repurchase programs
$(250,000)
$(200,000)
$(250,000)
STORE DATA
(cid:54)(cid:87)(cid:82)(cid:85)(cid:72)(cid:86) (cid:82)(cid:83)(cid:72)(cid:81) (cid:68)(cid:87) (cid:72)(cid:81)(cid:71) (cid:82)(cid:73) (cid:87)(cid:75)(cid:72) (cid:564)(cid:86)(cid:70)(cid:68)(cid:79) (cid:92)(cid:72)(cid:68)(cid:85)
Comparable store sales increase
Average sales per store
Gross square footage (000's)
Selling square footage (000's)
Decrease in selling square footage
Average selling square footage per store
1,432
0.9%
$3,610
44,570
31,519
(0.8)%
22,011
1,449
1.8%
$3,569
44,914
31,775
(0.7)%
21,929
1,460
1.8%
$3,506
45,134
32,006
(2.2)%
21,922
(cid:11)(cid:68)(cid:12)(cid:3)(cid:55)(cid:75)(cid:76)(cid:86) (cid:76)(cid:87)(cid:72)(cid:80) (cid:76)(cid:86) (cid:86)(cid:75)(cid:82)(cid:90)(cid:81) (cid:72)(cid:91)(cid:70)(cid:79)(cid:88)(cid:71)(cid:76)(cid:81)(cid:74) (cid:87)(cid:75)(cid:72) (cid:76)(cid:80)(cid:83)(cid:68)(cid:70)(cid:87) (cid:82)(cid:73) (cid:70)(cid:72)(cid:85)(cid:87)(cid:68)(cid:76)(cid:81) (cid:76)(cid:87)(cid:72)(cid:80)(cid:86) (cid:73)(cid:82)(cid:85) (cid:564)(cid:86)(cid:70)(cid:68)(cid:79) (cid:92)(cid:72)(cid:68)(cid:85)(cid:86) (cid:21)(cid:19)(cid:20)(cid:25) (cid:68)(cid:81)(cid:71) (cid:21)(cid:19)(cid:20)(cid:24)(cid:17) (cid:36) (cid:85)(cid:72)(cid:70)(cid:82)(cid:81)(cid:70)(cid:76)(cid:79)(cid:76)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81) (cid:82)(cid:73) (cid:87)(cid:75)(cid:72)
(cid:3)
(cid:3)
(cid:71)(cid:76)(cid:909)(cid:72)(cid:85)(cid:72)(cid:81)(cid:70)(cid:72) (cid:69)(cid:72)(cid:87)(cid:90)(cid:72)(cid:72)(cid:81) (cid:42)(cid:36)(cid:36)(cid:51) (cid:68)(cid:81)(cid:71) (cid:87)(cid:75)(cid:72) (cid:81)(cid:82)(cid:81)(cid:16)(cid:42)(cid:36)(cid:36)(cid:51) (cid:564)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79) (cid:80)(cid:72)(cid:68)(cid:86)(cid:88)(cid:85)(cid:72)(cid:86) (cid:83)(cid:85)(cid:72)(cid:86)(cid:72)(cid:81)(cid:87)(cid:72)(cid:71) (cid:76)(cid:81) (cid:87)(cid:75)(cid:76)(cid:86) (cid:87)(cid:68)(cid:69)(cid:79)(cid:72) (cid:73)(cid:82)(cid:85) (cid:564)(cid:86)(cid:70)(cid:68)(cid:79) (cid:92)(cid:72)(cid:68)(cid:85)(cid:86) (cid:21)(cid:19)(cid:20)(cid:25) (cid:68)(cid:81)(cid:71)
(cid:21)(cid:19)(cid:20)(cid:24) (cid:76)(cid:86) (cid:86)(cid:75)(cid:82)(cid:90)(cid:81) (cid:82)(cid:81) (cid:87)(cid:75)(cid:72) (cid:73)(cid:82)(cid:79)(cid:79)(cid:82)(cid:90)(cid:76)(cid:81)(cid:74) (cid:83)(cid:68)(cid:74)(cid:72)(cid:17)
(b)(cid:3)(cid:3)(cid:918)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:72)(cid:86) (cid:71)(cid:72)(cid:83)(cid:85)(cid:72)(cid:70)(cid:76)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81) (cid:68)(cid:81)(cid:71) (cid:68)(cid:80)(cid:82)(cid:85)(cid:87)(cid:76)(cid:93)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81) (cid:82)(cid:73) (cid:7)(cid:20)(cid:19)(cid:27)(cid:15)(cid:22)(cid:20)(cid:24)(cid:15) (cid:7)(cid:20)(cid:19)(cid:27)(cid:15)(cid:19)(cid:24)(cid:23)(cid:15) (cid:68)(cid:81)(cid:71) (cid:7)(cid:20)(cid:19)(cid:24)(cid:15)(cid:27)(cid:23)(cid:28) (cid:73)(cid:82)(cid:85) (cid:564)(cid:86)(cid:70)(cid:68)(cid:79) (cid:92)(cid:72)(cid:68)(cid:85)(cid:86) (cid:21)(cid:19)(cid:20)(cid:25)(cid:15) (cid:21)(cid:19)(cid:20)(cid:24)(cid:15) (cid:68)(cid:81)(cid:71)
(cid:3)
(cid:21)(cid:19)(cid:20)(cid:23)(cid:15) (cid:85)(cid:72)(cid:86)(cid:83)(cid:72)(cid:70)(cid:87)(cid:76)(cid:89)(cid:72)(cid:79)(cid:92)(cid:17)(cid:3)
(c)(cid:3) (cid:918)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:72)(cid:86) (cid:70)(cid:68)(cid:83)(cid:76)(cid:87)(cid:68)(cid:79) (cid:72)(cid:91)(cid:83)(cid:72)(cid:81)(cid:71)(cid:76)(cid:87)(cid:88)(cid:85)(cid:72)(cid:86) (cid:82)(cid:73) (cid:7)(cid:27)(cid:28)(cid:15)(cid:26)(cid:27)(cid:21)(cid:15) (cid:7)(cid:20)(cid:21)(cid:24)(cid:15)(cid:28)(cid:27)(cid:28)(cid:15) (cid:68)(cid:81)(cid:71) (cid:7)(cid:28)(cid:22)(cid:15)(cid:23)(cid:25)(cid:19) (cid:73)(cid:82)(cid:85) (cid:564)(cid:86)(cid:70)(cid:68)(cid:79) (cid:92)(cid:72)(cid:68)(cid:85)(cid:86) (cid:21)(cid:19)(cid:20)(cid:25)(cid:15) (cid:21)(cid:19)(cid:20)(cid:24)(cid:15) (cid:68)(cid:81)(cid:71) (cid:21)(cid:19)(cid:20)(cid:23)(cid:15) (cid:85)(cid:72)(cid:86)(cid:83)(cid:72)(cid:70)(cid:87)(cid:76)(cid:89)(cid:72)(cid:79)(cid:92)(cid:17)(cid:3)
(d) (cid:38)(cid:68)(cid:86)(cid:75) (cid:565)(cid:82)(cid:90) (cid:76)(cid:86) (cid:70)(cid:68)(cid:79)(cid:70)(cid:88)(cid:79)(cid:68)(cid:87)(cid:72)(cid:71) (cid:68)(cid:86) (cid:70)(cid:68)(cid:86)(cid:75) (cid:83)(cid:85)(cid:82)(cid:89)(cid:76)(cid:71)(cid:72)(cid:71) (cid:69)(cid:92) (cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74) (cid:68)(cid:70)(cid:87)(cid:76)(cid:89)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86) (cid:79)(cid:72)(cid:86)(cid:86) (cid:70)(cid:68)(cid:86)(cid:75) (cid:88)(cid:86)(cid:72)(cid:71) (cid:76)(cid:81) (cid:76)(cid:81)(cid:89)(cid:72)(cid:86)(cid:87)(cid:76)(cid:81)(cid:74) (cid:68)(cid:70)(cid:87)(cid:76)(cid:89)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)(cid:17)
(e)(cid:3)(cid:918)(cid:81) (cid:45)(cid:88)(cid:81)(cid:72) (cid:21)(cid:19)(cid:20)(cid:23)(cid:15) (cid:90)(cid:72) (cid:70)(cid:82)(cid:80)(cid:80)(cid:72)(cid:81)(cid:70)(cid:72)(cid:71) (cid:68) (cid:84)(cid:88)(cid:68)(cid:85)(cid:87)(cid:72)(cid:85)(cid:79)(cid:92) (cid:71)(cid:76)(cid:89)(cid:76)(cid:71)(cid:72)(cid:81)(cid:71) (cid:83)(cid:85)(cid:82)(cid:74)(cid:85)(cid:68)(cid:80) (cid:68)(cid:81)(cid:71)(cid:15) (cid:68)(cid:86) (cid:86)(cid:88)(cid:70)(cid:75)(cid:15) (cid:564)(cid:86)(cid:70)(cid:68)(cid:79) (cid:92)(cid:72)(cid:68)(cid:85) (cid:21)(cid:19)(cid:20)(cid:23) (cid:70)(cid:82)(cid:81)(cid:87)(cid:68)(cid:76)(cid:81)(cid:86) (cid:82)(cid:81)(cid:79)(cid:92) (cid:87)(cid:75)(cid:85)(cid:72)(cid:72)
(cid:3)
(cid:84)(cid:88)(cid:68)(cid:85)(cid:87)(cid:72)(cid:85)(cid:79)(cid:92) (cid:71)(cid:76)(cid:89)(cid:76)(cid:71)(cid:72)(cid:81)(cid:71)(cid:86)(cid:15) (cid:90)(cid:75)(cid:76)(cid:79)(cid:72) (cid:564)(cid:86)(cid:70)(cid:68)(cid:79) (cid:21)(cid:19)(cid:20)(cid:24) (cid:68)(cid:81)(cid:71) (cid:21)(cid:19)(cid:20)(cid:25) (cid:70)(cid:82)(cid:81)(cid:87)(cid:68)(cid:76)(cid:81) (cid:23) (cid:84)(cid:88)(cid:68)(cid:85)(cid:87)(cid:72)(cid:85)(cid:79)(cid:92) (cid:71)(cid:76)(cid:89)(cid:76)(cid:71)(cid:72)(cid:81)(cid:71) (cid:83)(cid:68)(cid:92)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:17)
$3.75
$3.50
$3.25
$3.00
$2.75
$2.50
$2.25
$2.00
24.0%
22.0%
20.0%
18.0%
16.0%
14.0%
12.0%
10.0%
1
0
.
3
$
6
4
.
2
$
2016
2015
2014
Return on invested
capital – continuing
operations (a)
%
7
1
2
.
%
8
.
8
1
%
9
4
1
.
2016
2015
2014
(cid:38)(cid:68)(cid:86)(cid:75)(cid:3)(cid:565)(cid:82)(cid:90) (b) (c) (d)
,
4
2
2
7
2
2
$
,
9
5
1
9
2
2
$
,
3
1
8
7
2
2
$
2016
2015
2014
$240,000
$230,000
$220,000
$210,000
$200,000
(cid:55)(cid:75)(cid:72) (cid:56)(cid:81)(cid:68)(cid:88)(cid:71)(cid:76)(cid:87)(cid:72)(cid:71) (cid:36)(cid:71)(cid:77)(cid:88)(cid:86)(cid:87)(cid:72)(cid:71) (cid:53)(cid:72)(cid:86)(cid:88)(cid:79)(cid:87)(cid:86)(cid:15) (cid:90)(cid:75)(cid:76)(cid:70)(cid:75) (cid:76)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:72) (cid:564)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79) (cid:80)(cid:72)(cid:68)(cid:86)(cid:88)(cid:85)(cid:72)(cid:86) (cid:87)(cid:75)(cid:68)(cid:87) (cid:68)(cid:85)(cid:72) (cid:81)(cid:82)(cid:87) (cid:70)(cid:68)(cid:79)(cid:70)(cid:88)(cid:79)(cid:68)(cid:87)(cid:72)(cid:71) (cid:76)(cid:81) (cid:68)(cid:70)(cid:70)(cid:82)(cid:85)(cid:71)(cid:68)(cid:81)(cid:70)(cid:72) (cid:90)(cid:76)(cid:87)(cid:75) (cid:68)(cid:70)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87)(cid:76)(cid:81)(cid:74) (cid:83)(cid:85)(cid:76)(cid:81)(cid:70)(cid:76)(cid:83)(cid:79)(cid:72)(cid:86)
(cid:74)(cid:72)(cid:81)(cid:72)(cid:85)(cid:68)(cid:79)(cid:79)(cid:92) (cid:68)(cid:70)(cid:70)(cid:72)(cid:83)(cid:87)(cid:72)(cid:71) (cid:76)(cid:81) (cid:87)(cid:75)(cid:72) (cid:56)(cid:81)(cid:76)(cid:87)(cid:72)(cid:71) (cid:54)(cid:87)(cid:68)(cid:87)(cid:72)(cid:86) (cid:82)(cid:73) (cid:36)(cid:80)(cid:72)(cid:85)(cid:76)(cid:70)(cid:68) (cid:11)(cid:5)(cid:42)(cid:36)(cid:36)(cid:51)(cid:5)(cid:12)(cid:15) (cid:68)(cid:85)(cid:72) (cid:83)(cid:85)(cid:72)(cid:86)(cid:72)(cid:81)(cid:87)(cid:72)(cid:71) (cid:76)(cid:81) (cid:82)(cid:85)(cid:71)(cid:72)(cid:85) (cid:87)(cid:82) (cid:83)(cid:85)(cid:82)(cid:89)(cid:76)(cid:71)(cid:72) (cid:68)(cid:71)(cid:71)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79) (cid:80)(cid:72)(cid:68)(cid:81)(cid:76)(cid:81)(cid:74)(cid:73)(cid:88)(cid:79) (cid:564)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)
information for the period presented. The Unaudited Adjusted Results should not be construed as an alternative to the reported
(cid:85)(cid:72)(cid:86)(cid:88)(cid:79)(cid:87)(cid:86) (cid:71)(cid:72)(cid:87)(cid:72)(cid:85)(cid:80)(cid:76)(cid:81)(cid:72)(cid:71) (cid:76)(cid:81) (cid:68)(cid:70)(cid:70)(cid:82)(cid:85)(cid:71)(cid:68)(cid:81)(cid:70)(cid:72) (cid:90)(cid:76)(cid:87)(cid:75) (cid:42)(cid:36)(cid:36)(cid:51)(cid:17) (cid:50)(cid:88)(cid:85) (cid:71)(cid:72)(cid:564)(cid:81)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81) (cid:82)(cid:73) (cid:68)(cid:71)(cid:77)(cid:88)(cid:86)(cid:87)(cid:72)(cid:71) (cid:85)(cid:72)(cid:86)(cid:88)(cid:79)(cid:87)(cid:86) (cid:80)(cid:68)(cid:92) (cid:71)(cid:76)(cid:909)(cid:72)(cid:85) (cid:73)(cid:85)(cid:82)(cid:80) (cid:86)(cid:76)(cid:80)(cid:76)(cid:79)(cid:68)(cid:85)(cid:79)(cid:92) (cid:87)(cid:76)(cid:87)(cid:79)(cid:72)(cid:71) (cid:80)(cid:72)(cid:68)(cid:86)(cid:88)(cid:85)(cid:72)(cid:86) (cid:88)(cid:86)(cid:72)(cid:71) (cid:69)(cid:92) (cid:82)(cid:87)(cid:75)(cid:72)(cid:85)
companies. While it is not possible to predict future results, our management believes that the adjusted non-GAAP information is useful
for the assessment of our ongoing operations. The Unaudited Adjusted Results should be read in conjunction with our Consolidated
(cid:41)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79) (cid:54)(cid:87)(cid:68)(cid:87)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86) (cid:68)(cid:81)(cid:71) (cid:87)(cid:75)(cid:72) (cid:85)(cid:72)(cid:79)(cid:68)(cid:87)(cid:72)(cid:71) (cid:49)(cid:82)(cid:87)(cid:72)(cid:86) (cid:70)(cid:82)(cid:81)(cid:87)(cid:68)(cid:76)(cid:81)(cid:72)(cid:71) (cid:76)(cid:81) (cid:82)(cid:88)(cid:85) (cid:41)(cid:82)(cid:85)(cid:80) (cid:20)(cid:19)(cid:16)(cid:46) (cid:73)(cid:82)(cid:85) (cid:564)(cid:86)(cid:70)(cid:68)(cid:79) (cid:21)(cid:19)(cid:20)(cid:25)(cid:17)(cid:3)
FISCAL 2016
T(cid:75)(cid:72) (cid:21)(cid:19)(cid:20)(cid:25) (cid:56)(cid:81)(cid:68)(cid:88)(cid:71)(cid:76)(cid:87)(cid:72)(cid:71) (cid:36)(cid:71)(cid:77)(cid:88)(cid:86)(cid:87)(cid:72)(cid:71) (cid:53)(cid:72)(cid:86)(cid:88)(cid:79)(cid:87)(cid:86) (cid:85)(cid:72)(cid:565)(cid:72)(cid:70)(cid:87) (cid:79)(cid:82)(cid:90)(cid:72)(cid:85) (cid:86)(cid:72)(cid:79)(cid:79)(cid:76)(cid:81)(cid:74) (cid:68)(cid:81)(cid:71) (cid:68)(cid:71)(cid:80)(cid:76)(cid:81)(cid:76)(cid:86)(cid:87)(cid:85)(cid:68)(cid:87)(cid:76)(cid:89)(cid:72) (cid:72)(cid:91)(cid:83)(cid:72)(cid:81)(cid:86)(cid:72) (cid:68)(cid:86) (cid:68) (cid:85)(cid:72)(cid:86)(cid:88)(cid:79)(cid:87) (cid:82)(cid:73) (cid:87)(cid:75)(cid:72) (cid:68)(cid:71)(cid:77)(cid:88)(cid:86)(cid:87)(cid:80)(cid:72)(cid:81)(cid:87) (cid:73)(cid:82)(cid:85) (cid:82)(cid:88)(cid:85) (cid:79)(cid:72)(cid:74)(cid:68)(cid:70)(cid:92)
(cid:83)(cid:72)(cid:81)(cid:86)(cid:76)(cid:82)(cid:81) (cid:83)(cid:79)(cid:68)(cid:81)(cid:86) (cid:83)(cid:68)(cid:85)(cid:87)(cid:76)(cid:68)(cid:79)(cid:79)(cid:92) (cid:82)(cid:909)(cid:86)(cid:72)(cid:87) (cid:69)(cid:92) (cid:68) (cid:74)(cid:68)(cid:76)(cid:81) (cid:82)(cid:81) (cid:86)(cid:68)(cid:79)(cid:72) (cid:82)(cid:73) (cid:85)(cid:72)(cid:68)(cid:79) (cid:72)(cid:86)(cid:87)(cid:68)(cid:87)(cid:72)(cid:15) (cid:68)(cid:86) (cid:71)(cid:72)(cid:86)(cid:70)(cid:85)(cid:76)(cid:69)(cid:72)(cid:71) (cid:68)(cid:81)(cid:71) (cid:85)(cid:72)(cid:70)(cid:82)(cid:81)(cid:70)(cid:76)(cid:79)(cid:72)(cid:71) (cid:69)(cid:72)(cid:79)(cid:82)(cid:90) (cid:11)(cid:7) (cid:76)(cid:81) (cid:87)(cid:75)(cid:82)(cid:88)(cid:86)(cid:68)(cid:81)(cid:71)(cid:86)(cid:12)(cid:29)
Adjustment To Exclude Pension Costs
During 2016, we recognized a total of $27,766 ($16,790, net of tax) for costs associated with our decision to terminate both
(cid:82)(cid:88)(cid:85) (cid:84)(cid:88)(cid:68)(cid:79)(cid:76)(cid:564)(cid:72)(cid:71) (cid:68)(cid:81)(cid:71) (cid:81)(cid:82)(cid:81)(cid:16)(cid:84)(cid:88)(cid:68)(cid:79)(cid:76)(cid:564)(cid:72)(cid:71) (cid:71)(cid:72)(cid:564)(cid:81)(cid:72)(cid:71) (cid:69)(cid:72)(cid:81)(cid:72)(cid:564)(cid:87) (cid:83)(cid:72)(cid:81)(cid:86)(cid:76)(cid:82)(cid:81) (cid:83)(cid:79)(cid:68)(cid:81)(cid:86)(cid:15) (cid:76)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:76)(cid:81)(cid:74) (cid:81)(cid:72)(cid:87) (cid:83)(cid:72)(cid:85)(cid:76)(cid:82)(cid:71)(cid:76)(cid:70) (cid:69)(cid:72)(cid:81)(cid:72)(cid:564)(cid:87) (cid:70)(cid:82)(cid:86)(cid:87)(cid:86)(cid:15) (cid:86)(cid:72)(cid:87)(cid:87)(cid:79)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87) (cid:70)(cid:75)(cid:68)(cid:85)(cid:74)(cid:72)(cid:86) (cid:68)(cid:81)(cid:71)
professional fees in support of the actions to facilitate the plan terminations, which resulted in an increase of selling and
administrative expenses.
Gain On Sale Of Real Estate
(cid:918)(cid:81) (cid:87)(cid:75)(cid:72) (cid:73)(cid:82)(cid:88)(cid:85)(cid:87)(cid:75) (cid:84)(cid:88)(cid:68)(cid:85)(cid:87)(cid:72)(cid:85) (cid:82)(cid:73) (cid:564)(cid:86)(cid:70)(cid:68)(cid:79) (cid:21)(cid:19)(cid:20)(cid:25)(cid:15) (cid:90)(cid:72) (cid:85)(cid:72)(cid:70)(cid:82)(cid:74)(cid:81)(cid:76)(cid:93)(cid:72)(cid:71) (cid:68) (cid:7)(cid:22)(cid:15)(cid:27)(cid:21)(cid:22) (cid:74)(cid:68)(cid:76)(cid:81) (cid:82)(cid:81) (cid:87)(cid:75)(cid:72) (cid:86)(cid:68)(cid:79)(cid:72) (cid:82)(cid:73) (cid:85)(cid:72)(cid:68)(cid:79) (cid:72)(cid:86)(cid:87)(cid:68)(cid:87)(cid:72) (cid:11)(cid:7)(cid:21)(cid:15)(cid:23)(cid:20)(cid:20)(cid:15) (cid:81)(cid:72)(cid:87) (cid:82)(cid:73) (cid:87)(cid:68)(cid:91)(cid:12) (cid:85)(cid:72)(cid:79)(cid:68)(cid:87)(cid:72)(cid:71) (cid:87)(cid:82) (cid:68) (cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:16)
owned and operated store in California which resulted in a decrease of selling and administrative expenses.
FISCAL 2015
T(cid:75)(cid:72) (cid:21)(cid:19)(cid:20)(cid:24) (cid:56)(cid:81)(cid:68)(cid:88)(cid:71)(cid:76)(cid:87)(cid:72)(cid:71) (cid:36)(cid:71)(cid:77)(cid:88)(cid:86)(cid:87)(cid:72)(cid:71) (cid:53)(cid:72)(cid:86)(cid:88)(cid:79)(cid:87)(cid:86) (cid:85)(cid:72)(cid:565)(cid:72)(cid:70)(cid:87) (cid:79)(cid:82)(cid:90)(cid:72)(cid:85) (cid:86)(cid:72)(cid:79)(cid:79)(cid:76)(cid:81)(cid:74) (cid:68)(cid:81)(cid:71) (cid:68)(cid:71)(cid:80)(cid:76)(cid:81)(cid:76)(cid:86)(cid:87)(cid:85)(cid:68)(cid:87)(cid:76)(cid:89)(cid:72) (cid:72)(cid:91)(cid:83)(cid:72)(cid:81)(cid:86)(cid:72) (cid:68)(cid:86) (cid:68) (cid:85)(cid:72)(cid:86)(cid:88)(cid:79)(cid:87) (cid:82)(cid:73) (cid:68)(cid:71)(cid:77)(cid:88)(cid:86)(cid:87)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86) (cid:73)(cid:82)(cid:85) (cid:82)(cid:88)(cid:85) (cid:79)(cid:72)(cid:74)(cid:68)(cid:70)(cid:92) (cid:83)(cid:72)(cid:81)(cid:86)(cid:76)(cid:82)(cid:81)
plans and a loss contingency, as described and reconciled below ($ in thousands):
Adjustment To Exclude Pension Costs
During 2015, we recognized a total of $12,932 ($7,820, net of tax) for costs associated with our decision to terminate both our
(cid:84)(cid:88)(cid:68)(cid:79)(cid:76)(cid:564)(cid:72)(cid:71) (cid:68)(cid:81)(cid:71) (cid:81)(cid:82)(cid:81)(cid:16)(cid:84)(cid:88)(cid:68)(cid:79)(cid:76)(cid:564)(cid:72)(cid:71) (cid:71)(cid:72)(cid:564)(cid:81)(cid:72)(cid:71) (cid:69)(cid:72)(cid:81)(cid:72)(cid:564)(cid:87) (cid:83)(cid:72)(cid:81)(cid:86)(cid:76)(cid:82)(cid:81) (cid:83)(cid:79)(cid:68)(cid:81)(cid:86)(cid:15) (cid:76)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:76)(cid:81)(cid:74) (cid:81)(cid:72)(cid:87) (cid:83)(cid:72)(cid:85)(cid:76)(cid:82)(cid:71)(cid:76)(cid:70) (cid:69)(cid:72)(cid:81)(cid:72)(cid:564)(cid:87) (cid:70)(cid:82)(cid:86)(cid:87)(cid:86)(cid:15) (cid:86)(cid:72)(cid:87)(cid:87)(cid:79)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87) (cid:70)(cid:75)(cid:68)(cid:85)(cid:74)(cid:72)(cid:86) (cid:68)(cid:81)(cid:71) (cid:83)(cid:85)(cid:82)(cid:73)(cid:72)(cid:86)(cid:86)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79)(cid:3)
fees in support of the actions to facilitate the plan terminations, which resulted in an increase of selling and administrative expenses.
Adjustment To Exclude Loss Contingency
(cid:918)(cid:81) (cid:564)(cid:86)(cid:70)(cid:68)(cid:79) (cid:21)(cid:19)(cid:20)(cid:24)(cid:15) (cid:90)(cid:72) (cid:85)(cid:72)(cid:70)(cid:82)(cid:85)(cid:71)(cid:72)(cid:71) (cid:68) (cid:7)(cid:23)(cid:15)(cid:23)(cid:27)(cid:26) (cid:70)(cid:75)(cid:68)(cid:85)(cid:74)(cid:72) (cid:11)(cid:7)(cid:21)(cid:15)(cid:26)(cid:20)(cid:20)(cid:15) (cid:81)(cid:72)(cid:87) (cid:82)(cid:73) (cid:87)(cid:68)(cid:91)(cid:12) (cid:85)(cid:72)(cid:79)(cid:68)(cid:87)(cid:72)(cid:71) (cid:87)(cid:82) (cid:68) (cid:79)(cid:82)(cid:86)(cid:86) (cid:70)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:74)(cid:72)(cid:81)(cid:70)(cid:92) (cid:68)(cid:86)(cid:86)(cid:82)(cid:70)(cid:76)(cid:68)(cid:87)(cid:72)(cid:71) (cid:90)(cid:76)(cid:87)(cid:75) (cid:80)(cid:72)(cid:85)(cid:70)(cid:75)(cid:68)(cid:81)(cid:71)(cid:76)(cid:86)(cid:72)(cid:16)(cid:85)(cid:72)(cid:79)(cid:68)(cid:87)(cid:72)(cid:71) (cid:3)
legal matters which resulted in an increase of selling and administrative expenses.
FISCAL YEAR 2016
(cid:11)(cid:7)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:82)(cid:88)(cid:86)(cid:68)(cid:81)(cid:71)(cid:86)(cid:15)(cid:3)(cid:72)(cid:91)(cid:70)(cid:72)(cid:83)(cid:87)(cid:3)(cid:83)(cid:72)(cid:85)(cid:3)(cid:86)(cid:75)(cid:68)(cid:85)(cid:72)(cid:3)(cid:68)(cid:80)(cid:82)(cid:88)(cid:81)(cid:87)(cid:86)(cid:3)(cid:12)
Reported
(GAAP)
Adjustment
to exclude
pension costs
Gain on
sale of
real estate
Unaudited
Adjusted Results
(non-GAAP)
Selling and administrative expenses
$ 1,731,006
33.3%
(cid:50)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74) (cid:83)(cid:85)(cid:82)(cid:564)(cid:87)
Income tax expense
Income from continuing operations
Net income
(cid:3)
(cid:21)(cid:23)(cid:26)(cid:15)(cid:28)(cid:26)(cid:22)(cid:3)
91,458
152,783
(cid:23)(cid:17)(cid:27)(cid:3)
1.8
2.9
$
152,828
2.9%
Earnings per common share - diluted: (f)
Continuing operations
Net income
$
$
3.32
3.32
$
(cid:3)
$
$
$
(27,766)
(cid:21)(cid:26)(cid:15)(cid:26)(cid:25)(cid:25)(cid:3)
10,976
16,790
16,790
$
(cid:3)
3,823
(cid:11)(cid:22)(cid:15)(cid:27)(cid:21)(cid:22)(cid:12)(cid:3)
(1,412)
(2,411)
$ 1,707,063
(cid:3)
(cid:21)(cid:26)(cid:20)(cid:15)(cid:28)(cid:20)(cid:25)(cid:3)
101,022
167,162
32.8%
(cid:24)(cid:17)(cid:21)
1.9
3.2
$
(2,411)
$
167,207
3.2%
0.37
0.37
$
$
(0.05)
(0.05)
$
$
3.64
3.64
FISCAL YEAR 2015
(cid:11)(cid:7)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:82)(cid:88)(cid:86)(cid:68)(cid:81)(cid:71)(cid:86)(cid:15)(cid:3)(cid:72)(cid:91)(cid:70)(cid:72)(cid:83)(cid:87)(cid:3)(cid:83)(cid:72)(cid:85)(cid:3)(cid:86)(cid:75)(cid:68)(cid:85)(cid:72)(cid:3)(cid:68)(cid:80)(cid:82)(cid:88)(cid:81)(cid:87)(cid:86)(cid:3)(cid:12)
Reported
(GAAP)
Selling and administrative expenses
$ 1,708,717
32.9 %
(cid:50)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74) (cid:83)(cid:85)(cid:82)(cid:564)(cid:87)(cid:3)
Income tax expense
Income from continuing operations
Net income
(cid:3)
(cid:21)(cid:22)(cid:24)(cid:15)(cid:26)(cid:22)(cid:21)(cid:3)
83,842
143,008
(cid:23)(cid:17)(cid:24)(cid:3)
1.6
2.8
$
142,873
2.8%
Earnings per common share - diluted: (f)
Continuing operations
Net income
$
$
2.81
2.80
Adjustment
to exclude
pension costs
Adjustment
to exclude
loss
contingency
Unaudited
Adjusted Results
(non-GAAP)
$
(cid:3)
$
$
$
(12,932)
(cid:20)(cid:21)(cid:15)(cid:28)(cid:22)(cid:21)(cid:3)
5,112
7,820
7,820
0.15
0.15
$
(cid:3)
$
$
$
(4,487)
$ 1,691,298
32.6%
(cid:23)(cid:15)(cid:23)(cid:27)(cid:26)(cid:3)
1,776
2,711
2,711
(cid:3)
(cid:21)(cid:24)(cid:22)(cid:15)(cid:20)(cid:24)(cid:20)(cid:3)
90,730
153,539
(cid:23)(cid:17)(cid:28)
1.7
3.0
$
153,404
3.0%
0.05
0.05
$
$
3.01
3.01
(cid:11)(cid:73)(cid:12)(cid:3) (cid:55)(cid:75)(cid:72) (cid:72)(cid:68)(cid:85)(cid:81)(cid:76)(cid:81)(cid:74)(cid:86) (cid:83)(cid:72)(cid:85) (cid:86)(cid:75)(cid:68)(cid:85)(cid:72) (cid:73)(cid:82)(cid:85) (cid:70)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:88)(cid:76)(cid:81)(cid:74) (cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:15) (cid:71)(cid:76)(cid:86)(cid:70)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:88)(cid:72)(cid:71) (cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86) (cid:68)(cid:81)(cid:71) (cid:81)(cid:72)(cid:87) (cid:76)(cid:81)(cid:70)(cid:82)(cid:80)(cid:72) (cid:68)(cid:85)(cid:72) (cid:86)(cid:72)(cid:83)(cid:68)(cid:85)(cid:68)(cid:87)(cid:72)(cid:79)(cid:92) (cid:70)(cid:68)(cid:79)(cid:70)(cid:88)(cid:79)(cid:68)(cid:87)(cid:72)(cid:71) (cid:76)(cid:81) (cid:68)(cid:70)(cid:70)(cid:82)(cid:85)(cid:71)(cid:68)(cid:81)(cid:70)(cid:72) (cid:90)(cid:76)(cid:87)(cid:75) (cid:36)(cid:70)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87)(cid:76)(cid:81)(cid:74) (cid:54)(cid:87)(cid:68)(cid:81)(cid:71)(cid:68)(cid:85)(cid:71)(cid:86) (cid:38)(cid:82)(cid:71)(cid:76)(cid:564)(cid:70)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81) (cid:11)(cid:5)(cid:36)(cid:54)(cid:38)(cid:5)(cid:12) (cid:21)(cid:25)(cid:19)(cid:30)
(cid:87)(cid:75)(cid:72)(cid:85)(cid:72)(cid:73)(cid:82)(cid:85)(cid:72)(cid:15) (cid:87)(cid:75)(cid:72) (cid:86)(cid:88)(cid:80) (cid:82)(cid:73) (cid:72)(cid:68)(cid:85)(cid:81)(cid:76)(cid:81)(cid:74)(cid:86) (cid:83)(cid:72)(cid:85) (cid:86)(cid:75)(cid:68)(cid:85)(cid:72) (cid:73)(cid:82)(cid:85) (cid:70)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:88)(cid:76)(cid:81)(cid:74) (cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86) (cid:68)(cid:81)(cid:71) (cid:71)(cid:76)(cid:86)(cid:70)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:88)(cid:72)(cid:71) (cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86) (cid:80)(cid:68)(cid:92) (cid:71)(cid:76)(cid:909)(cid:72)(cid:85)(cid:15) (cid:71)(cid:88)(cid:72) (cid:87)(cid:82) (cid:85)(cid:82)(cid:88)(cid:81)(cid:71)(cid:76)(cid:81)(cid:74)(cid:15) (cid:73)(cid:85)(cid:82)(cid:80) (cid:87)(cid:75)(cid:72) (cid:70)(cid:68)(cid:79)(cid:70)(cid:88)(cid:79)(cid:68)(cid:87)(cid:72)(cid:71) (cid:72)(cid:68)(cid:85)(cid:81)(cid:76)(cid:81)(cid:74)(cid:86) (cid:83)(cid:72)(cid:85) (cid:86)(cid:75)(cid:68)(cid:85)(cid:72) (cid:82)(cid:73) (cid:81)(cid:72)(cid:87) (cid:76)(cid:81)(cid:70)(cid:82)(cid:80)(cid:72)(cid:17)
(cid:3)
Big Lots, Inc. | 2016 Annual Report
DIRECTORS & EXECUTIVES
Board of Directors
(cid:45)(cid:72)(cid:909)rey P. Berger
former President &
(cid:38)(cid:75)(cid:76)(cid:72)(cid:73) (cid:40)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:89)(cid:72) (cid:50)(cid:605)(cid:70)(cid:72)(cid:85)
(cid:43)(cid:72)(cid:76)(cid:81)(cid:93) (cid:49)(cid:82)(cid:85)(cid:87)(cid:75) (cid:36)(cid:80)(cid:72)(cid:85)(cid:76)(cid:70)(cid:68) (cid:41)(cid:82)(cid:82)(cid:71)(cid:86)(cid:72)(cid:85)(cid:89)(cid:76)(cid:70)(cid:72)(cid:30)
former Executive Vice President
Global Foodservice
H. J. Heinz Company
David J. Campisi
C(cid:75)(cid:76)(cid:72)(cid:73) (cid:40)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:89)(cid:72) (cid:50)(cid:605)(cid:70)(cid:72)(cid:85) (cid:9) (cid:51)(cid:85)(cid:72)(cid:86)(cid:76)(cid:71)(cid:72)(cid:81)(cid:87)
Big Lots, Inc.
James R. Chambers
former President &
(cid:38)(cid:75)(cid:76)(cid:72)(cid:73) (cid:40)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:89)(cid:72) (cid:50)(cid:605)(cid:70)(cid:72)(cid:85)
Weight Watchers International, Inc.
Marla C. Gottschalk
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Pampered Chef, Ltd.
Cynthia T. Jamison
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AquaSpy, Inc.
Philip E. Mallott
Chairman of the Board
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Intimate Brands, Inc.
Nancy A. Reardon
former Senior Vice President &
Chief Human Resources and
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Campbell Soup Company
Wendy L. Schoppert
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Select Comfort Corporation
Russell E. Solt
former Executive Vice President &
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West Marine, Inc.
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President
David J. Campisi
Senior Vice Presidents
Michelle D. Christensen
General Merchandise Manager
Executive Vice Presidents
Craig A. Hart
Planning, Allocation & Replenishment
Lisa M. Bachmann
Chief Merchandising &
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Timothy A. Johnson
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Michael A. Schlonsky
Human Resources &
Store Operations
Stella M. Keane
Talent Management
Nicholas E. Padovano
Store Operations
Ronald A. Robins, Jr.
General Counsel & Corporate Secretary
Carlos V. Rodriguez
Distribution & Transportation Services
Paul A. Schroeder
Controller & Treasurer
Stewart W. Wenerstrom
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Martha A. Withers - Hall
General Merchandise Manager
Big Lots, Inc. | 2016 Annual Report
Big Lots, Inc.
300 Phillipi Road
Columbus, Ohio 43228
April 11, 2017
Dear Big Lots’ Shareholder:
We cordially invite you to attend the 2017 Annual Meeting of Shareholders of Big Lots, Inc. The Annual
Meeting will be held at our corporate offices located at 300 Phillipi Road, Columbus, Ohio, on May 25,
2017, beginning at 9:00 a.m. Eastern Time.
The following pages contain the Notice of Annual Meeting of Shareholders and the Proxy Statement.
You should review this material for information concerning the business to be conducted at the Annual
Meeting.
Your vote is important. Whether or not you plan to attend the Annual Meeting, we urge you to vote as
soon as possible. Voting by proxy in any of the ways described in the Proxy Statement will not prevent
you from attending the Annual Meeting or voting in person.
Thank you for your ongoing support of, and continued interest in, Big Lots, Inc.
Respectfully submitted,
PHILIP E. MALLOTT
Chairman
DAVID J. CAMPISI
Chief Executive Officer and President
NOTICE OF 2017 ANNUAL MEETING OF SHAREHOLDERS
Thursday, May 25, 2017
9:00 a.m. Eastern Time
300 Phillipi Road, Columbus, Ohio
We are pleased to invite you to the 2017 Annual Meeting of Shareholders of Big Lots, Inc. The meeting
will be held at our corporate offices located at 300 Phillipi Road, Columbus, Ohio, on May 25, 2017,
beginning at 9:00 a.m. Eastern Time, for the following purposes:
1. To elect as directors the nine nominees named in our accompanying Proxy Statement;
2. To consider and vote upon a proposal to approve the Big Lots 2017 Long-Term Incentive
Plan;
3. To approve, on an advisory basis, the compensation of our named executive officers;
4. To approve, on an advisory basis, the frequency of our future advisory votes on the
compensation of our named executive officers;
5. To ratify the appointment of Deloitte & Touche LLP as our independent registered public
accounting firm for fiscal 2017; and
6. To transact such other business as may properly come before the Annual Meeting.
Only shareholders of record at the close of business on the record date, March 27, 2017, are entitled to
notice of and to vote at the Annual Meeting and any postponement or adjournment thereof. Further
information regarding voting rights and matters to be voted upon is presented in this proxy statement.
By Order of the Board of Directors,
Ronald A. Robins, Jr.
Senior Vice President, General Counsel and Corporate Secretary
April 11, 2017
Columbus, Ohio
Your vote is important. Shareholders are urged to vote online. If you attend the Annual Meeting,
you may revoke your proxy and vote in person if you wish, even if you have previously
submitted a proxy.
BIG LOTS, INC.
PROXY STATEMENT
TABLE OF CONTENTS
1
ABOUT THE ANNUAL MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6
PROPOSAL ONE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10
GOVERNANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16
DIRECTOR COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
18
STOCK OWNERSHIP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
20
PROPOSAL TWO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
32
EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
69
PROPOSAL THREE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
70
PROPOSAL FOUR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
71
AUDIT COMMITTEE DISCLOSURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
73
PROPOSAL FIVE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
74
SHAREHOLDER PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
74
PROXY SOLICITATION COSTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
OTHER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
74
APPENDIX A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
PROXY STATEMENT
The Board of Directors (“Board”) of Big Lots, Inc., an Ohio corporation (“we,” “us,” “our” and “Big Lots”),
is furnishing you this Proxy Statement to solicit proxies for use at the 2017 Annual Meeting of
Shareholders to be held on May 25, 2017 (“Annual Meeting”). The Annual Meeting will be held at our
corporate offices located at 300 Phillipi Road, Columbus, Ohio at 9:00 a.m. Eastern Time.
On or about April 11, 2017, we began mailing to our shareholders of record at the close of business on
March 27, 2017 a Notice of Internet Availability containing instructions on how to access the Notice of
Annual Meeting of Shareholders, this Proxy Statement and our Annual Report to Shareholders for our
fiscal year ended January 28, 2017 (“fiscal 2016”).
ABOUT THE ANNUAL MEETING
Purpose of the Annual Meeting
At the Annual Meeting, shareholders will act upon the matters outlined in the Notice of Annual Meeting
included with this Proxy Statement. Specifically, the shareholders will be asked to:
(1) elect nine directors to the Board;
(2) approve the Big Lots 2017 Long-Term Incentive Plan (“2017 LTIP”);
(3) approve, on an advisory basis, the compensation of our named executive officers, as disclosed in
this Proxy Statement pursuant to Item 402 of Regulation S-K, including the Compensation
Discussion and Analysis, compensation tables and the narrative discussion accompanying the
tables (“say-on-pay vote”);
(4) approve, on an advisory basis, the frequency of our future advisory votes on the compensation
awarded to our named executive officers;
(5)
ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting
firm for our fiscal year ending February 3, 2018 (“fiscal 2017”); and
(6)
transact such other business as may properly come before the Annual Meeting.
Shareholder Voting Rights
Only those shareholders of record at the close of business on March 27, 2017, the record date for the
Annual Meeting, are entitled to receive notice of, and to vote at, the Annual Meeting. At the record
date, we had outstanding 44,786,322 common shares, $0.01 par value per share. Each of the
outstanding common shares entitles the holder thereof to one vote on each matter to be voted upon at
the Annual Meeting or any postponement or adjournment thereof. The holders of our common shares
have no cumulative voting rights in the election of directors. All voting at the Annual Meeting will be
governed by our Amended Articles of Incorporation, our Code of Regulations and the Ohio General
Corporation Law.
1
Registered Shareholders and Beneficial Shareholders
If your common shares are registered in your name directly with our transfer agent, Computershare
Investor Services, LLC, you are considered a holder of record (which we also refer to as a registered
shareholder). If you hold our common shares in a brokerage account or through a bank or other holder
of record, you are considered the beneficial shareholder of the common shares, which shares are often
referred to as being held in “street name.”
Internet Availability of Proxy Materials
In accordance with rules adopted by the Securities and Exchange Commission (“SEC”), instead of
mailing a printed copy of our proxy materials to each shareholder of record, we are permitted to furnish
our proxy materials, including the Notice of Annual Meeting of Shareholders, this Proxy Statement and
our Annual Report to Shareholders, by providing access to such documents on the Internet. Generally,
shareholders will not receive printed copies of the proxy materials unless they request them. We
believe furnishing proxy materials to our shareholders on the Internet will allow us to provide our
shareholders with the information they need, while reducing the costs of delivery of our proxy materials
and the environmental impact of the Annual Meeting.
A Notice of Internet Availability that provides instructions for accessing our proxy materials on the
Internet was mailed directly to registered shareholders. The Notice of Internet Availability also provides
instructions regarding how registered shareholders may vote their common shares on the Internet.
Registered shareholders who prefer to receive a paper or email copy of our proxy materials should
follow the instructions provided in the Notice of Internet Availability for requesting such copies.
A notice that directs our beneficial shareholders to the website where they can access our proxy
materials should be forwarded to each beneficial shareholder by the broker, bank or other holder of
record who is considered the registered shareholder with respect to the common shares of the
beneficial shareholder. Such broker, bank or other holder of record should also provide to the
beneficial shareholders instructions on how the beneficial shareholders may request a paper or email
copy of our proxy materials. Beneficial shareholders have the right to direct their broker, bank or other
holder of record on how to vote their common shares by following the voting instructions they receive
from their broker, bank or other holder of record.
To enroll in the electronic delivery service for future shareholder meetings, use your Notice of Internet
Availability (or proxy card, if you received printed copies of the proxy materials) to register online at
www.proxyvote.com and, when prompted, indicate that you agree to receive or access shareholder
communications electronically in future years.
Attendance at the Annual Meeting
All of our shareholders as of the record date, or their duly appointed proxies, may attend the Annual
Meeting. Registration and seating will begin at 8:30 a.m. Eastern Time, and the Annual Meeting will
begin at 9:00 a.m. Eastern Time. If you attend the Annual Meeting, you may be asked to present valid
photo identification, such as a driver’s license or passport. Cameras, recording devices and other
electronic devices will not be permitted at the Annual Meeting. If you hold your common shares as a
beneficial shareholder, you may also be asked to present a copy of a brokerage or bank statement
reflecting your beneficial ownership of our common shares as of the record date.
2
How to Vote
Registered Holders
After receiving the Notice of Internet Availability (or proxy card, if you received printed copies of the
proxy materials), registered shareholders are urged to visit www.proxyvote.com to access our proxy
materials. You will have the opportunity to vote your common shares online at www.proxyvote.com
until May 24, 2017 at 11:59 p.m. Eastern Time. When voting online, you must follow the instructions
posted on the website and you will need the control number included on your Notice of Internet
Availability (or proxy card, if applicable). If, after receiving the Notice of Internet Availability, you
request (via toll-free telephone number, e-mail or online) that we send you paper or electronic copies of
our proxy materials, you may vote your common shares by completing, dating and signing the proxy
card included with the materials and returning it in accordance with the instructions provided. Your
common shares will be voted as you direct if (1) you properly complete your proxy online, (2) you
complete, date, sign and return your proxy card no later than 11:59 p.m. Eastern Time on May 24,
2017 or (3) you are a registered shareholder, attend the Annual Meeting and deliver your completed
proxy card in person.
A registered shareholder may revoke a proxy at any time before it is exercised by filing with our
Corporate Secretary a written notice of revocation or duly executing and delivering to the Company a
proxy bearing a later date. A registered shareholder may also revoke a proxy by attending the Annual
Meeting and giving written notice of revocation to the secretary of the meeting. Attendance at the
Annual Meeting will not by itself revoke a previously granted proxy.
Beneficial Owners
Beneficial shareholders should follow the procedures and directions set forth in the materials they
receive from the broker, bank or other holder of record who is the registered holder of their common
shares to instruct such registered holder how to vote those common shares or revoke previously given
voting instructions. Please contact your broker, bank or other holder of record to determine the
applicable deadlines. Beneficial shareholders who wish to vote at the Annual Meeting will need to
obtain and provide to the secretary of the meeting a completed form of proxy from the broker, bank or
other holder of record who is the registered holder of their common shares.
Brokers, banks and other holders of record who hold common shares for beneficial owners in street
name may vote such common shares on “routine” matters (as determined under New York Stock
Exchange (“NYSE”) rules), such as Proposal Five, without specific voting instructions from the
beneficial owner of such common shares. Such brokers, banks and other holders of record may not,
however, vote such common shares on “non-routine” matters, such as Proposal One, Proposal Two,
Proposal Three and Proposal Four without specific voting instructions from the beneficial owner of
such common shares. Proxies submitted by such brokers, banks and other holders of record that have
not been voted on “non-routine” matters are referred to as “broker non-votes.” Broker non-votes will not
be counted for purposes of determining the number of common shares necessary for approval of any
matter to which broker non-votes apply (i.e., broker non-votes will have no effect on the outcome of
such matter).
Householding
SEC rules allow multiple shareholders residing at the same address the convenience of receiving a
single copy of the Annual Report to Shareholders, proxy materials and Notice of Internet Availability if
they consent to do so (“householding”). Householding is permitted only in certain circumstances,
including when you have the same last name and address as another shareholder. If the required
3
conditions are met, and SEC rules allow, your household may receive a single copy of the Annual
Report to Shareholders, proxy materials and Notice of Internet Availability. Upon request, we will
promptly deliver a separate copy of the Annual Report to Shareholders, proxy materials and Notice of
Internet Availability, as applicable, to a shareholder at a shared address to which a single copy of the
document(s) was delivered. Such a request should be made in the same manner as a revocation of
consent for householding.
You may revoke your consent for householding at any time by contacting Broadridge Financial
Solutions, Inc. (“Broadridge”), either by calling 1-800-542-1061, or by writing to: Broadridge,
Householding Department, 51 Mercedes Way, Edgewood, New York 11717. You will be removed from
the householding program within 30 days of receipt of your instructions at which time you will be sent
separate copies of the documents.
Beneficial shareholders can request more information about householding from their brokers, banks or
other holders of record.
Board’s Recommendations
Subject to revocation, all proxies that are properly completed and timely received will be voted in
accordance with the instructions contained therein. If no instructions are given (excluding broker non-
votes), the persons named as proxy holders will vote the common shares in accordance with the
recommendations of the Board. The Board’s recommendations are set forth together with the
description of each proposal in this Proxy Statement. In summary, the Board recommends a vote:
1. FOR the election of its nominated slate of directors (see Proposal One);
2. FOR the approval of the 2017 LTIP (see Proposal Two);
3. FOR the approval, on an advisory basis, of the compensation of our named executive officers,
as disclosed in this Proxy Statement pursuant to Item 402 of Regulation S-K, including the
Compensation Disclosure and Analysis, compensation tables and the narrative discussion
accompanying the tables (see Proposal Three);
4. FOR the approval, on an advisory basis, of holding future advisory votes on the compensation
of our named executive officers every ONE YEAR (see Proposal Four); and
5. FOR the ratification of Deloitte & Touche LLP as our independent registered public accounting
firm for fiscal 2017 (see Proposal Five).
If any other matter properly comes before the Annual Meeting, or if a director nominee named in this
Proxy Statement is unable to serve or for good cause will not serve, the proxy holders will vote on such
matter or for a substitute nominee as recommended by the Board.
Quorum
The presence, in person or by proxy, of the holders of a majority of the outstanding common shares
entitled to vote at the Annual Meeting will constitute a quorum and permit us to conduct our business at
the Annual Meeting. Proxies received but marked as abstentions and broker non-votes will be included
in the calculation of the number of common shares considered to be present at the Annual Meeting for
purposes of establishing a quorum.
4
Vote Required to Approve a Proposal
Proposal One
Our Corporate Governance Guidelines contain a majority vote policy and our Amended Articles of
Incorporation impose a majority vote standard applicable to the uncontested election of directors.
Specifically, Article Eighth of our Amended Articles of Incorporation provides that if a quorum is present
at the Annual Meeting, a director nominee in an uncontested election will be elected to the Board if the
number of votes cast for such nominee’s election exceeds the number of votes cast against and/or
withheld from such nominee’s election. In all director elections other than uncontested elections, the
nine director nominees receiving the greatest number of votes cast for their election will be elected as
directors. An “uncontested election” means an election of directors at a meeting of shareholders in
which the number of director nominees does not exceed the number of directors to be elected.
A properly executed proxy marked as withholding authority with respect to the election of one or more
nominees for director will not be voted with respect to the nominee or nominees for director indicated,
which will have the same effect as a vote against the nominee or nominees. Broker non-votes will not
be considered votes cast for or against or withheld from a director nominee’s election at the Annual
Meeting.
See the “Governance – Majority Vote Policy and Standard” section of this Proxy Statement for more
information about our majority vote policy and standard.
Other Matters
For purposes of Proposal Two, Proposal Three and Proposal Five, the affirmative vote of the holders of
a majority of the common shares represented in person or by proxy and entitled to vote on each such
matter will be required for approval. For purposes of Proposal Four, the frequency alternative that
receives the affirmative vote of the holders of a plurality of the common shares represented in person
or by proxy and entitled to vote on the matter will be approved. The votes received with respect to
Proposal Three, Proposal Four and Proposal Five are advisory and will not bind the Board or us. A
properly executed proxy marked “abstain” with respect to Proposal Two, Proposal Three, Proposal
Four and Proposal Five will not be voted with respect to such matter, although it will be counted for
purposes of determining the number of common shares necessary for approval of Proposal Two,
Proposal Three and Proposal Five. Accordingly, an abstention will have the effect of a vote against
Proposal Two, Proposal Three and Proposal Five. If no voting instructions are given (excluding broker
non-votes), the persons named as proxy holders on the proxy card will vote the common shares in
accordance with the recommendation of the Board.
5
PROPOSAL ONE: ELECTION OF DIRECTORS
At the Annual Meeting, the common shares represented by proxies will be voted, unless otherwise
specified, for the election of the nine director nominees named below. Proxies cannot be voted at the
Annual Meeting for more than nine persons. Directors are elected to serve until the next annual
meeting of shareholders and until their respective successors are elected and qualified, or until their
earlier death, resignation or removal.
Set forth below is certain information related to the nominees.
Director Independence
Tenure
Age
Gender Diversity
1
3
2
1
4
4
2
8
2
Independent Directors
Executive Officer
<3 years
3-9 years
> 10 years
4
45-55 years old
56-60 years old
61-65 years old
66-70 years old
5
Men
Women
JEFFREY P. BERGER
Mr. Berger is the former Executive Vice President, Global Foodservice of H.J. Heinz
Company (food manufacturer and marketer), and President and Chief Executive
Officer of Heinz North America Foodservice (food manufacturer and marketer).
Qualifications: Mr. Berger’s qualifications to serve on the Board include his 14 years
of experience as a chief executive of a multibillion dollar company, his service on
another public company board and his qualification as an “audit committee financial
expert,” as defined by applicable SEC rules.
Other Directorships: GNC Holdings, Inc. (health and wellness specialty retailer)
where he a member of the nominating and corporate governance committee and a
member of the audit committee.
DAVID J. CAMPISI
Chief Executive Officer (“CEO”) and President of Big Lots, Inc.
Before joining Big Lots in May 2013, Mr. Campisi served as the Chairman and Chief
Executive Officer of Respect Your Universe, Inc. (activewear retailer). Mr. Campisi
previously served as the Chairman, President and Chief Executive Officer of The
Sports Authority, Inc. (sporting goods retailer). Prior to that, Mr. Campisi served as
Executive Vice President and General Merchandise Manager, Women’s Apparel,
Accessories, Intimates and Cosmetics of Kohl’s Corporation (department store
retailer).
Qualifications: Mr. Campisi’s qualifications to serve on the Board include his day-to-
day leadership as Chief Executive Officer and President of Big Lots, strong leadership
skills, proven management capabilities, and more than 30 years of diverse retail
experience.
6
Age: 67
Director since: 2006
Committees:
• Compensation
• Nominating / Corporate
Governance (Chair)
Age: 61
Director since: 2013
Committees:
• none
JAMES R. CHAMBERS
Mr. Chambers is the former President and Chief Executive Officer and director of
Weight Watchers International, Inc. (weight management services provider).
Mr. Chambers previously served as President of the US Snacks and Confectionery
business unit and General Manager of the Immediate Consumption Channel of Kraft
Foods Inc. (food manufacturer). Mr. Chambers also served as President and CEO of
Cadbury Americas (confectionery manufacturer), and as the President and Chief
Executive Officer of Remy Amerique, Inc. (spirits manufacturer). Prior to his
employment with Remy Amerique, Inc., Mr. Chambers served as the Chief Executive
Officer of Paxonix, Inc. (online branding and packaging process solutions business),
the Chief Executive Officer of Netgrocer.com (online grocery retailer), and the Group
President of Information Resources, Inc. (global market research provider). Mr.
Chambers spent the first 17 years of his career at Nabisco (food manufacturer), where
he held leadership roles in sales, distribution, marketing and information technology,
culminating in the role of President, Refrigerated Foods. Mr. Chambers previously
served as a director of B&G Foods (food manufacturer) for seven years where he
served on the Nominating and Governance Committee and served on the
Compensation Committee and as a director of Weight Watchers International, Inc.
Qualifications: Mr. Chambers’ qualifications to serve on the Board include his
extensive cross-functional packaged goods industry experience, 20-year track record
in general management and his experience serving on the boards of other public
companies.
Other Directorships: TIAA Board of Trustees, where he serves on the human
resources committee, audit committee, and the corporate governance/social
responsibility committee.
MARLA C. GOTTSCHALK
Ms. Gottschalk is the former Chief Executive Officer of The Pampered Chef Ltd.
(marketer of kitchen tools, food products and cookbooks), where she also previously
served as President and Chief Operating Officer.
Ms. Gottschalk has also served as Senior Vice President of Financial Planning and
Investor Relations for Kraft Foods, Inc. (food manufacturer), where she also previously
served as Executive Vice President and General Manager of the Post Cereal division
and Vice President of Marketing and Strategy of the Kraft Cheese division.
Qualifications: Ms. Gottschalk’s qualifications to serve on the Board include her
extensive experience in operations and strategic management, her qualification as an
“audit committee financial expert,” as defined by applicable SEC rules, her expertise in
the food industry and her experience serving on the boards of other public companies.
Other Directorships: Potbelly Corporation (food retailer) where she is chair of the
compensation committee and a member of the audit committee, Underwriter
Laboratories, where she is chair of the compensation committee and serves on the
finance committee and corporate development committee, and Ocean Spray
Cranberries, Inc., where she serves on the nominating and governance committee and
the grower committee.
Age: 59
Director since: 2012
Committees:
• Compensation
• Nominating / Corporate
Governance
Age: 56
Director since: 2015
Committees:
• Audit
• Compensation
• Special Litigation
(Chair)
7
CYNTHIA T. JAMISON
Ms. Jamison served as Chief Financial Officer or Chief Operating Officer of several
companies during her tenure from 1999-2009 at Tatum, LLC, an executive services
firm. From 2005-2009, she led the CFO services practice and was a member of the
firm’s operating committee. After retiring from Tatum, Ms. Jamison subsequently
served as Chief Financial Officer of AquaSpy, Inc. (provider of soil moisture sensors to
monitor soil moisture levels).
Ms. Jamison has also served as Chief Financial Officer of Chart House Enterprises
(food retailer) and held various financial positions at Allied Domecq Retailing USA,
Kraft General Foods and Arthur Anderson LLP. Ms. Jamison previously served as a
director of B&G Foods, Inc. (food manufacturer and distributor) where she served as
chair of the audit committee. She held past board seats at Horizon Organic Holdings
and Cellu Tissue, Inc.
Qualifications: Ms. Jamison’s qualifications to serve on the Board include her
extensive experience in financial and accounting matters, including public company
reporting, as well as strategy and capitalization expertise, her qualification as an “audit
committee financial expert,” as defined by applicable SEC rules and her key
management, leadership, financial and strategic planning, corporate governance and
public company executive and board experience.
Other Directorships: Tractor Supply Company (farm and ranch retailer) where she
serves as chairman, Darden, Inc. (food retailer) where she serves as chair of the audit
committee and a member of the compensation committee and Office Depot, Inc. (office
supply retailer) where she is a member of the audit committee, compensation
committee and corporate governance and nominating committee.
PHILIP E. MALLOTT
Chairman of the Board of Big Lots, Inc.
Mr. Mallott is the former Vice President and Chief Financial Officer of Intimate Brands,
Inc. (intimate apparel and beauty product retailer). Mr. Mallott previously served as a
director of Tween Brands, Inc. (clothing retailer).
Qualifications: Mr. Mallott’s qualifications to serve on the Board include his
qualification as an “audit committee financial expert,” as defined by applicable SEC
Rules, his experience as a certified public accountant, his service on the boards of
other public companies and charitable organizations, and his experience in leadership
roles with other retailers.
Other Directorships: GNC Holdings, Inc. (health and wellness specialty retailer)
where he is chair of the audit committee and a member of the compensation
committee.
Age: 57
Director since: 2015
Committees:
• Audit
• Nominating /Corporate
Governance
• Special Litigation
Age: 59
Director since: 2003
Committees:
• Audit (Chair)
8
Age: 64
Director since: 2015
Committees:
• Compensation (Chair)
• Nominating /Corporate
Governance
NANCY A. REARDON
Ms. Reardon is the former Senior Vice President and Chief Human Resources and
Communications Officer of Campbell Soup Company (food manufacturer).
Additionally, Ms. Reardon served as Executive Vice President of Human Resources for
Comcast Cable Communications, Inc. (telecommunications provider). Prior to that, Ms.
Reardon served as Partner and Executive Vice President, Human Resources and
Corporate Affairs for Borden Capital Management Partners where she developed
financial and merger and acquisition skills through her involvement in multiple
transactions for a portfolio of operating companies. Ms. Reardon previously served as
a director of Warnaco Group, Inc. (apparel retailer) where she served as a member of
the audit committee and the compensation committee.
Qualifications: Ms. Reardon’s qualifications to serve on the Board include her
extensive experience in senior management roles, her experience on the boards of
other private and charitable organizations, her experience leading human resources
departments and in communications and public affairs and her leadership skills.
WENDY L. SCHOPPERT
Ms. Schoppert is the former Executive Vice President and Chief Financial Officer of
Select Comfort Corporation (bedding retailer and manufacturer).
Prior to joining Select Comfort, Ms. Schoppert led US Bank’s Private Asset
Management team and served as Head of Product, Marketing & Corporate
Development for the bank’s asset management division. Ms. Schoppert began her
career in the airline industry, serving in various financial, strategic and general
management leadership positions at American Airlines, Northwest Airlines and
America West Airlines.
Age: 50
Director since: 2015
Committees:
• Audit
• Nominating /Corporate
Governance
• Special Litigation
Qualifications: Ms. Schoppert’s qualifications to serve on the Board include her
qualification as an “audit committee financial expert,” as defined by applicable SEC
Rules, her vast experience in brand development and management, and her significant
financial leadership and expertise with respect to the oversight of financial reporting
and disclosure for public companies.
Other Directorships: Gaia, Inc. (provider of digital video streaming services) where
she serves as chair of the audit committee and Nina Hale, Inc. (digital marketing
agency).
RUSSELL E. SOLT
Mr. Solt is the former Director of Investor Relations of West Marine, Inc. (boating
supplies and accessories specialty retailer) where he previously served as Executive
Vice President and Chief Financial Officer.
Additionally, Mr. Solt previously served as the Chief Financial Officer of Venture
Stores, Inc. (discount retailer) and Williams-Sonoma, Inc. (home furnishing and
cookware specialty retailer).
Qualifications: Mr. Solt’s qualifications to serve on the Board include his experience
as a certified public accountant and as the Chief Financial Officer of other publicly-
traded retailers, his background in investor relations and his qualification as an “audit
committee financial expert,” as defined by applicable SEC Rules.
Age: 69
Director since: 2003
Committees:
• Audit
• Compensation
THE BOARD RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF EACH NOMINEE LISTED
ABOVE.
9
GOVERNANCE
Board Leadership and Independent Chairman of the Board
The Board is currently comprised of the individuals identified in Proposal One. Other than Mr. Campisi,
our Chief Executive Officer (“CEO”) and President, each of the other director nominees are
independent (as defined by the applicable NYSE rules) non-employee directors (“non-employee
directors”). Mr. Mallott, an independent director, serves as Chairman of the Board (“Chairman”). The
Board believes it should have the flexibility to establish a leadership structure that works best for us at
a particular time, and it reviews that structure from time to time, including in the context of a change in
leadership. The Chairman plans the agendas for meetings of the Board, chairs the Board meetings,
and is responsible for briefing our CEO, as needed, concerning executive sessions of the independent
members of the Board. The Chairman also determines when additional meetings of the Board are
needed. Additionally, the Chairman communicates informally with other directors between meetings of
the Board, to foster free and open dialogue among directors.
Board Meetings in Fiscal 2016
The Board held five meetings during fiscal 2016. During fiscal 2016, each director attended at least
75% of the aggregate of the total number of meetings of the Board and the committees on which he or
she served (in each case, held during the periods that he or she served). Eight of our nine directors
attended our 2016 annual meeting of shareholders. The director who did not attend our 2016 annual
meeting of shareholders was excused due to an illness.
Role of the Board’s Committees
The Board has standing Audit, Compensation and Nominating / Corporate Governance Committees.
Each of these committees reports its activities to the Board. In fiscal 2016, the Board formed a non-
standing Special Litigation Committee.
Audit Committee
The primary function of the Audit Committee is to assist the Board in fulfilling its oversight responsibility
with respect to:
(1)
the integrity of the financial reports and other financial information provided by us to our
shareholders and others;
(2) our compliance with legal and regulatory requirements;
(3)
the engagement of our independent registered public accounting firm and the evaluation of
the firm’s qualifications, independence and performance;
(4)
the performance of our system of internal controls;
(5)
the oversight of the performance of the internal audit function;
(5) our audit, accounting and financial reporting processes generally; and
(6)
the evaluation of enterprise risk issues.
All members of the Audit Committee are independent as required by the Audit Committee’s charter and
by the applicable NYSE and SEC rules. The Board has determined that each member of the Audit
Committee is “financially literate,” as required by NYSE rules, and each of Messrs. Mallott and Solt and
Msrs. Gottschalk, Jamison and Schoppert is an “audit committee financial expert,” as defined by
applicable SEC rules.
10
The functions of the Audit Committee are further described in its charter, which is available in the
Investor Relations section of our website (www.biglots.com) under the “Corporate Governance”
caption. The Audit Committee met twelve times during fiscal 2016.
Compensation Committee
The Compensation Committee discharges the responsibilities of the Board relating to the
administration of our compensation programs, including the compensation program for our
management leadership team (“Leadership Team”). Our Leadership Team is comprised of the current
executives named in the Summary Compensation Table (“named executive officers”) and other
executives holding the office of senior vice president.
The responsibilities of the Compensation Committee include:
(1) establishing our general compensation philosophy;
(2) overseeing the development of our compensation programs;
(3) approving goals and objectives for the incentive compensation awarded to the Leadership
Team;
(4)
reviewing and recommending to the Board the other compensation for our CEO and the
Leadership Team;
(5) administering our compensation programs; and
(6)
reporting on the entirety of the executive compensation program to the Board.
All members of the Compensation Committee are independent as required by the Committee’s charter
and NYSE rules.
The functions of the Compensation Committee are further described in its charter, which is available in
the Investor Relations section of our website (www.biglots.com) under the “Corporate Governance”
caption. The Compensation Committee met five times during fiscal 2016.
Nominating / Corporate Governance Committee
The responsibilities of the Nominating / Corporate Governance Committee include:
(1)
(2)
recommending individuals to the Board for nomination as members of the Board and its
committees;
taking a leadership role in shaping our corporate governance policies and practices, including
recommending to the Board changes to our Corporate Governance Guidelines and monitoring
compliance with such guidelines;
(3) monitoring issues associated with CEO succession and management development; and
(4)
reviewing the compensation of the members of the Board and recommending any changes to
such compensation to the Board for its approval.
All members of the Nominating / Corporate Governance Committee are independent as required by the
Committee’s charter and NYSE rules.
The functions of the Nominating / Corporate Governance Committee are further described in its
charter, which is available in the Investor Relations section of our website (www.biglots.com) under the
“Corporate Governance” caption. The Nominating / Corporate Governance Committee met four times
during fiscal 2016.
11
Special Litigation Committee
The Special Litigation Committee was created in fiscal 2016 to conduct an independent investigation
into certain derivative actions involving the Company. The Special Litigation Committee is composed of
three members, each of whom is a director that is not a party to any of the derivative actions and was
not a member of the Board until after the derivatives actions arose.
Selection of Nominees by the Board
The Nominating / Corporate Governance Committee has oversight over a broad range of issues
relating to the composition and operation of the Board. The Nominating / Corporate Governance
Committee is responsible for recommending to the Board the appropriate skills and qualifications
required of Board members, based on our needs from time to time. The Nominating / Corporate
Governance Committee also evaluates prospective director nominees against the standards and
qualifications set forth in the Corporate Governance Guidelines. Although the Nominating / Corporate
Governance Committee has not approved any specific minimum qualifications that must be met by a
nominee for director recommended by the Committee and has not adopted a formal policy with regard
to the consideration of diversity in identifying director nominees, the Committee considers factors such
as the prospective nominee’s relevant experience, character, intelligence, independence, commitment,
judgment, prominence, age, and compatibility with our CEO and other members of the Board. The
Nominating / Corporate Governance Committee also considers other relevant factors that it deems
appropriate, including the current composition of the Board, the alignment of the Board members’ skills
and experiences with our strategic plan, diversity, the balance of management and independent
directors, and the need for committee expertise. Before commencing a search for a new director
nominee, the Nominating / Corporate Governance Committee confers with the Board regarding the
factors it intends to consider in its search.
