Big Lots 2014 Annual Report Download

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One Team. One Goal.
Big Lots, Inc. 2014 Annual Report

Table of contents

  • Page 1
    One Team. One Goal. Big Lots, Inc. 2014 Annual Report

  • Page 2
    ... Participate and contribute Pursue excellence Work as a team Share knowledge Make quick, responsible decisions Listen and communicate Have fun Our Core Customer: Jennifer Jennifer is one of the most popular names in our Big Lots Buzz Club Rewards program. So it's the name we've chosen to represent...

  • Page 3
    ...legged stool. Our leadership team clearly understands and has demonstrated the importance of consistency of comparable store sales growth ...2014 was the first year of 4 consecutive quarters of positive comps in the last 8 years. Each leg of the stool has made | Big Lots, Inc. 2014 Annual Report |

  • Page 4
    ... a goal of a marketing launch of the site in early fiscal 2016. This first phase of developing our Omnichannel capabilities will focus solely on Ecommerce ...or allowing a customer to purchase product online and ship directly to her home. We know Jennifer frequents our Website today as evidenced by...

  • Page 5
    ... guidance of $2.25 to $2.45 per share (issued in March of 2014)  Improving the overall consistency of our business by delivering comp store growth in all four quarters for the first time since 2006 David J. Campisi Chief Executive Officer and President | Big Lots, Inc. 2014 Annual Report |

  • Page 6
    ... $50,000 (2.7)% 2014 2013 (2.7)% 0.0% 2012 2014 2013 2012 2014 2013 2012 (a) Recast to classify the results of Big Lots Canada into discontinued operations. (b) The results for fiscal year 2014 and 2013 include 52 weeks, while the results for fiscal year 2012 include 53 weeks. (c) This...

  • Page 7
    ... Gain on Sale of Real Estate In the third quarter of fiscal 2013, we recognized a $3,579 gain on the sale of real estate ($2,179 net of tax) related to a Company-owned and operated store in California which resulted in a decrease of selling and administrative expenses. Fiscal 2012 The 2012 Unaudited...

  • Page 8
    ... former Chief Operating Officer Variety Wholesalers Inc. Senior Vice Presidents Michelle D. Christensen General Merchandise Manager Brenda J. Lauderback former President Wholesale Group Nine West Group, Inc. Richard H. Flaks Planning & Allocation Philip E. Mallott Chairman of the Board Big Lots...

  • Page 9
    ... of Big Lots, Inc. The Annual Meeting will be held at our corporate offices located at 300 Phillipi Road, Columbus, Ohio, on May 28, 2015, 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...

  • Page 10
    - ii -

  • Page 11
    ... close of business on the record date, March 30, 2015, are entitled to notice of and to vote at the Annual Meeting and any postponement or adjournment thereof. By Order of the Board of Directors, TIMOThY A. JOhNSON Executive Vice President, Chief Financial Officer April 14, 2015 Columbus, Ohio Your...

  • Page 12
    BIG LOTS, INC. PROXY STATEMENT TABLE OF CONTENTS ABOUT THE ANNUAL MEETING ...PROPOSAL ONE ...GOVERNANCE ...DIRECTOR COMPENSATION ...STOCK OWNERSHIP...EXECUTIVE COMPENSATION...PROPOSAL TWO ...AUDIT COMMITTEE DISCLOSURE ...PROPOSAL THREE ...PROPOSAL FOUR ...SHAREHOLDER PROPOSALS ...PROXY SOLICITATION ...

  • Page 13
    ...and "Big Lots"), is furnishing you this Proxy Statement to solicit proxies for use at the 2015 Annual Meeting of Shareholders to be held on May 28, 2015 ("Annual Meeting"). The Annual Meeting will be held at our corporate offices located at 300 Phillipi Road, Columbus, Ohio at 9:00 a.m. Eastern Time...

  • Page 14
    ... 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. EDT on May 27, 2015 or (3) you are a registered shareholder, attend the Annual Meeting and...

  • Page 15
    ... 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...

  • Page 16
    ...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 Corporate Governance Guidelines contain a majority vote policy and our Amended Articles of Incorporation impose a majority vote standard applicable...

  • Page 17
    ...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. David J. Campisi is the Chief Executive Officer ("CEO") and President of Big Lots, Inc. Before joining Big Lots in May 2013, Mr...

  • Page 18
    ... she previously served as Chief Information Officer, interim Chief Marketing Officer and Senior Vice President of International and New Channel Development. Prior to joining Select Comfort, Ms. Schoppert led US Bank's Private Asset Management team and served as head of Product, Marketing & Corporate...

