Big Lots 2015 Annual Report Download

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2015 ANNUAL REPORT

Table of contents

  • Page 1
    2 0 15 A N N U A L R E P O R T

  • Page 2
    ... R M AT I O N Headquartered in Columbus, Ohio, Big Lots /ŶĐ͘;Ez 1,450 Big Lots stores in 47 states with product assortments in the merchandise categories of Food, Consumables, Furniture, Seasonal Accessories. Our vision is to be recognized for providing an outstanding shopping growth for our...

  • Page 3
    ...leveraged the learnings from the last two years to make the strategies of the Jennifer pillar played an important Merchandising: K Y&s;Y s KtE>Ä,ŶĚt/EE and looking to the future and how we will need to go dŚĞKtE W d dŚĞt/EE t D d D Shop Big Lots First Z t K we...

  • Page 4
    ...ZhE͘tÄžŬŶŽǁ:ĞŶŶŝĨĞƌǁÄ,ŶƚƐƚŽďƵLJ ĨƌŽŵƵƐŽŶůŝŶĞ͕Ä,ŶĚǁĞÅšÄ,ǀĞŽŶĞĐŚÄ,ŶĐĞƚŽŐĞƚŝƚƌŝŐŚƚ͘ ,ĞƌĞdžƉĞƌŝĞŶĐĞŵĞÄ,ŶƐĞǀĞƌLJƚŚŝŶŐ͕ƐŽǁĞǁŝůůďĞǀĞƌLJ measured in our rollout and future plans...

  • Page 5
    ...is not business as usual at Big Lots WW relevant by fundamentally improving our business with EKd lie ahead. K WŝůůÄ,ÆŒ d WW t t W at the beginning of the year D t t t K W " Each of the pillars of the SPP share B I G L O T S, I N C. 2 015 A N N U A L R E P O RT

  • Page 6
    ...Ψ ϱϬ͕ϬϬϬ 2015 2014 2013 Ä,ƐŚ&ůŽǁÄ,ÆšÄ, ...Store Data ^ƚŽƌĞƐŽƉĞŶÄ,ÆšĞŶĚŽĨƚŚĞĮƐĐÄ,ůLJĞÄ,ÆŒ ŽŵƉÄ,ÆŒÄ,ďůĞƐƚŽƌĞƐÄ,ůĞƐŝŶĐƌĞÄ,ƐĞ;ĚĞĐƌĞÄ,ƐĞͿ Average sales per store...

  • Page 7
    ... 2015 ;ΨŝŶƚŚŽƵƐÄ,ŶĚƐ͕ except per share amounts) Reported ;'WÍ¿ ĚũƵƐƚŵĞŶƚ to exclude loss ĐŽŶƟŶŐĞŶĐLJ ĚũƵƐƚŵĞŶƚ to exclude pension ƚĞƌŵŝŶÄ,ƟŽŶ costs Unaudited ĚũƵƐƚĞĚZĞƐƵůƚƐ ;ŶŽŶͲ'WÍ¿ Reported ;'WÍ¿ Fiscal Year 2013...

  • Page 8
    DIRECTORS & EXECUTIVES KĸĐĞƌΘW sŝĐĞW Lisa M. Bachmann Board of Directors :ĞīƌĞLJW W K E sŝĐĞW ŚŝĞĨD K KĸĐĞƌ d K KĸĐĞƌ D ,ƵŵÄ,ŶZ K KĸĐĞƌΘW ^ĞŶŝŽƌsŝĐĞW D D DÄ,ŶÄ,ŐĞƌ :Ä,ŵĞƐZ W ...

  • Page 9
    ...at our corporate offices located at 300 Phillipi Road, Columbus, Ohio, on May 26, 2016, 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...

  • Page 10

  • Page 11
    ... to the 2016 Annual Meeting of Shareholders of Big Lots, Inc. The meeting will be held at our corporate offices located at 300 Phillipi Road, Columbus, Ohio, on May 26, 2016, beginning at 9:00 a.m. Eastern Time, for the following purposes: 1. 2. 3. 4. To elect as directors the nine nominees named in...

  • 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 ...SHAREHOLDER PROPOSALS ...PROXY SOLICITATION COSTS ...OTHER ...

  • Page 13
    ...("Annual Meeting"). The Annual Meeting will be held at our corporate offices located at 300 Phillipi Road, Columbus, Ohio at 9:00 a.m. Eastern Time. On or about April 12, 2016, we began mailing to our shareholders of record at the close of business on March 28, 2016 a Notice of Internet Availability...

