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News and Information Article
Company Raises Annual Earnings and Cash Flow Guidance
COLUMBUS, Ohio, Aug. 16 /-FirstCall/ -- Big Lots, Inc. (NYSE:
BLI) today reported second quarter fiscal 2006 income from continuing
operations of $4.7 million, or $0.04 per diluted share, compared to a loss
from continuing operations of $12.9 million, or $0.11 per diluted share, in
the second quarter of fiscal 2005, exceeding Thomson Financial/First Calls
consensus second quarter estimate of a loss per share of $0.06. Including
the impact of discontinued operations, second quarter fiscal 2006 net
income totaled $4.3 million, or $0.04 per diluted share, compared to a loss
of $13.8 million, or $0.12 per diluted share, in the prior year. As
discussed in the Companys Form 10-K filed with the SEC on April 13, 2006,
the Companys fiscal 2005 results from continuing operations do not include
the 130 stores closed in January 2006 that are classified as discontinued
operations.
(Logo: http://www.newscom.com/cgi-bin/prnh/20011026/BIGLOTSLOGO)
SECOND QUARTER HIGHLIGHTS
* Earnings per share from continuing operations of $0.04 versus a loss
from continuing operations of $0.11 per share last year
* Comparable store sales increase 5.2%
* Expenses as percent of sales improved 360 basis points to 38.3% versus
41.9% last year
* Record inventory turnover performance
Second Quarter Results
Net sales for the second fiscal quarter ended July 29, 2006, increased
5.6% to $1,056.5 million, compared to $1,000.5 million for the same period
in fiscal 2005. Comparable store sales for stores open at least two years
at the beginning of the fiscal year increased 5.2% for the quarter.
Operating profit from continuing operations for the second quarter of
fiscal 2006 was $7.3 million, compared to an operating loss from continuing
operations of $17.9 million for the same period last year. The improvement
to last year was the result of significant expense leverage along with the
incremental gross margin dollars driven by the Companys 5.2% comparable
store sales increase. Expenses as a percent of sales improved by 360 basis
points for the quarter due to efficiencies in stores and distribution
centers that are attributable to the Companys "raise the ring" strategy
and lower inventory levels, benefits from cost savings initiatives
resulting from the Companys previously discussed WIN strategy, and record
productivity levels in the Companys distribution centers. Expense leverage
for the quarter was partially offset by a decline in the gross margin rate
compared to last year. As anticipated, the majority of the gross margin
rate decline of 110 basis points was markdown related as the Company
continues to focus on increasing inventory turnover and creating more of a
treasure hunt atmosphere for its customers. Also impacting the gross margin
rate comparisons year over year was the continued impact of rising fuel
prices on the cost of domestic freight, and cost pressures in certain
merchandise categories.
For the second fiscal quarter, the Company recorded net interest income
of $0.6 million, a $1.9 million improvement compared to last years net
interest expense of $1.3 million. The improvement in interest for the
second quarter was directly attributed to the improved cash generation of
the business over the last 12 months.
Inventory and Cash Management
Inventory ended the quarter at $819 million, down 10% or $94 million
compared to last year. Lower inventory value was due to a 9% decline in
store count coupled with a 2% decline in average inventory carried per
store. For the second consecutive quarter, the Company achieved record
inventory turnover results driven by improving inventory management and
timely flow of merchandise along with strength in comparable store sales.
Inventory turnover performance combined with improving operating results
and lower levels of capital spending resulted in significant cash flow
improvement for the second quarter compared to last year. Cash outflow
(defined as cash provided by operating activities less cash used in
investing activities) for the second quarter of fiscal 2006 was $5 million
compared to approximately $70 million of cash outflow during the same
period last year.
Share Repurchase Update
As announced in February of 2006, the Companys Board of Directors
authorized the repurchase of up to $150 million of the Companys common
shares. During the second fiscal quarter of 2006, the Company purchased
6,386,721 million shares at a total cost of $102.9 million. To date during
fiscal 2006, the Company has purchased 8,732,121 shares at a total cost of
$134.0 million under the repurchase program for an average price of $15.35.
