BIG LOTS INC (Form: 8-K, Received: 05/29/2012 16:25:55)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): May 23, 2012

BIG LOTS, INC.

(Exact name of registrant as specified in its charter)




Ohio	1-8897	06-1119097
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

300 Phillipi Road, Columbus, Ohio 43228

(Address of principal executive offices) (Zip Code)

(614) 278-6800

(Registrant's telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02 Results of Operations and Financial Condition.

On May 23, 2012, Big Lots, Inc. (“we,” “us” or “our”) issued a press release and conducted a conference call, both of which reported our first quarter fiscal 2012 unaudited results, provided an update on the status of our previously announced $400 million share repurchase program, announced that our Board of Directors authorized a new $200 million share repurchase program, provided initial guidance for the second quarter of fiscal 2012, and updated guidance for fiscal 2012.

The press release and conference call both included “non-GAAP financial measures,” as that term is defined by Rule 101 of Regulation G (17 CFR Part 244) and Item 10 of Regulation S-K (17 CFR Part 229). Specifically, segment-level diluted earnings (loss) per share from continuing operations, a non-GAAP financial measure, was included. This non-GAAP financial measure reflects the portion of our consolidated diluted earnings per share that is attributable to the performance of each of our U.S. and Canadian segments. Additionally, the following non-GAAP financial measures were included: (i) adjusted gross margin; (ii) adjusted gross margin rate; (iii) adjusted operating profit; (iv) adjusted operating profit rate; (v) adjusted income tax expense; (vi) adjusted effective income tax rate; (vii) adjusted income from continuing operations; (viii) adjusted diluted earnings per common share from continuing operations; and (ix) adjusted diluted earnings per common share. These non-GAAP financial measures exclude from the most directly comparable financial measure calculated and presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”), a non-cash, after-tax charge of approximately $3.4 million, or $0.05 per diluted share, incurred during the first quarter of fiscal 2012 in connection with an inventory accounting change associated with the implementation of new retail inventory systems. As required by Rule 100 of Regulation G and Item 10 of Regulation S-K, the press release, which was posted in the Investor Relations section of our website and referred to during the conference call, contained a presentation of the most directly comparable financial measure calculated and presented in accordance with GAAP and a reconciliation of the difference between the non-GAAP financial measure and the most directly comparable financial measure calculated and presented in accordance with GAAP.

Our management believes that disclosure of the segment-level non-GAAP financial measure provides useful information to investors because it separately reflects the portion of our consolidated diluted earnings per share that is attributable to the performance of each of our U.S. and Canadian segments. Our management also believes that disclosure of the non-GAAP financial measure that excludes the inventory charge provides useful information to investors because it presents an alternative and more relevant method for measuring our operating performance, excluding a special item included in the most directly comparable GAAP financial measure, that our management believes is more indicative of our ongoing operating results and financial condition. These non-GAAP financial measures, along with the most directly comparable GAAP financial measures, are used by our management in evaluating our operating performance.

Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in accordance with GAAP. Non-GAAP financial measures as reported by us may not be comparable to similarly titled items reported by other companies.

Attached as exhibits to this Form 8-K are copies of our May 23, 2012 press release (Exhibit 99.1) and the transcript of our May 23, 2012 conference call (Exhibit 99.2), including information concerning forward-looking statements and factors that may affect our future results. The information in Exhibits 99.1 and 99.2 is being furnished, not filed, pursuant to Item 2.02 of this Form 8-K. By furnishing the information in this Form 8-K and the attached exhibits, we are making no admission as to the materiality of any information in this Form 8-K or the exhibits.

Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

(e) As further described in Item 5.07 below, our shareholders approved the Big Lots 2012 Long-Term Incentive Plan (“2012 LTIP”) at our Annual Meeting of Shareholders held on May 23, 2012 (“Annual Meeting”). The 2012 LTIP replaces the Big Lots 2005 Long-Term Incentive Plan, as amended and restated (“2005 LTIP”), and no new awards will be granted under the 2005 LTIP; however, awards previously granted under the 2005 LTIP shall remain outstanding in accordance with the terms and conditions of the applicable award agreements and the 2005 LTIP.

The 2012 LTIP is intended to promote our long-term financial success by motivating performance through incentive compensation and to encourage participants to acquire ownership interests in our common shares. The 2012 LTIP is also intended to provide a means whereby employees, directors and third party service providers develop a sense of proprietorship and personal involvement in our development and financial success, and to encourage them to devote their best efforts to our business, thereby also advancing the interests of our shareholders. A further purpose of the 2012 LTIP is to provide a means through which we may attract able individuals to become employees or serve as directors or third party service providers.

The 2012 LTIP permits the grant of nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units, deferred stock units, performance shares, performance share units, performance units, cash-based awards and other stock-based awards. The maximum number of our common shares available for grant under the 2012 LTIP are (i) 7,750,000 common shares, plus (ii) any of the 4,702,362 common shares subject to outstanding awards under the 2005 LTIP as of March 15, 2012 that on or after March 15, 2012 cease for any reason to be subject to such awards (other than by reason of exercise or settlement of the awards to the extent they are exercised for or settled in vested and nonforfeitable common shares).

The 2012 LTIP became effective with shareholder approval on May 23, 2012. Unless sooner terminated in accordance with it terms, the 2012 LTIP shall terminate on May 23, 2022. After the 2012 LTIP is terminated, no awards may be granted under the 2012 LTIP, but awards previously granted shall remain outstanding in accordance with the terms and conditions of the applicable award agreements and the plan. This summary is qualified in its entirety by reference to the full text of the 2012 LTIP.

Also on May 23, 2012, the Compensation Committee of our Board of Directors approved the form of award agreements which may be used to grant nonqualified stock options and restricted stock to employee participants. The approved form of the Big Lots 2012 Long-Term Incentive Plan Non-Qualified Stock Option Award Agreement and the approved form of the Big Lots 2012 Long-Term Incentive Plan Restricted Stock Award Agreement are attached to this Form 8-K as Exhibit 10.2 and Exhibit 10.3, respectively. In addition, pursuant to Article 12 of the 2012 LTIP, our Board of Directors approved the form of award agreement which may be used to grant restricted stock to nonemployee director participants and approved the award of restricted stock to each nonemployee director elected at the Annual Meeting, with each such award to have a grant date fair value equal to approximately $95,000. As established by our Board of Directors, the grant date for the nonemployee directors' restricted stock awards was May 25, 2012, the second trading day following our release of earnings results from the first quarter of fiscal 2012. The approved form of the Big Lots 2012 Long-Term Incentive Plan Restricted Stock Award Agreement for Nonemployee Directors is attached to this Form 8-K as Exhibit 10.4.

Item 5.07 Submission of Matters to a Vote of Security Holders.

At the Annual Meeting, our shareholders elected to the Board of Directors each of the nine nominees identified in our 2012 Proxy Statement (Proposal One), with 2,836,620 broker non-votes and the remaining votes cast as follows:



Director	For	Withheld
Jeffrey P. Berger	55,720,464	1,098,062
James R. Chambers	55,704,412	1,114,114
Steven S. Fishman	53,845,423	2,973,103
Peter J. Hayes	55,736,267	1,082,259
Brenda J. Lauderback	46,473,205	10,345,321
Philip E. Mallott	55,726,087	1,092,439
Russell Solt	44,284,171	12,534,355
James R. Tener	43,731,559	13,086,967
Dennis B. Tishkoff	43,649,211	13,169,315

Also at our Annual Meeting, our shareholders voted on the following proposals, with 2,836,620 broker non-votes for Proposals Two and Three and the remaining votes cast as follows:


•	Proposal Two. To approve the 2012 LTIP:



For	46,796,629
Against	9,996,248
Abstain	25,649


•	Proposal Three. To approve, on an advisory basis, the compensation of our named executive officers, as disclosed in our 2012 Proxy Statement pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion:



For	17,713,823
Against	39,062,867
Abstain	41,836


•	Proposal Four. To ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for fiscal 2012:



For	58,113,721
Against	1,533,141
Abstain	8,284

No other matters were submitted to a vote of our shareholders at our Annual Meeting.

Item 8.01 Other Events.

On May 23, 2012, we announced that our Board of Directors authorized a new $200 million share repurchase program. The authorization is expected to be utilized to repurchase shares in the open market and/or in privately negotiated transactions at our discretion, subject to market conditions and other factors. Common shares acquired through the repurchase program will be available to meet obligations under equity compensation plans and for general corporate purposes. The new share repurchase program was eligible to begin on May 25, 2012 and will continue until exhausted.

Item 9.01 Financial Statements and Exhibits.



(d)	Exhibits

	Exhibits marked with an asterisk (*) are furnished herewith.

	Exhibit No.	Description

	10.1	Big Lots 2012 Long-Term Incentive Plan (incorporated herein by reference to Exhibit 4.4 to our Form S-8 dated May 23, 2012)

	10.2*	Form of Big Lots 2012 Long-Term Incentive Plan Non-Qualified Stock Option Award Agreement

	10.3*	Form of Big Lots 2012 Long-Term Incentive Plan Restricted Stock Award Agreement

	10.4*	Form of Big Lots 2012 Long-Term Incentive Plan Restricted Stock Award Agreement for Nonemployee Directors

	99.1*	Big Lots, Inc. press release dated May 23, 2012

	99.2*	Big Lots, Inc. conference call transcript dated May 23, 2012

Signature

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.



	BIG LOTS, INC.

Date: May 29, 2012	By:	/s/ Charles W. Haubiel II
		Charles W. Haubiel II
		Executive Vice President, Legal and Real Estate,
		General Counsel and Corporate Secretary

Exhibit 10.2

BIG LOTS 2012 LONG-TERM INCENTIVE PLAN

NON-QUALIFIED STOCK OPTION AWARD AGREEMENT



Participant:			Number of Shares:

Grant Date:			Exercise Price:

In accordance with the terms of the Big Lots 2012 Long-Term Incentive Plan, as may be amended (“Plan”), this Non-Qualified Stock Option Award Agreement (“Agreement”) is entered into as of the Grant Date by and between you, the Participant, and the Company in connection with the Company's grant of the right to purchase, at the option of the Participant, at the Exercise Price (“Option”) an aggregate of the number of Shares of the Company. The Option is subject to the terms and conditions of this Agreement and the Plan. Except as otherwise expressly provided herein, capitalized terms used but not defined in this Agreement shall have the respective meanings ascribed to them in the Plan. To ensure that you fully understand the terms and conditions of this Award, you should carefully read the Plan and this Agreement.

