UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~October~~July 31, ~~2020~~2021

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File Number 001-08897

BIG LOTS, ~~INC~~INC.

(Exact name of registrant as specified in its charter)

Ohio 06-1119097

(State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification No.)

4900 E. Dublin-Granville Road, Columbus, Ohio 43081

(Address of Principal Executive Offices) (Zip Code)

(614) 278-6800

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common shares	BIG	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yesþ Noo

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yesþ Noo

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer þ

Accelerated filer o

Non-accelerated filer o

Smaller reporting company o

Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No þ

The number of the registrant’s common shares, $0.01 par value, outstanding as of ~~December 4, 2020,~~September 3, 2021, was ~~37,110,016.~~32,556,311.

Table of Contents

BIG LOTS, INC.

FORM 10-Q

FOR THE FISCAL QUARTER ENDED ~~OCTOBER~~JULY 31, ~~2020~~2021

TABLE OF CONTENTS


		Page
Part I. Financial Information		2

Item 1.	Financial Statements	2

a)	Consolidated Statements of Operations and Comprehensive Income for the Thirteen and ~~Thirty-Nine~~Twenty-Six Weeks Ended ~~October~~July 31, 2021 3 ~~1, 2020~~ (Unaudited) and ~~November~~August 21 , ~~2019~~20 20 (Unaudited)	2

b)	Consolidated Balance Sheets at ~~October 3~~July 31, 2021 ~~1, 2020~~ (Unaudited) and ~~February~~ January 30 , 202 1 ~~2020~~ (Unaudited)	3

c)	Consolidated Statements of Shareholders’ Equity for the Thirteen and ~~Thirty-Nine~~Twenty-Si x Weeks Ended ~~October~~July 31, 2021 3 ~~1, 2020~~ (Unaudited) and ~~November~~2 ~~, 20~~19August 1, 2020 (Unaudited)	4

d)	Consolidated Statements of Cash Flows for the ~~Thirty-Nine~~Twenty-Six Weeks Ended ~~October~~July 31, 2021 3 ~~1, 2020~~ (Unaudited) and ~~November~~August 1, 2020 2 ~~, 2019~~ (Unaudited)	5

e)	Notes to Consolidated Financial Statements (Unaudited)	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1514

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2623

Item 4.	Controls and Procedures	2623

Part II. Other Information		2724

Item 1.	Legal Proceedings	2724

Item 1A.	Risk Factors	2724

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2724

Item 3.	Defaults Upon Senior Securities	2724

Item 4.	Mine Safety Disclosures	2724

Item 5.	Other Information	2724

Item 6.	Exhibits	2825

Signature		2825

Table of Contents

Part I. Financial Information

Item 1. Financial Statements


BIG LOTS, INC. AND SUBSIDIARIES Consolidated Statements of Operations and Comprehensive Income (Unaudited) (In thousands, except per share amounts)


		Thirteen Weeks Ended				Thirty-Nine Weeks Ended					Thirteen Weeks Ended				Twenty-Six Weeks Ended
		October 31, 2020		November 2, 2019		October 31, 2020		November 2, 2019			July 31, 2021		August 1, 2020		July 31, 2021		August 1, 2020
Net sales	Net sales	$	1,377,925	$	1,167,988	$	4,461,271	$	3,716,198	Net sales	$	1,457,374	$	1,644,197	$	3,082,926	$	3,083,346
Cost of sales (exclusive of depreciation expense shown separately below)	Cost of sales (exclusive of depreciation expense shown separately below)	820,032		704,602		2,649,058		2,235,535		Cost of sales (exclusive of depreciation expense shown separately below)	879,577		960,633		1,851,182		1,829,026
Gross margin	Gross margin	557,893		463,386		1,812,213		1,480,663		Gross margin	577,797		683,564		1,231,744		1,254,320
Selling and administrative expenses	Selling and administrative expenses	482,307		436,714		1,444,938		1,352,345		Selling and administrative expenses	488,658		504,000		986,076		962,631
Depreciation expense	Depreciation expense	33,086		34,752		104,750		97,572		Depreciation expense	35,289		33,974		69,266		71,664
Gain on sale of distribution centers	Gain on sale of distribution centers	0		(178,534)		(463,053)		(178,534)		Gain on sale of distribution centers	—		(463,053)		—		(463,053)
Operating profit	Operating profit	42,500		170,454		725,578		209,280		Operating profit	53,850		608,643		176,402		683,078
Interest expense	Interest expense	(2,586)		(5,359)		(8,456)		(13,657)		Interest expense	(2,296)		(2,548)		(4,864)		(5,870)
Other income (expense)	Other income (expense)	(484)		(322)		(2,444)		(201)		Other income (expense)	(133)		1,357		827		(1,960)
Income before income taxes	Income before income taxes	39,430		164,773		714,678		195,422		Income before income taxes	51,421		607,452		172,365		675,248
Income tax expense	Income tax expense	9,520		37,791		183,473		46,722		Income tax expense	13,714		155,480		40,095		173,953
Net income and comprehensive income	Net income and comprehensive income	$	29,910	$	126,982	$	531,205	$	148,700	Net income and comprehensive income	$	37,707	$	451,972	$	132,270	$	501,295

