Outside Back Cover
8.25”(W) x 10.875”(H)
Outside Front Cover
8.25”(W) x 10.875”(H)
ANNUAL
REPORT
biglots.com
WELCOME TO YOUR NEW COMMUNITY
337376_Big Lots AR17_CVR.indd 1
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Inside Front Cover
8.25”(W) x 10.875”(H)
Inside Back Cover
8.25”(W) x 10.875”(H)
About Our Company
Headquartered in Columbus, Ohio, Big Lots, Inc.
(NYSE: BIG) is a community retailer operating more than
1,400 BIG LOTS stores in 47 states, dedicated to friendly
service, trustworthy value, and affordable solutions in
every season and category — furniture, food, decor, and
more. We exist to serve everyone like family, providing
a better shopping experience for our customers, valuing
and developing our associates, and creating growth
for our shareholders. Big Lots supports the communities
it serves through the Big Lots Foundation, a charitable
organization focused on four areas of need: hunger,
housing, healthcare, and education. For more information
about the Company, visit www.biglots.com.
NOTICE OF
ANNUAL MEETING
The Annual Meeting of
Shareholders will be held at
9:00 a.m. EDT on Thursday,
May 31, 2018, at our corporate
headquarters, 4900 East Dublin
Granville Road, Columbus,
Ohio 43081. 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.
Who is
Big Lots?
We’re a Community Retailer.
Big Lots is a community retailer, which means
we’re dedicated to serving alongside you with
friendly service, trustworthy value, and affordable
solutions in every season and category — furniture,
food, decor, and more! Our mission to “serve
everyone like family” begins at home. That’s why
each one of our product solutions is meant to
bring friends, family, and the community together
with a price tag you’ll love!
JENNIFER, OUR
CORE CUSTOMER
Jennifer may feel like it’s
ordinary to serve others with
gifts and acts of kindness,
but at Big Lots, we depict
her as an extraordinary
woman: optimistic,
generous, and someone who
feels special because she is a
part of a caring community
devoted to something bigger
than herself.
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
4900 East Dublin Granville Road
Columbus, Ohio 43081
614.278.6622
Investor_Relations@biglots.com
Independent Registered
Public Accounting Firm
Deloitte & Touche LLP
180 East Broad Street, Suite 1400
Columbus, Ohio 43215
NYSE Trading Symbol
Telephone
614.278.6800
Website
biglots.com
Email
talk2us@biglots.com
337376_Big Lots AR17_CVR.indd 2
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DEAR SHAREHOLDERS,
Friendly, Trustworthy, Community… core values focused
on “doing the right thing.” Simple, straightforward,
and honest family values which were at the center
of a transformative year at Big Lots.
2017 was very good for our Company, our
associates, and our shareholders. We made
substantive and lasting improvements to our
merchandise assortments, business operations,
and corporate culture, and we delivered financial
results consistently equal to, or better than, our
earnings guidance. In September 2017, we hosted
an Investor & Analyst Conference detailing our
expectations for the next three years. We discussed
our Strategic Planning Process (SPP) and our
strategy for repositioning our brand and shared a
new store format aimed at elevating the shopping
experience for “Jennifer,” our core customer. Our
enhanced future brand identity and Store of the
Future format were the culmination of nearly 18
months of diligent, focused effort responding to
a fundamental question: How does Big Lots remain
relevant over the long term?
JENNIFER’S HIDDEN NEED AND
OUR GREATEST STRENGTH
Our journey started with an assessment as to
why we exist as a Company (beyond just making
money). Who is Big Lots? How are we different?
And how do we intend to beat the stigma
frequently associated with discount retail? To
address these questions, we conducted extensive
research and identified three different types of
Jennifers crossing over traditional segments:
• Deal-driven Jennifer looking for great values
• Home-focused Jennifer taking care of her
family and friends
• Cause-minded Jennifer wanting to give to
others for a greater purpose
Regardless of household income, all Jennifers
share a “love of deals,” and deals help her meet
her goals. We learned Jennifer struggles with
home decor and decorating — for a variety of
reasons — including a lack of budget and time.
But our most unique insight, one that is central
to making an emotional connection with her, is
Jennifer wants to feel special … and she feels
most special when serving others, whether it be
family, friends, or the community. THIS is Jennifer’s
hidden need.
Our analysis then turned inward with an
objective review of the Company’s strengths,
particularly in light of the strategic changes and
noteworthy accomplishments over the past five
years. We have worked diligently through the
three pillars (Jennifer, Associates, Shareholders)
of the SPP to improve all aspects of our business,
including attracting, engaging, and developing
the best and brightest talent in the industry.
And similar to previous years, we conducted
an Annual Engagement Survey of associates in
2017 to measure and understand our progress
and identify new opportunities for improvement.
Our scores and assessment suggest we continue
to make significant strides toward the goal of
being an employer of choice with associates and
engagement levels which continue to rise and
are well above the retail norms. We believe our
culture, where everyone is family, is OUR
greatest strength. It is who we are and how
we treat one another.
Big Lots, Inc. | 2017 Annual Report
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OUR NEW MISSION, VISION, VALUES
Imagine our excitement when research confirmed
the close alignment between Jennifer and our
strategic transformation. It spurred fresh thinking
in the Company around our Mission, Vision, and
Values — all with Jennifer in mind — and represents
an opportunity to grow with her. Our previous
Mission statement of Surprises in Every Aisle,
Every Day served us well, but it is time to evolve
and reposition Big Lots as a new kind of retailer —
a community retailer.
Mission Statement
We Exist to Serve Everyone Like Family
This simple, passionate mission provides a better
shopping experience for Jennifer, shows value
and development for our associates, and creates
growth for our shareholders.
Vision
Your Second Family
Our vision is to be known as your second family —
a new kind of retailer where friendly service,
trustworthy value, and investing in our community
is always affordable.
Values
Core Values We Strive to be Known for
• Friendly: Create fun and inviting experiences
with friendly service, friendly environments,
and friendly merchandise in a community
retail store that's easy to navigate and shop.
• Trustworthy Value: Exceed her
expectations every time with value she can
trust and quality of merchandise we expect
for our own families.
• Community: Serve people with respect and
dignity — nationally, locally, and personally.
After redefining our Mission, Vision, Values, and
the traits associated with them, we circled back to
our initial questions:
How does Big Lots remain relevant over the long term?
A New Kind of Retailer
Big Lots is a new kind of retailer — a community
retailer. We believe “serving everyone like family”
begins at home, with merchandise meant to bring
friends, family, and the
community together
with a price tag our
customers will love.
How are we different?
Brand Positioning
Statement
For Jennifer and those of
you who love serving others
and investing in causes
bigger than yourself , Big Lots
is your second family: a new
kind of retailer — a community
retailer — serving alongside
you with friendly service, trustworthy value, and
affordable solutions in every season and category —
furniture, food, decor, and more.
How do we beat the retail stigma often associated
with shopping discount stores?
We must consistently embed our core traits into
everything we say and do. In many ways, we’re
already doing it, but now our brand identity
communicates our commitment to Jennifer and a
passion to serve alongside her. We believe it’s simply
stated in our new brand tagline: Serve Big. Save Lots.
Big Lots, Inc. | 2017 Annual Report
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STORE OF THE FUTURE
Our goal with a new store concept is to bring these
brand principles to life in a shopping experience
that's fun and engaging for Jennifer. We want
to showcase our OWNABLE and WINNABLE
merchandise categories of Furniture, Seasonal, Soft
Home, Food, and Consumables, allowing us to stand
out in a crowded, overstored retail environment.
The layout of the store is dramatically different
from the traditional Big Lots by featuring Furniture
front and center in the store with Seasonal and
Home also at the front on either side. Pantry —
which includes Food and Consumables — is located
in the back of the store, but is clearly visible from
the front of the store given the low-profile of
our Furniture assortment. The store entryway
is clean and free of product and advertising
messages giving Jennifer plenty of room to enter
the store and focus on her shopping plan. She
will feel welcomed with our friendly atmosphere,
greeted by our “Hello” wall and signage with a
softer, more friendly tone. The featured colors
are warm and inviting throughout the store.
Responding to Jennifer's feedback, we’ve added
more visual decorating options with furniture and
home vignettes designed to highlight how our
merchandise can furnish and decorate Jennifer’s
home. Jennifer will find every aspect of the
shopping experience to be easy and more pleasing,
and we are very excited with how it showcases our
new brand identity. The Store of the Future will be
one of the largest investments in our Company’s
history, and we estimate impacting nearly half of
our stores over the next three years.
COMMUNITY
Doing the right thing is at the heart of our culture.
We are inspired by Jennifer every day serving her
family, friends, and her community. Early in the
development of the SPP, the Big Lots Foundation
was established with a goal of strengthening
our philanthropic efforts and supporting the
communities we serve. With the growth of our
Big Lots Foundation, we serve nationally with
a focus on healthcare, housing, hunger, and
education, assisting many different charitable
causes including Nationwide Children’s Hospital,
YWCA, Feeding America, the Mid-Ohio Food Bank,
and the American Heart Association. We serve
locally by investing in communities near our stores,
distribution centers, and across the country. And
we serve personally through our point-of-sale
donation campaigns and through our associates
who are encouraged to volunteer and who love to
contribute to causes that are most important
to them.
ONE TEAM, ONE GOAL
We want to thank our associates in our stores,
distribution centers, and the office here in
Columbus. We are “One Team with One Goal”
and together we are redefining the future of
Big Lots as a new kind of community retailer —
your second family. We also want to thank our
shareholders for your support on behalf of the
entire Big Lots organization, our Board of Directors,
and our associates.
Sincerely,
Lisa M. Bachmann
Chief Merchandising &
Operating Officer
Timothy A. Johnson
Chief Administrative Officer &
Chief Financial Officer
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Financial Highlights (Unaudited Adjusted Results)
($ in thousands, except per share amounts)
2017
FISCAL YEAR
2016
2015
Earnings Data (a)
Net sales
Net sales increase
Net income (b)
Income increase (b)
Earnings per share - diluted (b)
Earnings per share - diluted increase (b)
Dividends declared per share
Average diluted common shares outstanding (000's)
Gross margin - % of net sales
Selling and administrative expenses - % of net sales (b)
Depreciation expense - % of net sales
Operating profit - % of net sales (b)
Non-operating expense, including interest - % of net sales
Net income - % of net sales (b)
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 (a) (b)
Return on invested capital (a) (b)
Cash Flow Data (a)
Cash provided by operating activities (c)
Cash used in investing activities (d)
Cash flow (e)
Cash paid for dividends
Cash used in share repurchase programs
Store Data
Stores open at end of the fiscal year
Comparable store sales increase (a)
Average sales per store (a)
Gross square footage (000's)
Selling square footage (000's)
Decrease in selling square footage
Average selling square footage per store
$
$
$ 5,270,980
1.4%
$ 192,498
15.1%
4.45
22.3%
1.00
43,300
40.6%
32.8%
2.2%
5.7%
(0.1)%
3.7%
$
$
$ 5,200,439
0.2%
$ 167,207
9.0%
3.64
20.9%
0.84
45,974
40.4%
32.8%
2.3%
5.2%
(0.1)%
3.2%
$
$
$ 5,190,582
0.3%
$ 153,404
34.2%
3.01
46.1%
0.76
50,964
39.8%
32.6%
2.4%
4.9%
(0.2)%
3.0%
$
51,176
872,790
565,977
1,651,726
199,800
669,587
$ 432,365
1.7
3.5
23.0%
11.8%
23.7%
$ 250,368
(156,508)
93,860
(44,671)
$ (150,000)
$
1,416
0.4%
3,702
44,638
31,399
(0.4)%
22,175
$
51,164
858,689
525,851
1,607,707
106,400
650,630
$ 315,784
1.5
3.5
14.1%
10.3%
21.7%
$ 311,925
(84,701)
227,224
(38,466)
$ (250,000)
$
1,432
0.9%
3,610
44,570
31,519
(0.8)%
22,011
$
54,144
849,982
559,924
1,640,370
62,300
720,470
$ 315,984
1.5
3.5
8.0%
9.4%
18.8%
$ 342,352
(113,193)
229,159
(38,530)
$ (200,000)
$
1,449
1.8%
3,569
44,914
31,775
(0.7)%
21,929
Earnings per share – diluted (a) (b)
Return on invested capital (a) (b)
$4.45
$4.50
$4.25
$4.00
$3.75
$3.50
$3.25
$3.00
$2.75
$3.64
$3.01
23.7%
21.7%
25.0%
23.0%
21.0%
19.0%
17.0%
15.0%
18.8%
Operating profit –
% of net sales (a) (b)
5.7%
5.2%
4.9%
6.0%
5.5%
5.0%
4.5%
4.0%
2017
2016
2015
2017
2016
2015
2017
2016
2015
(a) The results for fiscal year 2017 include 53 weeks, while the results for fiscal years 2016 and 2015 include 52 weeks.
(b) This item is shown excluding the impact of certain items for fiscal years 2017, 2016 and 2015. A reconciliation of the difference between GAAP and the non-GAAP financial measures
presented in this table for fiscal years 2017, 2016 and 2015 is shown on the following page.
(c) Includes depreciation and amortization of $106,004, $108,315, and $108,054 for fiscal years 2017, 2016, and 2015, respectively.
(d) Includes capital expenditures of $142,745, $89,782, and $125,989 for fiscal years 2017, 2016, and 2015, respectively.
(e) Cash flow is calculated as cash provided by operating activities less cash used in investing activities.
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The Unaudited Adjusted Results, which include financial measures that are not calculated in accordance with accounting principles generally
accepted in the United States of America ("GAAP"), are presented in order to provide additional meaningful financial information for the
periods presented. The Unaudited Adjusted Results should not be construed as an alternative to the reported results determined in accordance
with GAAP. Our definition of adjusted results may differ from similarly titled measures used by other companies. While it is not possible to
predict future results, our management believes that the adjusted non-GAAP information is useful for the assessment of our ongoing operations.
The Unaudited Adjusted Results should be read in conjunction with our Consolidated Financial Statements and the related Notes contained in
our Form 10-K for fiscal 2017.
FISCAL 2017
The 2017 Unaudited Adjusted Results reflect higher selling and administrative expense as a result of the adjustment to exclude a gain on
insurance recoveries, and lower income tax expense as a result of the exclusion of an impact on deferred taxes, as described and reconciled
below ($ in thousands):
Adjustment to Exclude Gain on Insurance Recoveries
During 2017, we recognized a total of $3,000 ($1,851, net of tax) for insurance recoveries associated with merchandise-related legal
matters, which resulted in a decrease of selling and administrative expenses.
Impact on Deferred Taxes Resulting from U.S. Tax Reform
In the fourth quarter of fiscal 2017, we recognized a $4,517 change to deferred taxes resulting from the U.S. Tax Cuts and Jobs Act of 2017,
which resulted in an increase to income tax expense.
FISCAL 2016
The 2016 Unaudited Adjusted Results reflect lower selling and administrative expense as a result of the adjustment for our legacy pension plans
partially offset by a gain on sale of real estate, as described and reconciled below ($ in thousands):
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 our qualified
and non-qualified defined benefit pension plans, including net periodic benefit costs, settlement charges and 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
In the fourth quarter of fiscal 2016, we recognized a $3,823 gain on the sale of real estate ($2,411, net of tax) related to a Company-owned
and operated store in California which resulted in a decrease of selling and administrative expenses.
FISCAL 2015
The 2015 Unaudited Adjusted Results reflect lower selling and administrative expense as a result of adjustments for our legacy pension plans
and a loss contingency, as described and reconciled below ($ 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 qualified
and non-qualified defined benefit pension plans, including net periodic benefit costs, settlement charges and professional 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
In fiscal 2015, we recorded a $4,487 charge ($2,711, net of tax) related to a loss contingency associated with merchandise-related legal
matters which resulted in an increase of selling and administrative expenses.
FISCAL YEAR 2017
($ in thousands, except per share amounts )
Selling and administrative expenses
Operating profit
Income tax expense
Net income
Earnings per common share - diluted
FISCAL YEAR 2016
($ in thousands, except per share amounts )
Selling and administrative expenses
Operating profit
Income tax expense
Net income
Earnings per common share - diluted
FISCAL YEAR 2015
($ in thousands, except per share amounts )
Selling and administrative expenses
Operating profit
Income tax expense
Net income
Earnings per common share - diluted
Reported (GAAP)
$ 1,723,996
301,353
105,522
$ 189,832
$
4.38
32.7%
5.7
2.0
3.6%
Reported (GAAP)
$ 1,730,956
248,003
91,471
$ 152,828
$
3.32
33.3%
4.8
1.8
2.9%
Reported (GAAP)
$ 1,708,499
235,787
83,977
$ 142,873
$
2.80
32.9%
4.5
1.6
2.8%
Adjustment
to exclude gain
on insurance
recoveries
Impact on
deferred taxes
resulting from
U.S. tax reform
Unaudited Adjusted
Results (non-GAAP)
$
$
$
3,000
(3,000)
(1,149)
(1,851)
(0.04)
$
$
$
_
–
(4,517)
4,517
$ 1,726,996
298,353
99,856
$ 192,498
0.10
$
4.45
32.8%
5.7
1.9
3.7%
Adjustment
to exclude
pension costs
$ (27,766)
27,766
10,976
16,790
$
Gain on
sale of
real estate
$
3,823
(3,823)
(1,412)
$ (2,411)
Unaudited Adjusted
Results (non-GAAP)
$ 1,707,013
271,946
101,035
$ 167,207
32.8%
5.2
1.9
3.2%
$
0.37
$
(0.05)
$
3.64
Adjustment
to exclude
pension costs
$ (12,932)
12,932
5,112
7,820
$
$
Adjustment to
exclude loss
contingency
$ (4,487)
4,487
1,776
2,711
$
Unaudited Adjusted
Results (non-GAAP)
$ 1,691,080
253,206
90,865
$ 153,404
32.6%
4.9
1.8
3.0 %
0.15
$
0.05
$
3.01
Big Lots, Inc. | 2017 Annual Report
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Directors &
Executives
BOARD OF DIRECTORS
Jeffrey P. Berger
former President & Chief Executive Officer
Heinz North America Foodservice;
former Executive Vice President
Global Foodservice / H. J. Heinz Company
David J. Campisi*
Chief Executive Officer & President
Big Lots, Inc.
James R. Chambers
Chairman of the Board
Big Lots, Inc.;
former President & Chief Executive Officer
Weight Watchers International, Inc.
Marla C. Gottschalk
former Chief Executive Officer
Pampered Chef, Ltd.
Cynthia T. Jamison
former Chief Financial Officer
AquaSpy, Inc.
Philip E. Mallott
former Vice President & Chief Financial Officer
Intimate Brands, Inc.
Nancy A. Reardon
former Senior Vice President &
Chief Human Resources and
Communications Officer
Campbell Soup Company
Wendy L. Schoppert
former Executive Vice President &
Chief Financial Officer
Sleep Number Corporation
Russell E. Solt
former Executive Vice President &
Chief Financial Officer
West Marine, Inc.
CHIEF EXECUTIVE OFFICER &
PRESIDENT
David J. Campisi*
SENIOR VICE PRESIDENTS
Michelle D. Christensen
General Merchandise Manager
EXECUTIVE VICE PRESIDENTS
Lisa M. Bachmann
Chief Merchandising &
Operating Officer
Timothy A. Johnson
Chief Administrative Officer &
Chief Financial Officer
Michael A. Schlonsky
Human Resources &
Store Operations
Stephen M. Haffer
Chief Customer Officer
Craig A. Hart
Planning, Allocation &
Replenishment
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
Chief Information Officer
Martha A. Withers - Hall
General Merchandise Manager
*David J. Campisi retired as our CEO and President and as a director effective as of April 16, 2018.
Big Lots, Inc. | 2017 Annual Report
Big Lots, Inc.
4900 E. Dublin-Granville Road
Columbus, Ohio 43081
April 20, 2018
Dear Big Lots’ Shareholder:
We cordially invite you to attend the 2018 Annual Meeting of Shareholders of Big Lots, Inc. The Annual Meeting will be
held at our corporate offices located at 4900 E. Dublin-Granville, Road, Columbus, Ohio, on May 31, 2018, 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,
JAMES R. CHAMBERS
Chairman
NOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS
Thursday, May 31, 2018
9:00 a.m. Eastern Time
4900 E. Dublin-Granville Road, Columbus, Ohio
We are pleased to invite you to the 2018 Annual Meeting of Shareholders of Big Lots, Inc. The meeting will be held at our
corporate offices located at 4900 E. Dublin-Granville Road, Columbus, Ohio, on May 31, 2018, beginning at 9:00 a.m.,
Eastern Time, for the following purposes:
1.
2.
3.
4.
To elect as directors the eight nominees named in our accompanying Proxy Statement;
To approve, on an advisory basis, the compensation of our named executive officers;
To ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for
fiscal 2018; and
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, April 2, 2018, 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 the accompanying Proxy Statement.
By Order of the Board of Directors,
Ronald A. Robins, Jr.
Senior Vice President, General Counsel and Corporate Secretary
April 20, 2018
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
ABOUT THE ANNUAL MEETING..............................................................................................................................
1
PROPOSAL ONE .......................................................................................................................................................
5
GOVERNANCE...........................................................................................................................................................
9
DIRECTOR COMPENSATION ................................................................................................................................... 14
STOCK OWNERSHIP ................................................................................................................................................ 16
EXECUTIVE COMPENSATION ................................................................................................................................. 18
PROPOSAL TWO ....................................................................................................................................................... 46
AUDIT COMMITTEE DISCLOSURE .......................................................................................................................... 49
PROPOSAL THREE ................................................................................................................................................... 51
SHAREHOLDER PROPOSALS ................................................................................................................................. 51
PROXY SOLICITATION COSTS ................................................................................................................................ 51
OTHER MATTERS ..................................................................................................................................................... 51
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 2018 Annual Meeting of Shareholders to be held on May 31, 2018
(“Annual Meeting”). The Annual Meeting will be held at our corporate offices located at 4900 E. Dublin-Granville Road,
Columbus, Ohio at 9:00 a.m., Eastern Time.
On or about April 20, 2018, we began mailing to our shareholders of record at the close of business on April 2, 2018 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 February 3, 2018 (“fiscal 2017”).
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 eight directors to the Board;
(2) 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”);
(3)
(4)
ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for our fiscal
year ending February 2, 2019 (“fiscal 2018”); and
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 April 2, 2018, 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 42,182,744
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.
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.
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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 that 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.
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 30, 2018 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 30, 2018 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 that 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 that 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
Three, 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 and
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Proposal Two, 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 Statement 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 conditions are met, and SEC rules allow, your household may receive
a single copy of the Annual Report to Shareholders, Proxy Statement and Notice of Internet Availability. Upon request, we
will promptly deliver a separate copy of the Annual Report to Shareholders, Proxy Statement 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 1-866-540-7095, 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 Annual Report to Shareholders, Proxy Statement and
Notice of Internet Availability.
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.
2.
3.
FOR the election of its nominated slate of directors (see Proposal One);
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 Two); and
FOR the ratification of Deloitte & Touche LLP as our independent registered public accounting firm for fiscal
2018 (see Proposal Three).
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.
Vote Required to Approve a Proposal
Proposal One
Our Amended Articles of Incorporation impose a majority vote standard in uncontested elections and our Corporate
Governance Guidelines contain a majority vote policy applicable to uncontested elections of directors. Specifically, Article
Eighth of our Amended Articles of Incorporation provides that if a quorum is present at the Annual Meeting, a director
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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, plurality voting will apply and the director nominees receiving the greatest number of votes
cast for their election will be elected as directors. An “uncontested election” generally means an election of directors at a
meeting of shareholders in which the number of nominees for election 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 and 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 Standard and Policy” section of this Proxy Statement for more information about our
majority vote policy and standard.
Other Matters
For purposes of Proposal Two and Proposal Three, 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. The votes
received with respect to Proposal Two and Proposal Three are advisory and will not bind the Board or us. A properly
executed proxy marked “abstain” with respect to Proposal Two and Proposal Three 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 and Proposal Three. Accordingly, an abstention will have the same effect as a vote against Proposal Two
and Proposal Three. 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.