In identifying potential candidates for Board membership, the Nominating / Corporate Governance
Committee considers recommendations from the Board, shareholders and management, as well as
proxy access candidates. A shareholder who wishes to recommend a prospective director nominee to
the Board must send written notice to: Chair of the Nominating / Corporate Governance Committee,
Big Lots, Inc., 300 Phillipi Road, Columbus, Ohio 43228. The written notice must include the
prospective nominee’s name, age, business address, principal occupation, ownership of our common
shares, information that would be required under the rules of the SEC in a proxy statement soliciting
proxies for the election of such prospective nominee as a director, and any other information that is
deemed relevant by the recommending shareholder. Shareholder recommendations that comply with
these procedures and that meet the factors outlined above will receive the same consideration that the
recommendations of the Board and management receive.
Pursuant to its written charter, the Nominating / Corporate Governance Committee has the authority to
retain consultants and search firms to assist in the process of identifying and evaluating director
candidates and to approve the fees and other retention terms for any such consultant or search firm.
No such firm was retained in connection with the selection of the director nominees proposed for
election at the Annual Meeting.
Majority Vote Policy and Standard
Our Amended Articles of Incorporation impose a majority vote standard in uncontested elections of
directors and our Corporate Governance Guidelines contain a majority vote policy applicable to
uncontested elections of directors. Article Eighth of our Amended Articles of Incorporation provides that
if a quorum is present at the Annual Meeting, a director nominee in an uncontested election shall be
elected to the Board if the number of votes cast for such nominee’s election exceeds the number of
12
votes cast against and/or withheld from such nominee’s election. The majority vote policy contained in
our Corporate Governance Guidelines requires any nominee for director who does not receive more
votes cast for such nominee’s election than votes cast against and/or withheld as to his or her election
to deliver his or her resignation from the Board to the Nominating / Corporate Governance Committee.
Broker non-votes have no effect in determining whether the required affirmative majority vote has been
obtained. Withheld votes have the same effect as a vote against a director nominee. Upon its receipt of
such resignation, the Nominating / Corporate Governance Committee will promptly consider the
resignation and recommend to the Board whether to accept the resignation or to take other action. The
Board will act on the recommendation of the Nominating / Corporate Governance Committee no later
than 100 days following the certification of the shareholder vote. The Nominating / Corporate
Governance Committee, in making its recommendation, and the Board, in making its decision, will
evaluate such resignation in light of the best interests of Big Lots and our shareholders and may
consider any factors and other information they deem relevant. We will promptly publicly disclose the
Board’s decision in a periodic or current report to the SEC.
Determination of Director Independence
The Board affirmatively determined that, with the exception of Mr. Campisi, all of the directors
nominated for election at the Annual Meeting are independent of Big Lots, its subsidiaries and its
management under the standards set forth in the NYSE rules, and no director nominee has a material
relationship with Big Lots, its subsidiaries or its management aside from his or her service as a
director. Mr. Campisi is not an independent director due to his employment by Big Lots.
In determining that each of the director nominees other than Mr. Campisi is independent, the Board
considered charitable contributions to not-for-profit organizations of which these director nominees or
their immediate family members are executive officers or directors and determined that each of the
transactions and relationships it considered was immaterial and did not impair the independence of any
of the directors.
Related Person Transactions
Our Corporate Governance Guidelines, Code of Business Conduct and Ethics, Code of Ethics for
Financial Professionals, and human resources policies prohibit (without the consent of the Board or the
Nominating / Corporate Governance Committee) directors, officers and employees from engaging in
transactions that conflict with our interests or that otherwise usurp corporate opportunities.
Pursuant to our written related person transaction policy, the Nominating / Corporate Governance
Committee evaluates “related person transactions.” Consistent with SEC rules, we consider a related
person transaction to be any transaction, arrangement or relationship (or any series of similar
transactions, arrangements or relationships):
(1)
involving more than $120,000 in which we and any of our directors, nominees for director,
executive officers, holders of more than five percent of our common shares, or their
respective immediate family members were or are to be a participant; and
(2)
in which such related person had, has or will have a direct or indirect material interest.
Under our policy, our directors, executive officers and other members of management are responsible
for bringing all transactions, whether proposed or existing, of which they have knowledge and which
they believe may constitute related person transactions to the attention of our General Counsel. If our
General Counsel determines that the transaction constitutes a related person transaction, our General
Counsel will notify the chair of the Nominating / Corporate Governance Committee. Thereafter, the
Nominating / Corporate Governance Committee will review the related person transaction, considering
13
all factors and information it deems relevant, and either approve or disapprove the transaction in light
of what the Committee believes to be the best interests of Big Lots and our shareholders. If advance
approval is not practicable or if a related person transaction that has not been approved is discovered,
the Nominating / Corporate Governance Committee will promptly consider whether to ratify the related
person transaction. Where advance approval is not practicable or we discover a related person
transaction that has not been approved and the Committee disapproves the transaction, the
Committee will, taking into account all of the factors and information it deems relevant (including the
rights available to us or other parties under the transaction), determine whether we should amend,
rescind or terminate the transaction in light of what it believes to be the best interests of our
shareholders and company.
Examples of factors and information that the Nominating / Corporate Governance Committee may
consider in its evaluation of a related person transaction include:
(1)
the reasons for entering into the transaction;
(2)
the terms of the transaction;
(3)
the benefits of the transaction to us;
(4)
the comparability of the transaction to similar transactions with unrelated third parties;
(5)
the materiality of the transaction to each party;
(6)
the nature of the related person’s interest in the transaction;
(7)
the potential impact of the transaction on the status of an independent director; and
(8)
the alternatives to the transaction.
Additionally, each director, nominee for director and executive officer must complete an annual
questionnaire that requires written disclosure of any related person transaction. The responses to
these questionnaires are reviewed by the Nominating / Corporate Governance Committee and our
General Counsel to identify any potential conflicts of interest or potential related person transactions.
The son-in-law of Lisa Bachmann, our Executive Vice President, Chief Merchandising and Operating
Officer, is employed by Big Lots as a senior buyer and in fiscal 2016 received compensation greater
than $120,000 but less than $150,000, which was approved by the Nominating / Corporate
Governance Committee.
Board’s Role in Risk Oversight
The Board and its committees play an important role in overseeing the identification, assessment and
mitigation of risks that are material to us. In fulfilling this responsibility, the Board and its committees
regularly consult with management to evaluate and, when appropriate, modify our risk management
strategies. While each committee is responsible for evaluating certain risks and overseeing the
management of such risks, the entire Board is regularly informed about such risks through committee
reports.
The Audit Committee assists the Board in fulfilling its oversight responsibility relating to the
performance of our system of internal controls, legal and regulatory compliance, our audit, accounting
and financial reporting processes, and the evaluation of enterprise risk issues, particularly those risk
issues not overseen by other committees. The Compensation Committee is responsible for overseeing
the management of risks relating to our compensation programs. The Nominating / Corporate
Governance Committee manages risks associated with corporate governance, related person
transactions, succession planning, and business conduct and ethics. The Public Policy and
Environmental Affairs Committee, a management committee that reports to the Nominating / Corporate
14
Governance Committee, oversees management of risks associated with public policy, environmental
affairs and social matters that may affect our operations, performance or public image.
Corporate Governance Guidelines
Our Corporate Governance Guidelines, which comply with NYSE rules, can be found in the Investor
Relations section of our website (www.biglots.com) under the “Corporate Governance” caption.
Code of Business Conduct and Ethics & Code of Ethics for Financial Professionals
We have a Code of Business Conduct and Ethics, which applies to all of our directors, officers and
employees. We also have a Code of Ethics for Financial Professionals which applies to our principal
executive officer, principal financial officer, principal accounting officer, controller and other persons
performing similar functions. Both the Code of Business Conduct and Ethics and the Code of Ethics for
Financial Professionals are available in the Investor Relations section of our website
(www.biglots.com) under the “Corporate Governance” caption. We intend to post amendments to or
waivers from any applicable provision (related to elements listed under Item 406(b) of Regulation S-K)
of the Code of Business Conduct and Ethics and the Code of Ethics for Financial Professionals (in
each case, to the extent applicable to our principal executive officer, principal financial officer, principal
accounting officer, controller or persons performing similar functions), if any, in the Investor Relations
section of our website (www.biglots.com) under the “Corporate Governance” caption.
Compensation Committee Interlocks and Insider Participation
During fiscal 2016, Messrs. Berger, Chambers and Solt and Msrs. Gottschalk and Reardon served on
our Compensation Committee. No member of our Compensation Committee serves, or has served at
any time, as one of our officers or employees or has, or during fiscal 2016 had, a material interest in
any related person transaction, as defined in Item 404 of Regulation S-K. None of our executive
officers serve or, during fiscal 2016, served as a member of the board of directors or compensation
committee of any other company that has or had an executive officer serving as a member of the
Board or our Compensation Committee.
Communications with the Board
Shareholders and other parties interested in communicating directly with the Board, with specified
individual directors or with the non-employee directors as a group, may do so by choosing one of the
following options:
Call:
Write:
E-mail:
(866) 834-7325
Big Lots Board of Directors, 300 Phillipi Road, Columbus, Ohio 43228-5311
http://convercent.com/report
Under a process approved by the Nominating / Corporate Governance Committee for handling
correspondence received by us and addressed to non-employee directors, our General Counsel
reviews all such correspondence and forwards to the Board or appropriate members of the Board a
summary and/or copies of any such correspondence that deals with the functions of the Board,
members or committees thereof or otherwise requires their attention. Directors may at any time review
a log of all correspondence received by us and directed to members of the Board and may request
copies of any such correspondence. Concerns relating to our accounting, internal accounting controls
or auditing matters will be referred to the Audit Committee. Concerns relating to the Board or members
of senior management will be referred to the Nominating / Corporate Governance Committee. Parties
submitting communications to the Board may choose to do so anonymously or confidentially.
15
DIRECTOR COMPENSATION
Under the Big Lots, Inc. Non-Employee Director Compensation Package established by the Board,
each non-employee director is compensated for Board and committee participation in the form of
retainers and fees and a restricted stock award.
Retainers and Fees
During fiscal 2016, Messrs. Berger, Chambers, Mallott and Solt and Msrs. Gottschalk, Jamison,
Reardon and Schoppert qualified as non-employee directors and, as a result, received compensation
for their Board service. Due to our employment of Mr. Campisi as CEO in fiscal 2016, he did not qualify
as a non-employee director and he did not receive compensation for his service as a director. The
compensation received by Mr. Campisi as an employee is shown in the Summary Compensation Table
included in this Proxy Statement.
We pay our non-employee directors retainers and fees on a quarterly basis. The retainers and fees we
paid to non-employee directors for fiscal 2016 consisted of: (1) an annual retainer of $80,000 for each
non-employee director other than the nonexecutive chair; (2) an annual retainer of $170,000 for the
nonexecutive chair; (3) an annual retainer of $30,000 for the Audit Committee chair; (4) an annual
retainer of $20,000 for the chairs of the Compensation Committee, the Nominating / Corporate
Governance Committee and the Special Litigation Committee; (5) an annual retainer of $15,000 for
each Audit Committee member; (6) an annual retainer of $10,000 for each Compensation Committee
member, each Nominating / Corporate Governance Committee member and each Special Litigation
Committee member; (7) donations by us in an aggregate annual amount up to $15,000 to charitable
organizations nominated by the non-employee director; and (8) matching charitable donations by us in
an aggregate annual amount up to $15,000 to charitable organizations to which the non-employee
director makes contributions.
Restricted Stock
Our non-employee directors also received a restricted stock award in fiscal 2016 having a grant date
fair value equal to approximately $110,000 (2,102 common shares). The fiscal 2016 restricted stock
awards were made in June 2016 under the Big Lots 2012 Long-Term Incentive Plan (“2012 LTIP”). The
restricted stock awarded to the non-employee directors in fiscal 2016 will vest on the earlier of (1) the
trading day immediately preceding the Annual Meeting or (2) the non-employee director’s death or
disability (as that term is defined in the 2012 LTIP). However, the restricted stock will not vest if the
non-employee director ceases to serve on the Board before either vesting event occurs.
16
Director Compensation Table for Fiscal 2016
The following table summarizes the compensation earned by each non-employee director for his or her
Board service in fiscal 2016.
Fees
Earned
or
Paid in
Cash
($)
(b)
Stock
Awards
($) (1)(2)
(c)
Option
Awards
($) (3)
(d)
Non-Equity
Incentive Plan
Compensation
($)
(e)
Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
($)
(f)
All
Other
Compensation
($) (4)
(g)
Name
(a)
Mr. Berger
110,000 109,998
Mr. Chambers
100,000 109,998
Ms. Gottschalk
111,250 109,998
Ms. Jamison
Mr. Mallott
Ms. Reardon
107,500 109,998
200,000 109,998
105,000 109,998
Ms. Schoppert
107,500 109,998
Mr. Solt
107,500 109,998
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
45,250
30,000
8,150
15,000
22,500
26,500
33,450
15,000
Total
($)
(h)
265,248
239,998
229,398
232,498
332,498
241,498
250,948
232,498
(1) Amounts in this column reflect the aggregate grant date fair value of the restricted stock awards
granted to the non-employee directors in fiscal 2016 as computed in accordance with Financial
Accounting Standards Board Accounting Standards Codification Topic 718 (“ASC 718”),
excluding the effect of any estimated forfeitures. The full grant date fair value of the fiscal 2016
restricted stock award granted to each non-employee director, as computed in accordance with
ASC 718, was based on individual awards of 2,102 common shares at a per common share
value of $52.33 on the grant date (i.e., $109,998 per non-employee director). In accordance with
ASC 718 and the 2012 LTIP, the per common share grant date value is the average of the
opening price and the closing price of our common shares on the NYSE on the grant date.
(2) As of January 28, 2017, each individual included in the table held 2,102 shares of restricted stock.
(3) Prior to fiscal 2008, the non-employee directors received an annual stock option award under the
Big Lots, Inc. Amended and Restated Director Stock Option Plan (“Director Stock Option Plan”).
The Director Stock Option Plan was terminated on May 30, 2008 and no stock option awards were
granted to any non-employee director in fiscal 2016. As of January 28, 2017, only Mr. Mallott
(10,000 common shares) held stock options to purchase our common shares.
(4) Amounts in this column reflect both matching contributions and payments made by us during fiscal
2016 to charitable organizations nominated by the specified directors pursuant to the Big Lots, Inc.
Non-Employee Director Compensation Package during the year in which they were elected to
serve on the Board.
17
STOCK OWNERSHIP
Ownership of Our Common Shares by Certain Beneficial Owners and Management
The following table sets forth certain information with regard to the beneficial ownership of our common
shares by each holder of more than five percent of our common shares, each director, each of the
current and former executive officers named in the Summary Compensation Table, and all executive
officers and directors as a group. The assessment of holders of more than five percent of our common
shares is based on a review of and reliance upon their respective filings with the SEC. Except as
otherwise indicated, all information is as of March 14, 2017.
Name of Beneficial
Owner or Identity of Group
Amount and Nature of
Beneficial Ownership (1)
Percent of Outstanding
Common Shares
Lisa M. Bachmann
Jeffrey P. Berger
David J. Campisi
James R. Chambers
Marla C. Gottschalk
Cynthia T. Jamison
Timothy A. Johnson
Philip E. Mallott
Nancy A. Reardon
Ronald A. Robins, Jr.
Michael A. Schlonsky
Wendy L. Schoppert
Russell E. Solt
BlackRock, Inc. (2)
The Vanguard Group, Inc. (3)
LSV Asset Management (4)
All directors and executive officers as a group (14 persons)
186,650
10,802
233,362
12,610
4,490
4,490
183,733
25,202
4,490
1,276
104,508
4,490
9,337
5,454,916
5,105,669
2,331,004
785,440
*
*
*
*
*
*
*
*
*
*
*
*
*
12.20%
11.45%
5.23%
1.7%
*
Represents less than 1.0% of the outstanding common shares.
(1) Each person named in the table has sole voting power and sole dispositive power with respect to
all common shares shown as beneficially owned by such person, except as otherwise stated in
the footnotes to this table. The amounts set forth in the table include common shares that may be
acquired within 60 days of March 14, 2017 under stock options exercisable and performance
share units that will vest within that period. The number of common shares that may be acquired
within 60 days of March 14, 2017 through the vesting of performance share units within that
period are as follows: Ms. Bachmann: 36,650; Mr. Campisi: 125,099; Mr. Johnson: 27,561 and
Mr. Schlonsky: 17,103; and under stock options exercisable within that period are as follows:
Ms. Bachmann: 120,000; Mr. Campisi: 28,875; Mr. Johnson: 100,000; and Mr. Schlonsky:
55,000; and all executive officers as a group: 510,288.
(2)
In its Schedule 13G/A filed on January 12, 2017, BlackRock, Inc., 55 East 52nd Street, New York,
NY 10055, stated that it beneficially owned the number of common shares reported in the table
as of December 31, 2016, had sole voting power over 5,243,972 of the shares and sole
dispositive power over all the shares, and had no shared voting power or shared dispositive
power over any of the shares.
(3)
In its Schedule 13G/A filed on February 10, 2017, The Vanguard Group, Inc., 100 Vanguard
Blvd., Malvern, PA 19355, stated that it beneficially owned the number of common shares
18
reported in the table as of December 31, 2016, had sole voting power over 88,685 of the shares,
had sole dispositive power over 5,014,151 of the shares, had shared dispositive power over
91,518 of the shares, and had shared voting power over 5,404 of the shares. In its Schedule
13G/A, this reporting person indicated that its wholly-owned subsidiaries, Vanguard Fiduciary
Trust Company and Vanguard Investments Australia, Ltd., were the beneficial owners of
86,114 and 7,975 common shares, respectively.
(4)
In its Schedule 13G filed on February 6, 2017, LSV Asset Management, 155 North Wacker Drive,
Suite 4600, Chicago, IL 60606, stated that it beneficially owned the number of common shares
reported in the table as of December 31, 2016, had sole voting power over 1,351,019 of the
shares and sole dispositive power over all the shares, and had no shared voting power or shared
dispositive power over any of the shares.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended (“Exchange Act”), requires our
directors and executive officers, and persons who beneficially own more than 10% of our outstanding
common shares, to file with the SEC and the NYSE initial reports of ownership and reports of changes
in ownership of our common shares. Executive officers, directors and greater than 10% shareholders
are required by the SEC rules to furnish us with copies of all Section 16(a) reports they file. Based
upon a review of filings with the SEC and written representations that no other reports were required,
we believe that all of our directors and executive officers and greater than 10% shareholders complied
during fiscal 2016 with the reporting requirements of Section 16(a) of the Exchange Act.
19
PROPOSAL TWO: APPROVAL OF THE BIG LOTS 2017 LONG-TERM INCENTIVE PLAN
Background
On March 8, 2017, the Board proposed, based on the recommendation of the Compensation
Committee (which we refer to as the “Committee” throughout this discussion of Proposal Two), that our
shareholders approve, the 2017 LTIP. If our shareholders approve the 2017 LTIP, it will become
effective on May 25, 2017, and will replace the 2012 LTIP which will be frozen and no new awards will
be granted thereunder. The Board recommends that shareholders approve the 2017 LTIP.
The 2017 LTIP is designed to support our long-term business objectives in a manner consistent with
our compensation philosophy. The Board believes that by allowing us to continue to offer our
employees long-term equity and qualified performance-based compensation through the 2017 LTIP,
we will promote the following key objectives of our compensation program:
•
•
aligning the interests of salaried employees, outside directors and consultants with those of
our shareholders through increased participant ownership of our common shares; and
attracting, motivating and retaining experienced and highly qualified salaried employees,
outside directors and consultants who will contribute to our financial success.
As with the 2012 LTIP, the 2017 LTIP is an omnibus plan that provides for a variety of types of Awards
to maintain flexibility. The 2017 LTIP will permit grants of (1) non-qualified stock options (“NQSOs”),
(2) incentive stock options (“ISOs”) as defined in Section 422 of the Internal Revenue Code of 1986, as
amended and including applicable rules, regulations and authoritative interpretations thereunder
(“IRC”), (3) stock appreciation rights (“SARs”), (4) restricted stock, (5) restricted stock units,
(6) deferred stock units, (7) performance shares, (8) performance share units, (9) performance units,
(10) cash-based awards, and (11) other stock-based awards (NQSOs, ISOs, SARs, restricted stock,
restricted stock units, deferred stock units, performance shares, performance share units, performance
units, cash-based awards and other stock-based awards are referred to collectively as “Awards”). All of
our and our affiliates’ employees, outside directors and consultants are eligible to receive Awards
under the 2017 LTIP.
The total number of common shares available for Awards under the 2017 LTIP is equal to the sum of
(1) 5,500,000 newly issued common shares plus (2) any common shares subject to the 1,743,116
outstanding full value awards as of January 28, 2017 that on or after January 28, 2017 cease for any
reason to be subject to such awards (other than by reason of exercise or settlement of the awards to
the extent they are exercised for or settled in vested and nonforfeitable common shares). The Board
believes that this number represents a reasonable amount of potential equity dilution and provides a
powerful incentive for employees to increase the value of Big Lots for all of our shareholders.
As of January 28, 2017, there were 2,979,774 common shares available for grant under the 2012 LTIP
and 1,952,491 common shares underlying awards outstanding under the 2012 LTIP (305,125 of which
are underlying stock options, 242,666 of which are underlying restricted stock, 433,105 of which are
underlying restricted stock units and 971,595 of which are underlying performance share units). As of
January 28, 2017: (1) the weighted average exercise price of the 589,675 outstanding stock options
under our equity compensation plans (including under those plans that previously terminated) was
$38.75 and the weighted average remaining term was 2.46 years; and (2) there were 338,416
restricted stock awards, 433,105 restricted stock unit awards and 971,595 performance share unit
awards outstanding under our equity compensation plans (including those plans that previously
terminated). It is our current practice to grant stock-based compensation awards to key employees on
an annual basis during the first quarter of each year based on targeted dollar values that are generally
competitive with market and our comparator group.
20
The 2017 LTIP is designed to meet the requirements for deductibility of executive compensation under
Section 162(m) of the IRC (“Section 162(m)”) with respect to Awards under the 2017 LTIP that are
intended to qualify as “qualified performance-based compensation” under Section 162(m). In order to
meet one of the Section 162(m) deductibility requirements, the 2017 LTIP imposes limits on the
number of common shares underlying Awards that any one participant may receive, as described
below in the “Limits on Awards” section of this Proposal Two.
The 2017 LTIP does not permit the repricing of Awards without the approval of shareholders or the
granting of Awards with a reload feature.
Any dividend equivalents paid under an Award will be subject to performance conditions and service
conditions, as applicable, as the Award with respect to which such dividend equivalents are to be paid.
The following summary describes the material features of the 2017 LTIP and is qualified in its entirety
by reference to the complete text of the 2017 LTIP attached to this Proxy Statement as Appendix A.
Administration
Subject to the terms of the 2017 LTIP, the selection of participants in the 2017 LTIP, the level of
participation of each participant and the terms and conditions of all Awards will be determined by the
Committee. Each member of the Committee will be an “independent director” for purposes of our
Corporate Governance Guidelines, the Committee’s charter and the NYSE listing requirements; a
“non-employee director” within the meaning of Rule 16b-3 under the Exchange Act; and an “outside
director” within the meaning of Section 162(m). The Committee is currently comprised of five directors,
each of whom meets all of these criteria. Consistent with the purpose of the 2017 LTIP, the Committee
will have the discretionary authority to (1) interpret the 2017 LTIP, (2) prescribe, amend and rescind
rules and regulations relating to the 2017 LTIP, and (3) make all other determinations necessary or
advisable for the administration or operation of the 2017 LTIP. The Committee may delegate authority
to administer the 2017 LTIP as it deems appropriate, subject to the express limitations set forth in the
2017 LTIP.
Limits on Awards
The Board has reserved a number of common shares for issuance under the 2017 LTIP equal to the
sum of (1) 5,500,000 newly issued common shares plus (2) any common shares subject to the
1,743,116 outstanding full value awards as of January 28, 2017 that on or after January 28, 2017
cease for any reason to be subject to such awards (other than by reason of exercise or settlement of
the awards to the extent they are exercised for or settled in vested and nonforfeitable common shares).
Of this number, no more than 5,500,000 common shares may be issued pursuant to grants of ISOs
during the term of the 2017 LTIP.
The 2017 LTIP is designed with a flexible share pool. With a flexible share pool, the share
authorization is based on the least costly award vehicle (generally stock options). The value of an
option is compared to a full value award (a full value award is an award other than a stock option or
SAR that is settled by the issuance of a common share) to determine a valuation ratio. We have used a
binominal model to determine our valuation ratio of 1:2.15. This means that every time an option is
granted, the authorized pool is reduced by one common share and every time a full value share is
granted, the authorized pool is reduced by 2.15 common shares.
21
A participant may receive multiple Awards under the 2017 LTIP. Awards will be limited to the following
per participant annual fiscal year amounts:
Award Type
Stock Options
SARs
Restricted Stock
Restricted Stock Units
Deferred Stock Units
Performance Shares, Performance Share Units and Performance Units
Cash-Based Awards
Other Stock-Based Awards
Annual Limit per Participant
2,000,000 common shares
2,000,000 common shares
1,000,000 common shares
1,000,000 common shares
1,000,000 common shares
1,000,000 common shares
or equivalent value
The greater of $7,000,000
or the value of 1,000,000
common shares
1,000,000 common shares
The maximum number of common shares subject to Awards granted during a single fiscal year to any
non-employee director may not exceed $500,000 in total value (based on the grant date fair value of
such Awards for financial reporting purposes).
The common shares available for issuance under the 2017 LTIP will be our authorized but unissued
common shares and treasury shares. Subject to the terms of the 2017 LTIP, common shares covered
by an Award will only be counted as used to the extent they are actually issued. To the extent that any
Award payable in common shares (1) terminates by expiration, forfeiture, cancellation, or otherwise
without the issuance of such common shares, (2) is settled in cash in lieu of common shares, or (3) is
exchanged with the Committee’s permission prior to the issuance of common shares for Awards not
involving common shares, the common shares covered thereby may again be made subject to Awards
under the 2017 LTIP. However, common shares which are (a) not issued or delivered as a result of the
net settlement of a stock option or stock-settled SAR, (b) withheld to satisfy tax withholding obligations
on a stock option or SAR issued under the 2017 LTIP, (c) tendered to pay the exercise price of a stock
option or the grant price of a SAR under the 2017 LTIP, or (d) repurchased on the open market with
the proceeds of a stock option exercise will no longer be eligible to be again available for grant under
the 2017 LTIP.
Eligibility and Participation
All of our and our affiliates’ employees, outside directors and consultants will be eligible to participate in
the 2017 LTIP. As of January 28, 2017, we and our affiliates had approximately 35,100 employees and
eight outside directors. We are unable to reasonably estimate the number of consultants who will be
eligible to receive awards under the 2017 LTIP. In fiscal 2016, approximately 112 employees, eight
outside directors and no consultants received equity incentive awards, although this may vary from
year to year. From time to time, the Committee will determine who will be granted Awards, the number
of shares subject to such grants, and all other terms of Awards.
Types of Awards
Stock Options
Stock options granted under the 2017 LTIP may be either NQSOs or ISOs. The exercise price of any
stock option granted may not be less than the fair market value of the Company’s common shares on
the date the stock option is granted. The stock option exercise price is payable (1) in cash, (2) by
22
tendering previously acquired common shares (subject to the satisfaction of the holding period set forth
in the 2017 LTIP) having an aggregate fair value at the time of exercise equal to the exercise price,
(3) through a broker-assisted cashless exercise, or (4) by any combination of the foregoing.
The Committee determines the terms of each stock option grant at the time of the grant. However, the
aggregate fair market value (determined as of the date of the grant) of the common shares subject to
ISOs that are exercisable by any participant for the first time in any calendar year may not be greater
than $100,000. The Committee specifies at the time each stock option is granted the time or times at
which, and in what proportions, the stock option becomes vested and exercisable. No stock option
shall be exercisable later than the tenth anniversary of the grant date. In general, a stock option
expires upon the earlier of (1) its stated expiration date or (2) one year after the participant terminates
service (except in the case of ISOs which must be exercised within three months after a termination of
service, other than due to death or disability).
Stock Appreciation Rights
A SAR entitles the participant, upon settlement, to receive a payment based on the excess of the fair
market value of our common shares on the settlement date over the grant price of the SAR, multiplied
by the number of SARs being settled. The grant price of a SAR may not be less than the fair market
value of our common shares on the grant date. SARs may be payable in cash, our common shares or
a combination of both.
The Committee determines the vesting requirements, the form of payment and/or other terms of a
SAR. Vesting may be based on the continued service of the participant for specified time periods or the
attainment of a specified business performance goal established by the Committee or both. No SAR
shall be exercisable later than the tenth anniversary of the grant date. In general, a SAR expires upon
the earlier of (1) its stated expiration date or (2) one year after the participant terminates service. We
have not issued any SARs under the 2012 LTIP and do not currently have any SARs outstanding.
Restricted Stock
A restricted stock Award represents our common shares that are issued subject to restrictions on
transfer and vesting requirements as determined by the Committee. Vesting requirements may be
based on the continued service of the participant for specified time periods and/or the attainment of a
specified business performance goal established by the Committee.
Subject to the transfer restrictions and vesting requirements of the restricted stock Award, the
participant has the same rights as our shareholders during the restriction period, including all voting
and dividend rights, although the Committee may provide that dividends and restricted stock
certificates will be held in escrow during the restriction period (and forfeited or distributed depending on
whether applicable performance goals or service restrictions have been met). Also, any stock
dividends will be subject to the same restrictions that apply to the restricted stock upon which the stock
dividends are issued. Unless the Committee specifies otherwise in the Award agreement, the restricted
stock is forfeited if the participant terminates service before the restricted stock vests or if applicable
terms and conditions have not been met at the end of the restriction period.
Restricted Stock Units
An Award of restricted stock units provides the participant the right to receive a payment based on the
value of our common shares. Restricted stock units may be subject to such vesting requirements,
restrictions and conditions to payment as the Committee determines are appropriate. Vesting
requirements may be based on the continued service of the participant for a specified time period and/
23
or on the attainment of a specified business performance goal established by the Committee.
Restricted stock units are payable in cash, our common shares or a combination of both, as
determined by the Committee.
Participants receiving restricted stock units do not have, with respect to such restricted stock units, any
of the rights of a shareholder. Unless the Committee specifies otherwise in the Award agreement, the
restricted stock unit Award is forfeited if the participant terminates service before the restricted stock
unit vests or if applicable terms and conditions have not been met at the end of the restriction period.
Deferred Stock Units
An Award of deferred stock units provides the participant the right to defer receipt of all or some portion
of his or her annual compensation, annual incentive bonus and/or long-term compensation as
permitted by the Committee, and for which the participant will receive a payment based on the value of
our common shares. Deferred stock units shall be fully vested and non-forfeitable at all times. Deferred
stock units, together with any dividend-equivalent rights credited with respect thereto, may be subject
to such requirements, restrictions and conditions to payment as the Committee determines are
appropriate. Deferred stock unit Awards are payable in cash, our common shares or a combination of
both. Participants credited with deferred stock units shall not have, with respect to such deferred stock
units, any of the rights of a shareholder of the Company.
Performance Shares, Performance Share Units and Performance Units
An Award of performance shares, performance share units or performance units provides the
participant the right to receive our common shares if specified terms and conditions are met.
Performance shares are restricted shares that are subject to performance based vesting. Performance
share units are restricted stock units that are subject to performance based vesting. Performance units
are cash based awards that are subject to performance based vesting. Performance share,
performance share unit and performance unit Awards are payable in cash or our common shares or in
a combination of both. Unless the Committee specifies otherwise when the Award is granted, if a
participant terminates service for any reason before the performance shares, performance share units
or performance units become vested, such Award will be forfeited.
Cash-Based Awards
An Award of cash-based awards provides the participant an opportunity to receive a cash payment.
Cash-based awards may be subject to such vesting requirements, restrictions and conditions to
payment as the Committee determines are appropriate. Vesting requirements may be based on the
continued service of the participant for a specified time period or on the attainment of a specified
performance goal established by the Committee. If a participant terminates service before the cash-
based award vests, the Award will be forfeited.
Other Stock-Based Awards
An Award of other stock-based awards provides the participant an equity-based or equity-related right,
which may provide the participant the right to receive our common shares. Other stock-based awards
may be subject to such vesting requirements, restrictions and conditions to payment as the Committee
determines are appropriate. Vesting requirements may be based on the continued service of the
participant for a specified time period or on the attainment of a specified performance goal established
by the Committee. If a participant terminates service for any reason before the other stock-based
award vests, the Award will be forfeited.
24
Performance-Based Awards
Any Awards granted under the 2017 LTIP may be granted in a form that qualifies for the qualified
performance-based compensation exception under Section 162(m). Under Section 162(m), the terms
of the Award must state, through an objective formula or standard, the method of computing the
amount of compensation payable under the Award, and must preclude discretion to increase the
amount of compensation payable under the terms of the Award (but may give the Committee discretion
to decrease the amount of compensation payable). As described above in “Limits on Awards,” the
2017 LTIP imposes certain limitations on the number and value of performance-based Awards to
covered employees. The payment or vesting of performance-based Awards granted under the 2017
LTIP is based on performance goals established by the Committee. The 2017 LTIP specifies the
following performance measures from which the performance goals must be derived:
• Earnings (loss) per common share from continuing operations;
• Earnings (loss) per common share;
• Operating profit (loss), operating income (loss), or income (loss) from operations (as the case
may be);
•
•
•
•
•
Income (Loss) from continuing operations before unusual or infrequent items;
Income (Loss) from continuing operations;
Income (Loss) from continuing operations before income taxes;
Income (Loss) from continuing operations before extraordinary item and/or cumulative effect
of a change in accounting principle (as the case may be);
Income (Loss) before extraordinary item and/or cumulative effect of a change in accounting
principle (as the case may be);
• Net income (loss);
•
Income (Loss) before other comprehensive income (loss);
• Comprehensive income (loss);
•
•
Income (Loss) before interest and income taxes;
Income (Loss) before interest, income taxes, depreciation and amortization;
• Any other objective and specific income (loss) category or non-GAAP financial measure that
appears as a line item in our filings with the Securities and Exchange Commission or the
annual report to shareholders;
• Any of the performance measures above (other than earnings (loss) per common share from
continuing operations and earnings (loss) per common share) on a weighted average
common shares outstanding basis;
• Either of earnings (loss) per common share from continuing operations and earnings (loss)
per common share on a basic or diluted basis and any of the other performance measures
above on a basic or diluted earnings per share basis;
• Common stock price;
• Total shareholder return expressed on a dollar or percentage basis as is customarily
disclosed in the proxy statement accompanying the notice of annual meetings of
shareholders;
• Percentage increase in comparable store sales;
25
• Gross profit (loss) or gross margin (loss) (as the case may be);
• Economic value added;
• Return measures (including, but not limited to, return on assets, capital, invested capital,
equity, sales, or revenue);
• Expense targets;
• Cash flow (including, but not limited to, operating cash flow, free cash flow, cash flow return
on equity, and cash flow return on investment);
• Productivity ratios;
• Market share;
• Customer satisfaction; or
• Working capital targets and change in working capital.
Effect of Change in Control
Awards under the 2017 LTIP are generally subject to special provisions upon the occurrence of a
change in control (as defined in the 2017 LTIP). For Awards granted under the 2017 LTIP, if a change
in control occurs, then: (1) all outstanding stock options and SARs under the 2017 LTIP shall become
fully exercisable; (2) all remaining restrictions applicable to restricted stock and restricted stock units
shall lapse and such restricted stock and restricted stock units shall become free of restrictions, fully
vested and transferable or redeemed, as applicable; (3) all performance goals or other conditions
applicable to performance shares, performance share units or performance units shall be deemed
satisfied in full and the common shares or cash subject to such Award shall be fully distributable;
(4) any remaining restrictions, performance goals or other conditions applicable to deferred stock units
shall be deemed to be satisfied in full with the common shares or cash subject to such Award being
fully distributable; and (5) all outstanding other stock-based awards or cash-based awards shall
become fully vested. Payments under Awards that become subject to the excess parachute rules of
Section 280G of the IRC may be reduced under certain circumstances. See the “Tax Treatment of
Awards – Sections 280G and 4999” subsection below for more details.
Limited Transferability
All Awards or common shares subject to an Award under the 2017 LTIP are nontransferable except
upon death, either by the participant’s will or the laws of descent and distribution or through a
beneficiary designation, and Awards are exercisable during the participant’s lifetime only by the
participant (or by the participant’s legal representative in the event of the participant’s incapacity).
Adjustments for Corporate Changes
In the event of a reorganization, recapitalization, merger, spin-off, stock split or other specified changes
affecting us or our capital structure, the Committee is required to make equitable adjustments that
reflect the effects of such changes to the participants. Such adjustments may relate to the number of
our common shares available for grant, as well as to other maximum limitations under the 2017 LTIP
(e.g., exercise prices and number of Awards), and the number of our common shares or other rights
and prices under outstanding Awards.
Term, Amendment and Termination
The 2017 LTIP will expire on May 25, 2027, unless terminated earlier by the Board. Although the Board
or the Committee may amend or alter the 2017 LTIP, it may not do so without shareholder approval of
26
any amendment or alteration to the extent shareholder approval is required by law, regulation or stock
exchange rule. In addition, any amendment, alteration or termination of the 2017 LTIP or an Award
agreement may not adversely affect any outstanding Award to a participant without the consent of that
participant other than amendments for the purpose of (1) causing the 2017 LTIP to comply with
applicable law, (2) permitting us to receive a tax deduction under applicable law, or (3) avoiding an
expense charge to us or our affiliates.
Repricing
The 2017 LTIP does not permit the repricing of Awards without the approval of shareholders or the
granting of Awards with a reload feature.
Plan Benefits
Future benefits under the 2017 LTIP are not currently determinable. The Committee has discretionary
authority to grant Awards pursuant to the 2017 LTIP which does not contain any provision for
automatic grants.
Federal Income Tax Treatment of Awards
The following summary discussion of the United States federal income tax implications of Awards
under the 2017 LTIP is based on the provisions of the IRC as of the date of this Proxy Statement. This
summary is not intended to be exhaustive and does not, among other things, describe state, local or
foreign tax consequences and such tax consequences may not correspond to the federal income tax
treatment described herein. The exact federal income tax treatment of transactions could vary
depending upon the specific facts and circumstances involved and participants are advised to consult
their personal tax advisors with regard to all consequences arising from the grant, vesting or exercise
of Awards and the disposition of any acquired common shares.
Incentive Stock Options
ISOs may only be granted to our employees. No taxable ordinary income to the participant or a deduction to
us will be realized at the time the ISO is granted or exercised. If the participant holds the common shares
received as a result of an exercise of an ISO for at least two years from the grant date and one year from
the exercise date, then (1) any gain realized on disposition of the common shares is treated as a long-term
capital gain and any loss sustained will be a long-term capital loss and (2) we are not entitled to a
deduction. If the common shares acquired by an exercise of an ISO are disposed of within either of these
periods (i.e., a “disqualifying disposition”), then the participant must include in his or her income, as taxable
compensation for the year of the disposition, an amount equal to the excess, if any, of the fair market value
of the common shares upon exercise of the stock option over the stock option exercise price (or, if less, the
excess of the amount realized upon disposition over the stock option exercise price). In such case, we will
generally be entitled to a deduction, generally in the year of such a disposition, for the amount includible in
the participant’s income as taxable compensation. The participant’s basis in the common shares acquired
upon exercise of an ISO is equal to the stock option exercise price paid, plus any amount includible in his or
her income as a result of a disqualifying disposition. The rules that generally apply to ISOs do not apply
when calculating any alternative minimum tax liability. The rules affecting the application of the alternative
minimum tax are complex, and their effect depends on individual circumstances, including whether a
participant has items of adjustment other than those derived from ISOs.
Non-Qualified Stock Options
A NQSO results in no taxable income to the participant or deduction to us at the time it is granted. A
participant exercising a NQSO will, at that time, realize taxable compensation in the amount of the
27
difference between the stock option exercise price and the then-current fair market value of the
common shares. Subject to the applicable provisions of the IRC, a deduction for federal income tax
purposes will be allowable to us in the year of exercise in an amount equal to the taxable
compensation recognized by the participant.
The participant’s basis in such common shares is equal to the sum of the stock option exercise price
plus the amount includible in his or her income as compensation upon exercise. Any gain (or loss)
upon subsequent disposition of the common shares will be a long-term or short-term gain (or loss),
depending upon the holding period of the common shares.
If a participant tenders previously owned common shares in payment of the NQSO exercise price,
then, instead of the treatment described above, the following generally will apply: (1) a number of new
common shares equal to the number of previously owned common shares tendered will be considered
to have been received in a tax-free exchange; (2) the participant’s basis and holding period for such
number of new common shares will be equal to the basis and holding period of the previously owned
common shares exchanged; (3) the participant will have compensation income equal to the fair market
value on the exercise date of the number of new common shares received in excess of such number of
exchanged common shares; (4) the participant’s basis in such excess shares will be equal to the
amount of such compensation income; and (5) the holding period in such common shares will begin on
the exercise date.
Stock Appreciation Rights
Generally, a participant that receives a SAR will not recognize taxable income at the time the SAR is
granted. If a participant receives the appreciation inherent in a SAR in cash, the cash will be taxed as
ordinary compensation income to the participant at the time it is received. If a participant receives the
appreciation inherent in a SAR in common shares, the spread between the then-current fair market
value of the common shares and the grant price will be taxed as ordinary compensation income to the
participant at the time it is received. In general, there will be no federal income tax deduction allowed to
us upon the grant or termination of a SAR. However, upon the settlement of either form of SAR, we will
generally be entitled to a deduction equal to the amount of ordinary income the participant is required
to recognize as a result of the settlement.
If the amount a participant receives upon disposition of the common shares that the participant
acquired by exercising a SAR is greater than the sum of the aggregate exercise price that the
participant paid plus the amount of ordinary income recognized by the participant upon exercise, the
excess will be treated as a long-term or short-term capital gain, depending on the holding period of the
common shares. Conversely, if the amount a participant receives upon disposition of the common
shares that the participant acquired by exercising a SAR is less than the sum of the aggregate exercise
price that the participant paid plus the amount of ordinary income recognized by the participant upon
exercise, the difference will be treated as a long-term or short-term capital loss, depending on the
holding period of the common shares.
Restricted Stock
Generally, a participant will not recognize income and we will not be entitled to a deduction at the time
an award of restricted stock is made under the 2017 LTIP, unless the participant makes a
Section 83(b) election described below. A participant who has not made such an election will recognize
ordinary compensation income at the time the restrictions on the common shares lapse in an amount
equal to the fair market value of the common shares at such time. We will generally be entitled to a
corresponding deduction in the same amount and at the same time as the participant recognizes
income. Any otherwise taxable disposition of the restricted stock after the time the restrictions lapse will
28
result in a capital gain or loss to the extent the amount realized from the sale differs from the tax basis
(i.e., the fair market value of the common shares on the date the restrictions lapse).
Deferred Stock Units
Generally, a participant who defers compensation into deferred stock units will not recognize income at
the time the compensation would otherwise have been paid to the participant. Upon the settlement of
the deferred stock unit, the participant will be taxed on the then-current fair market value of the shares
or cash paid and we will be entitled to a deduction equal to the amount of ordinary compensation
income the participant is required to recognize as a result of the settlement.
Other Awards
The current United States federal income tax consequences of other Awards authorized under the
2017 LTIP are generally in accordance with the following: (1) the fair market value of other stock-based
awards is generally subject to ordinary compensation income tax at the time the restrictions lapse,
unless the participant elects to accelerate recognition as of the date of grant; and (2) the amount of
cash paid (or the fair market value of the common shares issued) to settle restricted stock units,
performance shares, performance share units, performance units and cash-based awards is generally
subject to ordinary compensation income tax. In each of the foregoing cases, we will generally be
entitled to a corresponding federal income tax deduction at the same time the participant recognizes
ordinary compensation income.
Dividend-Equivalent Rights
Participants may be granted dividend-equivalent rights in connection with any Award other than a stock
option or SAR. A participant who receives dividend-equivalent rights with respect to an Award will
recognize ordinary compensation income equal to the value of cash or common shares delivered and
we will generally be entitled to a corresponding deduction for such dividends.
Section 162(m)
As described above, Section 162(m) generally provides that a company is prohibited from deducting
compensation paid to certain “covered employees” (i.e., the principal executive officer and three other
most highly compensated officers (other than the principal financial officer)) in excess of $1 million per
person in any year. Compensation that qualifies as “qualified performance-based compensation” is
excluded for purposes of calculating the amount of compensation subject to the $1 million limit. To
qualify as qualified performance-based compensation, Awards must be granted under the 2017 LTIP
by the Committee and satisfy the 2017 LTIP’s limit on the total number of common shares that may be
awarded to any one participant during a year. In addition, for Awards other than stock options to qualify
as qualified performance-based compensation, the issuance or vesting of the Award, as applicable,
must be contingent upon satisfying one or more of the performance measures listed in the 2017 LTIP,
as established and certified by the Committee.
Sections 280G and 4999
Section 280G of the IRC disallows deductions for excess parachute payments and Section 4999 of the
IRC imposes penalties on persons who receive excess parachute payments. A parachute payment is
the present value of any compensation amount that is paid to “disqualified individuals” (such as our
and our subsidiaries’ officers and highly paid employees) that are contingent upon or paid on account
of a change in control – but only if such payments, in the aggregate, are equal to or greater than 300%
29
of the participant’s taxable compensation averaged over the five calendar years ending before the
change in control (or over the participant’s entire period of service if that period is less than five
calendar years). This average is called the “Base Amount.” An excess parachute payment is the
amount by which any parachute payment exceeds the portion of the Base Amount allocated to such
payment.
Some participants in the 2017 LTIP may receive parachute payments in connection with a change in
control. If this happens, the value of each participant’s parachute payment from the 2017 LTIP must be
combined with other parachute payments the same participant is entitled to receive under other
agreements or arrangements with us or our subsidiaries, such as an employment agreement or a
change in control agreement. If the participant is a disqualified individual and the combined value of all
parachute payments is an excess parachute payment, the participant must pay an excise tax equal to
20% of the value of all parachute payments above 100% of the participant’s Base Amount. This tax is
due in addition to other federal, state and local income, wage and employment taxes. Also, neither we
nor any of our subsidiaries would be able to deduct the amount of any participant’s excess parachute
payment and the $1,000,000 limit on deductible compensation under Section 162(m) would be reduced
by the amount of the excess parachute payment.
The 2017 LTIP addresses excess parachute payment penalties. Generally, if a participant in the 2017
LTIP receives an excess parachute payment, the value of the payment is reduced to avoid the excess
parachute penalties. However, the 2017 LTIP also states that other means of dealing with these
penalties will be applied if required by the terms of another written agreement (whether currently in
effect or adopted in future) with us or any of our subsidiaries (such as an employment or a change in
control agreement). We are a party to an employment agreement with two of our named executive
officers. Those employment agreements provide that if the payments received by the named executive
officer in connection with a change in control constitute an excess parachute payment under
Section 280G of the IRC, the executive’s benefits under his or her employment agreement will be
reduced to the extent necessary to become one dollar less than the amount that would generate such
excise tax, if this reduction results in a larger after-tax amount to the executive as compared to the
excise tax reimbursement method. The compensation payable on account of a change in control may
be subject to the deductibility limitations of Sections 162(m) and 280G of the IRC.
Section 83(b)
A participant may elect pursuant to Section 83(b) of the IRC to have compensation income recognized
at the grant date of an Award of restricted stock, restricted stock units or performance units and to
have the applicable capital gain holding period commence as of that date. If a participant makes this
election, we will generally be entitled to a corresponding tax deduction equal to the value of the Award
affected by this election. If the participant who has made an election subsequently forfeits the Award,
then the participant will not be entitled to deduct the amount previously recognized as income.
Section 409A
Section 409A of the IRC imposes certain restrictions on amounts deferred under nonqualified deferred
compensation plans and a 20% excise tax on amounts that are subject to, but do not comply with,
Section 409A of the IRC. If the requirements of Section 409A are not complied with, holders of such
Awards may be taxed earlier than would otherwise be the case (e.g., at the time of vesting instead of
the time of payment) and may be subject to an additional 20% penalty tax and, potentially, interest and
penalties. Section 409A of the IRC includes a broad definition of nonqualified deferred compensation
plans, which includes certain types of equity incentive compensation. It is intended that the Awards
granted under the 2017 LTIP will comply with or be exempt from the requirements of Section 409A of
30
the IRC and the treasury regulations promulgated thereunder (and any subsequent notices or guidance
issued by the Internal Revenue Service).
Market Value
On January 28, 2017, the closing price of the Company’s common shares traded on the NYSE was
$48.67 per share.
Equity Compensation Plan Information
The following table summarizes information as of January 28, 2017 relating to our equity compensation
plans pursuant to which our common shares may be issued.
Number of
securities to be
issued upon
exercise of
outstanding
options,
warrants, and
rights (#)
(a)
Weighted-
average
exercise price
of outstanding
options,
warrants, and
rights ($)
(b)
Number of
securities
remaining
available for
future issuance
under equity
compensation
plans (excluding
securities
reflected in
column (a)) (#)
(c)
1,994,375 (1)(2)
38.75 (3)
2,979,774 (4)
-
-
-
1,994,375
38.75 (3)
2,979,774
Plan Category
Equity compensation plans approved by security
holders
Equity compensation plans not approved by security
holders
Total
(1)
(2)
(3)
(4)
Includes stock options, performance share units, and restricted stock units granted under the
2012 LTIP, the Big Lots 2005 Long-Term Incentive Plan (“2005 LTIP”), and the Director Stock
Option Plan. In addition, we had 338,416 shares of unvested restricted stock outstanding under
the 2012 LTIP and the 2005 LTIP.
The common shares issuable upon exercise of outstanding stock options granted under each
shareholder-approved plan are as follows:
2012 LTIP
2005 LTIP
Director Stock Option Plan
305,125
274,550
10,000
The weighted average exercise price only represents stock options and does not take into
account the PSUs and the restricted stock units granted under the 2012 LTIP.
The common shares available for issuance under the 2012 LTIP are limited to 2,979,774
common shares. There are no common shares available for issuance under any of the other
shareholder-approved plans.
The Director Stock Option Plan terminated on May 30, 2008. The 2005 LTIP expired on May 16, 2012.
The 2012 LTIP was approved in May 2012.
See the “Stock Ownership” section of this Proxy Statement for additional information with respect to
security ownership of certain beneficial owners and management.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE PROPOSAL TO
APPROVE THE 2017 LTIP.
31
EXECUTIVE COMPENSATION
Compensation Committee Report
The Compensation Committee reviewed and discussed the following Compensation Discussion and
Analysis (“CD&A”) with management and, based on such review and discussion, the Compensation
Committee recommended to the Board that the CD&A be included in this Proxy Statement and our
Annual Report on Form 10-K for fiscal 2016 (“Form 10-K”).
Members of the Compensation Committee
Nancy A. Reardon, Chair
Jeffrey P. Berger
James R. Chambers
Marla C. Gottschalk
Russell E. Solt
Compensation Discussion and Analysis
This CD&A describes our executive compensation program for fiscal 2016 and certain elements of our
executive compensation program for fiscal 2017 and explains how the Board and the Compensation
Committee of the Board (which we refer to as the “Committee” in this CD&A) made its compensation
decisions for our named executive officers, who, for fiscal 2016, were:
• Mr. Campisi, our CEO and President;
• Mr. Johnson, our Executive Vice President, Chief Administrative Officer and Chief Financial
Officer;
• Ms. Bachmann, our Executive Vice President, Chief Merchandising and Operating Officer;
• Mr. Schlonsky, our Executive Vice President, Human Resources and Store Operations; and
• Mr. Robins, our Senior Vice President, General Counsel and Corporate Secretary.
Executive Summary
Objectives of Executive Compensation Program
Through a balanced mix of performance-linked and non-performance-linked compensation consisting
of salary, annual cash incentive awards and equity awards, the Committee and the Board seek to
promote three primary objectives: (1) align the interests of executives and shareholders through
performance-linked compensation; (2) motivate executives to contribute to our success and reward
them for their performance; and (3) attract and retain talented executives by paying compensation that
is competitive with the compensation paid by the companies in our comparator group.
Company Performance for Fiscal 2016
In fiscal 2016, we focused on improving our financial and operating performance and continued to
deliver solid and improved operating and financial results. 2016 was a challenging year for many
retailers, but we continued to demonstrate our ability to perform, exceed earnings per share, operating
32
profit and return on invested capital targets and return cash to our shareholders through share
repurchases and dividends.
Earnings
Per Share - Diluted
Operating Profit
Return on
Invested Capital
Total Shareholder
Return
$3.32
$248M
$2.81
$2.46
$236M
16.6%
14.9%
19.0%
31.2%
25.0%
$224M
5.8%
FY14
FY15
FY16
FY14
FY15
FY16
FY14
FY15
FY16
5 Yr
3 Yr
1 Yr
Approximately $1.1 Billion
Returned to Shareholders Since 2012
through Share Repurchases and Dividends
Named Executive Officer Compensation for Fiscal 2016
The principal elements of our executive compensation program – salary, annual cash incentive awards
and equity awards – remained the same in fiscal 2016. The Committee and our other outside directors
are committed to a pay-for-performance philosophy focused on the continued improvement of our
financial and operating performance and believe that emphasizing at-risk and variable compensation
advances the objectives of our executive compensation program. Accordingly, the Committee and our
other outside directors structured a significant portion of the compensation awarded to our named
executive officers for fiscal 2016 as “at risk” or “variable” and dependent on our performance and/or the
value of our common shares, including:
• Annual Cash Incentive Awards. Each named executive officer was eligible to receive a cash
performance bonus based solely on our operating profit, as adjusted. The fiscal 2016 annual
incentive awards were structured so that the target bonus would be earned only if we
achieved the operating profit for fiscal 2016 projected in our annual corporate operating plan.
The Committee and our other outside directors selected operating profit as the sole financial
measure because they believe it focuses our named executive officers on increasing our
revenues and controlling our costs. Based on our $280,690,478 operating profit in fiscal 2016,
as adjusted and described below in the “Elements of our Executive Compensation for Fiscal
2016 – Annual Incentive Award for Fiscal 2016” section of the CD&A, our named executive
officers earned an annual incentive award for fiscal 2016 equal to 174% of their respective
target bonus.
• Performance Share Unit Awards. Each named executive officer received 60% of their equity
awards in the form of performance share unit awards (“PSUs”). The PSUs awarded to our
named executive officers in fiscal 2016 will vest, if at all, after the completion of a three-year
performance period based: (1) 50% on our average adjusted EPS performance, excluding
plan-defined items, for each of the three fiscal year service periods during the performance
period; (2) 50% on our average adjusted ROIC performance, excluding plan-defined items, for
each of the three fiscal year service periods during the performance period; and (3) on the
named executive officer’s continued employment through the end of the performance period.
The Committee and our other outside directors selected EPS and ROIC as the financial
33
measures applicable to the PSUs to incentivize our named executive officers to achieve long-
term financial results that they believe will create shareholder value. Based on EPS of $3.75
and ROIC of 21.8%, as adjusted and described below in the “Elements of our Executive
Compensation for Fiscal 2016 – Equity for Fiscal 2016” section of the CD&A, we achieved
112% of the targeted goal for EPS and 114% of the targeted goal for ROIC for the first service
period of the performance period applicable to the PSUs awarded to our named executive
officers in fiscal 2016.
• Restricted Stock Unit Awards. Each named executive officer received the remaining 40% of
their equity awards in the form of restricted stock unit awards (“RSUs”). The RSUs will vest
ratably over three years from the grant date of the award if the participant remains employed
by us through each annual vesting date and if we meet an operating profit performance
component. The Committee and our other outside directors believe RSUs will align the
interests of our named executive officers and our shareholders and help retain and motivate
our named executive officers.
The following graphs show the percentage of Mr. Campisi’s and our other named executive officers’
total target compensation for fiscal 2016 that was at-risk or variable.
2016 COMPENSATION AWARDED
MR. CAMPISI
61%
Performance-Linked
Incentive Compensation
OTHER NEOS
53%
Performance-Linked
Incentive Compensation
23%
25%
21%
21%
38%
14%
32%
Restricted Stock Units Award
Salary and Other Compensation
Performance Share Units Award
Annual Bonus Incentive Award
26%
34
Executive Compensation Policies and Practices
Our executive compensation policies and practices support good governance and mitigate excessive
risk taking and include the following:
Policies and Practices
Pay for Performance
Big Lots Policies and Practices
In accordance with the Company’s pay-for-performance
philosophy, performance-linked compensation comprised 50% to
61% of the compensation awarded to our named executive
officers in fiscal 2016. We do not grant guaranteed bonuses to
our named executive officers.
Stock Ownership Requirements
All of our outside directors and Leadership Team members are
subject to stock ownership requirements.
Clawback Policy
Anti-Hedging and Pledging Policy
Independent Compensation Consultant
We adopted a Clawback Policy which provides that we may
require any associate to repay to the Company any incentive-
based compensation (whether paid in cash or settled in equity) if
the associate’s fraud, gross negligence or intentional misconduct
was a contributing factor to the Company having to prepare an
accounting restatement due to the Company’s material
noncompliance with financial reporting requirements.
We do not allow our directors or Leadership Team members to
enter into any hedging, pledging or monetization transactions
relating to our common shares.
The Committee’s independent compensation consultant is
engaged directly by the Committee and performs services solely
for the Committee.
Independent Board Chairman
We have separated our CEO and Chairman of the Board
positions.
No Dividends on Unearned Performance
We do not pay dividends on unearned performance awards.
Awards
No Excise Tax Gross-ups for Change-in-
Control Payments in our Employment
Agreements with Mr. Campisi and
Ms. Bachmann
Our employment agreements prohibit the reimbursement of any
“golden parachute” excise tax imposed under Section 4999 of the
IRC.
2016 Annual Meeting Results and Shareholder Engagement
At our 2016 annual meeting of shareholders, we held an advisory vote of our shareholders regarding
the compensation of our named executive officers as disclosed in our 2016 Proxy Statement (the
“2016 say-on-pay vote”). Approximately 96% of votes cast voted in favor of our 2016 say-on-pay vote.
The 2016 say-on-pay vote and discussions with shareholders before our 2016 annual meeting of
shareholders suggested to us that the Company’s executive compensation program was strongly
supported by our shareholders. Since our 2016 annual meeting of shareholders, the Committee has
considered the results of the 2016 say-on-pay vote in its evaluation of our executive compensation
program. Based on the strong support our shareholders expressed at our 2016 annual meeting of
shareholders, after due consideration and consultation with Exequity LLP (“Exequity”), our independent
compensation consultant for a portion of fiscal 2016 and Meridian Compensation Partners, LLC
(“Meridian”), our independent compensation consultant for the balance of 2016, the Committee did not
make any changes to our executive compensation program as a result of the 2016 say-on-pay vote.
35
However, the Company will continue to monitor shareholder concerns with its compensation programs
and will seek shareholder input to help understand any issues shareholders may have with the
Company’s compensation program.
Overview of our Executive Compensation Program
Philosophy and Objectives of our Executive Compensation Program
Our executive compensation program is designed to:
• Align the interests of executives and shareholders through performance-linked compensation.
We pay annual cash incentive awards only if we achieve corporate performance goals. For
fiscal 2016, sixty percent of our equity awards were awarded in the form of PSUs. The PSUs
awarded for fiscal 2016 vest only if we meet performance targets over a three-year
performance period. For the fiscal 2016 service period, the targets the Committee established
for the PSUs are based on EPS and ROIC, each of which account for 50% of the
performance component of the PSUs.
• Motivate executives to contribute to our success and reward them for their performance.
We use the bonus and equity elements of our executive compensation program to motivate
our executives to improve our business, promote sustainable profitability and create
shareholder value. These compensation elements also incentivize our executives to meet or
exceed the applicable corporate financial goals.
• Attract and retain talented executives by paying compensation that is competitive with the
compensation paid by the companies in our comparator group.
We believe most executives who consider joining our company expect to receive amounts
and elements of compensation comparable to those offered by most companies in our
comparator group and/or their current employer. We believe the amounts and elements of
compensation that we offer make us competitive within our comparator groups, and that
offering competitive packages has enabled us in recent years to attract and retain talented
executives.
Executive Performance and Compensation Evaluation Process
The Committee leads the process for establishing our annual executive compensation program, but
seeks the approval of its compensation decisions from our other outside directors. The Committee
believes that having all outside directors approve executive compensation is consistent with best
practices in corporate governance. Additionally, as discussed in more detail below in the “Role of
Management” and “Independent Compensation Consultant” sections of this CD&A, the Committee
consults with management and may engage independent compensation consultants to take advantage
of their executive compensation expertise.
Because of his direct knowledge of the performance and contributions of the other members of our
Leadership Team, our CEO provides the Board and Committee with (1) performance updates
regarding each member of our Leadership Team and (2) an annual performance evaluation and
compensation recommendation for each such Leadership Team member in the first quarter of each
fiscal year. Although the Committee and the other outside directors consider our CEO’s
recommendations, the Committee and the other outside directors may elect to not follow, and are not
bound by, our CEO’s recommendations on executive compensation. The Committee also conducts
executive sessions to evaluate our CEO’s performance. All of our outside directors participate in the
most comprehensive evaluation of our CEO’s performance which takes place in connection with our
36
first quarter Board meeting. See the “Performance Evaluation” section of this CD&A for a discussion of
the factors considered by our CEO, the Committee and the other outside directors when evaluating
performance.
At its March 2016 meeting, the Committee:
•
•
•
•
•
•
•
•
•
•
reviewed and discussed the continued appropriateness of our executive compensation
program, including its underlying philosophy, objectives, policies and elements;
reviewed and discussed Mr. Campisi’s performance, contributions and value to our business;
reviewed and discussed Mr. Campisi’s performance evaluations and compensation
recommendations for the other Leadership Team members;
reviewed and discussed comparative compensation survey data;
reviewed and analyzed tally sheets that included the total compensation awarded to each
Leadership Team member during the immediately preceding two fiscal years;
analyzed the potential payments to each Leadership Team member upon termination of
employment and change in control events;
considered internal pay equity by comparing the compensation of our CEO to the
compensation of the other members of our Leadership Team;
prepared its fiscal 2016 compensation recommendations for each member of our Leadership
Team;
determined that the performance trigger for the 2015 RSUs was achieved; and
determined that a bonus was payable under the annual incentive awards for fiscal 2015 as a
result of corporate performance in fiscal 2015.
The Committee then shared its compensation recommendations, including the underlying data and
analysis, with the other outside directors for their consideration and approval. The Committee’s
recommendations were consistent with Mr. Campisi’s recommendations. At the March 2016 Board
meeting, the outside directors discussed with the Committee the form, amount of, and rationale for the
recommended compensation and, consistent with the Committee’s recommendations, finalized the
compensation awards for the Leadership Team members.
Performance Evaluation
Our CEO, the Committee and our outside directors generally consider the following objective and
subjective factors when evaluating the performance of the members of our Leadership Team, although
the factors considered may vary for each executive:
•
•
•
•
•
•
•
•
•
•
long-term strategic goals;
short-term business goals;
profit and revenue goals;
expense goals;
operating margin improvement;
same store sales growth of the Company compared to the industry;
earnings per share growth;
optimization of organizational effectiveness and productivity;
leadership and the development of talent; and
fostering teamwork and other corporate values.
37
Our CEO, the Committee and the other outside directors do not assign any of these performance
factors a specific weight when they evaluate corporate performance or individual performance. Our
CEO, the Committee and the outside directors may consider different factors and may value the same
factors differently. Our CEO, the Committee and our other outside directors also consider the
performance of our competitors, specific business challenges and general economic and market
conditions in their performance evaluations. See the “Comparative Compensation Data” section of this
CD&A for more information regarding the impact that the competitive market has on our executive
compensation program.
Role of Management
Our CEO plays a significant role in determining the compensation of the other members of our
Leadership Team. Additionally, our CEO and the Committee consult with management from our human
resources, finance and legal departments regarding the design and administration of our compensation
programs, plans and awards for executives and directors. These members of management provide the
Committee and CEO with advice regarding the competitiveness of existing and proposed
compensation programs and the impact of accounting rules, laws and regulations on existing and
proposed compensation programs. Management from our human resources, finance and legal
departments also assist the Committee in the administration of our employee benefit and
compensation plans in accordance with the Committee’s charter and our compensation plans.
Our CEO and some members of management attend meetings of the Committee, and the CEO
participates in the Committee’s discussions regarding the compensation of the other Leadership Team
members. These individuals do not participate in executive sessions of the Committee or when
executive compensation determinations are made by the Committee and the other outside directors.
Independent Compensation Consultant
The Committee has the authority under its charter to retain independent compensation consultants as
it deems necessary. In establishing executive compensation for fiscal 2016, the Committee’s
independent compensation consultant, Exequity, provided the Committee with compensation and
financial information from the public filings of the members of our retailer comparator group (as defined
below in the “Comparative Compensation Data” section of this CD&A). The Committee also reviewed
non-customized compensation surveys provided by several independent compensation consultants at
the request of our human resources department. In fiscal 2016, the Committee interviewed a number
of independent compensation consultants and after much diligence, hired Meridian as its new
independent compensation consultant.
Comparative Compensation Data
The Committee reviews data regarding the compensation of executives at other companies in its
annual review of the compensation of the members of our Leadership Team. For fiscal 2016, the
Committee reviewed compensation data for a group of retailers similar to us with whom we believe we
compete for talent (the “retailer comparator group”). The factors the Committee considered in selecting
companies to include in the retailer comparator group included revenue, gross profit margin,
geographic location, inventory turns, gross margin return on investment, market capitalization, net
38
income, earnings per share, price-to-earnings ratio and shareholder return. The companies included in
the retailer comparator group for fiscal 2016 were:
Abercrombie & Fitch
Advance Auto Parts
American Eagle Outfitters
Ascena Retail Group
Bed Bath & Beyond
Burlington Stores
Dick’s Sporting Goods
Dollar General
Dollar Tree/Family Dollar
DSW
Foot Locker
Genesco
Guess
Ross Stores
Tractor Supply
Williams – Sonoma
The Committee also reviewed aggregated executive compensation data regarding broader groups of
companies included in compensation surveys provided by Mercer, Towers Watson and Hay. These
broader comparator groups consisted of the Standard & Poor’s Retail Stores Index companies and
other companies, including non-retailers, with whom we believe we compete for talent and whose
revenues or operations are similar to ours. We believed it was prudent to consult both sets of
information because the compensation surveys for the broader groups include compensation
information on more executives and provide a more extensive basis on which to compare the
compensation of the Leadership Team members, particularly those Leadership Team members whose
responsibilities, experience and other factors are not directly comparable to the executives included in
the publicly-available reports of the retailer comparator group. The comparator groups may vary from
year to year based on the Committee’s assessment of which companies compete with us for talent and
are similar to us in terms of operations or revenues and whether compensation information for the
companies remains publicly available.
The Committee and our human resources department reviewed each Leadership Team member’s
responsibilities and compared, where possible, the total direct compensation levels for our Leadership
Team members to the total direct compensation of similarly situated executives within the comparator
groups. For purposes of this evaluation, no specific weight was given to one comparator group over the
other and total direct compensation was comprised of salary, annual incentive award at target and
equity awards.
While we evaluate total direct compensation awarded to Leadership Team members against the total
direct compensation paid by the comparator groups, this evaluation merely provides a point of
reference and market check and is not a determinative factor for setting our executives’ compensation.
As discussed in this CD&A, compensation is subjectively determined based on numerous factors. We
do not benchmark or target our compensation at any particular level in relation to the compensation of
the comparator groups. We believe that our use of compensation data enables us to retain the
flexibility necessary to make adjustments for performance and experience, attract, retain and motivate
top talent, and reward executives who we believe excel or take on greater responsibility than
executives at comparator companies.
Elements of our Executive Compensation for Fiscal 2016
The primary compensation elements we provide to our named executive officers are salary, bonus
opportunities under the 2006 Bonus Plan and equity awards under the 2012 LTIP. In addition, our
named executive officers are entitled to certain limited personal benefits and perquisites. We believe
each of these individual elements and the total mix of elements are necessary to provide a competitive
executive compensation program and advance our compensation philosophy and objectives.
39
Salary for Fiscal 2016
The Committee annually reviews and establishes the salary for each named executive officer. Salary
serves as a short-term retention tool. A minimum salary for Mr. Campisi and Ms. Bachmann is set forth
in his or her respective employment agreement, as described below in the “Elements of our Executive
Compensation for Fiscal 2016 – Employment Agreements” section of this CD&A. Salary adjustments
are based on a thorough and robust review of each named executive officer’s performance, but
specific salary increases are not formally tied to any specific accomplishment.