  • Page 19
    ...reporting and disclosure for public companies, make her well suited to serve on the Board. Russell E. Solt is the former Director of Investor Relations of West Marine, Inc. (boating supplies and accessories specialty retailer) where he also previously served as the Executive Vice President and Chief...

  • Page 20
    ... 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 executive vice president or senior vice president...

  • Page 21
    ... / Corporate Governance Committee, Big Lots, Inc., 300 Phillipi Road, Columbus, Ohio 43228. The written notice must include the prospective nominee's name, age, business address, principal occupation, ownership of our common shares, information that would be required under the rules of the SEC in...

  • Page 22
    ... 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...

  • Page 23
    ... / 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...

  • Page 24
    ... common shares). The fiscal 2014 restricted stock awards were made in June 2014 under the Big Lots 2012 Long-Term Incentive Plan ("2012 LTIP"). The restricted stock awarded to the non-employee directors in fiscal 2014 will vest on the earlier of (1) the trading day immediately preceding the Annual...

  • Page 25
    ... the opening price and the closing price of our common shares on the NYSE on the grant date. As of January 31, 2015, each individual included in the table held 2,550 shares of restricted stock. Prior to fiscal 2008, the non-employee directors received an annual stock option award under the Big Lots...

  • Page 26
    ... all directors and executive officers as a group: 372,813. In its Schedule 13G/A filed on February 11, 2015, 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, 2014, had sole voting...

  • Page 27
    .... Johnson, our Executive Vice President, Chief Financial Officer; Ms. Bachmann, our Executive Vice President, Chief Operating Officer; Mr. Chene, our Executive Vice President, Chief Merchandising Officer; and Mr. Schlonsky, our Senior Vice President, human Resources and Corporate Secretary. - 15 -

  • Page 28
    ...focuses our named executive officers on increasing our revenues and controlling our costs. The fiscal 2014 annual incentive awards were structured so that the target bonus would be earned only if we achieved the operating profit for fiscal 2014 projected in our annual corporate operating plan. Based...

  • Page 29
    ... each annual vesting date (except in the case of death, disability, retirement, involuntary termination or constructive termination). • The following graphs show the percentage of Mr. Campisi's and our other named executive officers' total target compensation for fiscal 2014 that was at-risk or...

  • Page 30
    ... our employment agreements. 2014 Annual Meeting Results and Shareholder Engagement At our 2014 annual meeting of shareholders, we held an advisory vote of our shareholders regarding the fiscal 2013 compensation of our named executive officers as disclosed in our 2014 Proxy Statement (the "2014 say...

  • Page 31
    ... Team; determined that a bonus was not payable under the 2006 Bonus Plan as a result of corporate performance in fiscal 2013; and determined, for the named executive officers, that the second triggers for their fiscal 2011, fiscal 2012, and fiscal 2013 time-vested restricted stock awards were not...

  • Page 32
    ... base salary and equity awards provided to our named executive officers for fiscal 2014. • Mr. Campisi: (1) Implemented and executed a multi-year strategic planning process designed to better meet the expectations of our customers, improve the corporate culture for our employees and create value...

  • Page 33
    ...management system in our distribution centers; and Development and implementation of a strategic plan for enhancing our customers shopping experience in our stores. • Mr. Chene: (1) As Mr. Chene joined the company at the end of fiscal 2013, the Committee did not adjust his salary in fiscal 2014...

  • Page 34
    ... of our gross profit margin), geographic location (preference for companies in the Columbus, Ohio area with whom we compete for talent), inventory turns (cost of goods sold divided by average inventory turns; within approximately 50 points of our score), gross margin return on investment (gross...

  • Page 35
    ... for Fiscal 2014 The Committee annually reviews and establishes the salary for each named executive officer. Salary serves as a short-term retention tool. A minimum salary for Mr. Campisi and Ms. Bachmann is set forth in his or her respective employment agreement, as described below in the "Elements...

  • Page 36
    ... goals and our annual corporate operating plan may vary significantly from year to year. The payout percentages for our named executive officers for fiscal 2014 were established at the discretion of the Committee and other outside directors, subject, in the case of Mr. Campisi and Ms. Bachmann, to...

  • Page 37
    ...grants. The Committee undertook the following process to determine the size of the equity awards granted to our named executive officers for fiscal 2014: • The Committee reviewed an estimate prepared by management of the number of common shares to be subject to equity awards granted during fiscal...

  • Page 38
    ... trading day after we filed with the SEC our Current Report on Form 8-K reflecting the attainment of the performance measure. Personal Benefits and Perquisites We provide our named executive officers with certain benefits that are available to nearly all salaried employees, including paid group term...

  • Page 39
    ... of a succession plan. During Mr. Campisi's first 22 months, he recruited and effectively integrated a significant portion of our Leadership Team by hiring experienced merchandising and marketing leaders, who have helped rebuild our corporate culture centered around our associates and cross...