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PROPOSAL ONE: ELECTION OF DIRECTORS
The Board has nominated the eight persons set forth in the table below for election as directors as the Annual Meeting.
At the Annual Meeting, the common shares represented by proxies will be voted, unless otherwise specified, for the
election of the eight director nominees named below. Proxies cannot be voted at the Annual Meeting for more than eight
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.
Pursuant to our Code of Regulations, the Board is comprised of nine directors. As previously disclosed, David J. Campisi
retired as our Chief Executive Officer (“CEO”) and President and as a director on April 16, 2018. The Board is in the
process of identifying and evaluating qualified candidates to be our next CEO and currently anticipates that the individual
selected as the successor CEO will be appointed to the Board. We do not anticipate that this process will be completed
prior to the Annual Meeting.
Set forth below is certain information related to the nominees.
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 is a member of
the nominating and corporate governance committee and a member of the audit committee.
Age: 68
Director since: 2006
Committees:
• Compensation
• Nominating / Corporate
Governance
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JAMES R. CHAMBERS
Chairman of the Board of Big Lots, Inc.
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, his chief executive
experience and his experience serving on the boards of other public companies.
Other Directorships: TIAA Board of Trustees, where he chairs the audit committee and serves on the
human resources and risk and compliance committees.
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, her chief executive experience and her
experience serving on the boards of other public companies.
Other Directorships: Potbelly Corporation (food retailer) where she is a member of the compensation
committee and the audit committee, Underwriter Laboratories, where she is chair of the compensation
committee and serves on the nominating and governance committee, and Ocean Spray Cranberries, Inc.,
where she serves on the nominating and governance committee and the grower committee.
Age: 60
Director since: 2012
Committees:
• None
Age: 57
Director since: 2015
Committees:
• Audit
• Compensation
• Special Litigation
(Chair)
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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. from 2009 -2012 (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 chair of the audit
committee and a member of the compensation committee.
PHILIP E. MALLOTT
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). Mr. Mallott is also the former chairman of the board of Big Lots, Inc.
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: 58
Director since: 2015
Committees:
• Audit
• Nominating /Corporate
Governance (Chair)
• Special Litigation
Age: 60
Director since: 2003
Committees:
• Audit (Chair)
• Compensation
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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.
Other Directorships: Signet Jewelers Limited (jewelry retailer) where she serves on the compensation
committee.
WENDY L. SCHOPPERT
Ms. Schoppert is the former Executive Vice President and Chief Financial Officer of Sleep Number
Corporation (bedding retailer and manufacturer).
Prior to joining Sleep Number, 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.
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 diverse experience across
marketing, digital, and information technology, and her significant financial leadership and expertise with
respect to the oversight of financial reporting and disclosure for public companies.
Other Directorships: The Hershey Company (a global confectionery company) where she serves on the
audit committee, Bremer Financial Corporation (a financial services firm) where she serves on the audit
and compensation committees and Gaia, Inc. (provider of digital video streaming services) where she
serves as chair of the audit committee.
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: 65
Director since: 2015
Committees:
• Compensation (Chair)
• Nominating /Corporate
Governance
Age: 51
Director since: 2015
Committees:
• Audit
• Nominating /Corporate
Governance
• Special Litigation
Age: 70
Director since: 2003
Committees:
• Audit
• Compensation
THE BOARD RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF EACH NOMINEE LISTED ABOVE.
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GOVERNANCE
The following table sets forth some of our key governance policies and practices we have implemented to advance the
objectives and long term interests of our shareholders:
Governance Highlights
All of our current directors are
4 of our 8 independent directors are
independent
women
Annual election of all directors and
Annual shareholder engagement
Majority Voting Standard
Proxy Access for our shareholders
Executive session of non-employee
directors at all board meetings
We have a non-executive chairman
Mandatory Board Retirement at age 72
All committees composed of independent
Limit of 4 public company directorships
directors
Board members may hold
Annual board and committee self-
Director orientation and continuing
evaluations
education
Board Leadership and Independent Chairman of the Board
The Board is currently comprised of the individuals identified in Proposal One. Each of the director nominees is an
independent (as defined by the applicable NYSE rules) non-employee director (“non-employee directors”). Mr. Chambers,
an independent director, serves as non-executive 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 2017
The Board held six meetings during fiscal 2017. During fiscal 2017, 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). All of our directors attended our 2017 annual meeting of shareholders. In addition, the
non-employee directors met in executive session at each of the Board’s meetings and an additional four times during
fiscal 2017.
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)
(4)
(5)
the engagement of our independent registered public accounting firm and the evaluation of the firm’s
qualifications, independence and performance;
the performance of our system of internal controls;
the oversight of the performance of the internal audit function;
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(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.
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 2017.
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)
in coordination with the Nominating / Corporate Governance Committee, monitoring issues associated with
CEO succession planning and management development;
(6) administering our compensation programs; and
(7)
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 six times during fiscal 2017.
Nominating / Corporate Governance Committee
The responsibilities of the Nominating / Corporate Governance Committee include:
(1)
(2)
(3)
(4)
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;
in coordination with the Compensation Committee, monitoring issues associated with CEO succession
planning and management development; and
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 2017.
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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, senior
management 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, experience with succession planning, crisis
management, the balance of management and independent directors, public company experience 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., 4900 E. Dublin-Granville Road, Columbus, Ohio 43081.
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. Spencer Stuart was retained in December of 2017 in
connection with the search for one or two new directors.
Majority Vote Standard and Policy
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 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. 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.
11
Determination of Director Independence
The Board affirmatively determined that 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.
In determining that each of the director nominees 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)
(2)
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 will be a participant; and
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 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 Big Lots and its shareholders.
Examples of factors and information that the Nominating / Corporate Governance Committee may consider in its
evaluation of a related person transaction include:
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
the reasons for entering into the transaction;
the terms of the transaction;
the benefits of the transaction to us;
the comparability of the transaction to similar transactions with unrelated third parties;
the materiality of the transaction to each party;
the nature of the related person’s interest in the transaction;
the potential impact of the transaction on the status of an independent director; and
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
12
Merchandising and Operating Officer, is employed by Big Lots as a senior buyer and in fiscal 2017 received
compensation greater than $120,000 but less than $150,000.
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 Governance Committee, oversees
management of risks associated with public policy, environmental affairs and social matters that may affect our
operations, performance or public image. The Company will be adding to our website a Corporate Social Responsibility
section in fiscal 2018.
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 2017, Messrs. Berger, Chambers, Mallott and Solt and Msrs. Gottschalk and Reardon served on our
Compensation Committee. No member of our Compensation Committee serves, or at any time has served, as one of our
officers or employees or has, or during fiscal 2017, 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 2017, 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:
(866) 834-7325
Big Lots Board of Directors, 4900 E. Dublin-Granville Road, Columbus, Ohio
43081
Email: http://biglotsbigvoice.com
13
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.
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 Charitable Contributions
During fiscal 2017, 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 our CEO in fiscal 2017, 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. From the beginning of the 2017 fiscal year
until May 25, 2017, the annual retainers we paid to non-employee directors 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 additional annual retainer of $30,000 for the Audit Committee chair; (4) an additional annual retainer of
$20,000 for the chairs of the Compensation Committee, the Nominating / Corporate Governance Committee and the
Special Litigation Committee; (5) an additional annual retainer of $15,000 for each Audit Committee member; (6) an
additional annual retainer of $10,000 for each member of the Compensation Committee, the Nominating / Corporate
Governance Committee and the Special Litigation Committee. Effective on May 25, 2017, the Board made the following
changes to the annual retainers we pay to non-employee directors: (1) the annual retainer for each non-employee
director other than the nonexecutive chair increased to $85,000; (2) the additional annual retainer for the Compensation
Committee chair increased to $25,000; (3) the additional annual retainer for each Compensation Committee member
increased to $12,500; (4) the additional annual retainer for the Special Litigation Committee chair increased to $30,000;
and (5) the additional annual retainer for each Special Litigation Committee member increased to $20,000. Each term
during which our non-employee directors serve on the Board, we donate an aggregate annual amount of up to $15,000 to
charitable organizations nominated by the non-employee director and make matching charitable donations in an
aggregate annual amount of up to $15,000 to charitable organizations to which the non-employee director makes
contributions.
Restricted Stock Units
In May 2017, our nonexecutive chair received a restricted stock unit award having a grant date fair value equal to
approximately $200,000 (4,095 common shares) and our non-employee directors received a restricted stock unit award
having a grant date fair value equal to approximately $135,000 (2,764 common shares). The restricted stock awards were
made under the terms of the Big Lots 2017 Long-Term Incentive Plan (“2017 LTIP”). These restricted stock units will be
settled in our common shares on the earlier to occur of (1) the trading day immediately preceding the Annual Meeting or
(2) the non-employee director’s death or disability (as defined in the 2017 LTIP). The non-employee director will forfeit the
restricted stock units if the non-employee director ceases to serve on the Board before either settlement event occurs.
Our non-employee directors may defer all or any portion of their restricted stock unit award until the earlier to occur of (1)
the date specified by the non-employee director, (2) the non-employee director’s death or disability or (3) the date the
non-employee director ceases to serve as a member of the Board of Directors. The non-employee directors must make
any deferral election on or before December 31 of the year preceding the grant of the restricted stock unit award (e.g.,
December 31, 2016 for awards granted in 2017) or, in the case of a newly elected director, within thirty days of the date
they become eligible to participate in the 2017 LTIP.
14
Director Compensation Table for Fiscal 2017
The following table summarizes the total compensation for fiscal 2017 for each of our non-employee directors.
Fees
Earned
or
Paid in
Cash
($)
(b)
Stock
Awards
($) (1)(2)
(c)
108,125 134,966
147,000 199,959
143,125 134,966
133,750
134,966
145,625 134,966
117,500 134,966
126,250 134,966
110,625 134,966
Option
Awards
($)
(d)
-
-
-
-
-
-
-
-
Non-Equity
Incentive Plan
Compensation
($)
(e)
-
-
-
-
-
-
-
-
Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
($)
(f)
-
-
-
-
-
-
-
-
All
Other
Compensation
($) (3)
(g)
14,500
30,000
18,100
15,000
25,000
37,500
29,450
15,000
Total
($)
(h)
257,591
376,959
296,191
283,716
305,591
289,966
290,666
260,591
Name
(a)
Mr. Berger
Mr. Chambers
Ms. Gottschalk
Ms. Jamison
Mr. Mallott
Ms. Reardon
Ms. Schoppert
Mr. Solt
(1) Amounts in this column reflect the aggregate grant date fair value of the restricted stock unit awards granted to the
non-employee directors in fiscal 2017 as computed in accordance with Financial Accounting Standards Board
Accounting Standards Codification Topic 718 (“ASC 718”). The full grant date fair value of the fiscal 2017 restricted
stock unit award granted to our nonexecutive chair and each non-employee director was based on individual
awards of 4,095 and 2,764 common shares, respectively, at a per common share value of $48.83 on the grant date.
In accordance with ASC 718 and the 2017 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 February 3, 2018, Mr. Chambers held 4,095 shares of restricted stock units and each of the other individuals
included in the table held 2,764 shares of restricted stock units.
(3) Amounts in this column reflect both matching contributions and payments made by us during fiscal 2017 to
charitable organizations nominated by the specified directors.
15
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 April 1, 2018.
Name of Beneficial
Owner or Identity of Group
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)
Wells Fargo & Company (4)
LSV Asset Management (5)
All directors and executive officers as a group (14 persons)
Amount and Nature of
Beneficial Ownership (1)
Percent of Outstanding
Common Shares
129,649
7,566
123,844
16,705
7,254
7,254
133,266
23,666
7,254
14,323
79,059
7,254
10,041
4,793,147
4,272,864
2,642,929
2,253,673
567,735
*
*
*
*
*
*
*
*
*
*
*
*
*
11.4%
10.2%
6.3%
5.4%
1.3%
*
(1)
(2)
(3)
Represents less than 1.0% of the outstanding common shares.
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 April 1, 2018 under
stock options exercisable and performance share units and restricted stock units that will vest within that period.
The number of common shares that may be acquired within 60 days of April 1, 2018 through the vesting of
performance share units within that period are as follows: Ms. Bachmann: 22,343; Mr. Campisi: 76,385;
Mr. Johnson: 17,531; Mr. Schlonsky: 10,962; and Mr. Robins: 9,740; through the vesting of restricted stock units
awards within that period are as follows: Mr. Berger: 2,764; Mr. Chambers: 4,095, Ms. Gottschalk: 2,764; Ms.
Jamison: 2,764; Mr. Mallott: 2,764; Ms. Reardon: 2,764; Ms. Schoppert: 2,764; and Mr. Solt: 2,764 and under stock
options exercisable within that period are as follows: Ms. Bachmann: 80,000; Mr. Johnson: 80,000; and
Mr. Schlonsky: 40,000.
In its Schedule 13G/A filed on January 19, 2018, 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, 2017, had sole
voting power over 4,670,762 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.
In its Schedule 13G/A filed on February 12, 2018, The Vanguard Group, Inc., 100 Vanguard Blvd., Malvern, PA
19355, stated that it beneficially owned the number of common shares reported in the table as of December 31,
2017, had sole voting power over 82,802 of the shares, had sole dispositive power over 4,188,029 of the shares,
had shared dispositive power over 84,835 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 79,431 and 8,775 common
shares, respectively.
(4)
(5)
In its Schedule 13G filed on January 30, 2018, Wells Fargo & Company, 420 Montgomery Street, San Francisco,
CA 94163, stated that it beneficially owned the number of common shares reported in the table as of December 31,
2017, had sole voting power and sole dispositive power over 37,946 of the shares, had shared dispositive power
over 2,604,903 of the shares, and had shared voting power over 2,545,177 of the shares.
In its Schedule 13G filed on February 13, 2018, 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
16
December 31, 2017, had sole voting power over 1,187,908 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 2017 with the reporting requirements of Section 16(a) of the Exchange Act.
17
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
This Compensation Discussion and Analysis, or CD&A, describes the compensation program for our named executive
officers for fiscal 2017, who are listed below:
David J. Campisi (1)
Former Chief Executive Officer and President
Timothy A. Johnson
Executive Vice President, Chief Administrative Officer
and Chief Financial Officer
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
(1)
Mr. Campisi retired as our CEO and President and as a director effective as of April 16, 2018.
EXECUTIVE SUMMARY
Company Performance in Fiscal 2017
In fiscal 2017, we continued to focus on improving our financial and operating performance and continued to deliver solid
and improved operating and financial results. Fiscal 2017 was again a challenging year for many retailers, but we
continued to demonstrate our ability to perform by exceeding our earnings per share – diluted (“EPS”), operating profit
and return on invested capital (“ROIC”) from fiscal 2015 and fiscal 2016, and we continued to return cash to our
shareholders through share repurchases and dividends.
Key Executive Compensation Actions in Fiscal 2017
Base Salary Increases for Named Executive Officers. Based on an analysis of market data, the Committee
approved base salary increases in fiscal 2017 of 4.5% for Mr. Campisi, 3% for Messrs. Johnson and Schlonsky
and Ms. Bachmann and 5% for Mr. Robins.
18
Payouts on Performance-Based Awards. Based on the Company’s adjusted operating profit for fiscal 2017, the
annual cash incentive awards for fiscal 2017 were paid at 82.53% of the target performance level. Based on the
Company’s EPS and ROIC over the past three years, the performance share units (“PSUs”) we granted in fiscal
2015 vested at 118.6% of the target performance level. Based on the Company’s operating profit in fiscal 2017,
one-third of the restricted stock units (“RSUs”) we granted in fiscal 2017 vested and the remaining two-thirds will
vest ratably over the next two years.
Executive Compensation Program Objectives and Components
Compensation Objectives
Our executive compensation program is designed to:
Pay for superior results by rewarding executives for achieving short- and long-term performance goals and
creating long-term shareholder value;
Align the interests of our executives with the interests of our shareholders through performance- and equity-based
compensation; and
Attract and retain talented executives by paying compensation that is competitive with the compensation paid by
the companies in our peer group.
Compensation Components
The following table summarizes the primary components of our executive compensation program and the primary
purposes each component serves in furthering the objectives of our executive compensation program:
Component
Base Salary
Characteristics
Annual fixed cash compensation
Annual Cash Incentive
Awards
Annual variable performance-based
cash compensation
Long-Term Equity
Incentive Awards
Long-term variable equity awards
granted annually as a combination of
PSUs and RSUs
Primary Purposes
Attract and retain talented executives through
an annual salary that reflects the executive’s
performance, experience and scope of
responsibilities.
Mitigate pressure to take unnecessary or
excessive risks or unduly focus on the price of
our common shares.
Motivate executives to achieve performance
objectives that directly relate to our annual
operating and strategic goals.
Align the interests of our executives with the
interests of our shareholders.
Motivate executives to achieve multi-year
financial and strategic goals and create long-
term shareholder value.
Retain talented executives for the long-term.
19
Pay-for Performance
Pay-for-performance is the fundamental objective of our executive compensation philosophy. As a result, the Committee
believes that a majority of each named executive officer’s pay should be at-risk or variable and dependent on our
performance and/or stock price (i.e., performance-based). The following graphs show the percentage of Mr. Campisi’s
and our other named executive officers’ total target compensation for fiscal 2017 that was performance-based.
58%
Performance-Linked
Incentive Compensation
15%
2017 COMPENSATION AWARDED
MR. CAMPISI
OTHER NEOS
51%
Performance-Linked
Incentive Compensation
26%
13%
22%
43%
38%
16%
Restricted Stock Units Award
Salary and Other Compensation
Performance Share Units Award
Annual Bonus Incentive Award
27%
Executive Compensation and Governance Practices
The following table sets forth executive compensation and governance policies and practices we have implemented to
advance the objectives of our executive compensation program and to align our practices and policies with industry-
leading standards.
Practice
Big Lots Policy
Pay-for-Performance Philosophy
A majority of the total target compensation opportunity of our named
executive officers is at-risk or variable and dependent on our
performance and/or stock price.
Stock Ownership Requirements
All of our executive officers and outside directors are subject to stock
ownership requirements.
Clawback Policy
All of our executive officers are also subject to a compensation
clawback policy.
Independent Compensation
Consultant
The Committee engages an independent compensation consultant
that reviews and advises the Committee on executive compensation.
The consultant performs services solely for the Committee.
Independent Board Chair
We maintain separate CEO and Chairman of the Board positions.
Anti-Hedging and Pledging Policy
We do not allow our directors or Leadership Team members to enter
into any hedging or pledging transactions relating to our common
shares.
20
Excise Tax Gross-Ups
We do not pay excise tax gross up under our employment
agreements or our new severance agreements in the event of a
change in control.
Dividends on Unearned Awards
We do not pay dividends on unearned performance awards.
2017 Say-on-Pay Advisory Vote and Shareholder Engagement
At our 2017 annual meeting of shareholders, our shareholders approved the compensation of our named executive
officers with approximately 95% of votes cast in favor of our say-on-pay resolution. The Committee considers this vote a
positive endorsement of our executive compensation program, and our shareholders’ overwhelming support of our 2017
say-on-pay resolution and discussions with our shareholders before our 2017 annual meeting contributed to the
Committee’s decision to not make significant changes to our current executive compensation program.
EXECUTIVE COMPENSATION PROCESS
Roles in Compensation Determination Process
The principal roles of the Committee, our outside directors, our CEO and members of management in our executive
compensation determination process are as follows:
Responsible Party
Role
Compensation Committee
All Outside Directors
CEO
Management
Lead the process for establishing our annual executive compensation
program and approve or recommend that the Board approve compensation
actions.
Consult with management and compensation consultant regarding
employee benefit and compensation programs, plans and awards.
Conduct comprehensive evaluation of CEO performance.
Approve annual executive compensation program and finalize
compensation awards for the members of our Leadership Team.
Provide the Committee and other outside directors with an annual
performance evaluation and compensation recommendation for each of the
other members of our Leadership Team in the first quarter of each fiscal
year based on the CEO’s direct knowledge of their respective performance
and contributions.
Make recommendations to the Committee and our CEO in the design and
administration our employee benefit and compensation programs, plans
and awards in accordance with the Committee’s charter and our
compensation plans.
Advise the Committee and our CEO regarding the competitiveness of
existing and proposed compensation programs and the impact of
accounting rules, laws and regulations on existing and proposed
compensation programs.
Fiscal 2017 Compensation Determination Process
At its February and March 2017 meetings, the Committee:
•
•
•
reviewed and discussed the continued appropriateness of our executive compensation program, including its
objectives, policies, components and processes;
reviewed and discussed in executive session 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;
21
•
•
•
•
•
reviewed and discussed comparative compensation survey data;
considered internal pay equity by comparing the compensation of Mr. Campisi to the compensation of the other
members of our Leadership Team;
prepared its fiscal 2017 compensation recommendations for each member of our Leadership Team;
determined that the performance trigger for the 2016 RSUs was achieved;
determined that the performance metrics for the 2014 PSUs had been achieved; and
determined that a bonus was payable under the annual incentive awards for fiscal 2016 as a result of
corporate performance in fiscal 2016.
At our March 2017 Board meeting:
•
•
the Committee discussed its compensation recommendations (which were consistent with Mr. Campisi’s
recommendations) with the other outside directors, including the underlying data and analysis and the form,
amount of, and rationale for the recommended compensation; and
the outside directors finalized the compensation awards for the Leadership Team members consistent with the
Committee’s recommendations.
Performance Evaluation Process
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:
long-term strategic goals
short-term business goals
profit and revenue goals
expense goals
operating margin improvement
earnings per share growth
fostering teamwork and other
corporate values
optimization of organizational
effectiveness and productivity
leadership and the development of
talent
the performance of our
competitors
same store sales growth of the
Company compared to the
industry
specific business challenges and
general economic and market
conditions
Our CEO, the Committee and the other outside directors do not assign any of these performance factors a specific weight
and may consider different factors for each executive.
Independent Compensation Consultant
The Committee has the sole authority to retain compensation consultants as it deems necessary. In establishing
executive compensation for fiscal 2017, the Committee retained Meridian Compensation Partners, LLC (“Meridian”) as its
compensation consultant based on its independence, expertise and past service to the Committee. Meridian provided
research, data analyses, survey information and design expertise in developing compensation programs for executives
and incentive programs for eligible employees. Meridian kept the Compensation Committee apprised of regulatory
developments and market trends related to executive compensation practices. Meridian does not determine or
recommend the exact amount or form of executive compensation for any of the named executive officers.
Representatives of Meridian attended meetings of the Compensation Committee.
Peer Compensation Data
During the course of establishing the fiscal 2017 executive compensation program, the Committee reviewed
compensation data for a group of retailers similar to us with whom we believe we compete for talent (the “Retailer Peer
Group”). In selecting the Retailer Peer Group, the Committee considered revenue, gross profit margin, geographic
location, gross margin return on investment, market capitalization, net income, earnings per share, price-to-earnings ratio
and shareholder return. The companies included in the Retailer Peer Group for fiscal 2017 were:
Abercrombie & Fitch
Advance Auto Parts
Dick’s Sporting Goods
Dollar General
Genesco
Guess
American Eagle Outfitters
Dollar Tree/Family Dollar
Ross Stores
22
Ascena Retail Group
Bed Bath & Beyond
Burlington Stores
DSW
Foot Locker
Tractor Supply
Williams – Sonoma
As a secondary reference, the Committee also reviewed executive compensation data regarding a broader group of retail
companies included in a compensation survey provided by Equilar. We believe it is important to consult both sets of
information because the compensation survey for the broader group includes compensation information on more
executives and provides 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 characteristics are
not directly comparable to the executives included in the publicly-available reports of the Retailer Peer Group.
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 peer groups. For purposes of this evaluation, no specific weight
was given to one peer group over the other and total direct compensation was comprised of salary, annual incentive
award at target and equity awards.
As discussed in this CD&A, we determine compensation subjectively based on numerous factors. We do not benchmark
or target our compensation at any particular level in relation to the compensation of the peer groups. Rather, the peer
group data provides a point of reference and market check.