Nature of Grant

The Option is a Non-Qualified Stock Option (“NQSO”) and, as such, is not an Incentive Stock Option (“ISO”) within the meaning of Section 422 of the U.S. Internal Revenue Code of 1986, as amended.

Exercisability of Option

The Option will become vested and exercisable in increments according to the vesting schedule. However, if an Acceleration Event occurs before the latest date in the vesting schedule, the then-remaining unvested portion of the Option will vest and become exercisable on the day on which the Acceleration Event occurred, but only if the Acceleration Event occurred at least six (6) months following the Grant Date (and such vesting shall be deemed to have occurred immediately prior to the Participant's Termination of Employment or Service). “Acceleration Event” means the earlier of the Participant's death or Disability. Except as provided in the Plan, the Option, to the extent that it is vested, may be exercised any time from the date it vests through the date that it expires. Vesting is always subject to all other Plan requirements being satisfied.



Shares	Vesting Date	Expiration Date

Acceptance

The Participant hereby accepts the Option and acknowledges receipt of a copy of the Plan, as in effect on the Grant Date. By accepting the Option, the Participant agrees to all of the terms and conditions of the Plan and this Agreement, and the Participant agrees to accept as binding, conclusive and final all determinations, decisions and interpretations of the Committee upon any issues arising under the Plan and/or this Agreement. The Participant also represents and warrants to the Company that he or she is aware of and agrees to be bound by the Company's insider trading policies and the applicable laws and regulations relating to the receipt, ownership and transfer of the Company's securities.



Accepted as of _______________________, 20___		BIG LOTS, INC.
"Participant,"

_____________________________________		By: ______________________

Exhibit 10.3

BIG LOTS 2012 LONG-TERM INCENTIVE PLAN

RESTRICTED STOCK AWARD AGREEMENT



Participant:

Grant Date:

Restricted Stock ¹ :

In accordance with the terms of the Big Lots 2012 Long-Term Incentive Plan, as may be amended (“Plan”), this Restricted Stock Award Agreement (“Agreement”) is entered into as of the Grant Date by and between you, the Participant, and the Company in connection with the Company's grant of the Restricted Stock to you. The Restricted Stock is subject to the terms and conditions of this Agreement and the Plan. Except as otherwise expressly provided herein, capitalized terms used but not defined in this Agreement shall have the respective meanings ascribed to them in the Plan. To ensure that you fully understand the terms and conditions of this Award, you should carefully read the Plan and this Agreement.

Description of the Restricted Stock

This Agreement describes the Restricted Stock you have been granted and the conditions that must be met before you may receive the Restricted Stock. The Restricted Stock is the Company's Shares that you will own after the Restricted Stock vests (i.e., all restrictions lapse) and you comply with the terms of this Agreement and the Plan. However, you will forfeit any rights to the Restricted Stock (i.e., they will not be transferred to you) to the extent you do not comply with the terms of this Agreement and the Plan. No portion of the Restricted Stock that has not vested may be sold, transferred, assigned, pledged, encumbered or otherwise disposed of by you in any way (including a transfer by operation of law); and any attempt by you to make any such sale, transfer, assignment, pledge, encumbrance or other disposition shall be null and void and of no effect.

Vesting of the Restricted Stock

If (i) the First Trigger, as defined in Exhibit A, is met before your Termination of Employment or Service, and (ii) one of the events described below occurs after the First Trigger is met and your Termination of Employment or Service has not occurred on or prior to the vesting day associated with such occurrence, then your Restricted Stock will vest and be transferred to you without restriction to the extent and upon the earlier occurrence of the following:


(a)	If the Second Trigger, as defined in Exhibit A, is met, all of your Restricted Stock will vest on the first trading day ² after the Company files its Annual Report on Form 10-K (“Form 10-K”) with the U.S. Securities and Exchange Commission for the fiscal year in which the Second Trigger was met. Note that the First Trigger and Second Trigger may be met in the same fiscal year.

(b)

If you die or suffer a Disability, a fraction of your Restricted Stock will vest for each consecutive year that you have completed with the Company prior to your Termination of Employment or Service, with such measurement period beginning with the Grant Date. Such fraction shall be the reciprocal of the Outside Date, as defined in Exhibit A (i.e., 1/(Outside Date)). Note that if a portion of your Restricted Stock vests upon your death or Disability, the later occurrence of any of other event will not cause the vesting of the remaining Restricted Stock.


(c)	If events (a) or (b) above do not occur before the Outside Date, all of your Restricted Stock will vest on the first day of the Company's first trading window following the Outside Date.

Subject to the terms of the Plan, if the First Trigger is not met before the Outside Date occurs, this Agreement will expire and all of your rights in the Restricted Stock will be forfeited.

^{___________________________________________}

¹ Denotes the number of Big Lots, Inc. common shares, par value $0.01 per share, underlying the Restricted Stock Award.

² As determined by the New York Stock Exchange or other national securities exchange or market that regulates Big Lots, Inc. common shares.

Subject to the terms of the Plan, your Restricted Stock shall not vest before the first anniversary of the Grant Date. If the First Trigger is met and either event (a) or (b) above is also met before the first anniversary of the Grant Date, your Restricted Stock will vest on the first day of the Company's trading window first following the first anniversary of the Grant Date.

Rights in the Restricted Stock

Until the restrictions and conditions described in this Agreement and the Plan have been met or this Agreement expires, whichever occurs earlier, your Restricted Stock will be held in escrow. The Company will defer distribution of any dividends that are declared on your Restricted Stock until the Restricted Stock vests. These dividends will be distributed at the same time your Restricted Stock vests or will be forfeited if your Restricted Stock does not vest.

You may vote your Restricted Stock before all the terms and conditions described in this Agreement are met or until this Agreement expires, whichever occurs earlier. This is the case even though your Restricted Stock will not be distributed to you until the Restricted Stock vests.

Subject to the Company's insider trading policies and applicable laws and regulations, after you become vested in any portion of your Restricted Stock, you shall be free to deal with and dispose of the vested Restricted Stock, and you may request the Company's transfer agent to issue a certificate for such vested Restricted Stock in your name and free of any restrictions.

Tax Treatment of the Restricted Stock

You should consult with a tax or financial adviser to ensure you fully understand the tax ramifications of your Restricted Stock.

This brief discussion of the U.S. federal tax rules that affect your Restricted Stock is provided as general information (not as personal tax advice) and is based on the Company's understanding of U.S. federal tax laws and regulations in effect as of the Grant Date. Article 22 of the Plan further describes the manner in which withholding may occur.

You are not required to pay income taxes on your Restricted Stock on the Grant Date. However, you will be required to pay income taxes (at ordinary income tax rates) when, if and to the extent your Restricted Stock vests. The amount of ordinary income you will recognize is the value of your Restricted Stock when it vests. Also, the Company is required to withhold taxes on this same amount. You may elect to allow the Company to withhold, upon the vesting of your Restricted Stock, from the common shares to be issued pursuant to your vested Restricted Stock a number of common shares that would satisfy the required statutory minimum (but no more than such required minimum) with respect to the Company's tax withholding obligation. If you are at the Grant Date, or subsequently become, subject to the Company's trading windows, you may only make this election during an open trading window. If you wish to make the withholding election permitted by this paragraph, you must give notice to the Company in the manner then prescribed by the Company.

Any appreciation of your Restricted Stock after it vests could be eligible to be taxed at capital gains rates when you sell the common shares. If your Restricted Stock does not vest, your Restricted Stock will expire and no taxes will be due.

Section 83(b) Election

Subject to Section 8.6 of the Plan, you shall have the right to make an election under Section 83(b) of the Internal Revenue Code with respect to your Restricted Stock.

General Terms and Conditions

Nothing contained in this Agreement obligates the Company or a subsidiary to continue to employ you in any capacity whatsoever or prohibits or restricts the Company or a subsidiary from terminating your employment at any time or for any reason whatsoever; and this Agreement does not in any way affect any employment agreement that you may have with the Company.

This Agreement shall be governed by and construed in accordance with the internal laws, and not the laws of conflicts of laws, of the State of Ohio.

If any provision of this Agreement is adjudged to be unenforceable or invalid, then such unenforceable or invalid provision shall not effect the enforceability or validity of the remaining provisions of this Agreement, and the Company and you agree to replace such unenforceable or invalid provision with an enforceable and valid arrangement which in its economic effect shall be as close as possible to the unenforceable or invalid provision.

You represent and warrant to the Company that you have the full legal power, authority and capacity to enter into this Agreement and to perform your obligations under this Agreement and that this Agreement is a valid and binding obligation, enforceable in accordance with its terms, except that the enforcement of this Agreement may be subject to bankruptcy, insolvency, reorganization, moratorium, or other similar laws now or hereinafter in effect relating to creditors' rights generally and to general principles of equity. The Company represents and warrants to you that it has the full legal power, authority and capacity to enter into this Agreement and to perform its obligations under this Agreement and that this Agreement is a valid and binding obligation, enforceable in accordance with its terms, except that the enforcement of this Agreement may be subject to bankruptcy, insolvency, reorganization, moratorium, or other similar laws now or hereinafter in effect relating to creditors' rights generally and to general principles of equity.

Acceptance

You hereby accept the Restricted Stock and acknowledge receipt of a copy of the Plan, as in effect on the Grant Date. By accepting the Restricted Stock, you agree to all of the terms and conditions of the Plan and this Agreement, and you agree to accept as binding, conclusive and final all determinations, decisions and interpretations of the Committee upon any issues arising under the Plan and/or this Agreement. You also represent and warrant to the Company that you are aware of and agree to be bound by the Company's insider trading policies and the applicable laws and regulations relating to the receipt, ownership and transfer of the Company's securities.



Accepted as of _______________________, 20___		BIG LOTS, INC.
"Participant,"

_____________________________________		By: ______________________

EXHIBIT A

As used in this Agreement, the following terms shall have the meanings set forth below:

Applicable Performance Criteria shall mean the greater of Performance Criteria Item (A) or (B) below; provided, however, that if none of performance criteria (A) or (B) appear on the consolidated statements of operations included in the Form 10-K for the applicable fiscal year, then the greater of Performance Criteria Item (C) or (D), as its appears in the Form 10-K for the applicable fiscal year, shall be the Applicable Performance Criteria.