Earnings per common share	Earnings per common share									Earnings per common share
Basic	Basic	$	0.79	$	3.25	$	13.69	$	3.78	Basic	$	1.11	$	11.52	$	3.81	$	12.79
Diluted	Diluted	$	0.76	$	3.25	$	13.46	$	3.77	Diluted	$	1.09	$	11.29	$	3.75	$	12.66

Weighted-average common shares outstanding	Weighted-average common shares outstanding									Weighted-average common shares outstanding
Basic	Basic	38,054		39,017		38,807		39,313		Basic	34,004		39,239		34,676		39,184
Dilutive effect of share-based awards	Dilutive effect of share-based awards	1,137		77		659		85		Dilutive effect of share-based awards	712		801		643		419
Diluted	Diluted	39,191		39,094		39,466		39,398		Diluted	34,716		40,040		35,319		39,603

Cash dividends declared per common share	Cash dividends declared per common share	$	0.30	$	0.30	$	0.90	$	0.90	Cash dividends declared per common share	$	0.30	$	0.30	$	0.60	$	0.60

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents


BIG LOTS, INC. AND SUBSIDIARIES Consolidated Balance Sheets (Unaudited) (In thousands, except par value)


		October 31, 2020		February 1, 2020			July 31, 2021		January 30, 2021
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	547,831	$	52,721	Cash and cash equivalents	$	293,322	$	559,556
Inventories	Inventories	1,089,068		921,266		Inventories	943,776		940,294
Other current assets	Other current assets	84,814		89,962		Other current assets	142,066		85,939
Total current assets	Total current assets	1,721,713		1,063,949		Total current assets	1,379,164		1,585,789
Operating lease right-of-use assets	Operating lease right-of-use assets	1,679,054		1,202,252		Operating lease right-of-use assets	1,652,631		1,649,009
Property and equipment - net	Property and equipment - net	721,668		849,147		Property and equipment - net	737,259		717,216
Deferred income taxes	Deferred income taxes	15,428		4,762		Deferred income taxes	18,316		16,329
Other assets	Other assets	66,533		69,171		Other assets	35,355		68,914
Total assets	Total assets	$	4,204,396	$	3,189,281	Total assets	$	3,822,725	$	4,037,257

LIABILITIES AND SHAREHOLDERS’ EQUITY	LIABILITIES AND SHAREHOLDERS’ EQUITY					LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	569,434	$	378,241	Accounts payable	$	390,597	$	398,433
Current operating lease liabilities	Current operating lease liabilities	215,027		212,144		Current operating lease liabilities	218,930		226,075
Property, payroll, and other taxes	Property, payroll, and other taxes	99,399		82,109		Property, payroll, and other taxes	102,477		109,694
Accrued operating expenses	Accrued operating expenses	142,162		118,973		Accrued operating expenses	137,874		138,331
Insurance reserves	Insurance reserves	34,094		36,131		Insurance reserves	36,033		34,660
Accrued salaries and wages	Accrued salaries and wages	40,049		39,292		Accrued salaries and wages	72,306		49,830
Income taxes payable	Income taxes payable	52,813		3,930		Income taxes payable	1,396		43,601
Total current liabilities	Total current liabilities	1,152,978		870,820		Total current liabilities	959,613		1,000,624
Long-term debt	Long-term debt	39,434		279,464		Long-term debt	—		35,764
Noncurrent operating lease liabilities	Noncurrent operating lease liabilities	1,491,571		1,035,377		Noncurrent operating lease liabilities	1,492,148		1,465,433
Deferred income taxes	Deferred income taxes	9,303		48,610		Deferred income taxes	1,287		7,762
Insurance reserves	Insurance reserves	55,089		57,567		Insurance reserves	58,955		57,452
Unrecognized tax benefits	Unrecognized tax benefits	10,073		10,722		Unrecognized tax benefits	10,392		11,304
Other liabilities	Other liabilities	189,646		41,257		Other liabilities	146,961		181,187
Shareholders’ equity:	Shareholders’ equity:					Shareholders’ equity:
Preferred shares - authorized 2,000 shares; $0.01 par value; 0ne issued		0		0
Common shares - authorized 298,000 shares; $0.01 par value; issued 117,495 shares; outstanding 37,088 shares and 39,037 shares, respectively		1,175		1,175
Treasury shares - 80,407 shares and 78,458 shares, respectively, at cost		(2,636,939)		(2,546,232)
Preferred shares - authorized 2,000 shares; $0.01 par value; none issued						Preferred shares - authorized 2,000 shares; $0.01 par value; none issued	—		—
Common shares - authorized 298,000 shares; $0.01 par value; issued 117,495 shares; outstanding 32,550 shares and 35,535 shares, respectively						Common shares - authorized 298,000 shares; $0.01 par value; issued 117,495 shares; outstanding 32,550 shares and 35,535 shares, respectively	1,175		1,175
Treasury shares - 84,945 shares and 81,960 shares, respectively, at cost						Treasury shares - 84,945 shares and 81,960 shares, respectively, at cost	(2,934,912)		(2,709,259)
Additional paid-in capital	Additional paid-in capital	627,301		620,728		Additional paid-in capital	625,651		634,813
Retained earnings	Retained earnings	3,264,765		2,769,793		Retained earnings	3,461,455		3,351,002
Total shareholders’ equity	Total shareholders’ equity	1,256,302		845,464		Total shareholders’ equity	1,153,369		1,277,731
Total liabilities and shareholders’ equity	Total liabilities and shareholders’ equity	$	4,204,396	$	3,189,281	Total liabilities and shareholders’ equity	$	3,822,725	$	4,037,257