  • Page 14
    ... 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...

  • Page 15
    ... 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 materials and Notice of Internet Availability. Upon request, we will promptly deliver a separate copy...

  • Page 16
    ...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...

  • Page 17
    ... votes cast for or against or withheld from a director nominee's election at the Annual Meeting. See the "Governance - Majority Vote Policy and Standard" section of this Proxy Statement for more information about our majority vote policy and standard. Other Matters For purposes of Proposal Two...

  • Page 18
    ... of Kohl's Corporation (department store retailer). Age: 60 Director since: 2013 Committees: • none Qualifications: Mr. Campisi's qualifications to serve on the Board include his day-today leadership as Chief Executive Officer and President of Big Lots, strong leadership skills, proven management...

  • Page 19
    ... and the social responsibility committee. Age: 58 Director since: 2012 • Compensation • Nominating / Corporate Governance 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...

  • Page 20
    ... and corporate governance and nominating committee. Age: 56 Director since: 2015 Committees: • Audit PHILIP E. MALLOTT Chairman of the Board of Big Lots, Inc. Mr. Mallott is the former Vice President and Chief Financial Officer of Intimate Brands, Inc. (intimate apparel and beauty product...

  • Page 21
    ... 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. Age: 63 Director since: 2015 Committees: • Compensation WENDY L. SCHOPPERT Ms...

  • Page 22
    ...be present at the annual meeting of shareholders. Each director named in Proposal One attended our 2015 annual meeting of shareholders. Role of the Board's Committees The Board has standing Audit, Compensation and Nominating / Corporate Governance Committees. Each committee reports its activities to...

  • Page 23
    ... 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 four times during fiscal 2015. Nominating / Corporate Governance Committee The responsibilities of the Nominating...

  • Page 24
    ...to: Chair of the Nominating / Corporate Governance Committee, Big Lots, Inc., 300 Phillipi Road, Columbus, Ohio 43228. The written notice must include the prospective nominee's name, age, business address, principal occupation, ownership of our common shares, information that would be required under...

  • Page 25
    ... 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 26
    ..., our Executive Vice President, Chief Merchandising and Operating Officer, is employed by Big Lots as a senior buyer and in fiscal 2015 received compensation greater than $120,000 but less than $150,000, which was reviewed and approved by the Nominating / Corporate Governance Committee. Board's Role...

  • Page 27
    ...7325 Big Lots Board of Directors, 300 Phillipi Road, Columbus, Ohio 43228-5311 http://biglots.safe2say.info 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...

  • Page 28
    ... and Ms. Lauderback, our non-employee directors also received a restricted stock award in fiscal 2015 having a grant date fair value equal to approximately $110,000 (2,388 common shares). The fiscal 2015 restricted stock awards were made in June 2015 under the Big Lots 2012 Long-Term Incentive Plan...

  • Page 29
    ... average of the opening price and the closing price of our common shares on the NYSE on the grant date. (2) As of January 30, 2016, each individual included in the table held 2,388 shares of restricted stock. (3) Prior to fiscal 2008, the non-employee directors received an annual stock option award...

  • Page 30
    ... directors and executive officers as a group: 408,000. In its Schedule 13G/A filed on February 10, 2016, 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, 2015, had sole voting power...

  • Page 31
    ... no shared voting power or shared dispositive power over any of the shares. In its Schedule 13G/A filed on February 12, 2016, Sasco Capital, Inc., 10 Sasco Hill Road, Fairfield, CT 06824, stated that it beneficially owned the number of common shares reported in the table as of December 31, 2015, had...

  • Page 32
    ..., Chief Merchandising and Operating Officer; Mr. Schlonsky, our Executive Vice President, Human Resources and Store Operations; Mr. Stein, our Senior Vice President and Chief Customer Officer; and Mr. Chene, our former Executive Vice President, Chief Merchandising Officer. Mr. Chene's employment...

  • Page 33
    ... and $200 million returned to shareholders through share repurchases and approximately $39 million returned to shareholders through dividends. Named Executive Officer Compensation for Fiscal 2015 The principal elements of our executive compensation program - salary, annual cash incentive awards...

  • Page 34
    ...and 109% 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 2015. • Restricted Stock Unit Awards. Each named executive officer received the remaining 40% of their equity awards in the form of...