In reviewing the salaries of our named executive officers, the Committee considered, among other
factors, each executive’s past performance, experience, scope of responsibilities, base salary in
comparison to our other employees and anticipated future contributions. For fiscal 2016, the
Committee approved the following salaries for the named executive officers, which became effective
March 27, 2016:
Name
Mr. Campisi
Mr. Johnson
Ms. Bachmann
Mr. Schlonsky
Mr. Robins
Fiscal 2016
Salary
($)
$1,100,000
$ 580,920
$ 741,600
$ 484,100
$ 437,750
Annual Incentive Award for Fiscal 2016
Each named executive officer has the opportunity to earn an annual incentive award under the 2006
Bonus Plan. We design our annual incentive awards to retain, motivate and reward executives on a
year-to-year basis. Annual incentive award payouts correspond to a percentage of each named
executive officer’s salary (“payout percentage”) and are based on whether we achieve certain
corporate performance goals under one or more financial measures established by the Committee
when achievement of the goal is substantially uncertain. The corporate performance goals and
financial measures are set annually at the discretion of the Committee and the other outside directors
in connection with the Board’s approval of our annual corporate operating plan, subject to the terms of
the 2006 Bonus Plan and, in the case of Mr. Campisi and Ms. Bachmann, their respective employment
agreements.
The lowest level at which we will pay an annual incentive award under the 2006 Bonus Plan is referred
to as the “threshold.” The level at which we generally plan our performance and the associated payout
under the 2006 Bonus Plan is referred to as the “target.” The maximum level at which we will pay an
annual incentive award under the 2006 Bonus Plan is referred to as the “maximum.” If our performance
in a fiscal year exceeds the threshold corporate performance goal that earns a threshold bonus, there
is a corresponding increase in the amount of the annual incentive award (up to the maximum bonus
level). Conversely, if we do not meet the threshold corporate performance goal, executives do not
receive an annual incentive award. We believe that our annual incentive awards support our pay-for-
performance philosophy and directly aligns the interests of our named executive officers with those of
our shareholders. See the “Bonus and Equity Plans” discussion following the Summary Compensation
Table for more information regarding our annual incentive awards.
During their annual review of executive compensation in March 2016, the Committee and other outside
directors approved the financial measure, corporate performance goals and payout percentages for the
fiscal 2016 annual incentive awards. The Committee and the other outside directors selected operating
40
profit, as adjusted in accordance with the requirements of the 2006 Bonus Plan, as the financial
measure for the fiscal 2016 annual incentive awards because they believe it is a key indicator of the
strength of our operating results and financial condition. The Committee and other outside directors
selected the corporate performance goals based on the annual corporate operating plan established by
the Board. The corporate performance goals were set at an acceptable minimum operating profit level
for the threshold annual incentive award and at and above the projected operating profit in our annual
corporate operating plan for the target annual incentive award and the maximum annual incentive
award, respectively. The primary aim of the Committee and other outside directors in setting the
corporate performance goals for fiscal 2016 was to reward the participants in our annual incentive
award program while encouraging strong corporate earnings growth. The Committee and other outside
directors believed the selected goals reflected challenging but reasonable levels of performance that
were appropriate in light of our projected corporate operating plan for fiscal 2016 and our objectives to
promote sustained profitability and provide goals that motivate our executives. The relationship
between each of the corporate performance goals and between the corporate performance goals and
our annual corporate operating plan may vary significantly from year to year as a result of specific
circumstances that we expect to face in the coming fiscal year (e.g., year-over-year comparable
performance, general economic factors and performance of the retail sector) that the Committee and
the other outside directors consider when establishing the goals.
The payout percentages for our named executive officers for fiscal 2016 were established at the
discretion of the Committee and other outside directors, subject, in the case of Mr. Campisi and
Ms. Bachmann, to the minimum payout percentages set forth in their respective employment
agreements. The Committee and the other outside directors maintained the same annual incentive
award payout percentages for our named executive officers for fiscal 2016 that applied for fiscal 2015.
This decision was primarily driven by the belief of the Committee and other outside directors that those
annual incentive award payout percentages were appropriate for fiscal 2016 to accomplish our
executive compensation objectives.
To calculate the amount of the annual incentive awards earned under the 2006 Bonus Plan, if any, we
first calculate the applicable financial measure for purposes of our financial statements. We then adjust
the measure to eliminate the effect of those events, transactions or accrual items described in the 2006
Bonus Plan. The Committee approves such adjustments at the same time it establishes the corporate
performance goals and annual incentive award payout percentages applicable to the award. These
adjustments may increase or decrease the corporate performance amount achieved. Additionally, the
Committee may exercise negative discretion to cancel or decrease the annual incentive awards earned
(but not increase an annual incentive award for a covered employee, as that term is used in
Section 162(m) of the IRC). Accordingly, the corporate performance amount may differ from the
financial measure amount reported in our financial statements.
The Committee exercised negative discretion to reduce the corporate performance amount achieved
for fiscal 2016 to exclude certain accrual items that would have otherwise increased such amount. The
Committee decided to exclude these accrual items principally because they were anticipated as part of
the annual corporate operating plan upon which the financial measure and corporate performance
goals were established for fiscal 2016, and not because of any corporate or individual performance
factors.
The following table sets forth the payout percentage for each performance level, the corporate
performance amount required to achieve the corresponding performance level, and the corporate
41
performance amount and payout percentage achieved for fiscal 2016 (including the adjustments
described in the preceding paragraph):
Annual Incentive
Award Level and
2016 Results
No Bonus
Threshold
Target
Maximum
2016 Results
Payout Percentage
(% of salary)
Ms.
Bachmann
Mr.
Johnson
Mr.
Schlonsky
0
30
60
120
0
30
60
120
0
30
60
120
Mr.
Campisi
0
60
120
240
208.55
104.28
104.28
104.28
Corporate
Performance
Amount
($)
0-$249,886,579
$ 249,886,580
$ 259,659,232
$ 288,159,232
$ 280,690,478
Mr.
Robins
0
25
50
100
86.9
Our operating profit for fiscal 2016 exceeded our operating plan as established by our Board and
management and earned a bonus between the target and maximum performance levels. As a
consequence of the fiscal 2016 bonus payments, total cash compensation paid to the named executive
officers for fiscal 2016 was generally at or above the median for our peer group. We believe higher
than market average total cash compensation is appropriate in light of our fiscal 2016 performance and
advances our objectives to motivate our executives and reward strong performance.
Equity for Fiscal 2016
All equity awards granted to our named executive officers since May 23, 2012 have been issued under
the 2012 LTIP. For fiscal 2016, we awarded PSUs and RSUs to our named executive officers. The
Committee believes that granting equity awards to our named executive officers in amounts that are
competitive with the equity awards granted to similarly situated executives within the comparator
groups aligns the interests of our named executive officers with the interests of our shareholders and
helps retain and motivate them. The Committee uses its discretion and market data, and does not
utilize a particular formula, to determine the amount of equity awards it grants. The Committee
undertook the following process to determine the amount of equity awards it granted to our named
executive officers for fiscal 2016:
• The Committee reviewed an estimate prepared by management of the number of common
shares underlying the equity awards granted during fiscal 2016 to all recipients other than
Mr. Campisi. This estimate was based on historical grant information, anticipated future
events, and Mr. Campisi’s evaluation of the other Leadership Team members’ individual
performance and his recommendations for the size of their equity awards.
•
In executive session, the Committee evaluated and approved Mr. Campisi’s
recommendations for equity awards for the other Leadership Team members and determined
the equity award for our CEO. In each case, the Committee made these determinations based
on historical grant information and the Committee’s subjective views of comparative
compensation data, retention factors, corporate performance (particularly operating profit,
income from continuing operations, selling and administrative expenses and EPS against
planned and prior performance), individual performance, the executive’s level of responsibility,
the potential impact that the executive could have on our operations and financial condition
and the market price of our common shares. See the “Performance Evaluation” section of this
CD&A for a discussion regarding how our CEO and the Committee evaluate performance.
The Committee believes that this process makes our equity compensation awards consistent with
corporate and individual performance and our policy that incentive compensation should increase as a
percentage of total compensation as the executive’s level of responsibility and potential impact on our
operations and financial condition increases. Corporate and individual performance were the most
42
significant factors in determining the size of the equity awards made to our named executive officers in
fiscal 2016.
Vested PSUs and RSUs will be settled in our common shares. Any PSUs or RSUs that do not vest will
be forfeited. The PSUs and RSUs do not have voting rights. PSUs and RSUs include a dividend-
equivalent right, which represents the right to receive the equivalent of any cash dividends payable
with respect to our common shares underlying the awards. Any cash dividends will accrue without
interest and will vest and be paid only at the time the corresponding PSUs or RSUs vest. Any accrued
cash dividends relating to PSUs or RSUs that do not vest will be forfeited.
The PSUs awarded to our named executive officers in fiscal 2016 covered a target number of PSUs.
The PSUs will vest, if at all, after the completion of a three-year performance period with three
separate service periods based: (1) 50% on our average EPS performance, excluding plan-defined
items, for each of the three service periods during the performance period; (2) 50% on our average
ROIC performance, excluding plan-defined items, for each of the three service periods during the
performance period; and (3) on the named executive officer’s continued employment through the end
of the performance period. The actual number of PSUs that will vest will increase to 150% of the target
number if we achieve the maximum performance levels for both of the EPS and ROIC performance
goals, and decrease to zero if we fail to meet the minimum performance levels for both of the
performance goals. If we achieve the minimum performance levels for both of the EPS and ROIC
performance goals, 50% of the target number of PSUs will vest. The percentage of the target number
of PSUs that will vest for performance between the threshold and maximum performance levels will
increase proportionately from 50% to 150% based on our actual performance as described in the
following chart:
Performance
Level
Threshold
Target
Maximum
3-Year Average
Performance Attainment
Vesting
Factor
80%
100%
120%
50%
100%
150%
The Committee establishes the threshold, target and maximum performance levels applicable to the
EPS and ROIC performance goals. For the first service period of the fiscal 2016 PSU awards, the
Committee established the threshold, target and maximum EPS performance levels at $2.68, $3.35
and $4.02, respectively, and the threshold, target and maximum ROIC performance levels at 15.3%,
19.2% and 23.0%.
To calculate the attainment of the performance goals for the PSUs earned under the 2012 LTIP, if any,
we first calculate the applicable performance goals for purposes of our financial statements. We then
adjust the performance goals to eliminate the effect of those events, transactions or accrual items
described in the 2012 LTIP. The Committee approves such adjustments at the same time it establishes
the performance goals applicable to the PSU awards. These adjustments may increase or decrease
the performance goals achieved. Additionally, the Committee may exercise negative discretion to
decrease the final performance goals attained. Accordingly, the final performance goals may differ from
the applicable financial goals reported in our financial statements.
In February 2017, the Committee reviewed the attainment of the performance goals for each of the
three service periods during the three-year performance period applicable to the PSUs awarded to our
named executive officers in fiscal 2014 (the “fiscal 2014 PSU awards”). The vesting of the fiscal 2014
PSU awards was based: (1) 50% on our average EPS performance, excluding plan-defined items, for
each of the three service periods during the performance period; (2) 50% on our average ROIC
performance, excluding plan-defined items, for each of the three service periods during the
43
performance period; and (3) on the named executive officer’s continued employment through the end
of the performance period. The Committee certified with respect to the fiscal 2014 PSU awards that
(a) the average EPS attainment was 106.9% which yielded a vesting factor of 117.1%, (b) the average
ROIC attainment was 109% which yielded a vesting factor of 122.5% and (c) the overall vesting factor
was 119.8%.
The RSUs awarded to our named executive officers in fiscal 2016 will vest, if at all, ratably over three
years from the grant date of the award if the participant remains employed by us through each annual
vesting date. These RSUs are also subject to an operating profit performance component that requires
us to earn at least one dollar in operating profit for the fiscal year in which the grant date occurs or in
either of the two fiscal years immediately thereafter. The performance component is designed to
preserve the deductibility of the RSU awards under Section 162(m) of the IRC. As a result of our
performance in fiscal 2016, the performance measure for the fiscal 2016 RSU awards was met.
Accordingly, one-third of the RSU awards for fiscal 2016 vested on the second trading day after we
filed with the SEC our Current Report on Form 8-K reflecting the attainment of the performance
measure.
Personal Benefits and Perquisites
We provide our named executive officers with certain benefits that are available to nearly all salaried
employees, including paid group term life insurance equal to one and a half times base salary,
matching contributions to our Savings Plan, and medical and dental insurance. We generally provide
the following limited personal benefits and perquisites to employees at or above the vice president
level: (1) coverage under the Big Lots Executive Benefit Plan (“Executive Benefit Plan”); (2) enhanced
long-term disability insurance coverage; and (3) use of an automobile or payment of an automobile
allowance. We believe these personal benefits and perquisites, although immaterial to us in amount,
are an important element of total compensation because of the value our executives place on these
benefits.
Our Executive Benefit Plan reimburses executives for health-related costs incurred but not covered
under our Big Lots Associate Benefit Plan, up to an annual maximum reimbursement of $40,000 per
family. Amounts received by named executive officers under the Executive Benefit Plan are treated as
taxable income, and we reimburse each executive the approximate amount of his or her income tax
liability relating to the benefits received under the Executive Benefit Plan.
We offer short-term disability coverage to all full-time employees and long-term disability coverage to
all salaried employees. The benefits provided under the long-term disability plan are greater for our
named executive officers than for employees below the vice president level. Under the enhanced long-
term disability coverage, a named executive officer may receive 67% of his or her monthly salary, up to
$25,000 per month, until the executive is no longer disabled or turns 65, whichever occurs earlier. We
pay the premiums for this long-term disability coverage and also reimburse our named executive
officers for any income taxes resulting from our payment of such premiums.
In fiscal 2016, the Committee authorized Mr. Campisi to use the corporate aircraft for up to $100,000
(as such amount is calculated as described in the notes accompanying the “Summary Compensation
Table for 2016” section of this CD&A) of non-business flights, including any deadhead flights
associated with his non-business use of corporate aircraft. We reported imputed income for income tax
purposes for the value of his non-business use of corporate aircraft based on the Standard Industry
Fare Level in accordance with the IRC. We did not reimburse or otherwise “gross-up” Mr. Campisi for
any income tax obligation attributed to his non-business use of corporate aircraft.
44
Employment Agreements
We have entered into an employment agreement with each of Mr. Campisi and Ms. Bachmann. We
negotiated the terms of each employment agreement with the executive. In those negotiations, we
considered many factors, including:
•
•
•
•
•
•
•
our need for the services of the executive;
the executive’s level of responsibility and the potential impact that the executive could have
on our operations and financial condition;
the skills and past and anticipated future performance of the executive;
the compensation paid to similarly-situated executives at comparator group companies;
the relationship between the compensation offered to the executive and paid to the other
Leadership Team members;
our perception of the relative bargaining power of the Company and the executive; and
to the extent applicable, the elements and amounts of compensation offered or paid to the
executive by another employer.
On March 17, 2015, we entered into an Executive Employment Agreement (the “New Employment
Agreement”) with Mr. Campisi, which amended, restated and replaced the employment agreement we
entered into with Mr. Campisi on May 3, 2013 (the “Original Agreement”). Unless terminated earlier in
accordance with its terms, the New Employment Agreement will remain effective until May 3, 2020 and
will automatically renew for successive one-year renewal terms on each May 4 thereafter.
The New Employment Agreement modified the payments and benefits to which Mr. Campisi is entitled
as follows:
•
•
•
•
•
•
increases his annual base salary from $900,000 under the Original Agreement to $1,050,000
(and from his base salary of $950,000 in fiscal 2014);
increases the minimum payout percentages (expressed as a percentage of his annual base
salary) that may be established for his target and maximum annual incentive award levels
from 100% and 200%, respectively, under the Original Agreement to 120% and 240% (and
from 110% and 220% in fiscal 2014);
authorizes Mr. Campisi to use aircraft for personal travel in an amount up to $100,000 per
calendar year (calculated based on the aggregate incremental cost to the Company in
accordance with SEC rules and regulations);
requires that we maintain and pay all premiums on a life insurance policy on Mr. Campisi in a
face amount equal to two times his current base salary (an increase from our current
company policy of one and a half times base salary, up to a $1,000,000 total benefit);
provides Mr. Campisi with certain payments and benefits in the event that he retires after
May 3, 2020 and complies with all restrictive covenants in the New Employment Agreement;
and
conforms the severance payments and benefits provided to Mr. Campisi if we terminate him
without cause or he terminates his employment for good reason to the severance payments
and benefits provided to our Chief Executive Officer upon such termination events under the
Big Lots Executive Severance Plan adopted on August 28, 2014 (the “Severance Plan”).
The New Employment Agreement also specifically addresses the vesting of outstanding awards under
the Company’s equity incentive plans upon certain termination events. The Original Agreement
45
deferred to the vesting provisions set forth in the equity incentive plans and related award agreements
and the Severance Plan.
On April 29, 2013, we entered into a Second Amended and Restated Employment Agreement with
Ms. Bachmann. The term of Ms. Bachmann’s employment agreement will remain effective as long as
we employ her unless we and the executive mutually agree to amend or terminate her employment
agreement.
Under the terms of her employment agreement, Ms. Bachmann is entitled to receive at least $625,000
in annual base salary. Ms. Bachmann’s employment agreement also establishes the minimum payout
percentages (as a percentage of base salary) that may be set for her target and maximum annual
incentive award levels as 60% and 120%, respectively.
The employment agreements with Mr. Campisi and Ms. Bachmann impose several restrictive
covenants on the executive that survive the termination of his or her employment in exchange for
minimum salary levels and target and maximum bonus payout percentages, potential severance and
change in control payments and other benefits. These restrictive covenants include confidentiality
(infinite), non-solicitation (two years, but reduced to six months for Mr. Campisi following a change in
control), non-disparagement (infinite), non-competition (two years for Mr. Campisi and one year for
Ms. Bachmann, but reduced to six months for each executive following a change in control), and
continuing cooperation (infinite).
The employment agreements do not require us to reimburse the executives for the amount of any
golden parachute excise tax imposed under Section 4999 of the IRC. Each employment agreement
provides that if the payments to be received by the executive in connection with a change in control
constitute “excess parachute payments,” the executive’s payments and benefits will be reduced to the
extent necessary to become one dollar less than the amount that would generate an excise tax liability
unless the executive would be in a better net after-tax position without any such reduction, in which
case payments and benefits will not be reduced.
Termination of Employment
The consequences of termination of employment under the employment agreements depend on the
circumstances of the termination and are described below in the “Potential Payments Upon
Termination or Change in Control” section of this Proxy Statement.
Senior Executive Severance Agreements
We are a party to a senior executive severance agreement (all entered into prior to fiscal 2016) with
each of Messrs. Johnson, Schlonsky and Robins, and several other key officers who are not parties to
an employment agreement. The senior executive severance agreements expire on the first anniversary
of the date of execution and automatically renew for an additional year unless we provide the executive
at least 30 days’ notice of non-renewal. The senior executive severance agreements provide for the
following severance benefits if, within 24 months after a change in control, the executive is terminated
by us (other than for cause) or as a result of a constructive termination: (i) a lump-sum payment equal
to 200% of the executive’s then current annual salary and maximum annual incentive award; and
(ii) for a period of one year, the executive is entitled to participate in any group life, hospitalization or
disability insurance plan, health program or other executive benefit plan generally available to similarly
titled executive officers. The executives are also entitled to reimbursement of legal fees and expenses
they incur in seeking to enforce their rights under the agreement. Additionally, to the extent that
payments to the executive pursuant to the senior executive severance agreement (together with any
other amounts received by the executive in connection with a change in control) would trigger the
46
provisions of Sections 280G and 4999 of the IRC, payments under the agreement will be increased to
the extent necessary to place the executive in the same after-tax position as the executive would have
been if no excise tax or assessment had been imposed on any such payment to the executive under
the agreement or any other payment that the executive may receive as a result of such change in
control. The compensation payable on account of a change in control may be subject to the
deductibility limitations of Sections 162(m) and/or 280G of the IRC.
Severance Plan
The Board adopted the Severance Plan, which covers each of our named executive officers and
several of our other key executives, to provide a more uniform approach to severance for our
executives that avoids the use of individual severance agreements and ensures that restrictive
covenants apply to our key executives. The payments and benefits to which our named executive
officers would be entitled to under the Severance Plan (collectively, the “Severance Benefits”) if they
are terminated without Cause (as defined in the Severance Plan) or on account of a Constructive
Termination (as defined in the Severance Plan) are described below in the “Potential Payments Upon
Termination or Change in Control – Involuntary Termination Without Cause” section of this Proxy
Statement.
The Severance Plan imposes confidentiality, non-competition, non-solicitation, non-disparagement and
post-termination cooperation obligations on participants. The non-competition and non-solicitation
obligations apply during the period of employment and continue until the end of the restriction period
set forth in the Severance Plan.
The Severance Plan does not provide for a gross-up payment to any participants to offset any excise
taxes that may be imposed on excess parachute payments under Section 4999 (the “Excise Tax”) of
the IRC. Instead, the Severance Plan provides that in the event that the Severance Benefits would, if
provided, be subject to the Excise Tax, then the Severance Benefits will be reduced to the extent
necessary so that no portion of the Severance Benefits is subject to the Excise Tax, provided that the
net amount of the reduced Severance Benefits, after giving effect to tax consequences, is greater than
or equal to the net amount of the Severance Benefits without such reduction, after giving effect to the
Excise Tax and tax consequences.
Any executive who is a party to an employment agreement with the Company or any of its subsidiaries
or affiliates (except for Mr. Campisi and Ms. Bachmann) will not be eligible to participate in the
Severance Plan. If either of Mr. Campisi or Ms. Bachmann is entitled to benefits under the Severance
Plan and to severance benefits under their respective employment agreement, they will receive the
greater of (i) the aggregate benefits payable under the Severance Plan or (ii) the aggregate severance
benefits payable under their respective employment agreement.
Post-Termination and Change in Control Arrangements
The employment agreements and senior executive severance agreements described above provide for
potential severance and change in control payments and other consideration. Our equity compensation
plans and related award agreements also provide for the accelerated vesting of outstanding stock
options, restricted stock, PSUs and RSUs in connection with certain termination events.
The severance provisions of the employment agreements and the senior executive severance
agreements are intended to enhance our ability to attract and retain executives by providing the
executives with competitive severance and change in control payments and benefits. The change in
control provisions of the employment agreements and severance agreements provide that the
executive will receive certain cash payments and other benefits upon a change in control only if the
47
executive is terminated in connection with the change in control (including a constructive termination
and, in the case of Mr. Campisi under the New Employment Agreement, termination for good reason).
This “double trigger” structure is intended to enable us to incentivize our executive officers to remain
objective in connection with, and not be distracted by the personal uncertainties and risks created by,
an actual or proposed change in control.
While the Committee considers the potential payments upon termination or change in control annually
when it establishes compensation for the applicable year, this information is not a primary
consideration in setting salary, bonus payout percentages or equity compensation amounts.
See the “Potential Payments Upon Termination or Change in Control” narrative disclosure and tables
following this CD&A for a discussion of compensation that may be paid to our named executive officers
in connection with a change in control or the termination of their employment with us.
Retirement Plans
We maintain two retirement plans: (1) a tax-qualified defined contribution plan (“Savings Plan”); and
(2) a non-qualified supplemental defined contribution plan (“Supplemental Savings Plan”). We
terminated our tax-qualified, funded noncontributory defined benefit pension plan (“Pension Plan”) on
January 31, 2016 and our non-qualified supplemental pension plan (“Supplemental Pension Plan”) on
December 31, 2015. We believe that the Savings Plan and Supplemental Savings Plan are generally
commensurate with the retirement plans provided by companies in our comparator groups and that
providing these plans enhance our ability to attract and retain qualified executives. See the
“Nonqualified Deferred Compensation – Supplemental Savings Plan” section of this Proxy Statement
for a discussion of our retirement plans.
Our Executive Compensation Program for Fiscal 2017
In establishing the executive compensation program for fiscal 2017, the Committee engaged a new
independent compensation consultant, Meridian, to:
•
•
•
•
provide comparative compensation data;
review and recommend changes to our executive compensation program;
review the appropriateness of our retailer-only comparator group; and
compare the amount and form of executive compensation paid to our executives against the
compensation paid to similarly-situated executives at companies within the retailer-only
comparator group.
The Committee did not make any material changes to the design of our executive compensation
program when establishing compensation for fiscal 2017. For fiscal 2017, we awarded RSUs and
PSUs. The RSUs vest ratably over three years from the grant date of the award and also contain a
performance component intended to preserve deductibility under Section 162(m) of the IRC. The PSUs
vest only if we meet performance targets over a three-year performance period with three separate
service periods. For the fiscal 2017 service period, the PSU performance targets are based on EPS
and ROIC, each of which account for 50% of the performance component of the PSUs.
For fiscal 2017, the Committee recommended, and the outside directors approved, the following
salaries, payout percentages for the target annual incentive award level (with threshold being one-half
48
of the target payout percentage and maximum being double the target payout percentage) and equity
awards for our named executive officers:
Name
Mr. Campisi
Mr. Johnson
Ms. Bachmann
Mr. Schlonsky
Mr. Robins
Fiscal 2017
Salary
($)
1,150,000
598,350
763,850
498,625
460,000
Fiscal 2017
Target Annual
Incentive Award
Payout Percentage
(%)
Common Shares
Underlying
RSU Award
(#)
Common Shares
Underlying
Target PSU Award
(#)
130
60
60
60
60
41,949
10,153
12,962
8,461
6,801
62,925
15,231
19,444
12,693
10,202
Compensation Policies and Practices
Minimum Share Ownership Requirements and Hedging and Pledging Prohibition
The Board has adopted minimum share ownership requirements for all outside directors and
Leadership Team members. These requirements are designed to align the long-term interests of our
outside directors and executives with those of our shareholders. Under the requirements, the outside
directors and Leadership Team members must own common shares having an aggregate value equal
to at least the following multiple of his or her Board retainer or salary (as is in effect at the time
compliance with the requirements is evaluated), as applicable:
Title
Outside Director
Chief Executive Officer
Executive Vice President
Senior Vice President
Multiple of Retainer or Salary
5x
5x
2.5x
2x
Shares counted toward these requirements include common shares held directly or through a broker,
common shares held under the Savings Plan or Supplemental Savings Plan, unvested restricted stock,
unvested RSUs, unvested PSUs (at the threshold amount), deferred stock units and vested but
unexercised in-the-money stock options. Each outside director that served on the Board when these
requirements were adopted in March 2008 is required to meet the requirements at each annual
adjustment date (the “testing date”). Each Leadership Team member that was a Leadership Team
member when these requirements were adopted is required to meet the requirements on each annual
adjustment date. Outside directors elected and executives hired or promoted after the adoption of the
requirements must meet the requirements on the first testing date for outside directors or executives
following the fifth anniversary of their election, hire or promotion, as applicable. As of March 14, 2017,
each outside director and executive who has been on the Board or a Leadership Team member for at
least five years satisfied our minimum share ownership requirements. In addition to the minimum share
ownership requirements, we do not allow our outside directors or Leadership Team members to enter
into any hedging, pledging or monetization transactions involving our common shares.
Equity Grant Timing
Pursuant to the terms of the 2005 LTIP and 2012 LTIP, the grant date of equity awards must be the
later of the date the terms of the award are established by corporate action or the date specified in the
award agreement. Consistent with prior years, in fiscal 2016, the outside directors, after consultation
with the Committee, specified that the grant date of the equity awards was the second trading day
49
following our release of fiscal 2016 results. This future date was established to allow the market to
absorb and react to our release of material non-public information, and to avoid any suggestion that the
Board, the Committee or any employee manipulated the terms of the equity awards. For equity awards
made throughout the fiscal year, which generally are made as a result of a hiring or promotion, the
grant date is the 15th day of the month following the month of the hire or promotion date. We have no
policy of timing the grant date of equity awards with the release of material non-public information, and
we have not timed the release of material non-public information for the purpose of affecting the value
of any equity awards.
Tax and Accounting Considerations
The Committee reviews and considers the impact that tax laws and accounting regulations may have
on the executive compensation awards, including the deductibility of executive compensation under
Section 162(m) of the IRC. In doing so, the Committee relies on guidance from members of our finance
and legal departments, as well as outside accountants and attorneys.
For fiscal 2016, the Committee believes it has taken the necessary actions to preserve the deductibility
of all payments made under our executive compensation program, with the exception of a portion of
the base compensation paid to Mr. Campisi. If the IRC or the related regulations change, the
Committee intends to take reasonable steps to ensure the continued availability of deductions for
payments under our executive compensation program, while at the same time considering our
executive compensation philosophy and objectives and the competitive market for executive talent.
50
Summary Compensation Table for 2016
Name and
Principal Position (1)
(a)
Year
(b)
Salary
($) (2)
(c)
Bonus
($)
(d)
Stock
Awards
($) (3)
(e)
Option
Awards
($)
(f)
Non-Equity
Incentive Plan
Compensation
($) (4)
(g)
David J. Campisi,
Chief Executive Officer
and President
Timothy A. Johnson,
Executive Vice President,
Chief Administrative Officer
and Chief Financial Officer
2016 1,092,308
2015 1,034,656
942,308
2014
578,317
2016
543,935
2015
503,846
2014
Lisa M. Bachmann,
Executive Vice President,
Chief Merchandising and
Operating Officer
Michael A. Schlonsky,
Executive Vice President,
Human Resources and
Store Operations
Ronald A. Robins, Jr.,
Senior Vice President,
General Counsel and
Corporate Secretary (7)
2016
2015
2014
2016
2015
2014
738,277
694,773
646,154
481,931
446,312
404,615
2016
435,788
-
-
-
-
-
-
-
-
-
-
-
-
6,172,807
5,307,038
6,458,624
1,535,950
1,218,004
1,422,946
1,960,751
1,552,317
1,892,202
1,279,951
761,574
883,032
771,561
-
-
-
-
-
-
-
-
-
-
-
-
2,294,028
2,089,206
1,149,690
605,749
545,266
336,651
773,296
696,851
429,065
504,790
408,089
225,541
380,383
Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings
($)
(h)
-
-
-
-
-
-
-
-
-
228,547
605
87,072
All Other
Compensation
($) (5)(6)
(i)
Total
($)
(j)
240,384
196,084
155,778
71,132
49,404
48,043
101,014
57,816
58,125
116,861
60,838
44,517
9,799,527
8,626,984
8,706,400
2,791,148
2,356,609
2,311,486
3,573,338
3,001,757
3,025,546
2,612,080
1,677,418
1,644,777
-
52,557
1,640,289
(1) We are a party to an employment agreement with Mr. Campisi and Ms. Bachman, the material terms of
(2)
(3)
(4)
(5)
which are described in the “Elements of our Executive Compensation for Fiscal 2016 – Employment
Agreements” section of the CD&A. We are a party to a senior executive severance agreement with
Mr. Johnson, Mr. Schlonsky, and Mr. Robins, the material terms of which are described in the “Elements
of our Executive Compensation for Fiscal 2016 – Senior Executive Severance Agreements” section of the
CD&A. We are a party to an executive severance plan with each of our named executive officers, the
material terms of which are described in the “Elements of our Executive Compensation for Fiscal 2016 –
Severance Plan” section of the CD&A.
The amounts in this column reflect the salary earned by each named executive officer during fiscal 2016.
The amounts in this column reflect the sum of (i) the grant date fair value of the restricted stock unit
awards as determined in accordance with ASC 718 and (ii) the estimated fair value of the performance
share unit awards issued. These awards were granted to the executives under the 2012 LTIP. The
amounts in this column exclude the effect of any estimated forfeitures.
The amounts in this column reflect annual incentive awards earned under the 2006 Bonus Plan for
performance during each of the last three fiscal years.
For fiscal 2016, the amounts in this column include the following compensation for the executives, as
more fully described in the table included with this footnote:
i.
ii.
iii.
The reimbursement of taxes related to our payment of healthcare costs, including costs covered by
the Executive Benefit Plan, long-term disability insurance premiums, and relocation expenses;
Matching contributions made by Big Lots pursuant to the Savings Plan and the Supplemental
Savings Plan, both of which are described in the narrative disclosure accompanying the
Nonqualified Deferred Compensation table below and for Mr. Schlonsky, a $53,000 transition
contribution related to the termination of our Pension Plan and Supplemental Pension Plan;
Healthcare costs paid by Big Lots pursuant to the Executive Benefit Plan, which is described in the
“Elements of our Executive Compensation for Fiscal 2016 – Personal Benefits and Perquisites”
section of the CD&A;
51
iv.
v.
vi.
vii.
Premiums paid by Big Lots for life insurance, which is generally available to all full-time
employees;
Premiums paid by Big Lots for long-term disability insurance, which is described in the
“Elements of our Executive Compensation for Fiscal 2016 – Personal Benefits and
Perquisites” section of the CD&A;
The cost to Big Lots associated with the executive’s use of an automobile or receipt of a
cash allowance in lieu of an automobile;
The aggregate incremental cost to Big Lots associated with non-business use of corporate
aircraft by Mr. Campisi;
viii. Matching charitable contributions made by Big Lots; and
ix.
Dividends paid on vested RSU awards.
The aggregate incremental cost of non-business use of corporate aircraft is calculated based on the
direct costs we incur in connection with operating a flight, including expenses for fuel, oil, landing,
ground services, on-board catering, crew hotel and meals, empty return (deadhead) flights and other
miscellaneous variable costs. Due to the fact that the corporate aircraft are used primarily for business
travel, fixed costs which do not change based on usage, such as pilot salaries, hangar fees,
management fees, purchase costs, depreciation and capitalized improvements to the aircraft, are
excluded. We did not reimburse or otherwise “gross-up” Mr. Campisi for any income tax obligation
attributed to his non-business use of corporate aircraft. The benefit of non-business use of corporate
aircraft, which was approved by the Compensation Committee for fiscal 2016 as part of Mr. Campisi’s
overall compensation package, is described in the “Elements of our Executive Compensation for Fiscal
2016 – Personal Benefits and Perquisites” section of the CD&A.
Name
Mr. Campisi Mr. Johnson Ms. Bachmann Mr. Schlonsky Mr. Robins
Reimbursement of Taxes ($)
15,502
3,644
5,383
7,732
3,848
Big Lots Contributions to Defined Contribution
Plans ($)
10,600
10,600
10,600
63,600
10,600
Big Lots Paid Health Care under Executive
Benefits Plans ($)
Big Lots Paid Life Insurance Premiums ($)
Big Lots Paid Long-Term Disability Insurance
Premiums ($)
Use of Automobile or Automobile Allowance ($)
Non-Business Aircraft Usage ($)
Matching Charitable Contributions ($)
Dividend Payments ($)
15,887
1,191
941
45,079
96,240
15,000
39,944
3,015
1,034
941
13,200
-
15,000
23,698
4,902
1,191
941
13,200
-
15,000
49,797
7,452
863
941
13,200
-
15,000
8,073
6,777
774
913
13,200
-
15,000
1,445
(6) We purchase tickets to entertainment and sporting venues for the primary purpose of allowing
employees to use such tickets in furtherance of our business. Because we incur no incremental
cost if a named executive officer uses such tickets for purposes other than our business, such
tickets are not included in the amounts in this column.
(7) Mr. Robins was not a named executive officer in fiscal 2014 and 2015.
Bonus and Equity Plans
The amounts reported in the Summary Compensation Table above include amounts earned under the
2006 Bonus Plan and the 2012 LTIP. Below is a description of the material terms of each plan and the
awards made under those plans to our named executive officers, as reflected in the following Grants of
Plan-Based Awards in Fiscal 2016 table.
52
Big Lots 2006 Bonus Plan
The 2006 Bonus Plan provides for cash compensation, which is intended to qualify as “qualified
performance-based compensation” under Section 162(m) of the IRC, to be paid annually when we
meet or exceed pre-established minimum corporate performance amounts under one or more financial
measures approved by the Compensation Committee and other non-employee directors at the start of
the fiscal year. Whether we will achieve the minimum corporate performance amounts is substantially
uncertain at the time the corporate performance amounts and financial measures are established. No
right to a minimum annual incentive award exists, and the Compensation Committee has the discretion
to cancel or decrease an annual incentive award (but may not increase an annual incentive award for a
covered employee (as that term is used within Section 162(m) of the IRC)) calculated under the 2006
Bonus Plan. Any payments made with respect to a fiscal year are made in the first quarter of the
following fiscal year. The annual incentive awards that may be earned under the 2006 Bonus Plan
range from the threshold to the maximum annual incentive award payout percentages, and include all
amounts in between. The smallest target and maximum annual incentive award payout percentages
that may be set annually for our named executive officers who are a party to an employment
agreement with us are set forth in their respective employment agreements. The threshold annual
incentive award payout percentage is pre-established annually by the Compensation Committee and
the other non-employee directors and has historically been one-half of the target annual incentive
award payout percentage. Subject to the terms of the employment agreements, the Compensation
Committee and the other non-employee directors retain the right to adjust the payout percentages and,
in the past, have generally done so as deemed necessary to realign an executive’s annual incentive
award opportunity with our compensation philosophy. Pursuant to the terms of the 2006 Bonus Plan,
the maximum annual incentive award payable under the plan to a participant in a single fiscal year is
$4,000,000. See the “Elements of our Executive Compensation for Fiscal 2016 – Annual Incentive
Award for Fiscal 2016” and “Elements of our Executive Compensation for Fiscal 2016 – Employment
Agreements” sections of the CD&A for more information regarding the 2006 Bonus Plan and the
awards made under that plan for fiscal 2016.
Big Lots 2012 Long-Term Incentive Plan
Since May 23, 2012, all employee equity awards, including those made to our named executive
officers, have been granted under the 2012 LTIP. The 2012 LTIP authorizes the grants of (1) non-
qualified stock options (“NQSOs”), (2) incentive stock options (“ISOs”) as defined in Section 422 of the
IRC, (3) stock appreciation rights (“SARs”), (4) restricted stock, (5) restricted stock units (“RSUs”),
(6) deferred stock units, (7) performance shares, (8) performance share units (“PSUs”),
(9) performance units, (10) cash-based awards, and (11) other stock-based awards (NQSOs, ISOs,
SARs, restricted stock, restricted stock units, deferred stock units, performance shares, performance
share units, performance units, cash-based awards and other stock-based awards are referred to
collectively as “Awards”). All of our and our affiliates’ employees, non-employee directors and
consultants are eligible to receive Awards under the 2012 LTIP.
The total number of common shares available for Awards under the 2012 LTIP is equal to the sum of
(1) 7,750,000 newly issued common shares plus (2) any common shares subject to the 4,702,362
outstanding awards as of March 15, 2012 under the 2005 LTIP that on or after March 15, 2012 cease
for any reason to be subject to such awards (other than by reason of exercise or settlement of the
awards to the extent they are exercised for or settled in vested and nonforfeitable common shares).
Of the total number of common shares available for grant under the 2012 LTIP, no more than
7,750,000 common shares may be issued pursuant to grants of ISOs during the term of the 2012 LTIP.
A participant may receive multiple Awards under the 2012 LTIP.
53
Each stock option granted under the 2012 LTIP allows the recipient to acquire our common shares,
subject to the completion of a vesting period and continued employment with us through the applicable
vesting date. Once vested, these common shares may be acquired at a fixed exercise price per share
and they remain exercisable for the term set forth in the award agreement. Stock option awards made
under the 2012 LTIP vest on the anniversary of the grant date at a rate of 25% per year over the first
four years of the seven year option term. Pursuant to the terms of the 2012 LTIP, the exercise price of
a stock option may not be less than the average trading price of our common shares on the grant date
or, if the grant date occurs on a day other than a trading day, on the next trading day.
Under the restricted stock awards granted pursuant to the 2012 LTIP (other than those made to the
non-employee directors, which are discussed in the “Director Compensation” section of this Proxy
Statement), if we meet the first trigger and the recipient remains employed by us, the restricted stock
will vest at the opening of our first trading window after the fifth anniversary of the grant date. If we
meet the second trigger for any fiscal year ending prior to the fifth anniversary of the grant date and the
recipient remains employed by us, the restricted stock will vest on the first trading day after we file with
the SEC our Annual Report on Form 10-K for the year in which the second trigger is met. The
restricted stock will also vest on a prorated basis in the event that the recipient dies or becomes
disabled, or if the recipient is terminated without cause, after we meet the first trigger but before the
lapse of five years. The restricted stock will be forfeited, in whole or in part, as applicable, if the
recipient voluntarily terminates employment with us prior to vesting.
The RSUs awarded to our named executive officers in fiscal 2016 pursuant to the 2012 LTIP covered a
fixed number of RSUs. The RSUs will vest, if at all, ratably over three years from the grant date of the
award if the participant remains employed by us through each annual vesting date (except in the case
of death, disability, retirement, involuntary termination or constructive termination). These RSUs are
also subject to an operating profit performance component that requires us to earn at least one dollar
in operating profit for the fiscal year in which the grant date occurs or in either of the two fiscal years
immediately thereafter. The performance component is designed to preserve the deductibility of the
RSU awards under Section 162(m) of the IRC.
The PSUs awarded to our named executive officers in fiscal 2016 covered a target number of PSUs.
The PSUs will vest, if at all, after the completion of a three-year performance period, based: (1) 50% on
our average EPS performance, excluding plan-defined items, for each of the three service periods
during the performance period; (2) 50% on our average ROIC performance (net operating profit after-
tax divided by invested capital for the fiscal year), excluding plan-defined items, for each of the three
service periods during the performance period; and (3) on the named executive officer’s continued
employment through the end of the performance period (except in the case of death, disability or
retirement).
The actual number of PSUs that will vest will increase to 150% of the target number if we achieve the
maximum performance levels for both of the EPS and ROIC performance goals, and decrease to zero
if we fail to meet the minimum performance levels for both of the performance goals. If we achieve the
minimum performance levels for both of the EPS and ROIC performance goals, 50% of the target
number of PSUs will vest. The percentage of the target number of PSUs that will vest for performance
between the threshold and maximum performance levels will increase proportionately from 50% to
150% based on our actual performance. For the first service period of the fiscal 2016 PSU awards, the
Committee established the threshold, target and maximum EPS performance levels at $2.68, $3.35
and $4.02, respectively, and the threshold, target and maximum ROIC performance levels at 15.3%,
19.2% and 23.0%, respectively.
The performance share units awarded to Mr. Campisi in fiscal 2013 vest in one-third increments if the
market price of our common shares appreciates, for a period of 20 consecutive trading days, to prices
54
that are 110%, 120% and 130% of the grant date market value of $37.13 (i.e., appreciate to $40.84, $44.56 and
$48.27) before the earlier to occur of the termination of his employment or the seventh anniversary of the grant
date. This award fully vested in fiscal 2016.
Upon a change in control (as defined in the 2012 LTIP), all awards outstanding under the 2012 LTIP automatically
become fully vested. For a discussion of the change in control provisions in our named executive officers’
employment agreements and senior executive severance agreements and the 2012 LTIP, see “Potential
Payments Upon Termination or Change in Control – Rights Under Post-Termination and Change in Control
Arrangements” section below. See the “Elements of our Executive Compensation for Fiscal 2016 – Equity for
Fiscal 2016” section of the CD&A and the “Potential Payments Upon Termination or Change in Control – Rights
Under Post-Termination and Change in Control Arrangements” section below for more information regarding the
equity awards made under the 2012 LTIP in fiscal 2016.
Grants of Plan-Based Awards in Fiscal 2016
The following table sets forth each award made to our named executive officers in fiscal 2016 under the 2006
Bonus Plan and the 2012 LTIP.
Estimated Possible
Payouts Under
Non-Equity
Incentive Plan
Awards (2)
Target
($)
(d)
Grant
Date
(1)
(b)
Threshold
($)
(c)
Estimated Future
Payouts Under
Equity
Incentive Plan
Awards (3)
Target
(#)
(g)
Maximum
(#)
(h)
Maximum
($)
(e)
Threshold
(#)
(f)
- 660,000 1,320,000 2,640,000
-
-
697,104
-
-
889,920
-
-
580,920
-
-
437,750
-
-
-
-
- 174,276
-
-
- 222,480
-
-
- 145,230
-
-
- 109,438
-
-
-
-
348,552
-
-
444,960
-
-
290,460
-
-
218,875
-
-
3/8/16
3/8/16
3/8/16
3/8/16
3/8/16
3/8/16
3/8/16
3/8/16
3/8/16
3/8/16
-
41,052
-
-
10,215
-
-
13,040
-
-
8,513
-
-
5,132
-
-
-
82,104 123,156
-
-
30,645
-
-
39,120
-
-
25,538
-
-
15,395
-
-
-
20,430
-
-
26,080
-
-
17,025
-
-
10,263
-
All Other
Stock
Awards:
Number
of Shares
of Stock
or Units
(#) (4)
(i)
All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)
(j)
Exercise
or Base
Price of
Option
Awards
($/Sh.)
(k)
-
-
54,735
-
-
13,619
-
-
17,386
-
-
11,349
-
-
6,841
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Grant
Date Fair
Value of
Stock
and
Option
Awards
($/
Shr.) (5)
(l)
-
3,703,711
2,469,096
-
921,597
614,353
-
1,176,469
784,282
-
767,998
511,953
-
462,964
308,598
Name
(a)
Mr. Campisi
Mr. Johnson
Ms. Bachmann
Mr. Schlonsky
Mr. Robins
(1) As discussed in the “Compensation Policies & Practices – Equity Grant Timing” section of the CD&A, in
fiscal 2016, the Board set the grant date for the RSU awards and the service inception date for the PSU
awards as the second trading day following our release of results from our last completed fiscal year. This
future date was established to allow the market to absorb and react to our release of material non-public
information, and to avoid any suggestion that the Board, the Compensation Committee or any employee
manipulated the terms or timing of the equity awards.
(2)
The amounts in columns (c), (d) and (e) represent our named executive officers’ threshold, target and
maximum annual incentive award levels, respectively, for fiscal 2016 pursuant to the 2006 Bonus Plan,
which annual incentive award levels are further described in the “Elements of our Executive Compensation
for Fiscal 2016 – Annual Incentive Award for Fiscal 2016” section of the CD&A. For fiscal 2016, our named
55
(3)
(4)
(5)
executive officers earned an annual incentive award under the 2006 Bonus Plan, as reflected in column
(g) of the Summary Compensation Table.
The amounts in columns (f), (g) and (h) represent the threshold, target and maximum number of PSUs
awarded pursuant to the 2012 LTIP that each named executive officer is eligible to earn depending on the
level of achievement of the applicable performance metrics over the three-year performance period. For
more information on PSUs, see the narrative preceding this table and the “Elements of our Executive
Compensation for Fiscal 2016 – Equity for Fiscal 2016” section of the CD&A.
The amounts in column (i) represent RSUs awarded pursuant to the 2012 LTIP, which awards are described
in the narrative preceding this table and the “Elements of our Executive Compensation for Fiscal 2016 –
Equity for Fiscal 2016” section of the CD&A.
This column represents the full grant date fair value of the RSUs as calculated in accordance with ASC 718
and the estimated fair value of the PSUs as of the issuance date based on the probable outcome of the
performance conditions granted to each of our named executive officers.
Outstanding Equity Awards at 2016 Fiscal Year-End
The following table sets forth, as of the end of fiscal 2016, all equity awards outstanding under our equity
compensation plans for each named executive officer.
Option Awards
Stock Awards
Number
of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
(b)
Number
of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
(c)
Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#)
(d)
-
-
12,000
8,000
35,000
5,000
30,000
-
40,000
40,000
30,000
-
15,000
15,000
5,000
15,000
-
-
28,875
-
-
-
-
-
10,000
-
-
-
10,000
-
-
-
-
5,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Option
Exercise
Price
($) (1)
(e)
Option
Expiration
Date
(f)
37.13
-
41.12
33.67
43.85
30.82
35.72
-
41.12
43.85
35.72
-
41.12
43.85
30.82
35.72
-
-
5/6/2020
-
3/7/2018
7/18/2018
3/6/2019
8/28/2019
3/8/2020
-
3/7/2018
3/6/2019
3/8/2020
-
3/7/2018
3/6/2019
8/28/2019
3/8/2020
-
-
Name
(a)
Mr. Campisi
Mr. Johnson
Ms. Bachmann
Mr. Schlonsky
Mr. Robins
Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested
(#) (3)
(i)
Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested
($) (4)
(j)
Number of
Shares or
Units of
Stock
That Have
Not
Vested
(#) (2)
(g)
Market
Value of
Shares
or Units
of Stock
That
Have Not
Vested
($) (4)
(h)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
107,173 5,216,110 288,734 14,052,684
-
-
-
-
-
5,753,670
-
-
-
6,595,369
-
-
-
-
2,946,725
899,227
-
-
-
-
-
25,438 1,238,067 118,218
-
-
-
32,737 1,593,310 135,512
-
-
-
-
60,545
18,476
-
-
-
-
910,859
511,473
-
-
-
-
18,715
10,509
-
-
-
-
-
-
(1) All stock option awards reflected in this table were made pursuant to the 2005 LTIP or 2012 LTIP. Stock
option awards made under the 2005 LTIP or 2012 LTIP vest on the anniversary of the grant date at a rate of
25% per year over the first four years of the seven year option term.
56
(2)
(3)
The awards reported in column (g) reflect the unvested RSUs awarded to the named executive
officers in fiscal 2016, fiscal 2015 and fiscal 2014 under the 2012 LTIP. These RSUs will vest at a
rate of one third per year over the first three anniversaries of the grant date. The first third of the
fiscal 2015 RSU awards and the second third of the fiscal 2014 RSU awards vested during fiscal
2016. For additional information regarding the fiscal 2016 RSU awards, including the vesting
terms, see the narrative discussion preceding the Grants of Plan-Based Awards in Fiscal 2016
table and the “Our Executive Compensation Program for Fiscal 2016 – Equity for Fiscal 2016”
section of the CD&A.
The awards reported in column (i) reflect the following: (1) for Mr. Campisi, a PSU award in fiscal
2016, fiscal 2015 and fiscal 2014 (each at the target amount) and a restricted stock award in
fiscal 2013; (2) for Mr. Robins, a PSU award in fiscal 2016 and fiscal 2015 (each at the target
amount); and (3) for Mr. Johnson, Ms. Bachmann and Mr. Schlonsky, a PSU award in fiscal
2016, fiscal 2015 and fiscal 2014 (each at the target amount) and restricted stock awards in fiscal
2013 and fiscal 2012. If we achieve the maximum performance levels applicable to the PSU
awards in fiscal 2016 and fiscal 2015, the total number of PSUs that would vest and be earned
for such PSU awards would be: (1) 219,765 for Mr. Campisi; (2) 52,818 for Mr. Johnson;
(3) 67,378 for Ms. Bachmann; (4) 39,401 for Mr. Schlonsky; and (5) 27,713 for Mr. Robins. The
fiscal 2014 PSU awards vested on March 29, 2017. For additional information on the fiscal 2014
PSU awards, see the narrative discussion in “Our Executive Compensation Program for Fiscal
2016 – Equity for Fiscal 2016” section of the CD&A.
All awards were made pursuant to the 2005 LTIP or 2012 LTIP. The first trigger for the fiscal
2013 and fiscal 2012 restricted stock awards is EPS of $1.50 and the second trigger for the fiscal
2013 award is EPS of $3.98 and the second trigger for the fiscal 2012 restricted stock awards is
EPS of $3.95. The fiscal 2012 restricted stock awards vested on March 7, 2017. The actual
number of PSUs awarded to each named executive officer in fiscal 2016, fiscal 2015 and fiscal
2014 that will vest and be earned (if any) by each named executive officer is determined after the
three-year performance period based: (1) 50% on our average EPS performance, excluding plan-
defined items, for each of the three service periods during the performance period; (2) 50% on
our average ROIC performance (net operating profit after-tax divided by invested capital for the
fiscal year), excluding plan-defined items, for each of the three service periods during the
performance period; and (3) on the named executive officer’s continued employment through the
end of the performance period (except in the case of death, disability or retirement). For
additional information regarding the fiscal 2016 PSU awards, including the vesting terms, see the
narrative discussion preceding the Grants of Plan-Based Awards in Fiscal 2016 table and the
“Our Executive Compensation Program for Fiscal 2016 – Equity for Fiscal 2016” section of the
CD&A.
(4)
The market value was computed by multiplying the number of units or shares by $48.67, the
closing price of our common shares on January 28, 2017. If we achieve the maximum
performance levels applicable to the PSU awards in fiscal 2016 and fiscal 2015, the aggregate
market value for such PSU awards would be: (1) $10,695,962 for Mr. Campisi; (2) $2,570,652 for
Mr. Johnson; (3) $3,279,287 for Ms. Bachmann; (4) $1,917,646 for Mr. Schlonsky; and
(5) $1,348,792 for Mr. Robins. The fiscal 2014 PSU awards vested on March 29, 2017. For
additional information on the fiscal 2014 PSU awards, see the narrative discussion in “Our
Executive Compensation Program for Fiscal 2016 – Equity for Fiscal 2016” section of the CD&A.
57
Option Exercises and Stock Vested in Fiscal 2016
The following table reflects all stock option exercises and the vesting of restricted stock held by each of
our named executive officers during fiscal 2016.
Name
(a)
Mr. Campisi
Mr. Johnson
Ms. Bachmann
Mr. Schlonsky
Mr. Robins
Option Awards
Stock Awards
Number of Shares
Acquired on Exercise
(#)
(b)
Value Realized
on Exercise
($)
(c)
Number of Shares
Acquired on Vesting
(#)
(d)
Value Realized
on Vesting
($)
(e)
56,150
15,000
50,000
15,000
-
786,670
222,011
706,500
215,201
-
49,742
18,312
40,874
7,173
1,806
2,305,534
860,507
1,858,166
325,562
91,546
Pension Benefits
Pension Plan and Supplemental Pension Plan
The Pension Plan was maintained only for certain employees hired before April 1, 1994. Effective
January 1, 1996, the benefits accrued under the Pension Plan for certain highly compensated
individuals were frozen at the then current levels. The Supplemental Pension Plan was maintained only
for those executives whose benefits were frozen under the Pension Plan on or after January 1, 1996.
On December 31, 2015, we froze the accrual of benefits under the Pension Plan and terminated the
Supplemental Pension Plan, and we terminated the Pension Plan on January 31, 2016. Based on their
respective dates of hire, Mr. Schlonsky is the only named executive officer who was eligible to
participate in these plans.
The Pension Plan was intended to qualify under the IRC and comply with the Employee Retirement
Income Security Act of 1974, as amended. The amount of the Big Lots’ annual contribution to the
Pension Plan was actuarially determined to accumulate sufficient funds to maintain projected benefits.
The Supplemental Pension Plan constituted a contract to pay benefits upon retirement. The
Supplemental Pension Plan is designed to pay the same benefits in the same amount as if the
participants continued to accrue benefits under the Pension Plan. We have no obligation to fund the
Supplemental Pension Plan, and all assets and amounts payable under the Supplemental Pension
Plan are subject to the claims of our general creditors.
Effective January 1, 1993, the annual retirement benefit payable upon retirement under the Pension
Plan and the Supplemental Pension Plan for those working until age 65 was, and continues to be,
equal to 1% of the average annual compensation during the participant’s highest compensated five
consecutive year period of employment with Big Lots multiplied by the years of service up to a
maximum of 25 (“Normal Retirement Pension”), with participation and benefits being limited in and for
any single year to one plan (not both plans) based on the participant’s status as a highly compensated
employee, as defined in the IRC. This benefit is payable when a participant reaches the normal
retirement age of 65; however, the Pension Plan and Supplemental Pension Plan provide the option to
retire early (generally at age 55) or to continue employment beyond the normal retirement age.
Under the Pension Plan and the Supplemental Pension Plan, a participant who has reached the age of
55 and has at least five years of service with us can elect to retire early and receive a reduced monthly
pension commencing on the date of the participant’s early termination (if age plus service equals 65 or
more). Alternatively, a participant who has reached the age of 65 can elect to continue employment
with us and continue participation in either the Pension Plan or Supplemental Pension Plan until the
58
participant retires, at which time the participant will receive his Normal Retirement Pension.
Participants who terminate employment due to a disability are entitled to a pension amount under the
Pension Plan equal to the actuarially-determined present value of the Normal Retirement Pension. The
spouse of a participant who dies before retirement is entitled to receive an amount equal to the
actuarially-determined present value of the Normal Retirement Pension reduced for the period of time
that the participant’s death or 25th anniversary of employment, if later, precedes the normal retirement
age. A participant who terminates employment for any reason other than death or retirement may
receive a reduced pension amount determined based on the number of years the participant was
employed by us.
A participant may elect to receive a monthly annuity payment from the Pension Plan upon separation.
Alternatively, a participant may elect to receive a lump sum payment of the entire actuarial equivalent
of the participant’s accrued retirement pension or a reduced monthly annuity payable over a fixed
number of months. Under the Supplemental Pension Plan, a lump sum payment of the entire actuarial
equivalent of the participant’s retirement pension will be made within 90 days of the Entitlement Date.
For purposes of calculating benefits under the Pension Plan, compensation is defined to include the
monthly equivalent of the total cash remuneration paid for services rendered during a plan year prior to
salary reductions pursuant to Sections 401(k) or 125 of the IRC, including bonuses. The table below
illustrates the amount of annual benefits payable at age 65 to a person with the specified five year
average compensation and years of service under the Pension Plan combined with the Supplemental
Pension Plan; assuming working to age 65.
Final Average
Compensation
$100,000
$125,000
$150,000
$175,000
$200,000
$225,000
$250,000
Years of Service
10
15
20
25
$10,000 $15,000 $20,000 $25,000
$12,500 $18,750 $25,000 $31,250
$15,000 $22,500 $30,000 $37,500
$17,500 $26,250 $35,000 $43,750
$20,000 $30,000 $40,000 $50,000
$22,500 $33,750 $45,000 $56,250
$25,000 $37,500 $50,000 $62,500
The maximum annual benefit payable under the Pension Plan is restricted by the IRC ($210,000 for
calendar year 2016). At January 28, 2017, the maximum five year average compensation taken into
account for benefit calculation purposes was $259,000. The compensation taken into account for
benefit calculation purposes is limited by law ($265,000 for calendar year 2016), and is subject to
statutory increases and cost-of-living adjustments in future years. Income recognized as a result of the
exercise of stock options and the vesting of restricted stock is disregarded in computing benefits under
the Pension Plan.
59
Pension Benefits Table for Fiscal 2016
The following table reflects the number of years of credited service and the present value of
accumulated benefits payable to Mr. Schlonsky under the Pension Plan and the Supplemental Pension
Plan.
Name
(a)
Mr. Campisi
Mr. Johnson
Ms. Bachmann
Mr. Schlonsky
Plan
Name
(b)
N/A
N/A
N/A
Pension Plan
Supplemental Pension Plan
Mr. Robins
N/A
Nonqualified Deferred Compensation
Supplemental Savings Plan
Number of Years
Credited Service
(#)
(c)
Present Value of
Accumulated Benefit
($)
(d)
Payments During
Last Fiscal Year
($)
(e)
-
-
-
5
17
-
-
-
-
-
-
-
-
-
-
14,818
224,764
-
All of our named executive officers, as well as substantially all other full-time employees, are eligible to
participate in the Savings Plan, our “401(k) plan.” The Supplemental Savings Plan is maintained for
those executives participating in the Savings Plan who desire to contribute more than the amount
allowable under the Savings Plan. The Supplemental Savings Plan constitutes a contract to pay
deferred compensation and limits deferrals in accordance with prevailing tax law. The Supplemental
Savings Plan is designed to pay the deferred compensation in the same amount as if contributions had
been made to the Savings Plan. We have no obligation to fund the Supplemental Savings Plan, and all
assets and amounts payable under the Supplemental Savings Plan are subject to the claims of our
general creditors.
In order to participate in the Savings and Supplemental Savings Plans, an eligible employee must
satisfy applicable age and service requirements and must make contributions to such plans
(“Participant Contributions”). Participant Contributions are made through authorized payroll deductions
to one or more of the several investment funds available under the Savings and Supplemental Savings
Plans and selected at the discretion of the participant. All Participant Contributions are matched by us
(“Registrant Contributions”) at a rate of 100% for the first 2% of salary contributed and 50% for the next
4% of salary contributed. Additionally, the amount of the Registrant Contribution is subject to the
maximum annual compensation that may be taken into account for benefit calculation purposes under
the IRC ($265,000 for calendar year 2016). Accordingly, the maximum aggregate Registrant
Contribution that could be made to a named executive officer participating in the Savings and
Supplemental Savings Plans was $10,600 for fiscal 2016.
Under the Savings Plan and the Supplemental Savings Plan, 25% of the Registrant Contributions vests
annually beginning on the second anniversary of the employee’s hiring. Under the Savings Plan, a
participant who has terminated employment with us is entitled to all funds in his or her account, except
that if termination is for a reason other than retirement, disability or death, then the participant is entitled
to receive only the Participant Contributions and the vested portion of the Registrant Contributions. Under
the Supplemental Savings Plan, a participant who has terminated employment with us for any reason is
entitled to receive the Participant Contributions and only the vested portion of the Registrant
Contributions. Under both plans, all other unvested accrued benefits pertaining to Registrant
Contributions will be forfeited. Upon a change in control of Big Lots, the participant will receive a lump
sum payment of all amounts (vested and unvested) under the Supplemental Savings Plan.
60
Nonqualified Deferred Compensation Table for Fiscal 2016
The following table reflects the contributions to, earnings in and balance of each named executive
officer’s account held under the Supplemental Savings Plan.
Name
(a)
Mr. Campisi
Mr. Johnson
Ms. Bachmann
Mr. Schlonsky
Mr. Robins
Executive
Contributions
in Last FY
($) (1)
(b)
Registrant
Contributions
in Last FY
($) (2)
(c)
426,303
290,834
20,412
32,952
47,955
4,664
4,664
4,664
57,664
-
Aggregate
Earnings
in Last FY
($) (3)
(d)
126,985
79,360
54,498
82,499
7,152
Aggregate
Withdrawals/
Distributions
($)
(e)
-
-
-
-
-
Aggregate
Balance
at Last FYE
($) (4)
(f)
936,822
1,228,970
451,619
678,113
62,579
(1)
(2)
(3)
(4)
The amounts in this column are included in the “Salary” column of the Summary Compensation
Table for fiscal 2016.
The amounts in this column are included in the “All Other Compensation” column of the Summary
Compensation Table for fiscal 2016.
The amounts in this column are not included in the Summary Compensation Table as these
amounts reflect only the earnings on the investments designated by the named executive officer
in his or her Supplemental Savings Plan account in fiscal 2015 (i.e., appreciation or decline in
account value). The amounts in this column do not include any above-market or preferential
earnings, as defined by Item 402(c)(2)(viii) of Regulation S-K and the instructions thereto.
$381,941, $295,322, $40,116 and $59,304 of the amounts in this column were previously
reported as compensation to Mr. Campisi, Mr. Johnson, Ms. Bachmann and Mr. Schlonsky,
respectively, in the Summary Compensation Table for the prior years reported.
Potential Payments Upon Termination or Change in Control
The “Rights Under Post-Termination and Change in Control Arrangements” section below addresses
the rights of our named executive officers under their employment agreements and other
compensation arrangements upon a change in control or in the event their employment with us is
terminated. The “Estimated Payments if Triggering Event Occurred at 2016 Fiscal Year End” section
below reflects the payments that may be received by each executive (or his or her beneficiaries, as
applicable) upon a change in control or in the event the executive’s employment with us is terminated:
(1) involuntarily without cause (including a constructive termination (as defined in the Severance
Plan)); (2) in connection with the executive’s disability; (3) upon the executive’s death; (4) upon the
executive’s retirement (none of our named executive officers were retirement eligible at the end of
fiscal 2016); or (5) in connection with a change in control.
Rights Under Post-Termination and Change in Control Arrangements
Termination for Cause
If a named executive officer who is a party to an employment agreement with us (Mr. Campisi and
Ms. Bachmann) is terminated for cause or due to his or her voluntary resignation, we have no
obligation under the employment agreement to pay any unearned compensation or to provide any
future benefits to the executive; provided, however that if Mr. Campisi terminates his employment for
“good reason” (as defined in the New Employment Agreement), he will be entitled to the payments and
benefits described below in “Termination Without Cause.”
61
Involuntary Termination Without Cause
If a named executive officer is involuntarily terminated without cause (including a constructive
termination), the Severance Plan would entitle the named executive officer to:
•
•
•
•
•
a cash payment equal to the product of (1) the named executive officer’s annualized base
salary in effect on the date of termination and (2) a multiple thereof;
a cash payment equal to a prorated portion of the annual incentive award that the named
executive officer would have earned for the fiscal year in which the termination occurred had
such termination not occurred;
a cash payment for outplacement assistance;
continued coverage for the named executive officer under our health plans until the last day of
the calendar month in which the post-termination restriction period applicable to the named
executive officer elapses, plus the amount necessary to reimburse the named executive
officer for the taxes he or she would be liable for as a result of such continued coverage; and
prorated vesting of all unvested, outstanding restricted stock awards granted to the named
executive officer on or before February 1, 2014 and, upon achievement of the applicable
performance trigger, prorated vesting of all unvested, outstanding RSU awards granted to the
named executive officer.
The New Employment Agreement would also entitle Mr. Campisi to these payments and benefits in the
event he terminates his employment with us for “good reason.”
Termination due to Disability or Death
If a named executive officer is terminated as a result of his or her disability or death:
•
•
•
•
•
the Severance Plan would entitle the named executive officer to a cash payment equal to a
prorated portion of the annual incentive award that the named executive officer would have
earned for the fiscal year in which the termination occurred had such termination not
occurred;
unvested restricted stock awards granted under the 2005 LTIP and 2012 LTIP would vest in
increments of 20% for each consecutive year of employment completed since the grant date if
the first trigger is met while employed;
unvested stock options granted under the 2005 LTIP and 2012 LTIP in and after fiscal 2009
would vest on the date of termination, provided that the date of termination occurs at least six
months following the grant date;
a prorated portion of the unvested PSUs granted under the 2012 LTIP that the named
executive officer would have earned had the named executive officer remained employed for
the entire performance period would vest upon the certification of the applicable performance
condition; and
a prorated portion of the unvested RSUs granted under the 2012 LTIP would vest on the
termination date.
In addition, under the New Employment Agreement, if Mr. Campisi’s employment is terminated as a
result of his disability or death, all of Mr. Campisi’s unvested, outstanding service-based equity grants
and awards and RSUs granted after February 1, 2014 would become fully vested upon termination.
62
Termination Upon Retirement
If a named executive officer is terminated as a result of his or her retirement (as defined in the
applicable award agreement):
•
•
a prorated portion of the unvested PSUs granted under the 2012 LTIP that the named
executive officer would have earned had the named executive officer remained employed for
the entire performance period would vest upon the certification of the applicable performance
condition; and
if the performance condition is satisfied before the third anniversary of the grant date, a
prorated portion of the unvested RSUs granted under the 2012 LTIP would vest on the
termination date.
In addition, under the New Employment Agreement, if Mr. Campisi’s employment is terminated as a
result of his retirement after May 3, 2020:
• Mr. Campisi would be eligible (based on our achievement of at least the threshold
performance goal) to receive a prorated annual incentive award for the fiscal year in which his
termination is effective;
•
•
all of Mr. Campisi’s unvested, outstanding service-based equity grants and awards and RSUs
granted after February 1, 2014 for which the performance condition has been satisfied would
continue to vest for 24 months after the date of termination and any such awards and units
that vest more than 24 months after the date of termination will be forfeited; and
a pro rata portion of Mr. Campisi’s unvested, outstanding performance-based equity grants
and awards, to be determined by (1) multiplying the amount of such award or grant that would
have been earned had Mr. Campisi remained employed through the last vesting date under
such award or grant by (2) a fraction, the denominator of which is the total number of days
between the grant date of the award and the last vesting date under such award and the
numerator of which is the number of days between the grant date of the award and
Mr. Campisi’s termination date plus 730, provided such fraction shall never exceed 1.00. 730
is added to the numerator, as it is the equivalent number of days to the 24 months of
continued vesting used for Mr. Campisi’s service-based equity grants and RSUs and is also
equivalent to the time Mr. Campisi will be subject to the restrictive covenants included in the
New Employment Agreement. The performance-based equity grants and awards will only vest
upon the certification of the applicable performance criteria and will be paid at the end of the
applicable performance period.
Termination in connection with Change in Control
If terminated without cause (including a constructive termination) within 24 months after a change in
control, the senior executive severance agreements would entitle Mr. Johnson, Mr. Schlonsky and
Mr. Robins to (1) a lump-sum payment equal to 200% of the executive’s then current annual base
salary and maximum annual incentive award and (2) continued coverage under our health plans for up
to one year after the date of termination.
If terminated without cause (including a constructive termination and, in the case of Mr. Campisi under
the New Employment Agreement, termination for good reason), the employment agreements would
entitle Mr. Campisi and Ms. Bachmann to (1) a lump-sum payment equal to 200% of the highest
annual base salary and maximum annual incentive award in effect during the three months before and
the 24 months after the change in control and (2) continued coverage under our health plans for up to
two years after the date of termination, plus the amount necessary to reimburse him or her for the
taxes he or she would be liable for as a result of such continued healthcare coverage.
63
In addition, upon a change in control:
•
•
•
•
all unvested restricted stock awards granted to the named executive officer under the 2005
LTIP and 2012 LTIP would vest;
all unvested stock options granted to the named executive officer under the 2005 LTIP and
2012 LTIP would vest;
if the change in control occurs before the third anniversary of the grant date, all unvested
RSUs granted to the named executive officer under the 2012 LTIP would vest; and
if the change of control occurs before the end of the applicable performance period, the
greater of (1) the target number of PSUs and (2) a number of PSUs calculated based on the
satisfaction of the applicable performance conditions before the change in control, would vest
for each named executive officer.