  • Page 40
    ... his employment for good reason to the severance payments and benefits provided to our Chief Executive Officer upon such termination events under the Big Lots Executive Severance Plan adopted on August 28, 2014 (the "Severance Plan"). The New Employment Agreement also specifically addresses the...

  • Page 41
    ... benefits provide our named executive officers with important protections that we believe are necessary to attract and retain executive talent. While the Committee considers the potential payments upon termination or change in control annually when it establishes compensation for the applicable year...

  • Page 42
    ...of our executive compensation program, is limited to certain employees whose hire date precedes April 1, 1994. Mr. Schlonsky is the only named executive officer eligible to participate in the Pension Plan or Supplemental Pension Plan. See the "Pension Benefits - Pension Plan and Supplemental Pension...

  • Page 43
    ...the terms of the Big Lots 2005 Long-Term Incentive Plan ("2005 LTIP") and 2012 LTIP, the grant date of equity awards must be the later of the date the terms of the award are established by corporate action or the date specified in the award agreement. Consistent with prior years, in fiscal 2014, the...

  • Page 44
    ...Executive Vice President, Chief Financial Officer Lisa M. Bachmann, Executive Vice President, Chief Operating Officer Richard J. Chene, Executive Vice President, Chief Merchandising Officer (8) Michael A. Schlonsky, Senior Vice President, Human Resources and Corporate Secretary (8) Year (b) Salary...

  • Page 45
    ...March 11, 2014, $37.11 per common share - the average of the opening price and the closing price of our common shares on the NYSE on the grant date, as determined in accordance with ASC 718 and the terms of the 2012 LTIP). The amounts in this column reflect the aggregate grant date fair value of the...

  • Page 46
    ... 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 2014 table. Big Lots 2006 Bonus Plan The 2006 Bonus Plan provides for cash compensation...

  • Page 47
    ...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...

  • Page 48
    ... units awarded to Mr. Campisi in fiscal 2013 vest in one-third increments if the market price of our common shares appreciates, for a period of 20 consecutive trading days, to prices that are 110%, 120% and 130% of the grant date market value of $37.13 (i.e., appreciate to $40.84, $44.56 and $48...

  • Page 49
    ...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...

  • Page 50
    ... the end of fiscal 2014, all equity awards outstanding under our equity compensation plans for each named executive officer. Option Awards Stock Awards Equity Incentive Equity Plan Incentive Awards: Plan Market or Payout Awards: Number of Value of Unearned Unearned Shares, Shares, Units or Units or...

  • Page 51
    ... 2013 vests in one-third increments if the market price of our common shares appreciates, for a period of 20 consecutive trading days, to prices that are 110%, 120% and 130% of the grant date market value of $37.13. The actual number of PSUs awarded to each named executive officer in fiscal 2014...

  • Page 52
    ... benefit payable upon retirement under the Pension Plan and the Supplemental Pension Plan for those working until age 65 was, and continues to be, equal to 1% of the average annual compensation during the participant's highest compensated five consecutive year period of employment with Big Lots...

  • Page 53
    ... Accounting Policies and Estimates - Pension" section of the MD&A in our Form 10-K regarding the interest rate, mortality rate and other assumptions underlying the calculations in this table. Plan Name (b) Number of Years Credited Service (#) (c) Present Value of Accumulated Benefit ($) (d) Payments...

  • Page 54
    ...If a named executive officer who is a party to an employment agreement with us (Mr. Campisi and Ms. Bachmann) is terminated for cause or due to his or her voluntary resignation, we have no obligation under the employment agreement to pay any unearned compensation or to provide any future benefits to...

  • Page 55
    ... or before February 1, 2014 and, upon achievement of the applicable performance trigger, prorated vesting of all unvested, outstanding RSU awards granted to the named executive officer. • The New Employment Agreement would also entitle Mr. Campisi to these payments and benefits in the event he...

  • Page 56
    ...and Ms. Bachmann to (1) a lump-sum payment equal to 200% of the highest annual base salary and maximum annual incentive award in effect during the three months before and the 24 months after the change in control and (2) continued coverage under our health plans for up to two years after the date of...

  • Page 57
    ... 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 2014.) Change in Control Described Generally, pursuant to the 2005 LTIP, the 2012 LTIP, the Supplemental Savings Plan...

  • Page 58
    ... "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 2014 (i.e., the closing market price of our common shares on the final trading day of fiscal 2014 less the applicable exercise price) and...

  • Page 59
    ... a Change Cause Cause Termination Disability Death 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...

  • Page 60
    ... a Change Cause Cause Termination Disability Death 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...