COMPONENTS OF OUR EXECUTIVE COMPENSATION PROGRAM
We seek to achieve the objectives of our executive compensation program by awarding the following primary components
of compensation to our executive officers:
Component
Base Salary
Characteristics
Fiscal 2017 Metric
Annual fixed cash
compensation
Based on annual performance review
Annual Cash Incentive Awards Annual variable
100% adjusted operating profit
Long-Term Equity Incentive
Awards
performance-based cash
compensation
Long-term variable equity
awards granted annually
as a combination of PSUs
and RSUs
PSUs – EPS and ROIC performance during three
annual service periods
RSUs – Vest ratably over three years upon
satisfaction of operating profit performance
requirement
We believe each of these individual compensation components and the total mix of compensation components are
necessary to provide a competitive executive compensation program and advance the objectives of our executive
compensation program.
Base Salary
The Committee annually reviews and establishes the base salary for each named executive officer, subject to the
minimum salary requirements set forth in the employment agreements described below in “Agreements with Named
Executive Officers – Employment Agreements” to which we are a party with Ms. Bachmann and to which we were a party
with Mr. Campisi prior to his retirement. The Committee determines adjustments to the base salaries of our named
executive officers based on each executive’s performance, experience, scope of responsibilities and base salary in
comparison to our other employees and similarly positioned executives in our Retailer Peer Group and the anticipated
future contributions of the executive. The Committee did not assign any specific weighting to these factors. For fiscal
2017, the Committee approved the following salaries for the named executive officers, which became effective on March
26, 2017:
Name
Mr. Campisi
Mr. Johnson
Ms. Bachmann
Mr. Schlonsky
23
Fiscal 2017
Salary
($)
$1,150,000
$ 598,350
$ 763,850
$ 498,625
Name
Mr. Robins
Annual Cash Incentive Awards
Fiscal 2017
Salary
($)
$ 460,000
Each of our named executive officers participates in our annual cash incentive award program under the 2006 Bonus
Plan. The amount of the annual cash incentive award earned by each named executive officer is based entirely on our
corporate performance. On an annual basis with respect to our annual cash incentive award program, the Committee (1)
selects one or more performance measures, (2) establishes threshold, target and maximum performance goals for each
performance measure and (3) establishes for each named executive officer a percentage of base salary that is earned at
the threshold, target and maximum performance levels (with linear interpolation between the specified payout
percentages). No annual cash incentive award is earned if we do not meet the threshold performance goal. The
Committee may exercise negative discretion to cancel or decrease, but not increase for “covered employees” (as defined
in Section 162(m) of the Internal Revenue Code of 1986, as amended and including applicable rules, regulations and
authoritative interpretations thereunder (“IRC”)), the annual cash incentive awards earned. See the “Bonus and Equity
Plans” discussion following the Summary Compensation Table for more information regarding our annual cash incentive
awards.
Fiscal 2017 Performance Measure
The Committee and the other outside directors selected adjusted operating profit as the performance measure for the
annual cash incentive awards for fiscal 2017 because they believe it represents a key indicator of the strength of our
operating results and financial condition and incentivizes the participants in our annual cash incentive award program to
achieve strong earnings growth.
Fiscal 2017 Performance Goals
The Committee and other outside directors established the performance goals for the adjusted operating profit
performance measure based on the annual corporate operating plan established by the Board for fiscal 2017. The
minimum performance goal was set at the minimum acceptable level for adjusted operating profit in our annual corporate
operating plan for fiscal 2017 while the target and maximum performance goals were respectively set at and above the
projected operating profit in our annual corporate operating plan for fiscal 2017.
Fiscal 2017 Payout Percentages
Except for Mr. Campisi and Mr. Robins, the Committee and the other outside directors maintained the same annual cash
incentive award payout percentages for our named executive officers for fiscal 2017 that applied for fiscal 2016 primarily
as a result of the belief of the Committee and other outside directors that the payout percentages were appropriate to
accomplish our executive compensation objectives for fiscal 2017. Mr. Campisi’s and Mr. Robins’ annual incentive award
payout percentages were increased to make them competitive with our peers.
The following table sets forth for fiscal 2017 the performance goal established for each performance level and the payout
percentage established for each named executive officer for each performance level:
Fiscal 2017 Performance Levels
Below Threshold
Threshold
Target
Maximum
Performance
Goal ($)
0-
$290,939,014
$290,939,015
$302,995,027
$324,495,027
Payout Percentage (% of salary)
Mr. Campisi Mr. Johnson Ms. Bachmann Mr. Schlonsky Mr. Robins
0
65
130
260
0
30
60
120
0
30
60
120
0
30
60
120
0
30
60
120
24
Fiscal 2017 Annual Cash Incentive Awards
To calculate the amount of the annual incentive awards earned under the 2006 Bonus Plan, if any, we first calculate the
applicable financial measure for purposes of our financial statements. We then adjust the measure to eliminate the effect
of those events, transactions or accrual items described in the 2006 Bonus Plan. The Committee approves such
adjustments at the same time it establishes the corporate performance goals and annual incentive award payout
percentages applicable to the award. These adjustments may increase or decrease the corporate performance amount
achieved. The Committee exercised negative discretion to reduce the corporate performance amount achieved for fiscal
2017 to exclude certain accrual items that would have otherwise increased such amount. The Committee decided to
exclude these accrual items principally because they were anticipated as part of the annual corporate operating plan upon
which the financial measure and corporate performance goals were established for fiscal 2017, and not because of any
corporate or individual performance factors.
The following table sets forth for fiscal 2017 the payout percentage achieved and the annual cash incentive award earned
by each named executive officer:
Name
Mr. Campisi
Mr. Johnson
Ms. Bachmann
Mr. Schlonsky
Mr. Robins
Payout Percentage (% of salary)
107.3%
49.5%
49.5%
49.5%
49.5%
Annual Cash Incentive Award ($)
$1,233,824
$296,291
$378,243
$246,909
$227,783
Our operating profit for fiscal 2017 was below our operating plan as established by our Board and management and
therefore, our named executive officers earned a bonus between the threshold and target performance levels. As a
consequence of the fiscal 2017 bonus payments, total cash compensation paid to the named executive officers for fiscal
2017 was generally at or below the median for our peer groups.
Long-Term Equity Incentive Compensation
For fiscal 2017, we awarded PSUs and RSUs to our named executive officers. Each named executive officer received
60% of their equity awards in the form of PSUs and 40% in the form of RSUs. The Committee determined the value of
the equity awards granted to our named executive officers, and the allocation of the equity awards between PSUs and
RSUs, based on:
• management’s estimate of the number of common shares underlying the equity awards to be granted during fiscal
2017 to all recipients other than Mr. Campisi;
historical grant information;
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;
the market price of our common shares; and
•
•
•
•
•
•
•
•
• Mr. Campisi’s recommendations for the value of the equity awards granted to the other named executive officers.
The Committee did not utilize a particular formula in making these determinations, although Company and individual
performance were the most significant factors in determining the value of the equity awards granted to our named
executive officers in fiscal 2017. See “Performance Evaluation Process” above for more information regarding how our we
evaluate performance.
PSUs and RSUs are 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.
25
PSU Award Process
The Committee annually awards a target number of PSUs to our named executive officers subject to (1) the attainment of
performance goals applicable to specified performance measures during a three-year performance cycle consisting of
three annual service periods and (2) the named executive officer’s continued employment through the end of the
performance cycle. A percentage of the target number of PSUs (i.e., the vesting factor) vests based on our average
attainment of the performance goals applicable to the performance measures during the three-year performance cycle
(with linear interpolation between the performance levels) as described in the following chart:
Performance Level
Threshold
Target
Maximum
3-Year Average Performance Attainment
90%
100%
110%
Vesting Factor
50%
100%
150%
To calculate the attainment of the performance goals, we first calculate the applicable performance measures for
purposes of our financial statements and then adjust the performance measures to eliminate the effect of those events,
transactions or accrual items described in the Big Lots 2012 Long-Term Incentive Plan (“2012 LTIP”) and approved by the
Committee when it establishes the performance goals. These adjustments may increase or decrease the amount
achieved for the performance measure. The Committee may also exercise negative discretion to cancel or decrease, but
not increase for “covered employees,” the number of PSUs that vest.
The Committee establishes the performance measures and performance goals for each service period at the beginning of
the service period. In March 2017, the Committee selected EPS and ROIC as the performance measures for the fiscal
2017 service period and established the performance goals applicable to the first service period of the fiscal 2017 PSU
award performance cycle, the second service period of the fiscal 2016 PSU award performance cycle and the last service
period of the 2015 PSU award performance cycle. The following table sets forth the performance goals established by the
Committee for each performance measure for fiscal 2017 and the amount of each performance measure in fiscal 2017:
Performance Measure
EPS
ROIC
Weighting
50%
50%
Threshold
$3.69
21.1%
Target
$4.10
23.5%
Maximum
$4.51
25.8%
Actual
$4.27
22.7%
Fiscal 2017 PSU Awards
The following table sets forth the target number and grant value of the PSUs awarded to the named executive officers in
fiscal 2017 and the performance attained for each performance measure during each completed service period in the
fiscal 2017 PSU award performance cycle:
Name
Mr. Campisi
Mr. Johnson
Ms. Bachmann
Mr. Schlonsky
Mr. Robins
Target Number
of PSUs
Grant Value of
PSUs
62,925
15,231
19,444
12,693
10,202
$3,240,008
$784,244
$1,001,171
$653,562
$525,301
EPS
ROIC
Fiscal 2017 PSU Award Performance Cycle Attainment
(2017-2019)
Fiscal
2017
Fiscal 2018 Fiscal 2019
Actual Results
Target Performance Goal
Performance %
Actual Results
Target Performance Goal
Performance %
$4.27
$4.10
104.2%
22.7%
23.5%
96.8%
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
Fiscal 2016 PSU Awards
The following table sets forth the target number and grant value of the PSUs awarded to the named executive officers in
fiscal 2016 and the performance attained for each performance measure during each completed service period in the
fiscal 2016 PSU award performance cycle:
26
Name
Mr. Campisi
Mr. Johnson
Ms. Bachmann
Mr. Schlonsky
Mr. Robins
Target Number
of PSUs
Grant Value of
PSUs
82,104
20,430
26,080
17,025
10,263
$3,703,711
$921,597
$1,176,469
$767,998
$462,964
EPS
ROIC
Fiscal 2016 PSU Award Performance Cycle Attainment
(2016-2018)
Fiscal 2016 Fiscal
2017
Fiscal 2018
Actual Results
Target Performance Goal
Performance %
Actual Results
Target Performance Goal
Performance %
$3.75
$3.35
111.9%
21.8%
19.2%
113.7%
$4.27
$4.10
104.2%
22.7%
23.5%
96.8%
TBD
TBD
TBD
TBD
TBD
TBD
Fiscal 2015 PSU Awards
The following table sets forth the target number and grant value of the PSUs awarded to the named executive officers in
fiscal 2015, the number and value of the PSUs actually earned by the named executive under such awards, the vesting
factor applicable to such awards and the performance attained for each performance measure during each service period
in the fiscal 2015 PSU award performance cycle:
Name
Mr. Campisi
Mr. Johnson
Ms. Bachmann
Mr. Schlonsky
Mr. Robins
Target Number of
PSUs
64,406
14,782
18,839
9,243
8,213
Grant Value of
PSUs
$3,184,233
$730,822
$931,400
$456,974
$382,562
Number of PSUs
Earned
76,385
17,531
22,343
10,962
9,740
Value of PSUs
Earned
$3,305,423
$758,742
$967,005
$474,435
$421,547
Vesting Factor
118.6%
118.6%
118.6%
118.6%
118.6%
Fiscal 2015 PSU Award Performance Cycle Attainment
(2015-2017)
EPS
Actual Results
Target Performance Goal
Performance %
EPS Vesting Factor for 2015 PSU Awards (122.6% + 129.9% +110.4% / 3) = 120.9%
ROIC
Actual Results
Target Performance Goal
Performance %
ROIC Vesting Factor for 2015 PSU Awards (123.1% + 134.1% +91.9% / 3) = 116.4%
Fiscal 2015 Fiscal 2016
Fiscal
2017
$3.02
$2.77
109.0%
18.6%
17.0%
109.2%
$3.75
$3.35
111.9%
21.8%
19.2%
113.7%
$4.27
$4.10
104.2%
22.7%
23.5%
96.8%
Fiscal 2017 RSU Awards
The following table sets forth the number and grant value of the RSUs awarded to the named executive officers in fiscal
2017:
Name
Mr. Campisi
Mr. Johnson
Ms. Bachmann
Mr. Schlonsky
Mr. Robins
Number of
RSUs
Grant Value of
RSUs
41,949
10,153
12,962
8,461
6,801
$2,159,954
$522,778
$667,413
$435,657
$350,183
The RSUs awarded to our named executive officers vest ratably over three years from the grant date of the award,
subject to (1) the participant remaining employed by us through each annual vesting date and (2) 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. As a result of our performance in fiscal 2017, the
27
performance requirement for the fiscal 2017 RSU awards was met. Accordingly, one-third of the RSU awards for fiscal
2017 vested on the second trading day after we filed our Current Report on Form 8-K with the SEC reporting the
satisfaction of the performance requirement.
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 2017, the Committee authorized Mr. Campisi to use the corporate aircraft for up to $100,000 of non-business
flights (as calculated in accordance with the methodology described in the notes accompanying the “Summary
Compensation Table for 2017”). 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.
Post-Termination and Change in Control Arrangements
The employment agreements and senior executive severance agreements described below in “Agreements with Named
Executive Officers” provide our named executive officers with potential severance and change in control payments and
benefits. 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, including the
accelerated vesting of equity awards upon a change in control. The change in control provisions of the employment
agreements and severance agreements provide the executive certain cash payments and other benefits upon a change in
control only if the executive is terminated in connection with the change in control (including a constructive termination).
The Committee believes that this “double trigger” structure incentivizes 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 “Potential Payments Upon Termination or Change in Control” below for a discussion of the compensation that may be
paid to our named executive officers in connection with a change in control or the termination of employment.
We entered into a Separation Agreement (the “Retirement Agreement”) with Mr. Campisi effective as of April 16, 2018.
The Retirement Agreement sets forth all of the payments and benefits (including the treatment of outstanding equity
awards) that Mr. Campisi will receive in connection with his retirement. The material terms of the Retirement Agreement
are described in the Current Report on Form 8-K that we filed with the SEC on April 17, 2018 which is incorporated by
reference herein.
28
AGREEMENTS WITH NAMED EXECUTIVE OFFICERS
Employment Agreements
We are a party to an employment agreement with Ms. Bachmann and we were a party to an employment agreement with
Mr. Campisi prior to his retirement on April 16, 2018. The following table summarizes the key provisions of the
employment agreements:
Provision
Term
Campisi Employment Agreement
Bachmann Employment Agreement
Effective until May 3, 2020 with
Effective as long as we employ Ms.
automatic one-year renewal terms
beginning on each May 4 thereafter.
$1,050,000
120% (target) and 240% (maximum)
Bachmann.
$625,000
60% (target) and 120% (maximum)
Minimum Annual Base
Salary
Minimum Annual Cash
Incentive Bonus Payout
Percentages
Perquisites
Retirement Benefits
Restrictive Covenants
Authorizes personal use of corporate
aircraft in an amount up to $100,000
per calendar year.
Life insurance policy in an amount
equal to two times current base salary.
Provides certain payments and benefits
if Mr. Campisi retires after May 3, 2020
and complies with all restrictive
covenants.
Confidentiality (infinite).
Non-solicitation (two years, but reduced
to six months following a change in
control).
Non-disparagement (infinite).
Non-competition (two years, but
reduced to six months following a
change in control).
Continuing cooperation (infinite).
None
None
Confidentiality (infinite).
Non-solicitation (two years).
Non-disparagement (infinite).
Non-competition (one year, but
reduced to six months following a
change in control).
Continuing cooperation (infinite).
“Golden Parachute”
Excise Tax Gross-Up
None
None
In negotiating the employment agreements with the executives, 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 peer group companies;
the relationship between the compensation offered to the executive and the compensation paid to the other
Leadership Team members; and
•
our perception of the relative bargaining power of the Company and the executive.
Senior Executive Severance Agreements
We have entered into a senior executive severance agreement 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
29
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: (1) a lump-sum payment equal to 200% of the executive’s then
current annual salary and maximum annual incentive award; and (2) 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.
During fiscal 2017, the Committee amended all new senior executive severance agreements to eliminate a gross-up
payment to offset any excise taxes upon a change of control and termination. For all grandfathered senior executive
severance agreements, 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 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. All grandfathered senior
executive severance agreements will be amended to eliminate this gross-up provision at the end of fiscal 2018.
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 as a result 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.”
The Severance Plan also 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 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.
If Ms. Bachmann is entitled to benefits under the Severance Plan and to severance benefits under her employment
agreement, she will receive the greater of (i) the aggregate benefits payable under the Severance Plan or (ii) the
aggregate severance benefits payable under her employment agreement.
As indicated above, the Retirement Agreement sets forth all of the payments and benefits (including the treatment of
outstanding equity awards) that Mr. Campisi will receive in connection with his retirement.
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 peer 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.
30
OTHER EXECUTIVE 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”). Outside directors and executives 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 12, 2018, 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 2012 LTIP and the 2017 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 2017, the outside directors, after consultation with the Committee, specified that the grant date of the
equity awards was the second trading day 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.
The exception from Section 162(m)’s annual deduction limit for performance-based compensation has been repealed,
effective for taxable years beginning after December 31, 2017, such that compensation otherwise deductible with respect
to each of our covered executive officers in excess of $1 million will not be deductible unless it qualifies for transition relief
applicable to certain arrangements in place as of November 2, 2017.
Despite the Committee’s efforts to structure the executive team annual cash incentives and performance-based
compensation in a manner intended to meet the exception from Section 162(m)’s deduction limits, no assurance can be
given that compensation intended to satisfy the requirements of Section 162(m) in fact will, due to ambiguities and
uncertainties as to the application and interpretation of Section 162(m) and the regulations issued thereunder, including
the uncertain scope of the transition relief under the legislation repealing Section 162(m)’s exemption from the deduction
31
limit. Further, the Committee reserves the right to modify compensation that was initially intended to meet the exception
from Section 162(m) if it determines that such modifications are consistent with the Company’s business needs.
EXECUTIVE COMPENSATION PROGRAM FOR FISCAL 2018
In establishing the executive compensation program for fiscal 2018, the Committee engaged Meridian to:
•
•
•
•
provide comparative compensation data;
review and recommend changes to our executive compensation program;
review the appropriateness of our Retailer Peer 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 Peer Group.
The Committee did not make any material changes to the design of our executive compensation program when
establishing compensation for fiscal 2018 other than granting an additional award of restricted stock units to Messrs.
Johnson, Schlonsky and Robins and Ms. Bachmann in consideration for the additional responsibilities they assumed
during fiscal 2017, which will vest in fiscal 2020 subject to the executive’s continued employment. With the exception of
the additional restricted stock units award discussed in the preceding sentence, for fiscal 2018, we awarded RSUs and
PSUs with the same weighting as fiscal 2017, with the RSUs vesting ratably over three years from the grant date of the
award with a performance component and the PSUs vesting only if we meet performance targets over a three-year
performance period with three separate service periods. For the fiscal 2018 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.
COMPENSATION COMMITTEE REPORT
The Compensation Committee reviewed and discussed the above 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 2017 (“Form 10-K”).
Members of the Compensation Committee
Nancy A. Reardon (Chair)
Jeffrey P. Berger
Marla C. Gottschalk
Philip A. Mallott
Russell E. Solt
32
Summary Compensation Table for 2017
Name and
Principal Position (1)
(a)
David J. Campisi,
Chief Executive Officer
and President (7)
Timothy A. Johnson,
Executive Vice President,
Chief Administrative Officer
and Chief Financial Officer
Lisa M. Bachmann,
Executive Vice President,
Chief Merchandising and
Operating Officer
Michael A. Schlonsky,
Executive Vice President,
Human Resources and
Store Operations
Year
(b)
Salary
($) (2)
(c)
2017 1,142,308
2016 1,092,308
2015 1,034,656
2017
2016
2015
595,668
578,317
543,935
2017
2016
2015
760,427
738,277
694,773
2017
496,390
2016
2015
481,931
446,312
Ronald A. Robins Jr.,
2017
456,577
Senior Vice President,
General Counsel and
Corporate Secretary (8)
2016
435,788
Bonus
($)
(d)
-
-
-
Stock
Awards
($) (3)
(e)
5,399,962
6,172,807
5,307,038
-
-
-
-
-
-
-
-
-
-
1,307,022
1,535,950
1,218,004
1,668,585
1,960,751
1,552,317
1,089,219
1,279,951
761,574
875,484
771,561
Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings
($)
(h)
-
-
-
-
-
-
-
-
-
228,547
605
-
-
Option
Awards
($)
(f)
-
-
-
Non-Equity
Incentive Plan
Compensation
($) (4)
(g)
1,233,824
2,294,028
2,089,206
-
-
-
-
-
-
-
-
-
-
296,291
605,749
545,266
378,243
773,296
696,851
246,909
504,790
408,089
227,783
380,383
All Other
Compensation
($) (5)(6)
(i)
569,418
240,384
196,084
207,378
71,132
49,404
Total
($)
(j)
8,345,512
9,799,527
8,626,984
2,406,359
2,791,148
2,356,609
231,466
101,014
57,816
3,038,721
3,573,338
3,001,757
156,370
1,988,888
116,861
60,838
2,612,080
1,677,418
56,769
1,616,613
52,557
1,640,289
(1) We are a party to an employment agreement with Ms. Bachman and we were a party to an employment agreement
(2)
(3)
(4)
(5)
with Mr. Campisi prior to his retirement on April 16, 2018, the material terms of which are described in the
“Agreements with Named Executive Officers – 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 “Agreements with Named Executive Officers – 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 “Agreements with Named Executive Officers –
Severance Plan” section of the CD&A. We entered into the Retirement Agreement with Mr. Campisi effective as of
April 16, 2018. The Retirement Agreement sets forth all of the payments and benefits (including the treatment of
outstanding equity awards) that Mr. Campisi will receive in connection with his retirement.
The amounts in this column reflect the salary earned by each named executive officer during fiscal 2017.
The amounts in this column reflect the sum of (i) the grant date fair value of the RSUs, as determined in
accordance with ASC 718, and (ii) the estimated fair value of the PSUs awarded to the named executive officers
under the 2012 LTIP.
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 2017, the amounts in this column include the following compensation for the executives, as more fully
described in the table included with this footnote:
i.
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;
Healthcare costs paid by Big Lots pursuant to the Executive Benefit Plan, which is described in the
“Components of our Executive Compensation Program – Personal Benefits and Perquisites” section of the
CD&A;
Premiums paid by Big Lots for life insurance, which is generally available to all full-time employees;
ii.
iii.
iv.
33
v.
vi.
vii.
Premiums paid by Big Lots for long-term disability insurance, which is described in the “Components of our
Executive Compensation Program – 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 non-commercial aircraft by
Mr. Campisi;
viii. Matching charitable contributions made by Big Lots; and
Dividends paid on vested RSU and PSU awards.
ix.
The aggregate incremental cost of non-business use of non-commercial 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,
and other miscellaneous variable costs. Due to the fact that the non-commercial 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, and leasing costs for 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 non-commercial aircraft. The benefit of non-business use of
non-commercial aircraft, which was approved by the Compensation Committee for fiscal 2017 as part of Mr. Campisi’s
overall compensation package, is described in the “Components of our Executive Compensation Program – Personal
Benefits and Perquisites” section of the CD&A.