Upon a change in control, each participating named executive officer would also receive a lump sum
payment of all vested and unvested amounts under the Supplemental Savings Plan. (See the
“Nonqualified Deferred Compensation” section above for more information regarding the Supplemental
Savings Plan and our named executive officers’ aggregate balances under such plans at the end of
fiscal 2016.)
Change in Control Described
Generally, pursuant to the 2005 LTIP, the 2012 LTIP, the Supplemental Savings Plan (as to amounts
earned and vested before January 1, 2005, including earnings attributable to such amounts) and the
Severance Plan, a change in control is deemed to occur if:
•
•
•
any person or group (as defined in Section 13(d) under the Exchange Act) becomes the
beneficial owner, or has the right to acquire, 20% or more of our outstanding voting securities;
a majority of the Board is replaced within any two-year period by directors not nominated and
approved by a majority of the directors in office at the beginning of such period (or their
successors so nominated and approved), or a majority of the Board at any date consists of
persons not so nominated and approved; or
our shareholders approve an agreement to merge or consolidate with an unrelated company
or an agreement to sell or otherwise dispose of all or substantially all of our assets to an
unrelated company, except pursuant to the terms of the 2012 LTIP and the Severance Plan,
which requires the consummation of a merger or consolidation with another entity or the sale
or other disposition of all or substantially all of our assets (including, without limitation, a plan
of liquidation), which has been approved by our shareholders.
Consistent with the provisions of Section 409A (“Section 409A”) of the IRC and the Treasury
Regulations promulgated thereunder, pursuant to our named executive officers’ employment
agreements, the senior executive severance agreements, the 2006 Bonus Plan and the Supplemental
Savings Plan (as to all amounts earned and vested on or after January 1, 2005), a change in control is
deemed to occur upon:
•
•
the acquisition by any person or group (as defined under Section 409A) of our common
shares that, together with any of our common shares then held by such person or group,
constitutes more than 50% of the total fair market value or voting power in our outstanding
voting securities;
the acquisition by any person or group, within any one year period, of 30% or more of our
outstanding voting securities;
64
•
•
a majority of the Board is replaced during any one year period by directors whose
appointment or election is not endorsed by a majority of the directors in office prior to the date
of such appointment or election; or
the acquisition by any person or group, within any one year period, of 40% or more of the total
gross fair market value of all of our assets, as measured immediately prior to such
acquisition(s).
Notwithstanding the foregoing definitions, pursuant to our named executive officers’ employment
agreements, senior executive severance agreements, the 2005 LTIP, the 2012 LTIP, the 2006 Bonus
Plan and the Severance Plan, a change in control does not include any transaction, merger,
consolidation or reorganization in which we exchange, or offer to exchange, newly issued or treasury
shares in an amount less than 50% of our then-outstanding voting securities for 51% or more of the
outstanding voting securities of an unrelated company or for all or substantially all of the assets of such
unrelated company.
Estimated Payments if Triggering Event Occurred at 2016 Fiscal Year-End
The amounts in the following tables are approximations based on various assumptions and estimates.
The actual amounts to be paid can only be determined at the time of the change in control or
termination of employment, as applicable. In the tables that follow, we have made the following
material assumptions, estimates and characterizations:
• Except as otherwise provided in the tables below, the amounts are calculated based on
compensation levels and benefits effective at January 28, 2017, the last day of fiscal 2016.
• We have not taken into account the possibility that a named executive officer may be eligible to
receive healthcare benefits from another source following his or her termination. Therefore, the
amounts shown in the “Healthcare Coverage” row in the tables below reflect, consistent with the
assumptions that would be used to estimate the cost of these benefits for financial reporting
purposes under generally accepted accounting principles, the current monthly cost to provide
continued healthcare coverage under the Consolidated Omnibus Budget Reconciliation Act of
1985 (“COBRA”) applied to each month these benefits would be provided to the named
executive officer. Included in the amounts shown in the “Healthcare Coverage” row in the tables
below are the related tax gross-up amounts. The amounts shown in the “Long-Term Disability
Benefit” row in the tables below represent 67% of the named executive officer’s monthly salary,
up to a maximum of $25,000 per month in accordance with the long-term disability insurance we
maintain for our named executive officers. This benefit is payable until the named executive
officer is no longer disabled or age 65, whichever occurs earlier. Due to the speculative nature
of estimating the period of time during which a named executive officer may be disabled, we
have presented only one month of disability benefits in the tables below.
• The amounts in the “Accelerated Equity Awards” row under the “Termination upon Disability”
and “Termination upon Death” columns in the tables below represent the value (as of the final
trading day on the NYSE during fiscal 2016) of (1) 80% of the unvested restricted stock
awarded to each named executive officer in March 2012, (2) 60% of the unvested restricted
stock awarded to each named executive officer in March 2013, (3) all of the unvested stock
options awarded to our named executive officers in and after our 2009 fiscal year, (4) a
prorated portion of the unvested RSUs granted under the 2012 LTIP, (5) a prorated portion of
the unvested PSUs granted under the 2012 LTIP in fiscal 2015 and fiscal 2016 assuming that
the applicable performance goals will be achieved at the target level, and (6) the PSUs
granted under the 2012 LTIP in fiscal 2014, that vested based on our actual performance. As
discussed in the prior section, if termination of employment resulted from death or disability,
the unvested restricted stock awards made under the 2012 LTIP will vest in increments of
65
20% for each consecutive year of employment completed since the grant date if the first
trigger is met while employed. The first trigger for the restricted stock awarded to the named
executive officers in March 2012 and March 2013 was met as a result of our performance in
fiscal 2012 and fiscal 2013, respectively. Accordingly, 80% of the March 2012 restricted stock
award and 60% of the March 2013 restricted stock award awarded to each named executive
officer would have vested at the end of fiscal 2016 had the executive’s employment
terminated on such date as a result of their death or disability. The March 2012 restricted
stock awards vested on March 7, 2017. As discussed in the prior section, if a named
executive officer dies or becomes disabled before the last scheduled vesting date of a stock
option awarded in and after our 2009 fiscal year, the then-remaining unvested portion of that
stock option award will vest on the day such event occurred, provided such event occurred at
least six months following the grant date. The amounts in the “Accelerated Equity Awards”
row under the “Retirement” columns in the tables below represents the value (as of the final
trading day of fiscal 2016) of (1) a prorated portion of the unvested RSUs granted under the
2012 LTIP, (2) a prorated portion of the unvested PSUs granted under the 2012 LTIP in fiscal
2015 and fiscal 2016 assuming that the applicable performance goals will be achieved at the
target level and (3) the PSUs granted under the 2012 LTIP in fiscal 2014 that vested based on
or actual performance.
• The amounts in the “Accelerated Equity Awards” row under the “Termination in Connection with
a Change in Control” and “Change in Control (without termination)” columns in the tables below
include the value of all unvested stock options that were in-the-money at the end of fiscal 2016
(i.e., the closing market price of our common shares on the final trading day of fiscal 2016 less
the applicable exercise price) and all unvested restricted stock, RSUs and PSUs that would
have vested on an accelerated basis had a change in control occurred as of the end of fiscal
2016. These amounts do not reflect any equity awards that vested in fiscal 2016.
• The closing market price of our common shares on the final trading day on the NYSE during
fiscal 2016 was $48.67 per share.
David J. Campisi
The following table reflects the payments that would have been due to Mr. Campisi in the event of a
change in control and/or the termination of his employment on January 28, 2017.
Event Occurring at January 28, 2017
Voluntary
Termination/
For Cause
($)
Involuntary
Termination
without
Cause ($)
Retirement
($)
Termination
upon
Disability
($)
Termination
upon
Death ($)
Termination
in
Connection
with a
Change in
Control ($)
Change in
Control
(without
termination)
($)
-
-
-
-
-
-
-
-
2,200,000
2,294,028
70,058
-
40,000
4,056,387
-
8,660,473
-
-
-
-
-
-
-
-
66
-
- 2,200,000
2,294,028 2,294,028 5,280,000
-
25,000
-
-
-
-
70,058
-
-
-
-
-
-
-
17,467,079 17,467,079 21,680,728 21,680,728
-
-
-
-
19,786,107 19,761,107 29,230,786 21,680,728
Salary/Salary
Continuation ($)
Non-Equity Incentive Plan
Compensation ($)
Healthcare Coverage ($)
Long-Term Disability
Benefit ($)
Outplacement Benefits ($)
Accelerated Equity
Awards ($)
Excise Tax Benefit ($)
Total ($)
Timothy A. Johnson
The following table reflects the payments that would have been due to Mr. Johnson in the event of a
change in control and/or the termination of his employment with us on January 28, 2017.
Event Occurring at January 28, 2017
Voluntary
Termination/
For Cause
($)
Involuntary
Termination
without
Cause ($)
Termination
upon
Disability
($)
Termination
upon
Death ($)
Retirement
($)
Termination
in
Connection
with a
Change in
Control ($)
Change in
Control
(without
termination)
($)
Salary/Salary Continuation ($)
Non-Equity Incentive Plan
Compensation ($)
Healthcare Coverage ($)
Long-Term Disability
Benefit ($)
Outplacement Benefits ($)
Accelerated Equity Awards ($)
Excise Tax Benefit ($)
Total ($)
-
-
-
-
-
-
-
-
1,161,840
605,749
70,058
-
25,000
3,213,279
-
5,075,926
-
-
-
-
-
-
-
-
-
-
1,161,840
605,749
605,749
1,394,208
-
25,000
-
-
-
-
37,870
-
-
-
-
-
-
-
5,067,248 5,067,248
7,699,678 7,699,678
-
-
3,450,241
-
5,697,997 5,672,997 13,743,837 7,699,678
Lisa M. Bachmann
The following table reflects the payments that would have been due to Ms. Bachmann in the event of a
change in control and/or the termination of her employment with us on January 28, 2017.
Event Occurring at January 28, 2017
Voluntary
Termination/
For Cause
($)
Involuntary
Termination
without
Cause ($)
Termination
upon
Disability
($)
Termination
upon
Death ($)
Retirement
($)
Termination
in
Connection
with a
Change in
Control ($)
Change in
Control
(without
termination)
($)
Salary/Salary Continuation ($)
Non-Equity Incentive Plan
Compensation ($)
Healthcare Coverage ($)
Long-Term Disability
Benefit ($)
Outplacement Benefits ($)
Accelerated Equity Awards ($)
Excise Tax Benefit ($)
Total ($)
-
-
-
-
-
-
-
-
1,483,200
773,296
70,058
-
25,000
-
-
-
-
-
-
-
1,483,200
773,296
773,296
1,779,840
-
25,000
-
-
-
-
70,058
-
-
-
-
-
-
-
3,467,333 3,795,147 5,927,907 5,927,907
9,032,838 9,032,838
-
-
-
-
-
-
5,818,887 3,795,147 6,726,203 6,701,203 12,365,936 9,032,838
67
Michael A. Schlonsky
The following table reflects the payments that would have been due to Mr. Schlonsky in the event of a
change in control and/or the termination of his employment with us on January 28, 2017.
Event Occurring at January 28, 2017
Voluntary
Termination/
For Cause
($)
Involuntary
Termination
without
Cause ($)
Termination
upon
Disability
($)
Termination
upon
Death ($)
Retirement
($)
Termination
in
Connection
with a
Change in
Control ($)
Change in
Control
(without
termination)
($)
Salary/Salary Continuation ($)
Non-Equity Incentive Plan
Compensation ($)
Healthcare Coverage ($)
Long-Term Disability Benefit
($)
Outplacement Benefits ($)
Accelerated Equity Awards ($)
Excise Tax Benefit ($)
Total ($)
-
-
-
-
-
-
-
-
968,200
504,790
70,058
-
25,000
1,289,030
-
2,857,078
-
-
-
-
-
-
-
-
-
-
968,200
504,790
504,790 1,161,840
-
25,000
-
-
-
-
37,699
-
-
-
-
-
-
-
2,633,751 2,633,751 4,251,981 4,251,981
-
- 2,510,319
-
3,163,541 3,138,541 8,930,039 4,251,981
Ronald A. Robins
The following table reflects the payments that would have been due to Mr. Robins in the event of a
change in control and/or the termination of his employment with us on January 28, 2017.
Event Occurring at January 28, 2017
Voluntary
Termination/
For Cause
($)
Involuntary
Termination
without
Cause ($)
Termination
upon
Disability
($)
Termination
upon
Death ($)
Retirement
($)
Termination
in
Connection
with a
Change in
Control ($)
Change in
Control
(without
termination)
($)
Salary/Salary Continuation ($)
Non-Equity Incentive Plan
Compensation ($)
Healthcare Coverage ($)
Long-Term Disability
Benefit ($)
Outplacement Benefits ($)
Accelerated Equity Awards ($)
Excise Tax Benefit ($)
Total ($)
-
-
-
-
-
-
-
-
875,500
380,383
70,058
-
25,000
160,131
-
1,511,072
-
-
-
-
-
-
-
-
-
-
875,500
380,383
380,383
875,500
-
24,441
-
-
-
-
37,172
-
-
-
-
-
-
-
551,270
551,270
1,532,984 1,532,984
-
-
1,453,608
-
956,094
931,653
4,774,764 1,532,984
68
PROPOSAL THREE: APPROVAL, ON AN ADVISORY BASIS, OF THE COMPENSATION OF OUR
NAMED EXECUTIVE OFFICERS, AS DISCLOSED IN THIS PROXY STATEMENT PURSUANT TO
ITEM 402 OF REGULATION S-K, INCLUDING THE CD&A, COMPENSATION TABLES AND THE
NARRATIVE DISCUSSION ACCOMPANYING THE TABLES
Section 14A of the Exchange Act requires that we provide our shareholders with the opportunity to vote
to approve, on a nonbinding, advisory basis, the compensation of our named executive officers as
disclosed in this Proxy Statement in accordance with the compensation disclosure rules of the SEC.
The following summary of our executive compensation program describes our compensation
philosophy and the key objectives identified by our Compensation Committee to implement our
compensation philosophy.
Our executive compensation program is designed to: (1) align the interests of executives and
shareholders through performance-linked compensation; (2) motivate executives to contribute to our
success and reward them for their performance; and (3) attract and retain talented executives by
paying compensation that is competitive with the compensation paid by the companies in our
comparator groups. We use a balanced mix of salary, annual cash incentive awards and equity awards
to promote these objectives. For a more detailed discussion of how our executive compensation
program promotes these objectives and our executive compensation philosophy, including information
about the fiscal 2016 compensation of our named executive officers, we encourage you to read the
CD&A as well as the Summary Compensation Table and other compensation tables in this Proxy
Statement and the narrative discussion accompanying the tables.
In fiscal 2016, we continued to focus on improving our financial and operating performance. Given the
commitment of the Compensation Committee and other outside directors to a pay-for-performance
philosophy and our focus on improving our financial and operating performance in fiscal 2015, the
Compensation Committee and other outside directors structured a significant portion of the
compensation awarded to our named executive officers for fiscal 2016 as “at risk” or “variable” and
dependent on our performance and/or the value of our common shares, including:
• Annual Cash Incentive Awards. Each named executive officer was eligible to receive a cash
performance bonus based solely on our operating profit. The Compensation Committee and
other outside directors selected operating profit as the sole financial measure because they
believe it focuses our named executive officers on increasing our revenues and controlling our
costs. The fiscal 2016 annual incentive awards were structured so that the target bonus would
be earned only if we achieved the operating profit for fiscal 2016 projected in our annual
corporate operating plan. Based on our $280,690,478 operating profit, as adjusted, in fiscal
2016, our named executive officers earned an annual incentive award for fiscal 2016 equal to
174% of their respective target bonus.
• Performance Share Unit Awards. All of our named executive officers received a significant
portion (60%) of their equity awards in the form of PSUs. The PSUs awarded to our named
executive officers in fiscal 2016 will vest, if at all, after the completion of a three-year
performance period based: (1) 50% on our average EPS performance, excluding plan-defined
items, for each of the three service periods during the performance period; (2) 50% on our
average ROIC performance, excluding plan-defined items, for each of the three service
periods during the performance period; and (3) on the named executive officer’s continued
employment through the end of the performance period. The Compensation Committee and
other outside directors selected EPS and ROIC as the financial measures applicable to the
PSUs to incentivize our named executive officers to achieve long-term financial results that
we believe will create shareholder value. Based on EPS of $3.75 and ROIC of 21.8%, as
adjusted, we achieved 112% of the targeted goal for EPS and 114% of the targeted goal for
69
ROIC for the first service period of the performance period applicable to the PSUs awarded to
our named executive officers in fiscal 2016.
• Restricted Stock Unit Awards. RSUs are primarily intended to align the interests of our named
executive officers and our shareholders and help retain and motivate our named executive
officers. The RSUs will vest ratably over three years from the grant date of the award if the
participant remains employed by us through each annual vesting date and are subject to an
operating profit performance component.
We request that our shareholders indicate their support for the compensation of our named executive
officers as disclosed in this Proxy Statement pursuant to Item 402 of Regulation S-K by approving the
following resolution:
“RESOLVED, that the shareholders of Big Lots approve, on an advisory basis, the
compensation of the named executive officers of Big Lots, as disclosed in Big Lots’ Proxy
Statement for the 2017 Annual Meeting of Shareholders pursuant to Item 402 of Regulation
S-K, including the Compensation Discussion and Analysis, compensation tables and the
narrative discussion accompanying the tables.”
The vote on the approval of the compensation of our named executive officers is advisory, which
means that the vote is not binding on the Board, the Compensation Committee or us. If a majority of
the votes are cast against the approval of the compensation of our named executive officers, the Board
and the Compensation Committee will evaluate whether to take any actions to address the concerns of
the shareholders with respect to our executive compensation program.
THE BOARD RECOMMENDS THAT YOU VOTE FOR THE APPROVAL OF THE COMPENSATION
OF OUR NAMED EXECUTIVE OFFICERS, AS DISCLOSED IN THIS PROXY STATEMENT
PURSUANT TO ITEM 402 OF REGULATION S-K, INCLUDING THE CD&A, COMPENSATION
TABLES AND THE NARRATIVE DISCUSSION ACCOMPANYING THE TABLES.
PROPOSAL FOUR: APPROVAL, ON AN ADVISORY BASIS, OF THE FREQUENCY OF FUTURE
ADVISORY VOTES ON THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS.
The Dodd-Frank Act requires that we provide our shareholders with the opportunity to vote to approve,
on an advisory basis, whether future advisory votes on compensation of our executive officers (of the
nature reflected in Proposal Three above, and commonly referred to as “Say-on-Pay”) should occur
every one, two or three years (commonly referred to as “Say-on-Frequency”).
At our 2011 annual meeting of shareholders, a plurality of our shareholders voted for annual Say-on-
Pay advisory votes on executive compensation. The Company has held advisory Say-on-Pay votes on
the compensation of our executive offices at every subsequent annual meeting.
We are required to hold a Say-on-Frequency vote every six years. After careful consideration, the
Board has determined that continuing to hold an advisory vote on executive compensation every year
remains the most appropriate policy for us at this time, and recommends that shareholders vote for
future advisory votes on executive compensation to occur every year.
The Say-on-Frequency vote is advisory, which means that the vote on frequency is not binding on us,
our Board or our Compensation Committee.
THE BOARD RECOMMENDS THAT YOU VOTE FOR ONE YEAR AS THE FREQUENCY FOR
FUTURE ADVISORY VOTES ON THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS.
70
General Information
AUDIT COMMITTEE DISCLOSURE
The Audit Committee consists of five non-employee directors of the Board. The members of the Audit
Committee have been reviewed by the Board and determined to be independent within the meaning of
all applicable SEC regulations and NYSE listing standards.
The charter of the Audit Committee states that the purpose of the Audit Committee is to assist the
Board in its oversight of:
•
•
•
•
•
•
the integrity of our financial statements and financial reporting process, and our systems of
internal accounting and financial controls;
our compliance with legal and regulatory requirements, including our disclosure controls and
procedures;
the annual independent audit of our financial statements, the engagement of our independent
registered public accounting firm, and the evaluation of the firm’s qualifications, independence
and performance;
the performance of our internal audit function;
the evaluation of enterprise risk issues; and
the fulfillment of other responsibilities set forth in its charter.
The full text of the Audit Committee’s charter is available in the Investor Relations section of our
website (www.biglots.com) under the “Corporate Governance” caption. The Audit Committee regularly
reviews its responsibilities as outlined in its charter, prepares an annual agenda that addresses all of
its responsibilities and conducts a self-assessment and review of the charter annually. The Audit
Committee believes it fulfilled its responsibilities under the charter in fiscal 2016.
The Audit Committee schedules its meetings with a view towards ensuring that it devotes appropriate
attention to all of its responsibilities. The Audit Committee’s meetings include, whenever appropriate,
executive sessions with the independent registered public accounting firm, the Company’s Vice President,
Internal Audit and our Chief Financial Officer, in each case without the presence of management. The Audit
Committee also meets in executive session without the presence of anyone else, whenever appropriate.
During fiscal 2016, internal audit completed the documentation, testing and evaluation of our system of
internal control over financial reporting in accordance with the requirements set forth in Section 404 of the
Sarbanes-Oxley Act of 2002 and related regulations. The Audit Committee was apprised of the progress
of the evaluation and provided oversight and advice to management during the process. In connection
with its oversight, the Audit Committee received periodic updates provided by internal audit and the
independent registered public accounting firm at each regularly scheduled Audit Committee meeting. The
Audit Committee also reviewed the report of management contained in our Form 10-K, as well as the
independent registered public accounting firm’s Report of Independent Registered Public Accounting
Firm included in our Form 10-K related to its audit of (1) our financial statements and (2) the effectiveness
of our internal control over financial reporting. The Audit Committee continues to oversee efforts related
to our system of internal control over financial reporting and management’s preparations for the
evaluation thereof in fiscal 2017. The Audit Committee has also reviewed key initiatives and programs
aimed at strengthening the effectiveness of our internal and disclosure control structure.
Independent Registered Public Accounting Firm
The Audit Committee engaged Deloitte & Touche LLP as our independent registered public accounting
firm to audit our financial statements for fiscal 2016. Deloitte & Touche LLP has served as our
71
independent registered public accounting firm since October 1989. The Audit Committee annually
selects and evaluates our independent registered public accounting firm and reviews the scope of and
plans for the audit by the independent registered public accounting firm. Some of the factors the Audit
Committee considers in its evaluation include the independent auditor’s qualifications, performance,
independence and tenure. Based on its evaluation and review, the Audit Committee believes that it is
in the best interest of the Company to retain Deloitte & Touche LLP as our independent registered
public accounting firm for fiscal 2017.
Audit and Non-Audit Services Pre-Approval Policy
Pursuant to the Audit Committee’s Audit and Non-Audit Services Pre-Approval Policy, all audit and
non-audit services rendered by Deloitte & Touche LLP in fiscal 2016, including the related fees, were
pre-approved by the Audit Committee. Under the policy, the Audit Committee is required to pre-
approve all audit and permissible non-audit services performed by the independent registered public
accounting firm to assure that the provision of those services does not impair the firm’s independence.
Pre-approval is detailed as to the particular service or category of service and is subject to a specific
engagement authorization. The Audit Committee requires the independent registered public accounting
firm and management to report on the actual fees incurred for each category of service at Audit
Committee meetings throughout the year.
During the year, it may become necessary to engage the independent registered public accounting firm
for additional services that have not been pre-approved. In those instances, the Audit Committee
requires specific pre-approval before engaging the independent registered public accounting firm. The
Audit Committee may delegate pre-approval authority to one or more of its members for those
instances when pre-approval is needed prior to a scheduled Audit Committee meeting. The member or
members to whom pre-approval authority is delegated must report any pre-approval decisions to the
Audit Committee at its next scheduled meeting.
Fees Paid to Independent Registered Public Accounting Firm
The fees billed to us for the professional services rendered by Deloitte & Touche LLP during the two
most recently completed fiscal years were as follows:
($ in thousands)
Audit Fees
Audit-Related Fees (1)
Tax Fees (2)
All Other Fees (3)
Total Fees
Fiscal 2015
($)
Fiscal 2016
($)
1,355
76
105
3,533
5,069
1,355
15
77
2
1,449
(1)
(2)
(3)
For fiscal 2015 and fiscal 2016, the audit-related fees principally related to accounting
consultation.
For fiscal 2015 and fiscal 2016, $75 and $0 of the tax fees, respectively, related to tax
compliance services for our Canadian operations.
For fiscal 2015 and fiscal 2016, the other fees include fees related to online subscription fees for
technical support and for fiscal 2015, fees paid to Deloitte Consulting of $3,530 in connection with
Deloitte’s advisory services related to the development and expected launch of our e-commerce
operations. A review of the advisory services activities occurred at appropriate intervals with the
Deloitte & Touche LLP audit engagement partner, the Deloitte Consulting Team and the Audit
Committee chair, to ensure that independence was maintained.
72
Audit Committee Report
The Audit Committee has reviewed and discussed the audited financial statements for fiscal 2016 with
management and the independent registered public accounting firm. The Audit Committee has
discussed with the independent registered public accounting firm the matters required to be discussed
by Auditing Standard No. 1031, as adopted by the Public Company Accounting Oversight Board. The
Audit Committee has received the written communications from the independent registered public
accounting firm required by applicable requirements of the Public Company Accounting Oversight
Board regarding the independent registered public accounting firm’s communications with the Audit
Committee concerning independence, and has discussed with the independent registered public
accounting firm its independence. Based on these reviews and discussions, the undersigned members
of the Audit Committee recommended to the Board that the audited consolidated financial statements
for fiscal 2016 be included in our Form 10-K for filing with the SEC.
Members of the Audit Committee
Philip E. Mallott, Chair
Marla C. Gottschalk
Cynthia T. Jamison
Wendy L. Schoppert
Russell E. Solt
PROPOSAL FIVE: RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS
OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR FISCAL 2017
At its March 7, 2017 meeting, the Audit Committee appointed Deloitte & Touche LLP as our
independent registered public accounting firm for fiscal 2017, subject to our entry into a mutually
agreed upon services contract with Deloitte & Touche LLP. The submission of this matter for approval
by shareholders is not legally required; however, we believe that such submission is consistent with
best practices in corporate governance and is another opportunity for shareholders to provide direct
feedback on an important issue of our corporate governance. If the shareholders do not ratify the
appointment of Deloitte & Touche LLP, the selection of such firm as our independent registered public
accounting firm will be reconsidered by the Audit Committee.
A representative of Deloitte & Touche LLP will be present at the Annual Meeting to respond to
appropriate questions and to make a statement if so desired.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE PROPOSAL TO
RATIFY THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS OUR INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM FOR FISCAL 2017.
73
SHAREHOLDER PROPOSALS
Any proposals of shareholders which are intended to be presented at our 2018 annual meeting of
shareholders must be received by our Corporate Secretary at our corporate offices on or before
December 12, 2017 to be eligible for inclusion in our 2018 proxy statement and form of proxy. Such
proposals must be submitted in accordance with Rule 14a-8 of the Exchange Act. If a shareholder
intends to present a proposal at our 2018 annual meeting of shareholders without inclusion of that
proposal in our 2018 proxy materials and written notice of the proposal is not received by our
Corporate Secretary at our corporate offices on or before February 26, 2018, or if we meet other
requirements of the SEC rules, proxies solicited by the Board for our 2018 annual meeting of
shareholders will confer discretionary authority on the proxy holders named therein to vote on the
proposal at the meeting.
PROXY SOLICITATION COSTS
This solicitation of proxies is made by and on behalf of the Board. In addition to mailing the Notice of
Internet Availability (or, if applicable, paper copies of this Proxy Statement, the Notice of Annual
Meeting of Shareholders and the proxy card) to shareholders of record on the record date, the brokers
and banks holding our common shares for beneficial holders must, at our expense, provide our proxy
materials to persons for whom they hold our common shares in order that such common shares may
be voted. Solicitation of proxies may also be made by our officers and regular employees personally or
by telephone, mail or electronic mail. Officers and employees who assist with solicitation will not
receive any additional compensation. The cost of the solicitation will be borne by us. We have also
retained Georgeson LLC to aid in the solicitation of proxies for a fee estimated to be $7,500, plus
reasonable out-of-pocket expenses.
OTHER MATTERS
As of the date of this Proxy Statement, we know of no business that will be presented for consideration
at the Annual Meeting other than as referred to in Proposal One, Proposal Two, Proposal Three,
Proposal Four and Proposal Five above. If any other matter is properly brought before the Annual
Meeting for action by shareholders, common shares represented by proxies returned to us and not
revoked will be voted on such matter in accordance with the recommendations of the Board.
By order of the Board of Directors,
Ronald A. Robins, Jr.
Senior Vice President, General Counsel and
Corporate Secretary
April 11, 2017
Columbus, Ohio
74
APPENDIX A
BIG LOTS
2017 LONG-TERM INCENTIVE PLAN
Effective May 25, 2017
[THIS PAGE INTENTIONALLY LEFT BLANK]
CONTENTS
Article 1. Establishment, Purpose, and Duration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Article 2. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Article 3. Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Article 4. Shares Subject to this Plan and Award Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A-2
A-2
A-8
A-9
Article 5. Eligibility and Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-11
Article 6. Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-11
Article 7. Stock Appreciation Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-12
Article 8. Restricted Stock and Restricted Stock Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-13
Article 9. Deferred Stock Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-15
Article 10. Performance Shares, Performance Share Units, and Performance Units . . . . . . . . . . . A-16
Article 11. Cash-Based Awards and Other Stock-Based Awards . . . . . . . . . . . . . . . . . . . . . . . . . . . A-17
Article 12. Nonemployee Director Awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-18
Article 13. Qualified Performance-Based Awards and Performance Mesasures . . . . . . . . . . . . . . A-18
Article 14. Transferability of Awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-23
Article 15. Impact of Termination of Employment or Service on Awards . . . . . . . . . . . . . . . . . . . . . A-23
Article 16. Substitution Awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-24
Article 17. Dividend-Equivalent Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-24
Article 18. Beneficiary Designation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-25
Article 19. Rights of Participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-25
Article 20. Change in Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-25
Article 21. Amendment, Modification, Suspension, and Termination . . . . . . . . . . . . . . . . . . . . . . . . A-26
Article 22. Withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-27
Article 23. Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-28
Article 24. General Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-28
A-1
Big Lots 2017 Long-Term Incentive Plan
ARTICLE 1. ESTABLISHMENT, PURPOSE, AND DURATION
1.1 Establishment. Big Lots, Inc., an Ohio corporation (hereinafter referred to as the “Company”),
establishes an incentive compensation plan to be known as the Big Lots 2017 Long-Term Incentive
Plan (hereinafter referred to as the “Plan”), as set forth in this document.
This Plan permits the grant of Nonqualified Stock Options, Incentive Stock Options, Stock
Appreciation Rights, Restricted Stock, Restricted Stock Units, Deferred Stock Units, Performance
Shares, Performance Share Units, Performance Units, Cash-Based Awards, and Other Stock-Based
Awards.
This Plan shall become effective upon shareholder approval (the “Effective Date”) and shall
remain in effect as provided in Section 1.3 (Establishment, Purposes, and Duration/Duration of this
Plan) hereof.
1.2 Purpose of this Plan. This Plan is intended to promote the Company’s long-term financial
success by motivating performance through incentive compensation and to encourage Participants to
acquire ownership interests in the Company. This Plan is also intended to provide a means whereby
Employees, Directors, and Third Party Service Providers of the Company develop a sense of
proprietorship and personal involvement in the development and financial success of the Company,
and to encourage them to devote their best efforts to the business of the Company, thereby advancing
the interests of the Company and its shareholders. A further purpose of this Plan is to provide a means
through which the Company and its Affiliates may attract able individuals to become Employees or
serve as Directors or Third Party Service Providers of the Company and its Affiliates and to provide a
means whereby those individuals upon whom the responsibilities of the successful administration and
management of the Company are of importance, can acquire and maintain stock ownership, thereby
strengthening their concern for the welfare of the Company.
1.3 Duration of this Plan. Unless sooner terminated as provided herein, this Plan shall terminate
ten (10) years from the Effective Date. After this Plan is terminated, no Awards may be granted but
Awards previously granted shall remain outstanding in accordance with their applicable terms and
conditions and this Plan’s terms and conditions. Notwithstanding the foregoing, no Incentive Stock
Options may be granted more than ten (10) years after the earlier of (a) adoption of this Plan by the
Board, or (b) the Effective Date.
1.4 No More Grants Under Prior Plan. After the Effective Date, no more grants will be made
under the Prior Plan.
ARTICLE 2. DEFINITIONS
Whenever used in this Plan, the following terms shall have the meanings set forth below, and
when the meaning is intended, the initial letter of the word shall be capitalized.
2.1 “Affiliate” shall mean (a) in the case of an ISO, a “parent corporation” or a “subsidiary
corporation” of the Company, as those terms are defined in Code Sections 424(e) and (f), respectively;
and (b) in all other cases, any other entity regardless of its form (including, but not limited to, a
partnership or a limited liability company) that directly or indirectly controls, is controlled by or is under
common control with, the Company within the meaning of Code Section 414(b), as modified by Code
Section 409A.
A-2
2.2 “Annual Award Limit” or “Annual Award Limits” have the meaning set forth in Section 4.3
(Shares Subject to this Plan and Award Limitations/Annual Award Limits).
2.3 “Award” means, individually or collectively, a grant under this Plan of Nonqualified Stock
Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units,
Deferred Stock Units, Performance Shares, Performance Share Units, Performance Units, Cash-
Based Awards, or Other Stock-Based Awards, in each case subject to the terms of this Plan. At the
Committee’s discretion, an Award may be granted as a Qualified Performance-Based Award.
2.4 “Award Agreement” means either (a) a written or electronic agreement entered into by the
Company and a Participant setting forth the terms and provisions applicable to an Award granted
under this Plan, or (b) a written or electronic statement issued by the Company to a Participant
describing the terms and provisions of such Award, including any amendment or modification thereof.
The Committee may provide for the use of electronic, internet or other non-paper Award Agreements,
and the use of electronic, internet or other non-paper means for the acceptance thereof and actions
thereunder by a Participant.
2.5 “Beneficial Owner” or “Beneficial Ownership” shall have the meaning ascribed to such
term in Rule 13d-3 of the General Rules and Regulations under the Exchange Act.
2.6 “Board” or “Board of Directors” means the Board of Directors of the Company.
2.7 “Cash-Based Award” means an Award, denominated in cash, granted to a Participant as
described in Article 11 (Cash-Based Awards and Other Stock-Based Awards).
2.8 “Change in Control” means any one or more of the following events:
(a) Any person or group (as defined for purposes of Section 13(d) of the Exchange Act) becomes
the beneficial owner, directly or indirectly, of 20 percent or more of the outstanding equity
securities of the Company entitled to vote for the election of directors;
(b) A majority of the members of the Board of Directors then in office is replaced within any
period of two years or less by directors not nominated and approved by a majority of the
directors in office at the beginning of such period (or their successors so nominated and
approved), or a majority of the Board of Directors at any date consists of persons not so
nominated and approved; or
(c) The consummation of a merger or consolidation with another entity or the sale or other
disposition of all or substantially all of the Company’s assets (including, without limitation, a
plan of liquidation), which has been approved by shareholders of the Company.
Provided, however, the other provisions of this Section 2.8 (Definitions/Change in Control)
notwithstanding, the term “Change in Control” shall not mean any merger, consolidation,
reorganization, or other transaction in which the Company exchanges or offers to exchange newly-
issued or treasury Common Shares representing 20 percent or more, but less than 50 percent, of the
outstanding equity securities of the Company entitled to vote for the election of directors, for 51 percent
or more of the outstanding equity securities entitled to vote for the election of at least the majority of
the directors of a corporation other than the Company or an Affiliate (the “Acquired Corporation”), or for
all or substantially all of the assets of the Acquired Corporation.
Provided further, if a Change in Control constitutes a payment event with respect to any Award
that provides for the deferral of compensation and is subject to Code Section 409A, payments to be
made upon a Change in Control shall only be made upon a “change in control event” within the
meaning of Code Section 409A.
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2.9 “Code” means the U.S. Internal Revenue Code of 1986, as amended from time to time. For
purposes of this Plan, references to sections of the Code shall be deemed to include references to any
applicable rules, regulations, and authoritative interpretations thereunder and any successor or similar
provision.
2.10 “Committee” means the Compensation Committee of the Board or such other committee to
which the Board assigns the responsibility of administering this Plan. The Committee shall consist of at
least three members of the Board, each of whom may serve on the Committee only if the Board
determines that he or she (a) is a “Non-employee Director” for purposes of Rule 16b-3 under the
Exchange Act, (b) satisfies the requirements of an “outside director” for purposes of Code
Section 162(m), and (c) qualifies as “independent” in accordance with applicable stock exchange listing
standards. The members of the Committee shall be appointed from time to time by and shall serve at
the discretion of the Board. If the Committee does not exist or cannot function for any reason, the
members of the Board that each satisfy the requirements of an “outside director” for purposes of Code
Section 162(m) may take any action under the Plan that would otherwise be the responsibility of the
Committee.
2.11 “Company” means Big Lots, Inc., an Ohio corporation, and any successor thereto as
provided in Article 23 (Successors) herein.
2.12 “Covered Employee” means any key Employee who is or may become a “Covered
Employee,” as defined in Code Section 162(m), and who is designated, either as an individual
Employee or class of Employees, by the Committee as a “Covered Employee” under this Plan on or
before the Final Pre-Establishment Date.
2.13 “Deferred Annual Amount” has the meaning set forth in Section 9.1 (Deferred Stock Units/
In General).
2.14 “Deferred Stock Unit” means a Participant’s contractual right to receive a stated number of
Shares or, if provided by the Committee on the Grant Date, cash equal to the Fair Market Value of
such Shares, under the Plan at the end of a specified period of time or upon the occurrence of a
specified event, as further described in Section 9.1 (Deferred Stock Units/In General).
2.15 “Deferral Election Form” has the meaning set forth in Section 9.1 (Deferred Stock Units/In
General).
2.16 “Director” means any individual who is a member of the Board of Directors of the Company
or the board of directors of any Affiliate of the Company.
2.17 “Disability” means:
(a) With respect to ISOs, as that term is defined in Code Section 22(e)(3);
(b)
If Disability constitutes a payment event with respect to any Award that is subject to Code
Section 409A, Disability shall mean, unless the Committee determines otherwise in
accordance with Code Section 409A, that the Participant is (i) unable to engage in any
substantial gainful activity by reason of any medically determinable physical or mental
impairment which can be expected to result in death or can be expected to last for a
continuous period of not less than twelve (12) months, (ii) by reason of any readily
determinable physical or mental impairment which can be expected to result in death or can
be expected to last for a continuous period of not less than twelve (12) months, receiving
income replacement benefits for a period of at least three (3) months under an accident and
health plan covering employees of the Participant’s employer, or (iii) determined to be totally
disabled by the Social Security Administration or the Railroad Retirement Board; and
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(c) Unless the Committee determines otherwise, with respect to any other Award, a physical or
mental condition that, for more than six (6) consecutive months, renders the Participant
incapable, with reasonable accommodation, of performing his or her assigned duties on a full-
time basis.
2.18 “Dividend-Equivalent Right” means the right to receive an amount, calculated with respect
to a Full Value Award, which is determined by multiplying the number of Shares subject to the
applicable Award by the per-Share cash dividend, or the per-Share Fair Market Value (as determined
by the Committee) of any dividend in consideration other than cash, paid by the Company on Shares.
2.19 “Effective Date” has the meaning set forth in Section 1.1 (Establishment, Purpose, and
Duration/Establishment).
2.20 “Elective Deferred Stock Units” has the meaning set forth in Section 9.1 (Deferred Stock
Units/In General).
2.21 “Eligible Individual” means an individual who is an Employee, Director, and/or Third Party
Service Provider.
2.22 “Employee” means any employee of the Company or any of its Affiliates.
2.23 “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time,
or any successor act thereto.
2.24 “Exercise Price” means the price at which a Share may be purchased by a Participant
pursuant to an Option.
2.25 “Fair Market Value” or “FMV” means a price that is equal to the opening, closing, actual,
high, low, or average selling prices of a Share reported on the New York Stock Exchange (“NYSE”) or
other established stock exchange (or exchanges) on the applicable date, the preceding trading day,
the next succeeding trading day, or an average of trading days, as determined by the Committee and,
to the extent applicable, in a manner consistent with Code Section 409A. Unless the Committee
determines otherwise, Fair Market Value shall be deemed to be equal to the closing price per Share
reported on a consolidated basis for securities listed on the principal stock exchange or market on
which Shares are traded on the day as of which such Fair Market Value is being determined or, if there
is no closing price on that day, then the closing price on the last previous day on which a closing price
was reported. In the event Shares are not publicly traded at the time a determination of their value is
required to be made hereunder, the determination of their Fair Market Value shall be made by the
Committee in such manner as it deems appropriate taking into account all information material to the
value of the Company within the meaning of Code Section 409A.
2.26 “Final Pre-Establishment Date” means the last day a performance goal is considered pre-
established under Code Section 162(m). As of the Effective Date, a performance goal shall be
considered pre-established under Code Section 162(m) if the Committee establishes the performance
goal within ninety (90) days after the commencement of the period of service to which the performance
goal relates, or, in any event, no later than twenty-five percent (25%) of the period of service to which
the performance goal relates has elapsed; provided that the outcome of the performance goal is
substantially uncertain at the time the Committee establishes the performance goal.
2.27 “Full Value Award” means an Award other than an ISO, NQSO, or SAR, which is settled by
the issuance of Shares.
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2.28 “Grant Date” means the later of (a) the date the Committee establishes the terms of an
Award, or (b) any later date specified in the Award Agreement. In no event may the Grant Date be
earlier than the Effective Date.
2.29 “Grant Price” means the price established at the time of grant of an SAR pursuant to
Article 7 (Stock Appreciation Rights), used to determine whether there is any payment due upon
exercise of the SAR.
2.30 “Incentive Stock Option” or “ISO” means an Option to purchase Shares granted under
Article 6 (Options) to an Employee and that is designated as an Incentive Stock Option and that meets
the rules and requirements of Code Section 422, or any successor provision.
2.31 “Insider” shall mean an individual who is, on the relevant date, an officer, or Director of the
Company or an Affiliate, or a more than ten percent (10%) Beneficial Owner of any class of the
Company’s equity securities that is registered pursuant to Section 12 of the Exchange Act, as
determined by the Board in accordance with Section 16 of the Exchange Act.
2.32 “Nonemployee Director” means a Director who is not an Employee.
2.33 “Nonemployee Director Award” means any Award granted to a Nonemployee Director as
described in Article 12 (Nonemployee Director Awards).
2.34 “Nonqualified Stock Option” or “NQSO” means an Option that is not intended to meet the
requirements of Code Section 422, or that otherwise does not meet such requirements.
2.35 “Option” means an Incentive Stock Option or a Nonqualified Stock Option, as described in
Article 6 (Options).
2.36 “Other Stock-Based Award” means an equity-based or equity-related Award not otherwise
described by the terms of this Plan, granted pursuant to Article 11 (Cash-Based Awards and Other
Stock-Based Awards).
2.37 “Participant” means any Eligible Individual as set forth in Article 5 (Eligibility and
Participation) to whom an Award is granted.
2.38 “Performance Measures” means business criteria or measures as described in Article 13
(Qualified Performance-Based Awards and Performance Measures) on which the performance goals
are based and which are approved by the Company’s shareholders pursuant to this Plan in order to
qualify Awards for the exception for qualified performance-based compensation of Code
Section 162(m).
2.39 “Performance Period” means the period of time during which the performance goals must
be met in order to determine the degree of payout and/or vesting with respect to an Award.
2.40 “Performance Share” means a grant of a stated number of Shares to a Participant under
the Plan that is forfeitable by the Participant until the attainment of specified performance goals, or until
otherwise determined by the Committee or in accordance with the Plan, subject to the continuous
employment of the Participant through the applicable Performance Period.
2.41 “Performance Share Unit” means a Participant’s contractual right to receive a stated
number of Shares or, if provided by the Committee on or after the Grant Date, cash equal to the Fair
Market Value of such Shares, under the Plan at a specified time that is forfeitable by the Participant
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until the attainment of specified performance goals, or until otherwise determined by the Committee or
in accordance with the Plan, subject to the continuous employment of the Participant through the
applicable Performance Period.
2.42 “Performance Unit” means a Participant’s contractual right to receive a cash-denominated
award, payable in cash or Shares, under the Plan at a specified time that is forfeitable by the
Participant until the attainment of specified performance goals, or until otherwise determined by the
Committee or in accordance with the Plan, subject to the continuous employment of the Participant
through the applicable Performance Period.
2.43 “Person” shall have the meaning ascribed to such term in Section 3(a)(9) of the Exchange
Act and used in Sections 13(d) and 14(d) thereof, including a “group” as defined in Section 13(d)
thereof.
2.44 “Plan” means the Big Lots 2017 Long-Term Incentive Plan.
2.45 “Plan Year” means the Company’s fiscal year.
2.46 “Prior Plan” means the Big Lots 2012 Long-Term Incentive Plan, as amended and restated,
effective May 29, 2014.
2.47 “Qualified Performance-Based Awards” means compensation under an Award that is
intended to satisfy the requirements of Code Section 162(m) for certain performance-based
compensation paid to Covered Employees. Notwithstanding the foregoing, nothing in this Plan shall be
construed to mean that an Award which does not satisfy the requirements for performance-based
compensation under Code Section 162(m) does not constitute performance-based compensation for
other purposes.
2.48 “Restricted Stock” means an Award granted to a Participant pursuant to Article 8
(Restricted Stock and Restricted Stock Units).
2.49 “Restricted Stock Unit” means an Award granted to a Participant pursuant to Article 8
(Restricted Stock and Restricted Stock Units), except no Shares are actually awarded to the
Participant on the Grant Date.
2.50 “Restriction Period” means the period when Restricted Stock, Restricted Stock Units,
Deferred Stock Units and/or Other Stock-Based Awards are subject to a substantial risk of forfeiture
(based on the passage of time, the achievement of performance goals, or upon the occurrence of other
events as determined by the Committee, in its discretion).
2.51 “Share” means a common share of the Company, par value $.01 per share (as such par
value may be amended from time to time), whether presently or hereafter issued, and any other stock
or security resulting from adjustment thereof as described hereinafter, or a share of common stock of
any successor pursuant to Article 23 (Successors).
2.52 “Share Authorization” has the meaning set forth in Section 4.1(a) (Shares Subject to this
Plan and Award Limitations/Share Authorization).
2.53 “Stock Appreciation Right” or “SAR” means an Award, designated as an SAR, pursuant to
the terms of Article 7 (Stock Appreciation Rights) herein.
2.54 “Termination of Employment or Service” means the occurrence of any act or event that
causes a Participant to cease being an employee of the Company and any Affiliate, including, without
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limitation, death, Disability, dismissal, severance at the election of the Participant, or severance as a
result of the discontinuance, liquidation, sale, or transfer by the Company or its Affiliates of a business
owned or operated by the Company or any Affiliate. With respect to any Participant who is not an
employee of the Company or any Affiliate, the Award Agreement shall establish what act or event shall
constitute a Termination of Employment or Service for purposes of this Plan. A Termination of
Employment or Service shall occur with respect to a Participant who is employed by an Affiliate if the
Affiliate shall cease to be an Affiliate and the Participant shall not immediately thereafter become an
employee of the Company or an Affiliate. Notwithstanding the foregoing, as described in Section 15.4
(Impact of Termination of Employment or Service on Awards/Change in Participant Status), no
Termination of Employment or Service shall occur if the Participant continues to be an Employee,
Director, or Third Party Service Provider after such termination. Provided, however, if a Termination of
Employment or Service constitutes a payment event with respect to any Award that provides for the
deferral of compensation and is subject to Code Section 409A, payments to be made upon a
Termination of Employment or Service shall only be made upon a “separation from service” within the
meaning of Code Section 409A.
2.55 “Third Party Service Provider” means any consultant, agent, advisor, or independent
contractor who renders services to the Company or an Affiliate pursuant to a written agreement that
(a) are not in connection with the offer and sale of the Company’s securities in a capital raising
transaction, and (b) do not directly or indirectly promote or maintain a market for the Company’s
securities.
ARTICLE 3. ADMINISTRATION
3.1 General. The Committee shall be responsible for administering this Plan, subject to this
Article 3 (Administration) and the other provisions of this Plan. The Committee may employ attorneys,
consultants, accountants, agents, and other individuals, any of whom may be an Employee, and the
Committee, the Company, and its officers and Directors shall be entitled to rely upon the advice,
opinions, or valuations of any such individuals. All actions taken and all interpretations and
determinations made by the Committee shall be final and binding upon the Participants, the Company,
and all other interested individuals.
3.2 Authority of the Committee. The Committee shall have full and exclusive discretionary power
to interpret the terms and the intent of this Plan and any Award Agreement or other agreement or
document ancillary to or in connection with this Plan, to determine eligibility for Awards and to adopt
such rules, regulations, forms, instruments, and guidelines for administering this Plan as the
Committee may deem necessary or proper. Such authority shall include, but not be limited to,
(a) selecting Participants, (b) establishing all Award terms and conditions, including the terms and
conditions set forth in Award Agreements and any ancillary document or materials, (c) granting Awards
as an alternative to or as the form of payment for grants or rights earned or due under compensation
plans or arrangements of the Company, (d) construing any ambiguous provision of the Plan or any
Award Agreement, (e) establishing performance goals, and for Qualified Performance-Based Awards,
establishing and certifying satisfaction of performance goals in accordance with the requirements of
Code Section 162(m), (f) subject to Article 21 (Amendment, Modification, Suspension, and
Termination), adopting modifications and amendments to this Plan or any Award Agreement, including
without limitation, any that are necessary to comply with the laws of the countries and other
jurisdictions in which the Company or its Affiliates operate, and (g) making any other determination and
taking any other action that it deems necessary or desirable for the administration or operation of the
Plan and/or any Award Agreement.
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3.3 Delegation. The Committee may delegate to one or more of its members or to one or more
officers of the Company or its Affiliates or to one or more agents or advisors such administrative duties
or powers as it may deem advisable, and the Committee or any individuals to whom it has delegated
duties or powers as aforesaid may employ one or more individuals to render advice with respect to any
responsibility the Committee or such individuals may have under this Plan. Subject to applicable law,
the Committee may authorize one or more officers of the Company to do one or more of the following
on the same basis as can the Committee: (a) designate Employees to be recipients of Awards,
(b) designate Third Party Service Providers to be recipients of Awards, and (c) determine the size of
and make any such Awards; provided, however, (i) the Committee shall not delegate such
responsibilities to any such officer for Awards granted to a Nonemployee Director or an Employee who
is considered an Insider, (ii) the Committee shall not delegate any duties required to be taken by the
Committee to comply with Code Section 162(m), and (iii) the officer(s) shall report periodically to the
Committee regarding the nature and scope of the Awards granted pursuant to the authority delegated.
ARTICLE 4. SHARES SUBJECT TO THIS PLAN AND AWARD LIMITATIONS
4.1 Number of Shares Available for Awards.
(a) Share Authorization. Subject to adjustment as provided in Section 4.4 (Shares Subject to
this Plan and Award Limitations/Adjustments in Authorized Shares) herein, the maximum
number of Shares available for grant to Participants under this Plan (the “Share
Authorization”) shall be:
(i)
five million five hundred thousand (5,500,000) Shares, plus
(ii) any Shares subject to the 1,743,116 outstanding full value awards as of January 28,
2017 that on or after January 28, 2017 cease for any reason to be subject to such awards
(other than by reason of exercise or settlement of the awards to the extent they are
exercised for or settled in vested and nonforfeitable common shares).
(b) Limit on Full Value Awards. To the extent that a Share is issued pursuant to the grant or
exercise of a Full Value Award, it shall reduce the Share Authorization by two and fifteen one-
hundredths (2.15) Shares; and, to the extent that a Share is issued pursuant to the grant or
exercise of an Award other than a Full Value Award, it shall reduce the Share Authorization by
one (1) Share.
(c) Limits on ISOs. The maximum number of Shares of the Share Authorization that may be
issued pursuant to the exercise of ISOs granted under this Plan shall be five million five
hundred thousand (5,500,000) Shares.
4.2 Share Usage. Subject to the terms of this Plan, Shares covered by an Award shall only be
counted as used to the extent they are actually issued. Any Shares related to Awards issued under the
Plan on or after the Effective Date or under the Prior Plan before the Effective Date which (a) terminate
by expiration, forfeiture, cancellation, or otherwise without the issuance of such Shares, (b) are settled
in cash in lieu of Shares, or (c) are exchanged with the Committee’s permission prior to the issuance of
Shares for Awards not involving Shares, shall be available again for grant under this Plan. Shares that
are withheld from an Award of Restricted Stock, Restricted Stock Units, or Performance Share Units to
satisfy tax withholding obligations related to that Award shall be deemed to constitute Shares that are
not issued under this Plan. Shares which are (i) not issued or delivered as a result of the net settlement
of an Option or Share-settled SAR, (ii) withheld to satisfy tax withholding obligations on an Option or
SAR issued under the Plan, (iii) tendered to pay the Exercise Price of an Option or the Grant Price of a
Stock Appreciation Right under the Plan, or (iv) repurchased on the open market with the proceeds of
an Option exercise will no longer be eligible to be again available for grant under this Plan. To the
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extent permitted by applicable law or stock exchange rule, Shares issued in assumption of, or in
substitution for, any outstanding awards of any entity acquired in any form of combination by the
Company or any Affiliate shall not be counted against Shares available for grant pursuant to the Plan.
The Shares available for issuance under this Plan may be authorized and unissued Shares or treasury
Shares.
4.3 Annual Award Limits. The following limits (each an “Annual Award Limit” and, collectively,
“Annual Award Limits”), as adjusted pursuant to Section 4.4 (Shares Subject to this Plan and Award
Limitations/Adjustments in Authorized Shares) and/or Section 21.2 (Amendment, Modification,
Suspension, and Termination/Adjustment of Awards Upon the Occurrence of Certain Unusual or
Nonrecurring Events), shall apply to grants of such Awards under this Plan:
(a) Options: The maximum aggregate number of Shares subject to Options granted in any one
Plan Year to any one Participant shall be two million (2,000,000).
(b) SARs: The maximum number of Shares subject to Stock Appreciation Rights granted in any
one Plan Year to any one Participant shall be two million (2,000,000).
(c) Restricted Stock: The maximum aggregate grant with respect to Awards of Restricted Stock
in any one Plan Year to any one Participant shall be one million (1,000,000).
(d) Restricted Stock Units: The maximum aggregate grant with respect to Awards of Restricted
Stock Units in any one Plan Year to any one Participant shall be one million (1,000,000).
(e) Deferred Stock Units: The maximum aggregate grant with respect to Awards of Deferred
Stock Units in any one Plan Year to any one Participant shall be one million (1,000,000).
(f) Performance Shares, Performance Share Units, or Performance Units: The maximum
aggregate Award of Performance Shares, Performance Share Units or Performance Units
that a Participant may receive in any one Plan Year shall be one million (1,000,000) Shares,
or equal to the value of one million (1,000,000) Shares, determined as of the Grant Date.
(g) Cash-Based Awards: The maximum aggregate amount awarded or credited with respect to
Cash-Based Awards to any one Participant in any one Plan Year may not exceed the greater
of seven million dollars ($7,000,000) or the value of one million (1,000,000) Shares,
determined as of the Grant Date.
(h) Other Stock-Based Awards: The maximum aggregate grant with respect to Other Stock-
Based Awards pursuant to Section 11.2 (Cash-Based Awards and Other Stock-Based
Awards/Other Stock-Based Awards) in any one Plan Year to any one Participant shall be one
million (1,000,000) Shares.
4.4 Adjustments in Authorized Shares. In the event of any corporate event or transaction
(including, but not limited to, a change in the Shares of the Company or the capitalization of the
Company) such as a merger, consolidation, reorganization, recapitalization, separation, partial or
complete liquidation, stock dividend, special cash dividend, stock split, reverse stock split, split up,
spin-off, or other distribution of stock or property of the Company, combination of Shares, exchange of
Shares, dividend in kind, or other like change in capital structure, number of outstanding Shares or
distribution (other than normal cash dividends) to shareholders of the Company, or any similar
corporate event or transaction, the Committee, in order to prevent dilution or enlargement of
Participants’ rights under this Plan, shall substitute or adjust, as applicable, (i) the number and kind of
Shares that may be issued under this Plan or under particular forms of Awards, (ii) the number and
kind of Shares subject to outstanding Awards, (iii) the Exercise Price or Grant Price applicable to
outstanding Awards, (iv) the Annual Award Limits, and (v) other value determinations applicable to
outstanding Awards. Any such adjustment shall be done in a manner consistent with Code
Section 409A and, where applicable, Code Section 424. The Committee may also make appropriate
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adjustments in the terms of any Awards under this Plan to reflect such changes or distributions,
including modifications of performance goals and changes in the length of Performance Periods as
permitted by Code Section 162(m), or as the Committee otherwise determines. The determination of
the Committee as to the foregoing adjustments, if any, shall be at the discretion of the Committee and
shall be conclusive and binding on Participants under this Plan.
Subject to the provisions of Article 21 (Amendment, Modification, Suspension, and Termination)
and notwithstanding anything else herein to the contrary, without affecting the number of Shares
reserved or available hereunder, the Committee may authorize the issuance or assumption of benefits
under this Plan in connection with any merger, consolidation, acquisition of property or stock, or
reorganization upon such terms and conditions as it may deem appropriate (including, but not limited
to, a conversion of equity awards into Awards under this Plan), subject to compliance with the rules
under Code Sections 409A, 422 and 424, to the extent applicable.
ARTICLE 5. ELIGIBILITY AND PARTICIPATION
5.1 Eligibility. Individuals eligible to participate in this Plan include all Employees, Directors, and
Third Party Service Providers.
5.2 Actual Participation. Subject to the provisions of this Plan, the Committee may, from time to
time, select from the Eligible Individuals, those individuals to whom Awards shall be granted. Awards
need not be uniform as among Participants.
5.3 Conditions of Participation. By accepting an Award, each Participant agrees in his or her
own behalf and in behalf of his or her beneficiaries (1) to be bound by the terms of the Award
Agreement and the Plan and (2) that the Committee (or the Board) may amend the Plan and the Award
Agreement pursuant to Article 21 (Amendment, Modification, Suspension, and Termination).
ARTICLE 6. OPTIONS
6.1 Grant of Options. Subject to the terms and provisions of this Plan, Options may be granted to
Eligible Individuals in such number, and upon such terms, and at any time and from time to time as
shall be determined by the Committee; provided that ISOs may be granted only to Employees of the
Company or of any parent or subsidiary corporation (as permitted under Code Sections 422 and 424).
However, unless legitimate business criteria exist (within the meaning of Treas. Reg. Section 1.409A-
1(b)(5)(iii)(E)(1)), an Eligible Individual may only be granted Options to the extent that such individual
provides services to the Company or an Affiliate of the Company that is part of the Company’s
controlled group for purposes of Code Section 409A.
6.2 Option Award Agreement. Each Option grant shall be evidenced by an Award Agreement
that shall specify the Exercise Price, the term of the Option, the number of Shares to which the Option
pertains, the conditions upon which an Option shall become vested and exercisable, and such other
provisions as the Committee shall determine which are not inconsistent with the terms of this Plan. The
Award Agreement also shall specify whether the Option is intended to be an ISO or a NQSO.
6.3 Exercise Price. The Exercise Price for each grant of an Option shall be determined by the
Committee and shall be specified in the Award Agreement; provided, however, the Exercise Price must
be at least equal to (a) one hundred percent (100%) of the FMV of the Shares as determined on the
Grant Date, or (b) one hundred ten percent (110%) of the FMV of the Shares as determined on the
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Grant Date in the case of an ISO granted to an individual who owns or who is deemed to own shares
possessing more than ten percent (10%) of the total combined voting power of all classes of shares of
the Company or any Affiliate, as determined under Code Section 422.
6.4 Term of Options. Each Option granted to a Participant shall expire at such time as the
Committee shall determine at the time of grant; provided, however, no Option shall be exercisable later
than the tenth (10th) anniversary date of the Grant Date.
6.5 Exercise of Options. Options granted under this Article 6 (Options) shall be exercisable at
such times and be subject to such restrictions and conditions as the Committee shall in each instance
approve, which terms and restrictions need not be the same for each grant or for each Participant.
Options granted under this Article 6 (Options) shall be exercised by the delivery of a notice of
exercise to the Company or an agent designated by the Company in a form specified or accepted by
the Committee (setting forth the number of Shares with respect to which the Option is to be exercised,
accompanied by full payment for the Shares), or by complying with any alternative exercise
procedure(s) the Committee may authorize.
6.6 Payment. A condition of the issuance of the Shares as to which an Option shall be exercised
shall be the payment of the Exercise Price. The Exercise Price of any Option shall be payable to the
Company in full either: (a) in cash; (b) by tendering (either by actual delivery or attestation) previously
acquired Shares having an aggregate Fair Market Value at the time of exercise equal to the Exercise
Price; (c) by a cashless (broker-assisted) exercise; (d) by a combination of (a), (b) and/or (c); or (e) any
other method approved or accepted by the Committee in its sole discretion.
Subject to any governing rules or regulations, as soon as practicable after receipt of written
notification of exercise and full payment (including satisfaction of any applicable tax withholding), the
Company shall deliver to the Participant evidence of book entry Shares or Share certificates in an
appropriate amount based upon the number of Shares purchased under the Option(s).
Unless otherwise determined by the Committee, all payments under all of the methods indicated
above shall be paid in United States dollars.
6.7 Other Conditions and Restrictions. The Committee may impose such other conditions and/
or restrictions on any Shares acquired pursuant to the exercise of an Option granted under this Article
6 (Options) as it may deem advisable or desirable. Such conditions and restrictions may include, but
shall not be limited to, minimum holding period requirements, restrictions under applicable federal
securities laws, under the requirements of any stock exchange or market upon which such Shares are
then listed and/or traded, or under any blue sky or state securities laws applicable to such Shares.
6.8 Notification of Disqualifying Disposition. If any Participant shall make any disposition of
Shares issued pursuant to the exercise of an ISO under the circumstances described in Code
Section 421(b) (relating to certain disqualifying dispositions), such Participant shall notify the Company
of such disposition within ten (10) days thereof.
ARTICLE 7. STOCK APPRECIATION RIGHTS
7.1 Grant of SARs. Subject to the terms and conditions of this Plan, SARs may be granted to
Eligible Individuals in such number, and upon such terms, and at any time and from time to time as
shall be determined by the Committee. However, unless legitimate business criteria exist (within the
meaning of Treas. Reg. Section 1.409A-1(b)(5)(iii)(E)(1)), an Eligible Individual may only be granted
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SARs to the extent that such individual provides services to the Company or an Affiliate of the
Company that is part of the Company’s controlled group for purposes of Code Section 409A.
7.2 SAR Award Agreement. Each SAR Award shall be evidenced by an Award Agreement that
shall specify the Grant Price, the term of the SAR, and such other provisions as the Committee shall
determine which are not inconsistent with the terms of this Plan.
7.3 Grant Price. The Grant Price for each grant of an SAR shall be determined by the Committee
and shall be specified in the Award Agreement; provided, however, the Grant Price must be at least
equal to one hundred percent (100%) of the FMV of the Shares as determined on the Grant Date.
7.4 Term of SAR. Each SAR granted to a Participant shall expire at such time as the Committee
shall determine at the time of grant; provided, however, no SAR shall be exercisable later than the
tenth (10th) anniversary date of the Grant Date.
7.5 Exercise of SARs. SARs may be exercised upon whatever terms and conditions the
Committee, in its sole discretion, imposes.
7.6 Settlement of SARs. Upon the exercise of a SAR, a Participant shall be entitled to receive
payment from the Company in an amount determined by multiplying:
(a) The excess of the Fair Market Value of a Share on the date of exercise over the Grant Price;
by
(b) The number of Shares with respect to which the SAR is exercised.
At the discretion of the Committee, the payment upon SAR exercise may be in cash, Shares, or
any combination thereof, or in any other manner approved by the Committee in its sole discretion. The
Committee’s determination regarding the form of SAR payout shall be set forth in the Award
Agreement pertaining to the grant of the SAR.
7.7 Other Conditions and Restrictions. The Committee may impose such other conditions and/
or restrictions on any Shares received upon exercise of an SAR granted pursuant to this Plan as it may
deem advisable or desirable. Such conditions and restrictions may include, but shall not be limited to, a
requirement that the Participant hold the Shares received upon exercise of an SAR for a specified
period of time.
ARTICLE 8. RESTRICTED STOCK AND RESTRICTED STOCK UNITS
8.1 Grant of Restricted Stock or Restricted Stock Units. Subject to the terms and provisions of
this Plan, the Committee, at any time and from time to time, may grant Shares of Restricted Stock and/
or Restricted Stock Units to Eligible Individuals in such amounts as the Committee shall determine.
Restricted Stock Units shall be similar to Restricted Stock except that no Shares are actually awarded
to the Eligible Individual on the Grant Date.
8.2 Restricted Stock or Restricted Stock Unit Award Agreement. Each Award of Restricted
Stock and/or Restricted Stock Unit shall be evidenced by an Award Agreement that shall specify the
Restriction Period, the number of Shares of Restricted Stock or the number of Restricted Stock Units
granted, and such other provisions as the Committee shall determine which are not inconsistent with
the terms of this Plan.
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8.3 Other Conditions and Restrictions. The Committee may impose such other conditions and/
or restrictions on any Shares of Restricted Stock or Restricted Stock Units granted pursuant to this
Plan as it may deem advisable or desirable. Such conditions and restrictions may include, but shall not
be limited to, without limitation, a requirement that the Participant pay a stipulated purchase price for
each Share of Restricted Stock or each Restricted Stock Unit, restrictions based upon the achievement
of specific performance goals, acceleration of a Restriction Period based on the achievement of
performance goals, time-based restrictions on vesting following the attainment of the performance
goals, time-based restrictions, and/or restrictions under applicable laws or under the requirements of
any stock exchange or market upon which such Shares are listed or traded, or holding requirements or
sale restrictions placed on the Shares by the Company upon vesting of such Restricted Stock or
Restricted Stock Units.
To the extent deemed appropriate by the Committee, the Company may retain the certificates
representing Shares of Restricted Stock in the Company’s possession until such time as all conditions
and/or restrictions applicable to such Shares have been satisfied or lapse. Except as otherwise
provided in this Article 8 (Restricted Stock and Restricted Stock Units), Shares of Restricted Stock
covered by each Restricted Stock Award shall become freely transferable by the Participant after all
conditions and restrictions applicable to such Shares have been satisfied or lapse (including
satisfaction of any applicable tax withholding obligations), and Restricted Stock Units shall be settled in
cash, Shares, or a combination of cash and Shares as the Committee, in its sole discretion shall
determine.
8.4 Certificate Legend. In addition to any legends placed on certificates pursuant to Section 8.3
(Restricted Stock and Restricted Stock Units/Other Conditions and Restrictions), each certificate
representing Shares of Restricted Stock granted pursuant to this Plan may bear a legend such as the
following or as otherwise determined by the Committee in its sole discretion:
“The sale or transfer of Shares of stock represented by this certificate, whether voluntary,
involuntary, or by operation of law, is subject to certain restrictions on transfer as set forth in the Big
Lots 2017 Long-Term Incentive Plan, and in the associated Award Agreement. A copy of this Plan and
such Award Agreement may be obtained from Big Lots, Inc.”
8.5 Rights. Unless otherwise determined by the Committee and set forth in a Participant’s Award
Agreement, to the extent permitted or required by law, as determined by the Committee, Participants
holding Shares of Restricted Stock granted hereunder shall have the right to exercise full voting rights
with respect to those Shares during the Period of Restriction. Unless otherwise determined by the
Committee and set forth in a Participant’s Award Agreement, a Participant receiving a Restricted Stock
Award will have, with respect to the Restricted Stock, all of the rights of a shareholder of the Company
holding the class of Shares that is the subject of the Restricted Stock, including, if applicable, the right
to vote the shares and the right to receive any Dividend-Equivalent Rights pursuant to Article 17
(Dividend-Equivalent Rights) of this Plan. Any dividends paid on Restricted Stock will be subject to the
same restrictions that affect the Restricted Stock with respect to which the dividend was paid.
Dividends paid out of escrow will be treated as remuneration for employment unless an election has
been made under Section 8.6 (Restricted Stock and Restricted Stock Units/Section 83(b) Election). A
Participant shall have no voting rights with respect to any Restricted Stock Units granted hereunder. A
Participant shall have no dividend rights with respect to any Restricted Stock Units granted hereunder
unless the Participant is also granted Dividend-Equivalent Rights.
8.6 Section 83(b) Election. The Committee may provide in an Award Agreement that the Award
of Restricted Stock is conditioned upon the Participant making or refraining from making an election
with respect to the Award under Code Section 83(b). If a Participant makes an election pursuant to
Code Section 83(b) concerning a Restricted Stock Award, the Participant shall be required to file
promptly a copy of such election with the Company.