  • Page 35
    ...50% to 61% of the compensation awarded to our named executive officers in fiscal 2015. All of our outside directors and Leadership Team members are subject to stock ownership requirements. Our employment agreements with Mr. Campisi and Ms. Bachmann provide that any compensation paid to the executive...

  • Page 36
    ... to improve our business, promote sustainable profitability and create shareholder value. These compensation elements incentivize our executives to meet or exceed the applicable corporate financial goals. • Attract and retain talented executives by paying compensation that is competitive with the...

  • Page 37
    ... goals; operating margin improvement; same store sales growth of the Company compared to the industry; earnings-per-share growth; continued optimization of organizational effectiveness and productivity; leadership and the development of talent; and fostering teamwork and other corporate values. Our...

  • Page 38
    ...proposed compensation programs and the impact of accounting rules, laws and regulations on existing and proposed compensation programs. Management from our human resources, finance and legal departments also assist the Committee in the administration of our employee benefit and compensation plans in...

  • Page 39
    ... with us for talent and are similar to us in terms of operations or revenues and whether compensation information for the companies remains publicly available. The Committee and our human resources department reviewed each Leadership Team member's responsibilities and compared, where possible, the...

  • Page 40
    ..., Chief Merchandising and Operating Officer; and Mr. Schlonsky was promoted to Executive Vice President, Human Resources and Store Operations. In connection with their promotions and to reflect the increased responsibilities of their new positions, Mr. Johnson's salary was increased to $564,000; Ms...

  • Page 41
    ... and Ms. Bachmann, to the minimum payout percentages set forth in their respective employment agreements. Except for Mr. Campisi, the Committee and the other outside directors maintained the same annual incentive award payout percentages for our named executive officers for fiscal 2015 that applied...

  • Page 42
    ... the following process to determine the size of the equity awards granted to our named executive officers for fiscal 2015: • The Committee reviewed an estimate prepared by management of the number of common shares underlying the equity awards granted during fiscal 2015 to all recipients other than...

  • Page 43
    ...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 31

  • Page 44
    ... 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...

  • Page 45
    ... terminates his employment for good reason to the severance payments and benefits provided to our Chief Executive Officer upon such termination events under the Big Lots Executive Severance Plan adopted on August 28, 2014 (the "Severance Plan"). • • • • The New Employment Agreement also...

  • Page 46
    ... annual salary and maximum annual incentive award; and (ii) for a period of one year, the executive is entitled to participate in any group life, hospitalization or disability insurance plan, health program or other executive benefit plan generally available to similarly titled executive officers...

  • Page 47
    .... Campisi or Ms. Bachmann is entitled to benefits under the Severance Plan and to severance benefits under their respective employment agreement, they will receive the greater of (i) the aggregate benefits payable under the Severance Plan or (ii) the aggregate severance benefits payable under their...

  • Page 48
    ...) and equity awards for our named executive officers: Fiscal 2016 Target Annual Incentive Award Payout Percentage (%) Common Shares Underlying RSU Award (#) Common Shares Underlying Target PSU Award (#) Name Fiscal 2016 Salary ($) Mr. Campisi Mr. Johnson Ms. Bachmann Mr. Schlonsky Mr. Stein...

  • Page 49
    ... common shares. Equity Grant Timing Pursuant to 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...

  • Page 50
    ... against the competitive market for executive talent and our need to attract, retain and motivate the executive, as applicable. For fiscal 2015, the Committee believes it has taken the necessary actions to preserve the deductibility of all payments made under our executive compensation program, with...

  • Page 51
    ... Merchandising and Operating Officer Michael A. Schlonsky, Executive Vice President, Human Resources and Store Operations (8) Andrew D. Stein, Senior Vice President, Chief Customer Officer (8) Richard J. Chene, Former Executive Vice President, Chief Merchandising Officer (8)(9) Year (b) Salary...

  • Page 52
    ... which is generally available to all full-time employees; Premiums paid by Big Lots for long-term disability insurance, which is described in the "Elements of our Executive Compensation for Fiscal 2015 - Personal Benefits and Perquisites" section of the CD&A; The cost to Big Lots associated with the...

  • Page 53
    ... ($) Big Lots Paid Health Care under Executive Benefits Plans ($) Big Lots Paid Life Insurance Premiums ($) Big Lots Paid Long-Term Disability Insurance Premiums ($) Use of Automobile or Automobile Allowance ($) Non-Business Aircraft Usage ($) Matching Charitable Contributions ($) Dividend Payments...