First Trigger shall mean the Company has earned at least $ _____ under the Applicable Performance Criteria for any fiscal year during the Restriction Period.

Performance Criteria Item shall mean the greater of performance criteria (A), or (B), or under circumstances described above, the greater of (C) or (D) below, with each of (A) through (D) (as the case may be) adjusted to remove the effect of any Unusual or Non-recurring Event, Transaction, or Accrual Items:


(A)	Earnings per Common Share - diluted from continuing operations.


(B)	Earnings per Common Share - diluted from continuing operations before extraordinary item and/or cumulative effect of a change in accounting principle (as the case may be).

If neither (A) nor (B) appear:


(C)	Earnings per Common Share - diluted.


(D)	Earnings per Common Share - diluted before extraordinary item and/or cumulative effect of a change in accounting principle (as the case may be).

Outside Date shall mean the _____ anniversary of the date upon which the Restricted Stock Award was granted to the Participant.

Restriction Period shall mean the period commencing on Grant Date and continuing until the Outside Date.

Second Trigger shall mean the Company has earned at least $ _____ under the Applicable Performance Criteria for any fiscal year during the Restriction Period.

Unusual or Non-recurring Event, Transaction or Accrual Items shall mean any expense, gain or loss (including, but not limited to, judgments, interest on judgments, settlement amounts, attorneys' fees and costs, filing fees, experts' fees, and damages sustained as a result of the imposition of injunctive relief) as a result of claims, litigation or lawsuit settlement (including collective actions or class action lawsuits). With regard to Unusual or Non-recurring Event, Transaction or Accrual Items, the expenses, gains or losses as a result of claims, litigation or lawsuit settlements are intended to and shall be applicable only to claims, litigation and lawsuit settlements that are specifically (A) reported, appearing or disclosed in the Company's filings with the Securities and Exchange Commission, the Company's annual reports to shareholders or the Company's definitive proxy statements or (B) addressed in the quarterly Litigation and Claims Report of the Company's General Counsel to the Audit Committee of the Company's Board of Directors.

Exhibit 10.4

BIG LOTS 2012 LONG-TERM INCENTIVE PLAN

RESTRICTED STOCK AWARD AGREEMENT FOR NONEMPLOYEE DIRECTORS

In accordance with the terms of the Big Lots 2012 Long-Term Incentive Plan, as may be amended (“Plan”), this Restricted Stock Award Agreement for Nonemployee Directors (“Agreement”) is entered into as of the Grant Date by and between you, the Participant, and the Company in connection with the Company's grant of the Restricted Stock to you. The Restricted Stock is subject to the terms and conditions of this Agreement and the Plan. To ensure that you fully understand the terms and conditions of this Award, you should carefully read the Plan and this Agreement.

Definitions

Except as otherwise expressly provided herein, capitalized terms used but not defined in this Agreement shall have the respective meanings ascribed to them in the Plan. For purposes of this Agreement:

“Acceleration Event” means the earlier of the Participant's death or the Participant's Disability;

“Grant Date” means __________ ;

“Participant” means __________ ;

“Outside Date” means the Trading Day immediately preceding the Company's annual meeting of shareholders first following the Grant Date;

“Restricted Stock” means the __________ Shares underlying the Award made by this Agreement;

“Restriction Period” means the period commencing on Grant Date and continuing until the Outside Date;

“Termination of Employment or Service” means any act or event, other than an Acceleration Event, that causes the Participant to cease serving as a member of the Board of Directors; and

“Trading Day” means a day on which the principal national securities exchange on which the Shares are listed is open for business.

Description of the Restricted Stock

This Agreement describes the Restricted Stock you have been granted and the conditions that must be met before you may receive the Restricted Stock. The Restricted Stock is the Company's Shares that you will own after the Restricted Stock vests (i.e., all restrictions lapse) and you comply with the terms of this Agreement and the Plan. However, you will forfeit any rights in the Restricted Stock (i.e., they will not be transferred to you) to the extent you do not comply with the terms of this Agreement and the Plan. No portion of the Restricted Stock that has not vested may be sold, transferred, assigned, pledged, encumbered or otherwise disposed of by you in any way (including a transfer by operation of law); and any attempt by you to make any such sale, transfer, assignment, pledge, encumbrance or other disposition shall be null and void and of no effect.

Vesting of the Restricted Stock

The Restriction Period shall lapse and your Restricted Stock will vest and be transferred to you without restriction on the earlier of (i) the Outside Date or (ii) the day on which an Acceleration Event occurs; provided, however , if your Termination of Employment or Service occurs before the Outside Date or the occurrence of an Acceleration Event, then this Agreement will expire and all of your rights in your Restricted Stock will be forfeited.

Rights in the Restricted Stock

Until the earlier of the date on which (i) your Restricted Stock vests in accordance with the terms of this Agreement and the Plan or (ii) this Agreement expires, your Restricted Stock will be held in escrow. The Company will defer distribution of any dividends that are declared on your Restricted Stock until the Restricted Stock vests. These dividends will be distributed at the same time your Restricted Stock vests or will be forfeited if your Restricted Stock does not vest.

During the Restriction Period, you may vote your Restricted Stock. This is the case even though your Restricted Stock will not be distributed to you unless and until your Restricted Stock vests.

Subject to the Company's insider trading policies and applicable laws and regulations, after you become vested in your Restricted Stock, you shall be free to deal with and dispose of the vested Restricted Stock, and you may request the Company's transfer agent to issue a certificate for such vested Restricted Stock in your name and free of any restrictions.

Tax Treatment of the Restricted Stock

You should consult with a tax or financial adviser to ensure you fully understand the tax ramifications of your Restricted Stock.

Section 83(b) Election

Subject to Section 8.6 of the Plan, you shall have the right to make an election under Section 83(b) of the Internal Revenue Code with respect to your Restricted Stock.

General Terms and Conditions

Nothing contained in this Agreement obligates the Company or a subsidiary to employ you in any capacity whatsoever or prohibits or restricts the Company or a subsidiary from terminating your service as a member of the Board of Directors at any time or for any reason whatsoever; and this Agreement does not in any way affect any other agreement that you may have with the Company.

This Agreement shall be governed by and construed in accordance with the internal laws, and not the laws of conflicts of laws, of the State of Ohio.

Acceptance



Accepted as of _______________________, 20___		BIG LOTS, INC.
"Participant"

_____________________________________		By: ______________________

Exhibit 99.1



PRESS RELEASE
FOR IMMEDIATE RELEASE			Contact: Timothy A. Johnson
			Senior Vice President - Finance
			614-278-6622

BIG LOTS REPORTS FIRST QUARTER ADJUSTED EPS FROM CONTINUING

OPERATIONS OF $0.68 PER DILUTED SHARE

COMPANY PROVIDES UPDATED EPS AND CASH FLOW GUIDANCE

COMPANY ANNOUNCES NEW $200 MILLION SHARE REPURCHASE PROGRAM

Columbus, Ohio - May 23, 2012 - Big Lots, Inc. (NYSE: BIG) today reported income from continuing operations of $40.8 million, or $0.63 per diluted share, for the first quarter of fiscal 2012 ended April 28, 2012. As previously disclosed in our March 2, 2012 press release, we incurred an after-tax charge of $3.4 million, or $0.05 per diluted share, during the first quarter related to an inventory accounting change associated with the successful implementation of new retail inventory systems. Excluding this non-recurring, non-cash charge, adjusted income from continuing operations totaled $44.2 million, or $0.68 per diluted share (non-GAAP), for the first quarter of fiscal 2012. This compares to income from continuing operations of $52.5 million, or $0.70 per diluted share, for the first quarter of fiscal 2011.

FIRST QUARTER HIGHLIGHTS


•	Adjusted income from continuing operations of $0.68 per diluted share (non-GAAP) versus income from continuing operations of $0.70 per diluted share last year


•	Generated $108 million of Cash Flow (defined as operating activities less investing activities)


•	Opened 10 new stores


•	Invested $99 million to repurchase 2.5 million shares and completed our 2011 $400 million share repurchase program by repurchasing 11.7 million shares, or 16% of our outstanding shares, at an average price per share of $34.11



	EPS from Continuing Operations

	Q1 '12 ⁽¹⁾			Q1 '11 ⁽²⁾

U.S. Operations	$	0.72		$	0.70

Add back: Inventory charge	$	0.05		$	—

U.S. Operations - adjusted basis	$	0.77		$	0.70

Canadian Operations ⁽³⁾	$	(0.09	)	$	—

Consolidated - adjusted basis	$	0.68		$	0.70

(1) Non-GAAP
(2) GAAP
(3) Canadian operations were acquired on July 18, 2011. Based on materiality, we have not provided pro-forma fiscal 2011 results.



	Shareholder Relations Department
	300 Phillipi Road
	Columbus, OH 43228-5311
	Phone: (614) 278-6622 Fax: (614) 278-6666
	E-mail: aschmidt@biglots.com

First Quarter Results

U.S. Operations

Net sales for U.S. operations for the first quarter of fiscal 2012 increased 2.8% to $1,262.2 million, compared to $1,227.3 million for the same period of fiscal 2011. Comparable store sales for U.S. stores open at least fifteen months decreased 0.8% for the quarter. Adjusted income from continuing U.S. operations totaled $0.77 per diluted share (non-GAAP) compared to income from continuing operations of $0.70 per diluted share for the same period of fiscal 2011.

Canadian Operations

Net sales for Canadian operations for the first quarter of fiscal 2012 totaled $32.2 million, while incurring a net loss of $6.1 million, or $0.09 per diluted share (non-GAAP). We acquired our Canadian operations on July 18, 2011. Based on materiality to our total operations, we are not required to and have not provided pro-forma information for Canadian operations.

Inventory and Cash Management

On a consolidated basis, inventory ended the first quarter of fiscal 2012 at $848 million compared to $785 million last year. The increase of approximately 8% represents growth in the number of U.S. stores, approximately 1% per store growth of inventory in our U.S. stores, and our Canadian acquisition.