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8.7 Deferral Rights. The Committee may, in accordance with the requirements of Code
Section 409A, permit an Employee or Director to elect to defer any Award of Restricted Stock and/or
Restricted Stock Units. Any deferral of Restricted Stock shall be converted into a deferred Restricted
Stock Unit. Any deferral of Restricted Stock or Restricted Stock Units shall be evidenced by a deferral
election form containing such terms and conditions not inconsistent with this Plan or Code
Section 409A as the Committee shall determine, including customary representations, warranties and
covenants with respect to securities law matters. Any Dividend Equivalent Rights provided a
Participant with respect to deferred Restricted Stock or Restricted Stock Units shall be subject to
Article 17 (Dividend-Equivalent Rights).
ARTICLE 9. DEFERRED STOCK UNITS
9.1 In General. The Committee may, in accordance with the requirements of Code Section 409A,
permit an Employee or Director to elect to defer receipt of all or a portion of his annual compensation,
annual incentive bonus and/or long-term compensation (other than Options or SARs) (“Deferred
Annual Amount”) payable by the Company or an Affiliate and receive in lieu thereof an Award of
elective Deferred Stock Units equal to the number which may be obtained by dividing (a) the amount of
the Deferred Annual Amount, by (b) the Fair Market Value of a Share on the date such compensation
and/or annual bonus would otherwise have been paid (“Deferred Stock Units”). Deferred Stock Units
shall be evidenced by a deferral election form (“Deferral Election Form”) containing such terms and
conditions not inconsistent with this Plan or Code Section 409A as the Committee shall determine,
including customary representations, warranties and covenants with respect to securities law matters.
The Deferral Election Form shall serve as the Award Agreement for the Deferred Stock Units. Upon
receipt of a Deferral Election Form, the Company shall establish a notional account for the Participant
and will record in such account the number of Shares underlying the Deferred Stock Units awarded to
the Participant. No Shares will be issued to the Participant at the time Deferred Stock Units are
credited in connection with a Deferral Election Form.
9.2 Rights as a Stockholder. The Committee may, in its discretion, provide in the Deferral
Election Form related to a Deferred Stock Unit, that Dividend Equivalent Rights shall be granted with
respect to such Deferred Stock Unit, and if Dividend Equivalent Rights are granted, when such
Dividend Equivalent Rights shall be accrued, paid to, or credited to the account of, a Participant
credited with Deferred Stock Units pursuant to Article 17 (Dividend-Equivalent Rights) of this Plan.
Unless otherwise provided by the Committee in the Deferral Election Form, (a) any cash dividends or
distributions credited to the Participant’s account shall be deemed to have been invested in additional
Deferred Stock Units on the record date established for the related dividend or distribution in an
amount equal to the number which may be obtained by dividing (i) the value of such dividend or
distribution on the record date by (ii) the Fair Market Value of a Share on such date, and such
additional Deferred Stock Units shall be subject to the same terms and conditions as are applicable in
respect of the Deferred Stock Units with respect to which such dividends or distributions were payable,
and (b) if any such dividends or distributions are paid in Shares or other securities, such shares and
other securities shall be subject to the same Restriction Period and other restrictions, if any, as apply to
the Deferred Stock Units with respect to which they were paid. A Participant shall not have any rights
as a shareholder in respect of Deferred Stock Units awarded pursuant to the Plan (including, without
limitation, the right to vote on any matter submitted to the Company’s shareholders) until such time as
the Shares attributable to such Deferred Stock Units have been issued to such Participant or his
beneficiary.
9.3 Vesting. Unless otherwise provided in the Deferral Election Form related to a Deferred Stock
Unit, each Deferred Stock Unit, together with any Dividend–Equivalent Rights credited with respect
thereto, shall not be subject to any Restriction Period and shall be non-forfeitable at all times.
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9.4 Settlement. Subject to Article 24 (General Provisions), and the last sentence of Section 9.1
(Deferred Stock Units/In General), unless otherwise provided in the Deferral Election Form related to a
Deferred Stock Unit, the Company shall issue the Shares underlying any of a Participant’s Deferred
Stock Units (and any related Dividend-Equivalent Rights) credited to such Participant’s account under
this Plan within ninety (90) days following the date of such Participant’s Termination of Employment or
Service (or such other Code Section 409A-compliant distribution event as may be elected by the
Participant in the initial Deferral Election Form in accordance with the rules and procedures of the
Committee and Code Section 409A). The Committee may provide, or the Participant may elect, in the
Deferral Election Form applicable to any Deferred Stock Unit that, in lieu of issuing Shares in
settlement of that Deferred Stock Units, the Fair Market Value of the Shares corresponding to such
Deferred Stock Units shall be paid in cash. For each Share received in settlement of Deferred Stock
Units, the Company shall deliver to the Participant a certificate representing such Share, bearing
appropriate legends, if applicable. Notwithstanding any other provision of the Plan to the contrary, any
distribution that complies with Code Section 409A shall be deemed for all purposes to comply with the
Plan requirements regarding the time and form of distributions.
9.5 Further Deferral Elections. If permitted by the Committee in the Deferral Election Form, a
Participant may, elect to further defer receipt of Shares issuable in respect of Deferred Stock Units in
accordance with the requirements of Code Section 409A. Any such redeferral election shall be valid
only if : (a) such election does not take effect until at least twelve (12) months after the date on which it
is made; (b) in the case of an election not related to a payment on account of Disability, death, or an
unforeseeable emergency (within the meaning of Code Section 409A), the distribution is deferred for at
least five (5) years from the date such distribution would otherwise have been paid; and (c) any
election related to a distribution at a specified time or pursuant to a fixed schedule (within the meaning
of Code Section 409A) is made at least twelve (12) months prior to the date on which distributions are
otherwise scheduled to be paid. Any redeferral election in accordance with this paragraph shall be
irrevocable on the date it is filed with the Committee unless subsequently changed pursuant to this
paragraph.
ARTICLE 10. PERFORMANCE SHARES, PERFORMANCE SHARE UNITS, AND
PERFORMANCE UNITS
10.1 Grant of Performance Shares, Performance Share Units, and Performance Units.
Subject to the terms and provisions of this Plan, the Committee, at any time and from time to time, may
grant Performance Shares, Performance Share Units, and/or Performance Units to Eligible Individuals
in such amounts and upon such terms as the Committee shall determine.
10.2 Value of Performance Shares, Performance Share Units, and Performance Units. Each
Performance Share and each Performance Share Unit shall have an initial value equal to the Fair
Market Value of a Share on the Grant Date. Each Performance Unit shall have an initial value that is
established by the Committee at the time of grant. The Committee shall set performance goals in its
discretion which, depending on the extent to which they are met, will determine the value and/or
number of Performance Shares, Performance Share Units, and/or Performance Units that will be paid
out to the Participant.
10.3 Earning of Performance Shares, Performance Share Units, and Performance Units.
Subject to the terms of this Plan, after the applicable Performance Period has ended, the holder of
Performance Shares, Performance Share Units, and/or Performance Units shall be entitled to receive
payout on the value and number of Performance Shares, Performance Share Units, and/or
Performance Units earned by the Participant over the Performance Period, to be determined as a
function of the extent to which the corresponding performance goals have been achieved. Performance
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goals may include minimum, maximum and target levels of performance, with the size of the Award or
payout of Performance Shares, Performance Share Units or Performance Units or the vesting or lapse
of restrictions with respect thereto, based on the level attained. The Committee may also provide in
any such Award that any evaluation of performance against a performance goal may include or
exclude events that occur during a Performance Period (including the income tax effects attributable
thereto), singularly or in combination.
10.4 Form and Timing of Payment of Performance Shares, Performance Share Units, and
Performance Units. Payment of earned Performance Shares, Performance Share Units, and/or
Performance Units shall be as determined by the Committee and as evidenced in the Award
Agreement. Subject to the terms of this Plan, the Committee, in its sole discretion, may pay
earned Performance Shares, Performance Share Units, and/or Performance Units in the form of cash
or in Shares (or in a combination thereof) equal to the value of the earned Performance Shares,
Performance Share Units, and/or Performance Units at the close of the applicable Performance Period,
but no later than the fifteenth (15th) day of the third month after the year in which the Performance
Period ended. Any Shares may be granted subject to any restrictions deemed appropriate by the
Committee. The determination of the Committee with respect to the form of payout of such Awards
shall be set forth in the Award Agreement pertaining to the grant of the Award.
10.5 Deferral Rights. The Committee may, in accordance with the requirements of Code
Section 409A, permit an Employee or Director to elect to defer any Award of Performance Shares,
Performance Share Units and/or Performance Units. Any deferral of Performance Shares shall be
converted into a deferred Performance Share Unit. Any deferral of Performance Shares, Performance
Share Units and/or Performance Units shall be evidenced by a deferral election form containing such
terms and conditions not inconsistent with this Plan or Code Section 409A as the Committee shall
determine, including customary representations, warranties and covenants with respect to securities
law matters. Any Dividend Equivalent Rights provided a Participant with respect to deferred
Performance Shares, Performance Share Units or Performance Units shall be subject to Article 17
(Dividend-Equivalent Rights).
ARTICLE 11. CASH-BASED AWARDS AND OTHER STOCK-BASED AWARDS
11.1 Grant of Cash-Based Awards. Subject to the terms and provisions of the Plan, the
Committee, at any time and from time to time, may grant Cash-Based Awards to Eligible Individuals in
such amounts and upon such terms as the Committee may determine.
11.2 Other Stock-Based Awards. The Committee, at any time and from time to time, may grant
to Eligible Individuals other types of equity-based or equity-related Awards not otherwise described by
the terms of this Plan (including the grant or offer for sale of unrestricted Shares) in such amounts and
subject to such terms and conditions, as the Committee shall determine. Such Awards may involve the
transfer of actual Shares to Participants, or payment in cash or otherwise of amounts based on the
value of Shares and may include, without limitation, Awards designed to comply with or take advantage
of the applicable local laws of jurisdictions other than the United States.
11.3 Value of Cash-Based and Other Stock-Based Awards. Each Cash-Based Award shall
specify a payment amount or payment range as determined by the Committee. Each Other Stock-
Based Award shall be expressed in terms of Shares or units based on Shares, as determined by the
Committee. The Committee may establish performance goals in its discretion. If the Committee
exercises its discretion to establish performance goals, the number and/or value of Cash-Based
Awards or Other Stock-Based Awards that will be paid out to the Participant will depend on the extent
to which the performance goals are met.
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11.4 Payment of Cash-Based Awards and Other Stock-Based Awards. Payment, if any, with
respect to a Cash-Based Award or an Other Stock-Based Award shall be made in accordance with the
terms of the Award, in cash or Shares as the Committee determines. The Company may pay
earned Cash-Based Awards and Other Stock-Based Awards in the form of cash or in Shares (or in a
combination thereof) equal to the value of the earned Award at the close of the applicable Performance
Period, if any, but no later than the fifteenth (15th) day of the third month after the year in which the
Performance Period ended, the award vests (unless a valid deferral election has been made), or the
date the payment was otherwise scheduled to be made.
ARTICLE 12. NONEMPLOYEE DIRECTOR AWARDS
The Board or a committee of the Board shall determine all Awards to Nonemployee Directors. The
terms and conditions of any grant to any such Nonemployee Director shall be set forth in an Award
Agreement. Nonemployee Directors, pursuant to this Article 12 (Nonemployee Director Awards), may
be awarded, or may be permitted to elect to receive, pursuant to the procedures established by the
Board or a committee of the Board, all or any portion of their annual retainer, meeting fees or other
fees in Shares, Restricted Stock, Restricted Stock Units, Deferred Stock Units or other Awards as
contemplated by this Plan in lieu of cash. Notwithstanding Section 4.4 (Shares Subject to this Plan and
Award Limitations/Annual Award Limits), a Nonemployee Director may not receive equity-based
Awards under this Plan in any one Plan Year which have an aggregate “fair value” that exceeds
five hundred thousand dollars ($500,000), with fair value determined under applicable accounting
standards.
ARTICLE 13. QUALIFIED PERFORMANCE-BASED AWARDS AND PERFORMANCE MEASURES
13.1 In General. The Committee shall have the discretionary authority, consistent with Code
Section 162(m), to structure any Awards granted to Covered Employees under this Plan to qualify as
Qualified Performance-Based Awards. Only the Committee may grant Awards intended to be Qualified
Performance-Based Awards. With respect to any Award intended to be a Qualified Performance-Based
Award, this Plan and the applicable Award Agreement shall be interpreted and operated consistent
with that intention.
13.2 Options and SARs. Compensation attributable to an Option or SAR is deemed to be a
Qualified Performance-Based Award as long as (a) the Committee grants the Option and the SAR,
(b) the Exercise Price and Grant Price, respectively, are not less than the Fair Market Value, and
(c) such Option or SAR complies with the limitations imposed by Section 4.3 (Shares Subject to this
Plan and Award Limitations/Annual Award Limits).
13.3 Qualified Performance-Based Awards Other Than Options or SARS. With respect to
Qualified Performance-Based Awards that are not intended to be Options or SARs within the scope of
Section 13.2 (Qualified Performance-Based Awards and Performance Measures/Options and SARs),
the vesting, exercisability, lapse of restrictions, payment or grant, as applicable, must be contingent
upon the (a) attainment of a pre-established performance goal or measure (or combination thereof) as
specified in this Article 13 (Qualified Performance-Based Awards and Performance Measures), and
(b) certification described in Section 13.9 (Qualified Performance-Based Awards and Performance
Measures/Certification of Performance).
13.4 Pre-Establishment Prerequisite for Qualified Performance-Based Awards Other Than
Options or SARs. With respect to Qualified Performance-Based Awards that are not intended to be
Options or SARs within the scope of Section 13.2 (Qualified Performance-Based Awards and
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Performance Measures/Options and SARs), the Committee shall establish in writing on or before the
Final Pre-Establishment Date (a) the Covered Employees to which objective performance goals or
measures applicable to a given Performance Period will apply, (b) the objective performance goals or
measures (as described in Article 13 (Qualified Performance-Based Awards and Performance
Measures)) applicable to a given Performance Period, and (c) such performance goals shall state, in
terms of an objective formula or standard, the method for computing the amount of compensation
payable to the Covered Employee Participant if such performance goals are obtained. A formula or
standard is objective if a third party having knowledge of the relevant performance results could
calculate the amount to be paid to the Covered Employee.
13.5 Qualified Performance-Based Awards that have Base Pay or Salary-Based Formula
Terms. With respect to any Qualified Performance-Based Award compensation formula that is based,
in whole or in part, on a percentage of salary or base pay, such salary or base pay must be fixed on or
before the Final Pre-Establishment Date for the service period to which the Qualified Performance-
Based Award relates.
13.6 Prohibited Discretion. The terms of the objective formula or standard of a Qualified
Performance-Based Award must preclude discretion to increase the amount of compensation payable
that would otherwise be due upon attainment of the goal. However, the Committee shall retain the
discretion to reduce or eliminate the amount of any Award payable to any Participant either on a
formula or discretionary basis or any combination, as the Committee determines in its sole discretion.
13.7 Performance Goals for Qualified Performance-Based Awards. Effective as of the
Effective Date, the performance goals upon which the payment or vesting of an Award to a Covered
Employee that is intended to qualify as Qualified Performance-Based Awards shall be limited to the
following Performance Measures:
(a) Earnings (loss) per common share from continuing operations; or
(b) Earnings (loss) per common share; or
(c) Operating profit (loss), operating income (loss), or income (loss) from operations (as the case
may be); or
(d)
Income (Loss) from continuing operations before unusual or infrequent items; or
(e)
Income (Loss) from continuing operations; or
(f)
Income (Loss) from continuing operations before income taxes; or
(g)
(h)
Income (Loss) from continuing operations before extraordinary item and/or cumulative effect
of a change in accounting principle (as the case may be); or
Income (Loss) before extraordinary item and/or cumulative effect of a change in accounting
principle (as the case may be); or
(i) Net income (loss); or
(j)
Income (Loss) before other comprehensive income (loss); or
(k) Comprehensive income (loss); or
(l)
Income (Loss) before interest and income taxes (sometimes referred to as “EBIT”); or
(m) Income (Loss) before interest, income taxes, depreciation and amortization (sometimes
referred to as “EBITDA”); or
(n) Any other objective and specific income (loss) category or non-GAAP financial measure that
appears as a line item in the Company’s filings with the Securities and Exchange Commission
or the annual report to shareholders; or
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(o) Any of items (c) through (n) on a weighted average common shares outstanding basis; or
(p) Either of items (a) or (b) on a basic basis and any of items (c) through (n) on a basic earnings
per share basis, as basic earnings per share is defined in Financial Accounting Standards
Board (“FASB”) Accounting Standards Codification (“ASC”) 260, Earnings Per Share,
including authoritative interpretations or amendments thereof which may be issued from time
to time as long as such interpretations or amendments are utilized on the consolidated
statements of operations or statement of operations, as applicable, or in the notes to the
consolidated financial statements; or
(q) Either of items (a) or (b) on a diluted basis and any of items (c) through (n) on a diluted
earnings per share basis, as diluted earnings per share is defined in ASC 260, Earnings Per
Share, including authoritative interpretations or amendments thereof which may be issued
from time to time as long as such interpretations or amendments are utilized on the
consolidated statements of operations or statement of operations, as applicable, or in the
notes to the consolidated financial statements; or
(r) Common stock price; or
(s) Total shareholder return expressed on a dollar or percentage basis as is customarily
disclosed in the proxy statement accompanying the notice of annual meetings of
shareholders; or
(t) Percentage increase in comparable store sales; or
(u) Gross profit (loss) or gross margin (loss) (as the case may be); or
(v) Economic value added; or
(w) Return measures (including, but not limited to, return on assets, capital, invested capital,
equity, sales, or revenue); or
(x) Expense targets; or
(y) Cash flow (including, but not limited to, operating cash flow, free cash flow, cash flow return
on equity, and cash flow return on investment); or
(z) Productivity ratios; or
(aa) Market share; or
(bb) Customer satisfaction; or
(cc) Working capital targets and change in working capital; or
(dd) Any of items (a) through (cc) with respect to any subsidiary, Affiliate, business unit, business
group, business venture or legal entity, including any combination thereof, or controlled
directly or indirectly by the Company whether or not such information is included in the
Company’s annual report to shareholders, proxy statement or notice of annual meeting of
shareholders; or
(ee) Any of items (a) through (cc) above may be determined before or after a minority interest’s
share as designated by the Committee; or
(ff) Any of items (a) through (cc) above with respect to the period of service to which the
performance goal relates whether or not such information is included in the Company’s SEC
filings, annual report to shareholders, proxy statement or notice of annual meetings of
shareholders; or
(gg) Total shareholder return ranking position meaning the relative placement of the Company’s
total shareholder return (as determined in (s) above) compared to those publicly held
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companies in the Company’s peer group as established by the Committee prior to the
beginning of a vesting period or such later date as permitted under the Code. The peer group
shall be comprised of not less than eight and not more than sixteen companies, including the
Company; or
(hh) With respect to items (a), (b), (o), (p) and (q) above, other terminology may be used for each
such performance criteria (including, but not limited to, “Basic EPS,” “income (loss) per
common share,” “diluted EPS,” or “earnings per common share-assuming dilution”) as
contemplated in ASC 260, Earnings Per Share, as amended, revised or superseded.
13.8 Evaluation of Performance. Effective as of the Effective Date, the Committee may provide
in any Award that any evaluation of performance may include or exclude any of the following events
that occur during a Performance Period (including the income tax effects attributable thereto),
singularly or in combination, to the goals/targets in recognition of the following categories (or any
particular item(s) within the following categories or portion(s) thereof):
(a) Asset impairments as described in ASC 360, Property, Plant and Equipment, as amended,
revised or superseded; or
(b) Costs associated with exit or disposal activities as described in ASC 420, Exit or Disposal
Cost Obligations, as amended, revised or superseded; or
(c)
(d)
Impairment charges (excluding the amortization thereof) related to goodwill or other intangible
assets, as described in ASC 350, Intangibles – Goodwill and Other, as amended, revised or
superseded; or
Integration costs related to all merger and acquisition activity of the Company and/or its
Affiliates, including, without limitation, any merger, acquisition, reverse merger, triangular
merger, tender offer, consolidation, amalgamation, arrangement, security exchange, business
combination or any other purchase or sale involving the Company and/or its Affiliates (or
foreign equivalent of any of the foregoing); or
(e) Transaction costs related to all merger and acquisition activity of the Company and/or its
Affiliates, including, without limitation, any merger, acquisition, reverse merger, triangular
merger, tender offer, consolidation, amalgamation, arrangement, security exchange, business
combination or any other purchase or sale involving the Company and/or its Affiliates (or
foreign equivalent of any of the foregoing); or
(f) Any profit or loss attributable to the business operations of a specified segment as described
in ASC 280, Segment Reporting, as amended, revised or superseded; or
(g) Any profit or loss attributable to a specified segment as described in ASC 280, Segment
Reporting, as amended, revised or superseded acquired during the Performance Period or an
entity or entities acquired during the Performance Period to which the performance goal
relates; or
(h) Any tax settlement(s) with a tax authority; or
(i) Any gains and losses that are treated as unusual in nature or infrequent in their occurrence as
described in ASC 225-20, Income Statement – Unusual or Infrequently Occurring Items, as
amended, revised or superseded; or
(j) Any other non-recurring items, any events or transactions that do not constitute ongoing
operations, or other non-GAAP financial measures (not otherwise listed); or
(k) Any change in accounting principle as described in ASC 250-10, Accounting Changes and
Error Corrections, as amended, revised or superseded; or
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(l) Unrealized gains or losses on investments in debt and equity securities as described in ASC
320, Investments – Debt and Equity Securities, as amended, revised or superseded; or
(m) Any gain or loss recognized as a result of derivative instrument transactions or other hedging
activities as described in ASC 815, Derivatives and Hedging, as amended, revised or
superseded; or
(n) Stock-based compensation charges as described in ASC 718, Compensation – Stock
Compensation, including the related income tax impact, and ASC 505-50, Equity Based
Payments to Non Employees, as amended, revised or superseded; or
(o) Any gain or loss as reported as a component of other comprehensive income as described in
ASC 220, Comprehensive Income, as amended, revised or superseded; or
(p) Any expense (or reversal thereof) as a result of incurring an obligation for a direct or indirect
guarantee, as described in ASC 460, Guarantees, as amended, revised or superseded; or
(q) Any gain or loss as the result of the consolidation of a variable interest entity as described in
ASC 810, Consolidation, as amended, revised or superseded; or
(r) Any expense, gain or loss (including, but not limited to, judgments, interest on judgments,
settlement amounts, attorneys’ fees and costs, filing fees, experts’ fees, and damages
sustained as a result of the imposition of injunctive relief) as a result of claims, litigation or
lawsuit settlement (including collective actions or class action lawsuits); or
(s) Any charges associated with the early retirement of debt; or
(t) The relevant tax effect(s) of tax laws or regulations, or amendments thereto, that become
effective after the beginning of the applicable Performance Period.
To the extent such inclusions or exclusions affect Awards to Covered Employees, they shall be
prescribed in a form that meets the requirements of Code Section 162(m) for deductibility.
13.9 Certification of Performance. No Qualified Performance-Based Award shall vest, have
restrictions lapse, be payable or granted, as the case may be, any earlier than the Committee certifies
in writing (in any manner allowable under Code Section 162(m)) the extent or level of achievement (if
at all) to which the objective performance goals (and other material terms) applicable to the
Performance Period were satisfied. As provided in Section 13.6 (Qualified Performance-Based Awards
and Performance Measures/Prohibited Discretion), the Committee may reduce or eliminate (but not
increase) the amount of any Award otherwise payable to a Participant.
13.10 Death, Disability, Change in Control or Other Circumstances. The Committee may
provide in the Award Agreement that an Award intended to qualify as a Qualified Performance-Based
Award under this Article 13 (Qualified Performance-Based Awards and Performance Measures) shall
be payable, in whole or in part, in the event of the Participant’s death or Disability, a Change in Control,
or under other circumstances consistent with the requirements of Code Section 162(m).
13.11 Committee Discretion. In the event that applicable tax and/or securities laws change to
permit Committee discretion to alter the governing Performance Measures without obtaining
shareholder approval of such changes, the Committee shall have sole discretion to make such
changes without obtaining shareholder approval. In addition, in the event that the Committee
determines that it is advisable to grant Awards that shall not qualify as Qualified Performance-Based
Awards, the Committee may make such grants without satisfying the requirements of Code
Section 162(m) and base vesting on Performance Measures other than those set forth in Section 13.1
(Qualified Performance-Based Awards and Performance Measures/In General).
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13.12 Shareholder Approval for Qualified Performance-Based Awards. The material terms of
the performance goals with respect to Qualified Performance-Based Awards must be reapproved by
the Company’s shareholders no later than the first shareholders meeting that occurs in the fifth
(5th) year following the year in which the shareholders previously approved the provisions of this Article
13 (Qualified Performance-Based Awards and Performance Measures), if Qualified Performance-
Based Awards are to be made under Article 13 (Qualified Performance-Based Awards and
Performance Measures) after the date of such shareholders meeting and if required by Code
Section 162(m). The material terms include the employees eligible to receive Qualified Performance-
Based Awards, a description of the business criteria on which the performance goal is based, and
either the maximum amount of compensation that could be paid to any employee or the formula used
to calculate the amount of compensation to be paid to the employee if the performance goal is
attained.
ARTICLE 14. TRANSFERABILITY OF AWARDS
During a Participant’s lifetime, his or her Awards shall be exercisable only by the Participant (or by
the Participant’s legal representative in the event of the Participant’s incapacity). Awards shall not be
transferable other than by will or the laws of descent and distribution; no Awards shall be subject, in
whole or in part, to attachment, execution, or levy of any kind; and any purported transfer in violation
hereof shall be null and void.
ARTICLE 15. IMPACT OF TERMINATION OF EMPLOYMENT OR SERVICE ON AWARDS
15.1 In General. Unless otherwise determined by the Committee and set forth in the Award
Agreement, upon a Participant’s Termination of Employment or Service with or to the Company or an
Affiliate, for any reason whatsoever, except as otherwise set forth in this Article 15 (Impact of
Termination of Employment or Service on Awards), in an Award Agreement or, with the consent of
such individual, as determined by the Committee at any time prior to or after such termination, Awards
granted to such Participant will be treated as follows:
(a) Any Options and SARs will (i) to the extent not vested and exercisable as of the date of such
Termination of Employment or Service with or to the Company or an Affiliate, terminate on the
date of such termination, and (ii) to the extent vested and exercisable as of the date of such
Termination of Employment or Service with or to the Company or an Affiliate, remain
exercisable for a period of one (1) year following the date of such termination (but in no event
beyond the maximum term of such Award); provided, however, that a Participant may not
exercise an ISO more than three (3) months following the date of such termination for any
reason other than death or Disability (but in no event beyond the maximum term of such
Award).
(b) Any unvested portion of any Restricted Stock, Restricted Stock Units, or Deferred Stock Units
will be immediately forfeited.
(c) Any Performance Shares, Performance Share Units, or Performance Units will be
immediately forfeited and terminate.
(d) Any other Awards, including, but not limited to, Cash-Based Awards and Other Stock-Based
Awards, to the extent not vested will be immediately forfeited and terminate.
15.2 Upon Termination of Employment or Service in Connection with a Change in Control.
Except as otherwise provided in an Award Agreement, upon a Termination of Employment or Service
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in connection with a change in control, Awards granted to a Participant will be treated as set forth in
Article 20 (Change in Control).
15.3 Bona Fide Leave. Notwithstanding the fact that a Participant’s employment ostensibly
terminates and except as otherwise provided in an Award Agreement, if the Participant is on a bona
fide leave of absence, as defined in Treas. Reg. Section 1.409A-1(h)(1), then the Participant will be
treated as having a continuing employment relationship (and not as having terminated employment for
purposes of this Plan) so long as the period of the leave does not exceed six (6) months, or if longer,
so long as the Participant retains a right to reemployment with the Company or an Affiliate under an
applicable statute or by contract.
15.4 Change in Participant Status. If a Participant changes status from an Employee, Director,
or Third Party Service Provider to an Employee, Director, and/or Third Party Service Provider, without
interruption, the Committee, in its sole discretion, may permit any Award held by such Participant at the
time of such change in status to be unaffected by such status change; provided, however, that an ISO
held by an Employee shall be treated as a NQSO on the first (1st) day that is three (3) months after the
date that the Participant ceases to be an Employee.
ARTICLE 16. SUBSTITUTION AWARDS
Awards may be granted under the Plan from time to time in substitution for stock options and other
awards held by employees or directors of other entities who are about to become Employees, whose
employer is about to become an Affiliate as the result of a merger or consolidation of the Company or
its Affiliate with another corporation, or the acquisition by the Company or its Affiliate of substantially all
the assets of another corporation, or the acquisition by the Company or its Affiliate of at least fifty
percent (50%) of the issued and outstanding stock of another corporation as the result of which such
other corporation will become a subsidiary. The terms and conditions of the substitute Awards so
granted may vary from the terms and conditions set forth in the Plan to such extent as the Board at the
time of grant may deem appropriate to conform, in whole or in part, to the provisions of the award in
substitution for which they are granted to ensure that the requirements imposed under Code
Section 409A and 424, to the extent applicable, are satisfied.
ARTICLE 17. DIVIDEND-EQUIVALENT RIGHTS
Any Participant selected by the Committee may be granted Dividend-Equivalent Rights (in
connection with any Award other than an Option of SAR) based on the dividends declared on Shares
that are subject to the Award to which they relate, to be accrued as of dividend payment dates, during
the period between the date the Award is granted and the date the Award is exercised, vests or
expires, as determined by the Committee. Such Dividend-Equivalent Rights shall be converted to cash
or additional Shares by such formula and at such time and subject to such limitations as may be
determined by the Committee. Notwithstanding the foregoing or any provision of the Plan to the
contrary, if any Award for which Dividend-Equivalent Rights have been granted has its vesting or grant
dependent upon the satisfaction of (i) a service condition, (ii) one or more performance conditions, or
(iii) both a service condition and one or more performance conditions, then such Dividend-Equivalent
Rights shall be subject to the same performance conditions and service conditions, as applicable, as
the underlying Award. For purposes of clarity, no amount shall be paid or settled in connection with a
Dividend-Equivalent Right until the underlying Award has become vested. Under no circumstances
may Dividend-Equivalent Rights be granted for any Option or SAR.
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ARTICLE 18. BENEFICIARY DESIGNATION
Each Participant under this Plan may, from time to time, name any beneficiary or beneficiaries
(who may be named contingently or successively) to whom any benefit under this Plan is to be paid in
case of his death before he receives any or all of such benefit. Each such designation shall revoke all
prior designations by the same Participant, shall be in a form prescribed by the Committee, and will be
effective only when filed by the Participant in writing with the Company during the Participant’s lifetime.
In the absence of any such beneficiary designation, benefits remaining unpaid or rights remaining
unexercised at the Participant’s death shall be paid to or exercised by the Participant’s executor,
administrator, or legal representative.
ARTICLE 19. RIGHTS OF PARTICIPANTS
19.1 Employment/Service. Nothing in this Plan or an Award Agreement shall interfere with or
limit in any way the right of the Company or its Affiliates to terminate any Participant’s employment or
service on the Board or to the Company or its Affiliates at any time or for any reason, nor confer upon
any Participant any right to continue his employment or service as a Director or Third Party Service
Provider for any specified period of time. Neither an Award nor any benefits arising under this Plan
shall constitute an employment contract with the Company or any of its Affiliates and, accordingly,
subject to Article 3 (Administration) and Article 21 (Amendment, Modification, Suspension, and
Termination), this Plan and the benefits hereunder may be terminated at any time in the sole and
exclusive discretion of the Committee without giving rise to any liability on the part of the Company or
its Affiliates. Nothing contained herein shall be deemed to alter the relationship between the Company
or an Affiliate and a Participant, or the contractual relationship between a Participant and the Company
or an Affiliate if there is a written contract regarding such relationship.
19.2 Participation. No individual shall have the right to be selected to receive an Award under this
Plan, or, having been so selected, to be selected to receive a future Award.
19.3 Rights as a Shareholder. Except as otherwise provided herein, a Participant shall have
none of the rights of a shareholder with respect to Shares covered by any Award until the Participant
becomes the record holder of such Shares.
ARTICLE 20. CHANGE IN CONTROL
20.1 Impact of Event. Notwithstanding any other provision of the Plan to the contrary and unless
otherwise specifically provided in an Award Agreement, but subject to Section 4.4 (Shares Subject to
this Plan and Award Limitations/Adjustments in Authorized Shares) in the event of a Change in
Control:
(a) Any Options and SARs outstanding as of the date of such Change in Control and not then
exercisable shall become fully exercisable to the full extent of the original grant;
(b) All remaining Restriction Periods shall be accelerated and any remaining restrictions
applicable to any Restricted Stock Awards shall lapse and such Restricted Stock shall
become free of all restrictions and become fully vested and transferable to the full extent of
the original grant;
(c) All remaining Restriction Periods shall be accelerated and any remaining restrictions
applicable to any Restricted Stock Units shall lapse and such Restricted Stock Units shall
become free of all restrictions and become fully vested and redeemed to the full extent of the
original grant (i.e., the Restriction Period shall lapse);
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(d) Any performance goal or other condition with respect to any Performance Units, Performance
Shares, and Performance Share Units shall be deemed to have been satisfied in an amount
equal to the greater of (i) the target number of Performance Units, Performance Shares, or
Performance Share Units or (ii) the actual performance earned as measured on the date of
the Change in Control; and the Common Shares or cash subject to such Award shall be fully
distributable;
(e) Any remaining restrictions, performance goals or other conditions with respect to any
Deferred Stock Units shall lapse and such Deferred Stock Unit shall be deemed to have been
satisfied in full, and the Common Shares or cash subject to such Award shall be fully
distributable; and
(f) Any Cash-Based Awards and Other Stock-Based Awards outstanding as of the date of such
Change in Control and not then vested shall vest to the full extent of the original grant.
Notwithstanding the foregoing, with respect to any Award that provides for the deferral of
compensation and is subject to Code Section 409A, unless the Committee determines otherwise in the
Award Agreement, such Award shall be paid, distributed or settled, as applicable: (i) on the occurrence
of a Change in Control if that Change in Control constitutes a “change in control event” within the
meaning of Code Section 409A; or (ii) in accordance with the terms provided in the Award Agreement if
that Change in Control does not constitute a “change in control event” within the meaning of Code
Section 409A.
20.2 Effect of Code Section 280G. Except as otherwise provided in the Award Agreement or any
other written agreement between the Participant and the Company or any Affiliate in effect on the date
of the Change in Control, if the sum (or value) due under Section 20.1 (Change in Control/Impact of
Event) that are characterizable as parachute payments, when combined with other parachute
payments attributable to the same Change in Control, constitute “excess parachute payments” as
defined in Code Section 280G(b)(1), the entity responsible for making those payments or its successor
or successors (collectively, “Payor”) will reduce the Participant’s benefits under the Plan by the smaller
of (a) the value of the sum or the value of the payments due under Section 20.1 (Change in Control/
Effect of Code Section 280G), or (b) the amount necessary to ensure that the Participant’s total
“parachute payment” as defined in Code Section 280G(b)(2)(A) under the Plan and all other
agreements will be $1.00 less than the amount that would generate an excise tax under Code
Section 4999. Any reduction pursuant to this Section 20.2 (Change in Control/Effect of Code
Section 280G) shall be first applied against parachute payments (as determined above) that are not
subject to Code Section 409A and, thereafter, shall be applied against all remaining parachute
payments (as determined above) subject to Code Section 409A on a pro rata basis.
ARTICLE 21. AMENDMENT, MODIFICATION, SUSPENSION, AND TERMINATION
21.1 Amendment, Modification, Suspension, and Termination. Subject to Section 21.3
(Amendment, Modification, Suspension, and Termination/Awards Previously Granted) and
Section 21.5 (Amendment, Modification, Suspension, and Termination/Repricing Prohibition), the
Committee may, at any time and from time to time, alter, amend, modify, suspend, or terminate this
Plan and/or any Award Agreement in whole or in part; provided, however, that no material amendment
of this Plan shall be made without shareholder approval if shareholder approval is required by law,
regulation, or stock exchange rule.
21.2 Adjustment of Awards Upon the Occurrence of Certain Unusual or Nonrecurring
Events. Except to the extent prohibited under Code Sections 409A and 424, to the extent applicable,
and except as may be limited by Section 162(m) of the Code with respect to Awards intended to qualify
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as Qualified Performance-Based Awards, the Committee may make adjustments in the terms and
conditions of, and the criteria included in, Awards in recognition of unusual or nonrecurring events
(other than those described in Section 4.4 (Shares Subject to this Plan and Award Limitations/
Adjustments in Authorized Shares) hereof), affecting the Company or the financial statements of the
Company or of changes in applicable laws, regulations, or accounting principles, whenever the
Committee determines that such adjustments are appropriate in order to prevent unintended dilution or
enlargement of the benefits or potential benefits intended to be made available under this Plan. The
determination of the Committee as to the foregoing adjustments, if any, shall be conclusive and binding
on Participants under this Plan.
21.3 Awards Previously Granted. Notwithstanding any other provision of this Plan to the contrary
(other than Section 21.4 (Amendment, Modification, Suspension, and Termination/Amendment to
Conform to Law)), no termination, amendment, suspension, or modification of this Plan or an Award
Agreement shall adversely affect in any material way any Award previously granted under this Plan,
without the written consent of the Participant holding such Award.
21.4 Amendment to Conform to Law. Notwithstanding any other provision of this Plan to the
contrary, the Board of Directors may amend the Plan or an Award Agreement, to take effect
retroactively or otherwise, as deemed necessary or advisable for the purpose of (a) conforming the
Plan or an Award Agreement to any present or future law relating to plans of this or similar nature
(including, but not limited to, Code Section 409A to the extent applicable), and to the administrative
regulations and rulings promulgated thereunder; (b) permitting the Company or its Affiliates to receive
a tax deduction under applicable law; or (c) avoiding an expense charge to the Company or its
Affiliates. By accepting an Award under this Plan, a Participant consents to any amendment made
pursuant to this Section 21.4 (Amendment, Modification, Suspension, and Termination/Amendment to
Conform to Law) to any Award granted under the Plan without further consideration or action.
21.5 Repricing Prohibition. Except to the extent (a) approved by the Company’s shareholders, or
(b) provided in Section 4.4 (Shares Subject to this Plan and Award Limitations/Adjustments in
Authorized Shares), the Committee shall not have the power or authority to reduce, whether through
amendment or otherwise, the Exercise Price or the Grant Price of any outstanding Option or SAR or to
grant any new Award, or make any cash payment, in substitution for or upon the cancellation of
Options or SARs previously granted.
21.6 Reload Prohibition. Regardless of any other provision of the Plan, no Participant will be
entitled to (and no Committee discretion may be exercised to extend to any Participant) an automatic
grant of additional Awards in connection with the exercise of an Option or otherwise.
ARTICLE 22. WITHHOLDING
22.1 Tax Withholding. The Company shall have the power and the right to deduct or withhold, or
require a Participant to remit to the Company, the minimum statutory amount, or such higher
withholding elected by the Participant provided that such higher withholding would not have a negative
accounting impact for the Company, to satisfy federal, state, provincial, and local taxes, domestic or
foreign, required by law or regulation to be withheld with respect to any taxable event arising as a
result of this Plan. As soon as practicable after the date as of which the amount first becomes
includible in the gross income of the Participant (but no later than the last business day of the calendar
quarter during which the amount first becomes includible in gross income), the Participant shall pay to
the Company or an Affiliate (or other entity identified by the Committee), or make arrangements
satisfactory to the Company or other entity identified by the Committee regarding the payment of any
federal, state, provincial, or local taxes of any kind (including any employment taxes) required by law to
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be withheld with respect to such income. The obligations of the Company under this Plan shall be
conditional on such payment or arrangements, and the Company and its Affiliates shall, to the extent
permitted by law, have the right to deduct any such taxes from any payment otherwise due to the
Participant. or such higher withholding elected by the Participant provided that such higher withholding
would not have a negative accounting impact for the Company
22.2 Share Withholding. With respect to withholding required upon the exercise of Options or
SARs, upon the lapse of restrictions on Restricted Stock and Restricted Stock Units, or upon the
achievement of performance goals related to Performance Shares, or any other taxable event arising
as a result of an Award granted hereunder, unless the Participant has elected, with the approval of the
Committee, to satisfy the withholding requirement, in whole or in part, by paying the taxes in cash or
transferring to the Company Shares owned by the Participant that would satisfy no less than minimum
statutory total tax but no more than the maximum statutory total tax with respect to the Company’s
withholding obligation, the Participant shall be deemed to have elected to have the Company withhold
a number of Shares that would satisfy no less than the minimum statutory total tax and, in the
Committee’s discretion, up to the maximum statutory total tax that could be imposed on the
transaction. All such elections shall be irrevocable, made by the Participant in a manner approved by
the Committee, and shall be subject to any restrictions or limitations that the Committee, in its sole
discretion, deems appropriate.
ARTICLE 23. SUCCESSORS
All obligations of the Company under this Plan with respect to Awards granted hereunder shall be
binding on any successor to the Company, whether the existence of such successor is the result of a
direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business
and/or assets of the Company. All obligations imposed upon a Participant, and all rights granted to the
Company hereunder, shall be binding upon each Participant’s heirs, legal representatives, and
successors.
ARTICLE 24. GENERAL PROVISIONS
24.1 Recovery of Compensation. Any Award issued under this Plan will be subject to any
clawback policy developed by the Board of Directors or the Committee that is consistent with
applicable law, whether such Award was granted before or after the effective date of any such
clawback policy.
24.2 Legend. The certificates for Shares may include any legend which the Committee deems
appropriate to reflect any restrictions on transfer of such Shares.
24.3 Gender and Number. Except where otherwise indicated by the context, any masculine term
used herein also shall include the feminine, the singular shall include the plural, and the plural shall
include the singular.
24.4 Severability. In the event that any one or more of the provisions of this Plan shall be or
become invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not be affected thereby.
24.5 Compliance with Legal and Exchange Requirements. The Plan, the granting and
exercising of Awards thereunder, and any obligations of the Company under the Plan, shall be subject
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to all applicable federal and state laws, rules, and regulations, and to such approvals by any regulatory
or governmental agency as may be required, and to any rules or regulations of any stock exchange on
which the Shares are listed. The Company, in its discretion, may postpone the granting and exercising
of Awards, the issuance or delivery of Shares under any Award or any other action permitted under the
Plan to permit the Company, with reasonable diligence, to complete such stock exchange listing or
registration or qualification of such Shares or other required action under any federal or state law, rule,
or regulation and may require any Participant to make such representations and furnish such
information as it may consider appropriate in connection with the issuance or delivery of Shares in
compliance with applicable laws, rules, and regulations. The Company shall not be obligated by virtue
of any provision of the Plan to recognize the exercise of any Award or to otherwise sell or issue Shares
in violation of any such laws, rules, or regulations, and any postponement of the exercise or settlement
of any Award under this provision shall not extend the term of such Awards. Neither the Company nor
its Affiliates, or the directors or officers of any such entities, shall have any obligation or liability to a
Participant with respect to any Award (or Shares issuable thereunder) that shall lapse because of such
postponement.
24.6 No Limitation on Compensation. Nothing in the Plan shall be construed to limit the right of
the Company to establish other plans or to pay compensation to its employees, in cash or property, in
a manner which is not expressly authorized under the Plan.
24.7 Investment Representations. The Committee may require any individual receiving Shares
pursuant to an Award under this Plan to represent and warrant in writing that the individual is acquiring
the Shares for investment and without any present intention to sell or distribute such Shares.
24.8 Employees Based Outside of the United States. Notwithstanding any provision of this Plan
to the contrary, in order to comply with the laws in other countries in which the Company or its Affiliates
operate or have Employees, Directors or Third Party Service Providers, the Committee, in its sole
discretion, shall have the power and authority to:
(a) Determine which Affiliates shall be covered by this Plan;
(b) Determine which Employees, Directors and/or Third Party Service Providers outside the
United States are eligible to participate in this Plan;
(c) Modify the terms and conditions of any Award granted to Employees, Directors and/or Third
Party Service Providers outside the United States to comply with applicable foreign laws;
(d) Establish subplans and modify exercise procedures and other terms and procedures, to the
extent such actions may be necessary or advisable. Any subplans and modifications to Plan
terms and procedures established under this Section 24.8 (General Provisions/Employees
Based Outside of the United States) by the Committee shall be attached to this Plan
document as appendices; and
(e) Take any action, before or after an Award is made, that it deems advisable to obtain approval
or comply with any necessary local government regulatory exemptions or approvals.
Notwithstanding the above, the Committee may not take any actions hereunder, and no Awards
shall be granted, that would violate applicable law.
24.9 Uncertificated Shares. To the extent that this Plan provides for issuance of certificates to
reflect the transfer of Shares, the transfer of such Shares may be effected on a noncertificated basis,
to the extent not prohibited by applicable law or the rules of any stock exchange.
24.10 Unfunded Plan. It is intended that this Plan be an “unfunded” plan for incentive
compensation. The Committee may authorize the creation of trusts or other arrangements to meet the
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obligations created under this Plan to deliver Shares or make payments; provided, however, that,
unless the Committee otherwise determines, the existence of such trusts or other arrangements is
consistent with the “unfunded” status of this Plan and Participants shall have no right, title, or interest
whatsoever in or to any investments that the Company or its Affiliates may make to aid it in meeting its
obligations under this Plan.
24.11 No Fractional Shares. No fractional Shares shall be issued or delivered pursuant to this
Plan or any Award. The Committee shall determine whether cash, Awards, or other property shall be
issued or paid in lieu of fractional Shares or whether such fractional Shares or any rights thereto shall
be forfeited or otherwise eliminated (i.e., rounded down to the nearest whole Share).
24.12 No Impact on Benefits. Except as may otherwise be specifically stated under any
employee benefit plan, policy or program, no amount payable in respect of any Award shall be treated
as compensation for purposes of calculating a Participant’s right under any such plan, policy or
program.
24.13 Compliance with Code Section 409A.
(a)
In General. The Plan is intended to be administered in a manner consistent with the
requirements, where applicable, of Code Section 409A. All Award Agreements shall be
construed and administered such that the Award either (i) qualifies for an exemption from the
requirements of Code Section 409A or (ii) satisfies the requirements of Code Section 409A.
To the extent that any provision of the Plan or an Award Agreement would cause a conflict
with the requirements of Code Section 409A, or would cause the administration of the Plan or
an Award to fail to satisfy the requirements of Code Section 409A, such provision shall be
deemed amended to the extent practicable to avoid adverse tax consequences under Code
Section 409A for the Participant (including his or her beneficiaries). In no event shall a
Participant, directly or indirectly, designate the calendar year in which payment, distribution or
settlement, as applicable, of an Award subject to Code Section 409A is made, except in
accordance with Code Section 409A. Notwithstanding any provision in this Plan to the
contrary, neither the Company nor the Committee shall have any liability to any person in the
event such Code Section 409A applies to any Award in a manner that results in adverse tax
consequences for the Participant or any of his or her beneficiaries.
(b) Six-Month Delay for Specified Employees. Notwithstanding anything in this Plan or an
Award Agreement to the contrary, if a Participant is a “specified employee,” within the
meaning of Code Section 409A and as determined under the Company’s policy for
determining specified employees, on the date of his “separation from service”, within the
meaning of Code Section 409A, the distribution, payment or settlement, as applicable, of all of
Participant’s Awards that are both (i) subject to Code Section 409A and (ii) distributable,
payable or settleable, as appropriate, on account of a separation from service, shall be
postponed for six (6) months following the date of the Participant’s separation from service. If
a distribution, payment or settlement, as applicable, is delayed pursuant to this paragraph, the
distribution, payment or settlement, as applicable, shall be made within the thirty (30)-day
period following the first (1st) business day of the seventh (7th) month following the
Participant’s separation from service; provided that if the Participant dies during such six (6)-
month period, any postponed amounts shall be paid within ninety (90) days of the
Participant’s death. This distribution, payment or settlement, as applicable, shall include the
cumulative amount of any amount that could not be paid or provided during such period.
(c) Elective Deferrals. No Participant elective deferrals or re-deferrals of compensation (as
defined under Code Section 409A and/or guidance thereto) other than in regard to Restricted
Stock Units, Performance Share Units and Deferred Stock Units are permitted under this
Plan. Instead, any such elective deferrals of compensation shall only be permitted pursuant to
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the Company’s nonqualified deferred compensation plan. To the extent elective deferrals or
re-deferrals are permitted under this Plan, such elections shall be made in accordance with
the requirements of Code Section 409A and the rules, procedures and forms specified from
time to time by the Committee.
(d) Mandatory Deferrals. If, at the grant of an Award under this Plan, the Committee decides
that the payment of compensation with respect to such Award shall be deferred compensation
within the meaning of Code Section 409A, then, the Committee shall set forth the time and
form of payment in the Award Agreement in a manner consistent with Code Section 409A.
(e) Timing of Payments. Payment(s) of compensation that is subject to Code Section 409A shall
only be made in the form and upon an event or at a time permitted under Code Section 409A.
24.14 Nonexclusivity of this Plan. The adoption of this Plan shall not be construed as creating
any limitations on the power of the Board or Committee to adopt such other compensation
arrangements as it may deem desirable for any Participant.
24.15 No Constraint on Corporate Action. Nothing in this Plan shall be construed to: (a) limit,
impair, or otherwise affect the Company’s or an Affiliate’s right or power to make adjustments,
reclassifications, reorganizations, or changes of its capital or business structure, or to merge or
consolidate, or dissolve, liquidate, sell, or transfer all or any part of its business or assets; or (b) limit
the right or power of the Company or an Affiliate to take any action which such entity deems to be
necessary or appropriate.
24.16 Headings and Captions. The headings and captions herein are provided for reference and
convenience only, shall not be considered part of this Plan, and shall not be employed in the
construction of this Plan.
24.17 Offset. Subject to the requirements of Code Section 409A, if applicable, (a) any amounts
owed to the Company or an Affiliate by a Participant of whatever nature up to the fullest extent
permitted by applicable law may be offset by the Company from the value of any Award to be
transferred to the Participant, and (b) no Shares, cash or other thing of value under the Plan or an
Award Agreement shall be transferred unless and until all disputes between the Company and the
Participant have been fully and finally resolved and the Participant has waived all claims to such
against the Company and its Affiliates. However, no waiver of any liability (or the right to apply the
offset described in this Section 24.17 (General Provisions/Offset) may be inferred because the
Company pays an Award to a Participant with an outstanding liability owed to the Company or an
Affiliate.
24.18 Governing Law. The Plan and each Award Agreement shall be governed by the laws of the
State of Ohio, excluding any conflicts or choice of law rule or principle that might otherwise refer
construction or interpretation of this Plan to the substantive law of another jurisdiction. The Plan shall
be construed to comply with all applicable law and to avoid liability (other than a liability expressly
assumed under the Plan or an Award Agreement) to the Company, an Affiliate or a Participant.
Recipients of an Award under this Plan are deemed to submit to the exclusive jurisdiction and venue of
the federal or state courts located in Franklin County, Ohio, to resolve any and all issues that may arise
out of or relate to this Plan or any related Award Agreement.
24.19 Delivery and Execution of Electronic Documents. To the extent permitted by applicable
law, the Company may (a) deliver by email or other electronic means (including posting on a web site
maintained by the Company or an Affiliate or by a third party under contract with the Company or an
Affiliate) all documents relating to the Plan or any Award thereunder (including without limitation,
prospectuses required by the Securities and Exchange Commission) and all other documents that the
A-31
Company is required to deliver to its security holders (including without limitation, annual reports and
proxy statements), and (b) permit Participants to electronically execute applicable Plan documents
(including, but not limited to, Award Agreements) in a manner prescribed by the Committee.
24.20 No Representations or Warranties Regarding Tax Affect. Notwithstanding any provision
of the Plan to the contrary, the Company, its Affiliates, the Board, and the Committee neither represent
nor warrant the tax treatment under any federal, state, local or foreign laws and regulations thereunder
(individually and collectively referred to as the “Tax Laws”) of any Award granted or any amounts paid
to any Participant under the Plan including, but not limited to, when and to what extent such Awards or
amounts may be subject to tax, penalties and interest under the Tax Laws.
24.21 Indemnification. To the maximum extent permitted under the Company’s Articles of
Incorporation and Code of Regulations, each person who is or shall have been a member of the Board,
a committee appointed by the Board, or an officer of the Company to whom authority was delegated in
accordance with Article 3 (Administration), shall be indemnified and held harmless by the Company
against and from any (a) loss, cost, liability, or expense (including attorneys’ fees) that may be imposed
upon or reasonably incurred by him or her in connection with or resulting from any claim, action, suit, or
proceeding to which he or she may be a party or in which he or she may be involved by reason of any
action taken or failure to act under this Plan or any Award Agreement, and (b) from any and all
amounts paid by him or her in settlement thereof, with the Company’s prior written approval, or paid by
him or her in satisfaction of any judgment in any such action, suit, or proceeding against him or her;
provided, however, that he or she shall give the Company an opportunity, at its own expense, to
handle and defend the same before he or she undertakes to handle and defend it on his or her own
behalf. The foregoing right of indemnification shall not be exclusive of any other rights of
indemnification to which such persons may be entitled under the Company’s Articles of Incorporation
or Code of Regulations, by contract, as a matter of law, or otherwise, or under any power that the
Company may have to indemnify them or hold them harmless.
24.22 No Obligation to Disclose Material Information. Except to the extent required by
applicable securities laws, none of the Company, an Affiliate, the Committee, or the Board shall have
any duty or obligation to affirmatively disclose material information to a record or beneficial holder of
Shares or an Award, and such holder shall have no right to be advised of any material information
regarding the Company or any Affiliate at any time prior to, upon or in connection with receipt or the
exercise or distribution of an Award. The Company makes no representation or warranty as to the
future value of the Shares that may be issued or acquired under the Plan.
24.23 Entire Agreement. Except as expressly provided otherwise, this Plan and any Award
Agreement constitute the entire agreement with respect to the subject matter hereof and thereof,
provided that in the event of any inconsistency between this Plan and any Award Agreement, the terms
and conditions of the Plan shall control.
*****
A-32
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended January 28, 2017
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 1-8897
BIG LOTS, INC.
(Exact name of registrant as specified in its charter)
Ohio
(State or other jurisdiction of incorporation or organization)
06-1119097
(I.R.S. Employer Identification No.)
300 Phillipi Road, P.O. Box 28512, Columbus, Ohio
(Address of principal executive offices)
43228-5311
(Zip Code)
(614) 278-6800
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Shares $0.01 par value
Name of each exchange on which registered
New York Stock Exchange
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes
No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes
No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during
the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes
No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not
contained herein, and will not be contained to the best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2
of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
No
The aggregate market value of the Common Shares held by non-affiliates of the Registrant (assuming for these purposes that all
executive officers and directors are “affiliates” of the Registrant) was $2,331,138,387 on July 30, 2016, the last business day of the
Registrant's most recently completed second fiscal quarter (based on the closing price of the Registrant's Common Shares on such date
as reported on the New York Stock Exchange).
The number of the registrant’s common shares, $0.01 par value, outstanding as of March 24, 2017, was 44,786,322.
Portions of the registrant's Proxy Statement for its 2017 Annual Meeting of Shareholders are incorporated by reference into Part III of
this Annual Report on Form 10-K.
Documents Incorporated by Reference
[THIS PAGE INTENTIONALLY LEFT BLANK]
BIG LOTS, INC.
FORM 10-K
FOR THE FISCAL YEAR ENDED JANUARY 28, 2017
TABLE OF CONTENTS
Part I
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
Supplemental Item. Executive Officers of the Registrant
Part II
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Selected Financial Data
Management's Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Directors, Executive Officers and Corporate Governance
Executive Compensation
Part III
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services
Exhibits, Financial Statement Schedules
Form 10-K Summary
Signatures
Part IV
Page
2
7
13
13
15
15
16
17
19
20
37
38
72
72
73
73
73
73
73
73
74
76
77
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Item 15.
Item 16.
1
Item 1. Business
The Company
Part I
Big Lots, Inc., an Ohio corporation, through its wholly owned subsidiaries (collectively referred to herein as “we,” “us,” and
“our” except as used in the reports of our independent registered public accounting firm included in Item 8 of this Annual
Report on Form 10-K (“Form 10-K”)), is a unique, non-traditional, discount retailer operating in the United States (“U.S.”) (see
the discussion below under the caption “Merchandise”). At January 28, 2017, we operated a total of 1,432 stores. Our goal is
to exceed our core customer’s expectations by providing her with great savings on value-priced merchandise, which includes
tasteful and “trend-right” import merchandise, consistent and replenishable “never out” offerings, and brand-name closeouts.
You can locate us on the Internet at www.biglots.com. The contents of our websites are not part of this report.
Similar to many other retailers, our fiscal year ends on the Saturday nearest to January 31, which results in some fiscal years
being comprised of 52 weeks and some fiscal years being comprised of 53 weeks. Unless otherwise stated, references to years
in this Form 10-K relate to fiscal years rather than to calendar years. The following table provides a summary of our fiscal year
calendar and the associated number of weeks in each fiscal year:
Fiscal Year
Number of Weeks
Year Begin Date
2017
2016
2015
2014
2013
2012
53
52
52
52
52
53
January 29, 2017
January 31, 2016
February 1, 2015
February 2, 2014
February 3, 2013
January 29, 2012
Year End Date
February 3, 2018
January 28, 2017
January 30, 2016
January 31, 2015
February 1, 2014
February 2, 2013
We manage our business on the basis of one segment: discount retailing. We evaluate and report overall sales and merchandise
performance based on the following key merchandising categories: Furniture, Seasonal, Soft Home, Food, Consumables, Hard
Home, and Electronics, Toys, & Accessories. The Furniture category includes our upholstery, mattress, ready-to-assemble, and
case goods departments. The Seasonal category includes our lawn & garden, summer, Christmas, and other holiday
departments. The Soft Home category includes our home décor, frames, fashion bedding, utility bedding, bath, window,
decorative textile, home organization, and area rugs departments. The Food category includes our beverage & grocery, candy
& snacks, and specialty foods departments. The Consumables category includes our health and beauty, plastics, paper,
chemical, and pet departments. The Hard Home category includes our small appliances, table top, food preparation, stationery,
greeting cards, and home maintenance departments. The Electronics, Toys, & Accessories category includes our electronics,
jewelry, hosiery, toys, and infant accessories departments. Please refer to the consolidated financial statements and related
notes in this Form 10-K for our financial information. Specifically, see note 15 to the accompanying consolidated financial
statements for our net sales results by merchandise category for 2016, 2015, and 2014.
In May 2001, Big Lots, Inc. was incorporated in Ohio and was the surviving entity in a merger with Consolidated Stores
Corporation, a Delaware corporation. By virtue of the merger, Big Lots, Inc. succeeded to all the businesses, properties, assets,
and liabilities of Consolidated Stores Corporation. In July 2011, we acquired 100% of the outstanding shares of Liquidation
World Inc. (subsequently named Big Lots Canada, Inc.). In 2014, we completed the wind down and dissolution of Big Lots
Canada, Inc.
Our principal executive offices are located at 300 Phillipi Road, Columbus, Ohio 43228, and our telephone number is (614)
2
Merchandise
Our business historically focused on selling value-based merchandise sourced through closeout channels, which can result in
inconsistent offerings to our customers. In 2014, we implemented a merchandising strategy to improve the consistency of the
value-based merchandise available in our stores by reducing our reliance on sourcing closeout offerings in certain merchandise
categories. This strategy introduced a new merchandise purchasing discipline that uses a ratings process to measure quality,
brand, fashion, and value. This discipline requires us to focus our decision-making activities on our customers’ expectations
and enables us to compare the potential performance of traditionally-sourced merchandise, either domestic or import, to
closeout merchandise, which is generally sourced from production overruns, packaging changes, discontinued products, order
cancellations, liquidations, returns, and other disruptions in the supply chain of manufacturers. We believe that enhancing our
focus on our customers’ expectations improves both our ability to provide a desirable assortment of offerings in our
merchandise categories and our inventory turnover. For net sales and comparable store sales by merchandise category, see the
discussion below under the captions “2016 Compared To 2015” and “2015 Compared To 2014” in “Item 7. Management’s
Discussion and Analysis of Financial Condition and Results of Operations” (“MD&A”) of this Form 10-K.
Real Estate
The following table compares the number of our stores in operation at the beginning and end of each of the last five fiscal
years:
Stores open at the beginning of the year
Stores opened during the year
Stores closed during the year
Stores open at the end of the year
2016
1,449
9
(26)
1,432
2015
2014
2013
2012
1,460
9
(20)
1,449
1,493
24
(57)
1,460
1,495
55
(57)
1,493
1,451
87
(43)
1,495
For additional information about our real estate strategy, see the discussion under the caption “Operating Strategy - Real
Estate” in the accompanying MD&A in this Form 10-K.
In addition, in 2011, we acquired 89 stores in Canada as a result of our acquisition of Liquidation World Inc. (subsequently
renamed Big Lots Canada, Inc.) which are not included in the above table. During the first quarter of 2014, we wound down
and discontinued the operations of Big Lots Canada, Inc. and closed all of our stores in Canada (which are not included in the
above table).
3
The following table details our U.S. stores by state at January 28, 2017:
Alabama
Arizona
Arkansas
California
Colorado
Connecticut
Delaware
Florida
Georgia
Idaho
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
29
38
11
155
18
13
5
103
53
6
34
44
3
8
40
23
Maine
Maryland
Massachusetts
Michigan
Minnesota
Mississippi
Missouri
Montana
Nebraska
Nevada
New Hampshire
New Jersey
New Mexico
New York
North Carolina
North Dakota
6
26
21
45
7
14
25
3
3
13
7
27
12
63
74
1
Ohio
Oklahoma
Oregon
Pennsylvania
Rhode Island
South Carolina
Tennessee
Texas
Utah
Vermont
Virginia
Washington
West Virginia
Wisconsin
Wyoming
District of Columbia
Total stores
Number of states
96
18
15
69
1
33
47
114
9
4
39
26
17
11
2
1
1,432
47
Of our 1,432 stores, 33% operate in four states: California, Texas, Ohio, and Florida, and net sales from stores in these states
represented 35% of our 2016 net sales. We have a concentration in these states based on their size, population, and customer
base.
Associates
At January 28, 2017, we had approximately 35,100 active associates comprised of 11,200 full-time and 23,900
associates. Approximately 68% of the associates employed throughout the year are employed on a part-time basis. Temporary
associates hired for the holiday selling season increased the number of associates to a peak of approximately 38,500 in 2016.
We consider our relationship with our associates to be good, and we are not a party to any labor agreements.
Competition
We operate in the highly competitive retail industry. We face strong sales competition from other general merchandise,
discount, food, furniture, arts and crafts, and dollar store retailers, which operate in traditional brick and mortar stores and/or
online. Additionally, we compete with a number of companies for retail site locations, to attract and retain quality employees,
and to acquire our broad merchandising assortment from vendors. In 2016, we launched our e-commerce platform, which faces
additional challenges from a wider range of retailers in a highly competitive market.
Purchasing
The goal of our merchandising strategy is to provide great savings to our customers by consistently offering value-based
merchandise in our stores. We believe that we have made significant progress over the past three years towards achieving this
goal by reducing our reliance on sourcing closeout offerings and expanding our planned purchases in certain merchandise
categories. In particular, we have expanded our planned purchases in our Food, Soft Home, and Furniture merchandise
categories to provide a merchandise assortment that our customers expect us to consistently offer in our stores at a significant
value savings. In connection with the implementation of our merchandising strategy, we have expanded the role of our global
sourcing department, and assessed our overseas vendor relationships. We expect our import partners to responsibly source
goods that our merchandising teams identify as having our desired mix of quality, fashion, and value. During 2016, we
purchased approximately 23% of our merchandise directly from overseas vendors, including approximately 20% from vendors
located in China. Additionally, a significant amount of our domestically-purchased merchandise is manufactured abroad. As a
result, a significant portion of our merchandise supply is subject to certain risks described in “Item 1A. Risk Factors” of this
Form 10-K.
4
Although reduced in certain merchandise categories, the sourcing and purchasing of quality closeout merchandise directly from
manufacturers and other vendors, typically at prices below those paid by traditional discount retailers, continues to represent an
important competitive advantage for our Food and Consumables categories. We believe that our strong vendor relationships
and our strong credit profile support this sourcing model. We expect that the unpredictability of the retail and manufacturing
environments coupled with what we believe is our significant purchasing power position will continue to support our ability to
source quality closeout merchandise at competitive prices in these categories.
Warehouse and Distribution
The majority of our merchandise offerings are processed for retail sale and distributed to our stores from our five regional
distribution centers located in Pennsylvania, Ohio, Alabama, Oklahoma, and California. We selected the locations of our
distribution centers to minimize transportation costs and the distance from distribution centers to our stores. While certain of
our merchandise vendors deliver directly to our stores, the large majority of our inventory is staged and delivered from our
distribution centers to facilitate prompt and efficient distribution and transportation of merchandise to our stores and help
maximize our sales and inventory turnover rate. During 2015, we announced our intention to open a new distribution center in
California and relocate our existing California distribution operations to this facility. This transition is anticipated to occur
sometime in 2019.
In addition to our regional distribution centers that handle store merchandise, we operate two warehouses within our Ohio
distribution center. One warehouse distributes fixtures and supplies to our stores and our five regional distribution centers and
the other warehouse serves as a fulfillment center for our e-commerce operations.
For additional information regarding our warehouses and distribution facilities and related initiatives, see the discussion under
the caption “Warehouse and Distribution” in “Item 2. Properties” of this Form 10-K.
Advertising and Promotion
Our brand image is an important part of our marketing program. Our principal trademarks, including the Big Lots® family of
trademarks, have been registered with the U.S. Patent and Trademark Office. We use a variety of marketing vehicles to
promote our brand operations, including television, internet, social media, in-store point-of-purchase, and print media.
In all markets served by our stores, we design and distribute printed advertising circulars, through a combination of newspaper
insertions and mailings. In 2016, we distributed multi-page circulars representing 29 weeks of advertising coverage, which
resulted in a two week decrease from 2015. We create regional versions of these circulars to tailor our advertising message to
market differences caused by product availability, climate, and customer preferences. Our customer database, which we refer
to as the Buzz Club®, is an important marketing tool that allows us to communicate in a cost effective manner with our
customers, including e-mail delivery of our circulars. In addition to the Buzz Club®, we operate the Buzz Club Rewards®
program, which allows us to send specialized promotions to targeted customer groups with the intention of reinforcing and
expanding their desire to shop at our stores.
Another element of our marketing approach focuses on brand management by communicating our message directly to our core
customer through social and digital media outlets, including Facebook®, Instagram®, Twitter®, Pinterest®, and YouTube®. Our
marketing program also employs a traditional television campaign, which combines strategic branding and promotional
elements used in most of our other marketing media. Our highly-targeted media placement strategy uses national cable as the
foundation of our television advertising. In addition, we use in-store promotional materials, including in-store signage, to
emphasize special bargains and significant values offered to our customers. Total advertising expense as a percentage of total
net sales was 1.8%, 1.8%, and 1.9% in 2016, 2015, and 2014, respectively.
5
Seasonality
We have historically experienced, and expect to continue to experience, seasonal fluctuations in our sales and profitability, with
a larger percentage of our net sales and operating profit realized in our fourth fiscal quarter, which includes the Christmas
holiday selling season. In addition, our quarterly net sales and operating profits can be affected by the timing of new store
openings and store closings, advertising, and certain holidays. We historically receive a higher proportion of merchandise,
carry higher inventory levels, and incur higher outbound shipping and payroll expenses as a percentage of sales in our third
fiscal quarter in anticipation of increased sales activity during our fourth fiscal quarter. Performance during our fourth fiscal
quarter typically reflects a leveraging effect which has a favorable impact on our operating results because net sales are higher
and certain of our costs, such as rent and depreciation, are fixed and do not vary as sales levels escalate. If our sales
performance is significantly better or worse during the Christmas holiday selling season, we would expect a more pronounced
impact on our annual financial results than if our sales performance is significantly better or worse in a different season.
The following table sets forth the seasonality of net sales and operating profit for 2016, 2015, and 2014 by fiscal quarter:
Fiscal Year 2016
Net sales as a percentage of full year
Operating profit as a percentage of full year
Fiscal Year 2015
Net sales as a percentage of full year
Operating profit as a percentage of full year
Fiscal Year 2014
Net sales as a percentage of full year
Operating profit as a percentage of full year
First
Second
Third
Fourth
25.2%
25.2
24.7%
22.3
24.7%
21.0
23.1%
15.7
23.3%
12.9
23.1%
12.4
21.3%
0.8
21.5%
(0.9)
21.4%
(1.7)
30.4%
58.3
30.5%
65.7
30.8%
68.3
The seasonality of our net sales and related merchandise inventory requirements influences the availability of and demand for
cash or access to credit. We historically have drawn upon our credit facility to assist in funding our working capital
requirements, which typically peak near the end of our third fiscal quarter, and temporarily funding our share repurchase plans.