  • Page 61
    ... our annual corporate operating plan. Based on our $222,278,299 operating profit in fiscal 2014, our named executive officers earned an annual incentive award for fiscal 2014 equal to 110% of their respective target bonus. Performance Share Unit Awards. For the first time, all of our named executive...

  • Page 62
    ... 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 2015 Annual Meeting of Shareholders pursuant to Item 402 of Regulation...

  • Page 63
    .... 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...

  • Page 64
    ... 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 2014 be included in our Form 10-K for filing with the SEC. Members...

  • Page 65
    ... qualifying ownership of at least 3% of the Company's outstanding common shares for at least the previous three years would be permitted to include a specified number of director nominees in the Company's proxy materials for its annual meeting of shareholders. Calculation of Qualifying Ownership To...

  • Page 66
    ... proxy materials must be received no earlier than 150 days and no later than 120 days before the anniversary of the date that the Company issued its proxy statement for the previous year's annual meeting of shareholders. Information Required of All Nominating Shareholders Each shareholder seeking to...

  • Page 67
    ...following two annual meetings. Supporting Statement Nominating shareholders would be permitted to include in the proxy statement a 500-word statement in support of their nominee(s). The Company may omit any information or statement that it, in good faith, believes would violate any applicable law or...

  • Page 68
    ... (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...

  • Page 69
    ...") before the anniversary of the date that the corporation issued its proxy statement for the previous year's annual meeting of shareholders; provided, however, that if the corporation did not hold an annual meeting during the previous year, or if the date of the annual meeting has changed by more...

  • Page 70
    ... opportunity for profit from and risk of loss on) such shares; provided that the number of shares calculated in accordance with clauses (i) and (ii) shall not include any shares (A) sold by such shareholder or any of its affiliates in any transaction that has not been settled or closed, (B) borrowed...

  • Page 71
    ... owns, and has owned continuously for the Minimum holding Period, the Required Shares; (ii) the Eligible Shareholder's agreement to provide, within five business days after the record date for the annual meeting, written statements from such record holder and intermediaries verifying the Eligible...

  • Page 72
    ... the requirement to file a Schedule 13D is applicable to the Eligible Shareholder), and the Eligible Shareholder's agreement that it shall notify the corporation in writing within five business days after the record date for the annual meeting of any such agreement, arrangement or understanding...

  • Page 73
    ... of the corporation or service or action as a director of the corporation; (iii) who is not independent under the listing standards of the principal U.S. exchange upon which the common shares of the corporation are listed, any applicable rules of the SEC and any publicly disclosed standards used by...

  • Page 74
    ...group of shareholders that together is such Eligible Shareholder) provides information to the corporation in respect of such nomination that was untrue in any material respect or omitted to state a material fact necessary in order to make the statement made, in light of the circumstances under which...

  • Page 75
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  • Page 77
    ... 28512, Columbus, Ohio (Address of principal executive offices) (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...

  • Page 78
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  • Page 79
    ... About Market Risk Financial Statements and Supplementary Data Changes in and Disagreements With Accountants on Accounting and Financial Disclosure Controls and Procedures Other Information Part III Item 10. Item 11. Item 12. Item 13. Item 14. Directors, Executive Officers and Corporate Governance...

  • Page 80
    ... Stores Corporation. In July 2011, we acquired 100% of the outstanding shares of Liquidation World Inc. (subsequently named Big Lots Canada, Inc.). In 2014, we completed the wind down and dissolution of Big Lots Canada, Inc. Our principal executive offices are located at 300 Phillipi Road, Columbus...

  • Page 81
    ...Operating Strategy - Real Estate" in the accompanying MD&A in this Form 10-K. In addition, in 2011, we acquired 89 stores in Canada as a result of our acquisition of Liquidation World Inc. (subsequently named Big Lots Canada, Inc.), which are not included in the above table. During the first quarter...

  • Page 82
    ... details our U.S. stores by state at January 31, 2015: Alabama Arizona Arkansas California Colorado Connecticut Delaware Florida Georgia Idaho Illinois Indiana Iowa Kansas Kentucky Louisiana 30 39 12 159 19 13 5 105 55 6 35 46 3 8 40 24 Maine Maryland Massachusetts Michigan Minnesota Mississippi...

  • Page 83
    ...in "Item 1A. Risk Factors" of this Form 10-K. 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...

  • Page 84
    ... profit realized in our fourth fiscal quarter. In addition, our quarterly net sales and operating profits can be affected by the timing of new store openings and store closings, the timing of advertising, and the timing of certain holidays. We historically receive a higher proportion of merchandise...

  • Page 85
    ... 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...