We ended the first quarter of fiscal 2012 with $83 million of Cash and Cash Equivalents and no borrowings under our credit facility compared to $284 million of Cash and Cash Equivalents and no borrowings under our credit facility as of the end of the first quarter of fiscal 2011. Our net use of cash and debt during the last twelve months was focused on share repurchase activity, acquiring and funding our Canadian operations, and repaying borrowings under our credit facility offset by positive cash flow (defined as operating activities less investing activities) generated by our U.S. business.

Share Repurchase Activity

During the first quarter of fiscal 2012, we invested $99 million to repurchase 2.5 million of our shares at an average price of $39.32 per share. This activity exhausted our 2011 share repurchase program which resulted in a total investment of $400 million to repurchase 11.7 million shares at an average share price of $34.11 per share.

On May 22, 2012, our Board of Directors approved a new share repurchase program (“2012 share repurchase program”) providing for the repurchase of up to $200 million of our common shares. The $200 million authorization is expected to be utilized to repurchase shares in the open market and/or in privately negotiated transactions at our discretion, subject to market conditions and other factors. Common shares acquired through the repurchase program will be available to meet obligations under equity compensation plans and for general corporate purposes. The 2012 share repurchase program is eligible to begin on May 25, 2012 and will continue until exhausted.



	Shareholder Relations Department
	300 Phillipi Road
	Columbus, OH 43228-5311
	Phone: (614) 278-6622 Fax: (614) 278-6666
	E-mail: aschmidt@biglots.com

FISCAL Q2 2012 GUIDANCE


•	Provides initial Q2 guidance for income from continuing operations of $0.37 to $0.42 per diluted share versus income from continuing operations of $0.50 per diluted share for the same period last year


•	Provides initial Q2 guidance for U.S. comparable store sales in a range of slightly positive to slightly negative

For the second quarter of fiscal 2012, we estimate consolidated income from continuing operations will be in the range of $0.37 to $0.42 per diluted share, compared to income from continuing operations of $0.50 per diluted share for the second quarter of fiscal 2011.

We estimate income from U.S. operations in a range of $0.44 to $0.49 per diluted share (non-GAAP), compared to last year's $0.52 per diluted share (non-GAAP). This is based on U.S. comparable store sales in a range of slightly positive to slightly negative and a total U.S. sales increase in the range of 3% to 4%.

Sales from our Canadian operations are expected to be in the range of $32 to $35 million for the second quarter of fiscal 2012, resulting in an operating loss in the range of $4 to $6 million, or $0.07 to $0.10 per diluted share (non-GAAP).

2012 OUTLOOK


•	Updates fiscal 2012 annual guidance for adjusted income from continuing operations to $3.25 to $3.40 per diluted share (non-GAAP) versus income from continuing operations of $2.99 per diluted share for fiscal 2011


•	Updates fiscal 2012 U.S. comparable stores sales estimates to be in a range of flat to 1% increase


•	Updates Cash Flow guidance to $190 million

Based on first quarter operating results and our expectations for the second fiscal quarter, we now estimate our fiscal 2012 consolidated adjusted income from continuing operations to be in the range of $3.25 to $3.40 per diluted share (non-GAAP), compared to our prior guidance of $3.40 to $3.50 per diluted share (non-GAAP). We have revised our Cash Flow guidance to $190 million compared to our prior guidance of $200 million.

We now estimate adjusted income from U.S. operations will be in the range of $3.50 to $3.60 per diluted share (non-GAAP), compared to our prior guidance of $3.63 to $3.73 per diluted share (non-GAAP). This is based on U.S. comparable store sales in the range of flat to a 1% increase and a total U.S. sales increase in the range of 5.5% to 6.5%.

For our Canadian operations, sales are expected to be in the range of $142 to $152 million for fiscal 2012 resulting in an operating loss in the range of $14 to $16 million, or $0.23 to $0.26 per diluted share (non-GAAP).



	Shareholder Relations Department
	300 Phillipi Road
	Columbus, OH 43228-5311
	Phone: (614) 278-6622 Fax: (614) 278-6666
	E-mail: aschmidt@biglots.com




EPS from Continuing Operations (non-GAAP)	Full Year		Q2

	2012 Guidance	2011	2012 Guidance	2011

U.S. Operations	$3.45 - $3.55	$3.18	$0.44 - $0.49	$0.52

Add back: Inventory charge	$0.05	—	—	—

U.S. Operations - adjusted basis	$3.50 - $3.60	$3.18	$0.44 - $0.49	$0.52

Canadian Operations ⁽¹⁾	$(0.23) - $(0.26)	$(0.19)	$(0.07) - $(0.10)	$(0.02)

Consolidated - adjusted basis	$3.25 - $3.40	$2.99 ⁽²⁾	$0.37 - $0.42	$0.50 ⁽²⁾

(1) Canadian operations were acquired on July 18, 2011. Based on materiality, we have not provided pro-forma fiscal 2011 results.
(2) All results presented above are on a non-GAAP basis with the exception of Full Year 2011 and Q2 2011 Consolidated EPS.

Conference Call/Webcast

We will host a conference call today at 8:00 a.m. to discuss our financial results for the first quarter and provide commentary on our outlook for fiscal 2012. We invite you to listen to the webcast of the conference call through the Investor Relations section of our website ( www.biglots.com ).

If you are unable to join the live webcast, an archive of the call will be available through the Investor Relations section of our website ( www.biglots.com ) beginning two hours after the call ends and will remain available through midnight on Wednesday, June 6. A replay of the call will be available beginning today at 12:00 noon through June 6 at midnight by dialing: 1.888.203.1112 (United States and Canada) or 1.719.457.0820 (International). The Replay Confirmation Code is 1866714. All times are Eastern Time.

Big Lots is North America's largest broadline closeout retailer. As of May 23, 2012, we operated 1,459 BIG LOTS stores in the 48 contiguous United States and 82 LIQUIDATION WORLD and LW stores in Canada. Wholesale operations are conducted through BIG LOTS WHOLESALE, CONSOLIDATED INTERNATIONAL, and WISCONSIN TOY and with online sales at www.biglotswholesale.com.



	Shareholder Relations Department
	300 Phillipi Road
	Columbus, OH 43228-5311
	Phone: (614) 278-6622 Fax: (614) 278-6666
	E-mail: aschmidt@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 the Act. The words “anticipate,” “estimate,” “expect,” “objective,” “goal,” “project,” “intend,” “plan,” “believe,” “will,” “should,” “may,” “target,” “forecast,” “guidance,” “outlook” 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 management's 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 discussed in such forward-looking statements as a result of various factors, including, but not limited to, the current economic and credit crisis, 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.



	Shareholder Relations Department
	300 Phillipi Road
	Columbus, OH 43228-5311
	Phone: (614) 278-6622 Fax: (614) 278-6666
	E-mail: aschmidt@biglots.com




BIG LOTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)

		APRIL 28		APRIL 30
		2012		2011
		(Unaudited)		(Unaudited)

	ASSETS

Current assets:
	Cash and cash equivalents	$	82,571	$	283,895
	Inventories	847,655		784,865
	Deferred income taxes	45,997		51,136
	Other current assets	68,646		63,206
	Total current assets	1,044,869		1,183,102

Property and equipment - net		569,146		521,925

Deferred income taxes		3,402		10,786
Goodwill		15,030		0
Other assets		44,358		42,009
		$	1,676,805	$	1,757,822

	LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
	Accounts payable	$	433,505	$	372,425
	Property, payroll and other taxes	79,106		79,845
	Accrued operating expenses	100,327		60,270
	Insurance reserves	35,441		37,848
	KB bankruptcy lease obligation	3,069		3,452
	Accrued salaries and wages	25,307		24,222
	Income taxes payable	19,303		32,792
	Total current liabilities	696,058		610,854

Long-term obligations under bank credit facility		—		—

Deferred rent		62,016		44,924
Insurance reserves		50,811		47,077
Unrecognized tax benefits		17,274		18,221
Other liabilities		41,219		29,930

Shareholders' equity		809,427		1,006,816
		$	1,676,805	$	1,757,822




BIG LOTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)

		13 WEEKS ENDED					13 WEEKS ENDED
		APRIL 28, 2012					APRIL 30, 2011
					%					%
		(Unaudited)					(Unaudited)

Net sales		$	1,294,481		100.0		$	1,227,274		100.0
	Gross margin	512,449			39.6		494,129			40.3
	Selling and administrative expenses	418,319			32.3		387,167			31.5
	Depreciation expense	25,288			2.0		20,664			1.7
Operating profit		68,842			5.3		86,298			7.0
	Interest expense	(336		)	(0.0	)	(501		)	(0.0	)
	Other income (expense)	37			0.0		112			0.0
Income from continuing operations before income taxes		68,543			5.3		85,909			7.0
	Income tax expense	27,763			2.1		33,378			2.7
Income from continuing operations		40,780			3.2		52,531			4.3
	Loss from discontinued operations, net of tax benefit of $22 and $40, respectively	(34		)	(0.0	)	(60		)	(0.0	)
Net income		$	40,746		3.1		$	52,471		4.3

Earnings per common share - basic (a)
	Continuing operations	$	0.64				$	0.71
	Discontinued operations	0.00					0.00
	Net income	$	0.64				$	0.71

Earnings per common share - diluted (a)
	Continuing operations	$	0.63				$	0.70
	Discontinued operations	0.00					0.00
	Net income	$	0.63				$	0.70

Weighted average common shares outstanding
	Basic	64,119					74,047
	Dilutive effect of share-based awards	1,046					1,219
	Diluted	65,165					75,266

(a)	The earnings per share for Continuing Operations, Discontinued Operations and Net Income are separately calculated in accordance with accounting pronouncements; therefore, the sum of earnings per share for Continuing Operations and Discontinued Operations may differ, due to rounding, from the calculated earnings per share of Net Income.