  • Page 54
    ... 2015 - Annual Incentive Award for Fiscal 2015" and "Elements of our Executive Compensation for Fiscal 2015 - Employment Agreements" sections of the CD&A for more information regarding the 2006 Bonus Plan and the awards made under that plan for fiscal 2015. Big Lots 2012 Long-Term Incentive Plan...

  • Page 55
    ...(2) 50% on our average ROIC performance (net operating profit aftertax 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...

  • Page 56
    ... made under the 2012 LTIP in fiscal 2015. Grants of Plan-Based Awards in Fiscal 2015 The following table sets forth each award made to our named executive officers in fiscal 2015 under the 2006 Bonus Plan and the 2012 LTIP. Grant Date Fair Value of Stock and Option Awards ($/ Shr.)(6) (l) 3,184...

  • Page 57
    level of achievement of the applicable performance metrics over the three-year performance period. For more information on PSUs, see the narrative preceding this table and the "Elements of our Executive Compensation for Fiscal 2015 - Equity for Fiscal 2015" section of the CD&A. (5) The amounts in ...

  • Page 58
    ... the end of fiscal 2015, all equity awards outstanding under our equity compensation plans for each named executive officer. Option Awards Stock Awards Equity Equity Incentive Incentive Plan Plan Awards: Awards: Market or Number Payout of Value of Unearned Unearned Shares, Shares, Units or Units or...

  • Page 59
    ... Plan-Based Awards in Fiscal 2015 table and the "Our Executive Compensation Program for Fiscal 2015 - Equity for Fiscal 2015" section of the CD&A. The market value was computed by multiplying the number of units or shares by $38.78, the closing price of our common shares on January 30, 2016. Option...

  • Page 60
    ... 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 61
    ... 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 62
    ... 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...

  • Page 63
    ...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 64
    ... 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...

  • Page 65
    ...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 2015...

  • Page 66
    ...market value of all of our assets, as measured immediately prior to such acquisition(s). • • • Notwithstanding the foregoing definitions, pursuant to our named executive officers' employment agreements, senior executive severance agreements, the 2005 LTIP, the 2012 LTIP, the 2006 Bonus Plan...

  • Page 67
    ... otherwise provided in the tables below, the amounts are calculated based on compensation levels and benefits effective at January 30, 2016, the last day of fiscal 2015. We have not taken into account the possibility that a named executive officer may be eligible to receive healthcare benefits from...

  • Page 68
    ... do not reflect any equity awards that vested in fiscal 2015. • The closing market price of our common shares on the final trading day on the NYSE during fiscal 2015 was $38.78 per share. David J. Campisi The following table reflects the payments that would have been due to Mr. Campisi in the...

  • Page 69
    ... termination) Cause ($) Cause Death ($) Control ($) ($) Salary/Salary Continuation ($) Non-Equity Incentive Plan Compensation ($) Healthcare Coverage ($) Long-Term Disability Benefit ($) Outplacement Benefits ($) Accelerated Equity Awards ($) Excise Tax Benefit ($) Total ($) - 940,000 408,089 83...

  • Page 70
    ...of his employment with us on January 30, 2016. Event Occurring at January 30, 2016 Termination ...Salary/Salary Continuation ($) Non-Equity Incentive Plan Compensation ($) Healthcare Coverage ($) Long-Term Disability Benefit ($) Outplacement Benefits ($) Accelerated Equity Awards ($) Excise Tax Benefit...

  • Page 71
    ...corporate operating plan. Based on our $235,731,648 operating profit, as adjusted, in fiscal 2015, our named executive officers earned an annual incentive award for fiscal 2015 equal to 166% of their respective target bonus. Performance Share Unit Awards. All of our named executive officers received...

  • Page 72
    ... 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 2016 Annual Meeting of Shareholders pursuant to Item 402 of Regulation...

  • Page 73
    AUDIT COMMITTEE DISCLOSURE General Information The Audit Committee consists of four 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...

  • Page 74
    ... were utilized for approximately three months of 2014 and ten months in fiscal 2015, terminating in November of 2015. Deloitte Consulting is not acting in any company management capacity. A review of the advisory services activities occurred at appropriate intervals with the Deloitte & Touche...

  • Page 75
    ..., 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...

  • Page 76
    ...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 12, 2016 Columbus, Ohio...

  • Page 77
    ... File Number 1-8897 BIG LOTS, INC. (Exact name of registrant as specified in its charter) Ohio 06-1119097 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 300 Phillipi Road, P.O. Box 28512, Columbus, Ohio (Address of principal executive offices...