  • Page 86
    ... 10-K, we compete for customers, products, employees, real estate, and other aspects of our business with a number of other companies. Some of our competitors have greater financial, broader distribution (e.g., more stores and a current online presence), marketing, and other resources than us. It is...

  • Page 87
    ...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 the Company's records and intellectual property. We also utilize third party service providers in connection...

  • Page 88
    ... economic conditions and weather patterns of four states (Ohio, Texas, California, and Florida) are important as approximately 33% of our current stores operate and 35% of our 2014 net sales occurred in these states. Changes in federal or state legislation and regulations, including the effects of...

  • Page 89
    ...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...

  • Page 90
    ...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...

  • Page 91
    ... at January 31, 2015. The 55 owned stores are located in the following states: State Arizona California Colorado Florida Louisiana Michigan New Mexico Ohio Texas Total Stores Owned 2 39 3 3 1 1 2 1 3 55 Store leases generally obligate us for fixed monthly rental payments plus the payment, in most...

  • Page 92
    ... manner. The number of owned distribution centers and warehouse space and the corresponding square footage of the facilities by state at January 31, 2015, were as follows: State Ohio California Alabama Oklahoma Pennsylvania Total Corporate Office We own the facility in Columbus, Ohio that serves as...

  • Page 93
    ...and Home Electronics of Fred Meyer's Corporation, a department store retailer. Lisa M. Bachmann is responsible for store operations, information technology, merchandise planning and allocation, and distribution and transportation services. Ms. Bachmann was promoted to Executive Vice President, Chief...

  • Page 94
    ... 27, 2014 December 28, 2014 - January 31, 2015 Total (a) Total Number of Shares Purchased 225 - - 225 $ (d) Approximate (c) Total Number of Dollar Value of Shares Purchased Shares that May (b) Average as Part of Publicly Yet Be Purchased Price Paid Announced Plans Under the Plans or per Share or...

  • Page 95
    ... 31, 2015, 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 January 29, 2011, January 28, 2012, February 2, 2013, February 1, 2014 and January 31, 2015. The...

  • Page 96
    ... 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...

  • Page 97
    ... of Liquidation World Inc. (subsequently named Big Lots Canada, Inc.), whose results are included in the consolidated results since that date. In the first quarter of 2014, we ceased the operations of Big Lots Canada, Inc.; therefore, the results of operations for all fiscal years presented...

  • Page 98
    ... to quarter depending on various factors such as the timing of new or closed stores, the timing and extent of advertisements and promotions, and the timing of holidays. We expect the Christmas holiday selling season to continue to produce a significant portion of our sales and operating profits. If...

  • Page 99
    ... we have a competitive advantage in pricing and/or sourcing. We believe our merchandise categories - Food, Consumables, Soft Home, Hard Home, Furniture & Home Décor, Seasonal, and Electronics & Accessories - align our business with how our core customer shops our stores. Our merchandise categories...

  • Page 100
    ...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 store, which allows us to provide a high-quality product at a competitive price. During 2014, we rolled out a third party lease-to...

  • Page 101
    ... advertising are to promote our brand and, from time to time, promote products or special discounts in our stores. Our printed advertising circulars and our in-store signage initiatives focus on promoting our value proposition on our unique merchandise offerings. Shopping Experience During 2013...

  • Page 102
    ...,000 selling square feet is appropriate for us to provide our core customers with a positive shopping experience and properly present a representative assortment of products in the merchandise categories that our core customer finds meaningful. Accordingly, when we relocate or open new stores in the...

  • Page 103
    ...experienced net sales and comp increases in many departments, with the primary driver being improved quality, brand, fashion, and value. The Furniture & Home Décor category experienced a positive and improving comp during 2014, primarily as a result of the completion of the roll-out of our lease-to...

  • Page 104
    ... center operations, and fluctuating commodity prices, such as diesel fuel, which directly affects our outbound transportation cost. For 2015, we are forecasting an expense rate slightly lower than the rate achieved in 2014. Store expenses, distribution and transportation expenses, and advertising...

  • Page 105
    ... and freezers and point-of-sale system replacement programs, development of our e-commerce technologies, maintenance capital for our stores, distribution centers, and corporate offices, and the construction and opening of 15 new stores. Using this assumption and the run rate of depreciation on our...

  • Page 106
    ...week of sales in 2013 compared to 2012, as 2012 was a 53-week retail calendar year. Our comps are calculated by using all stores that were open for at least fifteen months. This decline was partially offset by an increase of $43.9 million, principally due to operating a higher average number of open...

  • Page 107
    ... and share-based compensation expense of $4.7 million, and a gain on the sale of real estate of $3.6 million. The increase in store occupancy expenses was primarily the result of an increase in the average number of stores operating per month in 2013 as compared to 2012. The increase in distribution...