BIG LOTS, INC. AND SUBSIDIARIES
SEGMENT OPERATING PERFORMANCE
(In thousands, except per share data)

		13 WEEKS ENDED
		APRIL 28, 2012 (a)
		U.S.			Canada			Consolidated
		(Unaudited)			(Unaudited)			(Unaudited)

Net sales		$	1,262,235		$	32,246		$	1,294,481
	Gross margin	500,945			11,504			512,449
	Selling and administrative expenses	401,526			16,793			418,319
	Depreciation expense	24,424			864			25,288
Operating profit (loss)		74,995			(6,153		)	68,842
	Interest expense	(336		)	0			(336		)
	Other income (expense)	0			37			37
Income (loss) from continuing operations before income taxes		74,659			(6,116		)	68,543
	Income tax expense	27,763			0			27,763
Income (loss) from continuing operations		$	46,896		$	(6,116	)	$	40,780
Diluted earnings (loss) per common share from continuing operations (b)		$	0.72		$	(0.09	)	$	0.63

(a)	The consolidated results of operations are comprised of the U.S. and Canadian operating segments. Prior year results are not presented as we operated only one segment during the first quarter of fiscal 2011.
(b)	The diluted earnings per share from continuing operations by segment are separately calculated; therefore, the sum of diluted earnings per share from continuing operations by segment may differ, due to rounding, from the calculated consolidated diluted earnings per share from continuing operations. Diluted earnings per share from continuing operations by segment is a “non-GAAP financial measure,” as that term is defined by Rule 101 of Regulation G (17 CFR Part 244) and Item 10 of Regulation S-K (17 CFR Part 229), which our management believes is useful information to investors.





BIG LOTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)


		13 WEEKS ENDED			13 WEEKS ENDED
		APRIL 28, 2012			APRIL 30, 2011
		(Unaudited)			(Unaudited)

	Net cash provided by operating activities	$	125,582		$	125,545

	Net cash used in investing activities	(17,989		)	(19,099		)

	Net cash used in financing activities	(93,648		)	(90		)

	Impact of foreign currency on cash	79			0

Increase in cash and cash equivalents		14,024			106,356
	Cash and cash equivalents:
	Beginning of period	68,547			177,539
	End of period	$	82,571		$	283,895

BIG LOTS, INC. AND SUBSIDIARIES

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(In thousands, except per share data)

(Unaudited)

The following table reconciles gross margin, gross margin rate, operating profit, operating profit rate, income tax expense, effective income tax rate, income from continuing operations, net income, diluted earnings per share from continuing operations, and diluted earnings per share for the first quarter of 2012 for our consolidated and U.S. segment results (GAAP financial measures) to adjusted gross margin, adjusted gross margin rate, adjusted operating profit, adjusted operating profit rate, adjusted income tax expense, adjusted effective income tax rate, adjusted income from continuing operations, adjusted net income, adjusted diluted earnings per share from continuing operations, and adjusted diluted earnings per share (non-GAAP financial measures).



First quarter of 2012 - Thirteen weeks ended April 28, 2012

Consolidated Results
	As reported			Adjustment to exclude change in inventory accounting principle			As Adjusted (non-GAAP)
Gross margin	$	512,449		$	5,574		$	518,023
Gross margin rate	39.6		%	0.4		%	40.0		%
Operating profit	$	68,842		5,574			74,416
Operating profit rate	5.3		%	0.4		%	5.7		%
Income tax expense	$	27,763		2,186			29,949
Effective income tax rate	40.5		%	(0.1		)%	40.4		%
Income from continuing operations	$	40,780		3,388			44,168
Net income	$	40,746		3,388			44,134
Diluted earnings per share from continuing operations	$	0.63		$	0.05		$	0.68
Diluted earnings per share	$	0.63		$	0.05		$	0.68

U.S. Segment Results
	As reported			Adjustment to exclude change in inventory accounting principle			As Adjusted (non-GAAP)
Gross margin	$	500,945		$	5,574		$	506,519
Gross margin rate	39.7		%	0.4		%	40.1		%
Operating profit	$	74,995		5,574			80,569
Operating profit rate	5.9		%	0.5		%	6.4		%
Income tax expense	$	27,763		2,186			29,949
Effective income tax rate	37.2		%	0.1		%	37.3		%
Income from continuing operations	$	46,896		3,388			50,284
Diluted earnings per share from continuing operations	$	0.72		$	0.05		$	0.77

The adjusted gross margin, adjusted gross margin rate, adjusted operating profit, adjusted operating profit rate, adjusted income tax expense, adjusted effective income tax rate, adjusted income from continuing operations, adjusted net income, adjusted diluted earnings per share from continuing operations, and adjusted diluted earnings per share are “non-GAAP financial measures” as that term is defined by Rule 101 of Regulation G (17 CFR Part 244) and Item 10 of Regulation S-K (17 CFR Part 229). These non-GAAP financial measures exclude from the most directly comparable financial measures calculated and presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”) a pretax charge for a change in an accounting estimate inseparable from a change in accounting principle associated with our implementation of new inventory management information systems of $5,574 ($3,388, net of tax).

Our management believes that the disclosure of these non-GAAP financial measures provides useful information to investors because the non-GAAP financial measures present an alternative and appropriate method for measuring our operating performance, excluding certain items included in the most directly comparable GAAP financial measures. Our management uses these non-GAAP financial measures, along with the most directly comparable GAAP financial measures, in evaluating our operating performance.

Exhibit 99.2

THOMSON REUTERS STREETEVENTS

EDITED TRANSCRIPT

BIG - Q1 2012 Big Lots, Inc. Earnings Conference Call

EVENT DATE/TIME: MAY 23, 2012 / 12:00PM GMT

OVERVIEW:

BIG announced 1Q12 adjusted income from continuing operations of $44.2m or $0.68 per diluted share. Management guided to 2Q12 EPS from continuing operations of $0.37-0.42 and FY12 EPS from continuing operations of $3.25-3.40.



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MAY 23, 2012 / 12:00PM, BIG - Q1 2012 Big Lots, Inc. Earnings Conference Call

CORPORATE PARTICIPANTS

Andy Regrut Big Lots, Inc. - IR

Tim Johnson Big Lots, Inc. - SVP, Finance

Joe Cooper Big Lots, Inc. - EVP, CFO & President, Big Lots Canada

Steve Fishman Big Lots, Inc. - Chairman, CEO & President

CONFERENCE CALL PARTICIPANTS

Laura Champine Canaccord Genuity - Analyst

Matt Boss JPMorgan - Analyst

Jeff Stein Northcoast Research - Analyst

David Mann Johnson Rice - Analyst

Peter Keith Piper Jaffray - Analyst

Dan Wewer Raymond James - Analyst

Charles Grom Deutsche Bank - Analyst

Anthony Lebiedzinski Sidoti & Co. - Analyst

Patrick McKeever MKM Partners - Analyst

PRESENTATION

Operator

Ladies and gentlemen, welcome to the Big Lots first quarter 2012 teleconference. This call is being recorded. During this session, all lines will be muted until the question-and-answer portion of the call. (Operator Instructions). At this time, I would like to introduce today's first speaker, Senior Vice President of Finance, Tim Johnson. Please go ahead, sir.

Andy Regrut - Big Lots, Inc. - IR

Thanks Chris and thank you everyone for joining us for our first quarter conference call. With me here today in Columbus are Steve Fishman, our Chairman, CEO and President; Chuck Haubiel, Executive Vice President, Real Estate, Legal and General Counsel; Joe Cooper, Executive Vice President and Chief Financial Officer of Big Lots and President of Big Lots Canada; and Tim Johnson, Senior Vice President of Finance.

Before we get started, I would like to remind you that any forward-looking statements we make on today's call involve risk and uncertainties and are subject to our Safe Harbor provisions as stated in our press release and SEC filings and that actual results can differ materially from those described in our forward-looking statements.

Our consolidated financials include results from our U.S. operations and from our Canadian business that was acquired on July 18, 2011. Our statements also include immaterial amounts of discontinued operations activity.

All commentary today is focused on adjusted non-GAAP results from continuing operations. That is, excluding the non-recurring non-cash after-tax charge of $3.4 million, or $0.05 per diluted share mentioned in today's press release. As a reminder, this charge relates to our previously announced change in accounting principal related to inventory valuation and was the direct result of our successful go-live of a new merchandising system at the beginning of the fiscal year. A reconciliation of GAAP to non-GAAP adjusted earnings is available in today's press release.



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MAY 23, 2012 / 12:00PM, BIG - Q1 2012 Big Lots, Inc. Earnings Conference Call

Given our annual meeting of shareholders begins at 9 a.m., our comments will be brief to allow for Q&A to be completed by 8.45. With that, I'll turn it over to TJ.

Tim Johnson - Big Lots, Inc. - SVP, Finance

Thanks Andy and good morning everyone. I am going to briefly cover Q1 results and then turn it over to Joe to update you on our progress in Canada, and also to speak to our forward guidance. After Joe, Steve will finish with his perspective on results and our merchandising efforts going forward.

Sales for U.S. operations were $1.262 billion, an increase of 2.8% compared to the $1.227 billion we reported for the first quarter of last year. Comparable store sales for stores open at least 15 months decreased 0.8%, which was below our original guidance of a 2% to 4% increase. Comp trends to plan varied widely during the quarter. For the first half of the quarter, comps were positive and sales dollars were essentially on plan. In the last half of the quarter, we expected to see higher comps against the softer compares from Q1 of 2011. This trend did not unfold and comps were actually down to the prior year. To give you a sense of magnitude, the month of April alone accounted for nearly 75% of the sales shortfall for the quarter. so our miss to plan was rather abrupt and the variance to plan widened in the higher volume weeks of April driving Q1 results below our guidance.

From a merchandise perspective, Furniture and Hardlines were the best-performing categories each comping up mid-single digits. Next was Lawn and Garden, which was up low-single digits. Actually the department was trending to a stronger result pre-Easter, but did slow in the last two weeks of April. The balance of the Seasonal category was down slightly. The Home category comps were essentially flat for Q1.

The two most challenging areas in merchandising were Consumables and Electronics. Consumables was down low singles and Electronics was slightly positive after a 20% comp in Q4. The combination of the miss in Consumables and the slowdown in Electronics trends contributed to nearly 3 points of the comp miss to our original forecast, or said another way, was the large majority of our miss. In a moment, Steve will go through more details of category learnings, adjustments, and go-forward expectations.

For the first quarter of fiscal 2012, adjusted operating profit dollars for our U.S. operations were $80.6 million, as our rate declined to 6.4% compared to 7% last year. As anticipated, our adjusted gross margin rate was down slightly at 40.1% compared to last year due to higher fuel costs and a higher markdown rate to turn inventory and stay fresh. These challenges were partially offset by a favorable merchandise mix and improving shrink results.