Name
Reimbursement of Taxes ($)
Big Lots Contributions to Defined Contribution Plans ($)
Big Lots Paid Health Care under Executive Benefits
Plans ($)
Big Lots Paid Life Insurance Premiums ($)
Big Lots Paid Long-Term Disability Insurance Premiums ($)
Mr. Campisi Mr. Johnson Ms. Bachmann Mr. Schlonsky Mr. Robins
19,140
10,800
19,323
775
5,686
10,800
4,718
693
7,582
10,800
6,776
775
18,986
10,800
19,155
579
4,080
10,800
6,707
533
Use of Automobile or Automobile Allowance ($)
Non-Business Aircraft Usage ($)
Matching Charitable Contributions ($)
Dividend Payments ($)
(6) We purchase tickets to entertainment and sporting venues for the primary purpose of allowing employees to use
1,454
13,200
-
15,000
77,196
1,447
13,200
-
15,000
5,002
1,454
13,200
-
15,000
155,827
1,454
13,200
-
15,000
175,879
1,454
46,379
73,525
15,000
383,022
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. Campisi retired as our CEO and President and as a director effective as of April 16, 2018.
(8) Mr. Robins was not a named executive officer in fiscal 2015.
Bonus and Equity Plans
The amounts reported in the Summary Compensation Table above include awards granted to the named executive
officers 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 2017 table.
Big Lots 2006 Bonus Plan
The 2006 Bonus Plan provides for cash compensation, which we have structured in a manner 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
34
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
“Components of our Executive Compensation Program – Annual Cash Incentive Awards” and “Agreements with Named
Executive Officers – Employment Agreements” sections of the CD&A for more information regarding the 2006 Bonus Plan
and the awards made under that plan for fiscal 2017.
Big Lots 2012 Long-Term Incentive Plan
From May 23, 2012 through May 25, 2017, all employee equity awards, including those made to our named executive
officers, were granted under the 2012 LTIP. The 2012 LTIP authorized the grant 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) RSUs, (6) deferred stock units, (7) performance shares, (8) 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”).
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 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 outstanding restricted stock awards granted pursuant to the 2012 LTIP, 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 2017 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 2017 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 2017 PSU awards, the Committee
established the threshold, target and maximum EPS performance levels at $3.69, $4.10 and $4.51, respectively, and the
threshold, target and maximum ROIC performance levels at 21.1%, 23.5% and 25.8%, respectively.
35
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 the “Potential Payments Upon
Termination or Change in Control – Rights Under Post-Termination and Change in Control Arrangements” section below.
See the “Components of our Executive Compensation Program – Long-Term Equity Incentive Compensation” 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 2017.
Big Lots 2017 Long-Term Incentive Plan
All equity awards granted to our employees and non-employee directors since May 25, 2017 have been granted under the
2017 LTIP. The 2017 LTIP authorizes grants of (1) NQSOs, (2) ISOs, (3) SARs, (4) restricted stock, (5) RSUs,
(6) deferred stock units, (7) performance shares, (8) PSUs, (9) performance units, (10) cash-based awards, and (11) other
stock-based 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 under the 2012 LTIP 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 the total number of common shares available for grant under the 2017 LTIP, no more than 5,500,000 common shares
may be issued pursuant to grants of ISOs during the term of the 2017 LTIP. A participant may receive multiple Awards
under the 2017 LTIP.
In fiscal 2017, the only awards made pursuant to the 2017 LTIP were the RSUs awarded to our non-employee directors,
which are discussed in the “Director Compensation” section of this Proxy Statement.
Grants of Plan-Based Awards in Fiscal 2017
The following table sets forth each award made to our named executive officers in fiscal 2017 under the 2006 Bonus Plan
and the 2012 LTIP.
Grant
Date
(1)
(b)
-
3/7/17
3/7/17
-
3/7/17
3/7/17
-
3/7/17
3/7/17
Name
(a)
Mr. Campisi
Mr. Johnson
Ms. Bachmann
Mr. Schlonsky
Estimated Possible
Payouts Under
Non-Equity
Incentive Plan
Awards (2)
Target
($)
(d)
Threshold
($)
(c)
Maximum
($)
(e)
Threshold
(#)
(f)
Estimated Future
Payouts Under
Equity
Incentive Plan
Awards (3)
Target
(#)
(g)
Maximum
(#)
(h)
747,500 1,495,000
-
-
-
-
2,990,000
-
-
179,505 359,010
-
-
-
-
718,020
-
-
229,155 458,310
-
-
-
-
916,620
-
-
-
31,463
-
-
7,616
-
-
9,722
-
-
62,925
-
-
15,231
-
-
19,444
-
-
12,693
-
-
-
94,388
-
-
22,847
-
-
29,166
-
-
19,040
-
-
-
3/7/17
3/7/17
149,588 299,175
-
-
-
-
598,350
-
-
-
6,347
-
Mr. Robins
-
138,000 276,000
552,000
-
3/7/17
3/7/17
-
-
-
-
-
-
5,101
-
10,202
-
15,303
-
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
($/Sh.)
(k)
-
-
41,949
-
-
10,153
-
-
12,962
-
-
8,461
-
-
6,801
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Grant
Date Fair
Value of
Stock
and
Option
Awards
($/
Shr.) (5)
(l)
-
3,240,008
2,159,954
-
784,244
522,778
-
1,001,171
667,413
-
653,562
435,657
-
525,301
350,183
(1)
As discussed in the “Compensation Policies & Practices – Equity Grant Timing” section of the CD&A, in fiscal
2017, the Board set the grant date for the RSU awards and the service inception date for the PSU awards as the
36
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.
The amounts in columns (c), (d) and (e) represent our named executive officers’ threshold, target and maximum
annual incentive award levels, respectively, for fiscal 2017 pursuant to the 2006 Bonus Plan, which annual
incentive award levels are further described in the “Components of our Executive Compensation Program – Annual
Cash Incentive Awards” section of the CD&A. For fiscal 2017, our named 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 “Components of our Executive Compensation Program –
Long-Term Equity Incentive Compensation” 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 “Components of our Executive Compensation Program – Long-Term Equity
Incentive Compensation” 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.
(2)
(3)
(4)
(5)
Outstanding Equity Awards at 2017 Fiscal Year-End
The following table sets forth, as of the end of fiscal 2017, 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)
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
($) (4)
(h)
Option
Exercise
Price
($) (1)
(e)
Option
Expiration
Date
(f)
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)
-
35,000
5,000
40,000
-
40,000
40,000
-
15,000
5,000
20,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
93,221
5,382,581
247,235
14,275,349
43.85
3/6/2019
30.82
8/28/2019
35.72
3/8/2020
-
-
-
-
-
-
-
-
-
-
-
-
-
-
22,630
1,306,656
80,443
4,644,779
43.85
35.72
-
43.85
30.82
35.72
-
3/6/2019
3/8/2020
-
3/6/2019
8/28/2019
3/8/2020
-
-
-
28,882
-
-
-
18,160
-
-
1,667,647
-
-
-
1,048,558
-
-
94,363
-
-
5,448,520
-
-
-
48,961
-
-
-
2,827,008
-
-
13,247
764,882
28,678
1,655,868
Name
(a)
Mr. Campisi
Mr. Johnson
Ms. Bachmann
Mr. Schlonsky
Mr. Robins
(1)
All stock option awards reflected in this table were made pursuant to the 2012 LTIP. 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.
37
(2)
(3)
The awards reported in column (g) reflect the unvested RSUs awarded to the named executive officers in fiscal
2017, fiscal 2016 and fiscal 2015 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 2016 RSU awards and the second third of
the fiscal 2015 RSU awards vested during fiscal 2017. For additional information regarding the fiscal 2017 RSU
awards, including the vesting terms, see the narrative discussion preceding the Grants of Plan-Based Awards in
Fiscal 2017 table and the “Components of our Executive Compensation Program – Long-Term Equity Incentive
Compensation” section of the CD&A.
The awards reported in column (i) reflect the following: (1) for Mr. Campisi, Mr. Johnson, Ms. Bachmann and
Mr. Schlonsky, a PSU award in fiscal 2017, fiscal 2016 and fiscal 2015 (each at the target amount) and a restricted
stock award in fiscal 2013; and (2) for Mr. Robins, a PSU award in fiscal 2017, fiscal 2016 and fiscal 2015 (each at
the target amount). If we achieve the maximum performance levels applicable to the PSU awards in fiscal 2017
and fiscal 2016, the total number of PSUs that would vest and be earned for such PSU awards would be:
(1) 217,544 for Mr. Campisi; (2) 53,492 for Mr. Johnson; (3) 68,286 for Ms. Bachmann; (4) 44,578 for
Mr. Schlonsky; and (5) 30,697 for Mr. Robins. The fiscal 2015 PSU awards vested on April 4, 2018. For additional
information on the fiscal 2015 PSU awards, see the narrative discussion in the “Components of our Executive
Compensation Program – Long-Term Equity Incentive Compensation” section of the CD&A.
All awards reported in column (i) were made pursuant to the 2012 LTIP. The first trigger for the fiscal 2013
restricted stock award is EPS of $1.50 and the second trigger is EPS of $3.98. Messrs. Johnson and Schlonsky
and Ms. Bachmann’s fiscal 2013 restricted stock awards vested on March 12, 2018 and Mr. Campisi’s 2013
restricted stock award vested on April 4, 2018. The actual number of PSUs awarded to each named executive
officer in fiscal 2017, fiscal 2016 and fiscal 2015 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 2017 PSU awards, including the vesting
terms, see the narrative discussion preceding the Grants of Plan-Based Awards in Fiscal 2017 table and the
“Components of our Executive Compensation Program – Long-Term Equity Incentive Compensation” section of the
CD&A.
The market value was computed by multiplying the number of units or shares by $57.74, the closing price of our
common shares on February 3, 2018. If we achieve the maximum performance levels applicable to the PSU
awards in fiscal 2017 and fiscal 2016, the aggregate market value for such PSU awards would be: (1) $12,560,990
for Mr. Campisi; (2) $3,088,628 for Mr. Johnson; (3) $3,942,834 for Ms. Bachmann; (4) $2,573,934 for
Mr. Schlonsky; and (5) $1,772,445 for Mr. Robins. The fiscal 2015 PSU awards vested on April 4, 2018. For
additional information on the fiscal 2015 PSU awards, see the narrative discussion in the “Components of our
Executive Compensation Program – Long-Term Equity Incentive Compensation” section of the CD&A.
(4)
Option Exercises and Stock Vested in Fiscal 2017
The following table reflects all stock option exercises and the vesting of restricted stock held by each of our named
executive officers during fiscal 2017.
Name
(a)
Mr. Campisi
Mr. Johnson
Ms. Bachmann
Mr. Schlonsky
Mr. Robins
Option Awards
Stock Awards
Number of Shares
Acquired on Exercise
(#)
(b)
Value Realized
on Exercise
($)(1)
(c)
Number of Shares
Acquired on Vesting
(#)
(d)
Value Realized
on Vesting
($)(2)
(e)
28,875
20,000
40,000
15,000
-
372,808
337,200
395,236
132,900
-
181,000
70,522
83,467
36,119
4,063
8,971,787
3,542,837
4,258,329
1,808,647
206,797
(1)
The amounts shown reflect the difference between the exercise price of the option and the market price of the
common shares at the time of exercise.
38
(2)
The amounts shown reflect the number of common shares issued to the named executive officer in settlement of
the vesting of stock awards multiplied by the closing price of our common shares on trading day before the
vesting date.
Nonqualified Deferred Compensation
Supplemental Savings Plan
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 3% of salary contributed and
50% for the next 2% 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 ($270,000
for calendar year 2017). Accordingly, the maximum aggregate Registrant Contribution that could be made to a named
executive officer participating in the Savings and Supplemental Savings Plans was $10,800 for fiscal 2017.
Prior to fiscal 2017, under the Savings Plan and the Supplemental Savings Plan, 25% of the Registrant Contributions
vests annually beginning on the second anniversary of the employee’s hiring. Under the Savings Plan, a participant who
has terminated employment with us is entitled to all funds in his or her account, except that if termination is for a reason
other than retirement, disability or death, then the participant is entitled to receive only the Participant Contributions and
the vested portion of the Registrant Contributions. Under the Supplemental Savings Plan, a participant who has
terminated employment with us for any reason is entitled to receive the Participant Contributions and only the vested
portion of the Registrant Contributions. Under both plans, all other unvested accrued benefits pertaining to Registrant
Contributions will be forfeited. Upon a change in control of Big Lots, the participant will receive a lump sum payment of all
amounts (vested and unvested) under the Supplemental Savings Plan.
In fiscal 2017, the Savings Plan and Supplemental Savings Plan were amended and all Registrant Contributions in fiscal
2017 and in the future will vest immediately and a participant in the Savings Plan and Supplemental Savings Plan who
has terminated employment will be entitled to all funds in his or her account.
Nonqualified Deferred Compensation Table for Fiscal 2017
The following table reflects the contributions to, earnings in and balance of each named executive officer’s account held
under the Supplemental Savings Plan.
Name
(a)
Mr. Campisi
Mr. Johnson
Ms. Bachmann
Mr. Schlonsky
Mr. Robins
Executive
Contributions
in Last FY
($) (1)
(b)
687,546
429,205
579,972
24,791
38,837
Registrant
Contributions
in Last FY
($) (2)
(c)
1,874
3,975
3,975
981
3,675
Aggregate
Earnings
in Last FY
($) (3)
(d)
253,919
265,318
144,007
150,915
22,156
Aggregate
Withdrawals/
Distributions
($)
(e)
-
-
-
-
-
Aggregate
Balance
at Last FYE
($) (4)
(f)
1,880,035
1,927,443
1,179,549
854,775
127,222
(1)
(2)
The amounts in this column are included in the “Salary” column of the Summary Compensation Table for fiscal
2017.
The amounts in this column are included in the “All Other Compensation” column of the Summary Compensation
Table for fiscal 2017.
39
(3 )
(4)
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 2017 (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.
$761,225, $500,764, $41,172, $64,027, and $47,955 of the amounts in this column were previously reported as
compensation to Mr. Campisi, Mr. Johnson, Ms. Bachmann, Mr. Schlonsky, and Mr. Robins, 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 summarizes 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 2017 Fiscal Year End” section below sets forth the payments
that would have been 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 terminated on February 3, 2018: (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 (only Ms. Bachmann was retirement eligible at the end of fiscal
2017); or (5) in connection with a change in control. We entered into the Retirement Agreement with Mr. Campisi
effective as of April 16, 2018. The Retirement Agreement sets forth all of the payments and benefits (including the
treatment of outstanding equity awards) that Mr. Campisi will receive in connection with his retirement.
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 (Ms. Bachmann and, prior to his
retirement, Mr. Campisi) 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, prior to his retirement, Mr. Campisi would have been entitled to the payments and benefits
described below in “Involuntary Termination Without Cause” if he terminated for “good reason.”
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.
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;
40
•
•
•
•
unvested restricted stock awards granted under the 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 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, prior to his retirement, all of Mr. Campisi’s unvested, outstanding service-based equity awards and RSUs
granted after February 1, 2014 would have become fully vested pursuant to his employment agreement if his employment
with us had terminated as a result of his disability or death.
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, Mr. Campisi’s employment agreement provided that if he retired after May 3, 2020:
• Mr. Campisi would have been 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 awards and RSUs granted for which the
performance condition has been satisfied would have continued 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 would
have been forfeited; and
a pro rata portion of Mr. Campisi’s unvested, outstanding performance-based equity awards would have vested.
The pro rata portion would have been 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 would have been 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 would have been the
number of days between the grant date of the award and Mr. Campisi’s termination date plus 730, provided such
fraction would never exceed 1.00. 730 would have been added to the numerator, as it was the equivalent
number of days to the 24 months of continued vesting used for Mr. Campisi’s service-based equity grants and
RSUs equivalent to the time Mr. Campisi would have been subject to the restrictive covenants imposed by his
employment agreement.
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 prior to his retirement,
termination for good reason), the employment agreements would entitle Ms. Bachmann and, prior to his retirement, would
have entitled Mr. Campisi 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.
41
In addition, upon a change in control:
•
•
•
•
all unvested restricted stock awards granted to the named executive officer under the 2012 LTIP would vest;
all unvested stock options granted to the named executive officer under the 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 2017.)
Change in Control Described
Generally, pursuant to the 2012 LTIP, the 2017 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, the 2017 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, 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;
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 2012 LTIP, the 2017 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.
42
Estimated Payments if Triggering Event Occurred at 2017 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 February 3, 2018, the last day of fiscal 2017.
• 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 2017) of (1) 80% of the unvested restricted stock awarded to each named executive officer in fiscal 2013,
(2) all of the unvested stock options awarded to our named executive officers in and after our 2011 fiscal year,
(3) a prorated portion of the unvested RSUs granted under the 2012 LTIP, (4) a prorated portion of the unvested
PSUs granted under the 2012 LTIP in fiscal 2016 and fiscal 2017 assuming that the applicable performance
goals will be achieved at the target level, and (5) the PSUs granted under the 2012 LTIP in fiscal 2015, that will
vest based on our actual performance. If termination of employment resulted from death or disability, the
unvested restricted stock awards made under the 2012 LTIP will vest in increments of 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 fiscal 2013 was met as a result of our
performance in fiscal 2013. Accordingly, 80% of the fiscal 2013 restricted stock award awarded to each named
executive officer would have vested at the end of fiscal 2017 had the executive’s employment terminated on
such date as a result of their death or disability. Messrs. Johnson and Schlonsky and Ms. Bachmann’s fiscal
2013 restricted stock awards vested on March 12, 2018 and Mr. Campisi’s fiscal 2013 restricted stock award
vested on April 4, 2018. In addition, if Mr. Campisi’s employment had terminated prior to his retirement as a
result of his disability or death, all of Mr. Campisi’s unvested, outstanding service-based equity awards and
RSUs granted after February 1, 2014 would have become fully vested upon termination. 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 represent the value (as of
the final trading day of fiscal 2017) 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 2016 and fiscal 2017
assuming that the applicable performance goals will be achieved at the target level and (3) the PSUs granted
under the 2012 LTIP in fiscal 2015 that vested based on our 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 2017 (i.e., the closing market price of our
common shares on the final trading day of fiscal 2017 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 2017. These amounts do not reflect any equity awards that vested in fiscal 2017.
• The closing market price of our common shares on the final trading day on the NYSE during fiscal 2017 was
$57.74 per share.
43
David J. Campisi
The following table reflects the payments that would have been due to Mr. Campisi in the event of a change in control
and/or the termination of his employment on February 3, 2018.
Event Occurring at February 3, 2018
Voluntary
Termination/
For Cause
($)
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 ($)
Total ($)
-
-
-
-
-
-
-
-
2,300,000
1,233,824
73,628
-
40,000
4,741,286
-
8,388,738
-
-
-
-
-
-
-
-
-
- 2,300,000
1,233,824 1,233,824
5,980,000
-
25,000
-
-
-
-
73,628
-
-
-
-
-
-
-
16,974,898 16,974,898 22,934,522 22,934,522
-
-
-
-
18,233,722
18,208,722 31,288,150 22,934,522
We entered into the Retirement Agreement with Mr. Campisi effective as of April 16, 2018. The Retirement Agreement
sets forth all of the payments and benefits (including the treatment of outstanding equity awards) that Mr. Campisi will
receive in connection with his retirement
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 February 3, 2018.
Event Occurring at February 3, 2018
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)
($)
-
- 1,196,700
296,291
296,291 1,436,040
-
-
-
40,301
-
-
-
25,000
-
4,253,999
-
4,253,999 6,805,552
- 3,062,542
6,805,552
-
4,575,290
4,550,290
12,541,135
6,805,552
-
-
-
-
-
Salary/Salary Continuation ($)
Non-Equity Incentive Plan
Compensation ($)
Healthcare Coverage ($)
Long-Term Disability Benefit ($)
Outplacement Benefits ($)
Accelerated Equity Awards ($)
Excise Tax Benefit ($)
Total ($)
-
-
-
-
-
-
-
-
1,196,700
296,291
73,628
-
25,000
2,408,179
-
3,999,798
-
-
-
-
-
-
-
-
44
Lisa M. Bachmann
The following table reflects the payments that would have been due to Ms. Bachmann in the event of a change in control
and/or the termination of her employment with us on February 3, 2018.
Event Occurring at February 3, 2018
Voluntary
Termination/
For Cause
($)
Involuntary
Termination
without
Cause ($)
Termination
upon
Disability
($)
Termination
upon
Death ($)
Retirement
($)
Termination
in
Connection
with a
Change in
Control ($)
Change in
Control
(without
termination)
($)
-
-
-
-
-
-
-
-
1,527,700
378,243
73,628
-
25,000
-
-
-
-
-
-
- 1,527,700
378,243
378,243 1,833,240
-
25,000
-
-
-
-
73,628
-
-
-
-
-
-
-
2,578,017 3,563,543
5,023,943 5,023,943 8,180,079
8,180,079
-
-
-
-
-
-
4,582,588 3,563,543 5,427,186 5,402,186
11,614,647 8,180,079
Salary/Salary Continuation ($)
Non-Equity Incentive Plan
Compensation ($)
Healthcare Coverage ($)
Long-Term Disability Benefit ($)
Outplacement Benefits ($)
Accelerated Equity Awards ($)
Excise Tax Benefit ($)
Total ($)
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 February 3, 2018.
Event Occurring at February 3, 2018
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 ($)
-
-
-
-
-
-
-
-
997,250
246,909
73,628
-
25,000
1,072,099
-
2,414,886
-
-
-
-
-
-
-
-
-
-
997,250
246,909
246,909 1,196,700
-
25,000
-
-
-
-
40,187
-
-
-
-
-
-
-
2,556,263 2,556,263 4,480,024
4,480,024
-
- 2,538,964
-
2,828,172 2,803,172 9,253,125
4,480,024
45
Ronald A. Robins, Jr.
The following table reflects the payments that would have been due to Mr. Robins in the event of a change in control
and/or the termination of his employment with us on February 3, 2018.
Event Occurring at February 3, 2018
Voluntary
Termination/
For Cause
($)
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 ($)
Total ($)
-
-
-
-
-
-
-
-
920,000
227,783
73,628
-
25,000
319,795
-
1,566,206
-
-
-
-
-
-
-
-
-
- 920,000
227,783 227,783 1,104,000
-
25,000
-
-
-
-
39,518
-
-
-
-
-
-
-
1,517,198 1,517,198 2,818,040
2,818,040
-
- 2,234,010
-
1,769,981 1,744,981 7,115,568 2,818,040
PROPOSAL TWO: 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) pay for superior results by rewarding executives for achieving
short- and long-term performance goals and creating long-term shareholder value; (2) align the interests of our executives
and our shareholders through performance- and equity-based compensation; and (3) attract and retain talented
executives by paying compensation that is competitive with the compensation paid by the companies in our peer group.
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 2017 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 2017, 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 2017, the Compensation Committee and other outside directors
structured a significant portion of the compensation awarded to our named executive officers for fiscal 2017 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 adjusted operating profit. The Compensation Committee and other outside directors selected
adjusted operating profit as the sole financial measure because they believe it represents a key indicator of the
strength of our operating results and financial condition and incentivizes the participants in our annual cash
incentive award program to achieve strong earnings growth. The fiscal 2017 annual incentive awards were
structured so that the target bonus would be earned only if we achieved the operating profit for fiscal 2017
projected in our annual corporate operating plan. Based on our $298,782,210 adjusted operating profit in fiscal
2017, our named executive officers earned an annual incentive award for fiscal 2017 equal to 82.53% of their
respective target bonus.
46
• 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 2017 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 $4.27 and ROIC of 22.74%, as
adjusted, we achieved 104.15% of the targeted goal for EPS and 96.77% 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 2017.
• 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 2018 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.
47
2017 CEO PAY RATIO
Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 402(u) of Regulation S-K
require the Company to disclose the following information for our 2017 fiscal year:
•
•
•
the annual total compensation of our CEO (David J. Campisi) was $8,345,512;
the annual total compensation of our median employee was $8,780; and
the ratio of the annual total compensation of our CEO to the annual total compensation of our median employee
was 951 to 1.
To identify the median of the annual total compensation of our active employees as of February 3, 2018, including any full-
time, part-time, temporary or seasonal employees but excluding our CEO, we used total wages from our payroll records as
reported to the Internal Revenue Service on Form W-2 for 2017. In making this determination, we did not annualize
compensation for any full-time or part-time permanent employees who were employed on February 3, 2018 but did not work
for us the entire year or make any full-time equivalent adjustments for part-time employees. We consistently applied this
compensation measure and methodology to all of our employees included in the calculation.