  • Page 78
    ... 14. Directors, Executive Officers and Corporate Governance Executive Compensation 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 Part IV...

  • Page 79
    ... 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 80
    ...result of our acquisition of Liquidation World Inc. (subsequently renamed Big Lots Canada, Inc.) (which are not included in the above table). During the first quarter of 2014, we wound down and discontinued the operations of Big Lots Canada, Inc. and closed all of our stores in Canada (which are not...

  • Page 81
    ...Alabama Arizona Arkansas California Colorado Connecticut Delaware Florida Georgia Idaho Illinois Indiana Iowa Kansas Kentucky Louisiana 29 39 12 159 19 13 5 103 54 6 34 45 3 8 40 24 Maine Maryland Massachusetts Michigan Minnesota Mississippi Missouri Montana Nebraska Nevada New Hampshire New Jersey...

  • Page 82
    ... regional distribution centers located in Pennsylvania, Ohio, Alabama, Oklahoma, and California. We selected the locations of our distribution centers to minimize transportation costs and the distance from distribution centers to our stores. While certain of our merchandise vendors deliver directly...

  • Page 83
    ... 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, carry higher inventory levels...

  • Page 84
    ... the Private Securities Litigation Reform Act of 1995. Our disclosure and analysis in this Form 10-K and in our 2015 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...

  • Page 85
    ... 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 86
    ... 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...

  • Page 87
    ... four states (Ohio, Texas, California, and Florida) are important as approximately 33% of our current stores operate and 35% of our 2015 net sales occurred in these states. Changes in federal or state legislation and regulations, including the effects of legislation and regulations on product safety...

  • Page 88
    ...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 89
    ... 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 for us to negotiate favorable lease renewals and new store leases, our financial position, results of operations, and liquidity may...

  • Page 90
    ... that 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 cases, of our applicable portion of...

  • Page 91
    ... square footage of the facilities by state at January 30, 2016, were as follows: State Ohio California Alabama Oklahoma Pennsylvania Total Corporate Office We own the facility in Columbus, Ohio that serves as our general office for corporate associates. Item 3. Legal Proceedings Item 103 of SEC...

  • Page 92
    ...of Fred Meyer's Corporation, a department store retailer. Lisa M. Bachmann is responsible for merchandising and global sourcing, information technology, and merchandise planning and allocation. Ms. Bachmann was promoted to Executive Vice President, Chief Merchandising and Operating Officer in August...

  • Page 93
    ..., 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, the Company has utilized its excess cash for share repurchase programs. Any future...

  • Page 94
    .... Indexed Returns Years Ended Base Period January 2011 $ $ 100.00 $ 100.00 100.00 $ January 2012 125.71 $ 105.33 113.42 $ January 2013 101.63 $ 123.86 144.15 $ January 2014 84.19 $ 149.21 180.69 $ January 2015 145.97 $ 170.43 216.99 $ January 2016 125.39 169.30 253.44 Company / Index Big Lots, Inc...

  • Page 95
    ...-average common shares outstanding: Basic Diluted Cash dividends declared per common share Balance sheet data: Total assets Working capital (c) Cash and cash equivalents Long-term obligations under bank credit facility Shareholders' equity Cash flow data: Cash provided by operating activities...

  • Page 96
    ....9%. Inventory of $850.0 million represented a $1.7 million decrease, or 0.2%, from 2014. We acquired approximately 4.4 million of our outstanding common shares for $200.0 million, under our 2015 Repurchase Program (as defined below in "Capital Resources and Liquidity"), at a weighted average price...

  • Page 97
    ...the sale of a company-owned property in California. Seasonality As discussed in "Item 1. Business - Seasonality" of this Form 10-K, our financial results fluctuate from quarter to quarter depending on various factors such as the timing of new or closed stores, the timing and extent of advertisements...

  • Page 98
    ... product offerings that we believe are important to our core customer's shopping experience and which we believe we have a competitive advantage. We believe our merchandise categories - Food, Consumables, Soft Home, Hard Home, Furniture, Seasonal, and Electronics & Accessories - align our business...

  • Page 99
    ... us to work directly with them to create product offerings specifically for our stores, which allows us to provide a high-quality product at a competitive price. Additionally, we believe our ability to carry in-stock inventory of our core furniture offerings that is available to take home at the...

  • Page 100
    ... 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 In 2014, we began the roll-out of two capital investment programs...