Total expense dollars were $426 million, and the first quarter SG&A rate was 33.7%, up 50 basis points to last year. Expense deleverage over a lower than expected sales base came from higher depreciation costs and higher occupancy-related costs along with an increase in advertising spend. Interest expense for U.S. operations was essentially unchanged to the prior year. Our U.S. tax rate of 37.3% was below last year's rate of 38.9% with the lower rate related to settlement activity which was planned and was included in our initial guidance.

In total, our U.S. business reported adjusted income from continuing operations of $50.3 million, or off approximately 4% to last year. EPS from U.S. operations was $0.77 per diluted share for the first quarter compared to last year's $0.70 per diluted share.

From a real estate perspective, we opened 10 new stores and closed six in the first quarter leaving us with 1,454 stores and total selling square footage of 31.6 million.

Joe will touch on Canada in a moment, but in terms of the P&L, sales in the first quarter were $32.2 million with a net loss of $6.1 million, or $0.09 per diluted share. This result was on plan and actually at the better end of our original guidance.

So in total, from a consolidated point of view, we reported adjusted income from continuing operations of $44.2 million, or $0.68 per diluted share. This compares to $52.5 million or $0.70 per diluted share a year ago when we had only U.S. operations.



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MAY 23, 2012 / 12:00PM, BIG - Q1 2012 Big Lots, Inc. Earnings Conference Call

Moving on to the balance sheet, inventory on a consolidated basis ended the first quarter of fiscal 2012 at $848 million, up 8% to last year, with the key drivers being an increase in U.S. store count, a 1% increase in U.S. per store inventory, and the impact of the acquisition of our Canadian operations.

CapEx for the quarter totaled $18.3 million compared to $19.2 million last year and depreciation expense was $25.3 million, an increase of $4.6 million to last year.

Consolidated cash flow, defined as operating activities less investing activities, for the quarter was $108 million or up slightly to $106 million last year. Included in the $108 million of cash flow was approximately $12 million of cash investment in Canada to fund building of inventory levels and operating losses incurred during the quarter.

We ended the quarter with $83 million of cash and cash equivalents and no borrowings under our credit facility compared to $284 million of cash and cash equivalents and no borrowings under our credit facility for the same period last year. Our net use of cash and debt over the last 12 months was focused on share repurchase activity, funding our Canadian operations, and paying off borrowings under our credit facility.

During the first quarter of fiscal 2012, we invested $99 million to repurchase 2.5 million shares of our stock at an average price of $39.32. This activity exhausted the May 2011 Share Repurchase Program, which resulted in a total investment of $400 million to repurchase 11.7 million shares at an average price of $34.11 per share. As noted in today's press release, last night, our Board of Directors approved a new share repurchase program providing for the repurchase of up to $200 million of our common stock. I will now turn it over to Joe for an update on Canada and our forward guidance.

Joe Cooper - Big Lots, Inc. - EVP, CFO & President, Big Lots Canada

Thanks TJ. During the first quarter of fiscal 2012, we continued to make progress in the turnaround strategy for Big Lots Canada. From a merchandising perspective, our inventory levels grew and the quality and breadth of assortment continued to improve. Inventory ended the quarter at approximately $25 million with our target level to be consistently in that $25 million to $30 million range. Based on sales results for the quarter, we believe the customer feedback to our changes and assortment and quality continues to be encouraging, particularly in the areas of Furniture, Seasonal and Consumables. The last major category where we continue to build our assortment is Home. We believe we are on track to have a fully assorted store by early Q3.

On the talent front, we are essentially staffed at this point with our last executive team member, a head of merchandising with extensive experience in the Canadian market, joining us in the last 30 days. With this final hire, the team is now in place.

We also continue to raise our in-store standards and build our store team to help us achieve our goals. Additionally, we continue to evaluate the potential of our stores given our current real estate. From a stores perspective, we ended Q1 with 82 Liquidation World and LW stores.

Now turning to forward guidance, for Q2, we expect income from U.S. operations to be in the range of $0.44 to $0.49 per diluted share compared to $0.52 per diluted share in the second quarter of fiscal 2011. This is based on a total U.S. sales increase in the range of 3% to 4% and comparable store sales in the range of slightly negative to slightly positive.

The gross margin rate for the second quarter of fiscal 2012 is expected to be above last year's second quarter rate, while our expense rate is expected to increase, driven by higher depreciation and occupancy-related costs, higher advertising spend, higher incentive costs and incremental headcount to support the merchandising and marketing areas of our business.

In Canada, second-quarter sales are expected to be in the range of $32 million to $35 million, resulting in a net loss in the range of $4 million to $6 million, or $0.07 to $0.10 per diluted share. And for the consolidated company, income from continuing operations is estimated to be in the range of $0.37 to $0.42 per diluted share, compared to income of $0.50 per diluted share for the second quarter of fiscal 2011.



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MAY 23, 2012 / 12:00PM, BIG - Q1 2012 Big Lots, Inc. Earnings Conference Call

Our updated outlook for the full year of fiscal 2012 calls for consolidated adjusted income from continuing operations to be in the range of $3.25 to $3.40 per diluted share. This compares to fiscal 2011 of $2.99 per diluted share. As noted last quarter, we are operating under a 53-week retail calendar for fiscal 2012, and we anticipate the impact of the extra week adds approximately $0.10 per diluted share to our earnings for the year. We expect this financial performance will result in cash flow of approximately $190 million. The average diluted share count is now forecasted to be approximately 64 million for fiscal 2012 with no assumption for additional share repurchase activity.

For our U.S. operations, we estimate adjusted income from continuing operations to be in the range of $3.50 to $3.60 per diluted share. This compares to our 2011 result of $3.18 per diluted share. Our updated guidance is based on a total sales increase of 5.5% to 6.5% and comparable store sales in the range of flat to up 1%.

We estimate the adjusted operating profit rate for the U.S. operations for 2012 will be similar to last year. The adjusted gross margin rate for fiscal 2012 is expected to be slightly higher than 2011 driven by lower anticipated markdowns. Expenses as a percent of sales are expected to increase slightly in this model with the entire increase and more coming from higher depreciation, bonus and equity-related expense, and occupancy-related costs. You may recall our 2011 operating profit was below plan for most of the year resulting in lower bonus expense and payout to management, stores and DC operations. Excluding bonus, we see expense leverage in our 2012 model with a comp leverage point, which is estimated to be approximately a 1% comp, which by most industry comparisons is very low. Expense leverage comes from stores, DCs, credit card fees, utilities and the 53rd week, partially offset by higher depreciation expense.

Filling out the rest of the U.S. P&L for 2012, we expect net interest expense of approximately $2 million and the effective income tax rate is forecasted to be in the neighborhood of 38.0% to 39.0%.

For our Canadian operations, we expect sales to be in the range of $142 million to $152 million resulting in a net loss in the range of $14 million to $16 million or $0.23 to $0.26 per diluted share.

Now to Steve for some closing remarks.

Steve Fishman - Big Lots, Inc. - Chairman, CEO & President

Thanks, Joe. So we have shared some details on results and thoughts on Q2. I want to focus my time on the merchandising elements, what worked in Q1, where we were off-track and how we expect to improve trends. From a category perspective, as TJ mentioned, Furniture and Hardlines were the leaders. Furniture delivered strong results in its largest volume quarter of the year capitalizing on tax time. Hardlines offered great brands and deals and the customer responded. Lawn and garden, our single largest seasonal business, was good where and when the weather was good. Home comps were flat and the expansion of the footage allocated to this category was completed on time and by quarter's end.

Which leads me to Consumables and Electronics where we came up short for the quarter. In each of these areas, we have completed a deep-dive assessment, have an action plan and a general understanding of when change in the stores should start to be visible to the customer. At that point, we will start to learn if we have made the appropriate adjustments.

First, Consumables. Our largest business comped down low single digits when we would have expected an increase of low single digits. Certain aspects of our pre-planned business were actually quite good, namely Specialty Food and Direct-toStore. The challenges were isolated to our business, which were more closeout in nature -- Food, HBC, Chemicals, businesses like that. In our review of these categories, we looked at all aspects of what can impact sales and in the final analysis, we believe our execution was off. We do not believe competition was an issue. We do not believe we were beat on price or see any issues with our value proposition. We don't believe placement in the store or a marketing changed from Q4 to any significant degree that would explain a slowdown in sales, and I won't allow or acknowledge macro excuses for what I believe is a straightforward execution issue.

I am the first to say this is a complicated business model, particularly in Consumables where our merchants are heavily dependent on closeout flow while also managing never outs and replenishable-type goods. I think we learned that sufficient closeout opportunities existed and the goods were available during the quarter. Our shortfall was either we bought the wrong brand or item, or we weren't broad enough in our selections, particularly in Food. With closeouts come risk. Most of the time, the deals perform very well. Other times, not so good and when we make a mistake, it can slow us down and create choppiness in our sales and merchandise flow, but we work through it, learn from the experience, and move on to the next great deal.



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MAY 23, 2012 / 12:00PM, BIG - Q1 2012 Big Lots, Inc. Earnings Conference Call

We are refocusing the buying efforts and providing additional resources to the team and it is an ongoing process, but it would be my expectation that later in Q2 and into early Q3, the assortments in Consumables should improve. At that time, we will reassess the business to understand if our adjustments were successful.

This was a good reminder and exercise for the team to go through while we're in the midst of developing our next three-year long-range plan. It stretches our thinking and also reminds us of the challenges of operating a closeout business model and raises the question what, if any, tweaks or adjustments to the strategy should we be thinking about or testing for the future of this business.

Turning to Electronics, I believe execution came up short here as well; although the reasons for the miss were different than Consumables. Certain elements of the Electronics business were quite good, particularly in accessories, which was a major focus in store and in ads. In this merchandise category, we are really good when we are a close second. Meaning, if we are one version behind the curve or technology at a red hot price, we win. We believe the slowdown from Q4 2011 into Q1 2012 was the result of not keeping pace with technology. For example, in certain classifications like tablets and video games, we underestimated the end-of-life impact and our sales slowed significantly, possibly impacting related selling and transactions. Additionally, our DVD business slumped during the quarter as our inventories were out of balance and titles were somewhat out of date. New receipts and new presentations are delivering now and we are hopeful this will help. As we move through Q2, we will have change in content and presentation.