After identifying our median employee, who was calculated to be a part-time store associate, we determined the median
employee’s annual total compensation in the same manner that we determine the total compensation of our named
executive officers for purposes of the Summary Compensation Table. With respect to the annual total compensation of our
CEO, we used the amount for 2017 reported in the “Total” column of the Summary Compensation Table.
This information is being provided for compliance purposes. Neither the Compensation Committee nor management of the
Company used the pay ratio measure in making compensation decisions.
48
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 2017.
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 2017, 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 2018. 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 2017. Deloitte & Touche LLP has served as our 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 2018.
49
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 2017, 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
All Other Fees (2)
Total Fees
Fiscal 2016
($)
1,355
15
77
2
Fiscal 2017
($)
1,472
157
40
2
1,449
1,671
(1)
(2)
For fiscal 2016 and fiscal 2017, the audit-related fees principally related to accounting consultation.
For fiscal 2016 and fiscal 2017, the other fees include fees related to online subscription fees for technical support.
Audit Committee Report
The Audit Committee has reviewed and discussed the audited financial statements for fiscal 2017 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 2017 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
50
PROPOSAL THREE: RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS
OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR FISCAL 2018
At its March 6, 2018 meeting, the Audit Committee appointed Deloitte & Touche LLP as our independent registered public
accounting firm for fiscal 2018, 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 2018.
SHAREHOLDER PROPOSALS
Any proposals of shareholders which are intended to be presented at our 2019 annual meeting of shareholders must be
received by our Corporate Secretary at our corporate offices on or before December 21, 2018 to be eligible for inclusion in
our 2019 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 2019 annual meeting of shareholders without
inclusion of that proposal in our 2019 proxy materials and written notice of the proposal is not received by our Corporate
Secretary at our corporate offices on or before March 6, 2019, or if we meet other requirements of the SEC rules, proxies
solicited by the Board for our 2019 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 and Proposal Three 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 20, 2018
Columbus, Ohio
51
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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 February 3, 2018
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)
300 Phillipi Road, P.O. Box 28512, Columbus, Ohio
(Address of principal executive offices)
06-1119097
(I.R.S. Employer Identification No.)
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.
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
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.
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).
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.
Yes
No
Yes
No
Yes
No
Yes
No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company,
or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging
growth company" in Rule 12b-2 of the Exchange Act
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
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 $2,105,403,532 on July 29, 2017, 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 30, 2018, was 42,182,744.
Portions of the Registrant's Proxy Statement for its 2018 Annual Meeting of Shareholders are incorporated by reference into Part III of this Annual
Report on Form 10-K.
Documents Incorporated by Reference
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BIG LOTS, INC.
FORM 10-K
FOR THE FISCAL YEAR ENDED FEBRUARY 3, 2018
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
12
13
14
14
14
16
18
19
35
36
68
68
68
69
69
69
70
70
71
73
74
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 community retailer operating in the United States (“U.S.”) (see the discussion
below under the caption “Merchandise”). At February 3, 2018, we operated a total of 1,416 stores. Our goal is to exceed the
expectations of our core customer (whom we refer to as Jennifer) 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. We are dedicated to providing Jennifer with friendly service, trustworthy value, and affordable
solutions in every season and category.
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
2018
2017
2016
2015
2014
2013
52
53
52
52
52
52
February 4, 2018
January 29, 2017
January 31, 2016
February 1, 2015
February 2, 2014
February 3, 2013
Year End Date
February 2, 2019
February 3, 2018
January 28, 2017
January 30, 2016
January 31, 2015
February 1, 2014
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, case goods, and ready-
to-assemble departments. The Seasonal category includes our Christmas trim, lawn & garden, summer, and other holiday
departments. The Soft Home category includes our fashion bedding, utility bedding, bath, window, decorative textile, home
organization, area rugs, home décor, and frames departments. 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 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,
toys, jewelry, and hosiery departments. Please refer to the consolidated financial statements and related notes in this Form 10-
K for our financial information. Specifically, see note 1 to the accompanying consolidated financial statements for our net sales
results by merchandise category for 2017, 2016, and 2015.
In May 2001, Big Lots, Inc. was incorporated in Ohio and was the surviving entity in a merger with Consolidated Stores
Corporation. By virtue of the merger, Big Lots, Inc. succeeded to all the businesses, properties, assets, and liabilities of
Consolidated Stores Corporation.
Our principal executive offices are located at 300 Phillipi Road, Columbus, Ohio 43228, and our telephone number is (614)
278 6800. In May 2018, our principal executive offices will have a new address and move to 4900 E. Dublin-Granville Road,
Columbus, Ohio 43081.
2
Merchandise
We focus our merchandise strategy on providing outstanding value to Jennifer in all of our merchandise categories. We utilize
traditional sourcing methods and also take advantage of closeout channels to be able to offer outstanding value. We evaluate
our product offerings using a rating process that measures the quality, brand, fashion, and value of each item. This process
requires us to focus our product offering decisions 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 has
improved our ability to provide a desirable assortment of offerings in our merchandise categories. For net sales and
comparable store sales by merchandise category, see the discussion below under the captions “2017 Compared To 2016” and
“2016 Compared To 2015” 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
2017
1,432
24
(40)
1,416
2016
2015
2014
2013
1,449
9
(26)
1,432
1,460
9
(20)
1,449
1,493
24
(57)
1,460
1,495
55
(57)
1,493
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.
The following table details our U.S. stores by state at February 3, 2018:
Alabama
Arizona
Arkansas
California
Colorado
Connecticut
Delaware
Florida
Georgia
Idaho
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
29
34
11
151
18
14
5
104
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
6
14
25
3
3
13
7
27
12
63
72
1
Ohio
Oklahoma
Oregon
Pennsylvania
Rhode Island
South Carolina
Tennessee
Texas
Utah
Vermont
Virginia
Washington
West Virginia
Wisconsin
Wyoming
96
18
15
67
1
34
47
112
8
4
38
26
16
10
2
District of Columbia
Total stores
Number of states
1
1,416
47
Of our 1,416 stores, 33% operate in four states: California, Texas, Florida, and Ohio, and net sales from stores in these states
represented 34% of our 2017 net sales. We have a concentration in these states based on their size, population, and customer
base.
3
Associates
At February 3, 2018, we had approximately 34,800 active associates comprised of 11,000 full-time and 23,800 part time
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 38,100 in 2017.
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. We operate an 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 consistently provide outstanding value to our customers in all of our merchandise
categories. We believe that we have achieved this goal by reducing our reliance on sourcing merchandise through closeout
offerings and expanding our planned purchases in most merchandise categories. In particular, over the past few years, we have
expanded our planned purchases in our Food, Consumables, 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. 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 2017, we purchased approximately 23% of our
merchandise directly from overseas vendors, including approximately 19% 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.
Although less prevalent in certain merchandise categories, the sourcing and purchasing of quality closeout merchandise directly
from manufacturers and other vendors, typically at prices lower than 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 help manage 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. Construction began on the new facility in
2017 and we expect the transition to occur in the summer of 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.
4
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, e-mail, in-store point-of-purchase, and print media.
During 2017, we performed a comprehensive review of our brand identity and began to define ourselves as a community
retailer. As a community retailer, we are focused on serving alongside Jennifer and investing in causes that are important to
her. We serve the community on a national level through our Big Lots Foundation which focuses on healthcare, housing,
hunger, and education. On a local level, we invest and support our associates throughout our geographic regions and serve
alongside Jennifer with our point of sale campaigns, and the positive impacts those campaigns generate for our foundation
partners. We believe our community retailing approach differentiates us from the competition and allows us to make a
difference in the communities we serve.
In all markets served by our stores, we design and distribute printed advertising circulars, through a combination of newspaper
insertions and mailings. In 2017, we distributed multi-page circulars representing 28 weeks of advertising coverage, which was
a one week decrease from 2016. 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 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 2017, we rolled-out our new rewards program, BIG Rewards which replaced our former Buzz Club Rewards®
program. The BIG Rewards program rewards our customers for making frequent and high ticket purchases and offers a special
birthday surprise to our BIG Rewards members.
Another element of our marketing approach focuses on brand management by communicating our message directly to Jennifer
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 strategically selected networks and
programs aired by national cable providers 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 1.7%, 1.8%, and 1.8% in 2017, 2016, and 2015,
respectively.
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.
5
The following table sets forth the seasonality of net sales and operating profit (loss) for 2017, 2016, and 2015 by fiscal quarter:
Fiscal Year 2017
Net sales as a percentage of full year
Operating profit as a percentage of full year
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 (loss) as a percentage of full year
First
Second
Third
Fourth
24.6%
26.5
25.2%
25.2
24.7%
22.3
23.2%
15.9
23.1%
15.6
23.3%
13.0
21.1%
1.9
21.3%
0.8
21.5%
(0.9)
31.1%
55.7
30.4%
58.4
30.5%
65.6
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 in funding our share repurchase programs. We
historically have higher net sales, operating profits, and cash flow provided by operations in the fourth fiscal quarter, which
generally allows us to substantially repay our seasonal borrowings and fund our share repurchase programs. In 2017, our total
indebtedness (outstanding borrowings and letters of credit) peaked in November 2017 at approximately $425 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 February 3, 2018, our total indebtedness under the 2011
Credit Agreement was $204.8 million, which included $199.8 million in borrowings and $5.0 million in outstanding letters of
credit. We expect that borrowings will vary throughout 2018 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, the timing of
and amount of capital expenditures, 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.
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.
6
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 2017 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 or 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.
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. Our ability to execute the business activities associated with our operating and
strategic plans, particularly as we focus on becoming a community retailer, 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.
7
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 broader distribution (e.g., more
stores and/or a more established online presence), and/or greater financial, 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 meets changing customer demands 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 to customer demands. 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.
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 2017, we
purchased approximately 23% of our products directly from overseas vendors, including 19% 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 or by foreign countries against U.S. practices), political instability, the financial stability of
vendors, merchandise quality issues, and tariffs. U.S policy on trade restrictions is ever-changing and may result in new laws,
regulations or treaties that increase the costs of importing goods and/or limit the scope of available foreign vendors. These and
other issues affecting our international vendors could materially adversely affect our business and financial performance.
8
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.
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.
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 computer systems, which are more exposed to
telecommunication failures.
9
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 conditions, disposable income levels, and other conditions, such as unseasonable weather,
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. Inclement weather can also
negatively impact our Furniture category, as many customers transport the product home personally. In particular, the
economic conditions and weather patterns of four states (California, Texas, Florida, and Ohio) are important as approximately
33% of our current stores operate and 34% of our 2017 net sales occurred in these states.
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, class action or shareholder
derivative 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, federal securities laws and 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.
10
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.
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. Additionally, we are subject cross-default provisions within the synthetic lease agreement (the
“Synthetic Lease”) that we entered into associated with our new distribution center in California. 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.
11
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 is requiring us to make significant changes to our lease management
system systems.
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:
• Changes in governmental laws and regulations, including matters related to taxation;
• 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;
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;
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.
12
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 31,500 square feet, of which an average of 22,200 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 2017 was approximately $1.4 million, including the cost of
inventory. All of our stores are leased, except for the 53 stores we own in the following states:
State
Arizona
California
Colorado
Florida
Louisiana
Michigan
New Mexico
Ohio
Texas
Total
Stores Owned
1
38
3
3
1
1
2
1
3
53
Additionally, in 2017, we closed one owned site, which we are not operating and is available for sale. Since this owned site is
no longer operating as an active store, it has been excluded from our store counts at February 3, 2018.
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. Forty-
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 leases for stores with more than one
lease and leases for stores not yet open and excludes 7 month-to-month leases and 53 owned locations.
Fiscal Year:
Expiring Leases
Leases Without
Options
2018
2019
2020
2021
2022
Thereafter
49
42
36
53
15
14
242
237
243
262
199
186
13
Warehouse and Distribution
At February 3, 2018, 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 highly accurate and efficient processing of merchandise from
vendors to our retail stores. The combined output of our regional distribution centers was approximately 2.4 million
merchandise cartons per week in 2017. 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. We operate our e-
commerce fulfillment center out of our Columbus warehouse.
Distribution centers and warehouse space, and the corresponding square footage of the facilities, by location at February 3,
2018, were as follows:
Location
Year Opened
Total Square Footage
Number of Stores Served
(Square footage in thousands)
Rancho Cucamonga, CA
Columbus, OH
Montgomery, AL
Tremont, PA
Durant, OK
Total
Corporate Office
1984
1989
1996
2000
2004
1,423
3,559
1,411
1,295
1,297
8,985
253
321
304
331
207
1,416
We own the facility in Columbus, Ohio that serves as our headquarters for corporate associates. During 2016, we entered into
an agreement to lease a new facility for our corporate headquarters, which is also in Columbus, Ohio. We continue to
anticipate moving our corporate operations to this new facility in the first half of 2018.
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 settlement we entered into with the various counties in the 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.
Supplemental Item. Executive Officers of the Registrant
Our executive officers at April 3, 2018 were as follows:
Name
David J. Campisi
Lisa M. Bachmann
Timothy A. Johnson
Michael A. Schlonsky
Stephen M. Haffer
Ronald A. Robins, Jr.
Age Offices Held
62 Chief Executive Officer and President
Officer Since
2013
56
50
51
54
54
Executive Vice President, Chief Merchandising and Operating Officer
Executive Vice President, Chief Administrative Officer and Chief
Financial Officer
Executive Vice President, Human Resources and Store Operations
Senior Vice President, Chief Customer Officer
Senior Vice President, General Counsel and Corporate Secretary
2002
2004
2000
2018
2015
14
David J. Campisi is our Chief Executive Officer and President. On December 4, 2017, we announced that Mr. Campisi was on a
temporary medical leave of absence. 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. On December 4, 2017, we announced that in connection with Mr. Campisi’s temporary
medical leave of absence, the Board assigned Mr. Campisi’s executive responsibilities to Ms. Bachmann and Mr. Johnson. 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. On December 4,
2017, we announced that in connection with Mr. Campisi’s temporary medical leave of absence, the Board assigned Mr. Campisi’s
executive responsibilities to Ms. Bachmann and Mr. Johnson. 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.
Stephen M. Haffer is responsible for customer engagement, and messaging touchpoints, including marketing, advertising, brand
development and e-commerce. Mr. Haffer joined us in 2018 as Senior Vice President, Chief Customer Officer. Prior to joining
us, Mr. Haffer was an executive at American Signature, Inc., the parent company for Value City Furniture and American Signature
Home stores, where he served in a number of roles over a 25-year career spanning marketing, e-commerce, information technology
and business development, leading up to his appointment as Chief Innovation Officer in 2016.
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.
15
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
2017
2016
High
Low
High
Low
$
$
55.10
51.77
54.18
64.42
$
$
46.84
45.10
46.95
50.67
$
$
47.95
53.95
56.30
56.54
$
$
35.86
41.61
42.40
42.58
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 fifteen consecutive quarterly cash dividends. The following reflects our quarterly
dividend payments for 2016 and 2017:
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Total
2017
2016
0.25
0.25
0.25
0.25
1.00
$
$
0.21
0.21
0.21
0.21
0.84
$
$
In the first quarter of 2018, our Board of Directors declared a dividend payable on April 6, 2018 to shareholders of record on
March 23, 2018 and increased the amount of the dividend from $0.25 to $0.30 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 the excess of our cash provided by
operations 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 financial condition, results of operations, capital
requirements, compliance with applicable laws and agreements, opportunities for reinvesting cash, and other factors deemed
relevant by our Board of Directors.
The following table sets forth information regarding our repurchase of common shares during the fourth fiscal quarter of 2017:
(In thousands, except price per share data)
Period
October 29, 2017 - November 25, 2017
November 26, 2017 - December 23, 2017
December 24, 2017 - February 3, 2018
Total
(a) Total
Number of
Shares
Purchased (1)
—
(b) Average
Price Paid
per Share (1)
53.88
$
—
—
—
$
54.10
57.37
54.78
(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
— $
—
—
— $
—
—
—
—
16
(1)
In November 2017, December 2017, and January 2018, in connection with the vesting of certain outstanding restricted
stock awards and restricted stock units, we acquired 48, 308, and 97 of our common shares, respectively, which were
withheld to satisfy minimum statutory income tax withholdings.
On March 7, 2018, our Board of Directors authorized a program for the repurchase of up to $100.0 million of our common
shares (“2018 Repurchase Program”). The 2018 Repurchase Program has no scheduled termination date.
At the close of trading on the NYSE on March 30, 2018, there were approximately 630 registered holders of record of our
common shares.
The following graph and table compares, for the five fiscal years ended February 3, 2018, 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 1, 2014, January 31, 2015, January 30, 2016, January 28, 2017 and February 3,
2018. The graph and table assume that $100 was invested on February 2, 2013, 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
2013
2014
2015
2016
2017
2018
$
$
100.00 $
82.84 $
143.62 $
123.38 $
157.47 $
100.00
120.46
137.60
136.68
165.20
100.00 $
125.35 $
150.54 $
175.82 $
208.43 $
190.59
202.93
294.52
17
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)
2017 (b)
2016 (a)
Fiscal Year
2015 (a)
2014 (a)
2013 (a)
Net sales
$
5,270,980 $
5,200,439 $
5,190,582 $
5,177,078 $
5,124,755
Cost of sales (exclusive of depreciation expense shown separately below)
3,128,538
3,101,020
3,123,442
3,133,124
3,117,386
Gross margin
2,142,442
2,099,419
2,067,140
2,043,954
2,007,369
Selling and administrative expenses
1,723,996
1,730,956
1,708,499
1,699,764
1,664,031
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
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.
117,093
301,353
(6,711)
712
295,354
105,522
189,832
—
120,460
248,003
(5,091)
1,387
244,299
91,471
152,828
—
122,854
235,787
(3,683)
(5,254)
226,850
83,977
142,873
119,702
224,488
113,228
230,110
(2,588)
(3,293)
—
221,900
85,239
136,661
(12)
226,805
85,515
141,290
—
(22,385)
(15,995)
189,832 $
152,828 $
142,873 $
114,276 $
125,295
4.43 $
3.37 $
2.83 $
2.49 $
—
—
—
(0.41)
4.43 $
3.37 $
2.83 $
2.08 $
4.38 $
3.32 $
2.80 $
2.46 $
—
—
—
(0.40)
4.38 $
3.32 $
2.80 $
2.06 $
42,818
43,300
45,316
45,974
50,517
50,964
54,935
55,552
1.00 $
0.84 $
0.76 $
0.51 $
2.46
(0.28)
2.18
2.44
(0.28)
2.16
57,415
57,958
—
$
$
$
$
$
$
$
1,651,726 $
1,607,707 $
1,640,370 $
1,635,891 $
1,739,599
432,365
51,176
199,800
315,784
51,164
106,400
315,984
411,446
483,833
54,144
62,300
52,261
62,100
68,629
77,000
669,587 $
650,630 $
720,470 $
789,550 $
901,427
250,368 $
311,925 $
342,352 $
318,562 $
198,334
(156,508) $
(84,701) $
(113,193) $
(90,749) $
(97,495)
44,638
31,399
1,416
44,570
31,519
1,432
44,914
31,775
1,449
45,134
32,006
1,460
45,708
32,732
1,493
$
$
$
18
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 year 2017 was comprised of 53 weeks, while fiscal years 2016 and 2015 were each comprised of 52 weeks.
Fiscal year 2018 will be comprised of 52 weeks.
Operating Results Summary
The following are the results from 2017 that we believe are key indicators of our operating performance when compared to
2016.
• Net sales increased $70.5 million, or 1.4%.
• Comparable store sales for stores open at least fifteen months, including e-commerce, increased $18.9 million, or
0.4%.
• Gross margin dollars increased $43.0 million with a 20 basis point increase in gross margin rate to 40.6% of sales.
•
Selling and administrative expenses decreased $7.0 million. As a percentage of net sales, selling and administrative
expenses decreased 60 basis points to 32.7% of net sales.
• Operating profit rate increased 90 basis points to 5.7%.
• Diluted earnings per share increased 31.9% to $4.38 per share, compared to $3.32 per share in 2016.
• Our return on invested capital increased to 22.9% from 19.0%.
•
• We acquired approximately 3.1 million of our outstanding common shares for $150.0 million, under our 2017
Inventory of $872.8 million represented a $14.1 million increase, or 1.6%, from 2016.
Repurchase Program (as defined below in “Capital Resources and Liquidity”), at a weighted average price of $48.04
per share.
• We declared and paid four quarterly cash dividends in the amount of $0.25 per common share, for a total paid amount
of approximately $44.7 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 before income taxes
Income tax expense
Net income
2017
2016
2015
100.0%
100.0%
100.0%
59.4
40.6
32.7
2.2
5.7
(0.1)
0.0
5.6
2.0
59.6
40.4
33.3
2.3
4.8
(0.1)
0.0
4.7
1.8
60.2
39.8
32.9
2.4
4.5
(0.1)
(0.1)
4.4
1.6
3.6%
2.9%
2.8%
19
See the discussion below under the captions “2017 Compared To 2016” and “2016 Compared To 2015” for additional details
regarding the specific components of our operating results.
In 2017, our selling and administrative expenses include recoveries of $3.0 million from our insurance carriers related to a legal
matter. Additionally, our income tax expense reflects a $4.5 million charge for the impact of the Tax Cuts and Jobs Act of 2017
related to our net deferred tax position and a $3.5 million benefit for the reduction in our federal tax rate.
In 2016, our selling and administrative expenses include $27.8 million of costs associated with the termination of our pension
plans, which was completed near the end of fiscal 2016, 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 the termination of our pension plans, which commenced in 2015 and was
completed near the end of fiscal 2016.
Operating Strategy
In 2013, 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. During 2016, we began to focus our Edit to Amplify strategy on what we call
“ownable” or “winnable” merchandise categories. In 2017, we continued to focus on our core customer, Jennifer, who we
believe is cause minded, home focused, and deal driven. Our goal is to offer Jennifer affordable solutions in every season and
category. Through our “ownable” and “winnable” merchandise categories, we are committed to offering product assortments
that score highly in quality, brand, fashion, and value (“QBFV”) at a price tag Jennifer will love and exceeding Jennifer’s
expectations by employing a customer-first mentality, including friendly experiences, and delivering a product assortment that
meets her everyday needs and delivers exciting surprises intended to drive discretionary purchases.
In 2018, we expect to continue to enhance our operating strategy, and anticipate:
• Earnings per diluted share to be $4.75 to $4.95.
• Comparable store sales increase in the low single digits.
• Opening 30 new stores and closing 40 stores.
• Cash flow (operating activities less capital expenditures) of approximately $120 to $130 million.
• Cash returned to shareholders of approximately $150 million, through our quarterly dividend program and the 2018
Repurchase Program.
Additional discussion and analysis of our financial performance and the assumptions and expectations upon which we are
basing our guidance for our future results is set forth below under the caption “2017 Compared To 2016.”
Merchandising
We intend to achieve our goal of exceeding Jennifer’s expectations by offering quality product assortments and friendly
solutions that align with our understanding of her hidden needs. We are committed to providing Jennifer products with high
levels of QBFV at a reliable value. Our Edit to Amplify strategy evaluates our product mix using the separate components of
“Edit” and “Amplify.” The “Edit” component focuses on downsizing, or potentially eliminating, those departments within our
merchandise categories and product offerings that we believe Jennifer 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 Jennifer’s shopping experience, and in which we believe we have a
competitive advantage. We continue to enhance the “Amplify” component of our strategy and have narrowed our focus to
internally define our 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 and affordable solutions. We believe
that our value proposition and in-store execution differentiates us from the competition in our “ownable” categories. A
“winnable” merchandise category is one where we believe the reliable value of our focused, trend-right assortment and/or
closeout merchandise differentiates us from the competition when Jennifer shops for these key product offerings. We believe
that our Furniture, Seasonal, Soft Home, Food, and Consumables merchandise categories are “ownable” or “winnable” and
align our business with how our core customer shops our stores, while our Hard Home and Electronics, Toys, & Accessories
merchandise categories provide convenient adjacencies to our “ownable” or “winnable” categories.