  • Page 101
    ...store size of approximately 22,000 selling square feet is appropriate for us to provide our core customers with a positive shopping experience and properly present a representative assortment of merchandise categories that our core customer finds meaningful. Accordingly, when we relocate or open new...

  • Page 102
    ... the end of 2014, which decreased net sales by $77.6 million. The Furniture category experienced positive net sales and comps in nearly all departments during 2015, led by our mattresses and upholstery departments, driven by the impact of our Easy Leasing lease-to-purchase program. Although many...

  • Page 103
    ... information technology and marketing team members. The increase in accrued bonus expense was directly related to better financial performance in 2015 relative to our quarterly and annual operating plans as compared to our performance during 2014. The increase in share-based compensation expense...

  • Page 104
    ...2011 Credit Agreement. We had total average borrowings (including capital leases) of $177.2 million in 2015 compared to total average borrowings of $105.5 million in 2014. The increase to our average revolving debt balance was primarily the result of year-over-year changes in the timing of our share...

  • Page 105
    ... 750, or 50%, of our stores as of the end of third quarter of 2014. Our Soft Home category experienced net sales and comp increases in many departments, with the primary driver being improved quality, brand, fashion, and value. The Furniture category experienced a positive and improving comp during...

  • Page 106
    ... self-insurance programs, particularly our general liability coverage, during the fourth quarter of 2014. The increase in store occupancy expense was primarily the result of an increase in store rents from the exercise of lease options and property maintenance costs. The increase in corporate office...

  • Page 107
    ...open market and/or in privately negotiated transactions at our discretion, subject to market conditions and other factors. Common shares acquired through the 2016 Repurchase Program will be available to meet obligations under our equity compensation plans and for general corporate purposes. The 2016...

  • Page 108
    ... in cash provided by the normal sales of our merchandise. The change in our inventory position decreased by $61.6 million in 2015 as compared to 2014, which was partially offset by the change in our accounts payable which increased by $30.2 million. In 2014, our operating cash flows benefited from...

  • Page 109
    ... retail store and office operating leases are $936.7 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 110
    ...distributions associated with the plan terminations in 2016 (see note 8 to the accompanying consolidated financial statements for additional information about our employee benefit plans). We have estimated the payments due by period for the nonqualified deferred compensation plan based on an average...

  • Page 111
    .... 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...

  • Page 112
    ... 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 113
    ... in future compensation. Therefore, our projected benefit obligation decreased by $2.8 million from January 31, 2015. When we receive the necessary regulatory approvals, we will distribute all of the assets of the Pension Plan and fund any required shortfall for both the Pension Plan and the...

  • Page 114
    ... trends, estimated lag time to report and pay claims, average cost per claim, network utilization rates, network discount rates, and other factors. A 10% change in our self-insured liabilities at January 30, 2016 would have affected selling and administrative expenses, operating profit, and income...

  • Page 115
    ...AND SUPPLEMENTARY DATA REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders of Big Lots, Inc. Columbus, Ohio We have audited the internal control over financial reporting of Big Lots, Inc. and subsidiaries (the "Company") as of January 30, 2016, based on...

  • Page 116
    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 30, 2016 and January 31, 2015, and the ...

  • Page 117
    BIG LOTS, INC. AND SUBSIDIARIES Consolidated Statements of Operations (In thousands, except per share amounts) 2015 Net sales Cost of sales (exclusive of depreciation expense shown separately below) Gross margin Selling and administrative expenses Depreciation expense Operating profit Interest ...

  • Page 118
    BIG LOTS, INC. AND SUBSIDIARIES Consolidated Statements of Comprehensive Income (In thousands) 2015 Net income Other comprehensive income (loss): $ 142,873 $ - 1,119 (2,440) (1,321) 141,552 $ 2014 114,276 $ 5,022 884 (7,051) (1,145) 113,131 $ 2013 125,295 (3,589) 1,005 2,403 (181) 125,114 ...

  • Page 119
    ...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 120
    BIG LOTS, ...Shares Balance - February 2, 2013 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 1, 2014...

  • Page 121
    ... from sale of property and equipment Other Net cash used in investing activities Financing activities: Net proceeds from (repayments of) borrowings under bank credit facility Payment of capital lease obligations Dividends paid Proceeds from the exercise of stock options Excess tax benefit from share...

  • Page 122
    ... in the United States of America ("U.S."). At January 30, 2016, we operated 1,449 stores in 47 states. We intend to achieve our goal of exceeding our core customer's expectations by offering a product assortment of value-priced merchandise that is meaningful to our core customer, combined with the...