  • Page 108
    ... 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...

  • Page 109
    ... to 24 new stores in 2014 from 55 new stores in 2013. Additionally, we received greater proceeds on the sale of property and equipment in 2013, as we sold an owned store location, as compared to 2014, when we had no similar real estate transaction. Cash used in financing activities increased...

  • Page 110
    ... retail store and office operating leases are $944.7 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...

  • Page 111
    ... of the timing of future payments. Our closed store lease termination cost payments are based on contractual terms. Off-Balance Sheet Arrangements Not applicable. CRITICAL ACCOUNTING POLICIES AND ESTIMATES The preparation of financial statements in conformity with accounting principles generally...

  • Page 112
    ... 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...

  • Page 113
    ... estimated the fair value of our stock options, granted in prior years, using a binomial model. The binomial model takes into account estimates, assumptions, and judgments about our stock price volatility, our dividend yield rate, the risk-free rate of return, the contractual term of the option, the...

  • Page 114
    ... in October 2014. These new mortality tables projected that our participants would receive benefits for a longer duration. Additionally, we performed the annual update to our discount rate estimate based on the current market, which resulted in a 1.7% decrease at January 31, 2015 as compared...

  • Page 115
    ... 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...

  • Page 116
    ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders of Big Lots, Inc. Columbus, Ohio We have audited the internal control over financial reporting of Big Lots, Inc. and subsidiaries (the "Company") as ...

  • Page 117
    REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders of Big Lots, Inc. Columbus, Ohio We have audited the accompanying consolidated balance sheets of Big Lots, Inc. and subsidiaries (the "Company") as of January 31, 2015 and February 1, 2014, and the ...

  • Page 118
    BIG LOTS, INC. AND SUBSIDIARIES Consolidated Statements of Operations (In thousands, except per share amounts) 2014 Net sales Cost of sales (exclusive of depreciation expense shown separately below) Gross margin Selling and administrative expenses Depreciation expense Operating profit Interest ...

  • Page 119
    BIG LOTS, INC. AND SUBSIDIARIES Consolidated Statements of Comprehensive Income (In thousands) 2014 Net income Other comprehensive income (loss): $ 114,276 $ 5,022 884 (7,051) (1,145) 113,131 $ 2013 125,295 $ (3,589) 1,005 2,403 (181) 125,114 $ 2012 177,121 (383) 1,403 1,169 2,189 179,310 ...

  • Page 120
    ...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: Preferred shares - authorized 2,000 shares; $0.01 par value...

  • Page 121
    ...) Common Shares Balance - January 28, 2012 Comprehensive income Purchases of common shares Exercise of stock options Restricted shares vested Tax benefit from share-based awards Share activity related to deferred compensation plan Share-based employee compensation expense Balance - February 2, 2013...

  • Page 122
    ... from sale of property and equipment Other Net cash used in investing activities Financing activities: Net (repayments of) 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...

  • Page 123
    ... 31, 2015, we operated 1,460 stores in 48 states. Our goal is to exceed our core customer's expectation by providing a product assortment of valuepriced merchandise that is meaningful to our core customer, combined with the quality and ease of the shopping experience. Our value-priced merchandise is...

  • Page 124
    ... 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...

  • Page 125
    ...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...

  • Page 126
    ... closed stores as discontinued operations, we report net sales, gross margin, and related operating costs that are directly related to and specifically identifiable with respect to the stores' operations identified as discontinued operations. Certain corporate-level charges, such as general office...

  • Page 127
    ... upon historical redemption patterns. For 2014, 2013, and 2012, we recognized in net sales on our consolidated statements of operations breakage of $0.2 million, $0.2 million, and $0.5 million, respectively, related to unredeemed gift card and merchandise credit balances that had aged at least four...

  • Page 128
    ... 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...

  • Page 129
    Share-Based Compensation Share-based compensation expense is recognized in selling and administrative expense in our consolidated statements of operations for all awards that we expect to vest. We estimate forfeitures based on historical information. Stock Options We value and expense stock options ...

  • Page 130
    ... payments of borrowings under the bank credit facility Non-cash activity: Assets acquired under capital leases Accrued property and equipment Reclassifications Canadian Operations During the first quarter of 2014, we executed the remainder of our wind down plan and ceased the operations of Big Lots...

  • Page 131
    ... in 2014, 2013, and 2012, respectively. The charges in 2014 were primarily related to our corporate aircraft. During 2014, we made the decision to no longer own and operate corporate aircraft and entered into sales agreements for both our corporate aircraft. We sold our older corporate aircraft...

  • Page 132
    ... of our retail stores and certain transportation, information technology and other office equipment. 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...