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents


BIG LOTS, INC. AND SUBSIDIARIES Consolidated Statements of Shareholders’ Equity (Unaudited) (In thousands)


		Common			Treasury			Additional Paid-In Capital		Retained Earnings					Common			Treasury			Additional Paid-In Capital		Retained Earnings
		Shares	Amount		Shares	Amount						Total			Shares	Amount		Shares	Amount						Total
Thirteen Weeks Ended November 2, 2019
Balance - August 3, 2019		39,001	$	1,175	78,494	$	(2,547,556)	$	617,993	$	2,572,931	$	644,543
Thirteen Weeks Ended August 1, 2020														Thirteen Weeks Ended August 1, 2020
Balance - May 2, 2020														Balance - May 2, 2020	39,223	$	1,175	78,272	$	(2,538,276)	$	613,823	$	2,807,211	$	883,933
Comprehensive income	Comprehensive income	—	0		—	0		0		126,982		126,982		Comprehensive income	—	—		—	—		—		451,972		451,972
Dividends declared ($0.30 per share)	Dividends declared ($0.30 per share)	—	0		—	0		0		(11,954)		(11,954)		Dividends declared ($0.30 per share)	—	—		—	—		—		(12,335)		(12,335)
Purchases of common shares	Purchases of common shares	(18)	0		18	(423)		0		0		(423)		Purchases of common shares	—	—		—	(11)		—		—		(11)
Exercise of stock options	Exercise of stock options	0	0		0	0		0		0		0		Exercise of stock options	3	—		(3)	91		7		—		98
Restricted shares vested	Restricted shares vested	47	0		(47)	1,526		(1,526)		0		0		Restricted shares vested	24	—		(24)	795		(795)		—		—
Performance shares vested	Performance shares vested	6	0		(6)	204		(204)		0		0		Performance shares vested	—	—		—	—		—		—		—
Other	Other	0	0		0	(2)		0		0		(2)		Other	1	—		(1)	42		8		—		50
Share-based employee compensation expense	Share-based employee compensation expense	—	0		—	0		3,178		0		3,178		Share-based employee compensation expense	—	—		—	—		4,453		—		4,453
Balance - November 2, 2019		39,036	$	1,175	78,459	$	(2,546,251)	$	619,441	$	2,687,959	$	762,324
Balance - August 1, 2020														Balance - August 1, 2020	39,251	$	1,175	78,244	$	(2,537,359)	$	617,496	$	3,246,848	$	1,328,160

Thirty-Nine Weeks Ended November 2, 2019
Balance - February 2, 2019		40,042	$	1,175	77,453	$	(2,506,086)	$	622,685	$	2,575,267	$	693,041
Twenty-Six Weeks Ended August 1, 2020														Twenty-Six Weeks Ended August 1, 2020
Balance - February 1, 2020														Balance - February 1, 2020	39,037	$	1,175	78,458	$	(2,546,232)	$	620,728	$	2,769,793	$	845,464
Comprehensive income	Comprehensive income	—	0		—	0		0		148,700		148,700		Comprehensive income	—	—		—	—		—		501,295		501,295
Dividends declared ($0.90 per share)		—	0		—	0		0		(36,356)		(36,356)
Adjustment for ASU 2016-02		—	—		—	—		—		348		348
Dividends declared ($0.60 per share)														Dividends declared ($0.60 per share)	—	—		—	—		—		(24,240)		(24,240)
Purchases of common shares	Purchases of common shares	(1,474)	0		1,474	(55,342)		0		0		(55,342)		Purchases of common shares	(119)	—		119	(1,951)		—		—		(1,951)
Exercise of stock options	Exercise of stock options	6	0		(6)	202		(2)		0		200		Exercise of stock options	3	—		(3)	91		7		—		98
Restricted shares vested	Restricted shares vested	201	0		(201)	6,521		(6,521)		0		0		Restricted shares vested	264	—		(264)	8,577		(8,577)		—		—
Performance shares vested	Performance shares vested	261	0		(261)	8,459		(8,459)		0		0		Performance shares vested	65	—		(65)	2,107		(2,107)		—		—
Other	Other	0	0		0	(5)		0		0		(5)		Other	1	—		(1)	49		7		—		56
Share-based employee compensation expense	Share-based employee compensation expense	—	0		—	0		11,738		0		11,738		Share-based employee compensation expense	—	—		—	—		7,438		—		7,438
Balance - November 2, 2019		39,036	$	1,175	78,459	$	(2,546,251)	$	619,441	$	2,687,959	$	762,324
Balance - August 1, 2020														Balance - August 1, 2020	39,251	$	1,175	78,244	$	(2,537,359)	$	617,496	$	3,246,848	$	1,328,160