FINANCIAL OUTLOOK
* Provides initial guidance for Q3 and Q4 Sales and EPS from continuing
operations
* Increases guidance for annual EPS from continuing operations to a range
of $0.62 to $0.67 per diluted share
* Increases annual inventory turnover guidance
* Increases annual cash flow guidance to $175 million
For the third quarter of fiscal 2006, the Companys guidance calls for
a 3% to 5% comparable store sales increase with total net sales estimated
to be in the range of $1,015 million to $1,035 million. The Company expects
that the operating income rate as a percent of sales will improve compared
to third quarter of fiscal 2005 assuming expense leverage of approximately
200 to 250 basis points and a gross margin rate that is essentially flat to
last year. Based on these assumptions, the Company estimates a loss from
continuing operations of $0.06 to $0.10 per share for the third quarter of
fiscal 2006, compared to a loss from continuing operations of $0.14 per
share for the third quarter of fiscal 2005. As a reminder, certain tax
events positively impacted the third quarter of fiscal 2005 results by
approximately $0.03 to $0.04 per share.
For the fourth quarter of fiscal 2006, the Companys guidance calls for
a 2% to 4% comparable store sales increase with total net sales estimated
to be in the range of $1,455 million to $1,480 million. The Company expects
that the operating income rate as a percent of sales will improve compared
to last year based on gross margin rate expansion partially offset by
slight expense de-leverage due to higher bonus expense compared to the
prior year. Based on these assumptions, the Company estimates income from
continuing operations of $0.55 to $0.60 per diluted share for the fourth
quarter of fiscal 2006, compared to income from continuing operations of
$0.33 per diluted share for the fourth quarter of fiscal 2005. As a
reminder, this guidance includes the positive impact of approximately $0.05
per diluted share for the 53 week retail calendar in fiscal 2006.
Based on the strength of the second quarter operating results and
todays guidance issued for third and fourth quarters, the Company revised
its fiscal 2006 guidance. Earnings from continuing operations are now
expected to be in the range of $0.62 to $0.67 per diluted share, an
increase from prior guidance which called for earnings from continuing
operations of $0.44 to $0.49 per diluted share. The Companys annual
earnings expectations for fiscal 2006 compare favorably to earnings from
continuing operations of $0.14 per diluted share for fiscal 2005. For
fiscal 2006, inventory turnover is now anticipated to be 3.2, up from prior
guidance of 3.1 to 3.2. The Company expects interest expense for fiscal
2006 to be approximately $1 to $2 million and the income tax rate is
estimated to be in the range of 36.0% to 39.0%. Capital expenditures are
expected to be approximately $50 million with depreciation expense now
estimated to be approximately $105 million. Given this set of assumptions,
the Company increased its fiscal 2006 cash flow guidance to $175 million
from its prior guidance of $140 million. All cash flow estimates exclude
the impact of the Companys share repurchase program mentioned earlier in
this release.
Board of Directors Update
The Company also announced the appointment of a new independent board
member, Jeffrey P. Berger (56). Mr. Berger is the Executive Vice President,
Global Food Service and President and CEO, Foodservice North America with
the J. H. Heinz Company, one of the worlds leading marketers in branded
foods and ketchup and condiments. Mr. Berger replaces Ned Mansour who
resigned from the board due to health related issues.
"During his tenure with our board, Ned made many significant
contributions and we will miss him a great deal", commented Steve Fishman,
the Companys Chairman and CEO. "He is a unique individual whose insight
and perspective have been invaluable to our board and our executive team."
Mr. Mansour led the search that identified his successor. Mr. Fishman
stated, "I think Jeff will be a great addition to our board and look
forward to the value he will add with his 34 years experience in the
consumer products arena."
NYSE Ticker Symbol Change
As a reminder, on August 3, 2006, the Company announced its intent to
change its NYSE ticker symbol from BLI to BIG to better reflect the
Companys corporate identity. This change will become effective with
trading activity on Friday, August 18, 2006.
Conference Call/Webcast
The Company will host a conference call today at 8:30 a.m. Eastern Time
to discuss the Companys financial results for the second quarter of fiscal
2006 and financial guidance for remainder of fiscal 2006. The Company
invites you to listen to the live webcast of the conference call. The
Company is hosting the live webcast at http://www.biglots.com.