We historically have higher net sales, operating profits, and cash flow provided by operations in the fourth fiscal quarter which
allows us to substantially repay our seasonal borrowings and fund our share repurchase programs. In 2016, our total
indebtedness (outstanding borrowings and letters of credit) peaked in November 2016 at approximately $398 million under our
$700 million unsecured credit facility entered into in July 2011, and most recently amended in May 2015 (“2011 Credit
Agreement”). The 2011 Credit Agreement expires in May 2020. At January 28, 2017, our total indebtedness under the 2011
Credit Agreement was $109.4 million, which included $106.4 million in borrowings and $3.0 million in outstanding letters of
credit. We expect that borrowings will vary throughout 2017 depending on various factors, including our seasonal need to
acquire merchandise inventory prior to the peak selling season, the timing and amount of sales to our customers, and the timing
of share repurchase or dividend payment activity. For a discussion of our sources and uses of funds, see “Item 5. Market for
Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities” and “Capital Resources
and Liquidity” in the accompanying MD&A, in this Form 10-K.
Available Information
We make available, free of charge, through the “Investor Relations” section of our website (www.biglots.com) under the “SEC
Filings” caption, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and
amendments to those reports filed or furnished pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended (“Exchange Act”), as soon as reasonably practicable after we file such material with, or furnish it to, the Securities
and Exchange Commission (“SEC”). Our filings with the SEC may be read and copied at the SEC’s Public Reference Room at
100 F Street, NE, Washington, DC 20549. Information on the operation of the Public Reference Room may be obtained by
calling 1-800-SEC-0330. These filings are also available on the SEC’s website at http://www.sec.gov free of charge as soon as
reasonably practicable after we have filed or furnished the above referenced reports.
6
In the “Investor Relations” section of our website (www.biglots.com) under the “Corporate Governance” and “SEC Filings”
captions, the following information relating to our corporate governance may be found: Corporate Governance Guidelines;
charters of our Board of Directors’ Audit, Compensation, Nominating/Corporate Governance Committees, and our Public
Policy and Environmental Affairs Committee; Code of Business Conduct and Ethics; Code of Ethics for Financial Officers;
Chief Executive Officer and Chief Financial Officer certifications related to our SEC filings; the means by which shareholders
may communicate with our Board of Directors; and transactions in our securities by our directors and executive officers. The
Code of Business Conduct and Ethics applies to all of our associates, including our directors and our principal executive
officer, principal financial officer, and principal accounting officer. The Code of Ethics for Financial Professionals applies to
our Chief Executive Officer and all other Senior Financial Officers (as that term is defined therein) and contains provisions
specifically applicable to the individuals serving in those positions. We intend to satisfy the requirement under Item 5.05 of
Form 8-K regarding disclosure of amendments to and waivers from, if any, our Code of Business Conduct and Ethics (to the
extent applicable to our directors and executive officers (including our principal executive officer, principal financial officer
and principal accounting officer)) and our Code of Ethics for Financial Professionals in the “Investor Relations” section of our
website (www.biglots.com) under the “Corporate Governance” caption. We will provide any of the foregoing information
without charge upon written request to our Corporate Secretary. The contents of our website are not incorporated into, or
otherwise made a part of, this Form 10-K.
Item 1A. Risk Factors
The statements in this section describe the material risks to our business and should be considered carefully. In addition, these
statements constitute cautionary statements under the Private Securities Litigation Reform Act of 1995.
Our disclosure and analysis in this Form 10-K and in our 2016 Annual Report to Shareholders contain forward-looking
statements that set forth anticipated results based on management’s plans and assumptions. From time to time, we also provide
forward-looking statements in other materials we release to the public as well as oral forward-looking statements. Such
statements give our current expectations or forecasts of future events. They do not relate strictly to historical or current facts.
Such statements are commonly identified by using words such as “anticipate,” “estimate,” “expect,” “objective,” “goal,”
“project,” “intend,” “plan,” “believe,” “will,” “should,” “may,” “target,” “forecast,” “guidance,” “outlook,” and similar
expressions in connection with any discussion of future operating or financial performance. In particular, forward-looking
statements include statements relating to future actions, future performance, or results of current and anticipated products, sales
efforts, expenses, interest rates, the outcome of contingencies, such as legal proceedings, and financial results.
We cannot guarantee that any forward-looking statement will be realized. Achievement of future results is subject to risks,
uncertainties, and potentially inaccurate assumptions. If known or unknown risks or uncertainties materialize, or should
underlying assumptions prove inaccurate, actual results could differ materially from past results and those anticipated,
estimated, or projected results set forth in the forward-looking statements. You should bear this in mind as you consider
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 Quarterly
Reports on Form 10-Q and Current Reports on Form 8-K filed with the SEC.
The following cautionary discussion of material risks, uncertainties, and assumptions relevant to our businesses describes
factors that, individually or in the aggregate, we believe could cause our actual results to differ materially from expected and
historical results. Additional risks not presently known to us or that we presently believe to be immaterial also may adversely
impact us. Should any risks or uncertainties develop into actual events, these developments could have material adverse effects
on our business, financial condition, results of operations, and liquidity. Consequently, all of the forward-looking statements
are qualified by these cautionary statements, and there can be no assurance that the results or developments we anticipate will
be realized or that they will have the expected effects on our business or operations. We note these factors for investors as
permitted by the Private Securities Litigation Reform Act of 1995. There can be no assurances that we have correctly and
completely identified, assessed, and accounted for all factors that do or may affect our business, financial condition, results of
operations, and liquidity, as it is not possible to predict or identify all such factors. Consequently, you should not consider the
following to be a complete discussion of all potential risks or uncertainties.
7
Our ability to achieve the results contemplated by forward-looking statements is subject to a number of factors, any one, or a
combination, of which could materially affect our business, financial condition, results of operations, or liquidity. These factors
may include, but are not limited to:
If we are unable to successfully execute our operating strategies, our operating performance could be significantly
impacted.
There is a risk that we will be unable to meet or exceed our operating performance targets and goals in the future if our
strategies and initiatives are unsuccessful. During 2013 and early 2014, our senior leadership team developed the core
principles of our current strategic plan. During 2014 through 2016, we have been executing our strategic plan. During 2016,
we began to reevaluate and adapt our strategic plan to adjust to a changing marketplace. Our ability to execute the business
activities associated with our operating and strategic plans and effectively adapt our plans to the changing marketplace, could
impact our ability to meet our operating performance targets. See the accompanying MD&A in this Form 10-K for additional
information concerning our operating strategy.
If we are unable to compete effectively in the highly competitive discount retail industry, our business and results of
operations may be materially adversely affected.
The discount retail industry, which includes both traditional brick and mortar stores and online marketplaces, is highly
competitive. As discussed in Item 1 of this Form 10-K, we compete for customers, products, employees, real estate, and other
aspects of our business with a number of other companies. Some of our competitors have greater financial, broader distribution
(e.g., more stores and/or a more established online presence), marketing, and other resources than us. It is possible that
increased competition, significant discounting, or improved performance by our competitors may reduce our market share,
gross margin, and operating margin, and may materially adversely affect our business and results of operations.
If we are unable to compete effectively in today’s omnichannel retail marketplace, our business and results of operations
may be materially adversely affected.
With the saturation of mobile computing devices, competition from other retailers in the online retail marketplace is very high,
and growing. Certain of our competitors, and a number of pure online retailers, have established online operations against
which we compete for customers and products. It is possible that the competition in the online retail space may reduce our
market share, gross margin, and operating margin, and may materially adversely affect our business and results of operations in
other ways. In 2016, we expanded our operations to include an e-commerce platform to enhance our omnichannel experience.
Operating an e-commerce platform is a complex undertaking and there is no guarantee that the resources we have applied to
this effort will result in increased revenues or improved operating performance. If our online retailing initiatives do not meet
our customers’ expectations, the initiatives may reduce our customers’ desire to purchase goods from us both online and at our
brick and mortar stores and may materially adversely affect our business and results of operations.
Our inability to properly manage our inventory levels and offer merchandise that our customers want may materially impact
our business and financial performance.
We must maintain sufficient inventory levels to successfully operate our business. However, we also must seek to avoid
accumulating excess inventory to maintain appropriate in-stock levels. We obtain approximately one quarter of our
merchandise directly from vendors outside of the U.S. These foreign vendors often require lengthy advance notice of our
requirements to be able to supply products in the quantities that we request. This usually requires us to order merchandise and
enter into purchase order contracts for the purchase of such merchandise well in advance of the time these products are offered
for sale. As a result, we may experience difficulty in responding to a changing retail environment, which makes us vulnerable
to changes in price and in consumer preferences. In addition, we attempt to maximize our operating profit and operating
efficiency by delivering proper quantities of merchandise to our stores in a timely manner. If we do not accurately anticipate
future demand for a particular product or the time it will take to replenish inventory levels, our inventory levels may not be
appropriate and our results of operations may be negatively impacted.
8
We rely on manufacturers located in foreign countries for significant amounts of merchandise and a significant amount of
our domestically-purchased merchandise is manufactured abroad. Our business may be materially adversely affected by
risks associated with international trade.
Global sourcing of many of the products we sell is an important factor in driving higher operating profit. During 2016, we
purchased approximately 23% of our products directly from overseas vendors, including 20% from vendors located in China,
and a significant amount of our domestically-purchased merchandise is manufactured abroad. Our ability to identify qualified
vendors and to access products in a timely and efficient manner is a significant challenge, especially with respect to goods
sourced outside of the U.S. Global sourcing and foreign trade involve numerous factors and uncertainties beyond our control
including increased shipping costs, increased import duties, more restrictive quotas, loss of most favored nation trading status,
currency and exchange rate fluctuations, work stoppages, transportation delays, economic uncertainties such as inflation,
foreign government regulations, political unrest, natural disasters, war, terrorism, trade restrictions (including retaliation by the
U.S. against foreign practices), political instability, the financial stability of vendors, merchandise quality issues, and tariffs.
These and other issues affecting our international vendors could materially adversely affect our business and financial
performance.
The U.S. federal government is analyzing comprehensive tax reform options that could negatively impact companies that
directly or indirectly import goods. Major developments in tax policy or trade relations, such as the disallowance of tax
deductions for imported merchandise or the imposition of unilateral tariffs on imported products, could have a material adverse
effect on our business, results of operations, financial condition, and liquidity.
Disruption to our distribution network, the capacity of our distribution centers, and our timely receipt of merchandise
inventory could adversely affect our operating performance.
We rely on our ability to replenish depleted merchandise inventory through deliveries to our distribution centers and from the
distribution centers to our stores by various means of transportation, including shipments by sea, rail and truck carriers. A
decrease in the capacity of carriers (e.g., trans-Pacific freight carrier bankruptcies) and/or labor strikes, disruptions or shortages
in the transportation industry could negatively affect our distribution network, our timely receipt of merchandise and
transportation costs. In addition, long-term disruptions to the U.S. and international transportation infrastructure from wars,
political unrest, terrorism, natural disasters, governmental budget constraints and other significant events that lead to delays or
interruptions of service could adversely affect our business. Also, a fire, earthquake, or other disaster at one of our distribution
centers could disrupt our timely receipt, processing and shipment of merchandise to our stores which could adversely affect our
business. Additionally, as we seek to expand our operation through the implementation of our online retail capabilities, we may
face increased or unexpected demands on distribution center operations, as well as new demands on our distribution network.
Changes by vendors related to the management of their inventories may reduce the quantity and quality of brand-name
closeout merchandise available to us or may increase our cost to acquire brand-name closeout merchandise, either of which
may materially adversely affect our revenues and gross margin.
We have very little control over the supply, design, function, availability, or cost of much of the closeout merchandise that we
source for sale in our stores. Our ability to meet or exceed our operating performance targets depends upon the sufficient
availability of closeout merchandise, in certain merchandise categories, that we can acquire and offer at prices that represent a
value to our customers. To the extent that certain of our vendors are better able to manage their inventory levels and reduce the
amount of their excess inventory, the amount of closeout merchandise available to us could be materially reduced. Shortages or
disruptions in the availability of closeout merchandise of a quality acceptable to our customers and us would likely have a
material adverse effect on our sales and gross margin in the effected merchandise categories and may result in customer
dissatisfaction.
If we are unable to secure customer, employee, vendor and company data, our systems could be compromised, our
reputation could be damaged, and we could be subject to penalties or lawsuits.
In the normal course of business, we process and collect relevant data about our customers, employees and vendors. During
2016, our normal activities expanded to include conducting sales transactions through an online channel. The protection of our
customer, employee, vendor and company data is critical to us. We have implemented procedures, processes and technologies
designed to safeguard our customers’ debit and credit card information and other private data, our employees’ and vendors’
private data, and our records and intellectual property. We also utilize third-party service providers in connection with certain
technology related activities, including credit card processing, website hosting, data encryption and software support. We
require these providers to take appropriate measures to secure such data and information and assess their ability to do so.
9
Despite our procedures, technologies and other information security measures, we cannot be certain that our information
technology systems or the information technology systems of our third-party service providers are or will be able to prevent,
contain or detect all cyberattacks, cyberterrorism, or security breaches. As evidenced by other retailers who have suffered
serious security breaches, we may be vulnerable to data security breaches and data loss, including cyberattacks. A material
breach of our security measures or our third-party service providers’ security measures, the misuse of our customer, employee,
vendor and company data or information or our failure to comply with applicable privacy and information security laws and
regulations could result in the exposure of sensitive data or information, attract a substantial amount of negative media
attention, damage our customer or employee relationships and our reputation and brand, distract the attention of management
from their other responsibilities, subject us to government enforcement actions, private litigation, penalties and costly response
measures, and result in lost sales and a reduction in the market value of our common shares. While we have insurance, in the
event we experience a material data or information security breach, our insurance may not be sufficient to cover the impact to
our business, or insurance proceeds may not be paid timely.
In addition, the regulatory environment surrounding data and information security and privacy is increasingly demanding, as
new and revised requirements are frequently imposed across our business. Compliance with more demanding privacy and
information security laws and standards may result in significant expense due to increased investment in technology and the
development of new operational processes.
If we are unable to maintain or upgrade our computer systems or if we are unable to convert to alternate systems in an
efficient and timely manner, our operations may be disrupted or become less efficient.
We depend on a variety of information technology and computer systems for the efficient functioning of our business. We rely
on certain hardware, telecommunications and software vendors to maintain and periodically upgrade many of these systems so
that we can continue to support our business. Various components of our information technology and computer systems,
including hardware, networks, and software, are licensed to us by third party vendors. We rely extensively on our information
technology and computer systems to process transactions, summarize results, and manage our business. Our information
technology and computer systems are subject to damage or interruption from power outages, computer and telecommunications
failures, computer viruses, cyberattacks or other security breaches, catastrophic events such as fires, floods, earthquakes,
tornados, hurricanes, acts of war or terrorism, and usage errors by our employees or our contractors. In recent years, we have
begun using hosted solutions for certain of our information technology and computers systems, which are more exposed to
telecommunication failures. If our information technology or computer systems are damaged or cease to function properly, we
may have to make a significant investment to fix or replace them, and we may suffer loss of critical data and interruptions or
delays in our operations as a result. Any material interruption experienced by our information technology or computer systems
could negatively affect our business and results of operations. Costs and potential interruptions associated with the
implementation of new or upgraded systems and technology or with maintenance or adequate support of our existing systems
could disrupt or reduce the efficiency of our business.
Declines in general economic condition, disposable income levels, and other conditions could lead to reduced consumer
demand for our merchandise thereby materially affecting our revenues and gross margin.
Our results of operations can be directly impacted by the health of the U.S. economy. Our business and financial performance
may be adversely impacted by current and future economic conditions, including factors that may restrict or otherwise
negatively impact consumer financing, disposable income levels, unemployment levels, energy costs, interest rates, recession,
inflation, tax reform, natural disasters or terrorist activities and other matters that influence consumer spending. Specifically,
our Soft Home, Hard Home, Furniture and Seasonal merchandise categories may be threatened when disposable income levels
are negatively impacted by economic conditions. Additionally, the net sales of cyclical product offerings in our Seasonal
category may be threatened when we experience extended periods of unseasonable weather. In particular, the economic
conditions and weather patterns of four states (Ohio, Texas, California, and Florida) are important as approximately 33% of our
current stores operate and 35% of our 2016 net sales occurred in these states.
10
Changes in federal or state legislation and regulations, including the effects of legislation and regulations on product safety
and hazardous materials, could increase our cost of doing business and adversely affect our operating performance.
We are exposed to the risk that new federal or state legislation, including new product safety and hazardous material laws and
regulations, may negatively impact our operations and adversely affect our operating performance. Changes in product safety
legislation or regulations may lead to product recalls and the disposal or write-off of merchandise, as well as fines or penalties
and reputational damage. If our merchandise and food products do not meet applicable governmental safety standards or our
customers’ expectations regarding quality or safety, we could experience lost sales, increased costs and be exposed to legal and
reputational risk.
In addition, if we discard or dispose of our merchandise, particularly that which is non-salable, in a fashion that is inconsistent
with jurisdictional standards, we could expose ourselves to certain fines and litigation costs related to hazardous material
regulations. Our inability to comply on a timely basis with regulatory requirements, execute product recalls in a timely manner,
or consistently implement waste management standards, could result in fines or penalties which could have a material adverse
effect on our financial results. In addition, negative customer perceptions regarding the safety of the products we sell could
cause us to lose market share to our competitors. If this occurs, it may be difficult for us to regain lost sales.
We are subject to periodic litigation and regulatory proceedings, including Fair Labor Standards Act, state wage and hour,
and shareholder class action lawsuits, which may adversely affect our business and financial performance.
From time to time, we are involved in lawsuits and regulatory actions, including various collective or class action lawsuits that
are brought against us for alleged violations of the Fair Labor Standards Act, state wage and hour laws, sales tax and consumer
protection laws, False Claims Act, and federal securities laws. We also are involved in shareholder derivative lawsuits and
investigations concerning our compliance with environmental and hazardous waste regulations. Due to the inherent
uncertainties of litigation, we may not be able to accurately determine the impact on us of any future adverse outcome of such
proceedings. The ultimate resolution of these matters could have a material adverse impact on our financial condition, results
of operations, and liquidity. In addition, regardless of the outcome, these proceedings could result in substantial cost to us and
may require us to devote substantial attention and resources to defend ourselves. For a description of certain current legal
proceedings, see note 10 to the accompanying consolidated financial statements.
Our current insurance program may expose us to unexpected costs and negatively affect our financial performance.
Our insurance coverage is subject to deductibles, self-insured retentions, limits of liability and similar provisions that we
believe are prudent based on our overall operations. We may incur certain types of losses that we cannot insure or which we
believe are not economically reasonable to insure, such as losses due to acts of war, employee and certain other crime, and
some natural disasters. If we incur these losses and they are material, our business could suffer. Certain material events may
result in sizable losses for the insurance industry and adversely impact the availability of adequate insurance coverage or result
in excessive premium increases. To offset negative cost trends in the insurance market, we may elect to self-insure, accept
higher deductibles or reduce the amount of coverage in response to these market changes. In addition, we self-insure a
significant portion of expected losses under our workers’ compensation, general liability, including automobile, and group
health insurance programs. Unanticipated changes in any applicable actuarial assumptions and management estimates
underlying our recorded liabilities for these self-insured losses, including potential increases in medical and indemnity costs,
could result in significantly different expenses than expected under these programs, which could have a material adverse effect
on our financial condition and results of operations. Although we continue to maintain property insurance for catastrophic
events, we are self-insured for losses up to the amount of our deductibles. If we experience a greater number of self-insured
losses than we anticipate, our financial performance could be adversely affected.
If we are unable to attract, train, and retain highly qualified associates while also controlling our labor costs, our financial
performance may be negatively affected.
Our customers expect a positive shopping experience, which is driven by a high level of customer service from our associates
and a quality presentation of our merchandise. To grow our operations and meet the needs and expectations of our customers,
we must attract, train, and retain a large number of highly qualified associates, while at the same time control labor costs. We
compete with other retail businesses for many of our associates in hourly and part-time positions. These positions have
historically had high turnover rates, which can lead to increased training and retention costs. In addition, our ability to control
labor costs is subject to numerous external factors, including prevailing wage rates, the impact of legislation or regulations
governing labor relations or benefits, and health insurance costs.
11
The loss of key personnel may have a material impact on our future results of operations.
We believe that we benefit substantially from the leadership and experience of our senior executives. The loss of services of
these individuals could have a material adverse impact on our business. Competition for key personnel in the retail industry is
intense, and our future success will depend on our ability to recruit, train, and retain our senior executives and other qualified
personnel.
If we are unable to retain existing and secure suitable new store locations under favorable lease terms, our financial
performance may be negatively affected.
We lease almost all of our stores, and a significant number of these leases expire or are up for renewal each year, as noted
below in “Item 2. Properties” and in MD&A in this Form 10-K. Our strategy to improve our financial performance includes
sales growth while managing the occupancy cost of each of our stores. The primary component of our sales growth strategy
revolves around increasing our comparable store sales, which will require renewing many leases each year. Additional
components of our sales growth strategy are to relocate certain stores to a new location within an existing market and to open
new store locations, either as an expansion in an existing market or as an entrance into a new market. If the commercial real
estate market does not allow us to negotiate favorable lease renewals and new store leases, our financial position, results of
operations, and liquidity may be negatively affected.
Our inability to comply with the terms of the 2011 Credit Agreement may have a material adverse effect on our capital
resources, financial condition, results of operations, and liquidity.
We have the ability to borrow funds under the 2011 Credit Agreement, and we utilize this ability at various times depending on
operating or other cash flow requirements. The 2011 Credit Agreement contains financial and other covenants, including, but
not limited to, limitations on indebtedness, liens, and investments, as well as the maintenance of a leverage ratio and a fixed
charge coverage ratio. A violation of any of these covenants may permit the lenders to restrict our ability to further access
loans and letters of credit and may require the immediate repayment of any outstanding loans. Our failure to comply with these
covenants may have a material adverse effect on our capital resources, financial condition, results of operations, and liquidity.
A significant decline in our operating profit and taxable income may impair our ability to realize the value of our long-lived
assets and deferred tax assets.
We are required by accounting rules to periodically assess our property and equipment and deferred tax assets for impairment
and recognize an impairment loss or valuation charge, if necessary. In performing these assessments, we use our historical
financial performance to determine whether we have potential impairments or valuation concerns and as evidence to support
our assumptions about future financial performance. A significant decline in our financial performance could negatively affect
the results of our assessments of the recoverability of our property and equipment and our deferred tax assets and trigger the
impairment of these assets. Impairment or valuation charges taken against property and equipment and deferred tax assets
could be material and could have a material adverse impact on our capital resources, financial condition, results of operations,
and liquidity (see the discussion under the caption “Critical Accounting Policies and Estimates” in the accompanying MD&A in
this Form 10-K for additional information regarding our accounting policies for long-lived assets and income taxes).
Changes in accounting guidance could significantly affect our results of operations and the presentation of those results.
Changes in accounting standards, including new interpretations and applications of accounting standards, may have adverse
effects on our financial condition, results of operations, and liquidity. The Financial Accounting Standards Board (“FASB”)
has issued and/or adopted new guidance that proposes numerous significant changes to current accounting standards. This new
guidance could significantly change the presentation of financial information and our results of operations. Additionally, the
new guidance may require us to make systems and other changes that could increase our operating costs. Specifically,
implementing future accounting guidance related to leases could require us to make significant changes to our lease
management system or other accounting systems.
12
The price of our common shares as traded on the New York Stock Exchange may be volatile.
Our stock price may fluctuate substantially as a result of factors beyond our control, including but not limited to, general
economic and stock market conditions, risks relating to our business and industry as discussed above, strategic actions by our
competitors, variations in our quarterly operating performance, and investor perceptions of the investment opportunity
associated with our common shares relative to other investment alternatives. Additionally, our stock price may reflect the
expectation that we will declare cash dividends at the current level or greater levels in the future. Future dividends are subject
to the discretion of our Board of Directors, and will depend on our financial condition, results of operations, capital
requirements, compliance with applicable laws and agreements and any other factors deemed relevant by our Board. If we fail
to meet any of the expectations related to future growth, profitability, or dividends, our stock price may decline significantly,
which could have a material adverse impact on investor confidence and employee retention.
We also may be subject to a number of other factors which may, individually or in the aggregate, materially adversely affect
our business. These factors include, but are not limited to:
•
•
•
•
•
•
Fluctuating commodity prices, including but not limited to diesel fuel and other fuels used by utilities to generate
power, may affect our gross profit and operating profit margins;
Changes in governmental laws and regulations, including matters related to taxation. In particular, income tax reform
in which the marginal tax rates are significantly reduced or future deductibility is disallowed could adversely impact
the value of our net deferred tax assets. Additionally, the deductibility of interest expense could be impacted;
A downgrade in our credit rating could negatively affect our ability to access capital or could increase our borrowing
costs;
Events or circumstances could occur which could create bad publicity for us or for types of merchandise offered in our
stores which may negatively impact our business results including our sales;
Infringement of our intellectual property, including the Big Lots trademarks, could dilute their value; and
Other risks described from time to time in our filings with the SEC.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
Retail Operations
All of our stores are located in the U.S., predominantly in strip shopping centers, and have an average store size of
approximately 31,100 square feet, of which an average of 22,000 is selling square feet. For additional information about the
properties in our retail operations, see the discussion under the caption “Real Estate” in “Item 1. Business” and under the
caption “Real Estate” in MD&A in this Form 10-K.
The average cost to open a new store in a leased facility during 2016 was approximately $1.4 million, including the cost of
inventory. All of our stores are leased, except for the 54 stores we own in the following states:
State
Arizona
California
Colorado
Florida
Louisiana
Michigan
New Mexico
Ohio
Texas
Total
13
Stores
Owned
2
38
3
3
1
1
2
1
3
54
Store leases generally obligate us for fixed monthly rental payments plus the payment, in most cases, of our applicable portion
of real estate taxes, common area maintenance costs (“CAM”), and property insurance. Some leases require the payment of a
percentage of sales in addition to minimum rent. Such payments generally are required only when sales exceed a specified
level. Our typical store lease is for an initial minimum term of five to ten years with multiple five-year renewal options. Fifty-
eight store leases have sales termination clauses that allow us to exit the location at our option if we do not achieve certain sales
volume results.
The following table summarizes the number of store lease expirations in each of the next five fiscal years and the total
thereafter. As stated above, many of our store leases have renewal options. The table also includes the number of leases that
are scheduled to expire each year that do not have a renewal option. The table includes stores with more than one lease and
leases for stores not yet open and excludes 17 month-to-month leases and 54 owned locations.
Fiscal Year:
2017
2018
2019
2020
2021
Thereafter
Expiring
Leases
Leases
Without
Options
241
267
241
235
259
128
57
48
11
12
8
15
Warehouse and Distribution
At January 28, 2017, we owned approximately 9.0 million square feet of distribution center and warehouse space. We own and
operate five regional distribution centers strategically located across the United States. The regional distribution centers utilize
warehouse management technology, which we believe enables high accuracy and efficient processing of merchandise from
vendors to our retail stores. The combined output of our regional distribution centers was approximately 2.6 million
merchandise cartons per week in 2016. Certain vendors deliver merchandise directly to our stores when it supports our
operational goal to deliver merchandise from our vendors to the sales floor in the most efficient manner. In 2016, we launched
our e-commerce platform, which is operated out of our Columbus warehouse.
Distribution centers and warehouse space, and the corresponding square footage of the facilities, by location at January 28,
2017, were as follows:
Location
Rancho Cucamonga, CA
Columbus, OH
Montgomery, AL
Tremont, PA
Durant, OK
Total
Corporate Office
Year
Opened
1984
1989
1996
2000
2004
Total Square Footage
Number of Stores Served
(Square footage in thousands)
1,423
3,559
1,411
1,295
1,297
8,985
262
326
302
333
209
1,432
We own the facility in Columbus, Ohio that serves as our general office for corporate associates. During 2016, we entered into
an agreement to lease a new facility for our general offices, which is also in Columbus, Ohio. We anticipate moving to this
new facility in the first half of 2018.
14
Item 3. Legal Proceedings
Item 103 of SEC Regulation S-K requires that we disclose actual or known contemplated legal proceedings to which a
governmental authority and we are each a party and that arise under laws dealing with the discharge of materials into the
environment or the protection of the environment, if the proceeding reasonably involves potential monetary sanctions of
$100,000 or more. Accordingly, please refer to the discussion in note 10 to the accompanying consolidated financial statements
regarding the subpoena we received from the District Attorney for the County of Alameda, State of California.
Aside from these matters, no response is required under Item 103 of Regulation S-K. For a discussion of certain litigated
matters, also see note 10 to the accompanying consolidated financial statements
Item 4. Mine Safety Disclosures
None.
15
Supplemental Item. Executive Officers of the Registrant
Our executive officers at March 28, 2017 were as follows:
Name
David J. Campisi
Age Offices Held
61 Chief Executive Officer and President
Lisa M. Bachmann
55
Executive Vice President, Chief Merchandising and Operating Officer
Timothy A. Johnson
Michael A. Schlonsky
Ronald A. Robins, Jr.
49
50
53
Executive Vice President, Chief Administrative Officer and Chief
Financial Officer
Executive Vice President, Human Resources and Store Operations
Senior Vice President, General Counsel and Corporate Secretary
Officer Since
2013
2002
2004
2000
2015
David J. Campisi is our Chief Executive Officer and President. Before joining Big Lots in May 2013, Mr. Campisi served as the
Chairman and Chief Executive Officer of Respect Your Universe, Inc., an activewear retailer. Mr. Campisi previously served as
the Chairman, President and Chief Executive Officer of The Sports Authority, Inc., a sporting goods retailer. Prior to that, Mr.
Campisi served as Executive Vice President and General Merchandise Manager, Women’s Apparel, Accessories, Intimates and
Cosmetics of Kohl’s Corporation, a department store retailer. Additionally, Mr. Campisi served as Senior Vice President and
General Merchandise Manager, Apparel, Home, and Home Electronics of Fred Meyer’s Corporation, a department store retailer.
Lisa M. Bachmann is responsible for merchandising and global sourcing, information technology, merchandise presentation, and
merchandise planning and allocation. Ms. Bachmann was promoted to Executive Vice President, Chief Merchandising and
Operating Officer in August 2015, at which time she assumed responsibility for merchandising and global sourcing. Prior to that,
Ms. Bachmann was promoted to Executive Vice President, Chief Operating Officer in August 2012 and Executive Vice President,
Supply Chain Management and Chief Information Officer in March 2010. Ms. Bachmann joined us as Senior Vice President,
Merchandise Planning, Allocation and Presentation in March 2002.
Timothy A. Johnson is responsible for financial reporting and controls, financial planning and analysis, treasury, risk management,
tax, internal audit, investor relations, real estate, asset protection and distribution and transportation services. Mr. Johnson was
promoted to Executive Vice President, Chief Administrative Officer and Chief Financial Officer in August 2015, at which time
he assumed responsibility for distribution and transportation services. Prior to that Mr. Johnson was promoted to Executive Vice
President, Chief Financial Officer in March 2014. Mr. Johnson assumed responsibility for real estate in June 2013 and asset
protection in November 2013. Mr. Johnson was promoted to Senior Vice President, Chief Financial Officer in August 2012, at
which time he assumed responsibility for treasury and risk management. He was promoted to Senior Vice President of Finance
in July 2011. He joined us in August 2000 as Director of Strategic Planning.
Michael A. Schlonsky is responsible for store operations, talent management and oversight of human resources. He was promoted
to Executive Vice President in August 2015, at which time he assumed responsibility for store operations. He was promoted to
Senior Vice President, Human Resources in August 2012 and promoted to Vice President, Associate Relations and Benefits in
2010. Prior to that, Mr. Schlonsky was promoted to Vice President, Associate Relations and Risk Management in 2005. Mr.
Schlonsky joined us in 1993 as Staff Counsel and was promoted to Director, Risk Management in 1998, and to Vice President,
Risk Management and Administrative Services in 2000.
Ronald A. Robins, Jr. is responsible for legal affairs and compliance. Mr. Robins joined us in 2015 as Senior Vice President,
General Counsel and Corporate Secretary. Prior to joining us, Mr. Robins was a partner at Vorys, Sater, Seymour and Pease LLP
and also previously served as General Counsel, Chief Compliance Officer, and Secretary of Abercrombie & Fitch Co., an apparel
retailer.
16
Part II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Our common shares are listed on the New York Stock Exchange (“NYSE”) under the symbol “BIG.” The following table
reflects the high and low sales prices for our common shares as reported on the NYSE composite tape for the fiscal periods
indicated:
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
2016
2015
High
Low
High
Low
$
$
47.95
53.95
56.30
56.54
$
$
35.86
41.61
42.40
42.58
$
$
51.11
48.53
50.15
48.14
$
$
44.45
41.37
39.77
33.78
In June 2014, we announced that our Board of Directors commenced a cash dividend program. Since the commencement of
the program, we have declared and paid eleven consecutive quarterly cash dividends. The following reflects our quarterly
dividend payments for 2015 and 2016:
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Total
2016
2015
0.21
0.21
0.21
0.21
0.84
$
$
0.19
0.19
0.19
0.19
0.76
$
$
In the first quarter of 2017, our Board of Directors declared a dividend payable on March 31, 2017 to shareholders of record on
March 17, 2017 and increased the amount of the dividend from $0.21 to $0.25 per share. Although it is the present intention of
our Board of Directors to continue to pay a quarterly cash dividend in the future, the determination to pay future dividends will
be at the discretion of our Board of Directors and will depend on our financial condition, results of operations, capital
requirements, compliance with applicable laws and agreements and any other factors deemed relevant by our Board.
After making investments in the business and paying declared dividends, we have utilized our excess cash for share repurchase
programs. Any future decisions on the uses of excess cash will be determined by our Board of Directors taking into account
business conditions then existing, including our earnings, financial requirements and condition, opportunities for reinvesting
cash, and other factors.
The following table sets forth information regarding our repurchase of common shares during the fourth fiscal quarter of 2016:
(In thousands, except price per share data)
Period
October 30, 2016 - November 26, 2016
November 27, 2016 - December 24, 2016
December 25, 2016 - January 28, 2017
Total
(a) Total
Number of
Shares
Purchased (1)
—
(b) Average
Price Paid
per Share (1)
50.65
$
—
—
—
$
51.72
50.46
51.13
(c) Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs
(d) Approximate
Dollar Value of
Shares that May
Yet Be Purchased
Under the Plans or
Programs
— $
—
—
— $
—
—
—
—
17
(1)
In November 2016, December 2016, and January 2017, in connection with the vesting of certain outstanding restricted
stock awards and restricted stock units, we acquired 45, 143, and 94 of our common shares, respectively, which were
withheld to satisfy minimum statutory income tax withholdings.
On February 28, 2017, our Board of Directors authorized a program for the repurchase of up to $150.0 million of our common
shares (“2017 Repurchase Program”). The 2017 Repurchase Program has no scheduled termination date.
At the close of trading on the NYSE on March 24, 2017, there were approximately 658 registered holders of record of our
common shares.
The following graph and table compares, for the five fiscal years ended January 28, 2017, the cumulative total shareholder
return for our common shares, the S&P 500 Index, and the S&P 500 Retailing Index. Measurement points are the last trading
day of each of our fiscal years ended February 2, 2013, February 1, 2014, January 31, 2015, January 30, 2016 and January 28,
2017. The graph and table assume that $100 was invested on January 28, 2012, in each of our common shares, the S&P 500
Index, and the S&P 500 Retailing Index and reinvestment of any dividends. The stock price performance on the following
graph and table is not necessarily indicative of future stock price performance.
Base Period
Indexed Returns
Years Ended
Company / Index
Big Lots, Inc.
S&P 500 Index
S&P 500 Retailing Index
January
January
January
January
January
January
2012
2013
2014
2015
2016
2017
$
$
100.00 $
80.85 $
66.98 $
116.12 $
99.75 $
100.00
117.60
141.66
161.82
160.74
100.00 $
127.09 $
159.31 $
191.32 $
223.45 $
127.31
194.28
264.90
18
Item 6. Selected Financial Data
The following statements of operations and balance sheet data have been derived from our consolidated financial statements
and should be read in conjunction with MD&A and the consolidated financial statements and related notes included herein.
(In thousands, except per share amounts and store counts)
2016 (a)
2015 (a)
Fiscal Year
2014 (a)
2013 (a)
2012 (b)
Net sales
$
5,200,439 $
5,190,582 $
5,177,078 $
5,124,755 $
5,212,318
Cost of sales (exclusive of depreciation expense shown separately below)
3,101,020
3,123,396
3,133,124
3,117,386
3,157,632
Gross margin
2,099,419
2,067,186
2,043,954
2,007,369
2,054,686
Selling and administrative expenses
1,731,006
1,708,717
1,699,764
1,664,031
1,639,770
Depreciation expense
Operating profit
Interest expense
Other income (expense)
Income from continuing operations before income taxes
Income tax expense
Income from continuing operations
120,440
247,973
(5,091)
1,359
244,241
91,458
152,783
122,737
235,732
(3,683)
(5,199)
226,850
83,842
143,008
119,702
224,488
113,228
230,110
103,146
311,770
(2,588)
(3,293)
(4,184)
—
221,900
85,239
136,661
(12)
226,805
85,515
141,290
2
307,588
117,071
190,517
Income (loss) from discontinued operations, net of tax
45
(135)
(22,385)
(15,995)
(13,396)
Net income
Earnings per common share - basic:
Continuing operations
Discontinued operations
Earnings per common share - diluted:
Continuing operations
Discontinued operations
Weighted-average common shares outstanding:
Basic
Diluted
Cash dividends declared per common share
Balance sheet data:
Total assets
Working capital
Cash and cash equivalents
Long-term obligations under bank credit facility
Shareholders’ equity
Cash flow data:
Cash provided by operating activities
Cash used in investing activities
Store data:
Total gross square footage
Total selling square footage
Stores open at end of the fiscal year
(a) The period presented is comprised of 52 weeks.
(b) The period presented is comprised of 53 weeks.
$
$
$
$
$
$
152,828 $
142,873 $
114,276 $
125,295 $
177,121
3.37 $
2.83 $
2.49 $
2.46 $
—
—
(0.41)
(0.28)
3.37 $
2.83 $
2.08 $
2.18 $
3.32 $
2.81 $
2.46 $
2.44 $
—
—
(0.40)
(0.28)
3.32 $
2.80 $
2.06 $
2.16 $
45,316
45,974
50,517
50,964
54,935
55,552
57,415
57,958
0.84 $
0.76 $
0.51 $
— $
3.18
(0.22)
2.96
3.15
(0.22)
2.93
59,852
60,476
—
$
1,607,707 $
1,640,370 $
1,635,891 $
1,739,599 $
1,753,626
315,784
51,164
106,400
315,984
411,446
483,833
54,144
62,300
52,261
62,100
68,629
77,000
423,300
60,581
171,200
650,630 $
720,470 $
789,550 $
901,427 $
758,142
311,925 $
342,352 $
318,562 $
198,334 $
281,133
(84,701) $
(113,193) $
(90,749) $
(97,495) $
(130,357)
44,570
31,519
1,432
44,914
31,775
1,449
45,134
32,006
1,460
45,708
32,732
1,493
45,505
32,623
1,495
$
$
$
19
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview
The discussion and analysis presented below should be read in conjunction with the accompanying consolidated financial
statements and related notes. Please refer to “Item 1A. Risk Factors” of this Form 10-K for a discussion of forward-looking
statements and certain risk factors that may have a material adverse effect on our business, financial condition, results of
operations, and/or liquidity.
Our fiscal year ends on the Saturday nearest to January 31, which results in some fiscal years with 52 weeks and some with 53
weeks. Fiscal years 2016, 2015, and 2014 were each comprised of 52 weeks. Fiscal year 2017 will be comprised of 53 weeks.
Operating Results Summary
The following are the results from 2016 that we believe are key indicators of our operating performance when compared to
2015.
•
•
•
•
•
•
Net sales increased $9.9 million, or 0.2%.
Comparable store sales for stores open at least fifteen months, including e-commerce, increased $45.8 million, or
0.9%.
Gross margin dollars increased $32.2 million with a 60 basis point increase in gross margin rate to 40.4% of sales.
Selling and administrative expenses increased $22.3 million. As a percentage of net sales, selling and administrative
expenses increased 40 basis points to 33.3% of net sales.
Operating profit rate increased 30 basis points to 4.8%.
Diluted earnings per share from continuing operations increased 18.2% to $3.32 per share, compared to $2.81 per
share in 2015.
Our return on invested capital increased to 19.0% from 16.6%.
Inventory of $858.7 million represented an $8.7 million increase, or 1.0%, from 2015.
•
•
• We acquired approximately 5.6 million of our outstanding common shares for $250.0 million, under our 2016
Repurchase Program (as defined below in “Capital Resources and Liquidity”), at a weighted average price of $44.72
per share.
• We declared and paid four quarterly cash dividends in the amount of $0.21 per common share, for a total paid amount
of approximately $38.5 million.
The following table compares components of our consolidated statements of operations as a percentage of net sales:
Net sales
Cost of sales (exclusive of depreciation expense shown separately
below)
Gross margin
Selling and administrative expenses
Depreciation expense
Operating profit
Interest expense
Other income (expense)
Income from continuing operations before income taxes
Income tax expense
Income from continuing operations
Loss from discontinued operations, net of tax
Net income
2016
2015
2014
100.0%
100.0%
100.0%
59.6
40.4
33.3
2.3
4.8
(0.1)
0.0
4.7
1.8
2.9
0.0
2.9%
60.2
39.8
32.9
2.4
4.5
(0.1)
(0.1)
4.4
1.6
2.8
(0.0)
2.8%
60.5
39.5
32.8
2.3
4.3
(0.0)
0.0
4.3
1.6
2.6
(0.4)
2.2%
20
See the discussion below under the captions “2016 Compared To 2015” and “2015 Compared To 2014” for additional details
regarding the specific components of our operating results.
In 2016, our selling and administrative expenses include $27.8 million of costs associated with our pension plans, which have
been frozen, terminated, and fully distributed, partially offset by a $3.8 million gain on the sale of a company-owned property
in California.
In 2015, our selling and administrative expenses include both a $4.5 million charge associated with the settlement of a legal
matter and $12.9 million of costs associated with our pension plans, which have been frozen, terminated, and fully distributed.
Operating Strategy
Mr. Campisi joined us in 2013 as our Chief Executive Officer and President. Under Mr. Campisi’s leadership, we reevaluated
the key components of our operating strategy, our leadership and organizational structure, and the businesses that we operated.
After performing his review with the senior leadership team, we introduced our Edit to Amplify operating strategy (“Edit to
Amplify”). Edit to Amplify applies to all aspects of our business, but particularly focuses on merchandising, marketing, and
our customers’ shopping experience, which we believe represent the key drivers of our net sales. Edit to Amplify focuses our
entire attention on our core customer, whom we refer to as Jennifer, and drives us to exceed Jennifer’s expectations by
employing a customer-first mentality and delivering a product assortment that simultaneously meets her everyday needs and
delivers exciting surprises intended to drive discretionary purchases. During 2016, our Edit to Amplify strategy began to
narrow our focus on what we call “ownable or winnable” merchandise categories in which Jennifer looks to us to deliver. In
2017, we expect to continue to refine our operating strategy, and anticipate:
•
•
•
•
•
Earnings per diluted share from continuing operations to be $3.95 to $4.10.
Comparable store sales increase 1% to 2%.
Opening 20 new stores and closing 40 stores.
Cash flow (operating activities less investing activities) of approximately $180 to $190 million.
Cash returned to shareholders of approximately $195 million, through our quarterly dividend program and the 2017
Repurchase Program.
The “2016 Compared To 2015” section below provides additional discussion and analysis of our financial performance and the
assumptions and expectations upon which we are basing our guidance for our future results.
Merchandising
We intend to achieve our goal of exceeding our core customer’s expectations by offering a product assortment of value-priced
merchandise that is meaningful to her and improving her shopping experience. Our Edit to Amplify strategy uses the two
separate “Edit” and “Amplify” components to achieve our goal of exceeding our core customer’s expectations. The “Edit”
component focuses on continuously evaluating our product mix and downsizing, or potentially eliminating, those departments
within our merchandise categories and product offerings that we believe she does not prioritize or where we believe we do not
maintain a competitive advantage. The “Amplify” component enhances the assortment of those merchandise categories and
product offerings that we believe are important to our core customer’s shopping experience and in which we believe we have a
competitive advantage. We internally define these “Amplify” merchandise categories as “ownable” or “winnable.” An
“ownable” merchandise category is one where we believe Jennifer views us as a destination to shop for a tasteful assortment of
products. A “winnable” merchandise category is one where we believe our value proposition differentiates us from the
competition when Jennifer shops for these key product offerings. We believe these merchandise categories – Furniture,
Seasonal, Soft Home, Food, and Consumables – align our business with how our core customer shops our stores. Additionally,
we believe our Hard Home and Electronics, Toys, & Accessories merchandise categories provide convenient adjacencies to our
“ownable” or “winnable” categories.
21
Our merchandise categories place differing emphasis on essential items (needs) and discretionary items (wants).
•
•
•
•
Our Furniture category primarily focuses on our core customer’s home furnishing needs, such as upholstery,
mattresses, ready-to-assemble, and case goods. In Furniture, we believe our competitive advantage is attributable to
our sourcing relationships, everyday value offerings, and our in-store availability. A significant majority of our
offerings in this category consists of replenishable products sourced either from recognized brand-name manufacturers
or sold under our own brands. Our long-standing relationships with certain brand-name manufacturers, most notably
in our mattresses and upholstery departments, allow us to work directly with them to create product offerings
specifically for our stores, which enables us to provide a high-quality product at a competitive price. Additionally, we
believe our ability to carry in-stock inventory of our core furniture offerings that is available to take home at the end of
our customer’s shopping experience positively differentiates us from our competition.
Our Food and Consumables categories focus primarily on catering to our core customer’s daily essentials, or “need,
use, buy most” items, by providing significant value and consistency of product offerings. We believe we possess a
competitive advantage in the Food and Consumables categories based on our sourcing capabilities for closeout
merchandise. Manufacturers and vendors have closeout merchandise for a variety of different reasons, including other
retailers canceling orders or going out of business, marketing or packaging changes, or a new product launch that has
underperformed. We believe our vendor relationships along with our size and financial strength afford us these
opportunities. We have expanded and improved the consistency of our offerings in these categories to supplement our
closeout strategy.
Our Soft Home and Hard Home categories address our core customer’s cooking and living essentials, such as tabletop,
bedding, and bath, as well as their home-related discretionary items, such as small appliances, home fashion, and
accents. We believe that our competitive advantage in the Soft Home and Hard Home categories is based on the
quality, brand, fashion, and value of our merchandise offerings, with a particular focus on value and savings. In these
categories, our merchandise mix is comprised of replenishable products or assortments we develop with our vendors.
Our closeout penetration in these categories is significantly lower than in our Food and Consumables categories. Over
the past few years, we have amplified our assortment in Soft Home by allocating more selling space to the category to
support a wider range of fashion-based products that our core customer uses to decorate her home.
Our Seasonal and Electronics, Toys, & Accessories categories focus on our core customer’s discretionary purchases,
such as patio furniture, summer outdoor décor, and Christmas trim. We generally work with vendors to develop
product offerings for our stores based on our market evaluations, as closeouts are not always practicable from an
availability or timing perspective. Much of this merchandise is sourced on an import basis, which allows us to
maintain our competitive pricing. During the past few years, we have amplified our assortment of our Seasonal
offerings, particularly patio furniture and summer outdoor décor, while we have “edited” our assortment of offerings
in our Electronics, Toys, & Accessories categories in response to reduced customer demand for our selection.
Our merchandising management team is aligned with our merchandise categories. The primary goal of this team is to increase
our total company comparable store sales (“comp” or “comps”). We focus our performance review of members within
merchandise management on comps by merchandise category, as we believe it is the key metric that will drive our long-term
net sales. By focusing on growing our “ownable” and/or “winnable” merchandise categories, and managing contraction in
certain departments within those categories, we believe our merchandise management team can effectively address the
changing shopping behaviors of our customers and implement more tailored programs within each merchandise category,
which we believe will lead to continued growth in our comps in the future.
22
Marketing
The top priority of all of our marketing activities is to increase our comps. Since the implementation of our Edit to Amplify
strategy, we have shifted our marketing efforts to focus on strengthening our connection with our core customer through the
forms of media that are integral in her daily life. We continue to increase our use of social and digital media outlets including
conducting entire campaigns through these outlets (specifically on Facebook®, Instagram®, Pinterest®, Twitter®, and YouTube®)
to drive increased brand awareness with our core customer and to attempt to speak to new potential customers. These outlets
provide us with a channel to deliver our brand message directly to Jennifer, while also providing her with the opportunity to
share direct feedback with us, which can enhance our understanding of what is most important to her and improve the shopping
experience in our stores. During 2016, we began a comprehensive review of our brand identity to gain further insights into
Jennifer's perception of our brand and how best to improve the overall effectiveness of our messaging efforts.
Given our customers’ proficiency with mobile devices and digital media, we focus on communicating with her through those
channels. We believe most of our core customers are members of our Buzz Club Rewards® program. Our Buzz Club
Rewards® members receive a variety of targeted email campaigns throughout the year that promote our most attractive and
unique product offerings. We are continuously learning additional information about our rewards members, and we will
continually refine our methodologies to effectively incentivize their behaviors.
In addition to electronic, social and digital media, our marketing communication efforts involve a mix of television advertising,
printed ad circulars, and in-store signage. The primary goals of our television advertising are to promote our brand and, from
time to time, promote products or special discounts in our stores. Our printed advertising circulars and our in-store signage
initiatives focus on promoting our value proposition on our unique merchandise offerings.
Shopping Experience
Starting in 2015, a major focus of our business has been to increase our investment in our store teams through the roll-out of
store operations initiatives designed to aid our store associates in delivering more consistent customer service experiences by
focusing on catering to her needs, including:
•
•
•
Redefining roles and responsibilities of our store associates by delineating our team into two primary areas - customer
service and replenishment - which narrows the responsibilities of, and provides greater focus to, our team members.
Implementing a new scheduling system focused on ensuring adequate staffing levels during Jennifer’s core shopping
windows.
Standardizing our training program for our furniture sales managers to improve the consistency of the Furniture
category shopping experience in our stores.
The analysis we conducted during our strategic planning process continues to identify our Furniture category as a competitive
differentiator and, as a result, we continue to implement initiatives designed to positively impact our core customer's furniture
shopping experience (in addition to standardizing our training program for our furniture sales managers), including:
•
•
•
•
Expanding the size of our Furniture departments in many stores to enable Jennifer to navigate our furniture department
more freely.
Refining our product adjacencies to provide a more cohesive shopping experience with our complementary Soft Home
and Hard Home product offerings.
Completing full chain roll outs of private label credit card and furniture coverage / warranty programs, which provide
access to revolving credit, through a third party, for use on both larger ticket items and daily purchases and a method
for obtaining multi-year warranty coverage for furniture purchases.
Promoting our Easy Leasing lease-to-own program, which provides a single use opportunity for access to third-party
financing.
In addition to our efforts to improve the in-store shopping experience, we continue to focus on improving our e-commerce
platform, which we launched in the spring of 2016. Our integrated e-commerce platform has offered a narrowed assortment of
our in-store offerings. As we learn more about our core customer’s online shopping habits we will expand and refine our online
offerings. We also expect that in 2017 our e-commerce platform will begin offering expanded fabric and color options on
certain products in our Furniture category and certain outdoor furniture offerings in our Seasonal category.
23
Real Estate
We have determined that our average store size of approximately 22,000 selling square feet is currently appropriate for us to
provide our core customers with a positive shopping experience and properly present a representative assortment of
merchandise categories that our core customer finds meaningful. Accordingly, when we relocate or open new stores in the
future, we intend to open stores of a similar size. Additionally, we have established more stringent merchandise presentation
and store layout requirements for our new stores, which were established to ensure a more consistent shopping experience in
each location. In late 2016, we engaged a third party specialist and began a study to analyze our store design and layout in
relation to changing retail landscape and needs of our core customers. During 2017, we will begin to test certain design and
layout revisions and adaptations and evaluate the customer feedback and operating results. Dependent on the outcome of this
analysis, we may begin implementing elements of the proposed store design and layout suggestions in future years.
As discussed in “Item 2. Properties,” of this Form 10-K, we have 241 store leases that will expire in 2017. During 2017, we
anticipate opening 20 new stores and closing approximately 40 of our existing locations. The majority of these closings are to
relocate stores to improved locations within the same local market, with the balance resulting from a lack of renewal options or
our belief that a location’s sales and operating profit volume are not strong enough to warrant additional investment in the
location. As part of our evaluation of potential store closings, we consider our ability to transfer sales from a closing store to
other nearby locations and generate a better overall financial result for the geographic market. For our remaining store
locations with fiscal 2017 lease expirations, we expect to exercise our renewal option or negotiate lease renewal terms
sufficient to allow us to continue operations and achieve an acceptable return on our investment.
Discontinued Operations
During the first quarter of 2014, we ceased our Canadian operations by closing all of our stores in Canada. Accordingly, we
reclassified the results of our Canadian operations to discontinued operations for all periods presented. In conjunction with the
wind down of our Canadian operations in the first quarter of 2014, we recorded $23.0 million in contract termination costs,
primarily associated with store operating leases, $2.2 million in severance costs associated with our store and corporate office
operations in Canada, and $5.1 million in foreign currency losses associated with the reclassification of the cumulative
translation adjustment from other comprehensive income. After the first quarter of 2014, we incurred approximately $2.1
million in costs, which were primarily associated with professional services and negotiating the termination of our leased
facilities with our former landlords.
Additionally, we have elected to classify in discontinued operations the U.S. income tax benefit related to the excess tax basis
in the common shares of Big Lots Canada, Inc. that we expected to, and did, recover as a worthless stock deduction in 2014, as
this deduction was generated from our Canadian operations which we have also classified as discontinued operations. During
2014, the amount of this income tax benefit that we recognized was $13.8 million.
24
2016 COMPARED TO 2015
Net Sales
Net sales by merchandise category (in dollars and as a percentage of total net sales), net sales change (in dollars and
percentage), and comps in 2016 compared to 2015 were as follows:
(In thousands)
Furniture
Food
Consumables
Soft Home
Seasonal
Hard Home
Electronics, Toys, & Accessories
2016
2015
Change
Comps
$ 1,195,365
23.0% $ 1,135,757
21.9% $
830,508
823,482
743,359
739,106
437,575
431,044
16.0
15.8
14.3
14.2
8.4
8.3
845,541
832,345
710,821
725,238
477,451
463,429
16.3
16.0
13.7
14.0
9.2
8.9
59,608
(15,033)
(8,863)
32,538
13,868
(39,876)
(32,385)
9,857
5.2%
(1.8)
(1.1)
4.6
1.9
(8.4)
(7.0)
0.2%
5.7%
(1.0)
(0.2)
5.4
2.6
(7.5)
(6.5)
0.9%
Net sales
$ 5,200,439
100.0% $ 5,190,582
100.0% $
In the fourth quarter of 2016, we realigned select merchandise categories to be consistent with the changes in our merchandising
team and our management reporting. Specifically, we reclassified our toy department from our Seasonal category to our Electronics,
Toys, & Accessories category and our home organization department from our Consumables category to our Soft Home category.
Sales results for all years have been reclassified to reflect this realignment.
We periodically assess and make minor adjustments to our product hierarchy, which can impact the roll-up of our merchandise
categories. Our financial reporting process utilizes the most current product hierarchy in reporting net sales by merchandise
category for all periods presented. Therefore, there may be minor reclassifications of net sales by merchandise category compared
to previously reported amounts.
Net sales increased $9.9 million, or 0.2%, to $5,200.4 million in 2016, compared to $5,190.6 million in 2015. The increase in
net sales was principally due to a 0.9% increase in comps, which increased net sales by $45.8 million, partially offset by the net
decrease of 17 stores since the end of 2015, which decreased net sales by $35.9 million. The Furniture category experienced
positive net sales and comps during 2016, primarily driven by strength in our mattress, case goods, and upholstery departments,
which were positively impacted by an expansion of allocated square footage in approximately 50% of our stores during the first
quarter of 2016, the performance of our Easy Leasing lease-to-own program, and the introduction of a third party, private label
credit card offering. Soft Home experienced increases in net sales and comps which were primarily driven by continued broad-
based improvement in the product assortment, quality and perceived value by our customers. The positive net sales and comps
in our Seasonal category were driven by strength in our lawn & garden and summer departments. The strength in our lawn &
garden and summer departments was primarily a result of improved product assortment and a favorable weather pattern in the
first quarter of 2016 as compared to the first quarter of 2015, which experienced an extended winter. The net sales and comp
increases in Furniture, Soft Home, and Seasonal were partially offset by slightly negative net sales and comps in Consumable
and Food and larger negative net sales and comps in our Hard Home and Electronics, Toys, & Accessories categories. The
Consumable category experienced slightly negative comps and negative net sales, driven by negative comps in our paper
department, due to fewer closeout opportunities. This was partially offset by positive comps in our pet department where we
introduced an exclusive label offering in 2015 that has continued to grow, coupled with positive performance in our health,
beauty, and cosmetics department due to the introduction of an everyday, branded product program. The Food category
experienced a slight decrease in net sales and comps due to merchandising execution, such as product mix imbalances, and the
timing of closeout inventory purchases. The negative net sales and comps in Electronics, Toys, & Accessories were a result of
a reduced product offering from our “edit” activities in the electronics department, as we continue to refine our understanding
of where we can be successful in this category. Hard Home experienced negative net sales and comps as a result of an
intentionally narrowed assortment, primarily from a reduction in allocated space executed in the first quarter of 2016.
25
For 2017, we expect net sales to be in the range of flat to up slightly compared to 2016, which is based on an anticipated
increase in comps of 1% to 2%, partially offset by a lower overall store count. Additionally, we expect sales to benefit from a
53rd week of operations in 2017 as compared to 2016, which was comprised of 52 weeks. We expect comps above the
company average in our Furniture, Soft Home and Seasonal categories, driven by continued growth in our lease-to-own and
private label credit card programs, strength in our lawn & garden offerings, and continued refinement of our Soft Home
assortment. We expect slightly positive comps in our Food and Consumables categories as we continue to improve our product
assortment and expand our everyday offerings. We anticipate below company average comps in our Hard Home and
Electronics, Toys, & Accessories categories due to continued downsizing and narrowed product assortments.
Gross Margin
Gross margin dollars increased $32.2 million, or 1.6%, to $2,099.4 million in 2016, compared to $2,067.2 million in 2015. The
increase in gross margin dollars was principally due to a higher gross margin rate, which increased gross margin dollars by
approximately $28.3 million along with an increase in net sales, which increased gross margin dollars by approximately $3.9
million. Gross margin as a percentage of net sales increased 60 basis points to 40.4% in 2016 compared to 39.8% in 2015. The
gross margin rate increase was principally due to the impact of a higher initial mark-up. The higher initial mark-up was a
product of lower inbound freight costs, increased sales of higher margin products, and slightly favorable merchandise costs.
For 2017, we expect our gross margin rate to be essentially flat compared to 2016.
Selling and Administrative Expenses
Selling and administrative expenses were $1,731.0 million in 2016, compared to $1,708.7 million in 2015. The increase of
$22.3 million, or 1.3%, was primarily due to increases in share-based compensation of $19.6 million, pension termination
related expenses of $14.9 million, administrative costs to support our e-commerce platform of $10.0 million, and accruals for
legal settlements of $5.1 million, partially offset by decreases in distribution and outbound transportation costs of $7.5 million,
a gain on the sale of real estate of $3.8 million, a decrease in self-insurance costs of $3.8 million, and the absence of a $4.5
million loss contingency associated with a merchandise related legal matter, which occurred during the second quarter of 2015.
The increase in share-based compensation expense was driven by performance share units (“PSUs”), which had not met the
accounting requirements for expensing prior to the first quarter of 2016. The increase in pension expense includes all costs
associated with the termination of our pension plan including settlement charges and professional fees. The increase in
administrative costs to support our e-commerce platform was attributable to the launch of our e-commerce platform during the
first quarter of 2016 and, as a result, many of these costs were not incurred in 2015. In 2016, we incurred $4.8 million in
charges related to wage and hour claims brought against us in the State of California associated with both our stores and our
distribution center as well as for an action related to our handling of hazardous materials and hazardous waste in California.
The decrease in distribution and outbound transportation costs was driven by operational efficiencies generated at our
distribution centers and through our outbound transportation initiatives, as well as lower diesel fuel prices, during 2016 as
compared to the 2015. The gain on the sale of real estate resulted from the sale of an owned store location in the fourth quarter
of 2016. The decrease in self-insurance costs was due to a decrease in the occurrence of high cost claims within our general
liability program.
As a percentage of net sales, selling and administrative expenses increased by 40 basis points to 33.3% in 2016 compared to
32.9% in 2015. Our future selling and administrative expense as a percentage of net sales depends on many factors, including
our level of net sales, our ability to implement additional efficiencies, principally in our store and distribution center operations,
and fluctuating commodity prices, such as diesel fuel, which directly affects our outbound transportation cost.
For 2017, selling and administrative expenses as a percentage of net sales are expected to decrease from 2016. Specifically, we
anticipate selling and administrative expenses as a percentage of net sales will decrease even when excluding the $27.8 million
in costs associated with our terminated pension plans from our 2016 selling and administrative expenses, as we expect our
leverage point occurs at a slightly positive comp.
26
Depreciation Expense
Depreciation expense decreased $2.3 million to $120.4 million in 2016 compared to $122.7 million in 2015. The decrease was
driven by a reduction in new store spending in 2014 and 2015 as compared to 2010 and 2011, as the initial store construction
costs on those stores are completing the depreciation cycle. This decrease was partially offset by the depreciation of our e-
commerce platform, which was placed into service in the first quarter of 2016. Depreciation expense as a percentage of net
sales decreased by 10 basis points compared to 2015.
For 2017, we expect capital expenditures to be approximately $150 million, which includes maintenance capital for our stores,
distribution centers, and corporate offices, investments in strategic initiatives to support future growth including our investment
in the store of the future, and the construction costs associated with opening 20 new stores. Based on our anticipated level of
capital expenditures in 2017 and the run rate of depreciation on our existing property and equipment, we expect 2017
depreciation expense to be approximately $115 million to $120 million, compared to $120 million in 2016.
Operating Profit
Operating profit was $248.0 million in 2016 as compared to $235.7 million in 2015. The increase in operating profit was
primarily driven by the items discussed in the "Net Sales", "Gross Margin", "Selling and Administrative Expenses", and
"Depreciation Expense" sections above. In summary, the increase in our comps and gross margin rate coupled with a decrease
in depreciation expense was partially offset by an increase in selling and administrative expenses.
During 2017, we anticipate our operating profit will benefit by approximately $5 million from the addition of the 53rd week in
the fiscal year.
Interest Expense
Interest expense increased $1.4 million to $5.1 million in 2016 compared to $3.7 million in 2015. The increase was driven by
higher average borrowings under the 2011 Credit Agreement. We had total average borrowings (including capital leases) of
$240.7 million in 2016 compared to total average borrowings of $177.2 million in 2015. The increase in our average revolving
debt balance was primarily the result of year-over-year changes in the timing and amount of our share repurchase activity.
Other Income (Expense)
Other income (expense) was $1.4 million in 2016, compared to $(5.2) million in 2015. We recognized unrealized gains of $3.7
million partially offset by realized losses of $2.3 million in 2016 related to our diesel fuel hedging contracts, driven by an
increase in current and future projected diesel fuel prices, which positively impacted valuation. We recognized unrealized
losses of $4.7 million along with realized losses of $0.5 million in 2015 related to our diesel fuel hedging contracts, driven by a
decrease in current and future projected diesel fuel prices which negatively impacted valuation.
Income Taxes
The effective income tax rate in 2016 and 2015 for income from continuing operations was 37.5% and 37.0%, respectively.
The increase in our effective rate was principally driven by an increase in nondeductible expenses and a net decrease in
settlements and lapses of the statute of limitations.
27
2015 COMPARED TO 2014
Net Sales
Net sales by merchandise category, in dollars and as a percentage of total net sales, net sales change in dollars and percentage,
and comps from 2015 compared to 2014 were as follows:
(In thousands)
Furniture
Food
Consumables
Seasonal
Soft Home
Hard Home
Electronics, Toys, & Accessories
2015
2014
Change
Comps
$ 1,135,757
21.9% $ 1,051,165
20.3% $
84,592
8.0%
8.8%
845,541
832,345
725,238
710,821
477,451
463,429
16.3
16.0
14.0
13.7
9.2
8.9
821,915
839,310
732,323
683,448
510,095
538,822
15.9
16.2
14.1
13.2
9.9
10.4
23,626
(6,965)
(7,085)
27,373
(32,644)
(75,393)
13,504
2.9
(0.8)
(1.0)
4.0
(6.4)
(14.0)
0.3%
4.6
1.1
0.6
5.8
(4.5)
(12.5)
1.8%
Net sales
$ 5,190,582
100.0% $ 5,177,078
100.0% $
Net sales increased $13.5 million, or 0.3%, to $5,190.6 million in 2015, compared to $5,177.1 million in 2014. The increase in
net sales was principally due to a 1.8% increase in comps, which increased net sales by $91.1 million, partially offset by the net
decrease of 11 stores since the end of 2014, which decreased net sales by $77.6 million. The Furniture category experienced
positive net sales and comps in nearly all departments during 2015, led by our mattresses and upholstery departments, driven
by the impact of our Easy Leasing lease-to-own program. Although many departments in our Soft Home category experienced
increased net sales and positive comps, the overall increases in Soft Home net sales and comps were primarily driven by new
and improved products in our bath and bedding departments and an expansion of selling space allocated to this key category.
The Food category experienced positive comps and increased net sales, which were attributable to an increased square footage
allocation, the completion of the roll-out of our cooler and freezer program, and enhanced assortments of branded products,
particularly in connection with closeouts. Consumables experienced an increase in comps, primarily driven by our pet and
household chemicals departments, which benefited from an expanded product assortment and increased closeouts, respectively,
during 2015. The Seasonal category experienced positive comps due to strength in our Christmas, Halloween, and summer
departments, which was driven by an improved product assortment. The positive comps in these categories were partially offset
by negative comps in our Hard Home, and Electronics, Toys, & Accessories categories. Our Hard Home and Electronics, Toys,
& Accessories both experienced negative comps as a result of an intentionally narrowed assortment, which resulted from our
“edit” activities during 2015.
Gross Margin
Gross margin dollars increased $23.2 million, or 1.1%, to $2,067.2 million in 2015, compared to $2,044.0 million in 2014. The
increase in gross margin dollars was principally due to a higher gross margin rate, which increased gross margin dollars by
approximately $17.9 million along with an increase in net sales, which increased gross margin dollars by approximately $5.3
million. Gross margin as a percentage of net sales increased 30 basis points to 39.8% in 2015 compared to 39.5% in 2014. The
gross margin rate increase was principally due to improvements in initial markup and a lower overall markdown rate in 2015 as
compared to 2014, due to the significant markdowns taken in 2014 as part of our Edit to Amplify merchandise strategy to sell
through and narrow our assortment in certain underperforming categories in the first quarter of 2014.
28
Selling and Administrative Expenses
Selling and administrative expenses were $1,708.7 million in 2015, compared to $1,699.8 million in 2014. The increase of
$8.9 million, or 0.5%, was primarily due to pension termination related expenses of $9.2 million, a $4.5 million loss
contingency associated with a merchandise-related legal matter during the second quarter of 2015, along with increases in
corporate office payroll and severance related expense of $5.5 million, accrued bonus expense of $4.5 million, and share-based
compensation of $2.9 million. These increases were partially offset by a decrease in store related payroll of $9.4 million.
During the third and fourth quarters of 2015, we amended our Pension Plan and Supplemental Pension Plan, respectively, to
freeze benefits and terminate the plans, and as a result, we incurred curtailments, while also incurring settlement charges, which
totaled approximately $2.2 million. Additionally, when we announced the plan terminations to active plan participants, we
communicated to them a one-time conversion benefit, for which we accrued $7.0 million. The increase in corporate office
payroll expenses was primarily driven by annual merit increases and severance related expenses combined with our investment
in hiring for our e-commerce support functions, including information technology and marketing team members. The increase
in accrued bonus expense was directly related to better financial performance in 2015 relative to our quarterly and annual
operating plans as compared to our performance during 2014. The increase in share-based compensation expense was
primarily driven by the lack of forfeiture of awards, and the related expense reversal, by individuals affected by separation
activities in 2015 when compared to 2014. The decrease in store-related payroll resulted principally from a net decrease of 11
stores compared to the end of 2014.
As a percentage of net sales, selling and administrative expenses increased by 10 basis points to 32.9% in 2015 compared to
32.8% in 2014. Our future selling and administrative expense as a percentage of net sales depends on many factors, including
our level of net sales, our ability to implement additional efficiencies, principally in our store and distribution center operations,
and fluctuating commodity prices, such as diesel fuel, which directly affects our outbound transportation cost.
Depreciation Expense
Depreciation expense increased $3.0 million to $122.7 million in 2015 compared to $119.7 million in 2014. The increase was
directly related to our continued investment in systems and capital spending to support and maintain our stores, including the
completion of the roll-out of our cooler and freezer program and our POS systems upgrade, and projects at our distribution
centers. Depreciation expense as a percentage of net sales increased by 10 basis points compared to 2014.
Operating Profit
Operating profit was $235.7 million in 2015 as compared to $224.5 million in 2014. The increase in operating profit was
primarily driven by the items discussed in the "Net Sales", "Gross Margin", "Selling and Administrative Expenses", and
"Depreciation Expense" sections above. In summary, the increase in our net sales and gross margin was partially offset by
increases in selling and administrative expenses and depreciation expense.