Thirteen Weeks Ended October 31, 2020
Balance - August 1, 2020		39,251	$	1,175	78,244	$	(2,537,359)	$	617,496	$	3,246,848	$	1,328,160
Thirteen Weeks Ended July 31, 2021														Thirteen Weeks Ended July 31, 2021
Balance - May 1, 2021														Balance - May 1, 2021	34,920	$	1,175	82,575	$	(2,782,987)	$	615,955	$	3,434,359	$	1,268,502
Comprehensive income	Comprehensive income	—	0		—	0		0		29,910		29,910		Comprehensive income	—	—		—	—		—		37,707		37,707
Dividends declared ($0.30 per share)	Dividends declared ($0.30 per share)	—	0		—	0		0		(11,993)		(11,993)		Dividends declared ($0.30 per share)	—	—		—	—		—		(10,611)		(10,611)
Purchases of common shares	Purchases of common shares	(2,197)	0		2,197	(100,690)		0		0		(100,690)		Purchases of common shares	(2,411)	—		2,411	(153,327)		—		—		(153,327)
Exercise of stock options		0	0		0	10		0		0		10
Restricted shares vested	Restricted shares vested	34	0		(34)	1,102		(1,102)		0		0		Restricted shares vested	38	—		(38)	1,265		(1,265)		—		—
Performance shares vested	Performance shares vested	0	0		0	0		0		0		0		Performance shares vested	3	—		(3)	109		(109)		—		—
Other	Other	0	0		0	(2)		1		0		(1)		Other	—	—		—	28		33		—		61
Share-based employee compensation expense	Share-based employee compensation expense	—	0		—	0		10,906		0		10,906		Share-based employee compensation expense	—	—		—	—		11,037		—		11,037
Balance - October 31, 2020		37,088	$	1,175	80,407	$	(2,636,939)	$	627,301	$	3,264,765	$	1,256,302
Balance - July 31, 2021														Balance - July 31, 2021	32,550	$	1,175	84,945	$	(2,934,912)	$	625,651	$	3,461,455	$	1,153,369

Thirty-Nine Weeks Ended October 31, 2020
Balance - February 1, 2020		39,037	$	1,175	78,458	$	(2,546,232)	$	620,728	$	2,769,793	$	845,464
Twenty-Six Weeks Ended July 31, 2021														Twenty-Six Weeks Ended July 31, 2021
Balance - January 30, 2021														Balance - January 30, 2021	35,535	$	1,175	81,960	$	(2,709,259)	$	634,813	$	3,351,002	$	1,277,731
Comprehensive income	Comprehensive income	—	0		—	0		0		531,205		531,205		Comprehensive income	—	—		—	—		—		132,270		132,270
Dividends declared ($0.90 per share)		—	0		—	0		0		(36,233)		(36,233)
Dividends declared ($0.60 per share)														Dividends declared ($0.60 per share)	—	—		—	—		—		(21,817)		(21,817)
Purchases of common shares	Purchases of common shares	(2,316)	0		2,316	(102,641)		0		0		(102,641)		Purchases of common shares	(3,949)	—		3,949	(257,818)		—		—		(257,818)
Exercise of stock options		3	0		(3)	101		7		0		108
Restricted shares vested	Restricted shares vested	298	0		(298)	9,679		(9,679)		0		0		Restricted shares vested	428	—		(428)	14,260		(14,260)		—		—
Performance shares vested	Performance shares vested	65	0		(65)	2,107		(2,107)		0		0		Performance shares vested	536	—		(536)	17,879		(17,879)		—		—
Other	Other	1	0		(1)	47		8		0		55		Other	—	—		—	26		33		—		59
Share-based employee compensation expense	Share-based employee compensation expense	—	0		—	0		18,344		0		18,344		Share-based employee compensation expense	—	—		—	—		22,944		—		22,944
Balance - October 31, 2020		37,088	$	1,175	80,407	$	(2,636,939)	$	627,301	$	3,264,765	$	1,256,302
Balance - July 31, 2021														Balance - July 31, 2021	32,550	$	1,175	84,945	$	(2,934,912)	$	625,651	$	3,461,455	$	1,153,369

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents


BIG LOTS, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows (Unaudited) (In thousands)