20
We define our Furniture and Seasonal categories as “ownable”:
• Our Furniture category primarily focuses on our core customer’s home furnishing needs, such as upholstery,
mattresses, case goods, and ready-to-assemble. In Furniture, we believe our competitive advantage is attributable to
our sourcing relationships, our in-store availability, and everyday value offerings. 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 “buy today, take home today” practice of carrying in-stock inventory of our core furniture offerings, which
allows Jennifer to take home her purchase at the end of her shopping experience, positively differentiates us from our
competition. We encourage Jennifer to shop in store by allowing her to touch and feel the quality and comfort of our
products. We believe that offering a focused assortment, which is displayed in furniture vignettes, provides Jennifer a
solution for decorating her home when combined with our home decor offerings.
• Our Seasonal category is “ownable” in our patio furniture, gazebos, and Christmas trim departments. We believe we
have a competitive advantage in this category by creating trend-right products with strong value proposition in our
own brands. We believe our in-store shopping experience differentiates us from the competition. We have a large
selection of samples assembled and displayed throughout the seasonal section of our store and have packaged the box
stock so that it is very easy for Jennifer to purchase and take home. Much of this merchandise is sourced on an import
basis, which allows us to maintain our competitive pricing. Additionally, our Seasonal category offers a mix of
departments / products that complement her outdoor experience and holiday decorating desires. We continue to work
with our vendors to expand our assortment to respond to Jennifer's evolving wants and needs.
We define our Soft Home, Food, and Consumables categories as “winnable”:
• Our Soft Home category is considered a “winnable” category, but has the potential to be an “ownable” category in
areas such as bedding, bath, home fashion, and accents. Over the past few years, we have enhanced our assortment in
Soft Home by allocating more selling space to the category to support a wider range of replenishable, fashion-based
products. Our competitive advantage in Soft Home is centered around (1) a trend-right, focused assortment with
improved quality and perceived value; and (2) our ability to outfit Jennifer’s home with the décor that compliments an
in-store furniture purchase. We have worked to develop a “solutions” approach when combining our Soft Home
offerings with our Furniture and Seasonal categories through our cross-merchandising efforts on color palette
coordination. This helps Jennifer envision how the product can work in her home and enhances our brand image.
• Our Food and Consumables categories focus primarily on catering to Jennifer's daily essentials, or “need, use, buy
most” items, by providing reliable 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, production overruns, or marketing or packaging changes. We believe our
vendor relationships, along with our size and financial strength, afford us these opportunities. To supplement our
closeout business, we have focused on improving and expanding our “never out” product assortment to provide more
consistency in those areas where Jennifer desires consistently available product offerings. We have added top brands
to our “never out” programs in both Food and Consumables and believe our assortment and value proposition will
continue to differentiate us in this highly competitive industry.
We consider our Hard Home and Electronics, Toys, & Accessories as convenience categories:
• Our Hard Home and Electronics, Toys, & Accessories categories serve as convenient adjacencies to our “ownable”
and “winnable” categories. Over the past few years, we have intentionally narrowed our assortments in these
categories and allocated linear footage to the “ownable” and “winnable” categories. Our product assortments in these
categories focus on value and savings in areas such as food prep, table top, home maintenance, small appliances, and
electronics.
21
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 “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 solutions within each merchandise category, which we
believe will lead to continued growth in our comps in the future.
Marketing
The top priority of our marketing activities is to increase our comps. In 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
marketing efforts. After extensive research, we identified three key insights about Jennifer: she is (1) deal-driven, (2) home-
focused and (3) cause-minded. We determined that we needed to identify Jennifer’s hidden needs and align them with our
greatest strengths. We learned Jennifer feels most special when serving others and investing in causes bigger than herself. We
believe that this aligns with our involvement in the community and mission at the Big Lots Foundation to improve and enrich
the lives of families and children. As a result, we began to develop a new brand identity focused on the vision of community
orientation and serving as Jennifer’s second family. Our mission is simple, we exist to serve everyone like family. We strive to
be known for our three core traits: (1) friendly, (2) reliable and trustworthy value, and (3) community driven, and intend to
embed these traits in everything that we do. We want to be known as a new kind of community retailer that serves the
community and offers affordable solutions for every season and category. In 2018, we plan to launch a new campaign to share
our new brand identity with Jennifer and introduce our new brand line “Serve Big, Save Lots.”
As we implement our new brand identity, we have shifted our marketing efforts to focus on strengthening our new brand and
connecting with our core customer, Jennifer. 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.
Given our customer’s proficiency with mobile devices and digital media, we focus on communicating with her through those
channels. In the past we have used our Buzz Club Rewards® Program to communicate our promotions and deals. In 2017, we
launched a new loyalty program, BIG Rewards, to more effectively incentivize our loyal customers. Our new program rewards
Jennifer with a coupon after every third purchase, offers her a birthday surprise, and special rewards after large-ticket furniture
purchases. We believe our BIG Rewards Program will help increase engagement with Jennifer and clearly communicate our
offerings.
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. We have begun using more local television advertising and
digital streaming media in concentrated markets, which allows us to connect deeper and more frequently with Jennifer. 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 and improve in-store
execution through a number of initiatives designed to deliver more consistent experiences, while catering to Jennifer's needs.
Those key initiatives include redefining the roles and responsibilities of our store associates, and implementing a new
scheduling system and standardized furniture sales training. We completed full chain roll outs of private label credit card,
which provide access to revolving credit, through a third party, for use on both larger ticket items and daily purchases, and
furniture coverage/warranty programs, which provides a method for obtaining multi-year warranty coverage for furniture
purchases. We continue to promote our Easy Leasing lease-to-own program, which provides a single use opportunity for
access to third-party financing.
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In 2017, we introduced our “Store of the Future” concept which incorporates our new brand identity and seeks to enhance the
way Jennifer shops our stores, including:
•
Showcasing our “ownable” and “winnable” merchandise categories by moving our Furniture department to the front
center of the prototype store with Seasonal and Soft Home on either side to improve the coordination of our home
decorating solutions. We moved Food and Consumables to the back of the prototype store, while keeping them visible
with clear sight lines from the entrance of the store. We have also added color coordinated way-finding signage to
help Jennifer navigate our stores.
• Creating a warm and personalized tone throughout the store through improved lighting, new flooring, softening the
colors on our walls, and greeting Jennifer with a “Hello” wall as she enters the store. We increased the length of our
check-out counter and removed signage and clutter to make checking out more friendly and efficient. Additionally, we
have added furniture vignettes and incorporated lifestyle photography to provide visual solutions for Jennifer.
• Highlighting our focus on the community with a “connect with the community” board that highlights local events and
support. The wall behind the check out counters thanks Jennifer for shopping her community Big Lots. We
personalized the signage throughout the store and back room to reflect our friendly and community-oriented values.
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 offers a narrowed assortment of our
in-store offerings. In 2017, we began offering on our e-commerce platform expanded fabric and color options on select
products in our Furniture and Seasonal categories, including items only available online. We continue to strengthen our
relationships with our key vendor partners to enhance and expand our product assortments. See “Real Estate” below for the
projected roll-out schedule for the Store of the Future concept.
Real Estate
Historically, we have determined that our average store size of approximately 22,000 selling square feet is appropriate for us to
provide our core customer with a positive shopping experience and properly present a representative assortment of merchandise
categories that our core customer finds meaningful. In late 2016, we engaged a third party specialist and began a study to
analyze our store design and layout in relation to the changing retail landscape and needs of our core customers. During 2017,
we began testing certain design and layout revisions and adaptations and evaluated the customer feedback and operating
results. In 2017, we rolled-out our Store of the Future layout to two geographic markets and expect to convert over 600 stores
to the new format by 2020. As we transition to our new Store of the Future design, we intend to open slightly larger stores with
an average size of approximately 23,000 selling square feet. As we increase our capital investment in our stores, we have
worked with our landlords to negotiate longer lease terms and renewal options. Through 2018, we expect to convert nearly
15% of our fleet to the Store of the Future layout through remodels and new store openings.
As discussed in “Item 2. Properties,” of this Form 10-K, we have 242 store leases that will expire in 2018. During 2018, we
anticipate opening 30 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 2018 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.
23
2017 COMPARED TO 2016
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 2017 compared to 2016 were as follows:
(In thousands)
Furniture
Food
Consumables
Soft Home
Seasonal
Hard Home
Electronics, Toys, & Accessories
2017
2016
Change
Comps
$ 1,237,022
23.6% $ 1,195,365
23.0% $
824,487
822,533
789,596
765,907
428,788
402,647
15.6
15.6
15.0
14.5
8.1
7.6
830,508
817,747
750,814
739,106
437,575
429,324
16.0
15.7
14.4
14.2
8.4
8.3
41,657
(6,021)
4,786
38,782
26,801
(8,787)
(26,677)
70,541
3.5%
(0.7)
0.6
5.2
3.6
(2.0)
(6.2)
1.4%
1.8%
(1.8)
(0.2)
4.2
3.6
(2.5)
(7.8)
0.4%
Net sales
$ 5,270,980
100.0% $ 5,200,439
100.0% $
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 $70.5 million, or 1.4%, to $5,271.0 million in 2017, compared to $5,200.4 million in 2016. The increase in
net sales was principally due to an extra week of sales, as 2017 had 53 weeks, which increased net sales by $69.1 million,
coupled with a 0.4% increase in comps, which increased net sales by $18.9 million. The increases in net sales were partially
offset by the net decrease of 16 stores since the end of 2016, which decreased net sales by $17.5 million.
Our Soft Home, Seasonal, and Furniture merchandise categories generated positive comps:
•
Soft Home experienced increases in net sales and comps which were primarily driven by continued improvement in
the product assortment, quality, and perceived value by our customers, particularly in our bath and kitchen textiles.
• The positive comps and increased net sales in our Seasonal category were primarily the result of strength in our
summer and lawn & garden departments, which was the result of improved product assortment, particularly in outdoor
décor and patio furniture, and strategically higher inventory levels in 2017 compared to 2016.
• The Furniture category experienced increased net sales and comps during 2017, primarily driven by strength in our
upholstery and mattress departments and the positive impact of our Easy Leasing lease-to-own program and our third-
party, private label credit card offering.
The positive comps in our Seasonal, Soft Home, and Furniture merchandise categories were partially offset by negative comps
in our Consumables, Food, Hard Home and Electronics, Toys, & Accessories merchandise categories:
• Consumables experienced a slight decrease in comps in numerous departments due to the timing of closeout inventory
purchases, which was partially offset by positive comps in our health, beauty, and cosmetics department due to the
introduction of an everyday, branded product program and space expansions in our bath / body wash and over-the-
counter / nutritional health departments.
• The Food category experienced decreased net sales and comps due to product mix imbalances, particularly in our
snacks and dry goods, and a highly competitive marketplace. We invested in growing our Food inventory position
from the beginning of the year to address these imbalances and in improving our assortment of “never out” products.
• The negative comps and decreased net sales in Hard Home and Electronics, Toys, & Accessories resulted from an
intentionally narrowed merchandise assortment.
For 2018, we expect net sales to be in the range of flat to up slightly compared to 2017, which is based on an anticipated
increase in comps in the low single digits, partially offset by a lower overall store count and the absence of the 53rd week. We
expect comps above the company average in our Furniture, Soft Home and Seasonal categories, driven by continued focus on
these “ownable” and “winnable” categories. We anticipate below company average comps in our Hard Home and Electronics,
Toys, & Accessories categories due to continued downsizing and narrowed product assortments.
24
Gross Margin
Gross margin dollars increased $43.0 million, or 2.0%, to $2,142.4 million in 2017, compared to $2,099.4 million in 2016. The
increase in gross margin dollars was principally due to an increase in net sales, which increased gross margin dollars by
approximately $28.5 million along with a higher gross margin rate, which increased gross margin dollars by approximately
$14.5 million. Gross margin as a percentage of net sales increased 20 basis points to 40.6% in 2017 compared to 40.4% in
2016. The gross margin rate increase was the result of a higher initial mark-up, driven by favorable cumulative inbound freight
costs and lower product costs, and a lower shrink rate, partially offset by a higher overall markdown rate.
For 2018, we expect our gross margin rate to be up slightly compared to 2017, which is driven by continued sales growth in our
higher margin “ownable” and “winnable” categories and a lower shrink rate.
Selling and Administrative Expenses
Selling and administrative expenses were $1,724.0 million in 2017, compared to $1,731.0 million in 2016. The decrease of
$7.0 million, or 0.4%, was primarily due to the absence of pension termination related expenses of $27.8 million, decreases in
accrued bonus expense of $9.5 million, legal settlement costs of $7.7 million, share-based compensation expense of $5.2
million, self-insurance costs of $4.1 million, and utility expenses of $3.1 million, partially offset by increases in store
operations payroll of $12.2 million, distribution and outbound transportation costs of $9.6 million, occupancy charges of $8.6
million, and corporate office payroll expenses of $6.3 million, the absence of a gain on the real estate sale of $3.8 million, and
an increase in professional fees of $2.9 million. In 2016, the pension expense included all costs associated with the termination
of our pension plan including settlement charges and professional fees. The decrease in accrued bonus expense was driven by
our performance relative to our operating plan in 2017 as compared to our out-performance relative to our operating plan in
2016. During 2016, we incurred $4.8 million in charges related to State of California wage and hour claims brought against
both our stores and our distribution center and an action related to our handling of hazardous materials and hazardous waste in
California. Additionally, in the third quarter of 2017, we collected $3.0 million in recoveries from our insurance carriers related
to the previously disclosed tabletop torches matter. The decrease in share-based compensation expense was primarily a result
of fewer performance share units expensing in 2017 compared to 2016. The decrease in self-insurance costs was driven by a
decreased occurrence of high cost claims within our health benefit program. The decrease in utility expenses was primarily
driven by cost saving initiatives, such as our LED lighting replacement project. The increase in store operations payroll was
driven by the addition of the 53rd week in fiscal 2017. The increase in distribution and outbound transportation costs was
driven by higher fuel prices in 2017 compared to 2016, coupled with additional expenses as we continue to sell and ship larger
sized items in our Furniture and Seasonal categories. The increase in occupancy charges was primarily driven by annual rent
increases for the renewal of expiring leases, coupled with increases in real estate taxes. The increase in corporate office payroll
expenses was primarily driven by annual merit increases and the addition of the 53rd week in fiscal 2017. In the fourth quarter
of 2016, we recorded a gain on real estate resulting from the sale of an owned store location, while no similar transaction
occurred in 2017. The increase in professional fees was driven by consulting fees for various corporate projects.
As a percentage of net sales, selling and administrative expenses decreased by 60 basis points to 32.7% in 2017 compared to
33.3% in 2016. 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 2018, selling and administrative expenses as a percentage of net sales are expected to increase from 2017. Specifically, we
anticipate selling and administrative expenses as a percentage of net sales will increase due to utilizing savings from U.S.
federal tax reform to reinvest in our associate-related costs, including wages, and an increase in costs to support our
investments in our Store of the Future initiative and our new corporate headquarters.
25
Depreciation Expense
Depreciation expense decreased $3.4 million to $117.1 million in 2017 compared to $120.5 million in 2016. The decrease was
driven by a reduction in new store spending in 2016 and 2017 as compared to 2011 and 2012, as the initial store construction
costs on those stores are completing the depreciation cycle. Depreciation expense as a percentage of net sales decreased by 10
basis points compared to 2016.
For 2018, we expect capital expenditures to be approximately $225 million to $230 million, which is an increase compared to
2017 when capital expenditures were approximately $143 million. The increase in expected capital expenditures is driven by
our anticipated investments in strategic initiatives to support future growth including our investment in the Store of the Future
and equipment for our new distribution center in California. Our 2018 expectations also includes maintenance capital for our
stores, distribution centers, and corporate offices, and investments in the construction costs associated with opening 30 new
stores. Based on our anticipated level of capital expenditures in 2018 and the run rate of depreciation on our existing property
and equipment, we expect 2018 depreciation expense to be approximately $120 million, compared to $117 million in 2017.
Operating Profit
Operating profit was $301.4 million in 2017 as compared to $248.0 million in 2016. 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, operating profit was driven by increases in sales and gross margin,
coupled with decreases in selling and administrative expenses and depreciation expense. Additionally, our operating profit
increased by approximately $7 million as a result of the addition of the 53rd week in fiscal 2017.
Interest Expense
Interest expense increased $1.6 million to $6.7 million in 2017 compared to $5.1 million in 2016. The increase was primarily
driven by an increase in our average interest rate on our revolving debt, as our revolving debt was impacted by increases in the
LIBOR rate. Additionally, we maintained a slightly higher average borrowings under the 2011 Credit Agreement. We had total
average borrowings (including capital leases) of $241.5 million in 2017 compared to total average borrowings of $240.7
million in 2016. The slight increase in our average borrowings (including capital leases) was driven by increases in our capital
lease liabilities.
Other Income (Expense)
Other income (expense) was $0.7 million in 2017, compared to $1.4 million in 2016. The change from 2016 to 2017 was
related to our diesel fuel hedging contracts, driven by a change in pricing trends for diesel fuel.
Income Taxes
The effective income tax rate in 2017 and 2016 was 35.7% and 37.4%, respectively. The decrease in our effective rate was
principally driven by the following:
• The net excess tax benefits associated with settlement of share-based payment awards due to the adoption of ASU
2016-09;
• The lower rate on 2017 current taxable income due to enactment of federal legislation on December 22, 2017
commonly referred to as the Tax Cut and Jobs Act (“TCJA”) that resulted in a lower blended 2017 rate (prorated based
on a January 1, 2018 effective date for the rate reduction); and
• A decrease in the nondeductible expenses.
The rate decreases were offset by the estimated effects of the TCJA corporate income tax rate reduction on our net deferred tax
assets resulting in the provisional recognition of income tax expense.
26
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 from 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
817,747
750,814
739,106
437,575
429,324
16.0
15.7
14.4
14.2
8.4
8.3
845,541
826,530
718,666
725,238
477,451
461,399
16.3
15.9
13.8
14.0
9.2
8.9
59,608
(15,033)
(8,783)
32,148
13,868
(39,876)
(32,075)
9,857
5.2%
(1.8)
(1.1)
4.5
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% $
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.
Our Furniture, Soft Home, and Seasonal merchandise categories generated positive comps:
• 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 Consumables and Food and larger negative net sales and comps in our Hard Home and Electronics, Toys, &
Accessories categories:
• The Consumables 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 offerings
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.
Gross Margin
Gross margin dollars increased $32.3 million, or 1.6%, to $2,099.4 million in 2016, compared to $2,067.1 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 $28.4 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.
27
Selling and Administrative Expenses
Selling and administrative expenses were $1,731.0 million in 2016, compared to $1,708.5 million in 2015. The increase of
$22.5 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 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.
Depreciation Expense
Depreciation expense decreased $2.4 million to $120.5 million in 2016 compared to $122.9 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.
Operating Profit
Operating profit was $248.0 million in 2016 as compared to $235.8 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.
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 $(5.3) 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 was 37.4% 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.
28
Capital Resources and Liquidity
On July 22, 2011, we entered into a $700 million five-year unsecured credit facility. 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 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. Additionally, we are subject to cross-default provisions associated with the Synthetic
Lease. 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 February 3, 2018, 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 2017, our total indebtedness (outstanding borrowings and letters of credit) under the
2011 Credit Agreement peaked at approximately $425 million in November. At February 3, 2018, we had $199.8 million in
outstanding borrowings under the 2011 Credit Agreement and $495.2 million in borrowings available under the 2011 Credit
Agreement, after taking into account the reduction in availability resulting from outstanding letters of credit totaling $5.0
million. Working capital was $432.4 million at February 3, 2018.
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, for payment of capital expenditures, and for payment of payroll and other operating
expenses, income and other taxes, employee benefits, and other miscellaneous disbursements.
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”). During 2017, we exhausted this program by purchasing
approximately 3.1 million of our outstanding common shares at an average price of $48.04.
On March 7, 2018, our Board of Directors authorized a share repurchase program providing for the repurchase of $100 million
of our common shares (the “2018 Repurchase Program”). Pursuant to the 2018 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 2018 Repurchase Program will be available to meet obligations under
our equity compensation plans and for general corporate purposes. The 2018 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.
29
In 2017, we declared and paid four quarterly cash dividends of $0.25 per common share for a total paid amount of
approximately $44.7 million.
In March 2018, our Board increased our quarterly dividend payment rate by approximately 20% by declaring a quarterly cash
dividend of $0.30 per common share payable on April 6, 2018 to shareholders of record as of the close of business on March
23, 2018.
The following table compares the primary components of our cash flows from 2017 to 2016:
(In thousands)
Net cash provided by operating activities
Net cash used in investing activities
Net cash used in financing activities
2017
2016
Change
$
$
250,368
(156,508)
(93,848)
$
$
311,925
(84,701)
(230,204)
$
$
(61,557)
(71,807)
136,356
Cash provided by operating activities decreased by $61.6 million to $250.4 million in 2017 compared to $311.9 million in
2016. The decrease was driven by a decrease to accounts payable, which decreased our cash provided by operating activities
by $67.5 million in 2017 compared to 2016. The decrease to accounts payable was primarily driven by partnering with our
vendor community, through changes in certain payment terms, which accounted for approximately $40 million of the decrease,
and the timing of purchases of inventory while we prepare for our Spring selling season. The decrease in accounts payable was
coupled with increases in other current assets and a decrease in other current liabilities. The increase in other current assets,
which decreased our cash provided by operating activities by $12.1 million was driven by increases in various receivables,
primarily from landlords and vendors. The decrease in other current liabilities, which decreased our cash provided by operating
activities by $10.5 million was primarily driven by payments related to the termination of our pension plan in 2016, partially
offset by a decrease in bonus accruals. As discussed in our "Selling and Administrative Expenses" section, the decrease in
bonus accruals year over year was driven by performance relative to our operating plan. Partially offsetting the decrease in
cash provided by operating activities was an increase in net income of $37.0 million, which was primarily driven by the
increase in comparable stores sales and an improved operating profit rate in 2017. Additionally, a change in our income tax
position (current and deferred) and a lower effective tax rate, increased our net cash provided by operating activities by $3.0
million. The shift from deferred to current taxes payable was primarily driven by significant favorable deductible temporary
differences for 2017, and by tax planning activities.
Cash used in investing activities increased by $71.8 million to $156.5 million in 2017 compared to $84.7 million in 2016. The
increase was primarily driven by a $52.9 million increase in capital expenditures to $142.7 million in 2017 compared to $89.8
million in 2016. The increase in capital expenditures was driven by our increased investment in our new store openings and our
Store of the Future remodels at twenty-seven of our locations in 2017, and fixtures and equipment for our new corporate office
and new California distribution center. The increase in capital expenditures was coupled with an increase in assets acquired
under synthetic lease of $15.6 million and a decrease in cash proceeds of $3.2 million. The increase in assets acquired under
synthetic lease was driven by the Synthetic Lease for our new distribution center in Apple Valley, California during the fourth
quarter of 2017. The decrease in cash proceeds of $3.2 million was driven by the sale of property in the fourth quarter of 2016,
while no similar transaction occurred in 2017.
Cash used in financing activities decreased by $136.4 million to $93.8 million in 2017 compared to $230.2 million in 2016.
The primary driver of this decrease was an $88.5 million decrease in payments for treasury shares acquired to $165.8 million in
2017 from $254.3 million in 2016, coupled with an increase of $49.3 million in net borrowings under our bank credit facility to
$93.4 million in 2017 compared to $44.1 million in 2016, and an increase of $15.6 million for proceeds from the Synthetic
Lease. The increase in net borrowings was principally driven by the changes in our accounts payable position, discussed in
cash provided by operating activities above. Partially offsetting these decreases were a decrease of $10.0 million in proceeds
from stock option exercises and an increase in dividends paid of $6.2 million.
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 $120 to $130 million in 2018; and we intend to distribute approximately $150 million to
shareholders through the 2018 Repurchase Program and quarterly dividend payments.