Interest Expense
Interest expense increased $1.1 million to $3.7 million in 2015 compared to $2.6 million in 2014. The increase was driven by
higher average borrowings under the 2011 Credit Agreement. We had total average borrowings (including capital leases) of
$177.2 million in 2015 compared to total average borrowings of $105.5 million in 2014. The increase to our average revolving
debt balance was primarily the result of year-over-year changes in the timing of our share repurchase activity. The increase in
capital leases was driven by a capital lease for store security equipment, which commenced in late 2014.
Other Income (Expense)
Other income (expense) was $(5.2) million in 2015, compared to $0.0 million in 2014. We recognized unrealized losses of
$4.7 million along with realized losses of $0.5 million in 2015 related to our diesel fuel hedging contracts, driven by a decrease
in current and future projected diesel fuel prices which negatively impacted valuation. We did not maintain any diesel fuel
hedging contracts in 2014.
Income Taxes
The effective income tax rate in 2015 and 2014 for income from continuing operations was 37.0% and 38.4%, respectively.
The decrease in our effective rate was principally driven by the recognition of increased employment-related tax credit benefits
in 2015 including the impact of the retroactive renewals of federal hiring credits, coupled with increased statute of limitation
lapses and discrete settlement benefits.
29
Capital Resources and Liquidity
On July 22, 2011, we entered into a $700 million five-year unsecured credit facility, which was first amended on May 30, 2013.
On May 28, 2015, we entered into an additional amendment of the credit facility that among other things extended its term to
May 30, 2020 (as amended, the “2011 Credit Agreement”). In connection with our original entry into the 2011 Credit
Agreement, we paid bank fees and other expenses in the aggregate amount of $3.0 million, which are being amortized over the
term of the agreement. In connection with the second amendment of the 2011 Credit Agreement, we paid bank fees and other
expenses in the amount of $0.8 million, which are being amortized over the term of the agreement. Borrowings under the 2011
Credit Agreement are available for general corporate purposes and working capital. The 2011 Credit Agreement includes a $30
million swing loan sublimit and a $150 million letter of credit sublimit. The interest rates, pricing and fees under the 2011
Credit Agreement fluctuate based on our debt rating. The 2011 Credit Agreement allows us to select our interest rate for each
borrowing from multiple interest rate options. The interest rate options are generally derived from the prime rate or LIBOR.
We may prepay revolving loans made under the 2011 Credit Agreement. The 2011 Credit Agreement contains financial and
other covenants, including, but not limited to, limitations on indebtedness, liens and investments, as well as the maintenance of
two financial ratios – a leverage ratio and a fixed charge coverage ratio. A violation of any of the covenants could result in a
default under the 2011 Credit Agreement that would permit the lenders to restrict our ability to further access the 2011 Credit
Agreement for loans and letters of credit and require the immediate repayment of any outstanding loans under the 2011 Credit
Agreement. At January 28, 2017, we were in compliance with the covenants of the 2011 Credit Agreement.
We use the 2011 Credit Agreement, as necessary, to provide funds for ongoing and seasonal working capital, capital
expenditures, share repurchase programs, and other expenditures. In addition, we use the 2011 Credit Agreement to provide
letters of credit for various operating and regulatory requirements, and if needed, letters of credit required to cover our self-
funded insurance programs. Given the seasonality of our business, the amount of borrowings under the 2011 Credit Agreement
may fluctuate materially depending on various factors, including our operating financial performance, the time of year, and our
need to increase merchandise inventory levels prior to the peak selling season. Generally, our working capital requirements
peak late in our third fiscal quarter or early in our fourth fiscal quarter. We have typically funded those requirements with
borrowings under our credit facility. In 2016, our total indebtedness (outstanding borrowings and letters of credit) under the
2011 Credit Agreement peaked at approximately $398 million in November. At January 28, 2017, we had $106.4 million in
outstanding borrowings under the 2011 Credit Agreement and $590.6 million in borrowings available under the 2011 Credit
Agreement, after taking into account the reduction in availability resulting from outstanding letters of credit totaling $3.0
million. Working capital was $315.8 million at January 28, 2017.
The primary source of our liquidity is cash flows from operations and, as necessary, borrowings under the 2011 Credit
Agreement. Our net income and, consequently, our cash provided by operations are impacted by net sales volume, seasonal
sales patterns, and operating profit margins. Our net sales are typically highest during the nine-week Christmas selling season
in our fourth fiscal quarter.
Whenever our liquidity position requires us to borrow funds under the 2011 Credit Agreement, we typically repay and/or
borrow on a daily basis. The daily activity is a net result of our liquidity position, which is generally driven by the following
components of our operations: (1) cash inflows such as cash or credit card receipts collected from stores for merchandise sales
and other miscellaneous deposits; and (2) cash outflows such as check clearings, wire transfers and other electronic transactions
for the acquisition of merchandise and for payment of payroll and other operating expenses, income and other taxes, employee
benefits, and other miscellaneous disbursements.
On March 1, 2016, our Board of Directors authorized a share repurchase program providing for the repurchase of $250 million
of our common shares (“2016 Repurchase Program”). During 2016, we exhausted this program by purchasing approximately
5.6 million of our outstanding common shares at an average price of $44.72.
On February 28, 2017, our Board of Directors authorized a share repurchase program providing for the repurchase of $150
million of our common shares (“2017 Repurchase Program”). Pursuant to the 2017 Repurchase Program, we are authorized to
repurchase shares in the open market and/or in privately negotiated transactions at our discretion, subject to market conditions
and other factors. Common shares acquired through the 2017 Repurchase Program will be available to meet obligations under
our equity compensation plans and for general corporate purposes. The 2017 Repurchase Program has no scheduled
termination date and will be funded with cash and cash equivalents, cash generated from operations and by drawing on the
2011 Credit Agreement.
30
In 2016, we declared and paid four quarterly cash dividends of $0.21 per common share for a total paid amount of
approximately $38.5 million.
In February 2017, our Board increased our quarterly dividend payment rate by approximately 19% by declaring a quarterly
cash dividend of $0.25 per common share payable on March 31, 2017 to shareholders of record as of the close of business on
March 17, 2017.
The following table compares the primary components of our cash flows from 2016 to 2015:
(In thousands)
Net cash provided by operating activities
Net cash used in investing activities
Net cash used in financing activities
2016
2015
Change
$
$
311,925
(84,701)
(230,204)
$
$
342,352
(113,193)
(227,276)
$
$
(30,427)
28,492
(2,928)
Cash provided by operating activities decreased by $30.4 million to $311.9 million in 2016 compared to $342.4 million in
2015. The decrease was primarily attributable to a change in our income tax position (current and deferred), which decreased
our cash provided by operating activities by $25.5 million, primarily as a result of payments. The increase in income tax
payments was principally driven by our increase in pretax income in 2016 compared to 2015 and extension payments for 2015
made in 2016. There were substantially less income tax payments in 2015 for 2014 extensions due to the large taxable loss
associated with the wind down of our former Canadian operations. Additionally in 2016, we had an increase in contributions to
our pension plans, which decreased our cash provided by operating activities by $8.3 million in 2016 compared to 2015. As a
result of the termination of our pension plans, we contributed $19.2 million to the plans in 2016, compared to $10.9 million
dollars in 2015. Coupled with the contributions, we made a one-time transition benefit payment to the participants of the
Pension Plan, which decreased our operating cash flows by $7.0 million, while no similar payment was made in 2015. Partially
offsetting the decrease in cash provided by operating activities was an increase of $19.6 million in share-based compensation
expense in 2016, which was driven by the expense associated with our PSUs.
Cash used in investing activities decreased by $28.5 million to $84.7 million in 2016 compared to $113.2 million in 2015. The
decrease was primarily driven by a $36.2 million decrease in capital expenditures to $89.8 million in 2016 compared to $126.0
million in 2015. The decrease in capital expenditures was driven by fewer capital projects in 2016 as compared to 2015, which
included an upgrade in our POS systems and substantial investment in our e-commerce platform. The decrease in capital
expenditures was partially offset by a decrease in cash proceeds from the sale of an asset held for sale of $10.0 million in the
first quarter of 2015, compared to cash proceeds of $3.8 million from the sale of property in the fourth quarter of 2016.
Cash used in financing activities increased by $2.9 million to $230.2 million in 2016 compared to $227.3 million in 2015. The
primary driver of this increase was a $52.4 million increase in payments for treasury shares acquired to $254.3 million in 2016
from $201.9 million in 2015, partially offset by an increase of $43.9 million in net borrowings under our bank credit facility to
$44.1 million in 2016 compared to $0.2 million in 2015.
Based on historical and expected financial results, we believe that we have or, if necessary, have the ability to obtain, adequate
resources to fund ongoing and seasonal working capital requirements, proposed capital expenditures, new projects, and
currently maturing obligations. On a consolidated basis, we expect cash provided by operating activities less capital
expenditures to be approximately $180 to $190 million in 2017; and we intend to distribute approximately $195 million to
shareholders through the 2017 Share Repurchase program and quarterly dividend payments.
31
Contractual Obligations
The following table summarizes payments due under our contractual obligations at January 28, 2017:
(In thousands)
Obligations under bank credit facility (2)
Operating lease obligations (3) (4)
Capital lease obligations (4)
Purchase obligations (4) (5)
Other long-term liabilities (6)
Total contractual obligations
Payments Due by Period (1)
Less than
More than
Total
1 year
1 to 3 years
3 to 5 years
5 years
$
106,545 $
145 $
— $
106,400 $
—
1,383,629
22,613
649,905
69,230
329,701
5,481
562,451
10,422
526,329
303,396
224,203
8,846
77,526
12,537
7,781
8,966
12,537
505
962
33,734
$
2,231,922 $
908,200 $
625,238 $
439,080 $
259,404
(1) The disclosure of contractual obligations in this table is based on assumptions and estimates that we believe to be
reasonable as of the date of this report. Those assumptions and estimates may prove to be inaccurate; consequently,
the amounts provided in the table may differ materially from those amounts that we ultimately incur. Variables that
may cause the stated amounts to vary from the amounts actually incurred include, but are not limited to: the
termination of a contractual obligation prior to its stated or anticipated expiration; fees or damages incurred as a result
of the premature termination or breach of a contractual obligation; the acquisition of more or less services or goods
under a contractual obligation than are anticipated by us as of the date of this report; fluctuations in third party fees,
governmental charges, or market rates that we are obligated to pay under contracts we have with certain vendors; and
the exercise of renewal options under, or the automatic renewal of, contracts that provide for the same.
(2) Obligations under the bank credit facility consist of the borrowings outstanding under the 2011 Credit Agreement, and
the associated accrued interest of $0.1 million. In addition, we had outstanding letters of credit totaling $61.6 million
at January 28, 2017. The outstanding letters of credit represent stand-by letters of credit and we do not expect to meet
the conditions requiring significant cash payments on these letters of credit; accordingly, they have been excluded
from this table. For a further discussion, see note 3 to the accompanying consolidated financial statements.
(3) Operating lease obligations include, among other items, leases for retail stores, offices, and certain computer and other
business equipment. The future minimum commitments for retail store and office operating leases are $1,082.5
million. For a further discussion of leases, see note 5 to the accompanying consolidated financial statements. Many of
the store lease obligations require us to pay for our applicable portion of CAM, real estate taxes, and property
insurance. In connection with our store lease obligations, we estimated that future obligations for CAM, real estate
taxes, and property insurance were $300.9 million at January 28, 2017. We have made certain assumptions and
estimates in order to account for our contractual obligations relative to CAM, real estate taxes, and property insurance.
Those assumptions and estimates include, but are not limited to: use of historical data to estimate our future
obligations; calculation of our obligations based on comparable store averages where no historical data is available for
a particular leasehold; and assumptions related to average expected increases over historical data.
(4) For purposes of the lease and purchase obligation disclosures, we have assumed that we will make all payments
scheduled or reasonably estimated to be made under those obligations that have a determinable expiration date, and we
disregarded the possibility that such obligations may be prematurely terminated or extended, whether automatically by
the terms of the obligation or by agreement between us and the counterparty, due to the speculative nature of
premature termination or extension. Where an operating lease or purchase obligation is subject to a month-to-month
term or another automatically renewing term, we included in the table our minimum commitment under such
obligation, such as one month in the case of a month-to-month obligation and the then-current term in the case of
another automatically renewing term, due to the uncertainty of future decisions to exercise options to extend or
terminate any existing leases.
32
(5) Purchase obligations include outstanding purchase orders for merchandise issued in the ordinary course of our
business that are valued at $416.5 million, the entirety of which represents obligations due within one year of
January 28, 2017. In addition, we have purchase commitments for future inventory purchases totaling $26.6 million at
January 28, 2017. While we are not required to meet any periodic minimum purchase requirements under this
commitment, we have included, for purposes of this tabular disclosure, the value of the purchases that we anticipate
making during each of the reported periods as purchases that will count toward our fulfillment of the aggregate
obligation. The remaining $206.8 million of purchase obligations is primarily related to distribution and
transportation, information technology, print advertising, energy procurement, and other store security, supply, and
maintenance commitments.
(6) Other long-term liabilities include $24.4 million for obligations related to our nonqualified deferred compensation
plan and $4.2 million for unrecognized tax benefits. We have estimated the payments due by period for the
nonqualified deferred compensation plan based on an average of historical distributions. We have included
unrecognized tax benefits of $3.6 million for payments expected in 2017 and $0.6 million of timing-related income tax
uncertainties anticipated to reverse in 2018. Unrecognized tax benefits in the amount of $15.3 million have been
excluded from the table because we are unable to make a reasonably reliable estimate of the timing of future
payments.
Off-Balance Sheet Arrangements
Not applicable.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of
America (“GAAP”) requires management to make estimates, judgments, and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the
reporting period, as well as the related disclosure of contingent assets and liabilities at the date of the financial statements. The
use of estimates, judgments, and assumptions creates a level of uncertainty with respect to reported or disclosed amounts in our
consolidated financial statements or accompanying notes. On an ongoing basis, management evaluates its estimates,
judgments, and assumptions, including those that management considers critical to the accurate presentation and disclosure of
our consolidated financial statements and accompanying notes. Management bases its estimates, judgments, and assumptions
on historical experience, current trends, and various other factors that management believes are reasonable under the
circumstances. Because of the inherent uncertainty in using estimates, judgments, and assumptions, actual results may differ
from these estimates.
Our significant accounting policies, including the recently adopted accounting standards and recent accounting standards -
future adoptions, if any, are described in note 1 to the accompanying consolidated financial statements. We believe the
following estimates, assumptions, and judgments are the most critical to understanding and evaluating our reported financial
results. Management has reviewed these critical accounting estimates and related disclosures with the Audit Committee of our
Board of Directors.
33
Merchandise Inventories
Merchandise inventories are valued at the lower of cost or market using the average cost retail inventory method. Market is
determined based on the estimated net realizable value, which generally is the merchandise selling price at or near the end of
the reporting period. The average cost retail inventory method requires management to make judgments and contains
estimates, such as the amount and timing of markdowns to clear slow-moving inventory and the estimated allowance for
shrinkage, which may impact the ending inventory valuation and prior or future gross margin. These estimates are based on
historical experience and current information.
When management determines the saleability of merchandise inventories is diminished, markdowns for clearance activity and
the related cost impact are recorded at the time the price change decision is made. Factors considered in the determination of
markdowns include current and anticipated demand, customer preferences, the age of merchandise, and seasonal trends.
Timing of holidays within fiscal periods, weather, and customer preferences could cause material changes in the amount and
timing of markdowns from year to year.
The inventory allowance for shrinkage is recorded as a reduction to inventories, charged to cost of sales, and calculated as a
percentage of sales for the period from the last physical inventory date to the end of the reporting period. Such estimates are
based on both our current year and historical inventory results. Independent physical inventory counts are taken at each store
once a year. During calendar 2017, the majority of these counts will occur between January and June. As physical inventories
are completed, actual results are recorded and new go-forward shrink accrual rates are established based on historical results at
the individual store level. Thus, the shrink accrual rates will be adjusted throughout the January to June inventory cycle based
on actual results. At January 28, 2017, a 10% difference in our shrink reserve would have affected gross margin, operating
profit and income from continuing operations before income taxes by approximately $3.7 million. While it is not possible to
quantify the impact from each cause of shrinkage, we have asset protection programs and policies aimed at minimizing
shrinkage.
Long-Lived Assets
Our long-lived assets primarily consist of property and equipment. We perform impairment reviews of our long-lived assets at
the store level on an annual basis, or when other impairment indicators are present. Generally, all other property and equipment
is reviewed for impairment at the enterprise level. When we perform our annual impairment reviews, we first determine which
stores had impairment indicators present. We use actual historical cash flows to determine which stores had negative cash
flows within the past two years. For each store with negative cash flows or other impairment indicators, we obtain
undiscounted future cash flow estimates based on operating performance estimates specific to each store’s operations that are
based on assumptions currently being used to develop our company level operating plans. If the net book value of a store’s
long-lived assets is not recoverable through the expected undiscounted future cash flows of the store, we estimate the fair value
of the store’s assets and recognize an impairment charge for the excess net book value of the store’s long-lived assets over their
fair value. The fair value of store assets is estimated based on expected cash flows, including salvage value, which is based on
information available in the marketplace for similar assets.
We identified one store, two stores, and three stores in the U.S., in 2016, 2015, and 2014, respectively, with impairment
indicators as a result of our annual store impairment tests. For these stores, we recognized impairment charges of $0.1 million,
$0.4 million, and $0.2 million in 2016, 2015, and 2014, respectively. We do not believe that varying the assumptions used to
test for recoverability to estimate fair value of our long-lived assets would have a material impact on the impairment charges
we incurred in 2016, 2015, or 2014.
If our future operating results decline significantly, we may be exposed to impairment losses that could be material (for
additional discussion of this risk, see “Item 1A. Risk Factors - A significant decline in our operating profit and taxable income
may impair our ability to realize the value of our long-lived assets and deferred tax assets.”).
In addition to our annual store impairment reviews, we evaluate our other long-lived assets at each reporting period to
determine whether impairment indicators are present. In 2014, we reviewed our operational needs surrounding travel and
determined that our travel demands no longer merited the need to own two corporate aircraft. As a result of that decision, we
placed both of our aircraft in the market as available-for-sale during 2014 and recorded impairment charges totaling $3.3
million in 2014.
34
Share-Based Compensation
We currently grant non-vested restricted stock units and PSUs to our employees under shareholder approved incentive plans.
Additionally, we have granted stock options and non-vested restricted stock awards in prior years. Share-based compensation
expense was $33.0 million, $13.5 million, and $10.5 million in 2016, 2015, and 2014, respectively. Future share-based
compensation expense for non-vested restricted stock units depends on the future number of awards, fair value of our common
shares on the grant date, and the estimated vesting period. Future share-based compensation expense for PSUs is dependent
upon the future number of awards, the estimated vesting period, the grant date of the award which may vary from the issuance
date, financial results relative to the targets established for each three-year performance period, and potentially other estimates,
judgments and assumptions used in arriving at the fair value of PSUs. Future share-based compensation expense related to
non-vested restricted stock units and PSUs may vary materially from the currently amortizing awards.
Compensation expense for non-vested restricted stock units is recorded over the contractual vesting period based on our
expectation of achieving the performance criteria. We monitor the achievement of the performance criteria at each reporting
period.
We issued PSUs to certain employees in 2014, 2015, and 2016. The PSUs issued in 2014, 2015 and 2016 were structured to
reflect specific shareholder feedback and are based on a three-year financial performance period payable to associates at the
end of the third year assuming certain financial performance metrics are achieved. Those financial metrics include earnings per
share (“EPS”) and return on invested capital (“ROIC”). Financial performance targets (for both EPS and ROIC) are established
by the Compensation Committee of our Board of Directors at the beginning of each fiscal year based on our approved
operating plan. From an accounting perspective, a grant date will be deemed to be established when all financial targets are
determined, which occurred in March 2016 and March 2017 and is estimated to occur in March 2018 for the PSUs issued in
2014, 2015 and 2016, respectively. Compensation expense for the PSUs will be recorded (1) based on fair value of the award
on the grant date and the estimated achievement of financial performance objectives, and (2) on a straight-line basis from the
grant date, which may vary from the issuance date, through the vesting date. Accordingly, based on this accounting treatment,
there was no expense recognized in fiscal 2014 or 2015, related to the PSUs issued in 2014 and 2015. On March 1, 2016, the
Compensation Committee established the 2016 performance targets, which established the grant date, and, therefore, the fair
value of the PSUs issued in 2014. We monitored the estimated achievement of the financial performance objectives at each
reporting period end and adjusted the estimated expense on a cumulative basis. In 2016, we recognized $17.5 million in share
based compensation expense related to the PSUs issued in 2014.
At January 28, 2017, PSUs issued and outstanding were as follows:
Issue Year
2014
2015
2016
Total
Outstanding PSUs at
January 28, 2017
360,357
259,042
352,196
971,595
Actual Grant Date
March 2016
Expected Valuation
(Grant) Date
March 2016
March 2017
March 2018
Income Taxes
The determination of our income tax expense, refunds receivable, income taxes payable, deferred tax assets and liabilities and
financial statement recognition, de-recognition and/or measurement of uncertain tax benefits (for positions taken or to be taken
on income tax returns) requires significant judgment, the use of estimates, and the interpretation and application of complex
accounting and multi-jurisdictional income tax laws.
The effective income tax rate in any period may be materially impacted by the overall level of income (loss) before income
taxes, the jurisdictional mix and magnitude of income (loss), changes in the income tax laws (which may be retroactive to the
beginning of the fiscal year), subsequent recognition, de-recognition and/or measurement of an uncertain tax benefit, changes
in deferred tax asset valuation allowances and adjustments of a deferred tax asset or liability for enacted changes in tax laws or
rates. Although we believe that our estimates are reasonable, actual results could differ from these estimates resulting in a final
tax outcome that may be materially different from that which is reflected in our consolidated financial statements.
35
We evaluate our ability to recover our deferred tax assets within the jurisdiction from which they arise. We consider all
available positive and negative evidence including recent financial results, projected future pretax accounting income from
continuing operations and tax planning strategies (when necessary). This evaluation requires us to make assumptions that
require significant judgment about the forecasts of future pretax accounting income. The assumptions that we use in this
evaluation are consistent with the assumptions and estimates used to develop our consolidated operating financial plans. If we
determine that a portion of our deferred tax assets, which principally represent expected future deductions or benefits, are not
likely to be realized, we recognize a valuation allowance for our estimate of these benefits which we believe are not likely
recoverable. Additionally, changes in tax laws, apportionment of income for state and local tax purposes, and rates could also
affect recorded deferred tax assets.
We evaluate the uncertainty of income tax positions taken or to be taken on income tax returns. When a tax position meets the
more-likely-than-not threshold, we recognize economic benefits associated with the position on our consolidated financial
statements. The more-likely-than-not recognition threshold is a positive assertion that an enterprise believes it is entitled to
economic benefits associated with a tax position. When a tax position does not meet the more-likely-than-not threshold, or in
the case of those positions that do meet the threshold but are measured at less than the full benefit taken on the return, we
recognize tax liabilities (or de-recognize tax assets, as the case may be). A number of years may elapse before a particular
matter, for which we have de-recognized a tax benefit, is audited and fully resolved or clarified. We adjust unrecognized tax
benefits and the income tax provision in the period in which an uncertain tax position is effectively or ultimately settled, the
statute of limitations expires for the relevant taxing authority to examine the tax position, or as a result of the evaluation of new
information that becomes available.
Insurance and Insurance-Related Reserves
We are self-insured for certain losses relating to property, general liability, workers’ compensation, and employee medical,
dental, and prescription drug benefit claims, a portion of which is funded by employees. We purchase stop-loss coverage from
third party insurance carriers to limit individual or aggregate loss exposures in these areas. Accrued insurance liabilities and
related expenses are based on actual claims reported and estimates of claims incurred but not reported. The estimated loss
accruals for claims incurred but not paid are determined by applying actuarially-based calculations taking into account
historical claims payment results and known trends such as claims frequency and claims severity. Management makes
estimates, judgments, and assumptions with respect to the use of these actuarially-based calculations, including but not limited
to, estimated health care cost trends, estimated lag time to report and pay claims, average cost per claim, network utilization
rates, network discount rates, and other factors. A 10% change in our self-insured liabilities at January 28, 2017 would have
affected selling and administrative expenses, operating profit, and income from continuing operations before income taxes by
approximately $7 million.
General liability and workers’ compensation liabilities are recorded at our estimate of their net present value, using a 3.5%
discount rate, while other liabilities for insurance reserves are not discounted. A 1.0% change in the discount rate on these
liabilities would have affected selling and administrative expenses, operating profit, and income from continuing operations
before income taxes by approximately $2.3 million.
Lease Accounting
In order to recognize rent expense on our leases, we evaluate many factors to identify the lease term such as the contractual
term of the lease, our assumed possession date of the property, renewal option periods, and the estimated value of leasehold
improvement investments that we are required to make. Based on this evaluation, our lease term is typically the minimum
contractually obligated period over which we have control of the property. This term is used because although many of our
leases have renewal options, we typically do not incur an economic or contractual penalty in the event of non-renewal.
Therefore, we typically use the initial minimum lease term for purposes of calculating straight-line rent, amortizing deferred
rent, and recognizing depreciation expense on our leasehold improvements.
36
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
We are subject to market risk from exposure to changes in interest rates on investments and on borrowings under the 2011
Credit Agreement that we make from time to time. We had borrowings of $106.4 million under the 2011 Credit Agreement at
January 28, 2017. An increase of 1.0% in our variable interest rate on our investments and expected future borrowings would
not have a material effect on our financial condition, results of operations, or liquidity.
We are subject to market risk from exposure to changes in our derivative instruments, associated with diesel fuel. At January
28, 2017, we had outstanding derivative instruments, in the form of collars, covering 4,425,000 gallons of diesel fuel. The
below table provides further detail related to our current derivative instruments, associated with diesel fuel.
Calendar Year of
Maturity
Diesel Fuel Derivatives
Fair Value
Puts
Calls
Asset (Liability)
2017
2018
2019
Total
(Gallons, in thousands)
(In thousands)
3,225
1,200
—
4,425
$
3,225
1,200
—
4,425
$
(853)
(155)
—
(1,008)
Additionally, at January 28, 2017, a 10% difference in the forward curve for diesel fuel prices would affect unrealized gains
(losses) in other income (expense) by approximately $1.1 million.
37
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Big Lots, Inc.
Columbus, Ohio
We have audited the internal control over financial reporting of Big Lots, Inc. and subsidiaries (the "Company") as of January
28, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission. The Company's management is responsible for maintaining effective
internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting,
included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to
express an opinion on the Company's internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal
control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and
operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's
principal executive and principal financial officers, or persons performing similar functions, and effected by the company's
board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of
the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that
could have a material effect on the financial statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or
improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a
timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future
periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of
January 28, 2017, based on the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee
of Sponsoring Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),
the consolidated financial statements as of and for the year ended January 28, 2017 of the Company and our report dated March
28, 2017 expressed an unqualified opinion on those consolidated financial statements.
/s/ DELOITTE & TOUCHE LLP
Dayton, Ohio
March 28, 2017
38
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Big Lots, Inc.
Columbus, Ohio
We have audited the accompanying consolidated balance sheets of Big Lots, Inc. and subsidiaries (the "Company") as of
January 28, 2017 and January 30, 2016, and the related consolidated statements of operations, comprehensive income,
shareholders' equity, and cash flows for each of the three years in the period ended January 28, 2017. These consolidated
financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Big Lots,
Inc. and subsidiaries at January 28, 2017 and January 30, 2016, and the results of their operations and their cash flows for each
of the three years in the period ended January 28, 2017, in conformity with accounting principles generally accepted in the
United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),
the Company's internal control over financial reporting as of January 28, 2017, based on the criteria established in Internal
Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission
and our report dated March 28, 2017 expressed an unqualified opinion on the Company's internal control over financial
reporting.
/s/ DELOITTE & TOUCHE LLP
Dayton, Ohio
March 28, 2017
39
BIG LOTS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(In thousands, except per share amounts)
Net sales
Cost of sales (exclusive of depreciation expense shown separately below)
Gross margin
Selling and administrative expenses
Depreciation expense
Operating profit
Interest expense
Other income (expense)
Income from continuing operations before income taxes
Income tax expense
Income from continuing operations
Income (loss) from discontinued operations, net of tax (expense) benefit of
$(14), $(135), and $13,852, respectively
Net income
Earnings per common share - basic
Continuing operations
Discontinued operations
Earnings per common share - diluted
Continuing operations
Discontinued operations
Cash dividends declared per common share
2016
2015
2014
$
5,200,439 $
5,190,582 $
5,177,078
3,101,020
2,099,419
1,731,006
3,123,396
2,067,186
1,708,717
3,133,124
2,043,954
1,699,764
120,440
247,973
(5,091)
1,359
244,241
91,458
152,783
122,737
235,732
(3,683)
(5,199)
226,850
83,842
143,008
119,702
224,488
(2,588)
—
221,900
85,239
136,661
45
152,828 $
(135)
142,873 $
(22,385)
114,276
3.37 $
—
3.37 $
3.32 $
—
3.32 $
2.83 $
—
2.83 $
2.81 $
—
2.80 $
2.49
(0.41)
2.08
2.46
(0.40)
2.06
0.84 $
0.76 $
0.51
$
$
$
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
40
BIG LOTS, INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income
(In thousands)
Net income
Other comprehensive income (loss):
Foreign currency translation
Amortization of pension, net of tax benefit of $(886), $(702),
and $(579), respectively
Valuation adjustment of pension, net of tax (benefit) expense of
$(9,556), $1,530, and $4,613, respectively
Total other comprehensive income (loss)
Comprehensive income
2016
2015
2014
$
152,828 $
142,873 $
114,276
—
1,355
14,622
15,977
$
168,805 $
—
1,119
(2,440)
(1,321)
141,552 $
5,022
884
(7,051)
(1,145)
113,131
The accompanying notes are an integral part of these consolidated financial statements.
41
BIG LOTS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except par value)
ASSETS
Current assets:
Cash and cash equivalents
Inventories
Other current assets
Total current assets
Property and equipment - net
Deferred income taxes
Other assets
Total assets
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable
Property, payroll, and other taxes
Accrued operating expenses
Insurance reserves
Accrued salaries and wages
Income taxes payable
Total current liabilities
Long-term obligations
Deferred rent
Insurance reserves
Unrecognized tax benefits
Other liabilities
Shareholders’ equity:
January 28, 2017
January 30, 2016
$
51,164
$
858,689
84,526
994,379
525,851
46,469
41,008
54,144
849,982
90,306
994,432
559,924
47,739
38,275
$
$
1,607,707
$
1,640,370
400,495
$
382,277
81,306
71,251
40,269
54,009
31,265
678,595
106,400
56,035
56,593
15,853
43,601
76,568
81,756
40,661
72,250
24,936
678,448
62,300
59,454
58,359
17,789
43,550
Preferred shares - authorized 2,000 shares; $0.01 par value; none issued
—
—
Common shares - authorized 298,000 shares; $0.01 par value; issued 117,495
shares; outstanding 44,259 shares and 49,101 shares, respectively
Treasury shares - 73,236 shares and 68,394 shares, respectively, at cost
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Total shareholders’ equity
Total liabilities and shareholders’ equity
1,175
(2,291,379)
617,516
2,323,318
—
650,630
$
1,607,707
$
1,175
(2,063,091)
588,124
2,210,239
(15,977)
720,470
1,640,370
The accompanying notes are an integral part of these consolidated financial statements.
42
BIG LOTS, INC. AND SUBSIDIARIES
Consolidated Statements of Shareholders’ Equity
(In thousands)
Common
Treasury
Shares Amount
Shares
Amount
Additional
Paid-In
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Total
Balance - February 1, 2014
57,548 $
1,175
59,947 $(1,670,041) $ 562,447 $ 2,021,357 $
(13,511) $
901,427
114,276
(1,145)
113,131
Comprehensive income
Dividends declared ($0.51 per
share)
Purchases of common shares
Exercise of stock options
Restricted shares vested
Performance shares vested
Tax benefit from share-based
awards
Share activity related to deferred
compensation plan
Share-based employee
compensation expense
—
—
(6,122)
1,389
70
25
—
2
—
—
—
—
—
—
—
— 6,122
(250,671)
— (1,389)
—
—
—
—
—
(70)
(25)
—
(2)
—
39,440
1,995
716
—
38
—
—
—
—
3,166
(1,995)
(716)
994
24
10,534
(28,533)
—
—
—
—
—
—
—
Balance - January 31, 2015
52,912
1,175
64,583
(1,878,523)
574,454
2,107,100
Comprehensive income
Dividends declared ($0.76 per
share)
—
—
—
—
—
—
—
—
Purchases of common shares
(4,403)
— 4,403
(201,867)
—
—
—
Exercise of stock options
Restricted shares vested
Performance shares vested
Tax benefit from share-based
awards
Share activity related to deferred
compensation plan
Other
Share-based employee
compensation expense
450
128
—
—
1
13
—
—
—
—
—
—
—
—
(450)
(128)
13,149
3,747
3,134
(3,747)
—
—
(1)
(13)
—
—
—
19
384
—
687
4
113
—
13,479
142,873
(39,734)
—
—
—
—
—
—
—
—
Balance - January 30, 2016
49,101
1,175
68,394
(2,063,091)
588,124
2,210,239
Comprehensive income
Dividends declared ($0.84 per
share)
—
—
—
—
—
—
—
—
Purchases of common shares
(5,685)
— 5,685
(254,304)
Exercise of stock options
Restricted shares vested
Performance shares vested
Tax benefit from share-based
awards
Share activity related to deferred
compensation plan
Other
Share-based employee
compensation expense
573
252
13
—
—
5
—
—
—
—
—
—
—
—
(573)
(252)
(13)
—
—
(5)
—
17,834
7,649
394
—
3
136
—
—
—
3,822
(7,649)
(394)
510
6
68
152,828
(39,749)
—
—
—
—
—
—
—
—
—
33,029
—
(28,533)
— (250,671)
—
—
—
—
—
—
(14,656)
(1,321)
42,606
—
—
994
62
10,534
789,550
141,552
—
(39,734)
— (201,867)
—
—
—
—
—
—
—
(15,977)
15,977
16,283
—
—
687
23
497
13,479
720,470
168,805
—
(39,749)
— (254,304)
—
—
—
—
—
—
—
21,656
—
—
510
9
204
33,029
Balance - January 28, 2017
44,259 $
1,175
73,236 $(2,291,379) $ 617,516 $ 2,323,318 $
— $
650,630
The accompanying notes are an integral part of these consolidated financial statements.
43
BIG LOTS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)
Operating activities:
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
2016
2015
2014
$
152,828
$
142,873
$
114,276
Depreciation and amortization expense
Deferred income taxes
Non-cash share-based compensation expense
Excess tax benefit from share-based awards
Non-cash impairment charge
(Gain) loss on disposition of property and equipment
Unrealized (gain) loss on fuel derivatives
Pension expense, net of contributions
Change in assets and liabilities, excluding effects of foreign currency adjustments:
Inventories
Accounts payable
Current income taxes
Other current assets
Other current liabilities
Other assets
Other liabilities
Net cash provided by operating activities
Investing activities:
Capital expenditures
Cash proceeds from sale of property and equipment
Other
Net cash used in investing activities
Financing activities:
Net proceeds from (repayments of) borrowings under bank credit facility
Payment of capital lease obligations
Dividends paid
Proceeds from the exercise of stock options
Excess tax benefit from share-based awards
Payment for treasury shares acquired
Deferred bank credit facility fees paid
Other
Net cash used in financing activities
Impact of foreign currency on cash
(Decrease) increase in cash and cash equivalents
Cash and cash equivalents:
Beginning of year
End of year
108,315
108,054
(9,171)
33,029
(1,111)
100
(2,899)
(3,657)
6,644
(8,707)
18,217
12,391
34
(4,789)
(3,976)
14,677
311,925
(89,782)
5,061
20
(84,701)
44,100
(4,514)
(38,466)
21,656
1,111
(617)
13,479
(1,330)
386
1,464
4,665
(5,312)
1,687
23,345
29,305
(12,189)
22,282
3,806
10,454
342,352
(125,989)
12,773
23
(113,193)
200
(4,433)
(38,530)
16,283
1,330
105,849
22,628
10,534
(3,776)
3,532
2,759
—
4,190
63,336
(6,864)
(21,549)
3,181
20,718
3,206
(3,458)
318,562
(93,460)
2,783
(72)
(90,749)
(14,900)
(2,365)
(27,828)
42,606
3,776
(254,304)
(201,867)
(250,671)
—
213
(230,204)
—
(2,980)
(779)
520
(227,276)
—
1,883
—
62
(249,320)
5,139
(16,368)
54,144
51,164
$
52,261
54,144
$
68,629
52,261
$
The accompanying notes are an integral part of these consolidated financial statements.
44
BIG LOTS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 1 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
We are a unique, non-traditional, discount retailer in the United States (“U.S.”). At January 28, 2017, we operated 1,432 stores
in 47 states and an e-commerce platform. We intend to achieve our goal of exceeding our core customer’s expectations by
providing great savings on value-priced merchandise, which includes tasteful and “trend-right” import merchandise, consistent
and replenishable “never out” offerings, and brand-name closeouts that are meaningful, combined with the quality and ease of
the shopping experience.
Basis of Presentation
The consolidated financial statements include Big Lots, Inc. and all of its subsidiaries, have been prepared in accordance with
accounting principles generally accepted in the United States of America (“GAAP”), and include all of our accounts. We
consolidate all majority-owned and controlled subsidiaries. All intercompany accounts and transactions have been eliminated.
Management Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates, judgments, and
assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period, as well as the related disclosure of contingent assets and
liabilities at the date of the financial statements. The use of estimates, judgments, and assumptions creates a level of
uncertainty with respect to reported or disclosed amounts in our consolidated financial statements and accompanying notes. On
an ongoing basis, management evaluates its estimates, judgments, and assumptions, including those that management considers
critical to the accurate presentation and disclosure of our consolidated financial statements and accompanying notes.
Management bases its estimates, judgments, and assumptions on historical experience, current trends, and various other factors
that it believes are reasonable under the circumstances. Because of the inherent uncertainty in using estimates, judgments, and
assumptions, actual results may differ from these estimates.
Fiscal Periods
Our fiscal year ends on the Saturday nearest to January 31, which results in fiscal years consisting of 52 or 53 weeks. Unless
otherwise stated, references to years in this report relate to fiscal years rather than calendar years. Fiscal year 2016 (“2016”)
was comprised of the 52 weeks that began on January 31, 2016 and ended on January 28, 2017. Fiscal year 2015 (“2015”) was
comprised of the 52 weeks that began on February 1, 2015 and ended on January 30, 2016. Fiscal year 2014 (“2014”) was
comprised of the 52 weeks that began on February 2, 2014 and ended on January 31, 2015.
Segment Reporting
We manage our business based on one segment, discount retailing. Our entire operation is located in the U.S.
Cash and Cash Equivalents
Cash and cash equivalents primarily consist of amounts on deposit with financial institutions, outstanding checks, credit and
debit card receivables, and highly liquid investments, including money market funds, which are unrestricted to withdrawal or
use and which have an original maturity of three months or less. We review cash and cash equivalent balances on a bank by
bank basis in order to identify book overdrafts. Book overdrafts occur when the amount of outstanding checks exceed the cash
deposited at a given bank. We reclassify book overdrafts, if any, to accounts payable on our consolidated balance sheets.
Amounts due from banks for credit and debit card transactions are typically settled in less than five days, and at January 28,
2017 and January 30, 2016, totaled $26.9 million and $28.3 million, respectively.
Investments
Investment securities are classified as available-for-sale, held-to-maturity, or trading at the date of purchase. Investments are
recorded at fair value as either current assets or non-current assets based on the stated maturity or our plans to either hold or sell
the investment. Unrealized holding gains and losses on trading securities are recognized in earnings. Unrealized holding gains
and losses on available-for-sale securities are recognized in other comprehensive income, until realized. We did not own any
held-to-maturity or available-for-sale securities as of January 28, 2017 and January 30, 2016.
45
Merchandise Inventories
Merchandise inventories are valued at the lower of cost or market using the average cost retail inventory method. Cost includes
any applicable inbound shipping and handling costs associated with the receipt of merchandise into our distribution centers (see
the discussion below under the caption “Selling and Administrative Expenses” for additional information regarding outbound
shipping and handling costs to our stores). Market is determined based on the estimated net realizable value, which generally is
the merchandise selling price. Under the average cost retail inventory method, inventory is segregated into classes of
merchandise having similar characteristics at its current retail selling value. Current retail selling values are converted to a cost
basis by applying an average cost factor to each specific merchandise class’s retail selling value. Cost factors represent the
average cost-to-retail ratio computed using beginning inventory and all fiscal year-to-date purchase activity specific to each
merchandise class.
Under the average cost retail inventory method, permanent sales price markdowns result in cost reductions in inventory. Our
permanent sales price markdowns are typically related to end of season clearance events and are recorded as a charge to cost of
sales in the period of management’s decision to initiate sales price reductions with the intent not to return the price to regular
retail. Promotional markdowns are recorded as a charge to net sales in the period the merchandise is sold. Promotional
markdowns are typically related to specific marketing efforts with respect to products maintained continuously in our stores or
products that are only available in limited quantities but represent substantial value to our customers. Promotional markdowns
are principally used to drive higher sales volume during a defined promotional period.
We record a reduction to inventories and charge to cost of sales for a shrinkage inventory allowance. The shrinkage allowance
is calculated as a percentage of sales for the period from the last physical inventory date to the end of the reporting period.
Such estimates are based on a combination of our historical experience and current year physical inventory results.
We record a reduction to inventories and charge to cost of sales for any excess or obsolete inventory. The excess or obsolete
inventory is estimated based on a review of our aged inventory and takes into account any items that have already received a
cost reduction as a result of the permanent markdown process discussed above. We estimate the reduction for excess or
obsolete inventory based on historical sales trends, age and quantity of product on hand, and anticipated future sales.
Payments Received from Vendors
Payments received from vendors relate primarily to rebates and reimbursement for markdowns and are recognized in our
consolidated statements of operations as a reduction to cost of inventory purchases in the period that the rebate or
reimbursement is earned or realized and, consequently, result in a reduction in cost of sales when the related inventory is sold.
Store Supplies
When opening a new store, a portion of the initial shipment of supplies (which primarily includes display materials, signage,
security-related items, and miscellaneous store supplies) is capitalized at the store opening date. These capitalized supplies
represent more durable types of items for which we expect to receive future economic benefit. Subsequent replenishments of
capitalized store supplies are expensed. The consumable/non-durable type items for which the future economic benefit is less
measurable are expensed upon shipment to the store. Capitalized store supplies are adjusted periodically for changes in
estimated quantities or costs and are included in other current assets in our consolidated balance sheets.
Property and Equipment - Net
Depreciation and amortization expense of property and equipment are recorded on a
lives. The estimated service lives of our depreciable property and equipment by major asset category were as follows:
basis using estimated service
Land improvements
Buildings
Leasehold improvements
Store fixtures and equipment
Distribution and transportation fixtures and equipment
Office and computer equipment
Computer software costs
Company vehicles
15 years
40 years
5 years
5 - 7 years
5 - 15 years
5 years
5 - 8 years
3 years
46
Leasehold improvements are amortized on a straight-line basis using the shorter of their estimated service lives or the lease
term. Because many initial lease terms range from five to seven years and the majority of our lease options have a term of five
years, we estimate the useful life of leasehold improvements at five years. This amortization period is consistent with the
amortization period for any lease incentives that we would typically receive when initially entering into a new lease that are
recognized as deferred rent and amortized over the initial lease term.
Assets acquired under noncancellable leases, which meet the criteria of a capital lease, are capitalized in property and
equipment - net and amortized over the estimated service life of the asset or the applicable lease term.
Depreciation estimates are revised prospectively to reflect the remaining depreciation or amortization of the asset over the
shortened estimated service life when a decision is made to dispose of property and equipment prior to the end of its previously
estimated service life. The cost of assets sold or retired and the related accumulated depreciation are removed from the
accounts with any resulting gain or loss included in selling and administrative expenses. Major repairs that extend service lives
are capitalized. Maintenance and repairs are charged to expense as incurred. Capitalized interest was not significant in any
period presented.
Long-Lived Assets
Our long-lived assets primarily consist of property and equipment - net. In order to determine if impairment indicators are
present for store property and equipment, we review historical operating results at the store level on an annual basis, or when
other impairment indicators are present. Generally, all other property and equipment is reviewed for impairment at the
enterprise level. If the net book value of a store’s long-lived assets is not recoverable by the expected undiscounted future cash
flows of the store, we estimate the fair value of the store’s assets and recognize an impairment charge for the excess net book
value of the store’s long-lived assets over their fair value. Our assumptions related to estimates of undiscounted future cash
flows are based on historical results of cash flows adjusted for management projections for future periods. We estimate the fair
value of our long-lived assets using expected cash flows, including salvage value, which is based on readily available market
information for similar assets.
Closed Store Accounting
We recognize an obligation for the fair value of lease termination costs when we cease using the leased property in our
operations. In measuring fair value of these lease termination obligations, we consider the remaining minimum lease
payments, estimated sublease rentals that could be reasonably obtained, and other potentially mitigating factors. We discount
the estimated obligation using the applicable credit adjusted interest rate, which results in accretion expense in periods
subsequent to the period of initial measurement. We monitor the estimated obligation for lease termination liabilities in
subsequent periods and revise our estimated liabilities, if necessary. Severance and benefits associated with terminating
employees from employment are recognized ratably from the communication date through the estimated future service period,
unless the estimated future service period is less than 60 days, in which case we recognize the impact at the communication
date. Generally all other store closing costs are recognized when incurred.
Income Taxes
We account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and
liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements.
Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statement
basis and tax basis of assets and liabilities using enacted law and tax rates in effect for the year in which the differences are
expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the
period that includes the enactment date.
We assess the adequacy and need for a valuation allowance for deferred tax assets. In making such assessment, we consider all
available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable
income, tax planning strategies and recent financial operations. We have established a valuation allowance to reduce our
deferred tax assets to the balance that is more likely than not to be realized.
47
We recognize interest and penalties related to unrecognized tax benefits within the income tax expense line in the
accompanying consolidated statements of operations. Accrued interest and penalties are included within the related tax liability
line in the accompanying consolidated balance sheets.
The effective income tax rate in any period may be materially impacted by the overall level of income (loss) before income
taxes, the jurisdictional mix and magnitude of income (loss), changes in the income tax laws (which may be retroactive to the
beginning of the fiscal year), subsequent recognition, de-recognition and/or measurement of an uncertain tax benefit, changes
in a deferred tax valuation allowance, and adjustments of a deferred tax asset or liability for enacted changes in tax laws or
rates.
Pension
As of January 28, 2017, our pension plans were frozen, terminated and fully distributed. Accordingly, we no longer evaluate
pension assumptions or calculate expenses and obligations related to our pension plans, as further discussed in note 8. In prior
years, we evaluated pension assumptions and used actuarial valuations to calculate the estimated expenses and obligations
related to our pension plans. We reviewed external data and historical trends to help determine the discount rate and expected
long-term rate of return. Our objective in selecting a discount rate was to identify the best estimate of the rate at which the
benefit obligations would be settled on the measurement date. In making this estimate, we reviewed rates of return on high-
quality, fixed-income investments available at the measurement date and expected to be available during the period to maturity
of the benefits. This process included a review of the bonds available on the measurement date with a quality rating of Aa or
better. The expected long-term rate of return on assets was derived from detailed periodic studies, which include a review of
asset allocation strategies, anticipated future long-term performance of individual asset classes, risks (standard deviations), and
correlations of returns among the asset classes that comprise the plan’s asset mix. While the studies gave appropriate
consideration to recent plan performance and historical returns, the assumption for the expected long-term rate of return was
primarily based on our expectation of a long-term, prospective rate of return.
Insurance and Insurance-Related Reserves
We are self-insured for certain losses relating to property, general liability, workers’ compensation, and employee medical,
dental, and prescription drug benefit claims, a portion of which is paid by employees. We purchase stop-loss coverage to limit
significant exposure in these areas. Accrued insurance-related liabilities and related expenses are based on actual claims filed
and estimates of claims incurred but not reported. The estimated accruals are determined by applying actuarially-based
calculations. General liability and workers’ compensation liabilities are recorded at our estimate of their net present value,
using a 3.5% discount rate, while other liabilities for insurance-related reserves are not discounted.
Fair Value of Financial Instruments
The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy, as defined
below, gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities and the lowest
priority to unobservable inputs.
Level 1, defined as observable inputs such as unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2, defined as observable inputs other than Level 1 inputs. These include quoted prices for similar assets or liabilities
in an active market, quoted prices for identical assets and liabilities in markets that are not active, or other inputs that
are observable or can be corroborated by observable market data for substantially the full term of the assets or
liabilities.
Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its
own assumptions.
The carrying value of cash equivalents, accounts receivable, accounts payable, and accrued expenses approximates fair value
because of the relatively short maturity of these items.
Commitments and Contingencies
We are subject to various claims and contingencies including legal actions and other claims arising out of the normal course of
business. In connection with such claims and contingencies, we estimate the likelihood and amount of any potential obligation,
where it is possible to do so, using management's judgment. Management uses various internal and external specialists to assist
in the estimating process. We accrue, if material, a liability if the likelihood of an adverse outcome is probable and the amount
is estimable. If the likelihood of an adverse outcome is only reasonably possible (as opposed to probable), or if it is probable
but an estimate is not determinable, disclosure of a material claim or contingency is made in the notes to our consolidated
financial statements and no accrual is made.
48
Revenue Recognition
We recognize sales at the time the customer takes possession of the merchandise. Sales are recorded net of discounts and
estimated returns and exclude any sales tax. The reserve for merchandise returns is estimated based on our prior return
experience.
We sell gift cards in our stores and issue merchandise credits, typically as a result of customer returns, on stored value cards.
We do not charge administrative fees on unused gift card or merchandise credit balances and our gift cards and merchandise
credits do not expire. We recognize sales revenue related to gift cards and merchandise credits when (1) the gift card or
merchandise credit is redeemed in a sales transaction by the customer or (2) breakage occurs. We recognize gift card and
merchandise credit breakage when we estimate that the likelihood of the card or credit being redeemed by the customer is
remote and we determine that we do not have a legal obligation to remit the value of unredeemed cards or credits to the
relevant regulatory authority. We estimate breakage based upon historical redemption patterns. For 2016, 2015, and 2014, we
recognized in net sales on our consolidated statements of operations breakage of $0.4 million, $0.4 million, and $0.2 million,
respectively, related to unredeemed gift card and merchandise credit balances that had aged at least four years beyond the end
of their original issuance month. The liability for the unredeemed cash value of gift cards and merchandise credits is recorded
in accrued operating expenses.
We offer price hold contracts on merchandise. Revenue for price hold contracts is recognized when the customer makes the
final payment and takes possession of the merchandise. Amounts paid by customers under price hold contracts are recorded in
accrued operating expenses until a sale is consummated.
Cost of Sales
Cost of sales includes the cost of merchandise, net of cash discounts and rebates, markdowns, and inventory shrinkage. Cost of
merchandise includes related inbound freight to our distribution centers, duties, and commissions. We classify warehousing
and outbound distribution and transportation costs as selling and administrative expenses. Due to this classification, our gross
margin rates may not be comparable to those of other retailers that include warehousing and outbound distribution and
transportation costs in cost of sales.
Selling and Administrative Expenses
Selling and administrative expenses include store expenses (such as payroll and occupancy costs) and costs related to
warehousing, distribution, outbound transportation to our stores, advertising, purchasing, insurance, non-income taxes,
accepting credit/debit cards, and overhead. Selling and administrative expense rates may not be comparable to those of other
retailers that include warehousing, distribution, and outbound transportation costs in cost of sales. Distribution and outbound
transportation costs included in selling and administrative expenses were $151.9 million, $159.4 million, and $161.1 million for
2016, 2015, and 2014, respectively.
Rent Expense
Rent expense is recognized over the term of the lease and is included in selling and administrative expenses. We recognize
minimum rent starting when possession of the property is taken from the landlord, which normally includes a construction or
set-up period prior to store opening. When a lease contains a predetermined fixed escalation of the minimum rent, we
recognize the related rent expense on a straight-line basis and record the difference between the recognized rental expense and
the amounts payable under the lease as deferred rent. We also receive tenant allowances, which are recorded in deferred
incentive rent and are amortized as a reduction to rent expense over the term of the lease.
Our leases generally obligate us for our applicable portion of real estate taxes, CAM, and property insurance that has been
incurred by the landlord with respect to the leased property. We maintain accruals for our estimated applicable portion of real
estate taxes, CAM, and property insurance incurred but not settled at each reporting date. We estimate these accruals based on
historical payments made and take into account any known trends. Inherent in these estimates is the risk that actual costs
incurred by landlords and the resulting payments by us may be higher or lower than the amounts we have recorded on our
books.
Certain of our leases provide for contingent rents that are not measurable at the lease inception date. Contingent rent includes
rent based on a percentage of sales that are in excess of a predetermined level. Contingent rent is excluded from minimum rent
but is included in the determination of total rent expense when it is probable that the expense has been incurred and the amount
is reasonably estimable.
49
Advertising Expense
Advertising costs, which are expensed as incurred, consist primarily of television and print advertising, internet and social
media marketing and advertising, and in-store point-of-purchase presentations. Advertising expenses are included in selling
and administrative expenses. Advertising expenses were $92.3 million, $91.5 million, and $97.5 million for 2016, 2015, and
2014, respectively.
Store Pre-opening Costs
Pre-opening costs incurred during the construction periods for new store openings are expensed as incurred and included in our
selling and administrative expenses.
Share-Based Compensation
Share-based compensation expense is recognized in selling and administrative expense in our consolidated statements of
operations for all awards that we expect to vest. We estimate forfeitures based on historical information.
Non-vested Restricted Stock Awards
Compensation expense for our performance-based non-vested restricted stock awards is recorded based on fair value of the
award on the grant date and the estimated achievement date of the performance criteria. An estimated target achievement date
is determined at the time of the award grant based on historical and forecasted performance of similar measures. We monitor
the projected achievement of the performance targets at each reporting period and make prospective adjustments to the
estimated vesting period when our internal models indicate that the estimated achievement date differs from the date being used
to amortize expense.
Non-vested Restricted Stock Units
We expense our non-vested restricted stock units with graded vesting as a single award with an average estimated life over the
entire term of the award. The expense for the non-vested restricted stock units is recorded on a straight-line basis over the
vesting period.
Performance Share Units
Compensation expense for performance share units (“PSUs”) will be recorded based on fair value of the award on the grant
date and the estimated achievement of financial performance objectives. From an accounting perspective, the grant date is
established once all financial performance targets have been set. We monitor the estimated achievement of the financial
performance objectives at each reporting period and will potentially adjust the estimated expense on a cumulative basis. The
expense for the PSUs is recorded on a straight-line basis from the grant date through the vesting date.
CEO Performance Share Units
For the PSUs granted to our CEO during 2013, compensation expense is recorded based on fair value of the award on the grant
date and the estimated achievement date of the performance criteria. An estimated target achievement date for each tranche of
the award was determined at the time of the award grant based on a Monte Carlo simulation.
Stock Options
We value and expense stock options with graded vesting as a single award with an average estimated life over the entire term of
the award. The expense for options with graded vesting is recorded on a straight-line basis over the vesting period.
Historically, we estimated the fair value of stock options using a binomial model. The binomial model takes into account
variables such as volatility, dividend yield rate, risk-free rate, contractual term of the option, the probability that the option will
be exercised prior to the end of its contractual life, and the probability of retirement of the option holder in computing the value
of the option. Expected volatility was based on historical implied volatilities from traded options on our common shares. The
dividend yield on our common shares was assumed to be zero, since we had not paid dividends at the time of our most recent
stock option grants in 2013, nor did we have intentions of doing so at that time. The risk-free rate was based on U.S. Treasury
security yields at the time of the grant. The expected life was determined from the binomial model, which incorporates
exercise and post-vesting forfeiture assumptions based on analysis of historical data.
Earnings per Share
Basic earnings per share is based on the weighted-average number of shares outstanding during each period. Diluted earnings
per share is based on the weighted-average number of shares outstanding during each period and the additional dilutive effect
of stock options, restricted stock awards, restricted stock units, and performance share units, calculated using the treasury stock
method.
50
Derivative Instruments
We use derivative instruments to mitigate the risk of market fluctuations in diesel fuel prices. We do not enter into derivative
instruments for speculative purposes. Our derivative instruments may consist of collar or swap contracts. Our current
derivative instruments do not meet the requirements for cash flow hedge accounting. Instead, our derivative instruments are
marked-to-market to determine their fair value and any gains or losses are recognized currently in other income (expense) on
our consolidated statements of operations.
Other Comprehensive Income
Our other comprehensive income includes the impact of the amortization of our pension actuarial loss, net of tax, the
revaluation of our pension actuarial loss, net of tax, and the impact of foreign currency translation.
Supplemental Cash Flow Disclosures
The following table provides supplemental cash flow information for 2016, 2015, and 2014:
(In thousands)
Supplemental disclosure of cash flow information:
Cash paid for interest, including capital leases
Cash paid for income taxes, excluding impact of refunds
Gross proceeds from borrowings under the bank credit facility
Gross payments of borrowings under the bank credit facility
Non-cash activity:
Assets acquired under capital leases
Accrued property and equipment
Cash flows from discontinued operations:
Net cash used in operating activities, discontinued operations
Net cash provided by investing activities, discontinued operations
2016
2015
2014
$
$
$
$
$
$
$
$
4,486
103,323
1,673,700
1,629,600
286
9,295
(448)
$
$
$
$
$
$
$
3,204
56,158
1,588,200
1,588,000
10,180
9,808
(2,846)
$
$
$
$
$
$
$
— $
— $
1,921
69,919
1,550,900
1,565,800
20,982
10,974
(48,339)
522
Reclassifications
Merchandise Categories
In the fourth quarter of 2016, we realigned select merchandise categories to be consistent with the changes in our merchandising
team and our management reporting. Specifically, we reclassified our toy department from our Seasonal category to the Electronics,
Toys, & Accessories category. We also moved our home organization department from the Consumables category to our Soft
Home category. In order to provide comparative information, we have reclassified our net sales by merchandise category into this
revised alignment for all periods presented in note 15 to the consolidated financial statements.
We periodically assess, and make minor adjustments to, our product hierarchy, which can impact the roll-up of our merchandise
categories. Our financial reporting process utilizes the most current product hierarchy in reporting net sales by merchandise
category for all periods presented. Therefore, there may be minor reclassifications of net sales by merchandise category compared
to previously reported amounts.
51
Recent Accounting Standards
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09,
Revenue from Contracts with Customers (Topic 606). This update provides a comprehensive new revenue recognition model
that requires a company to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects
the consideration it expects to receive in exchange for those goods or services. Additionally, this guidance expands related
disclosure requirements. The pronouncement was originally set to be effective for annual and interim reporting periods
beginning after December 15, 2016. In July 2015, the FASB approved a one-year deferral of the effective date from December
15, 2016 to December 15, 2017, but will allow for early adoption as of December 15, 2016. This ASU permits the use of either
the retrospective or cumulative effect transition method. We are currently evaluating the impact this guidance will have on our
consolidated financial statements as well as the expected adoption method. We do not currently anticipate a significant change
in the timing of the recognition of our revenue or costs; although upon adoption of this standard, our principal versus agent
presentation of an immaterial portion of our vendor relationships may be impacted. We currently anticipate adopting the new
standard effective February 4, 2018, using the full retrospective method; however, this decision is not final and is subject to the
completion of our analysis of the standard. We will continue to evaluate ASU 2014-09 through the date of adoption.
In February 2016, the FASB issued ASU 2016-02, Leases. The update requires a lessee to recognize a liability to make lease
payments and a right-of-use asset representing a right to use the underlying asset for the lease term on the balance sheet. The
ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018, with early
adoption permitted. We are currently evaluating both the impact that this standard will have on our consolidated financial
statements and which method of adoption to employ. We will not early adopt this standard.
In March 2016, the FASB issued ASU 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee
Share-Based Payment Accounting. This update makes several modifications to the accounting for employee share-based
payment transactions, including the requirement to recognize the income tax effects (income tax deduction excess or
deficiency) of awards that vest or settle as income tax expense in the reporting period they vest or settle. Additionally, this
update clarifies the presentation of certain components of share-based awards in the statement of cash flows. The ASU is
effective for annual reporting periods beginning after December 15, 2016, and interim periods within those annual periods. For
2016, 2015 and 2014, $0.5 million, $0.7 million, and $1.0 million, respectively, of excess tax benefits were recorded to
additional paid-in capital that would have been recorded as a reduction to the provision for income taxes if this new guidance
had been adopted as of the respective dates. We have selected a modified retrospective method to adopt the recognition of the
income tax effects and cash flow presentations, and except as described above, do not expect the provisions of ASU 2016-09 to
have a significant impact on our consolidated financial position or results of operations.
Subsequent Events
We have evaluated events and transactions subsequent to the balance sheet date. Based on this evaluation, we are not aware of
any events or transactions (other than those disclosed in notes 10 and 17) that occurred subsequent to the balance sheet date but
prior to filing that would require recognition or disclosure in our consolidated financial statements.
NOTE 2 – PROPERTY AND EQUIPMENT - NET
Property and equipment - net consist of:
(In thousands)
Land and land improvements
Buildings and leasehold improvements
Fixtures and equipment
Computer software costs
Construction-in-progress
Property and equipment - cost
Less accumulated depreciation and amortization
Property and equipment - net
January 28, 2017
January 30, 2016
$
$
50,906 $
853,324
743,212
165,209
18,653
1,831,304
1,305,453
525,851 $
51,523
840,931
737,169
132,101
30,974
1,792,698
1,232,774
559,924
Property and equipment - cost includes $31.0 million and $31.5 million at January 28, 2017 and January 30, 2016, respectively,
to recognize assets from capital leases. Accumulated depreciation and amortization includes $11.1 million and $6.2 million at
January 28, 2017 and January 30, 2016, respectively, related to capital leases.
52
During 2016, 2015, and 2014, respectively, we invested $89.8 million, $126.0 million, and $93.5 million of cash in capital
expenditures and we recorded $120.4 million, $122.7 million, and $119.7 million of depreciation expense.
We incurred $0.1 million, $0.4 million, and $3.5 million in asset impairment charges in 2016, 2015, and 2014, respectively.
During 2016, we wrote down the value of long-lived assets at one store identified as part of our annual store impairment
review. In 2015, we wrote down the value of long-lived assets at two stores identified as part of our annual store impairment
review. The charges in 2014 were primarily related to our corporate aircraft, as we made the decision to no longer own and
operate corporate aircraft and entered into sales agreements for both our corporate aircraft. Additionally, we wrote down the
value of long-lived assets at three stores identified as part of our annual store impairment review.
Asset impairment charges are included in selling and administrative expenses in our accompanying consolidated statements of
operations. We perform annual impairment reviews of our long-lived assets at the store level. When we perform the annual
impairment reviews, we first determine which stores had impairment indicators present. We generally use actual historical cash
flows to determine if stores had negative cash flows within the past two years. For each store with negative cash flows, we
estimate future cash flows based on operating performance estimates specific to each store’s operations that are based on
assumptions currently being used to develop our company level operating plans. If the net book value of a store’s long-lived
assets is not recoverable by the expected future cash flows of the store, we estimate the fair value of the store's assets and
recognize an impairment charge for the excess net book value of the store’s long-lived assets over their fair value.
NOTE 3 – BANK CREDIT FACILITY
On July 22, 2011, we entered into a $700 million five-year unsecured credit facility, which was first amended on May 30, 2013.
On May 28, 2015, we entered into a second amendment of the credit facility that, among other things, extended its term to May
30, 2020 (as amended, the “2011 Credit Agreement”). In connection with our original entry into the 2011 Credit Agreement,
we paid bank fees and other expenses in the aggregate amount of $3.0 million, which are being amortized over the term of the
agreement. In connection with the 2015 amendment of the 2011 Credit Agreement, we paid additional bank fees and other
expenses in the aggregate amount of $0.8 million, which are being amortized over the term of the amended agreement.
Borrowings under the 2011 Credit Agreement are available for general corporate purposes and working capital. The 2011
Credit Agreement includes a $30 million swing loan sublimit and a $150 million letter of credit sublimit. The interest rates,
pricing and fees under the 2011 Credit Agreement fluctuate based on our debt rating. The 2011 Credit Agreement allows us to
select our interest rate for each borrowing from multiple interest rate options. The interest rate options are generally derived
from the prime rate or LIBOR. We may prepay revolving loans made under the 2011 Credit Agreement. The 2011 Credit
Agreement contains financial and other covenants, including, but not limited to, limitations on indebtedness, liens and
investments, as well as the maintenance of two financial ratios – a leverage ratio and a fixed charge coverage ratio. A violation
of any of the covenants could result in a default under the 2011 Credit Agreement that would permit the lenders to restrict our
ability to further access the 2011 Credit Agreement for loans and letters of credit and require the immediate repayment of any
outstanding loans under the 2011 Credit Agreement. At January 28, 2017, we had $106.4 million of borrowings outstanding
under the 2011 Credit Agreement and $3.0 million was committed to outstanding letters of credit, leaving $590.6 million
available under the 2011 Credit Agreement.
NOTE 4 – FAIR VALUE MEASUREMENTS
In connection with our nonqualified deferred compensation plan, we had mutual fund investments of $24.1 million and $17.3
million at January 28, 2017 and January 30, 2016, respectively, which were recorded in other assets. These investments were
classified as trading securities and were recorded at their fair value. The fair values of mutual fund investments were Level 1
valuations under the fair value hierarchy because each fund’s quoted market value per share was available in an active market.
The fair values of our long-term obligations under our bank credit facility are estimated based on the quoted market prices for
the same or similar issues and the current interest rates offered for similar instruments. These fair value measurements are
classified as Level 2 within the fair value hierarchy. Given the variable rate features and relatively short maturity of the
instruments underlying our long-term obligations, the carrying value of these instruments approximates the fair value.
53
NOTE 5 – LEASES
Leased property consisted primarily of 1,378 of our retail stores, our new corporate office (anticipated to open in the first half
of 2018), and certain transportation, information technology and other office equipment. In 2016, we entered into a lease for
our new corporate office. We expect to move into the new office in 2018. Many of the store leases obligate us to pay for our
applicable portion of real estate taxes, CAM, and property insurance. Certain store leases provide for contingent rents, have
rent escalations, and have tenant allowances or other lease incentives. Many of our leases contain provisions for options to
renew or extend the original term for additional periods.
Total rent expense, including real estate taxes, CAM, and property insurance, charged to continuing operations for operating
leases consisted of the following:
(In thousands)
Minimum rents
Contingent rents
Total rent expense
2016
2015
2014
$
$
321,248 $
607
321,855 $
314,605 $
637
315,242 $
314,276
312
314,588
Future minimum rental commitments for leases, excluding closed store leases, real estate taxes, CAM, and property insurance,
at January 28, 2017, were as follows:
Fiscal Year
2017
2018
2019
2020
2021
Thereafter
Total leases
(In thousands)
256,400
223,827
182,186
138,449
93,174
188,496
1,082,532
$
$
We have obligations for capital leases primarily for store asset protection equipment and office equipment, included in accrued
operating expenses and other liabilities on our consolidated balance sheet. Scheduled payments for all capital leases at
January 28, 2017, were as follows:
Fiscal Year
2017
2018
2019
2020
2021
Thereafter
Total lease payments
Less amount to discount to present value
Capital lease obligation per balance sheet
(In thousands)
5,481
4,423
4,423
4,423
3,358
505
22,613
(2,368)
20,245
$
$
$
54
NOTE 6 – SHAREHOLDERS’ EQUITY
Earnings per Share
There were no adjustments required to be made to weighted-average common shares outstanding for purposes of computing
basic and diluted earnings per share and there were no securities outstanding in any year presented, which were excluded from
the computation of earnings per share other than antidilutive stock options, restricted stock awards, restricted stock units, and
PSUs. Stock options outstanding that were excluded from the diluted share calculation because their impact was antidilutive at
the end of 2016, 2015, and 2014 were as follows:
(In millions)
Antidilutive stock options excluded from dilutive share calculation
2016
2015
2014
—
0.1
1.1
Antidilutive options are excluded from the calculation because they decrease the number of diluted shares outstanding under
the treasury stock method. Antidilutive stock options are generally outstanding options where the exercise price per share is
greater than the weighted-average market price per share for our common shares for each period. The restricted stock awards,
restricted stock units, and PSUs that were antidilutive, as determined under the treasury stock method, were immaterial for all
years presented.
A reconciliation of the number of weighted-average common shares outstanding used in the basic and diluted earnings per
share computations is as follows:
(In thousands)
Weighted-average common shares outstanding:
Basic
Dilutive effect of share-based awards
Diluted
2016
2015
2014
45,316
658
45,974
50,517
447
50,964
54,935
617
55,552
Share Repurchase Programs
On March 1, 2016, our Board of Directors authorized a share repurchase program providing for the repurchase of up to $250
million of our common shares (“2016 Repurchase Program”). The 2016 Repurchase Program was exhausted during the second
quarter of 2016. During 2016, we acquired approximately 5.6 million of our outstanding common shares for $250 million
under the 2016 Repurchase Program.