If you are unable to join the live webcast, an archive of the call will
be available at http://www.biglots.com in the Investor Relations section of
our website beginning two hours after the call ends and will remain
available through midnight on Wednesday, August 30. A replay of the call
will also be available beginning August 16 at 12:00 noon (Eastern Time)
through August 30 at midnight by dialing: 1.800.207.7077 (United States and
Canada) or 1.913.383.5767 (International or metro-Seattle). The PIN number
is 5002.
Big Lots is the nations largest broadline closeout retailer. The
Company currently operates 1,402 BIG LOTS stores in 47 states. Wholesale
operations are conducted through BIG LOTS WHOLESALE, CONSOLIDATED
INTERNATIONAL, WISCONSIN TOY and with online sales at
http://www.biglotswholesale.com. The Companys website is located at
http://www.biglots.com.
Cautionary Statement Concerning Forward-Looking Statements
Certain statements in this release are forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995,
and such statements are intended to qualify for the protection of the safe
harbor provided by that Act. The words "anticipate," "estimate," "expect,"
"objective," "goal," "project," "intend," "plan," "believe," "will,"
"target," "forecast" and similar expressions generally identify
forward-looking statements. Similarly, descriptions of our objectives,
strategies, plans, goals or targets are also forward-looking statements.
Forward-looking statements relate to the expectations of management as to
future occurrences and trends, including statements expressing optimism or
pessimism about future operating results or events and projected sales,
earnings, capital expenditures and business strategy. Forward-looking
statements are based upon a number of assumptions concerning future
conditions that may ultimately prove to be inaccurate. Forward-looking
statements are and will be based upon managements then-current views and
assumptions regarding future events and operating performance, and are
applicable only as of the dates of such statements. Although we believe the
expectations expressed in forward-looking statements are based on
reasonable assumptions within the bounds of our knowledge, forward-looking
statements, by their nature, involve risks, uncertainties and other
factors, any one or a combination of which could materially affect our
business, financial condition, results of operations or liquidity.
Forward-looking statements that we make herein and in other reports and
releases are not guarantees of future performance and actual results may
differ materially from those in such forward-looking statements as a result
of various factors, including, but not limited to, the cost of goods, our
inability to successfully execute strategic initiatives, competitive
pressures, economic pressures on our customers and us, the availability of
brand name closeout merchandise, trade restrictions, freight costs, the
risks discussed in the Risk Factors section of our most recent Annual
Report on Form 10-K, and other factors discussed from time to time in our
other filings with the SEC, including Quarterly Reports on Form 10-Q and
Current Reports on Form 8-K. This release should be read in conjunction
with such filings, and you should consider all of these risks,
uncertainties and other factors carefully in evaluating forward-looking
statements.
You are cautioned not to place undue reliance on forward-looking
statements, which speak only as of the date thereof. We undertake no
obligation to publicly update forward-looking statements, whether as a
result of new information, future events or otherwise. You are advised,
however, to consult any further disclosures we make on related subjects in
our public announcements and SEC filings.