		Thirty-Nine Weeks Ended					Twenty-Six Weeks Ended
		October 31, 2020		November 2, 2019			July 31, 2021		August 1, 2020
Operating activities:	Operating activities:					Operating activities:
Net income	Net income	$	531,205	$	148,700	Net income	$	132,270	$	501,295
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense	Depreciation and amortization expense	105,136		98,153		Depreciation and amortization expense	69,669		71,924
Non-cash lease amortization expense	Non-cash lease amortization expense	175,174		171,564		Non-cash lease amortization expense	129,958		118,170
Deferred income taxes	Deferred income taxes	(49,973)		16,842		Deferred income taxes	(8,463)		(55,806)
Non-cash impairment charge	Non-cash impairment charge	920		3,292		Non-cash impairment charge	954		658
Gain on disposition of property and equipment		(463,191)		(178,431)
Loss (gain) on disposition of property and equipment						Loss (gain) on disposition of property and equipment	800		(462,744)
Non-cash share-based compensation expense	Non-cash share-based compensation expense	18,344		11,738		Non-cash share-based compensation expense	22,944		7,438
Unrealized loss on fuel derivatives		1,635		126
Unrealized (gain) loss on fuel derivatives						Unrealized (gain) loss on fuel derivatives	(1,365)		1,438
Loss on extinguishment of debt						Loss on extinguishment of debt	535		—
Change in assets and liabilities:	Change in assets and liabilities:					Change in assets and liabilities:
Inventories	Inventories	(167,801)		(147,702)		Inventories	(3,482)		207,762
Accounts payable	Accounts payable	191,193		79,092		Accounts payable	(7,836)		1,168
Operating lease liabilities	Operating lease liabilities	(193,818)		(163,970)		Operating lease liabilities	(114,965)		(148,722)
Current income taxes	Current income taxes	62,204		2,000		Current income taxes	(59,900)		191,488
Other current assets	Other current assets	(7,738)		(4,880)		Other current assets	(6,561)		(9,768)
Other current liabilities	Other current liabilities	36,823		48,538		Other current liabilities	(15,608)		28,938
Other assets	Other assets	2,420		(2,066)		Other assets	809		2,512
Other liabilities	Other liabilities	24,877		(2,448)		Other liabilities	2,399		12,633
Net cash provided by operating activities	Net cash provided by operating activities	267,410		80,548		Net cash provided by operating activities	142,158		468,384
Investing activities:	Investing activities:					Investing activities:
Capital expenditures	Capital expenditures	(103,000)		(231,889)		Capital expenditures	(77,075)		(69,402)
Cash proceeds from sale of property and equipment	Cash proceeds from sale of property and equipment	588,231		190,679		Cash proceeds from sale of property and equipment	13		587,010
Other	Other	(22)		(21)		Other	(24)		(22)
Net cash provided by (used in) investing activities		485,209		(41,231)
Net cash (used in) provided by investing activities						Net cash (used in) provided by investing activities	(77,086)		517,586
Financing activities:	Financing activities:					Financing activities:
Net (repayments of) proceeds from long-term debt		(239,677)		140,926
Net repayments of long-term debt						Net repayments of long-term debt	(50,264)		(236,155)
Net financing proceeds from sale and leaseback	Net financing proceeds from sale and leaseback	123,435		0		Net financing proceeds from sale and leaseback	—		124,074
Payment of finance lease obligations	Payment of finance lease obligations	(2,962)		(72,479)		Payment of finance lease obligations	(2,247)		(1,968)
Dividends paid	Dividends paid	(35,825)		(36,707)		Dividends paid	(22,664)		(24,285)
Proceeds from the exercise of stock options	Proceeds from the exercise of stock options	108		200		Proceeds from the exercise of stock options	—		98
Payment for treasury shares acquired	Payment for treasury shares acquired	(102,641)		(55,342)		Payment for treasury shares acquired	(255,752)		(1,951)
Payments for debt issuance costs		0		(150)
Payments to extinguish debt						Payments to extinguish debt	(438)		—
Other	Other	53		(5)		Other	59		56
Net cash used in financing activities	Net cash used in financing activities	(257,509)		(23,557)		Net cash used in financing activities	(331,306)		(140,131)
Increase in cash and cash equivalents		495,110		15,760
(Decrease) increase in cash and cash equivalents						(Decrease) increase in cash and cash equivalents	(266,234)		845,839
Cash and cash equivalents:	Cash and cash equivalents:					Cash and cash equivalents:
Beginning of period	Beginning of period	52,721		46,034		Beginning of period	559,556		52,721
End of period	End of period	$	547,831	$	61,794	End of period	$	293,322	$	898,560

The accompanying notes are an integral part of these consolidated financial statements.

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BIG LOTS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited)

NOTE 1 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

All references in this report to “we,” “us,” or “our” are to Big Lots, Inc. and its subsidiaries. We are a neighborhood discount retailer operating in the United States (“U.S.”). At ~~October~~July 31, ~~2020,~~2021, we operated ~~1,411~~1,418 stores in 47 states and an e-commerce platform. We make available, free of charge, through the “Investor Relations” section of our website (www.biglots.com) under the “SEC Filings” caption, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (“Exchange Act”), as soon as reasonably practicable after we file such material with, or furnish it to, the Securities and Exchange Commission (“SEC”). The contents of our ~~website~~websites are not ~~incorporated into or otherwise~~ part of this report.

The accompanying consolidated financial statements and these notes have been prepared in accordance with the rules and regulations of the SEC for interim financial information. The consolidated financial statements reflect all normal recurring adjustments which management believes are necessary to present fairly our financial condition, results of operations, and cash flows for all periods presented. The consolidated financial statements, however, do not include all information necessary for a complete presentation of financial condition, results of operations, and cash flows in conformity with accounting principles generally accepted in the United States of America (“GAAP”). Interim results may not necessarily be indicative of results that may be expected for, or actually result during, any other interim period or for the year as a whole, including as a result of the COVID-19 ~~coronavirus~~ pandemic, which has disrupted and may continue to disrupt our business. We have historically experienced seasonal fluctuations, with a larger percentage of our net sales and operating profit realized in our fourth fiscal quarter. However, due to demand volatility, supply chain disruption, and other effects we have experienced ~~during~~as a result of the COVID-19 ~~coronavirus~~ pandemic, the seasonality of our ~~2020~~2021 results may differ from our historical experience. The accompanying consolidated financial statements and these notes should be read in conjunction with the audited consolidated financial statements and notes included in our Annual Report on Form 10-K for the fiscal year ended ~~February 1,~~ January 30, 2021 (“2020 ~~(“2019~~ Form 10-K”).