  • Page 123
    ... 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...

  • Page 124
    ...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...

  • Page 125
    ...plans. We review 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 is to identify the best estimate of the rate at which the benefit obligations would be settled on the measurement date. In making...

  • Page 126
    ...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...

  • Page 127
    ...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...

  • Page 128
    ...cor and frames departments from our former Furniture & Home Décor category to our Soft Home category. Subsequently, we changed the name of our Furniture & Home Décor category to Furniture. In order to provide comparative information, we have reclassified our net sales by merchandise category into...

  • Page 129
    ...to no longer own and operate corporate aircraft and entered into sales agreements for both our corporate aircraft. Additionally, we wrote down the value of long-lived assets at three stores identified as part of our annual store impairment review. The total charges in 2013 principally related to the...

  • Page 130
    ... 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...

  • Page 131
    ... 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 132
    ... 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: Dividends Per Share 2014: Second quarter Third quarter Fourth quarter Total 2015: First...

  • Page 133
    ... the Director Stock Option Plan so that no additional awards may be made under that plan. Our non-employee directors did not receive any stock options in 2015, 2014, and 2013, but did, as discussed below, receive restricted stock awards under the 2012 and 2005 LTIPs. Share-based compensation expense...

  • Page 134
    ... performance objective and the grantee remains employed by us, the restricted stock will vest on the first trading day after we file our Annual Report on Form 10-K with the SEC for the fiscal year in which the higher objective is met. As of January 30, 2016, we estimated a five-year period for...

  • Page 135
    ... used in the stock option pricing model for each of the respective periods were as follows: 2013 Weighted-average fair value of stock options granted Risk-free interest rates Expected life (years) Expected volatility Expected annual forfeiture rate During 2014 and 2015, we granted no stock...

  • Page 136
    ... years 2013, 2014, and 2015 is as follows: Weighted Average Exercise Price Per Share 34.49 35.80 22.87 38.97 34.88 - 30.67 39.19 37.59 - 36.17 35.84 38.26 38.28 38.72 Weighted Average Remaining Contractual Term (years) Aggregate Intrinsic Value (000's) Number of Options Outstanding stock options at...

  • Page 137
    ... past service credits. The weighted-average assumptions used to determine net periodic pension expense were: 2015 Discount rate Rate of increase in compensation levels Expected long-term rate of return 3.3% 2.8% 5.2% 2014 5.0% 3.0% 6.0% 2013 4.6% 3.5% 5.1% The weighted-average assumptions...

  • Page 138
    ... of year Change in plan assets: Fair market value at beginning of year Actual return on plan assets Employer contributions Benefits and settlements paid Fair market value at end of year Under funded and net amount recognized Amounts recognized in the consolidated balance sheets consist of: Current...

  • Page 139
    ... benefit obligation Fair market value of plan assets During 2015, we elected to make a $10.7 million contribution to the Pension Plan. During 2014, we elected not to make a discretionary contribution to the Pension Plan. Historically, our funding policy of the Pension Plan is to make annual...

  • Page 140
    ... 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 2015, 2014, and 2013, we expensed $6.3 million...

  • Page 141
    ... tax benefit Work opportunity tax and other employment tax credits Valuation allowance Other, net Effective income tax rate Income tax payments and refunds were as follows: (In thousands) 2014 35.0% 3.0 (1.1) - 0.1 37.0% 35.0% 3.8 (0.7) - 0.3 38.4% 2013 35.0% 3.6 (1.0) - 0.1 37.7% 2015 $ $ 56...

  • Page 142
    ...receive an income tax deduction upon the exercise of non-qualified stock options and the vesting of restricted stock. Tax benefits of $0.7 million, $1.2 million, and $0.2 million in 2015, 2014, and 2013, respectively, were credited directly to shareholders' equity related to share-based compensation...

  • Page 143
    ... 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...

  • Page 144
    ... we sold certain tabletop torch and citronella products manufactured by a third party. In August 2013, we recalled these products and discontinued their sale in our stores. In 2014, we were named as a defendant in a number of lawsuits relating to these products alleging personal injuries suffered as...

  • Page 145
    ... 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...

  • Page 146
    ... 2013, which included the closing of our Canadian distribution centers. We completed the wind down activities during the first quarter of 2014, which included the closure of our Canadian stores and corporate offices. Therefore, we determined the results of our Canadian operations should be reported...