As we look forward, I would anticipate certain of our businesses will remain solid while a few could remain stressed. However, as we execute to and enter the back half of the year, we are forecasting comps to move back into positive territory as I believe the content changes coming from Consumables and Electronics will improve those businesses. I believe the recently completed Home expansion will provide an incremental sales opportunity.

After walking off the back-to-school floor sets and reinvigorating the in-store marketing, I believe we are prepared to have a good Q2 to Q3 transition. And maybe most important, I believe we have another solid nine weeks of Christmas strategy and the holiday calendar this year is quite favorable with two extra shopping days between Christmas and Thanksgiving.

So to summarize, clearly, we are not happy with the start to the year, but we believe we have identified our misses and have a plan to correct them. The closeout model is truly unique and more complex than most understand. However, it does yield opportunities to change trends in short order. We have turned around categories and entire businesses before and we see the opportunity ahead of us again. So with that, I will turn the call back over to Andy.

Andy Regrut - Big Lots, Inc. - IR

Thanks, Steve. Chris, we would now like to open the lines for questions at this time.

QUESTION AND ANSWER

Operator

(Operator Instructions). Laura Champine, Canaccord Genuity.



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MAY 23, 2012 / 12:00PM, BIG - Q1 2012 Big Lots, Inc. Earnings Conference Call

Laura Champine - Canaccord Genuity - Analyst

Good morning. My question, Steve, is about the guidance for the same-store sales trends to improve in the back half when you do have difficult comparisons. And I am just wondering -- I hear you saying that Consumables you expect to show some improvement, but how do you get visibility into what closeouts you will buy in Consumables and can you just give us more color on what the change is in the buying strategy there that should drive that comp improvement in the back half?

Steve Fishman - Big Lots, Inc. - Chairman, CEO & President

I think there are a couple things that we have been working on that actually were good for us in the third and fourth quarter of last year, particularly, and continue to be good. The basic never-out programs that we have developed over the last 12 months, Fresh Finds, in particular, and international foods, have really performed well and continue to grow as a percent to our total business, and we have some pretty exciting plans for the second and into the third quarter, particularly with expanding Fresh Finds and an international event that we did not have, so that is number one.

Number two, we actually have, although we don't like to talk about it, a little bit more visibility for the balance of the second quarter into the third quarter of closeout availability. And we are pretty pleased with what we believe will be coming in and I think you will see changes -- actually, you'll probably start to see some of the inventory in the stores in the next two weeks, and we will continue flowing through June a pretty substantial closeout opportunity that we have taken advantage of. So we feel particularly good about that.

And then I think we have pre-planned the back-to-school period really, really well, and I think you will start to see a transitional set in July there. I think Doug and the team have done a job that we have really never done before, so I am pretty excited about that. And he also has a planned transition after back-to-school for the balance of the third quarter. Again, another program that we have never done before that is extremely similar to what we have done and we have always talked about, which is the nine weeks of Christmas before.

So we kind of have a nine weeks of Christmas plan for back-to-school through the third quarter, and he has actually expanded and extended the nine weeks of Christmas for the fourth quarter to a 14-week period so that we can transition well not only during Christmas, but out of Christmas into January this year. So I think we really have our arms around the business probably more substantially than we have had in a long time.

Operator

Matt Boss, JPMorgan.

Matt Boss - JPMorgan - Analyst

Hey, guys. With 70% to 80% of the Consumables category more closeout in nature, are you seeing any signs of opportunity for an increased level of direct-from-manufacturer goods over time in this category? And is it something that you would be interested in just in terms of stabilizing the consistency in the category?

Steve Fishman - Big Lots, Inc. - Chairman, CEO & President

Matt, that is the question of the hour that we have asked ourselves 100 times and I think it is a really good one. I think we have always said that we have challenged our self about what is the right amount of closeout business day in and day out or in-and-out business. And I think going through this process of the next three-year long-range plan, we are going to challenge our self there.

We've talked forever about the fact that the largest piece of the closeout business is Consumables, which is the largest piece of our overall business and we have built a very large business over the last five years, particularly with that level of success. And you know, and as we do, when it is good, it is really good and when it is not, it is not and I think the relationship-building that Doug has really initiated with his team and with some of the major manufacturers, the best manufacturers in the country, that we probably didn't have as close a relationship with in the past few years is only going to continue to grow.



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MAY 23, 2012 / 12:00PM, BIG - Q1 2012 Big Lots, Inc. Earnings Conference Call

He is not only structuring the business or restructuring it around giving him some more talent in those businesses, but also infusing some relationship people that we have really never had before to continue to grow those things. The answer to your question is there is some opportunities for day in and day out business from some of these manufacturers who just manufacture goods for us. The answer is yes to that too.

Matt Boss - JPMorgan - Analyst

That's great. The second question I had is, given some of the changes that you outlined in the category, and it sounds like more back-end weighted in terms of the second quarter and the second half, have you seen any signs of stabilization in Consumables and Electronics in May thus far?

Tim Johnson - Big Lots, Inc. - SVP, Finance

Matt, this is TJ. I guess from our guidance perspective, what we are communicating here is that this is kind of a flow issue or flow process through the second quarter as some of the opportunities that surfaced in the deep dive start to come into the store. That will happen gradually through the quarter, so it is a little premature for us to sit here three weeks into the quarter and talk about trends changing when really those deep dives with the merchants really just finished in the latter part of April.

So I think from a guidance perspective, I would remind people that we do have an extra ad here in the month of May, so we would have an expectation that May would be a little bit better than the balance of the quarter. That's why we put the advertising there, but it is a little premature for us to comment on current trends coming out of those deep dives, which just finished in the latter part of April.

Matt Boss - JPMorgan - Analyst

Okay, great. Good luck, guys.

Operator

(Operator Instructions). Jeff Stein, Northcoast Research.

Jeff Stein - Northcoast Research - Analyst

I have got a financial question. Given the fact, guys, that you are looking for a down second quarter, I am wondering if you could perhaps get us from A to B. Obviously, you are still guiding to a decent full fiscal year, so it is obviously going to be heavily back-end weighted. Should we expect all of the increase to come in Q4 or are you currently looking at the possibility of having an up third quarter as well?

Tim Johnson - Big Lots, Inc. - SVP, Finance

Yes, Jeff, this is TJ. We are not breaking out the third and fourth quarter at this point. That is something we typically do not do on this call. I think from our perspective though as we move through the second quarter and into the back half of the year, based on Steve's comments earlier, we would expect gradual improvement in the merchandising area and hopefully sales will follow that.

I would like to remind everybody of a couple things. Our annual comp guidance of flat to plus 1% comp for the year, if you kind of squeeze the math on that, you are looking at the back half of the year of a comp of a little over 1% to get in that range. So it is not like we have got a terrific hockey stick here where we are expecting big, big comps in the back half of the year.



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MAY 23, 2012 / 12:00PM, BIG - Q1 2012 Big Lots, Inc. Earnings Conference Call

I'd also like to remind people that this is one of the more favorable retail calendars that we will have. We have got the two extra shopping days between Thanksgiving and Christmas. Clearly, we have an expectation that will help us in the fourth quarter as well. I guess the one wildcard in the fourth quarter that would be something we are very aware of is that, in the early part of November with the national election, that historically has caused consumers to be a little bit cautious. So we try to take all of that into account, Jeff, when we set our quarters for the back half of the year.

Jeff Stein - Northcoast Research - Analyst

Got it. Thank you.

Operator

David Mann, Johnson Rice.

David Mann - Johnson Rice - Analyst

Yes, thank you. Good morning. Can you talk a little bit about the comment about adding resources to the team? Talk about some of the changes that may have happened in the buying team and where your plans are for the future in terms of the merchant team.

Steve Fishman - Big Lots, Inc. - Chairman, CEO & President

I think it might be slightly preliminary to talk about what it is going to look like as we go forward, David, and I think the fact that we're working on a long-range plan, how we want to structure this business for the next 36 months and take it from $5.5 billion to whatever the number is that we will talk about next February and March, I'd like to hold the opportunity in reserve.

But I will tell you, Consumables particularly, being one of the largest businesses that we have, we think the opportunities continue to exist to add some more support staff there from a relationship standpoint and that is what I was kind of speaking to. We have run a business for a number of years called Big Lots Capital and I think you following the Company for many years remember that in that business there were what we call finders. We made a conscious decision to take those finders and infuse five of the six of them -- five into five of our six businesses answering directly to the Vice Presidents so that they can, one, concentrate on specific businesses. One will go to Home, one will go to Furniture, one will go to Hardlines, one will go to Consumables. I'm sorry. I missed one, but the only division that won't have one right now is Seasonal because so much of their business is done overseas and is pre-planned. We don't at this particular point feel like we need that additional support.

So that is occurring as we speak, David. We haven't filled every one of the finders, but I think the majority of them have been filled and that is going to allow the merchants to do their jobs and really make rate decisions and it is going to allow finders to continue to develop and establish relationships with major manufacturers so that we can do the kinds of things that was asked of me before, like continue to build existing relationships of one being first and foremost topical of the major manufacturers when it comes to closeouts and number two, to take a look at opportunities to build potential, create closeout opportunities for us on existing merchandise at the same time too. And it frees up the buyers to be capable of making the day in and day out decisions, so we think that that is going to be a real plus. And that is just a function of us just getting bigger and bigger. That is all. But I think it will help an awful lot.

David Mann - Johnson Rice - Analyst

Okay great. Thank you.



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MAY 23, 2012 / 12:00PM, BIG - Q1 2012 Big Lots, Inc. Earnings Conference Call

Operator

Peter Keith, Piper Jaffray.

Peter Keith - Piper Jaffray - Analyst

Hi, good morning. I just wanted to ask about the Q2 guidance, which came in below what I think most people expected. It seems that the sales guidance was not off and the gross margin is going to be up. So as I am trying to get to your numbers, it looks like something funny might be going on with the SG&A. Is there something very specific to Q2 that's maybe a little bit more expense-heavy than the rest of the year?

Tim Johnson - Big Lots, Inc. - SVP, Finance

Yes, Peter, this is TJ. I think first off at a real high level, when we adjusted our Q2 guidance from a flow standpoint, you have heard us talk about before, for every dollar above or below plan, we typically flow about 30% to operating profit. Now in the first quarter, we did much better than that. The flow-through, when you work through your model from our original guidance, was probably more like 20% to the downside. So that clearly -- expenses flexed real well in the first quarter and margins held. The team did a good job managing inventory in a tough month, particularly in April.