Fiscal Periods

Our fiscal year ends on the Saturday nearest to January 31, which results in fiscal years consisting of 52 or 53 weeks. Unless otherwise stated, references to years in this report relate to fiscal years rather than calendar years. Fiscal year 2021 (“2021”) is comprised of the 52 weeks that began on January 31, 2021 and will end on January 29, 2022. Fiscal year 2020 (“2020”) iswas comprised of the 52 weeks that began on February 2, 2020 and ~~will end~~ended on January 30, 2021. ~~Fiscal year 2019 (“2019”) was comprised of the 52 weeks that began on February 3, 2019 and ended on February 1, 2020.~~ The fiscal quarters ended ~~October~~July 31, ~~2020~~2021 (“~~third~~second quarter of ~~2020”~~2021”) and ~~November 2, 2019~~August 1, 2020 (“~~third~~second quarter of ~~2019”~~2020”) were both comprised of 13 weeks. The year-to-date periods ended ~~October~~July 31, 2021 (“year-to-date 2021”) and August 1, 2020 (“year-to-date ~~2020") and November 2, 2019 (“year-to-date 2019”~~2020”) were both comprised of 3926 weeks.

~~Cash and Cash Equivalents~~

Cash and cash equivalents primarily consist of amounts on deposit with financial institutions, outstanding checks, credit and debit card receivables, and highly liquid investments, including money market funds, treasury bills and commercial paper, which are unrestricted to withdrawal or use and which have an original maturity of three months or less. We review cash and cash equivalent balances on a bank by bank basis in order to identify book overdrafts. Book overdrafts occur when the aggregate amount of outstanding checks and electronic fund transfers exceed the cash deposited at a given bank. We reclassify book overdrafts, if any, to accounts payable on our consolidated balance sheets.

Selling and Administrative Expenses

Selling and administrative expenses include store expenses (such as payroll and occupancy costs) and costs related to warehousing (which includes rent), distribution, outbound transportation to our stores, advertising, purchasing, insurance, non-income taxes, accepting credit/debit cards, and overhead. Our selling and administrative expense rates may not be comparable to those of other retailers that include warehousing, distribution, and outbound transportation costs in cost of sales. Warehousing, distribution, and outbound transportation costs included in selling and administrative expenses were ~~$66.3~~$71.9 million and ~~$48.8~~$59.7 million for the ~~third~~second quarter of 2021 and the second quarter of 2020, ~~and the third quarter of 2019,~~ respectively, and ~~$178.3~~$138.1 million and ~~$137.1~~$112.0 million for the year-to-date ~~2020~~2021 and the year-to-date ~~2019,~~2020, respectively.

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Advertising Expense

Advertising costs, which are expensed as incurred, consist primarily of television and print advertising, digital, social media, internet and e-mail marketing, ~~and advertising,~~payment card-linked marketing, and in-store point-of-purchase signage and presentations. Advertising expenses are included in selling and administrative expenses. Advertising expenses were ~~$24.4~~$21.9 million and ~~$18.2~~$21.9 million for the ~~third~~second quarter of 2021 and the second quarter of 2020, ~~and the third quarter of 2019,~~ respectively, and ~~$69.2~~$43.8 million and ~~$57.9~~$44.8 million for the year-to-date ~~2020~~2021 and the year-to-date ~~2019,~~2020, respectively.

~~Derivative Instruments~~

We use derivative instruments to mitigate the risk of market fluctuations in the price of diesel fuel that we expect to consume to support our outbound transportation of inventory to our stores. We do not enter into derivative instruments for speculative purposes. Our derivative instruments may consist of collar or swap contracts. Our current derivative instruments do not meet the requirements for cash flow hedge accounting. Instead, our derivative instruments are marked-to-market to determine their fair value and any gains or losses are recognized currently in other income (expense) on our consolidated statements of operations and comprehensive income.

Supplemental Cash Flow Disclosures

The following table provides supplemental cash flow information for the year-to-date ~~2020~~2021 and the year-to-date ~~2019:~~2020:


		Thirty-Nine Weeks Ended					Twenty-Six Weeks Ended
(In thousands)	(In thousands)	October 31, 2020		November 2, 2019		(In thousands)	July 31, 2021		August 1, 2020
Supplemental disclosure of cash flow information:	Supplemental disclosure of cash flow information:					Supplemental disclosure of cash flow information:
Cash paid for interest	Cash paid for interest	$	5,864	$	13,828	Cash paid for interest	$	2,310	$	5,338
Cash paid for income taxes, excluding impact of refunds	Cash paid for income taxes, excluding impact of refunds	171,155		28,379		Cash paid for income taxes, excluding impact of refunds	108,112		38,356
Gross proceeds from long-term debt	Gross proceeds from long-term debt	514,500		1,425,400		Gross proceeds from long-term debt	—		514,500
Gross payments of long-term debt	Gross payments of long-term debt	754,177		1,284,474		Gross payments of long-term debt	50,264		750,655
Gross financing proceeds from sale and leaseback	Gross financing proceeds from sale and leaseback	133,999		0		Gross financing proceeds from sale and leaseback	—		133,999
Gross repayments of financing from sale and leaseback	Gross repayments of financing from sale and leaseback	10,564		0		Gross repayments of financing from sale and leaseback	—		9,925
Cash paid for operating lease liabilities	Cash paid for operating lease liabilities	264,676		217,935		Cash paid for operating lease liabilities	163,744		189,263
Non-cash activity:	Non-cash activity:					Non-cash activity:
Assets acquired under finance leases		0		70,831
Share repurchases payable						Share repurchases payable	2,066		—
Accrued property and equipment	Accrued property and equipment	19,608		23,906		Accrued property and equipment	30,551		22,057
Operating lease right-of-use assets obtained in exchange for operating lease liabilities	Operating lease right-of-use assets obtained in exchange for operating lease liabilities	$	661,182	$	1,489,449	Operating lease right-of-use assets obtained in exchange for operating lease liabilities	$	134,738	$	572,949

