Big Lots 2014 Annual Report Download - page 28

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Executive Summary
Objectives of Executive Compensation Program
Through a balanced mix of salary, annual cash incentive awards and equity awards, the Committee and the
Board seek to promote three primary objectives: (1) align the interests of executives and shareholders through
performance-linked compensation; (2) motivate executives to contribute to our success and reward them for their
performance; and (3) attract and retain talented executives by paying compensation that is competitive with the
compensation paid by the companies in our comparator groups.
Company Performance for Fiscal 2014
In fiscal 2014, we focused on improving our financial and operating performance. We delivered solid and improved
operating and financial results in fiscal 2014, including:
• positive comparable store sales in all four fiscal quarters and a 1.8% increase in comparable store sales
for fiscal 2014;
• an increase of $52 million in net sales, an increase of 1%;
• $2.46 in diluted earnings per share from continuing U.S. operations, compared to $2.44 diluted earnings
per share in fiscal 2013;
• an increase of 30 basis points in gross margin rate;
• return on invested capital (i.e., net operating profit after-tax divided by invested capital) (“ROIC”)
of 14.9%;
• total shareholder return of 73%; and
• $250 million returned to shareholders through share repurchases and approximately $28 million
returned to shareholders through dividends.
In fiscal 2014, our operating profit declined on a relative basis from fiscal 2013 (from $230.1 million to
$224.5 million) but exceeded the amount projected by the Board in our fiscal 2014 corporate operating plan.
We anticipated a decline in our operating profit as a result of the implementation of our strategic plan, which is
designed to create long-term value for our shareholders.
Named Executive Officer Compensation for Fiscal 2014
The principal elements of our executive compensation program remained the same in fiscal 2014: salary; annual
cash incentive awards; and equity awards. However, given the commitment of the Committee and other outside
directors to a pay-for-performance philosophy and our focus on improving our financial and operating performance
in fiscal 2014, the Committee and other outside directors structured a significant portion of the compensation
awarded to our named executive officers for fiscal 2014 as “at risk” or “variable” and dependent on our
performance and/or the value of our common shares. The Committee believes this emphasis on at-risk and variable
compensation advances the objectives of our executive compensation program. Specifically, the at-risk or variable
compensation awarded to our named executive officers in fiscal 2014 included:
• Annual Cash Incentive Awards. Each named executive officer was eligible to receive a cash
performance bonus based solely on our operating profit. The Committee and other outside directors
selected operating profit as the sole financial measure because they believe it focuses our named
executive officers on increasing our revenues and controlling our costs. The fiscal 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 on our $222,278,299 operating
profit in fiscal 2014, as adjusted and described below in the “Elements of our Executive Compensation
for Fiscal 2014 – Annual Incentive Award for Fiscal 2014” section of the CD&A, our named executive
officers earned an annual incentive award for fiscal 2014 equal to 110% of their respective target bonus.