  • Page 147
    ... to wholesale customers, the costs associated with those products, and selling and administrative expenses, including personnel, purchasing, warehousing, distribution, occupancy and overhead costs. KB Toys Matters We acquired the KB Toys business from Melville Corporation (now known as CVS New York...

  • Page 148
    ... statements for further information on our discontinued operations. NOTE 14 - SALE OF REAL ESTATE In October 2013, we sold company-owned real property in California, on a component of which we operated a store, for $5.1 million. Concurrently with the sale, we entered into a lease agreement with the...

  • Page 149
    ... our small appliances, table top, food preparation, stationery, greeting cards, and home maintenance departments. The Furniture category includes our upholstery, mattress, ready-to-assemble, and case goods departments. The Seasonal category includes our lawn & garden, summer, Christmas, toys, and...

  • Page 150
    ...) Summarized fiscal quarterly financial data for 2015 and 2014 is as follows: Fiscal Year 2015 (In thousands, except per share amounts) (a) First Second Third Fourth Year 5,190,582 2,067,186 143,008 (135) 142,873 Net sales Gross margin Income (loss) from continuing operations (Loss) income...

  • Page 151
    ...open market and/or in privately negotiated transactions at our discretion, subject to market conditions and other factors. Common shares acquired through the 2016 Repurchase Program will be available to meet obligations under our equity compensation plans and for general corporate purposes. The 2016...

  • Page 152
    ... 2005 LTIP 593,126 Director Stock Option Plan 15,000 (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 2012 LTIP. (4) The common shares available for issuance under the 2012 LTIP are limited...

  • Page 153
    The Director Stock Option Plan terminated on May 30, 2008. The 2005 LTIP expired on May 16, 2012. The 2012 LTIP was approved in May 2012. See note 7 to the accompanying consolidated financial statements. The information contained under the caption "Stock Ownership" in the 2016 Proxy Statement, with ...

  • Page 154
    ...Form 10-Q for the quarter ended May 3, 2008). Form of Non-Qualified Stock Option Grant Agreement under the Big Lots, Inc. 1996 Performance Incentive Plan (incorporated herein by reference to Exhibit 10.2 to our Form 8-K dated September 9, 2004). Big Lots 2005 Long-Term Incentive Plan, as amended and...

  • Page 155
    ... year ended February 2, 2013). Form of Big Lots 2012 Long-Term Incentive Plan Restricted Stock Award Agreement for Nonemployee Directors (incorporated herein by reference to Exhibit 10.4 to our Form 8-K dated May 23, 2012). Form of Big Lots 2012 Long-Term Incentive Plan Performance Share Units Award...

  • Page 156
    ... 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 157
    ..., thereunto duly authorized, on this 29th day of March 2016. BIG LOTS, INC. By: /s/ David J. Campisi David J. Campisi Chief Executive Officer and President Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf...

  • Page 158
    ..., 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 159
    ... over financial reporting, appearing in this Annual Report on Form 10-K of the Company for the year ended January 30, 2016. 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...

  • Page 160
    ... sign, in the undersigned's name and behalf of each such director and in any and all capacities stated below, and to cause to be filed with the Securities and Exchange Commission (the "Commission"), the Company's Annual Report on Form 10-K (the "Form 10-K") for the fiscal year ended January 30, 2016...

  • Page 161
    EXHIBIT 31.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, 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 ...

  • Page 162
    EXHIBIT 31.2 CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Timothy A. Johnson, 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 ...

  • Page 163
    ...2002, and accompanies the annual report on Form 10-K (the "Report") for the year ended January 30, 2016, of Big Lots, Inc. (the "Company"). I, David J. Campisi, Chief Executive Officer and President of the Company, certify that: (i) the Report fully complies with the requirements of Section 13(a) or...

  • Page 164
    ... 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 30, 2016, of Big Lots, Inc. (the "Company"). I, Timothy A. Johnson, Executive Vice President, Chief Administrative Officer and Chief...

  • Page 165
    ... dyϳϳϴϰϮ 877.581.5548 (Within USA, US territories & Canada) 781.575.2879 (Outside USA, US territories & Canada) www.computershare.com/investor NOTICE OF ANNUAL MEETING dÅše AnnuÄ,ůD dŽŶd D 300 Phillipi Road, Columbus, Ohio. t are encouraged to vote as soon as possible Investment...

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    300 Phillipi Rd. | Columbus, OH 43228 | 614.278.6800 biglots.com