  • Page 133
    Future minimum rental commitments for leases, excluding closed store leases, real estate taxes, CAM, and property insurance, at January 31, 2015, were as follows: Fiscal Year 2015 2016 2017 2018 2019 Thereafter Total leases $ (In thousands) $ 248,122 208,356 165,037 128,974 85,542 108,629 944,660...

  • Page 134
    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) 2014 54,935 617 55,552 2013 57,415 543 57,958 2012 59,852 624 60,476 Weighted-average common shares outstanding: Basic Dilutive...

  • Page 135
    ... to determine the terms of each award. Nonqualified stock options granted to employees under the 2012 LTIP, the exercise price of which may not be less than the fair market value of the underlying common shares on the grant date, generally expire on the earlier of: (1) the seven year term set by the...

  • Page 136
    ...years 2012, 2013, and 2014 is as follows: Weighted Average Exercise Price Per Share 28.36 43.23 23.67 40.18 34.49 35.80 22.87 38.97 34.88 - 30.67 39.19 37.59 37.55 36.97 Weighted Average Remaining Contractual Term (years) Aggregate Intrinsic Value (000's) Number of Options Outstanding stock options...

  • Page 137
    ... on the opening of our first trading window five years after the grant date of the award. If we meet a higher financial performance objective and the grantee remains employed by us, the restricted stock will vest on the first trading day after we file our Annual Report on Form 10-K with the SEC for...

  • Page 138
    ... the end of the performance period, the performance share units will vest on the first trading day after we file our Annual Report on Form 10-K for the last year in the performance period. In 2014, 2013, and 2012, we granted to each non-employee member of our Board of Directors a restricted stock...

  • Page 139
    ...combined annual service cost and interest cost for each year. The weighted-average assumptions used to determine net periodic pension expense were: 2014 Discount rate Rate of increase in compensation levels Expected long-term rate of return 5.0% 3.0% 6.0% 2013 4.6% 3.5% 5.1% 2012 5.0% 3.5% 5.5% The...

  • Page 140
    ... year Service cost Interest cost Plan amendments Benefits and settlements paid Actuarial loss (gain) Projected benefit obligation at end of year Change in plan assets: Fair market value at beginning of year Actual return on plan assets Employer contributions Benefits and settlements paid Fair market...

  • Page 141
    ... 31, 2015 $ $ 72,659 $ 65,627 55,292 $ February 1, 2014 Projected benefit obligation Accumulated benefit obligation Fair market value of plan assets We elected not to make a discretionary contribution to the Pension Plan in 2014 or 2013. Our funding policy of the Pension Plan is to make annual...

  • Page 142
    ...regulations. For 2014, 2013, and 2012, we expensed $5.9 million, $5.7 million, and $5.6 million, respectively, related to our matching contributions. In connection with our nonqualified deferred compensation plan, we had liabilities of $17.2 million and $21.4 million at January 31, 2015 and February...

  • Page 143
    ...the statutory federal income tax rate and the effective income tax rate for continuing operations was as follows: 2014 Statutory federal income tax rate Effect of: State and local income taxes, net of federal tax benefit Work opportunity tax and other employment tax credits Valuation allowance Other...

  • Page 144
    ... (including a net operating loss carryforward) of Big Lots Canada, Inc. by a valuation allowance. Big Lots Canada, Inc. had an accumulated retained deficit in 2013, thus we did not provide for income taxes in the United States on undistributed earnings. The deferred tax asset related to the impaired...

  • Page 145
    ...upon the exercise of non-qualified stock options and the vesting of restricted stock. Tax benefits of $1.2 million, $0.2 million, and $8.1 million in 2014, 2013, and 2012, respectively, were credited directly to shareholders' equity related to share-based compensation deductions in excess of expense...

  • Page 146
    ... of Ohio against us and each of the current and former outside directors and executive officers named in the 2012 shareholder derivative lawsuit. The plaintiff's complaint generally alleges that the individual defendants traded in our common shares based on material, nonpublic information concerning...

  • Page 147
    ...reported. We use letters of credit, which amounted to $55.1 million at January 31, 2015, 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...

  • Page 148
    ..., and primarily related to fair value adjustments on our intangible assets and liabilities associated with the acquired operating leases. Our entire balance of goodwill was related to our acquisition of Big Lots Canada, Inc. During the third and fourth quarters of 2013, our senior management team...

  • Page 149
    ...$0.5 million for severance cost reducing the liability to zero at January 31, 2015. We anticipate no additional charges associated with the wind down of the operations of our wholesale business. NOTE 13 - DISCONTINUED OPERATIONS Our discontinued operations for 2014, 2013, and 2012, were comprised of...