~~Reclassification~~Reclassifications

In the year-to-date 2021, we realigned select merchandise categories to be consistent with the realignment of ~~Merchandise Categories~~

~~We periodically assess,~~our merchandising team and ~~make minor adjustments~~changes to our ~~product hierarchy, which can impact~~management reporting. To better suit the ~~roll-up of~~new alignment, we renamed our Electronics, Toys, & Accessories category as Apparel, Electronics, & Other. We moved our pet department from our Consumables category to our Food category; our home organization department from our Soft Home category to our Hard Home category; our toys department from our Apparel, Electronics, & Other category to our Hard Home category; our candy & snacks from our Food category to our Apparel, Electronics, & Other category; and added new departments for the merchandise ~~categories. Our financial reporting process utilizes~~assortments for The Lot, our cross-category presentation solution, and the ~~most current product hierarchy in reporting net sales by merchandise category for all periods presented. Therefore, there may be minor reclassifications of net sales by merchandise category compared~~Queue Line, our streamlined checkout experience, to ~~previously reported amounts.~~the Apparel, Electronics, & Other category.

~~Recently Adopted Accounting Standards~~

~~In August 2018,~~Our seven merchandise categories, which match our internal management and reporting of merchandise net sales are now as follows: Food; Consumables; Soft Home; Hard Home; Furniture; Seasonal; and Apparel, Electronics, & Other. The Food category includes our beverage & grocery; specialty foods; and pet departments. The Consumables category includes our health, beauty and cosmetics; plastics; paper; and chemical departments. The Soft Home category includes our home décor; frames; fashion bedding; utility bedding; bath; window; decorative textile; and area rugs departments. The Hard Home category includes our small appliances; table top; food preparation; stationery; home maintenance; home organization; and toys departments. The Furniture category includes our upholstery; mattress; ready-to-assemble; and case goods departments. The Seasonal category includes our lawn & garden; summer; Christmas; and other holiday departments. The Apparel, Electronics, & Other department includes our apparel; electronics; jewelry; hosiery; and candy & snacks departments, as well as the ~~Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-15 Intangibles - Goodwill~~assortment for The Lot, our cross-category presentation solution, and ~~Other - Internal-Use Software. This update evaluates~~ the ~~accounting~~assortment for ~~costs paid by a customer to implement a cloud computing arrangement. The new guidance aligns cloud computing arrangement implementation cost accounting with~~ the capitalization requirements for internal-use software development, while leaving the accounting for service elements unchanged. On February 2, 2020, we adopted ASU 2018-15 on a prospective basis. The impact of the adoption was immaterial to the consolidated financial statements.Queue Line, our streamlined checkout experience.

In order to provide comparative information, we have reclassified our results into the new alignment for both periods presented.

Recent Accounting Pronouncements

There are currently no new accounting pronouncements with a future effective date that are of significance, or potential significance, to us.

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NOTE 2 – DEBT

Bank Credit Facility

On August 31, 2018, we entered into a $700 million five-year unsecured credit facility (“~~2018~~ Credit Agreement”). The ~~2018~~ Credit Agreement expires on August 31, 2023. In connection with our entry into the ~~2018~~ Credit Agreement, we paid bank fees and other expenses in the aggregate amount of $1.5 million, which are being amortized over the term of the ~~2018~~ Credit Agreement.

Borrowings under the ~~2018~~ Credit Agreement are available for general corporate purposes, working capital, and to repay certain indebtedness. The ~~2018~~ Credit Agreement includes a $30 million swing loan sublimit, a $75 million letter of credit sublimit, a $75 million sublimit for loans to foreign borrowers, and a $200 million optional currency sublimit. The interest rates, pricing and fees under the ~~2018~~ Credit Agreement fluctuate based on our debt rating. The ~~2018~~ Credit Agreement allows us to select our interest rate for each borrowing from multiple interest rate options. The interest rate options are generally derived from the prime rate or LIBOR. We may prepay revolving loans made under the ~~2018~~ Credit Agreement. The ~~2018~~ Credit Agreement contains financial and other covenants, including, but not limited to, limitations on indebtedness, liens and investments, as well as the maintenance of two financial ratios – a leverage ratio and a fixed charge coverage ratio. The covenants of the ~~2018~~ Credit Agreement do not restrict our ability to pay dividends. Additionally, we are subject to cross-default provisions associated with the synthetic lease for our distribution center in Apple Valley, CA. A violation of any of the covenants could result in a default under the ~~2018~~ Credit Agreement that would permit the lenders to restrict our ability to further access the ~~2018~~ Credit Agreement for loans and letters of credit and require the immediate repayment of any outstanding loans under the ~~2018~~ Credit Agreement. At ~~October~~July 31, ~~2020,~~2021, we had 0no borrowings outstanding under the ~~2018~~ Credit Agreement, while ~~$6.3~~$9.1 million was committed to outstanding letters of credit, leaving ~~$693.7~~$690.9 million available under the ~~2018~~ Credit Agreement.