BIG LOTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
JULY 29 JULY 30
2006 2005
(Unaudited) (Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $757 $10,173
Inventories 819,021 912,941
Deferred income taxes 74,006 73,078
Other current assets 81,381 86,731
Total current assets 975,165 1,082,923
Property and equipment - net 549,701 630,523
Deferred income taxes 26,012 22,457
Other assets 28,734 30,107
$1,579,612 $1,766,010
LIABILITIES AND SHAREHOLDERS EQUITY
Current liabilities:
Accounts payable $208,617 $164,007
Property, payroll and other taxes 106,518 112,373
Accrued operating expenses 49,384 39,297
Insurance reserves 46,029 47,941
KB lease obligation 27,205 32,436
Accrued salaries and wages 27,763 23,520
Other current liabilities 1,554 1,648
Total current liabilities 467,070 421,222
Long-term obligations 31,300 173,600
Deferred rent 39,657 42,751
Insurance reserves 45,118 38,567
Other liabilities 18,342 11,645
Shareholders equity 978,125 1,078,225
$1,579,612 $1,766,010
BIG LOTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
13 WEEKS ENDED 13 WEEKS ENDED
JULY 29 JULY 30
2006 % 2005 %
(Unaudited) (Unaudited)
Net sales $1,056,535 100.0 $1,000,511 100.0
Gross margin 412,293 39.0 401,362 40.1
Selling and administrative expenses 380,116 36.0 391,826 39.2
Depreciation expense 24,927 2.3 27,417 2.7
Operating profit (loss) 7,250 0.7 (17,881) (1.8)
Interest expense 115 0.0 1,315 0.1
Interest and investment income (754) 0.0 0 0.0
Income (loss) from continuing
operations before income taxes 7,889 0.7 (19,196) (1.9)
Income tax expense (benefit) 3,185 0.3 (6,251) (0.6)
Income (loss) from continuing operations 4,704 0.4 (12,945) (1.3)
Loss from discontinued operations,
net of tax benefit of $170 and $500,
respectively (405) 0.0 (807) (0.1)
Net income (loss) $4,299 0.4 ($13,752) (1.4)
Income (loss) per common share - basic
Continuing operations $0.04 ($0.11)
Discontinued operations 0.00 (0.01)
Net income (loss) $0.04 ($0.12)
Income (loss) per common share - diluted
Continuing operations $0.04 ($0.11)
Discontinued operations 0.00 (0.01)
Net income (loss) $0.04 ($0.12)
Weighted average common shares outstanding
Basic 111,094 113,244
Dilutive effect of share-based awards 1,139 -
Diluted 112,233 113,244
BIG LOTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
26 WEEKS ENDED 26 WEEKS ENDED
JULY 29 JULY 30
2006 % 2005 %
(Unaudited) (Unaudited)
Net sales $2,148,157 100.0 $2,043,595 100.0
Gross margin 850,615 39.6 827,020 40.4
Selling and administrative expenses 772,505 36.0 779,132 38.1
Depreciation expense 49,580 2.3 53,254 2.6
Operating profit (loss) 28,530 1.3 (5,366) (0.3)
Interest expense 205 0.0 2,489 0.1
Interest and investment income (1,148) (0.1) (31) 0.0
Income (loss) from continuing
operations before income taxes 29,473 1.4 (7,824) (0.4)
Income tax expense (benefit) 10,265 0.5 (2,145) (0.1)
Income (loss) from continuing operations 19,208 0.9 (5,679) (0.3)
Loss from discontinued operations,
net of tax benefit of $676 and $169,
respectively (1,196) (0.1) (273) 0.0
Net income (loss) $18,012 0.8 ($5,952) (0.3)
Income (loss) per common share - basic
Continuing operations $0.17 ($0.05)
Discontinued operations (0.01) 0.00
Net income (loss) $0.16 ($0.05)
Income (loss) per common share - diluted
Continuing operations $0.17 ($0.05)
Discontinued operations (0.01) 0.00
Net income (loss) $0.16 ($0.05)
Weighted average common shares outstanding
Basic 112,029 113,107
Dilutive effect of share-based awards 1,008 -
Diluted 113,037 113,107
BIG LOTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
13 WEEKS ENDED 13 WEEKS ENDED
July 29, 2006 July 30, 2005
(Unaudited) (Unaudited)
Net cash provided by (used in)
operating activities $3,141 $(41,609)
Net cash used in investing activities (8,615) (28,074)
Net cash provided by (used in)
financing activities (68,310) 68,911
(Decrease) increase in cash and cash
equivalents (73,784) (772)
Cash and cash equivalents:
Beginning of period 74,541 10,945
End of period $757 $10,173
BIG LOTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
26 WEEKS ENDED 26 WEEKS ENDED
July 29, 2006 July 30, 2005
(Unaudited) (Unaudited)
Net cash provided by (used in)
operating activities $113,075 $33,515
Net cash used in investing
activities (14,531) (43,348)
Net cash provided by (used in)
financing activities (99,497) 17,485
(Decrease) increase in cash and cash
equivalents (953) 7,652
Cash and cash equivalents:
Beginning of period 1,710 2,521
End of period $757 $10,173
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