  • Page 150
    ... 2013, which included the closing of our Canadian distribution centers, and completed the wind down activities during the first quarter of 2014, which included the closing of our Canadian stores and corporate offices. Therefore, we determined the results of our Canadian operations should be reported...

  • Page 151
    ...to Chapter 11 of title 11 of the United States Code. Based on information provided to us by KB-II, we believe that we continue to have KB Lease Obligations with respect to certain KB Toys stores ("KB-II Bankruptcy Lease Obligations"). In the fourth fiscal quarter of 2008, we recorded a charge in the...

  • Page 152
    ...over the committed lease term. NOTE 16 - BUSINESS SEGMENT DATA We use the following seven merchandise categories, which match our internal management and reporting of merchandise net sales: Food, Consumables, Soft Home, Hard Home, Furniture & Home Décor, Seasonal, and Electronics & Accessories. The...

  • Page 153
    ... data for 2014 and 2013 is as follows: Fiscal Year 2014 (In thousands, except per share amounts) (a) First Second Third Fourth Year 5,177,078 2,043,954 136,661 (22,385) 114,276 Net sales Gross margin Income (loss) from continuing operations Income (loss) from discontinued operations Net income...

  • Page 154
    ... Framework). Based on this assessment, management, including the Chief Executive Officer and Chief Financial Officer, concluded that we maintained effective internal control over financial reporting as of January 31, 2015. Our independent registered public accounting firm, Deloitte & Touche LLP, has...

  • Page 155
    ... 10. Directors, Executive Officers and Corporate Governance The information contained under the captions "Proposal One: Election of Directors," "Governance," and "Stock Ownership" in the 2015 Proxy Statement, with respect to directors, shareholder nomination procedures, the code of ethics, the Audit...

  • Page 156
    ...Committee Disclosure - Audit and Non-Audit Services Pre-Approval Policy" and "Audit Committee Disclosure - Fees Paid to Independent Registered Public Accounting Firm" in the 2015 Proxy Statement, with respect to the Audit Committee's pre-approval policies and procedures and the fees paid to Deloitte...

  • Page 157
    ... Financial Statements, Financial Statement Schedules and Exhibits (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...

  • Page 158
    ... our Form 8-K dated May 29, 2014). Big Lots Savings Plan (incorporated herein by reference to Exhibit 10.8 to our Form 10-K for the year ended January 29, 2005). Big Lots Supplemental Savings Plan, as amended and restated effective January 1, 2014. Big Lots Defined Benefit Pension Plan (incorporated...

  • Page 159
    ... 28, 2014). Form of Big Lots Executive Severance Plan Acknowledgement and Agreement (incorporated by reference to Exhibit 10.2 to our Form 8-K dated August 28, 2014). Credit Agreement among Big Lots, Inc., Big Lots Stores, Inc. and Big Lots Canada, Inc., as borrowers, the Guarantors named therein...

  • Page 160
    ... of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on this 31st day of March 2015. BIG LOTS, INC. By: /s/ David J. Campisi David J. Campisi Chief Executive Officer and President Pursuant to the requirements of the Securities...

  • Page 161
    ..., 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...

  • Page 162
    ... control over financial reporting, appearing in this Annual Report on Form 10-K of the Company for the year ended January 31, 2015. 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...

  • Page 163
    ... and in any and all capacities stated below, and to cause to be filed with the Securities and Exchange Commission (the "Commission"), the Company's Annual Report on Form 10-K (the "Form 10-K") for the fiscal year ended January 31, 2015, and likewise to sign and file with the Commission any and all...

  • Page 164
    ... David J. Campisi, certify that: 1. 2. I have reviewed this annual report on Form 10-K of Big Lots, Inc.; 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...

  • Page 165
    ... and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Dated: March 31, 2015 By: /s/ Timothy A. Johnson Timothy A. Johnson Executive Vice President and Chief Financial Officer

  • Page 166
    ... 18 of the United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and accompanies the annual report on Form 10-K (the "Report") for the year ended January 31, 2015, of Big Lots, Inc. (the "Company"). I, David J. Campisi, Chief Executive Officer and President of the...

  • Page 167
    ... United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and accompanies the annual report on Form 10-K (the "Report") for the year ended January 31, 2015, of Big Lots, Inc. (the "Company"). I, Timothy A. Johnson, Executive Vice President and Chief Financial Officer...

  • Page 168
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  • Page 169
    ... Trading Symbol Company Information Headquartered in Columbus, Ohio, Big Lots Inc. (NYSE: BIG) is a unique, nontraditional discount retailer operating approximately 1,400 Big Lots stores in 48 states with product assortments in the merchandise categories of Food, Consumables, Furniture & Home Decor...

  • Page 170
    300 Phillipi Rd. | Columbus, OH 43228 | 614.278.6800 www.biglots.com