30
Contractual Obligations
The following table summarizes payments due under our contractual obligations at February 3, 2018:
(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
$
200,088 $
288 $
— $
199,800 $
—
1,412,258
17,519
812,094
84,106
344,041
4,760
705,115
8,355
532,241
289,736
246,240
8,812
96,313
10,497
3,860
8,705
10,107
87
1,961
55,147
$
2,526,065 $
1,062,559 $
647,863 $
512,208 $
303,435
(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 $0.3 million. In addition, we had outstanding letters of credit totaling $59.6 million
at February 3, 2018. Approximately $57.6 million of 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. The remaining $2.0 million of outstanding letters of credit represent commercial
letters of credit whereby the related obligation is included in the purchase obligation.
(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 $1,118.8
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 $293.4 million at February 3, 2018. 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.
31
(5) Purchase obligations include outstanding purchase orders for merchandise issued in the ordinary course of our
business that are valued at $415.3 million, the entirety of which represents obligations due within one year of
February 3, 2018. In addition, we have purchase commitments for future inventory purchases totaling $11.5 million at
February 3, 2018. 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 $385.3 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 $33.4 million for obligations related to our nonqualified deferred compensation
plan, $30.9 million for a charitable commitment, $15.6 million for the Synthetic Lease, and $2.8 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 committed to make a $40.0 million charitable donation
over a 10-year period, and we have a remaining obligation of $30.9 million over the next nine years. We have entered
into the Synthetic Lease for our new distribution center in California. We have included unrecognized tax benefits of
$2.2 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 $14.4 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.
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 salability 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.
32
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 2018, 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 February 3, 2018, a 10% difference in our shrink reserve would have affected gross margin, operating
profit and income before income taxes by approximately $3.2 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 in 2016 and two stores in 2015, respectively, with impairment indicators as a result of our annual store
impairment tests. For these stores, we recognized impairment charges of $0.1 million and $0.4 million in 2016, and 2015,
respectively. In 2017, we did not identify any stores with impairment indicators during our annual review and therefore, did
not recognize any impairment charges. 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 or
2015.
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.
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 $27.8 million, $33.0 million, and $13.5 million in 2017, 2016, and 2015, 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 fiscal year within the 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.
33
We issued PSUs to certain employees in 2015, 2016, and 2017. The PSUs issued in 2015, 2016 and 2017 were structured to
reflect specific shareholder feedback and are based on a three-year financial performance period and are 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 2017 for the PSUs issued in 2015, and is estimated to occur in March 2018
and March 2019 for the PSUs issued in 2016 and 2017, 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 2015 or fiscal 2016 related to the PSUs issued in
2015. On March 7, 2017, the Compensation Committee established the 2017 performance targets, which established the grant
date, and, therefore, the fair value of the PSUs issued in 2015. 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 2017, we
recognized $15.4 million in share-based compensation expense related to the PSUs issued in 2015. In 2016, we recognized
$17.5 million in share-based compensation expense related to the PSUs issued in 2014.
At February 3, 2018, PSUs issued and outstanding were as follows:
Issue Year
2015
2016
2017
Total
Outstanding PSUs at
February 3, 2018
249,324
337,421
268,296
855,041
Actual Grant Date
March 2017
Expected Valuation
(Grant) Date
March 2018
March 2019
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, such as the Tax Cuts and Jobs Act. 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.
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 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
34
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 February 3, 2018 would have
affected selling and administrative expenses, operating profit, and income 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 before income taxes by
approximately $2.2 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.
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 $199.8 million under the 2011 Credit Agreement at
February 3, 2018. An increase of 1% in our variable interest rate on our investments and expected future borrowings could
affect our financial condition, results of operations, or liquidity through higher interest expense by approximately $2.4 million.
We are subject to market risk from exposure to changes in our derivative instruments, associated with diesel fuel. At February
3, 2018, we had outstanding derivative instruments, in the form of collars, covering 3.6 million 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
Calls
Puts
Fair Value
Asset (Liability)
(Gallons, in thousands)
(In thousands)
2018
2019
2020
Total
2,400
1,200
—
3,600
$
2,400
1,200
—
3,600
$
219
171
—
390
Additionally, at February 3, 2018, a 10% difference in the forward curve for diesel fuel prices could affect unrealized gains
(losses) in other income (expense) by approximately $1.1 million.
35
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.
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Big Lots, Inc. and subsidiaries (the “Company”) as of February
3, 2018, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission (“COSO”). In our opinion, the Company maintained, in all material respects, effective
internal control over financial reporting as of February 3, 2018, based on criteria established in Internal Control - Integrated
Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(“PCAOB”), the consolidated financial statements as of and for the year ended February 3, 2018, of the Company and our report
dated April 3, 2018 expressed an unqualified opinion on those financial statements.
Basis for Opinion
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 are a public accounting firm registered with the PCAOB and are required to be independent with
respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities
and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. 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.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed 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 its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because
of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ DELOITTE & TOUCHE LLP
Columbus, Ohio
April 3, 2018
36
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Big Lots, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Big Lots, Inc. and subsidiaries (the “Company”) as of
February 3, 2018 and January 28, 2017, the related consolidated statements of operations, comprehensive income, shareholders’
equity, and cash flows, for each of the three years in the period ended February 3, 2018, and the related notes (collectively
referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the
financial position of the Company as of February 3, 2018 and January 28, 2017, and the results of its operations and its cash
flows for each of the three years in the period ended February 3, 2018, 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)
(“PCAOB”), the Company’s internal control over financial reporting as of February 3, 2018, based on criteria established in
Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission and our report dated April 3, 2018, expressed an unqualified opinion on the Company’s internal control over
financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on
the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to
error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ DELOITTE & TOUCHE LLP
Columbus, Ohio
April 3, 2018
We have served as the Company’s auditor since 1989.
37
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 before income taxes
Income tax expense
Net income
Earnings per common share:
Basic
Diluted
Cash dividends declared per common share
2017
2016
2015
$
5,270,980 $
5,200,439 $
5,190,582
3,128,538
2,142,442
1,723,996
117,093
301,353
(6,711)
712
295,354
105,522
3,101,020
2,099,419
1,730,956
120,460
248,003
(5,091)
1,387
244,299
91,471
3,123,442
2,067,140
1,708,499
122,854
235,787
(3,683)
(5,254)
226,850
83,977
189,832 $
152,828 $
142,873
4.43 $
4.38 $
3.37 $
3.32 $
1.00 $
0.84 $
2.83
2.80
0.76
$
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
38
BIG LOTS, INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income
(In thousands)
Net income
Other comprehensive income (loss):
2017
2016
2015
$
189,832 $
152,828 $
142,873
Amortization of pension, net of tax benefit of $0, $(886), and
$(702), respectively
Valuation adjustment of pension, net of tax (benefit) expense of
$0, $(9,556), and $1,530, respectively
Total other comprehensive income (loss)
Comprehensive income
—
—
—
1,355
14,622
15,977
$
189,832 $
168,805 $
1,119
(2,440)
(1,321)
141,552
The accompanying notes are an integral part of these consolidated financial statements.
39
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:
February 3, 2018
January 28, 2017
$
51,176
$
872,790
98,007
1,021,973
565,977
13,986
49,790
51,164
858,689
84,526
994,379
525,851
46,469
41,008
$
$
1,651,726
$
1,607,707
351,226
$
400,495
80,863
72,013
38,517
39,321
7,668
589,608
199,800
58,246
55,015
14,929
64,541
81,306
71,251
40,269
54,009
31,265
678,595
106,400
56,035
56,593
15,853
43,601
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 41,925 shares and 44,259 shares, respectively
Treasury shares - 75,570 shares and 73,236 shares, respectively, at cost
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Total shareholders’ equity
Total liabilities and shareholders’ equity
1,175
(2,422,396)
622,550
2,468,258
—
669,587
$
1,651,726
$
1,175
(2,291,379)
617,516
2,323,318
—
650,630
1,607,707
The accompanying notes are an integral part of these consolidated financial statements.
40
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 - January 31, 2015
52,912 $
1,175
64,583 $(1,878,523) $ 574,454 $ 2,107,100 $
(14,656) $
789,550
142,873
(1,321)
141,552
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
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
—
33,029
(39,734)
—
—
—
—
—
—
—
—
152,828
(39,749)
—
—
—
—
—
—
—
—
Balance - January 30, 2016
49,101
1,175
68,394
(2,063,091)
588,124
2,210,239
Balance - January 28, 2017
44,259
1,175
73,236
(2,291,379)
617,516
2,323,318
Comprehensive income
Dividends declared ($1.00 per
share)
Adjustment for ASU 2016-09
—
—
—
—
—
—
—
—
—
—
—
—
Purchases of common shares
(3,437)
— 3,437
(165,757)
Exercise of stock options
Restricted shares vested
Performance shares vested
Share activity related to deferred
compensation plan
Other
Share-based employee
compensation expense
304
368
431
—
—
—
—
—
—
—
—
—
(304)
(368)
(431)
—
—
—
9,659
11,562
13,523
(4)
—
—
—
189,832
—
241
—
2,053
(11,562)
(13,523)
—
—
27,825
(44,746)
(146)
—
—
—
—
—
—
—
—
(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
650,630
189,832
(44,746)
95
— (165,757)
—
—
—
—
—
—
11,712
—
—
(4)
—
27,825
Balance - February 3, 2018
41,925 $
1,175
75,570 $(2,422,396) $ 622,550 $ 2,468,258 $
— $
669,587
The accompanying notes are an integral part of these consolidated financial statements.
41
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:
2017
2016
2015
$
189,832
$
152,828
$
142,873
Depreciation and amortization expense
Deferred income taxes
Non-cash share-based compensation expense
Excess tax benefit from share-based awards
Non-cash impairment charge
Loss (gain) 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
Assets acquired under synthetic lease
Other
Net cash used in investing activities
Financing activities:
Net proceeds from 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
Proceeds from synthetic lease
Deferred bank credit facility fees paid
Other
Net cash used in financing activities
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents:
Beginning of year
End of year
106,004
32,578
27,825
—
—
483
(1,398)
—
(14,100)
(49,269)
(26,368)
(12,144)
(15,342)
(9,335)
21,602
250,368
(142,745)
1,854
(15,606)
(11)
(156,508)
93,400
(4,134)
(44,671)
11,712
—
(165,757)
15,606
—
(4)
(93,848)
12
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
(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
(84,701)
(113,193)
44,100
(4,514)
(38,466)
21,656
1,111
200
(4,433)
(38,530)
16,283
1,330
(254,304)
(201,867)
—
—
213
(230,204)
(2,980)
—
(779)
520
(227,276)
1,883
51,164
51,176
$
54,144
51,164
$
52,261
54,144
$
The accompanying notes are an integral part of these consolidated financial statements.
42
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 community retailer in the United States (“U.S.”). At February 3, 2018, we operated 1,416 stores in 47 states and an e-
commerce platform. We are dedicated to friendly service, trustworthy value, and affordable solutions in every season and
category – furniture, food, décor, and more. We exist to serve everyone like family, providing a better shopping experience for
our customers 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 2017 (“2017”)
was comprised of the 53 weeks that began on January 29, 2017 and ended on February 3, 2018. 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.
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 February 3,
2018 and January 28, 2017, totaled $27.0 million and $26.9 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 February 3, 2018 and January 28, 2017.
43
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 straight line basis using estimated service
lives. The estimated service lives of our depreciable property and equipment by major asset category were as follows:
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
44
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 ten 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, whichever is shorter.
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.
45
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 included 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 comprised 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 and are reliably determinable. The 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 a loss is probable and the amount is estimable.
If the likelihood of a loss 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.
46
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, and record breakage when a gift
card or merchandise credit has 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 $161.5 million, $151.9 million, and $159.4 million for
2017, 2016, and 2015, 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.
47
Advertising Expense
Advertising costs, which are expensed as incurred, consist primarily of television and print advertising, internet and social
media marketing and advertising, e-mail, and in-store point-of-purchase presentations. Advertising expenses are included in
selling and administrative expenses. Advertising expenses were $92.0 million, $92.3 million, and $91.5 million for 2017, 2016,
and 2015, 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.
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”) is 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 was 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 valued and expensed 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 was 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 PSUs, calculated using the treasury stock method.
48
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 included the impact of the amortization of our pension actuarial loss, net of tax, and the
revaluation of our pension actuarial loss, net of tax.
Supplemental Cash Flow Disclosures
The following table provides supplemental cash flow information for 2017, 2016, and 2015:
(In thousands)
2017
2016
2015
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 repayments of borrowings under the bank credit facility
Non-cash activity:
Assets acquired under capital leases
Accrued property and equipment
$
$
$
$
$
$
5,991
99,693
1,656,100
1,562,700
238
11,236
$
$
$
$
$
$
4,486
103,323
1,673,700
1,629,600
286
9,295
$
$
$
$
$
$
3,204
56,158
1,588,200
1,588,000
10,180
9,808
Reclassifications
Merchandise Categories
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.
Recent Accounting Pronouncements
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. This ASU permits the use of either the retrospective or cumulative effect transition method.
We have evaluated the impact this guidance will have on our consolidated financial statements and our adoption method. Our
adoption of this standard will not significantly change the timing of the recognition of our revenue or costs although our
principal versus agent presentation of an immaterial portion of our vendor relationships will be impacted. We will adopt the
new standard effective February 4, 2018, using the full retrospective method.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The update requires a lessee to recognize, on the
balance sheet, a liability to make lease payments and a right-of-use asset representing a right to use the underlying asset for the
lease term. 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 practical expedients to employ during adoption. We will not early adopt this standard.
49
Recently Adopted Accounting Standards
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 deduction excess or deficiency attributable to
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 was effective for annual
reporting periods beginning after December 15, 2016, and interim periods within those annual periods.
We selected a modified retrospective method for the recognition of the cumulative income tax effects and a prospective method
for cash flow presentations. For 2017, we recorded a $4.5 million benefit to income tax expense attributable to excess tax
benefits. For 2016 and 2015, $0.5 million and $0.7 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 on a full retrospective basis. Additionally, we recorded an insignificant adjustment to retained earnings to change our
accounting method from an estimated forfeiture rate approach to actual forfeiture approach, which accounts for forfeitures as
they occur.
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, if applicable, and 16) 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
February 3, 2018
January 28, 2017
$
$
60,416 $
881,077
772,711
172,539
35,084
1,921,827
1,355,850
565,977 $
50,906
853,324
743,212
165,209
18,653
1,831,304
1,305,453
525,851
Property and equipment - cost includes $28.6 million and $31.0 million at February 3, 2018 and January 28, 2017, respectively,
to recognize assets from capital leases. Accumulated depreciation and amortization includes $13.2 million and $11.1 million at
February 3, 2018 and January 28, 2017, respectively, related to capital leases. Additionally, we had $15.6 million in assets
from a synthetic lease for our distribution center in Apple Valley, California at February 3, 2018. We did not have any synthetic
leases in 2016.
During 2017, 2016, and 2015, respectively, we invested $142.7 million, $89.8 million, and $126.0 million of cash in capital
expenditures and we recorded $117.1 million, $120.5 million, and $122.9 million of depreciation expense.
We incurred $0.0 million, $0.1 million, and $0.4 million in asset impairment charges in 2017, 2016, and 2015, respectively.
During 2017, we did not impair the value of long-lived assets at any stores as a result of our annual store impairment review. In
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.
50
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 February 3, 2018, we had $199.8 million of borrowings outstanding
under the 2011 Credit Agreement and $5.0 million was committed to outstanding letters of credit, leaving $495.2 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 $33.0 million and $24.1
million at February 3, 2018 and January 28, 2017, 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.
51
NOTE 5 – LEASES
Leased property consisted primarily of 1,363 of our retail stores, our new corporate office, our new California distribution
center, and certain transportation, information technology and other office equipment. In 2016, we entered into a lease for our
new corporate office and expect to move into the new office in the first half of 2018. In late 2017, we entered into a synthetic
lease arrangement for a new distribution center in California. We are the construction agent for the new distribution center in
California and we expect the lease term to commence and to begin operations in 2019. 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 for operating leases consisted of the following:
(In thousands)
Minimum rents
Contingent rents
Total rent expense
2017
2016
2015
$
$
330,229 $
469
330,698 $
321,248 $
607
321,855 $
314,605
637
315,242
Future minimum rental commitments for leases, excluding closed store leases, real estate taxes, CAM, and property insurance,
at February 3, 2018, were as follows:
Fiscal Year
2018
2019
2020
2021
2022
Thereafter
Total leases
(In thousands)
268,500
228,709
185,332
139,050
89,990
207,254
1,118,835
$
$
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
February 3, 2018, were as follows:
Fiscal Year
(In thousands)
2018
2019
2020
2021
2022
Thereafter
Total lease payments
Less amount to discount to present value
Capital lease obligation per balance sheet
NOTE 6 – SHAREHOLDERS’ EQUITY
$
$
$
4,760
4,406
4,406
3,352
508
87
17,519
(1,539)
15,980
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 2017, 2016, and 2015 were as follows:
52
(In millions)
2017
2016
2015
Antidilutive stock options excluded from dilutive share calculation
—
—
0.1
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
2017
2016
2015
42,818
482
43,300
45,316
658
45,974
50,517
447
50,964
Share Repurchase Programs
On February 28, 2017, our Board of Directors authorized a share repurchase program providing for the repurchase of up to
$150 million of our common shares (“2017 Repurchase Program”). The 2017 Repurchase Program was exhausted during the
third quarter of 2017. During 2017, we acquired approximately 3.1 million of our outstanding common shares for $150 million
under the 2017 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:
2016:
First quarter
Second quarter
Third quarter
Fourth quarter
Total
2017:
First quarter
Second quarter
Third quarter
Fourth quarter
Total
Dividends
Per Share
Amount
Declared
Amount Paid
(In thousands)
(In thousands)
$
$
$
$
0.21
0.21
0.21
0.21
0.84
0.25
0.25
0.25
0.25
1.00
$
$
$
$
10,616
$
9,674
9,699
9,760
39,749
(In thousands)
11,547
11,289
11,007
10,903
44,746
$
$
$
10,597
9,282
9,290
9,297
38,466
(In thousands)
12,683
10,872
10,638
10,478
44,671
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 condition, results of operations, capital
requirements, compliance with applicable laws and agreements and any other factors deemed relevant by our Board of
Directors.
53
NOTE 7 – SHARE-BASED PLANS
Our shareholders approved the Big Lots 2017 Long-Term Incentive Plan (“2017 LTIP”) in May 2017. The 2017 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 restricted stock units and PSUs under the
2017 LTIP. The number of common shares available for issuance under the 2017 LTIP consists of an initial allocation of 5,500,000
common shares plus any common shares subject to the 1,743,116 outstanding awards as of January 28, 2017 under the Big Lots
2012 Long-Term Incentive Plan (“2012 LTIP”) 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). The Compensation Committee of our Board of Directors (“Committee”), which is
charged with administering the 2017 LTIP, has the authority to determine the terms of each award.
Our former equity compensation plan, the 2012 LTIP, approved by our shareholders in May 2012, expired on May 24, 2017. The
2012 LTIP authorized 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 issued nonqualified stock options,
restricted stock, restricted stock units, and PSUs under the 2012 LTIP. The Committee, which was charged with administering the
2012 LTIP, had the authority to determine the terms of each award. Nonqualified stock options granted to employees under the
2012 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.
Our other 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.
Share-based compensation expense was $27.8 million, $33.0 million and $13.5 million in 2017, 2016, and 2015, respectively.
54
Non-vested Restricted Stock
The following table summarizes the non-vested restricted stock awards and restricted stock units activity for fiscal years 2015,
2016, and 2017:
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
Granted
Vested
Forfeited
Outstanding non-vested restricted stock at February 3, 2018
Weighted
Average
Grant-Date
Fair Value
Per Share
Number of
Shares
744,805 $
217,767
(128,140)
(49,283)
785,149 $
261,792
(252,156)
(23,264)
771,521 $
205,819
(368,408)
(19,089)
589,843 $
38.13
49.00
38.42
40.28
40.96
45.62
42.03
43.63
42.12
51.16
42.84
44.02
44.77
The non-vested restricted stock units granted in 2015, 2016 and 2017 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 2013 have met the applicable threshold financial performance
objective and will vest in 2018.
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 and 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 2015, 2016, and 2017, 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 February 3, 2018, 855,041 non-vested 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.
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.
55
We have begun or expect to begin recognizing expense related to PSUs as follows:
Issue Year
2015
2016
2017
Total
Outstanding PSUs
at
February 3, 2018
249,324
337,421
268,296
855,041
Actual Grant Date
March 2017
Expected Valuation
(Grant) Date
Actual or Expected
Expense Period
March 2018
March 2019
Fiscal 2017
Fiscal 2018
Fiscal 2019
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
2015 performed above target and more shares will be distributed than initially granted. At February 3, 2018, we estimate the
attainment of an average performance that is greater than the targets established for the PSUs issued in 2016. In 2017 and 2016, we
recognized $15.4 million and $17.5 million, respectively, in share-based compensation expense related to PSUs.
The following table summarizes the activity related to PSUs for fiscal years 2016 and 2017:
Outstanding PSUs at January 30, 2016
Granted
Vested
Forfeited
Outstanding PSUs at January 28, 2017
Granted
Vested
Forfeited
Outstanding PSUs at February 3, 2018
PSUs, excluding 2013
CEO PSUs
Weighted
Average
Grant-Date
Fair Value
Per Share
Number of
Shares
— $
379,794
—
(19,437)
360,357 $
259,042
(360,357)
(9,718)
249,324 $
—
41.04
—
41.04
41.04
51.49
41.04
51.49
51.49
Board of Directors' Awards
In 2016 and 2015, we granted to each non-employee member of our Board of Directors a restricted stock award. In 2017, we
granted (1) the chairman of our Board of Directors an annual restricted stock unit award having a grant date fair value of
approximately $200,000, and (2) the remaining non-employees elected to our Board of Directors at our 2017 Annual Meeting of
Shareholders an annual restricted stock unit award having a grant date fair value of approximately $135,000. 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 units will not vest if the non-employee director ceases to serve on our Board of Directors
before either vesting event occurs. Additionally, we allow our non-employee directors to defer all or a portion of their restricted
stock unit award and by such election, the non-employee director can defer receipt of the restricted stock units until the earlier of
the first to occur; (1) the specified date by the non-employee director in the deferral agreement, (2) the non-employee director’s
death or disability, or (3) the date the non-employee director ceases to serve as a member of the Board of Directors.
56
Stock Options
The following table summarizes information about our stock options outstanding and exercisable at February 3, 2018:
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
$
$
30.01
40.01
$
$
40.00
50.00
163,126
117,500
280,626
2.1 $
1.1
1.7 $
35.58
43.85
39.04
163,126 $
117,500
280,626 $
35.58
43.85
39.04
A summary of the annual stock option activity for fiscal years 2015, 2016, and 2017 is as follows:
Weighted
Average
Exercise
Price Per
Share
Weighted
Average
Remaining
Contractual
Term (years)
Aggregate
Intrinsic
Value
(000's)
Number of
Options
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
Exercised
Forfeited
Outstanding stock options at February 3, 2018
Vested or expected to vest at February 3, 2018
Exercisable at February 3, 2018
1,703,213 $
(450,136)
(78,175)
1,174,902 $
(572,727)
(12,500)
589,675 $
(304,049)
(5,000)
280,626 $
280,626 $
280,626 $
37.59
36.17
35.84
38.26
37.81
35.83
38.75
38.51
36.93
39.04
39.04
39.04
1.7 $
1.7 $
1.7 $
5,247
5,247
5,247
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. With the adoption of ASU 2016-09, we have eliminated our annual forfeiture rate assumption.
During 2017, 2016, and 2015, 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
2017
2016
2015
$
$
$
4,423 $
19,015 $
21,026 $
7,392 $
11,510 $
621 $
5,980
6,259
—
The total unearned compensation cost related to all share-based awards outstanding, excluding PSUs issued in 2016 and 2017, at
February 3, 2018 was approximately $11.0 million. This compensation cost is expected to be recognized through January 2021
based on existing vesting terms with the weighted-average remaining expense recognition period being approximately 1.7 years
from February 3, 2018.