But for the second quarter, when you flow that 30% model through your forecasts, you are going to find the same type of thing. So for us, internally, when we moved off of plan and reset our guidance for second quarter, we saw that same 30% flow-through. We do expect the margin rate to be up slightly. That is something that we have said from day one. We took heavy, heavy markdowns last year in Lawn and Garden, as you will recall.

But also in second quarter, keep in mind, we will deleverage for a couple different reasons. First off, we do have an extra ad in the month of May and in the second quarter and with that comes incremental cost. We do have higher depreciation expense, as we have talked about and obviously on a lower sales base, that is going to create some deleverage. We do have incremental bonus expense year-over-year. We called that out in our Qs and Ks last year, so that shouldn't be a surprise to people.

So there certainly are some elements that are creating deleverage, but, from our perspective, from the beginning of the year to today, the model for second quarter is flexing as anticipated. I can't really speak to street models per se because each one of them are a little bit different.

I would say though, and I would remind people that included in our estimates for the year is an operating loss in the range of $0.07 to $0.10 in Canada and it is not always clear to me exactly how that is factored into the street models because we don't always have good visibility to that. But that is consistent with what we said at the beginning of the year. We would expect, from first quarter to second quarter, that we would make improvements and that is reflected in our guidance as well.

So a long way of answering you, but hopefully enough detail for people to understand that internally when we flexed our model based on the sales changes, the flow-through was appropriate and consistent with what we have told you in the past.

Peter Keith - Piper Jaffray - Analyst

Okay, that's helpful, Tim and good luck this coming quarter.

Tim Johnson - Big Lots, Inc. - SVP, Finance

Thanks.



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MAY 23, 2012 / 12:00PM, BIG - Q1 2012 Big Lots, Inc. Earnings Conference Call

Operator

Dan Wewer, Raymond James.

Dan Wewer - Raymond James - Analyst

Steve, I have become concerned that Big Lots' philosophy on not adding coolers and freezers is placing the Company at a competitive disadvantage in Consumables. Looking at companies such as Family Dollar, Dollar General collectively will open almost 1200 stores this year and many of those are in neighborhoods where Big Lots competes. And they have been increasing the number of coolers and freezers from five stores to as many as 20 a store.

So again, I understand your view about the economics of coolers not being favorable, but I am not sure that the customer really cares about the economics. They are looking for a more convenient shopping trip. So what are your thoughts on as to whether or not that type of investment will ultimately be needed to make yourself more competitive?

Steve Fishman - Big Lots, Inc. - Chairman, CEO & President

Dan, I think that is a very fair challenge and I think it is something that we question all the time to ourselves also and try to understand the potential complicated nature of making that decision and trying to execute it versus just saying we want to do it. And I think very clearly it is fair enough that I, along with Doug, are challenging ourselves to understand what we should be doing and how we should be running the Consumables business and probably in the long-range plan next spring, we can speak much more to that.

Dan Wewer - Raymond James - Analyst

Okay. And just one other thing real quick, you were calling out the execution issues in consumer electronics. But when I look at the results being put up by Best Buy and RadioShack and HH Gregg in consumer electronics, this just looks like an industry that is definitely in a cyclical, maybe a secular decline, not an execution issue.

Steve Fishman - Big Lots, Inc. - Chairman, CEO & President

Well, when we say execution, we are talking about how we make decisions in how we go to market for the merchandise content that we are talking about. And I think the real surprise to us in the first quarter was the change in the trend from the fourth quarter to the first quarter. If you really take a look at our business versus those people and of course, we are not even remotely in the electronics business the way that Best Buy and HH Gregg and some of the other people are. We are in classifications of the business and as we mentioned, we like to be a close second in those businesses. The business still trended up comp in the first quarter. It is just that the trend shifted so dramatically from the fourth quarter to the first quarter and that was the real surprise to us.

We still think that there is a great opportunity. We are selling the heck out of accessories. It is just a booming business for us and it is a high margin business. We like that piece of the business. The tablet business is really right for us to be in in great values and we are in that as long as we stay up with the technology and we don't allow ourselves to get behind it. And that is what happened to us moving to a 4.0 Android versus a 2. something in the fourth quarter that sold very, very well that didn't sell in the fourth quarter.

And then the execution issue was in the DVD business, which is a very large business of ours that we didn't execute well. We had choppy inventory in the first quarter. We had the wrong titles, we had inconsistent inventories there and in the gaming business and that is probably just about fixed at this particular point.



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MAY 23, 2012 / 12:00PM, BIG - Q1 2012 Big Lots, Inc. Earnings Conference Call

Dan Wewer - Raymond James - Analyst

Okay. For what it's worth, Best Buy indicated their DVD and gaming software business was down about 24% in comp stores, so it sounds like you did better than they did.

Steve Fishman - Big Lots, Inc. - Chairman, CEO & President

Yes, yes, they are challenged. They are challenged. We understand that, but we are in the real value business too. We are selling DVDs in the $3, $5, $8 and $10 range, not in the $15 to $20 and $30 range. So there is still a large customer out there who is buying an awful lot of that value from us.

Dan Wewer - Raymond James - Analyst

Fair enough. Well, thank you.

Operator

(Operator Instructions). Charles Grom, Deutsche Bank.

Charles Grom - Deutsche Bank - Analyst

Thanks. Good morning, Steve, TJ, Jeff. So on this Consumables issue, it's the second time in two years it has flared up. Do you guys as you kind of do this and complete the deep dive, do you guys believe there is a structural problem here? If you look at 80% roughly of your business is closeout in that category, it seems like that is the area of weakness, but then when you call out the pre-planned business, it seems like that is the area that you have changed over the past couple of years and has really been an area of strength. So I am wondering as we go through the year, will we hear about more changes structurally to this segment and do you believe there is an issue there?

Steve Fishman - Big Lots, Inc. - Chairman, CEO & President

Chuck, I am going to be repetitive because I think I commented on that very same question earlier on today. We challenge ourselves all the time. We need to understand what is the right mix of business to be doing in every one of our businesses, not just Consumables. By the way, last year was a really good Consumables year, so it was a couple of years ago that we had the same challenge. It is very clear that it is the level of the closeouts that we have and the quality of those closeouts. And we have worked at establishing some of the business, particularly in the food area that we have done a better job in. With Fresh Finds and international foods, we have talked about the consistency of trying to build that business. I think it is a very fair challenge on your part and all the other analysts who are questioning us and we are doing the same thing about questioning ourselves. And I think we are adjusting as quickly as we possibly can to run the business so that we continue to grow the top line, not just the bottom line of the business.

Operator

Anthony Lebiedzinski, Sidoti & Company.

Anthony Lebiedzinski - Sidoti & Co. - Analyst

Yes, good morning. I was wondering if you could comment on your lack of e-commerce. Do you think that is hurting your business and do you have any updated thoughts on e-commerce?



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MAY 23, 2012 / 12:00PM, BIG - Q1 2012 Big Lots, Inc. Earnings Conference Call

Tim Johnson - Big Lots, Inc. - SVP, Finance

No. Anthony, I think to Steve's point earlier, we are right in the middle of a long-range plan process, really looking at the next three years. So if there is any -- that is obviously a pretty significant undertaking to move into that business. So if there is anything to comment on there, it would be in light of a three-year plan we would speak to next year.

Anthony Lebiedzinski - Sidoti & Co. - Analyst

Okay, thank you.

Operator

Patrick McKeever, MKM Partners.

Patrick McKeever - MKM Partners - Analyst

Thanks. Good morning, everyone. Just wondering if you could comment about the closeout deal opportunity outside of Consumables. How are things looking there? Has there been any change in availability, anything exciting coming down the road here over the next few months? Any big deals envisioned? Thanks.

Steve Fishman - Big Lots, Inc. - Chairman, CEO & President

I think the secret sauce to our business is the fact that you will see the deals in the stores when you see them. And I think that is something we have always held very, very close to our vest. But I think that there is good flow in every one of the businesses that we deal in at this particular point. Consumables, Home, Hardlines, all three of those businesses, I think as we move through the second quarter and into the third quarter, we feel particularly good about right now. But I think you'll have to judge that on your own when you go into the stores and see what those great deals are. But we feel pretty good about it.

Patrick McKeever - MKM Partners - Analyst

And then, Steve, you have talked over the past couple of years or so about how your customer is not resistant, so to speak, to higher price points if the value is there. I mean does that -- again, looking outside of the Consumables business, does that still hold true today or has there been any change there?

Steve Fishman - Big Lots, Inc. - Chairman, CEO & President

Absolutely none, absolutely none. And in fact, it continues to be about the quality of the deal and the brand and the value relationship, not about a price point. Our average sales check continues to rise. Our average unit retail continues to rise. The deals that we are getting are better quality from better name-brand manufacturers than ever before and we are real excited about all that potential and there has been absolutely no resistance whatsoever to individual price points by classification. It is all about the great value that we are presenting.

And the thing that we continue to hear, and we continue to be told by our customer, is it is all about the deal; it is not about the price. We continue to be a leader in value proposition and what we are offering and there is absolutely no resistance. And probably the number one reason why a customer comes to us continue is the great values that we are offering. So I wish I could find even better more deals at higher retails if they became available to us with wonderful branded manufacturers.



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MAY 23, 2012 / 12:00PM, BIG - Q1 2012 Big Lots, Inc. Earnings Conference Call

Patrick McKeever - MKM Partners - Analyst

Sounds good. Thanks very much.

Andy Regrut - Big Lots, Inc. - IR

Thank you, Chris and thank you, everyone, for joining us here on our first-quarter call. We look forward to talking to you again at the end of May.

Operator

Ladies and gentlemen, a replay of this call will be available to you within the hour and will end at 11.59 p.m. on Wednesday, June 6, 2012. You can access the replay by dialing 888-203-1112 -- that is toll-free US and Canada -- or 719-457-0820 international and entering pass code 1866714. Again, that phone number is 888-203-1112 or 719-457-0820 and the international pass code is 1866714. This concludes today's presentation. Thank you for your participation. You may now disconnect.

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