Common shares acquired through repurchase programs are held in treasury at cost and are available to meet obligations under
equity compensation plans and for general corporate purposes.
Dividends
The Company declared and paid cash dividends per common share during the periods presented as follows:
2015:
First quarter
Second quarter
Third quarter
Fourth quarter
Total
2016:
First quarter
Second quarter
Third quarter
Fourth quarter
Total
$
$
$
$
Dividends
Per Share
Amount
Declared
Amount Paid
(In thousands)
(In thousands)
0.19
0.19
0.19
0.19
0.76
0.21
0.21
0.21
0.21
0.84
$
$
$
$
10,479
10,069
9,549
9,637
39,734
(In thousands)
10,616
9,674
9,699
9,760
39,749
55
$
$
$
$
10,197
9,734
9,267
9,332
38,530
(In thousands)
10,597
9,282
9,290
9,297
38,466
The amount of dividends declared may vary from the amount of dividends paid in a period based on certain instruments with
restrictions on payment, including restricted stock awards, restricted stock units, and PSUs. The payment of future dividends
will be at the discretion of our Board of Directors and will depend on our financial conditions, results of operations, capital
requirements, compliance with applicable laws and agreements and any other factors deemed relevant by our Board of
Directors.
NOTE 7 – SHARE-BASED PLANS
Our shareholders approved the Big Lots 2012 Long-Term Incentive Plan (“2012 LTIP”) in May 2012, as amended and restated in
May 2014. The 2012 LTIP authorizes the issuance of incentive and nonqualified stock options, restricted stock, restricted stock
units, deferred stock awards, PSUs, stock appreciation rights, cash-based awards, and other share-based awards. We have issued
nonqualified stock options, restricted stock, restricted stock units, and PSUs under the 2012 LTIP. The number of common shares
available for issuance under the 2012 LTIP consists of an initial allocation of 7,750,000 common shares plus any common shares
subject to the 4,702,362 outstanding awards as of March 15, 2012 under the Big Lots 2005 Long-Term Incentive Plan (“2005
LTIP”) that, on or after March 15, 2012, cease for any reason to be subject to such awards (other than by reason of exercise or
settlement). The Compensation Committee of our Board of Directors (“Committee”), which is charged with administering the 2012
LTIP, has the authority to determine the terms of each award. Nonqualified stock options granted to employees under the 2012
LTIP, the exercise price of which may not be less than the fair market value of the underlying common shares on the grant date,
generally expire on the earlier of: (1) the seven year term set by the Committee; or (2) one year following termination of
employment, death, or disability. The nonqualified stock options generally vest ratably over a four-year period; however, upon a
change in control, all awards outstanding automatically vest.
Our former equity compensation plan, the 2005 LTIP, approved by our shareholders in May 2005, expired on May 16, 2012. The
2005 LTIP authorized the issuance of nonqualified stock options, restricted stock, and other award types. We issued only
nonqualified stock options and restricted stock under the 2005 LTIP. The Committee, which was charged with administering the
2005 LTIP, had the authority to determine the terms of each award. Nonqualified stock options granted to employees under the
2005 LTIP, the exercise price of which was not less than the fair market value of the underlying common shares on the grant date,
generally expire on the earlier of: (1) the seven year term set by the Committee; or (2) one year following termination of
employment, death, or disability. The nonqualified stock options generally vest ratably over a four-year period; however, upon a
change in control, all awards outstanding automatically vest.
We previously maintained the Big Lots Director Stock Option Plan (“Director Stock Option Plan”) for non-employee directors. The
Director Stock Option Plan was terminated on May 30, 2008. The Director Stock Option Plan was administered by the Committee
pursuant to an established formula. Neither the Board of Directors nor the Committee exercised any discretion in administration of
the Director Stock Option Plan. Grants were made annually at an exercise price equal to the fair market value of the underlying
common shares on the date of grant. The annual grants to each non-employee director of an option to acquire 10,000 of our
common shares became fully exercisable over a three
period: 20% of the shares on the first anniversary, 60% on the second
anniversary, and 100% on the third anniversary. Stock options granted to non-employee directors expire on the earlier of: (1) 10
years plus one month; (2) one year following death or disability; or (3) at the end of our next trading window one year following
termination. In connection with the amendment to the 2005 LTIP in May 2008, our Board of Directors amended the Director Stock
Option Plan so that no additional awards may be made under that plan. Our non-employee directors did not receive any stock
options in 2016, 2015, and 2014, but did, as discussed below, receive restricted stock awards under the 2012 and 2005 LTIPs.
Share-based compensation expense was $33.0 million, $13.5 million and $10.5 million in 2016, 2015, and 2014, respectively.
56
Non-vested Restricted Stock
The following table summarizes the non-vested restricted stock awards and restricted stock units activity for fiscal years 2014,
2015, and 2016:
Outstanding non-vested restricted stock at February 1, 2014
Granted
Vested
Forfeited
Outstanding non-vested restricted stock at January 31, 2015
Granted
Vested
Forfeited
Outstanding non-vested restricted stock at January 30, 2016
Granted
Vested
Forfeited
Outstanding non-vested restricted stock at January 28, 2017
Weighted
Average
Grant-Date
Fair Value
Per Share
Number of
Shares
664,101 $
317,641
(70,155)
(166,782)
744,805 $
217,767
(128,140)
(49,283)
785,149 $
261,792
(252,156)
(23,264)
771,521 $
38.34
37.81
34.54
39.87
38.13
49.00
38.42
40.28
40.96
45.62
42.03
43.63
42.12
The non-vested restricted stock units granted in 2014, 2015 and 2016 generally vest, and are expensed, on a ratable basis over three
years from the grant date of the award, if certain threshold financial performance objectives are achieved and the grantee remains
employed by us through the vesting dates.
The non-vested restricted stock awards granted to employees in prior years vest if certain financial performance objectives are
achieved. If we meet a threshold financial performance objective and the grantee remains employed by us, the restricted stock will
vest on the opening of our first trading window five years after the grant date of the award. If we meet a higher financial
performance objective and the grantee remains employed by us, the restricted stock will vest on the first trading day after we file
our Annual Report on Form 10-K with the SEC for the fiscal year in which the higher objective is met.
As of January 28, 2017, we estimated a five-year period for vesting, and therefore expensing, of all non-vested restricted stock
awards granted in prior years, as we do not anticipate achieving the higher financial performance objective for any outstanding
restricted stock awards.
Performance Share Units
In 2013, in connection with his appointment as CEO and President, Mr. Campisi was awarded 37,800 PSUs, which vest based on
the achievement of share price performance goals, that had a weighted average grant-date fair value per share of $34.68. The PSUs
have a contractual term of seven years. In 2014, Mr. Campisi’s first two tranches for a total of 25,200 PSUs vested. In 2016,
Mr. Campisi's third and final tranche of 12,600 PSUs vested.
In 2014, 2015, and 2016, we issued PSUs to certain members of management, which vest if certain financial performance
objectives are achieved over a three-year performance period and the grantee remains employed by us through that performance
period. At January 28, 2017, 971,595 nonvested PSUs were outstanding in the aggregate. The financial performance objectives for
each fiscal year within the three-year performance period are approved by the Compensation Committee of our Board of Directors
during the first quarter of the respective fiscal year.
57
As a result of the process used to establish the financial performance objectives, we will only meet the requirements of establishing
a grant date for the PSUs when we communicate the financial performance objectives for the third fiscal year of the award to the
award recipients, which will then trigger the service inception date, the fair value of the awards, and the associated expense
recognition period. If we meet the applicable threshold financial performance objectives over the three-year performance period
and the grantee remains employed by us through the end of the performance period, the PSUs will vest on the first trading day after
we file our Annual Report on Form 10-K for the last fiscal year in the performance period.
We have begun or expect to begin recognizing expense related to PSUs as follows:
Issue Year
2014
2015
2016
Total
Outstanding PSUs
at
January 28, 2017
360,357
259,042
352,196
971,595
Actual Grant Date
March 2016
Expected Valuation
(Grant) Date
Actual or Expected
Expense Period
March 2017
March 2018
Fiscal 2016
Fiscal 2017
Fiscal 2018
The number of shares to be distributed upon vesting of the PSUs depends on our average performance attained during the three-year
performance period as compared to the targets defined by the Compensation Committee, and may result in the distribution of an
amount of shares that is greater or less than the number of PSUs granted, as defined in the award agreement. The PSUs issued in
2014 performed above target and more shares will be distributed than initially granted. At January 28, 2017, we estimate the
attainment of an average performance that is greater than the targets established for the PSUs issued in 2015. In 2016, we
recognized $17.5 million in share-based compensation expense related to PSUs.
The following table summarizes the activity related to PSUs for fiscal year 2016:
Outstanding PSUs at January 30, 2016
Granted
Vested
Forfeited
Outstanding PSUs at January 28, 2017
PSUs, excluding 2013
CEO PSUs
Weighted
Average
Grant-Date
Fair Value
Per Share
Number of
Shares
— $
379,794
—
(19,437)
360,357 $
—
41.04
—
41.04
41.04
Board of Directors' Awards
In 2016, 2015, and 2014, we granted to each non-employee member of our Board of Directors a restricted stock award. Each award
granted in 2016 had a fair value on the grant date of approximately $110,000. These awards vest on the earlier of (1) the trading
day immediately preceding the next annual meeting of our shareholders or (2) the death or disability of the grantee. However, the
restricted stock award will not vest if the non-employee director ceases to serve on our Board of Directors before either vesting
event occurs.
58
Stock Options
The following table summarizes information about our stock options outstanding and exercisable at January 28, 2017:
Range of Prices
Options Outstanding
Greater
Than
Less Than
or Equal to
Options
Outstanding
Weighted-
Average
Remaining
Life (Years)
Weighted-
Average
Exercise
Price
Options Exercisable
Weighted-
Average
Exercise
Price
Options
Exercisable
$
$
20.01
30.01
40.01
$
$
30.00
40.00
50.00
10,000
313,125
266,550
589,675
0.7 $
3.1
1.7
2.5 $
28.22
35.67
42.77
38.75
10,000 $
141,186
266,550
417,736 $
28.22
35.37
42.77
39.92
A summary of the annual stock option activity for fiscal years 2014, 2015, and 2016 is as follows:
Outstanding stock options at February 1, 2014
Exercised
Forfeited
Outstanding stock options at January 31, 2015
Exercised
Forfeited
Outstanding stock options at January 30, 2016
Exercised
Forfeited
Outstanding stock options at January 28, 2017
Vested or expected to vest at January 28, 2017
Exercisable at January 28, 2017
Weighted
Average
Exercise
Price Per
Share
Weighted
Average
Remaining
Contractual
Term (years)
Aggregate
Intrinsic
Value
(000's)
34.88
30.67
39.19
37.59
36.17
35.84
38.26
37.81
35.83
38.75
38.76
39.92
2.5 $
2.5 $
2.1 $
5,846
5,835
3,655
Number of
Options
3,377,303 $
(1,389,040)
(285,050)
1,703,213 $
(450,136)
(78,175)
1,174,902 $
(572,727)
(12,500)
589,675 $
588,733 $
417,736 $
The stock options granted in prior years vest in equal amounts on the first four anniversaries of the grant date and have a contractual
term of seven years. The number of stock options expected to vest was based on our annual forfeiture rate assumption.
During 2016, 2015, and 2014, the following activity occurred under our share-based compensation plans:
(In thousands)
Total intrinsic value of stock options exercised
Total fair value of restricted stock vested
Total fair value of performance shares vested
2016
2015
2014
$
$
$
7,392 $
11,510 $
621 $
5,980 $
6,259 $
— $
18,614
2,825
1,143
The total unearned compensation cost related to all share-based awards outstanding, excluding PSUs, at January 28, 2017 was
approximately $13.4 million. This compensation cost is expected to be recognized through September 2019 based on existing
vesting terms with the weighted-average remaining expense recognition period being approximately 1.6 years from January 28,
2017.
59
NOTE 8 – EMPLOYEE BENEFIT PLANS
Pension Benefits
We maintained the Pension Plan and Supplemental Pension Plan covering certain employees whose hire date was on or before
April 1, 1994. Benefits under each plan were based on credited years of service and the employee’s compensation during the
last five years of employment.
On October 31, 2015, our Board of Directors approved amendments to freeze benefits and terminate the Pension Plan. The
Pension Plan discontinued accruing benefits on December 31, 2015 and the termination was effective January 31, 2016. On
December 2, 2015, our Board of Directors approved amendments to freeze benefits and terminate the Supplemental
Pension Plan. The Supplemental Pension Plan discontinued accruing benefits on December 31, 2015 and the termination was
effective December 31, 2015. During 2016, we completed the termination proceedings for the Pension Plan, including seeking
and receiving a favorable IRS determination letter, conducting a lump sum offering to our active and terminated vested
participants, and conducting an insurance placement for the annuity purchasers. Additionally, we funded the Pension Plan and
reduced our liability thereunder to zero. In January 2017, we completed the termination proceedings for the Supplemental
Pension Plan and paid all accrued balances to participants through lump sum settlements.
In addition, in the fourth quarter of 2015, when we communicated the approved amendments to the participants of the Pension
Plan, we informed Pension Plan participants that we would provide for a one-time transition benefit to participants who were
actively employed on December 31, 2015. We recorded a charge in selling and administrative expenses for this one-time
transition benefit of $7.0 million, which was contributed to participants’ savings plan accounts in 2016.
The components of net periodic pension expense were comprised of the following:
(In thousands)
Service cost - benefits earned in the period
Interest cost on projected benefit obligation
Expected investment return on plan assets
Amortization of prior service cost
Amortization of actuarial loss
Curtailment loss
Settlement loss
Net periodic pension cost
2016
2015
2014
$
$
— $
879
(1,536)
—
2,241
—
24,483
26,067 $
1,923 $
2,444
(2,628)
4
1,817
191
1,912
5,663 $
1,951
3,218
(3,219)
(34)
1,497
—
1,868
5,281
The weighted-average assumptions used to determine net periodic pension expense were:
Discount rate
Rate of increase in compensation levels
Expected long-term rate of return
2016
2015
2014
1.2%
—%
2.8%
3.3%
2.8%
5.2%
5.0%
3.0%
6.0%
The weighted-average assumptions used to determine benefit obligations were:
Discount rate
2015
1.2%
60
The following schedule provides a reconciliation of projected benefit obligations, plan assets, funded status, and amounts
recognized for the Pension Plan and Supplemental Pension Plan at January 28, 2017 and January 30, 2016:
(In thousands)
Change in projected benefit obligation:
Projected benefit obligation at beginning of year
Service cost
Interest cost
Plan curtailments
Benefits and settlements paid
Actuarial loss
Projected benefit obligation at end of year
Change in plan assets:
Fair market value at beginning of year
Actual return on plan assets
Employer contributions
Benefits and settlements paid
Fair market value at end of year
Under funded and net amount recognized
Amounts recognized in the consolidated balance sheets consist of:
Current liabilities
Net amount recognized
January 28, 2017
January 30, 2016
$
$
$
$
$
$
$
75,411 $
—
879
—
(77,264)
974
— $
55,636 $
2,393
19,235
(77,264)
— $
— $
— $
— $
78,187
1,923
2,444
(7,291)
(7,564)
7,712
75,411
55,292
(3,025)
10,933
(7,564)
55,636
(19,774)
(19,774)
(19,774)
In 2015, as a result of executing the plan termination amendments, the pension liability and other comprehensive loss were
recalculated to reflect the elimination of future compensation increases, which resulted in a decrease of $7.3 million, before tax.
The following are components of accumulated other comprehensive income and, as such, are not yet reflected in net periodic
pension expense:
(In thousands)
Unrecognized actuarial loss
Accumulated other comprehensive loss, pretax
2016
2015
$
$
— $
— $
(26,418)
(26,418)
The following table sets forth certain information for the Pension Plan and the Supplemental Pension Plan at January 28, 2017
and January 30, 2016:
(In thousands)
Projected benefit obligation
Accumulated benefit obligation
Fair market value of plan assets
Pension Plan
Supplemental Pension Plan
January 28, 2017
January 30, 2016
January 28, 2017
January 30, 2016
$
$
— $
—
— $
70,046
70,046
55,636
$
$
— $
—
— $
5,365
5,365
—
61
Savings Plans
We have a savings plan with a 401(k) deferral feature and a nonqualified deferred compensation plan with a similar deferral
feature for eligible employees. We contribute a matching percentage of employee contributions. Our matching contributions
are subject to Internal Revenue Service (“IRS”) regulations. For 2016, 2015, and 2014, we expensed $6.6 million, $6.3
million, and $5.9 million, respectively, related to our matching contributions. In connection with our nonqualified deferred
compensation plan, we had liabilities of $24.4 million and $17.5 million at January 28, 2017 and January 30, 2016,
respectively.
NOTE 9 – INCOME TAXES
The provision for income taxes from continuing operations was comprised of the following:
(In thousands)
Current:
U.S. Federal
U.S. State and local
Total current tax expense
Deferred:
U.S. Federal
U.S. State and local
Total deferred tax expense
Income tax provision
2016
2015
2014
$
87,522 $
73,421 $
13,124
100,646
(7,979)
(1,209)
(9,188)
91,458 $
$
10,660
84,081
56
(295)
(239)
83,842 $
74,235
12,840
87,075
(2,022)
186
(1,836)
85,239
Net deferred tax assets fluctuated by items that are not reflected in deferred tax expense in the above table, in 2016 this
fluctuation is primarily related to the termination of the defined benefit pension plan. Net deferred tax assets decreased by
$10.4 million in 2016, increased by $0.8 million in 2015, and increased by $4.0 million in 2014, principally from pension-
related charges recorded in accumulated other comprehensive loss. Additionally, net deferred tax assets increased by $0.4
million in 2015, and decreased by $24.3 million in 2014 as a result of deferred income tax expense associated with our
discontinued operations.
Reconciliation between the statutory federal income tax rate and the effective income tax rate for continuing operations was as
follows:
Statutory federal income tax rate
Effect of:
State and local income taxes, net of federal tax benefit
Work opportunity tax and other employment tax credits
Valuation allowance
Other, net
Effective income tax rate
Income tax payments and refunds were as follows:
2016
2015
2014
35.0%
3.2
(1.1)
—
0.4
37.5%
35.0%
3.0
(1.1)
—
0.1
37.0%
35.0%
3.8
(0.7)
—
0.3
38.4%
(In thousands)
Income taxes paid
Income taxes refunded
Net income taxes paid
2016
2015
2014
$
$
103,323 $
(16,187)
87,136 $
56,158 $
(818)
55,340 $
69,919
(135)
69,784
62
Deferred taxes reflect the net tax effects of temporary differences between carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax, including income tax uncertainties. Significant components
of our deferred tax assets and liabilities were as follows:
(In thousands)
Deferred tax assets:
Compensation related
Workers’ compensation and other insurance reserves
Accrued rent
Uniform inventory capitalization
Depreciation and fixed asset basis differences
Accrued state taxes
State tax credits, net of federal tax benefit
Accrued operating liabilities
Pension plans
Other
Valuation allowances
Total deferred tax assets
Deferred tax liabilities:
Accelerated depreciation and fixed asset basis differences
Lease construction reimbursements
Prepaid expenses
Workers’ compensation and other insurance reserves
Other
Total deferred tax liabilities
Net deferred tax assets
January 28, 2017
January 30, 2016
$
39,616 $
32,194
22,259
18,648
10,095
7,157
3,844
2,056
—
17,138
(2,087)
150,920
71,155
15,682
6,553
3,482
7,579
$
104,451
46,469 $
31,478
33,531
23,540
18,488
10,523
7,119
4,253
2,189
7,815
19,775
(2,419)
156,292
70,698
15,602
6,625
4,329
11,299
108,553
47,739
We have the following income tax loss and credit carryforwards at January 28, 2017 (amounts are shown net of tax excluding
the federal income tax effect of the state and local items):
(In thousands)
U.S. State and local:
State net operating loss carryforwards
California enterprise zone credits
Other state credits
Total income tax loss and credit carryforwards
$
$
39 Expires fiscal years 2020 through 2025
5,611 Predominately expires fiscal year 2023
302 Expires fiscal years through 2025
5,952
Income taxes payable on our consolidated balance sheets have been reduced by the tax benefits primarily associated with share-
based compensation. We receive an income tax deduction upon the exercise of non-qualified stock options and the vesting of
restricted stock awards, restricted stock units, and PSUs. Tax benefits of $0.5 million, $0.7 million, and $1.2 million in 2016,
2015, and 2014, respectively, were credited directly to shareholders' equity related to share-based compensation income tax
deductions in excess of expense recognized for these awards.
63
The following is a tabular reconciliation of the total amounts of unrecognized tax benefits for 2016, 2015, and 2014:
(In thousands)
2016
2015
2014
Unrecognized tax benefits - beginning of year
$
13,772 $
14,922 $
Gross increases - tax positions in current year
Gross increases - tax positions in prior period
Gross decreases - tax positions in prior period
Settlements
Lapse of statute of limitations
Foreign currency translation
822
171
(80)
(236)
(1,328)
—
939
872
(430)
(732)
(1,799)
—
Unrecognized tax benefits - end of year
$
13,121 $
13,772 $
16,650
898
820
(2,418)
(488)
(566)
26
14,922
At the end of 2016 and 2015, the total amount of unrecognized tax benefits that, if recognized, would affect the effective
income tax rate is $8.4 million and $8.9 million, respectively, after considering the federal tax benefit of state and local income
taxes of $4.1 million and $4.3 million, respectively. Unrecognized tax benefits of $0.6 million and $0.5 million in 2016 and
2015, respectively, relate to tax positions for which the ultimate deductibility is highly certain but for which there is uncertainty
about the timing of such deductibility. The uncertain timing items could result in the acceleration of the payment of cash to the
taxing authority to an earlier period.
We recognized an expense (benefit) associated with interest and penalties on unrecognized tax benefits of approximately $0.2
million, $0.1 million, and $0.5 million during 2016, 2015, and 2014, respectively, as a component of income tax expense. The
amount of accrued interest and penalties recognized in the accompanying consolidated balance sheets at January 28, 2017 and
January 30, 2016 was $6.3 million and $6.1 million, respectively.
We are subject to U.S. federal income tax, income tax of multiple state and local jurisdictions. The statute of limitations for
assessments on our federal income tax returns for periods prior to 2013 has lapsed. In addition, the state income tax returns
filed by us are subject to examination generally for periods beginning with 2006, although state income tax carryforward
attributes generated prior to 2006 and non-filing positions may still be adjusted upon examination. We have various state
returns in the process of examination or administrative appeal. After acquiring Canadian operations on July 18, 2011 and prior
to dissolution on June 10, 2014, we also were subject to Canadian and provincial taxes. Generally, the time limit for
reassessing returns for Canadian and provincial income taxes for periods prior to the short fiscal period ended July 18, 2011
have lapsed.
We have estimated the reasonably possible expected net change in unrecognized tax benefits through February 3, 2018, based
on expected cash and noncash settlements or payments of uncertain tax positions and lapses of the applicable statutes of
limitations for unrecognized tax benefits. The estimated net decrease in unrecognized tax benefits for the next 12 months is
approximately $4.0 million. Actual results may differ materially from this estimate.
NOTE 10 – COMMITMENTS, CONTINGENCIES AND LEGAL PROCEEDINGS
On May 21, May 22 and July 2, 2012, three shareholder derivative lawsuits were filed in the U.S. District Court for the
Southern District of Ohio against us and certain of our current and former outside directors and executive officers. The
lawsuits were consolidated, and, on August 13, 2012, plaintiffs filed a consolidated complaint captioned In re Big Lots, Inc.
Shareholder Litigation, No. 2:12-cv-00445 (S.D. Ohio) (the “Consolidated Derivative Action”), which generally alleged that
the individual defendants traded in our common shares based on material, nonpublic information concerning our guidance for
fiscal 2012 and the first quarter of fiscal 2012 and the director defendants failed to suspend our share repurchase program
during such trading activity. The consolidated complaint asserted claims under Ohio law for breach of fiduciary duty, unjust
enrichment, misappropriation of trade secrets and corporate waste and sought declaratory relief and disgorgement to us of
proceeds from any wrongful sales of our common shares, plus attorneys’ fees and expenses.
64
The defendants filed a motion to dismiss the consolidated complaint, which was granted by the Court in an Opinion and Order
dated April 14, 2015, pursuant to which plaintiffs’ claims were all dismissed with prejudice, with the exception of their claim
for corporate waste, which was dismissed without prejudice. On May 5, 2015, plaintiffs filed a Motion for Leave to File
Verified Consolidated Amended Shareholder Derivative Complaint, which sought to replead the claim for corporate waste that
was dismissed without prejudice by the Court, as well as a Motion for Reconsideration and, in the Alternative, for Certification
of Question of State Law to the Supreme Court of Ohio. Defendants’ responses to both motions were filed on May 29, 2015.
On August 3, 2015, the Court granted Plaintiffs’ Motion for Leave to File Verified Consolidated Amended Shareholder
Derivative Complaint, and Plaintiffs filed the amended complaint on the same date, asserting a claim for corporate waste
against Jeffrey Berger, Steven Fishman, David Kollat, Brenda Lauderback, Philip Mallott, Russell Solt, and Dennis Tishkoff.
On September 30, 2015, defendants filed an answer to the amended complaint. Discovery in this case is currently stayed, as
discussed further below.
We received a letter dated January 28, 2013, sent on behalf of a shareholder demanding that our Board of Directors investigate
and take action in connection with the allegations made in the derivative and securities lawsuits described above. The
shareholder indicated that he would commence a derivative lawsuit if our Board of Directors failed to take the demanded
action. On March 6, 2013, our Board of Directors referred the shareholder’s letter to a committee of independent directors to
investigate the matter. That committee, with the assistance of independent outside counsel, investigated the allegations in the
shareholder’s demand letter and, on August 28, 2013, reported its findings to our Board of Directors along with its
recommendation that the Board reject the shareholder’s demand. Our Board of Directors unanimously accepted the
recommendation of the demand investigation committee and, on September 9, 2013, outside counsel for the committee sent a
letter to counsel for the shareholder informing the shareholder of the Board’s determination. On October 18, 2013, the
shareholder filed a derivative lawsuit captioned Brosz v. Fishman et al., No. 1:13-cv-00753 (S.D. Ohio) (the “Brosz Action”) in
the U.S. District Court for the Southern District of Ohio against us and each of the current and former outside directors and
executive officers originally named in the 2012 shareholder derivative lawsuit. The plaintiff’s complaint generally alleged that
the individual defendants traded in our common shares based on material, nonpublic information concerning our guidance for
fiscal 2012 and the first quarter of fiscal 2012 and the director defendants failed to suspend our share repurchase program
during such trading activity. The complaint asserted claims under Ohio law for breach of fiduciary duty, unjust enrichment,
abuse of control, gross mismanagement, corporate waste and misappropriation of trade secrets and sought damages, injunctive
relief and disgorgement to us of proceeds from any wrongful sales of our common shares, plus attorneys’ fees and expenses.
The defendants filed a motion to dismiss the complaint, which was granted by the Court in an Opinion and Order dated April
14, 2015, which dismissed the plaintiff’s claims with prejudice with the exception of his claim for corporate waste and his
assertion that our Board of Directors wrongfully rejected his demand to take action against the individually named defendants.
On May 5, 2015, the Court so ordered the parties’ stipulation, staying plaintiff’s time to seek leave to amend his complaint in
order to make a request to inspect the Company’s books and records pursuant to Ohio Revised Code §1701.37, and plaintiff
served that request for inspection on May 8, 2015. On August 17, 2015 plaintiff filed an Amended Verified Shareholder
Derivative Complaint. On September 30, 2015, defendants moved to dismiss the amended complaint. On December 29, 2016,
the Court denied defendants’ motion to dismiss the amended complaint and ordered that the Brosz Action be consolidated with
the Consolidated Derivative Action.
On February 10, 2014, a shareholder derivative lawsuit was filed in the Franklin County Common Pleas Court in Columbus,
Ohio, captioned Tremblay v. Campisi et al., No. 14CV-02-1421 (Ohio Ct. Com. Pl., Franklin Cnty.) (the “Tremblay Action”),
against us and certain of our current and former outside directors and executive officers (David Campisi, Steven Fishman, Joe
Cooper, Charles Haubiel, Timothy Johnson, Robert Claxton, John Martin, Norman Rankin, Paul Schroeder, Robert Segal,
Steven Smart, David Kollat, Jeffrey Berger, James Chambers, Peter Hayes, Brenda Lauderback, Philip Mallott, Russell Solt,
James Tener and Dennis Tishkoff). The plaintiff’s complaint generally alleges that the individual defendants traded in our
common shares based on material, nonpublic information concerning our guidance for fiscal 2012 and the first quarter of fiscal
2012 and the director defendants failed to suspend our share repurchase program during such trading activity. The complaint
also alleges that we and various individual defendants made false and misleading statements regarding our Canadian operations
prior to our announcement on December 5, 2013 that we were exiting the Canadian market. The complaint asserts claims under
Ohio law for breach of fiduciary duty, unjust enrichment, waste of corporate assets and misappropriation of insider information
and seeks damages, injunctive relief and disgorgement to us of proceeds from any wrongful sales of our common shares, plus
attorneys’ fees and expenses. At the parties’ request, the court stayed this lawsuit until after the judge in the federal derivative
lawsuits discussed in the preceding paragraphs has ruled on the motions to dismiss pending in those actions. On January 12,
2017, the Tremblay Action was voluntarily dismissed by the plaintiffs, without prejudice to refiling.
65
On August 1, 2016, our Board of Directors passed a resolution creating a special litigation committee (“SLC”) to conduct an
independent investigation and determine, in its sole discretion, whether it is in the best interests of the Company to pursue,
settle, or seek dismissal of, the claims asserted in the Consolidated Derivative Action, the Brosz Action, and the Tremblay
Action. The SLC is composed of three members, each of whom is a director that is not a party to any of the derivative actions
and was not a member of the Board until well after the relevant time period. The SLC has retained independent counsel and is
actively proceeding with its investigation. On October 20, 2016, the Company filed motions to stay all proceedings in the
Consolidated Derivative Action and the Brosz Action pending the completion of the SLC’s investigation. The court granted the
motion to stay all proceedings on December 15, 2016.
On July 9, 2012, a putative securities class action lawsuit captioned Willis, et al. v. Big Lots, Inc., et al., 2:12-cv-00604 (S.D.
Ohio) was filed in the U.S. District Court for the Southern District of Ohio on behalf of persons who acquired our common
shares between February 2, 2012 and April 23, 2012. This lawsuit was filed against us, Lisa Bachmann, Mr. Cooper, Mr.
Fishman and Mr. Haubiel. The complaint in the putative class action generally alleges that the defendants made statements
concerning our financial performance that were false or misleading. The complaint asserts claims under sections 10(b) and 20
(a) of the Securities Exchange Act of 1934 and Rule 10b-5 and seeks damages in an unspecified amount, plus attorneys’ fees
and expenses. The lead plaintiff filed an amended complaint on April 4, 2013, which added Mr. Johnson as a defendant,
removed Ms. Bachmann as a defendant, and extended the putative class period to August 23, 2012. On May 6, 2013, the
defendants filed a motion to dismiss the putative class action complaint. On January 21, 2016, the Court granted in part and
denied in part the defendants’ motion to dismiss, allowing some claims to move forward. The case is currently in discovery. On
May 27, 2016, the lead plaintiff moved for class certification (requesting a class period from March 2, 2012 through August 23,
2012) and to appoint class representatives and class counsel. Defendants opposed the motion. On March 17, 2017, the Court
granted plantiff's motion, certifying the class and appointing class representatives and class counsel. On March 31, 2017, the
Company anticipates filing a petition pursuant to Federal Rule of Civil Procedure 23(f) for appeal of the Court's ruling with the
U.S. Court of Appeals for the Sixth Circuit.
We believe that the shareholder derivative and putative class action lawsuits are without merit, and we intend to defend
ourselves vigorously against the allegations levied in these lawsuits. While a loss from these lawsuits is reasonably possible, at
this time, we cannot reasonably estimate the amount of any loss that may result or whether the lawsuits will have a material
impact on our financial statements.
On October 1, 2013, we received a subpoena from the District Attorney for the County of Alameda, State of California, seeking
information concerning our handling of hazardous materials and hazardous waste in the State of California. We have provided
information and are cooperating with the authorities from multiple counties and cities in California in connection with this
ongoing matter. In March of 2016, we entered into settlement negotiations related to this matter.
Overall, during the first quarter of 2016, we recorded accruals totaling $4.7 million associated with pending legal and
regulatory matters.
In 2013, we sold certain tabletop torch and citronella products manufactured by third parties. In August 2013, we recalled the
products and discontinued their sale in our stores. In 2014, we were named as a defendant in a number of lawsuits relating to
these products alleging personal injuries suffered as a result of negligent shelving and pairing of the products, product design,
manufacturing and marketing defects and/or breach of warranties. Although we believe that we are entitled to indemnification
from the third-party manufacturers of the products for all of the expenses that we have incurred (and may in the future incur)
with respect to these matters and that these expenses are covered by our insurance (subject to a $1 million deductible), in the
second quarter of 2015, we (1) determined that our ability to obtain any recovery from the manufacturer of the tabletop torches
may be limited because, among other things, the manufacturer has exhausted its applicable insurance coverage, is domiciled
outside the United States and has been dissolved by its parent and (2) became engaged in litigation with our excess insurance
carrier regarding the scope of our coverage. In the second quarter of 2015, we settled one of the lawsuits and settled another
lawsuit in the third quarter of 2015. Two additional lawsuits remain pending against Big Lots in the United States District
Court for the Western District of Pennsylvania and the United States District Court for the District of New Jersey, respectively.
In the first quarter of 2017, we reached a settlement in principle with the plaintiff in the New Jersey action and are in the
process of formalizing the settlement agreement. The Pennsylvania action remains in the discovery phase. Additionally, we
have brought a separate lawsuit in the United States District Court of Massachusetts against the company that tested the
product. During the second quarter of 2015, we recorded a $4.5 million charge related to these matters.
66
We are involved in other legal actions and claims arising in the ordinary course of business. We currently believe that each
such action and claim will be resolved without a material effect on our financial condition, results of operations, or liquidity.
However, litigation involves an element of uncertainty. Future developments could cause these actions or claims to have a
material effect on our financial condition, results of operations, and liquidity.
We are self-insured for certain losses relating to property, general liability, workers' compensation, and employee medical,
dental, and prescription drug benefit claims, a portion of which is paid by employees, and we have purchased stop-loss
coverage in order to limit significant exposure in these areas. Accrued insurance liabilities are actuarially determined based on
claims filed and estimates of claims incurred but not reported. We use letters of credit, which amounted to $58.6 million at
January 28, 2017, as collateral to back certain of our self-insured losses with our claims administrators.
We have purchase obligations for outstanding purchase orders for merchandise issued in the ordinary course of our business
that are valued at $416.5 million, the entirety of which represents obligations due within one year of January 28, 2017. In
addition, we have purchase commitments for future inventory purchases totaling $26.6 million at January 28, 2017. We paid
$18.2 million, $11.3 million, and $16.8 million related to this commitment during 2016, 2015, and 2014, respectively. We are
not required to meet any periodic minimum purchase requirements under this commitment. The term of the commitment
extends until the purchase requirement is satisfied. We have additional purchase obligations in the amount of $206.8 million
primarily related to distribution and transportation, information technology, print advertising, energy procurement, and other
store security, supply, and maintenance commitments.
NOTE 11 – DERIVATIVE INSTRUMENTS
In the first quarter of 2015, our Board of Directors authorized our management to enter into derivative instruments designed to
mitigate certain risks; and we entered into collar contracts to mitigate our risk associated with market fluctuations in diesel fuel
prices. These contracts are used strictly to limit our risk exposure and not as speculative transactions. Our derivative
instruments associated with diesel fuel do not meet the requirements for cash flow hedge accounting. Therefore, our derivative
instruments associated with diesel fuel will be marked-to-market to determine their fair value; and the associated gains and
losses will be recognized currently in other income (expense) on our consolidated statements of operations.
Our outstanding derivative instrument contracts were comprised of the following:
(In thousands)
Diesel fuel collars (in gallons)
January 28, 2017
January 30, 2016
4,425
8,175
The fair value of our outstanding derivative instrument contracts was as follows:
(In thousands)
Derivative Instrument
Diesel fuel collars
Total derivative instruments
Balance Sheet Location
January 28, 2017
January 30, 2016
Assets (Liabilities)
Other current assets
Other assets
Accrued operating expenses
Other liabilities
$
$
135 $
180
(1,001)
(322)
(1,008) $
78
794
(2,799)
(2,738)
(4,665)
The effect of derivative instruments on the consolidated statements of operations was as follows:
(In thousands)
Derivative Instrument
Diesel fuel collars
Statements of Operations
Location
Amount of Gain (Loss)
2016
2015
Realized
Unrealized
Other income (expense)
Other income (expense)
Total derivative instruments
(2,299) $
3,657
1,358 $
(535)
(4,665)
(5,200)
$
$
67
The fair values of our derivative instruments are determined using observable inputs from commonly quoted markets. These
fair value measurements are classified as Level 2 within the fair value hierarchy.
NOTE 12 – DISCONTINUED OPERATIONS
Our discontinued operations for 2016, 2015, and 2014, were comprised of the following:
(In thousands)
Canadian operations
Other
Total income (loss) from discontinued operations, pretax
2016
2015
2014
$
$
91
(32)
59
$
$
$
165
(165)
— $
(35,998)
(239)
(36,237)
Canadian Operations
During the fourth quarter of 2013, we announced our intention to wind down our Canadian operations. We began the wind
down activities during the fourth quarter of 2013, which included the closing of our Canadian distribution centers. We
completed the wind down activities during the first quarter of 2014, which included the closure of our Canadian stores and
corporate offices. Therefore, we determined the results of our Canadian operations should be reported as discontinued
operations. The results of our Canadian operations historically consisted of sales of product to retail customers, the costs
associated with those products, and selling and administrative expenses, including personnel, purchasing, warehousing,
distribution, occupancy and overhead costs. In the first quarter of 2014, the results of our Canadian operations also included
contract termination costs of $23.0 million, severance charges of $2.2 million and a loss on the realization of our cumulative
translation adjustment on our investment in our Canadian operations of $5.1 million.
In addition to the costs associated with our Canadian operations, we reclassified to discontinued operations the direct expenses
incurred by our U.S. operations to facilitate the wind down. These costs primarily consist of professional fees. We also
reclassified the income tax benefit that our U.S. operations was expected to, and did, generate as a result of the wind down of
our Canadian operations, based principally on our ability to recover a worthless stock deduction in the foreseeable future.
During 2016, 2015, and 2014, the amount of this income tax expense (benefit) that we recognized was approximately $0.0
million, $0.2 million, and $(13.8) million, respectively.
The loss from discontinued Canadian operations presented in our consolidated statements of operations was comprised of the
following:
2016
2015
2014
$
— $
— $
—
—
(62)
—
62
—
29
91
14
77
3
(3)
(224)
—
221
—
(56)
165
$
206
(41) $
6,040
3,356
2,684
33,419
2
(30,737)
(18)
(5,243)
(35,998)
(13,771)
(22,227)
(In thousands)
Net sales
Cost of sales (exclusive of depreciation expense shown
separately below)
Gross margin
Selling and administrative expenses
Depreciation expense
Operating profit (loss)
Interest expense
Other income (expense)
Income (loss) from discontinued operations before income taxes
Income tax expense (benefit)
Income (loss) from discontinued operations
$
68
NOTE 13 – COMPONENTS OF ACCUMULATED OTHER COMPREHENSIVE LOSS
The following table summarizes the components of accumulated other comprehensive loss, net of tax, during 2014, 2015, and
2016:
Foreign currency
translation
Pension Plan
Total accumulated
other comprehensive
loss
$
(5,022)
$
(8,489)
$
(13,511)
(In thousands)
Balance at February 1, 2014
Other comprehensive income (loss) before
reclassifications
Amounts reclassified from accumulated other
comprehensive loss
Period change
Balance at January 31, 2015
Other comprehensive income (loss) before
reclassifications
Amounts reclassified from accumulated other
comprehensive loss
Period change
Balance at January 30, 2016
Other comprehensive income (loss) before
reclassifications
Amounts reclassified from accumulated other
comprehensive loss
Period change
(39)
5,061
5,022
—
—
—
—
—
—
—
—
(8,180)
2,013
(6,167)
(14,656)
(3,730)
2,409
(1,321)
(15,977)
(185)
16,162
15,977
(8,219)
7,074
(1,145)
(14,656)
(3,730)
2,409
(1,321)
(15,977)
(185)
16,162
15,977
—
Balance at January 28, 2017
$
— $
— $
The amounts reclassified from accumulated other comprehensive income (loss) associated with our pension plans have been
reclassified to selling and administrative expenses in our statement of operations. Please see note 8 to the consolidated financial
statements for further information on our pension plans.
The amounts reclassified from accumulated other comprehensive income (loss) associated with foreign currency translation
have been reclassified to loss from discontinued operations in our statements of operations, as the amounts related to our
Canadian operations. Please see note 12 to the consolidated financial statements for further information on our discontinued
operations.
NOTE 14 - SALE OF REAL ESTATE
In January 2017, we sold real property in California, on a component of which we operated a store, for $4.6 million. Based on
the terms of the transaction, we recognized a pre-tax gain of $3.8 million during the fourth quarter of 2016.
69
NOTE 15 – BUSINESS SEGMENT DATA
We use the following seven merchandise categories, which match our internal management and reporting of merchandise net
sales: Food, Consumables, Soft Home, Hard Home, Furniture, Seasonal, and Electronics, Toys, & Accessories. The Food
category includes our beverage & grocery, candy & snacks, and specialty foods departments. The Consumables category
includes our health, beauty and cosmetics, plastics, paper, chemical, and pet departments. The Soft Home category includes the
home décor, frames, fashion bedding, utility bedding, bath, window, decorative textile, home organization, and area rugs
departments. The Hard Home category includes our small appliances, table top, food preparation, stationery, greeting cards,
and home maintenance departments. The Furniture category includes our upholstery, mattress, ready-to-assemble, and case
goods departments. The Seasonal category includes our lawn & garden, summer, Christmas, and other holiday departments.
The Electronics, Toys, & Accessories category includes the electronics, jewelry, hosiery, toys and infant accessories
departments. In the fourth quarter of 2016, we realigned our merchandise categories to be consistent with our merchandising
team. See the Reclassifications section of note 1 to the consolidated financial statements for additional information.
We periodically assess, and potentially enact minor adjustments to, our product hierarchy, which can impact the roll-up of our
merchandise categories. Our financial reporting process utilizes the most current product hierarchy in reporting net sales by
merchandise category for all periods presented. Therefore, there may be minor reclassifications of net sales by merchandise
category compared to previously reported amounts.
The following table presents net sales data by merchandise category:
(In thousands)
Furniture
Food
Consumables
Soft Home
Seasonal
Hard Home
Electronics, Toys, & Accessories
Net sales
2016
2015
2014
$
1,195,365
$
1,135,757
$
1,051,165
830,508
823,482
743,359
739,106
437,575
431,044
845,541
832,345
710,821
725,238
477,451
463,429
821,915
839,310
683,448
732,323
510,095
538,822
$
5,200,439
$
5,190,582
$
5,177,078
70
NOTE 16 – SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized fiscal quarterly financial data for 2016 and 2015 is as follows:
Fiscal Year 2016
First
Second
Third
Fourth
Year
(In thousands, except per share amounts) (a)
Net sales
Gross margin
Income (loss) from continuing operations
Income (loss) from discontinued operations
Net income (loss)
$ 1,312,575 $ 1,203,155 $ 1,105,498 $ 1,579,211 $ 5,200,439
517,681
38,613
46
38,659
486,423
441,992
653,323
2,099,419
22,737
(22)
22,715
1,356
20
1,376
90,077
152,783
1
45
90,078
152,828
Earnings (loss) per share - basic:
Continuing operations
Discontinued operations
Earnings (loss) per share - diluted:
Continuing operations
Discontinued operations
$
$
$
$
0.80 $
0.51 $
0.03 $
2.04 $
—
—
—
—
0.80 $
0.51 $
0.03 $
2.04 $
0.79 $
0.51 $
0.03 $
1.99 $
—
—
—
—
0.79 $
0.50 $
0.03 $
1.99 $
3.37
—
3.37
3.32
—
3.32
Fiscal Year 2015
First
Second
Third
Fourth
Year
(In thousands, except per share amounts) (a)
Net sales
Gross margin
Income (loss) from continuing operations
(Loss) income from discontinued operations
Net income (loss)
$ 1,280,455 $ 1,209,686 $ 1,116,474 $ 1,583,967 $ 5,190,582
504,116
475,834
32,308
(95)
32,213
17,711
(75)
17,636
440,007
(1,703)
195
(1,508)
647,229
2,067,186
94,692
(160)
94,532
143,008
(135)
142,873
Earnings (loss) per share - basic:
Continuing operations
Discontinued operations
Earnings (loss) per share - diluted:
Continuing operations
Discontinued operations
$
$
$
$
0.61 $
0.35 $
—
—
0.61 $
0.35 $
(0.03) $
—
(0.03) $
0.60 $
0.35 $
—
—
0.60 $
0.34 $
(0.03) $
—
(0.03) $
1.93 $
—
1.93 $
1.91 $
—
1.91 $
2.83
—
2.83
2.81
—
2.80
(a) Earnings per share calculations for each fiscal quarter are based on the applicable weighted-average shares outstanding for
each period and the sum of the earnings per share for the four fiscal quarters may not necessarily be equal to the full year
earnings per share amount.
71
In the fourth quarter of 2016, we realigned the merchandise categories to be consistent with the realignment of our
merchandising team. Please see the Reclassifications section of note 1 to the consolidated financial statements for further
discussion. The following table presents net sales data by merchandise category by quarter in 2016, as reclassified:
Fiscal Year 2016
First
Second
Third
Fourth
Year
(In thousands)
Furniture
Food
Consumables
Soft Home
Seasonal
Hard Home
Electronics, Toys, & Accessories
Net Sales
NOTE 17 – SUBSEQUENT EVENT
$
357,057 $
249,276 $
272,639 $
316,393 $ 1,195,365
202,480
196,301
183,925
184,636
99,958
88,218
189,199
203,096
166,566
216,493
101,251
77,274
199,063
198,907
178,632
77,183
98,140
80,934
239,766
225,178
214,236
260,794
138,226
184,618
830,508
823,482
743,359
739,106
437,575
431,044
$ 1,312,575 $ 1,203,155 $ 1,105,498 $ 1,579,211 $ 5,200,439
On February 28, 2017, our Board of Directors authorized the repurchase of up to $150.0 million of our common shares (“2017
Repurchase Program”). Pursuant to the 2017 Repurchase Program, we may repurchase shares in the open market and/or in
privately negotiated transactions at our discretion, subject to market conditions and other factors. Common shares acquired
through the 2017 Repurchase Program will be available to meet obligations under our equity compensation plans and for
general corporate purposes. The 2017 Repurchase Program has no scheduled termination date and will be funded with cash
and cash equivalents, cash generated from operations or, if needed, by drawing on the 2011 Credit Agreement.
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the
effectiveness of our disclosure controls and procedures, as that term is defined in Rules 13a-15(e) and 15d-15(e) of the
Securities Exchange Act of 1934, as amended (“Exchange Act”), as of the end of the period covered by this report. Based on
that evaluation, our Chief Executive Officer and Chief Financial Officer have each concluded that such disclosure controls and
procedures were effective as of the end of the period covered by this report.
Management's Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in
Rules 13a-15(f) and 15d-15(f) under the Exchange Act) for us. Our internal control over financial reporting is designed to
provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in
accordance with accounting principles generally accepted in the United States of America.
Management assessed the effectiveness of our internal control over financial reporting as of January 28, 2017. In making its
assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway
Commission in Internal Control - Integrated Framework (2013 Framework). Based on this assessment, management,
including our Chief Executive Officer and Chief Financial Officer, concluded that we maintained effective internal control over
financial reporting as of January 28, 2017.
Our independent registered public accounting firm, Deloitte & Touche LLP, has issued an attestation report on our internal
control over financial reporting. The report appears in the Financial Statements and Supplementary Data section of this Form
10-K.
72
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during our most recent fiscal quarter that
have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information
None.
Item 10. Directors, Executive Officers and Corporate Governance
Part III
The information contained under the captions “Proposal One: Election of Directors,” “Governance,” and “Stock Ownership” in
the 2017 Proxy Statement, with respect to directors, shareholder nomination procedures, the code of ethics, the Audit
Committee, our audit committee financial experts, and Section 16(a) beneficial ownership reporting compliance, is
incorporated herein by reference in response to this item. The information contained in Part I of this Form 10-K under the
caption “Supplemental Item. Executive Officers of the Registrant,” with respect to executive officers, is incorporated herein by
reference in response to this item.
Item 11. Executive Compensation
The information contained under the captions “Governance,” “Director Compensation,” and “Executive Compensation” in the
2017 Proxy Statement, with respect to corporate Compensation Committee interlocks and insider participation, director
compensation, the Compensation Committee Report, and executive compensation, is incorporated herein by reference in
response to this item.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Equity Compensation Plan Information
The information contained under the caption “Equity Plan Compensation Information” and “Stock Ownership” in the 2017
Proxy Statement, with respect to our equity compensation plans pursuant to which our common shares may be issued and the
security ownership of certain beneficial owners and management, is incorporated herein by reference in response to this item.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information contained under the caption “Governance - Determination of Director Independence” and “Governance -
Related Person Transactions” in the 2017 Proxy Statement, with respect to the review of director independence and transactions
with related persons, is incorporated herein by reference in response to this item.
Item 14. Principal Accounting Fees and Services
The information contained under the captions “Audit Committee Disclosure - Audit and Non-Audit Services Pre-Approval
Policy” and “Audit Committee Disclosure - Fees Paid to Independent Registered Public Accounting Firm” in the 2017 Proxy
Statement, with respect to the Audit Committee's pre-approval policies and procedures and the fees paid to Deloitte & Touche
LLP, is incorporated herein by reference in response to this item.
73
Item 15. Exhibits, Financial Statement Schedules
Index to Consolidated Financial Statements, Financial Statement Schedules and Exhibits
Part IV
(a)
(1)
Documents filed as part of this report:
Financial Statements
Reports of Independent Registered Public Accounting Firm
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Income
Consolidated Balance Sheets
Consolidated Statements of Shareholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
38
40
41
42
43
44
45
All other financial statements not listed in the preceding index are omitted because they are not required or are not applicable or
because the information required to be set forth therein either was not material or is included in the consolidated financial
statements or notes thereto.
(2)
Financial Statement Schedules
All schedules are omitted because they are not required or are not applicable or because the information required to be set forth
therein either was not material or is included in the consolidated financial statements or notes thereto.
(3)
Exhibits. Exhibits marked with an asterisk (*) are filed herewith. The Exhibit marked with two asterisks (**) is
furnished electronically with this Annual Report. Copies of exhibits will be furnished upon written request and payment of our
reasonable expenses in furnishing the exhibits. Exhibits 10.1 through 10.38 are management contracts or compensatory plans or
arrangements.
Exhibit No.
2
Document
Agreement of Merger (incorporated herein by reference to Exhibit 2 to our Form 10-Q for the quarter ended
May 5, 2001).
3.1
3.2
3.3
4
10.1
10.2
10.3
10.4
10.5
10.6
Amended Articles of Incorporation (incorporated herein by reference to Exhibit 3(a) to our Form 10-Q for
the quarter ended May 5, 2001).
Amendment to the Amended Articles of Incorporation of Big Lots, Inc. (incorporated herein by reference to
Exhibit 3.1 to our Form 8-K dated May 27, 2010).
Code of Regulations (incorporated herein by reference to Exhibit 3(b) to our Form 10-Q for the quarter
ended May 5, 2001).
Specimen Common Share Certificate (incorporated herein by reference to Exhibit 4(a) to our Form 10-K
for the year ended February 2, 2002).
Big Lots 2005 Long-Term Incentive Plan, as amended and restated effective May 27, 2010 (incorporated
herein by reference to Exhibit 4.4 to our Form S-8 dated March 3, 2011).
Form of Big Lots 2005 Long-Term Incentive Plan Non-Qualified Stock Option Award Agreement
(incorporated herein by reference to Exhibit 10.4 to our Form 8-K dated February 21, 2006).
Form of Big Lots 2005 Long-Term Incentive Plan Non-Qualified Stock Option Award Agreement
(incorporated herein by reference to Exhibit 10.3 to our Form 8-K dated March 4, 2009).
Form of Big Lots 2005 Long-Term Incentive Plan Restricted Stock Award Agreement (incorporated herein
by reference to Exhibit 10.4 to our Form 8-K dated March 4, 2009).
Big Lots 2012 Long-Term Incentive Plan, as amended and restated effective May 29, 2014 (incorporated
herein by reference to Exhibit 10.1 to our Form 8-K dated May 29, 2014).
Form of Big Lots 2012 Long-Term Incentive Plan Non-Qualified Stock Option Award Agreement
(incorporated herein by reference to Exhibit 10.2 to our Form 8-K dated May 23, 2012).
74
10.7
10.8
10.9
10.10
10.11
10.12
10.13*
10.14
10.15
10.16
10.17
10.18
10.19
10.20
10.21
10.22
10.23
10.24
10.25
10.26
10.27
10.28
10.29
10.30
10.31
10.32
10.33
Form of Big Lots 2012 Long-Term Incentive Plan Restricted Stock Award Agreement (incorporated herein
by reference to Exhibit 10.3 to our Form 8-K dated May 23, 2012).
Form of Big Lots 2012 Long-Term Incentive Plan Restricted Stock Retention Award Agreement
(incorporated herein by reference to Exhibit 10.14 to our Form 10-K for the year ended February 2, 2013).
Form of Big Lots 2012 Long-Term Incentive Plan Restricted Stock Award Agreement for Nonemployee
Directors (incorporated herein by reference to Exhibit 10.4 to our Form 8-K dated May 23, 2012).
Form of Big Lots 2012 Long-Term Incentive Plan Performance Share Units Award Agreement
(incorporated herein by reference to Exhibit 10.9 to our Form 8-K dated April 29, 2013).
Form of Big Lots 2012 Long-Term Incentive Plan Performance Share Units Award Agreement
(incorporated herein by reference to Exhibit 10.1 to our Form 8-K dated March 4, 2015).
Form of Big Lots 2012 Long-Term Incentive Plan Restricted Stock Units Award Agreement (incorporated
herein by reference to Exhibit 10.2 to our Form 8-K dated March 4, 2015).
Form of Big Lots 2012 Long-Term Incentive Plan Deferral Election Form and Deferred Stock Units Award
Agreement for Non-Employee Directors.
Big Lots, Inc. Amended and Restated Director Stock Option Plan (incorporated herein by reference to
Exhibit 10 to our Post-Effective Amendment No. 1 to Form S-8).
Form of Option Award Agreement under the Big Lots, Inc. Amended and Restated Director Stock Option
Plan (incorporated herein by reference to Exhibit 10.1 to our Form 8-K dated September 9, 2004).
Big Lots 2006 Bonus Plan, as amended and restated effective May 29, 2014 (incorporated herein by
reference to Exhibit 10.2 to our Form 8-K dated May 29, 2014).
Big Lots Savings Plan (incorporated herein by reference to Exhibit 10.8 to our Form 10-K for the year
ended January 29, 2005).
Big Lots Supplemental Savings Plan, as amended and restated effective December 31, 2015.
Big Lots Executive Benefit Plan (incorporated herein by reference to Exhibit 10(m) to our Form 10-K for
the year ended January 31, 2004).
First Amendment to Big Lots Executive Benefit Plan (incorporated herein by reference to Exhibit 10.11 to
our Form 10-Q for the quarter ended November 1, 2008).
Executive Employment Agreement with David J. Campisi (incorporated herein by reference to Exhibit 10.1
to our Form 8-K dated March 17, 2015).
Second Amended and Restated Employment Agreement with Lisa M. Bachmann (incorporated herein by
reference to Exhibit 10.2 to our Form 8-K dated April 29, 2013).
Form of Indemnification Agreement (incorporated herein by reference to Exhibit 10.12 to our Form 10-Q
for the quarter ended November 1, 2008).
Form of Executive Severance Agreement (incorporated herein by reference to Exhibit 10.13 to our Form
10-Q for the quarter ended November 1, 2008).
Form of Senior Executive Severance Agreement (incorporated herein by reference to Exhibit 10.14 to our
Form 10-Q for the quarter ended November 1, 2008).
Big Lots Executive Severance Plan (incorporated herein by reference to Exhibit 10.1 to our Form 8-K dated
August 28, 2014).
Form of Big Lots Executive Severance Plan Acknowledgement and Agreement (incorporated by reference
to Exhibit 10.2 to our Form 8-K dated August 28, 2014).
Credit Agreement among Big Lots, Inc., Big Lots Stores, Inc. and Big Lots Canada, Inc., as borrowers, the
Guarantors named therein, and the Banks named therein (incorporated herein by reference to Exhibit 10.1
to our Form 8-K dated July 22, 2011).
First Amendment to Credit Agreement among Big Lots, Inc., Big Lots Stores, Inc. and Big Lots Canada,
Inc., as borrowers, the Guarantors named therein, and the Banks named therein (incorporated herein by
reference to Exhibit 10.1 to our Form 8-K dated May 30, 2013).
Second Amendment to Credit Agreement among Big Lots, Inc., Big Lots Stores, Inc., as borrowers, the
Guarantors named therein, and the Banks named therein (incorporated herein by reference to Exhibit 10.1
to our Form 8-K dated May 28, 2015).
Security Agreement between Big Lots Stores, Inc. and Big Lots Capital, Inc. (incorporated herein by
reference to Exhibit 10.2 to our Form 8-K dated October 29, 2004).
Stock Purchase Agreement between KB Acquisition Corporation and Consolidated Stores Corporation
(incorporated herein by reference to Exhibit 2(a) to our Form 10-Q for the quarter ended October 28, 2000).
Acquisition Agreement between Big Lots, Inc. and Liquidation World Inc. (incorporated herein by
reference to Exhibit 10.1 to our Form 8-K dated May 26, 2011).
75
10.34
21*
23*
24*
31.1*
31.2*
32.1*
32.2*
101**
Big Lots, Inc. Non-Employee Director Compensation Package and Share Ownership Requirements.
Subsidiaries.
Consent of Deloitte & Touche LLP.
Power of Attorney for Jeffrey P. Berger, James R. Chambers, Marla C. Gottschalk, Cynthia T. Jamison,
Philip E. Mallott, Nancy A. Reardon, Wendy L. Schoppert, and Russell E. Solt.
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
XBRL Instance Document.
Item 16. Form 10-K Summary
None.
76
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized, on this 28th day of March 2017.
BIG LOTS, INC.
By: /s/ David J. Campisi
David J. Campisi
Chief Executive Officer and President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities indicated on the 28th day of March 2017.
By: /s/ David J. Campisi
David J. Campisi
Chief Executive Officer and President
(Principal Executive Officer)
/s/ Timothy A. Johnson
Timothy A. Johnson
Executive Vice President, Chief Administrative Officer
and Chief Financial Officer
(Principal Financial Officer, Principal Accounting Officer
and Duly Authorized Officer)
/s/ Jeffrey P. Berger *
Jeffrey P. Berger
Director
/s/ James R. Chambers *
James R. Chambers
Director
/s/ Marla C. Gottschalk *
Marla C. Gottschalk
Director
/s/ Cynthia T. Jamison *
Cynthia T. Jamison
Director
/s/ Philip E. Mallott *
Philip E. Mallott
Director
/s/ Nancy A. Reardon *
Nancy A. Reardon
Director
/s/ Wendy L. Schoppert *
Wendy L. Schoppert
Director
/s/ Russell E. Solt *
Russell E. Solt
Director
*
The above named Directors of the Registrant execute this report by Ronald A. Robins, Jr., their attorney-in-fact, pursuant
to the power of attorney executed by the above-named Directors all in the capacities indicated and on the 8th day of March
2017, and filed herewith.
By: /s/ Ronald A. Robins, Jr.
Ronald A. Robins, Jr.
Attorney-in-Fact
77
Name
Big Lots Capital, Inc.
Big Lots F&S, Inc.
Big Lots Online LLC
Big Lots Stores, Inc.
BLSI Property, LLC
Capital Retail Systems, Inc.
Closeout Distribution, Inc.
Consolidated Property Holdings, Inc.
CSC Distribution, Inc.
C.S. Ross Company
Durant DC, LLC
Great Basin LLC
Industrial Products of New England, Inc.
Midwestern Home Products, Inc.
PNS Stores, Inc.
Sahara LLC
Sonoran LLC
Tool and Supply Company of New England, Inc.
West Coast Liquidators, Inc.
Barn Acquisition Corporation
Fashion Barn, Inc.
Fashion Barn of Oklahoma, Inc.
Fashion Bonanza, Inc.
Midwestern Home Products Company, Ltd.
Rogers Fashion Industries, Inc.
SS Investments Corporation
BLC LLC
Liquidation Services, Inc.
Liquidation World U.S.A. Holding Corp.
Liquidation World U.S.A Inc.
LQW Traders Inc.
North American Solutions, Inc.
Talon Wholesale, Inc.
Big Lots eCommerce LLC
AVDC, Inc.
SUBSIDIARIES
EXHIBIT 21
Jurisdiction
OH
OH
OH
OH
DE
OH
PA
NV
AL
OH
OH
DE
ME
DE
DE
CA
DE
DE
DE
CA
DE
NY
OK
NY
OH
NY
DE
DE
DE
DE
DE
DE
DE
DE
OH
IL
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the Registration Statements listed below on Form S-8 of our reports dated
March 28, 2017, relating to the consolidated financial statements of Big Lots, Inc. and subsidiaries (the “Company”), and the
effectiveness of the Company’s internal control over financial reporting, appearing in this Annual Report on Form 10-K of the
Company for the year ended January 28, 2017.
EXHIBIT 23
1)
2)
3)
4)
5)
6)
7)
8)
9)
Post-Effective Amendment No. 1 to Registration Statement No. 33-42502 on Form S-8 pertaining to Big Lots,
Inc. Director Stock Option Plan;
Post-Effective Amendment No. 1 to Registration Statement No. 33-42692 on Form S-8 pertaining to Big Lots,
Inc. Supplemental Savings Plan;
Post-Effective Amendment No. 2 to Registration Statement No. 33-19309 on Form S-8 pertaining to Big Lots,
Inc. Savings Plan;
Post-Effective Amendment No. 1 to Registration Statement No. 333-32063 on Form S-8 pertaining to Big Lots,
Inc. 1996 Performance Incentive Plan;
Registration Statement No. 333-140181 on Form S-8 pertaining to the Big Lots 2005 Long-Term Incentive Plan;
Registration Statement No. 333-152481 on Form S-8 pertaining to the Big Lots 2005 Long-Term Incentive Plan;
Registration Statement No. 333-172592 on Form S-8 pertaining to the Big Lots 2005 Long-Term Incentive Plan;
Registration Statement No. 333-179836 on Form S-8 pertaining to the Big Lots 2005 Long-Term Incentive Plan;
and
Registration Statement No. 333-181619 on Form S-8 pertaining to the Big Lots 2012 Long-Term Incentive Plan.
/s/ DELOITTE & TOUCHE LLP
Dayton, Ohio
March 28, 2017
POWER OF ATTORNEY
EXHIBIT 24
Each director of Big Lots, Inc. (the “Company”) whose signature appears below hereby appoints Ronald A. Robins, Jr. as the
undersigned's attorney to sign, in the undersigned's name and behalf of each such director and in any and all capacities stated
below, and to cause to be filed with the Securities and Exchange Commission (the “Commission”), the Company's Annual
Report on Form 10-K (the “Form 10-K”) for the fiscal year ended January 28, 2017, and likewise to sign and file with the
Commission any and all amendments thereto, including any and all exhibits and other documents required to be included
therewith, and the Company hereby also appoints Ronald A. Robins, Jr. as its attorney-in-fact with like authority to sign and
file the Form 10-K and any amendments thereto granting to such attorneys-in-fact full power of substitution and revocation,
and hereby ratifying all that any such attorneys-in-fact or their substitutes may do by virtue hereof.
IN WITNESS WHEREOF, each of the undersigned has executed this instrument to be effective as of March 8, 2017.
Signature
/s/ Jeffrey P. Berger
Jeffrey P. Berger
/s/ James R. Chambers
James R. Chambers
/s/ Marla C. Gottschalk
Marla C. Gottschalk
/s/ Cynthia T. Jamison
Cynthia T. Jamison
/s/ Philip E. Mallott
Philip E. Mallott
/s/ Nancy A. Reardon
Nancy A. Reardon
/s/ Wendy L. Schoppert
Wendy L. Schoppert
/s/ Russell E. Solt
Russell E. Solt
Title
Director
Director
Director
Director
Director
Director
Director
Director
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
EXHIBIT 31.1
I, David J. Campisi, certify that:
1.
I have reviewed this annual report on Form 10-K of Big Lots, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and
for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period
in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
c)
evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control
over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or
persons performing the equivalent functions):
a)
all significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
b)
any fraud, whether or not material, that involves management or other employees who have a significant role
in the registrant's internal control over financial reporting.
Dated: March 28, 2017
By: /s/ David J. Campisi
David J. Campisi
Chief Executive Officer and President
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
EXHIBIT 31.2
I, Timothy A. Johnson, certify that:
1.
I have reviewed this annual report on Form 10-K of Big Lots, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and
for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period
in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
c)
evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control
over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or
persons performing the equivalent functions):
a)
all significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
b)
any fraud, whether or not material, that involves management or other employees who have a significant role
in the registrant's internal control over financial reporting.
Dated: March 28, 2017
By: /s/ Timothy A. Johnson
Timothy A. Johnson
Executive Vice President, Chief Administrative Officer
and Chief Financial Officer
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
EXHIBIT 32.1
This certification is provided pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002, and accompanies the annual report on Form 10-K (the “Report”) for the year
ended January 28, 2017, of Big Lots, Inc. (the “Company”). I, David J. Campisi, Chief Executive Officer and President of the
Company, certify that:
(i)
the Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of
1934 (15 U.S.C. 78m or 78o(d)); and
(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
Dated: March 28, 2017
By: /s/ David J. Campisi
David J. Campisi
Chief Executive Officer and President
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
EXHIBIT 32.2
This certification is provided pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002, and accompanies the annual report on Form 10-K (the “Report”) for the year
ended January 28, 2017, of Big Lots, Inc. (the “Company”). I, Timothy A. Johnson, Executive Vice President, Chief
Administrative Officer and Chief Financial Officer of the Company, certify that:
(i)
the Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of
1934 (15 U.S.C. 78m or 78o(d)); and
(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
Dated: March 28, 2017
By: /s/ Timothy A. Johnson
Timothy A. Johnson
Executive Vice President, Chief Administrative Officer
and Chief Financial Officer
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ABOUT OUR COMPANY
Headquartered in Columbus, Ohio, Big Lots, Inc.
(NYSE: BIG) is a unique, non-traditional, discount retailer
operating over 1,400 BIG LOTS stores in 47 states with
product assortments in the merchandise categories of
Furniture, Seasonal, Soft Home, Food, Consumables,
Hard Home, and Electronics, Toys & Accessories. Our
vision is to be recognized for providing an outstanding
shopping experience for our customers, valuing and
developing our associates, and creating growth for our
shareholders. Big Lots supports the communities it serves
through the Big Lots Foundation, a charitable organization
focused on four areas of need: hunger, housing, healthcare,
and education. For more information about the Company,
visit biglots.com.
Notice of Annual Meeting
The Annual Meeting of Shareholders
will be held at 9:00 a.m. EDT on
Thursday, May 25, 2017, at our
(cid:70)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:72)(cid:3)(cid:82)(cid:605)(cid:70)(cid:72)(cid:15)(cid:3)(cid:22)(cid:19)(cid:19)(cid:3)(cid:51)(cid:75)(cid:76)(cid:79)(cid:79)(cid:76)(cid:83)(cid:76)(cid:3)(cid:53)(cid:82)(cid:68)(cid:71)(cid:15)(cid:3)
Columbus, Ohio. Whether or not you
plan to attend, you are encouraged
to vote as soon as possible. In
accordance with the accompanying
proxy statement, shareholders who
attend the meeting may withdraw
their proxies and vote in person if
they so desire.
Transfer Agent & Registrar
Computershare
P.O. Box 30170
College Station, TX 77842
877.581.5548 (Within USA, US territories & Canada)
781.575.2879 (Outside USA, US territories & Canada)
computershare.com/investor
Investment Inquiries
Investor Relations Department
300 Phillipi Road
Columbus, Ohio 43228
614.278.6622
Investor_Relations@biglots.com
Independent Registered
Public Accounting Firm
Deloitte & Touche LLP
220 E. Monument Avenue, Suite 500
Dayton, Ohio 45402
NYSE Trading Symbol
Telephone
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Website
biglots.com
E-Mail
talk2us@biglots.com
300 Phillipi Rd. | Columbus, OH 43228 | 614.278.6800
biglots.com