57
NOTE 8 – EMPLOYEE BENEFIT PLANS
Pension Benefits
In prior years, 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
$
$
— $
879
(1,536)
—
2,241
—
24,483
26,067 $
1,923
2,444
(2,628)
4
1,817
191
1,912
5,663
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
1.2%
—%
2.8%
3.3%
2.8%
5.2%
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 2017, 2016, and 2015, we expensed $7.7 million, $6.6
million, and $6.3 million, respectively, related to our matching contributions. In connection with our nonqualified deferred
compensation plan, we had liabilities of $33.4 million and $24.4 million at February 3, 2018 and January 28, 2017,
respectively, which are recorded in other liabilities.
58
NOTE 9 – INCOME TAXES
On December 22, 2017, the President of the United States signed into law legislation commonly referred to as the Tax Cut and
Jobs Act (“TCJA”). The legislation significantly changed U.S. tax law, including permanently lowering the U.S. corporate
income tax rate from 35% to 21%, effective January 1, 2018 and accelerating tax depreciation for certain assets placed in
service after September 27, 2017. Since the rate reduction was effective on January 1, 2018, our 2017 federal statutory tax rate
is a blended rate of 33.7%. Also, we estimated the effects of the corporate income tax rate reduction on our net deferred tax
assets resulting in the provisional recognition of an additional $4.5 million of income tax expense in our consolidated statement
of operations for 2017.
On December 22, 2017, the SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”) to address the application of U.S.
GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including
computations) in reasonable detail to complete the accounting for certain income tax effects of the TCJA. We have recorded
the provisional tax impacts of the TCJA on existing current and deferred tax amounts for 2017. The ultimate impact may differ
from these provisional amounts due to, among other things, additional analysis, changes in interpretations and assumptions we
have made, and additional regulatory guidance that may be issued. The accounting is expected to be complete in the fourth
quarter of 2018 in light of the filing of our 2017 U.S. corporate income tax return and anticipated regulatory guidance.
The provision for income taxes 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
2017
2016
2015
$
63,743 $
87,521 $
9,201
72,944
28,336
4,242
32,578
$
105,522 $
13,122
100,643
(7,965)
(1,207)
(9,172)
91,471 $
73,817
10,783
84,600
(348)
(275)
(623)
83,977
Net deferred tax assets fluctuated by items that are not reflected in deferred tax expense in the above table. In 2017, net
deferred tax assets increased by $0.1 million as a result of ASU 2016-09. Net deferred tax assets decreased by $10.4 million in
2016, and increased by $0.8 million in 2015, principally from pension-related charges recorded in accumulated other
comprehensive loss.
Reconciliation between the statutory federal income tax rate and the effective income tax rate was as follows:
Statutory federal income tax rate
Effect of:
State and local income taxes, net of federal tax benefit
Provisional effect of the TCJA
Work opportunity tax and other employment tax credits
Excess tax benefit from share-based compensation
Other, net
Effective income tax rate
2017
2016
2015
33.7%
3.0
1.5
(1.0)
(1.3)
(0.2)
35.7%
35.0%
35.0%
3.2
—
(1.1)
—
0.3
3.0
—
(1.1)
—
0.1
37.4%
37.0%
59
In 2017, we adopted ASU 2016-09. Prior to the adoption of ASU 2016-09, differences between the tax deduction ultimately
realized from an equity award and the deferred tax asset recognized as compensation cost were generally credited (“excess tax
benefits”) or charged (“deficiencies”) to equity. Under ASU 2016-09, all tax effects of share-based compensation, including
excess tax benefits and tax deficiencies, are recognized in income tax expense. In 2017, we recognized excess tax benefits
which reduced income tax expense by $4.3 million. Tax benefits of $0.5 million and $0.7 million in 2016 and 2015,
respectively, were credited directly to additional paid-in capital within shareholders’ equity.
Income tax payments and refunds were as follows:
(In thousands)
Income taxes paid
Income taxes refunded
Net income taxes paid
2017
2016
2015
$
$
99,693 $
(888)
98,805 $
103,323 $
(16,187)
87,136 $
56,158
(818)
55,340
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:
February 3, 2018
January 28, 2017
Workers’ compensation and other insurance reserves
$
21,106 $
Accrued rent
Compensation related
Uniform inventory capitalization
Depreciation and fixed asset basis differences
State tax credits, net of federal tax benefit
Accrued state taxes
Accrued operating liabilities
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
15,292
14,308
13,591
8,435
4,246
3,749
537
11,623
(2,311)
90,576
51,310
11,542
5,559
2,424
5,755
Total deferred tax liabilities
Net deferred tax assets
$
76,590
13,986 $
32,194
22,259
39,616
18,648
10,095
3,844
7,157
2,056
17,138
(2,087)
150,920
71,155
15,682
6,553
3,482
7,579
104,451
46,469
60
We have the following income tax loss and credit carryforwards at February 3, 2018 (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
$
$
17 Expires fiscal years 2020 through 2025
4,976 Predominately expires fiscal year 2023
399 Expires fiscal years through 2025
5,392
The following is a tabular reconciliation of the total amounts of unrecognized tax benefits for 2017, 2016, and 2015:
(In thousands)
Unrecognized tax benefits - beginning of year
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
Unrecognized tax benefits - end of year
2017
2016
2015
$
$
13,121 $
13,772 $
361
1,329
(1,385)
(319)
(1,434)
11,673 $
822
171
(80)
(236)
(1,328)
13,121 $
14,922
939
872
(430)
(732)
(1,799)
13,772
At the end of 2017 and 2016, the total amount of unrecognized tax benefits that, if recognized, would affect the effective
income tax rate is $9.2 million and $8.4 million, respectively, after considering the federal tax benefit of state and local income
taxes of $2.1 million and $4.1 million, respectively. Unrecognized tax benefits of $0.6 million and $0.6 million in 2017 and
2016, 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 associated with interest and penalties on unrecognized tax benefits of approximately $0.1 million,
$0.2 million, and $0.1 million during 2017, 2016, and 2015, respectively, as a component of income tax expense. The amount
of accrued interest and penalties recognized in the accompanying consolidated balance sheets at February 3, 2018 and
January 28, 2017 was $6.1 million and $6.3 million, respectively.
We are subject to U.S. federal income tax, and income tax of multiple state and local jurisdictions. The statute of limitations
for assessments on our federal income tax returns for periods prior to 2014 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 January 28, 2012
have lapsed.
We have estimated the reasonably possible expected net change in unrecognized tax benefits through February 2, 2019, 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 $5.0 million. Actual results may differ materially from this estimate.
61
NOTE 10 – COMMITMENTS, CONTINGENCIES AND LEGAL PROCEEDINGS
Shareholder and Derivative Matters
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.
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.
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 here within. 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.
62
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 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.
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 retained independent counsel and
conducted an 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. As noted above, the Brosz action was consolidated with the Consolidated
Derivative Action on December 29, 2016, and the Tremblay Action was voluntarily dismissed on January 12, 2017. On May
18, 2017, after concluding its investigation, the SLC filed a motion to dismiss the Consolidated Derivative Action. On May 19,
2017, the Court issued an order providing for discovery and briefing in connection with the SLC’s motion to dismiss and
setting a schedule for further litigation of the merits of the lawsuit. On December 14, 2017, the parties entered into a
Stipulation and Agreement of Settlement and Plaintiff filed an Unopposed Motion for Preliminary Approval of Derivative
Settlement with the Court. That motion remains pending with the Court.
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. 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 plaintiffs' motion,
certifying the class and appointing class representatives and class counsel. On March 31, 2017, defendants filed 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. Defendant’s petition was granted on August 23, 2017, and briefing on the appeal was completed January 12, 2018. On
August 28, 2017, defendants filed a motion in the District Court to stay all further proceedings pending the resolution of
defendants’ appeal of class certification. On September 19, 2017, the District Court granted defendants’ motion and stayed all
proceedings, except for the exchange of expert reports, pending the resolution of defendants’ appeal. Fact discovery in the
District Court was substantially completed on May 26, 2017.
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.
63
California Hazardous Materials Matter
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 provided
information and cooperated with the authorities from multiple counties and cities in California in connection with this matter.
In the first quarter of 2016, we entered into settlement negotiations related to this matter. We settled this matter in the first
quarter of 2017.
During the first quarter of 2016, we recorded accruals totaling $4.7 million associated with pending legal and regulatory
matters, including this matter related to hazardous materials and hazardous waste.
Tabletop Torches Matter
In 2013, we sold certain tabletop torch and citronella products manufactured by third parties. In August 2013, we recalled the
tabletop torches 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 and the company that tested the tabletop torches for all of
the expenses that we have incurred 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. We settled an additional lawsuit in the first quarter of
2017. In the second quarter of 2017, we reached a settlement with the plaintiff in the final lawsuit. Additionally, we have
brought a separate lawsuit in the United States District Court of Massachusetts against the company that tested the tabletop
torch and an additional lawsuit in the United States District Court for the Southern District of Ohio against the third-party
manufacturers and the company that tested the tabletop torch. In the second quarter of 2017, we reached a settlement in
principle with our primary and excess insurance carriers. In the third quarter of 2017, we finalized the settlement with our
insurance carriers and collected the associated settlement funds, which resulted in a $3.0 million gain. In addition, our excess
insurance carrier has negotiated a settlement with each of the third-party manufacturers and the company that tested the
tabletop torch. All pending actions have now been dismissed. During the second quarter of 2015, we recorded a $4.5 million
charge related to these matters.
Other Matters
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 $57.7 million at
February 3, 2018, 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 $415.3 million, the entirety of which represents obligations due within one year of February 3, 2018. In
addition, we have purchase commitments for future inventory purchases totaling $11.5 million at February 3, 2018. We paid
$11.0 million, $18.2 million, and $11.3 million related to these commitments during 2017, 2016, and 2015, 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 $385.3 million
primarily related to distribution and transportation, information technology, print advertising, energy procurement, and other
store security, supply, and maintenance commitments.
64
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)
February 3, 2018
January 28, 2017
Diesel fuel collars (in gallons)
3,600
4,425
The fair value of our outstanding derivative instrument contracts was as follows:
(In thousands)
Assets (Liabilities)
Derivative Instrument
Balance Sheet Location
February 3, 2018
January 28, 2017
Diesel fuel collars
Total derivative instruments
Other current assets
Other assets
Accrued operating expenses
Other liabilities
$
$
312 $
262
(77)
(107)
390 $
135
180
(1,001)
(322)
(1,008)
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
2017
2016
2015
Amount of Gain (Loss)
Realized
Unrealized
Other income (expense)
Other income (expense)
Total derivative instruments
$
$
(756) $
1,398
642 $
(2,299) $
3,657
1,358 $
(535)
(4,665)
(5,200)
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 – COMPONENTS OF ACCUMULATED OTHER COMPREHENSIVE LOSS
The following table summarizes the components of accumulated other comprehensive loss, net of tax, during 2015 and 2016:
(In thousands)
Beginning of Period
Other comprehensive income before reclassifications
Amounts reclassified from accumulated other comprehensive loss
Net period change
End of Period
$
2016
2015
$
(15,977)
(185)
16,162
15,977
—
(14,656)
(3,730)
2,409
(1,321)
(15,977)
The amounts reclassified from accumulated other comprehensive loss associated with our pension plans have been reclassified
to selling and administrative expenses in our statements of operations. Please see note 8 to the consolidated financial statements
for further information on our pension plans.
65
NOTE 13 - 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.
NOTE 14 – BUSINESS SEGMENT DATA
We use the following seven merchandise categories, which match our internal management and reporting of merchandise net
sales: Furniture, Seasonal, Soft Home, Food, Consumables, Hard Home, and Electronics, Toys, & Accessories. The Furniture
category includes our upholstery, mattress, case goods, and ready-to-assemble departments. The Seasonal category includes
our Christmas trim, lawn & garden, summer, and other holiday departments. The Soft Home category includes our fashion
bedding, utility bedding, bath, window, decorative textile, home organization, area rugs, home décor, and frames departments.
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 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, toys, jewelry, and hosiery departments.
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
2017
2016
2015
$
1,237,022
$
1,195,365
$
1,135,757
824,487
822,533
789,596
765,907
428,788
402,647
830,508
817,747
750,814
739,106
437,575
429,324
845,541
826,530
718,666
725,238
477,451
461,399
$
5,270,980
$
5,200,439
$
5,190,582
66
NOTE 15 – SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized fiscal quarterly financial data for 2017 and 2016 is as follows:
Fiscal Year 2017
First
Second
Third
Fourth
Year
(In thousands, except per share amounts) (a)
Net sales
Gross margin
Net income
Earnings per share:
Basic
Diluted
$ 1,296,787 $ 1,221,301 $ 1,110,824 $ 1,642,068 $ 5,270,980
524,275
51,512
492,500
29,120
443,626
4,372
682,041
104,828
2,142,442
189,832
$
1.16 $
1.15
0.68 $
0.67
0.10 $
0.10
2.50 $
2.46
4.43
4.38
Fiscal Year 2016
First
Second
Third
Fourth
Year
(In thousands, except per share amounts) (a)
Net sales
Gross margin
Net income
Earnings per share:
Basic
Diluted
$ 1,312,575 $ 1,203,155 $ 1,105,498 $ 1,579,211 $ 5,200,439
517,681
38,659
486,423
22,715
441,992
1,376
653,323
2,099,419
90,078
152,828
$
0.80 $
0.79
0.51 $
0.50
0.03 $
0.03
2.04 $
1.99
3.37
3.32
(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.
NOTE 16 – SUBSEQUENT EVENT
On March 7, 2018, our Board of Directors authorized the repurchase of up to $100.0 million of our common shares (“2018
Repurchase Program”). Pursuant to the 2018 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 2018 Repurchase Program will be available to meet obligations under our equity compensation plans and for
general corporate purposes. The 2018 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.
67
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 Principal Executive Officers and Principal 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 Principal Executive Officers and Principal 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 February 3, 2018. 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 Principal Executive Officers and Principal Financial Officer, concluded that we maintained effective internal
control over financial reporting as of February 3, 2018.
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.
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.
68
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 2018 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
2018 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 following table summarizes information as of February 3, 2018, 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
(#)
Weighted-average
exercise price of
outstanding
options, warrants,
and rights ($)
Number of securities
remaining available
for future issuance
under equity
compensation plans
(excluding securities
reflected in column
(a)) (#)
Plan Category
(a)
(b)
(c)
Equity compensation plans approved by
security holders
Equity compensation plans not approved
by security holders
Total
(1)
1,544,185 (1)(2)
39.04 (3)
5,506,484 (4)
—
1,544,185
—
39.04 (3)
—
5,506,484
Includes stock options, PSUs, and restricted stock units granted under the 2017 LTIP, the 2012 LTIP, and the 2005
LTIP. In addition, we had 181,325 shares of unvested restricted stock outstanding under the 2012 LTIP.
(2) The common shares issuable upon exercise of outstanding stock options granted under each shareholder-approved
plan are as follows:
2012 LTIP
2005 LTIP
163,126
117,500
(3) 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 2017 LTIP.
(4) The common shares available for issuance under the 2017 LTIP are limited to 5,506,484 common shares. There are
no common shares available for issuance under any of the other shareholder-approved plans.
The 2005 LTIP expired on May 16, 2012. The 2012 LTIP was expired on May 24, 2017. The 2017 LTIP was approved in May
2017. See note 7 to the accompanying consolidated financial statements.
The information contained under the caption “Stock Ownership” in the 2018 Proxy Statement, with respect to the security
ownership of certain beneficial owners and management, is incorporated herein by reference in response to this item.
69
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 2018 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 2018 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.
70
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
36
38
39
40
41
42
43
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 10.42 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) (File No. 1-8897).
3.1
3.2
3.3
4
10.1
10.2
10.3
10.4
10.5
Amended Articles of Incorporation (incorporated herein by reference to Exhibit 3(a) to our Form 10-Q for
the quarter ended May 5, 2001) (File No. 1-8897).
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) (File No. 1-8897).
Code of Regulations (incorporated herein by reference to Exhibit 3(b) to our Form 10-Q for the quarter
ended May 5, 2001) (File No. 1-8897).
Specimen Common Share Certificate (incorporated herein by reference to Exhibit 4(a) to our Form 10-K
for the year ended February 2, 2002) (File No. 1-8897).
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) (File No. 1-8897).
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) (File No.
1-8897).
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) (File No. 1-8897).
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) (File No. 1-8897).
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).
71
Exhibit No.
10.6
Document
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) (File No. 1-8897).
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
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) (File No. 1-8897).
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)
(File No. 1-8897).
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) (File No.
1-8897).
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 (incorporated herein by reference to Exhibit 10.13 to our Form 10-
K for the year ended January 28, 2017).
Form of Big Lots 2017 Long-Term Incentive Plan (incorporated herein by reference to Appendix A to our
definitive proxy statement on Schedule 14A relating to the 2017 Annual Meeting of Shareholders filed April
11, 2017).
Form of Big Lots 2017 Long-Term Incentive Plan Restricted Stock Units Award Agreement (incorporated
herein by reference to Exhibit 10.1 to our Form 10-Q for the quarter ended April 29, 2017).
Form of Big Lots 2017 Long-Term Incentive Plan Performance Share Units Award Agreement
(incorporated herein by reference to Exhibit 10.2 to our Form 10-Q for the quarter ended April 29, 2017).
Form of Big Lots 2017 Long-Term Incentive Plan Deferral Election Form and Deferred Stock Units Award
for Non-Employee Directors (incorporated herein by reference to Exhibit 10.1 to our Form 10-Q for the
quarter ended October 28, 2017).
Big Lots, Inc. Amended and Restated Director Stock Option Plan (incorporated by reference to Exhibit
10(c)(ii) to Consolidated (Delaware)’s Annual Report on Form 10-K for the fiscal year ended February 1,
1992) (File No. 1-8897).
First Amendment to Big Lots, Inc. Amended and Restated Director Stock Option Plan, effective August 20,
2002 (incorporated herein by reference to Exhibit 10(d) to our Form 10-Q for the quarter ended August 3,
2002 (File No. 1-8897)).
Amendment to Big Lots, Inc. Amended and Restated Director Stock Option Plan, effective March 5, 2008
(incorporated herein by reference to Exhibit 10.5 to our Form 10-Q for the quarter ended May 3, 2008)
(File No. 1-8897).
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) (File No.
1-8897).
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) (File No. 1-8897).
Big Lots Supplemental Savings Plan, as amended and restated effective December 31, 2015 (incorporated
herein by reference to Exhibit 10.25 to our Form 10-K for the year ended January 30, 2016).
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) (File No. 1-8897).
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) (File No. 1-8897).
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).
72
Exhibit No.
10.29
Document
Form of Indemnification Agreement (incorporated herein by reference to Exhibit 10.12 to our Form 10-Q
for the quarter ended November 1, 2008) (File No. 1-8897).
10.30
10.31
10.32
10.33
10.34
10.35
10.36
10.37
10.38
10.39
10.40*
10.41*
10.42*
21*
23*
24*
31.1*
31.2*
32.1*
32.2*
101**
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) (File No. 1-8897).
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) (File No. 1-8897).
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 Acknowledgment 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) (File No. 1-8897).
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) (File No. 1-8897).
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)
(File No. 1-8897).
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) (File No. 1-8897).
AVDC Participation Agreement
AVDC Lease Agreement (Real Property)
AVDC Construction Agency Agreement
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.
73
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 3rd day of April 2018.
BIG LOTS, INC.
By: /s/ Timothy A. Johnson
Timothy A. Johnson
Executive Vice President, Chief Administrative Officer
and Chief Financial Officer
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 3rd day of April 2018.
By: /s/ Lisa M. Bachmann
Lisa M. Bachmann
Executive Vice President, Chief Merchandising and
Operating Officer
(Principal Executive Officer)
/s/ Timothy A. Johnson
Timothy A. Johnson
Executive Vice President, Chief Administrative Officer
and Chief Financial Officer
(Principal Executive 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 7th day of March
2018, and filed herewith.
By: /s/ Ronald A. Robins, Jr.
Ronald A. Robins, Jr.
Attorney-in-Fact
74
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
OH
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 April
3, 2018, 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 February 3, 2018.
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;
Registration Statement No. 333-181619 on Form S-8 pertaining to the Big Lots 2012 Long-Term Incentive Plan;
and
10)
Registration Statement No. 333-218262 on Form S-8 pertaining to the Big Lots 2017 Long-Term Incentive Plan;
/s/ DELOITTE & TOUCHE LLP
Columbus, Ohio
April 3, 2018
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 February 3, 2018, 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 7, 2018.
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 PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
EXHIBIT 31.1
I, Lisa M. Bachmann, 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: April 3, 2018
By: /s/ Lisa M. Bachmann
Lisa M. Bachmann
Executive Vice President, Chief Merchandising
and Operating Officer
(Principal Executive Officer)
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL 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: April 3, 2018
By: /s/ Timothy A. Johnson
Timothy A. Johnson
Executive Vice President, Chief Administrative Officer
and Chief Financial Officer
(Principal Executive Officer and Principal Financial Officer)
CERTIFICATION OF PRINCIPAL 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 February 3, 2018, of Big Lots, Inc. (the “Company”). I, Lisa M. Bachmann, Executive Vice President, Chief
Merchandising and Operating 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: April 3, 2018
By: /s/ Lisa M. Bachmann
Lisa M. Bachmann
Executive Vice President, Chief Merchandising
and Operating Officer
(Principal Executive Officer)
EXHIBIT 32.2
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
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 February 3, 2018, 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: April 3, 2018
By: /s/ Timothy A. Johnson
Timothy A. Johnson
Executive Vice President, Chief Administrative Officer
and Chief Financial Officer
(Principal Executive Officer and Principal Financial Officer)
This page intentionally left blank.
Inside Front Cover
8.25”(W) x 10.875”(H)
Inside Back Cover
8.25”(W) x 10.875”(H)
About Our Company
Headquartered in Columbus, Ohio, Big Lots, Inc.
(NYSE: BIG) is a community retailer operating more than
1,400 BIG LOTS stores in 47 states, dedicated to friendly
service, trustworthy value, and affordable solutions in
every season and category — furniture, food, decor, and
more. We exist to serve everyone like family, providing
a better shopping experience for our customers, valuing
and developing our associates, and creating growth
for our shareholders. Big Lots supports the communities
it serves through the Big Lots Foundation, a charitable
organization focused on four areas of need: hunger,
housing, healthcare, and education. For more information
about the Company, visit www.biglots.com.
NOTICE OF
ANNUAL MEETING
The Annual Meeting of
Shareholders will be held at
9:00 a.m. EDT on Thursday,
May 31, 2018, at our corporate
headquarters, 4900 East Dublin
Granville Road, Columbus,
Ohio 43081. 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.
Who is
Big Lots?
We’re a Community Retailer.
Big Lots is a community retailer, which means
we’re dedicated to serving alongside you with
friendly service, trustworthy value, and affordable
solutions in every season and category — furniture,
food, decor, and more! Our mission to “serve
everyone like family” begins at home. That’s why
each one of our product solutions is meant to
bring friends, family, and the community together
with a price tag you’ll love!
JENNIFER, OUR
CORE CUSTOMER
Jennifer may feel like it’s
ordinary to serve others with
gifts and acts of kindness,
but at Big Lots, we depict
her as an extraordinary
woman: optimistic,
generous, and someone who
feels special because she is a
part of a caring community
devoted to something bigger
than herself.
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
4900 East Dublin Granville Road
Columbus, Ohio 43081
614.278.6622
Investor_Relations@biglots.com
Independent Registered
Public Accounting Firm
Deloitte & Touche LLP
180 East Broad Street, Suite 1400
Columbus, Ohio 43215
NYSE Trading Symbol
Telephone
614.278.6800
Website
biglots.com
Email
talk2us@biglots.com
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Outside Back Cover
8.25”(W) x 10.875”(H)
Outside Front Cover
8.25”(W) x 10.875”(H)
ANNUAL
REPORT
biglots.com
WELCOME TO YOUR NEW COMMUNITY
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