Secured Equipment Term Note

On August 7, 2019, we entered into a $70 million term note agreement (“2019 Term Note”), which iswas secured by the equipment at our Apple Valley, CA distribution ~~center. The 2019 Term Note will expire on May 7, 2024. We are required to make monthly payments over the term of the 2019 Term Note~~center and ~~are permitted to prepay, subject to penalties, at any time. The~~carried an interest rate ~~on the 2019 Term Note is~~of 3.3%. In connection with our entry into the 2019 Term Note, we paid debt issuance costs of $0.2 million. In light of our strong liquidity and current market conditions, on June 7, 2021, we prepaid the remaining $44.3 million principal balance under the 2019 Term Note. In connection with the prepayment, we incurred a $0.4 million prepayment fee and recognized a $0.5 million loss on debt extinguishment, which was recorded in Other income (expense) in the consolidated statements of operations and comprehensive income, in the second quarter of 2021.

Debt was recorded in our consolidated balance sheets as follows:

Instrument (In thousands)
October 31, 2020 February 1, 2020
2019 Term Note $ 53,815 $ 64,291
2018 Credit Agreement 0 229,200
Total debt $ 53,815 $ 293,491
Less current portion of long-term debt (included in Accrued operating expenses) $ (14,381) $ (14,027)
Long-term debt $ 39,434 $ 279,464


Instrument (In thousands)	July 31, 2021		January 30, 2021
2019 Term Note	$	—	$	50,264
Credit Agreement	—		—
Total debt	$	—	$	50,264
Less current portion of long-term debt (included in Accrued operating expenses)	$	—	$	(14,500)
Long-term debt	$	—	$	35,764

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NOTE 3 – FAIR VALUE MEASUREMENTS

~~In 2020,~~At July 31, 2021 and January 30, 2021, we ~~invested a portion of the proceeds from the sale of four distribution centers (see note 9 for additional information on the sale and leaseback transactions)~~held investments in money market ~~fund investments and commercial paper investments. These highly liquid investments~~funds, which were recorded ~~in cash and cash equivalents~~ in our consolidated balance sheets at their fair value. The fair values of the money market fund investments were Level 1 valuations under the fair value hierarchy because each fund’s quoted market value per share was available in an active market. The fair values of the commercial paper investments were Level 2 valuations under the fair value hierarchy because the instruments’ market values were determined based on quoted market prices in active markets.

InAt July 31, 2021 and January 30, 2021, in connection with our nonqualified deferred compensation plan, we had mutual fund investments, which were classified as trading securities and were recorded at their fair value. The fair values of mutual fund investments were Level 1 valuations under the fair value hierarchy because each fund’s quoted market value per share was available in an active market.

As of ~~October~~July 31, ~~2020,~~2021, the fair value of our investments were recorded in our consolidated balance sheets as follows:


(In thousands)	(In thousands)	Balance Sheet Location	October 31, 2020		Level 1		Level 2		(In thousands)	Balance Sheet Location	July 31, 2021		Level 1
Assets:	Assets:								Assets:
Money market funds	Money market funds	Cash and cash equivalents	$	175,070	$	175,070	$	0	Money market funds	Cash and cash equivalents	$	35,038	$	35,038
Commercial paper		Cash and cash equivalents	29,996		0		29,996
Mutual funds - deferred compensation plan	Mutual funds - deferred compensation plan	Other Assets	$	30,777	$	30,777	$	0	Mutual funds - deferred compensation plan	Other current assets	$	27,354	$	27,354

As of ~~February 1, 2020,~~January 30, 2021, the fair value of our investments were recorded in our consolidated balance sheets as follows:

(In thousands) Balance Sheet Location February 1,
2020 Level 1 Level 2
Assets:
Money market funds Cash and cash equivalents $ 0 $ 0 $ 0
Commercial paper Cash and cash equivalents 0 0 0
Mutual funds - deferred compensation plan Other Assets $ 33,715 $ 33,715 $ 0

The fair values of our long-term obligations under the 2018 Credit Agreement are estimated based on quoted market prices for the same or similar issues and the current interest rates offered for similar instruments. These fair value measurements are classified as Level 2 within the fair value hierarchy. The carrying value of these instruments was $0 as of October 31, 2020.

The fair value of our long-term obligations under the 2019 Term Note are based on quoted market prices and are classified as Level 2 within the fair value hierarchy. The carrying value of the instrument approximates its fair value.


(In thousands)	Balance Sheet Location	January 30, 2021		Level 1
Assets:
Money market funds	Cash and cash equivalents	$	175,113	$	175,113
Mutual funds - deferred compensation plan	Other Assets	$	32,484	$	32,484

The carrying value of accounts receivable and accounts payable approximates fair value because of the relatively short maturity of these items.

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NOTE 4 – SHAREHOLDERS’ EQUITY

Earnings per Share

There were no adjustments required to be made to the weighted-average common shares outstanding for purposes of computing basic and diluted earnings per share. ~~At October 31, 2020 and November 2, 2019, we excluded from securities outstanding for the computation of earnings per share, antidilutive stock options,~~Antidilutive restricted stock units, ~~and~~ performance share units for which the minimum applicable performance conditions had not been attained as of October 31, 2020 and November 2, 2019, respectively. For the third quarter of 2020, it was determined that an immaterial amount of stock options outstanding were antidilutive and excluded from the computation of diluted earnings per share, and for the third quarter of 2019, there were 0.1 million stock options outstanding that were antidilutive. Antidilutive stock options for the year-to-date 2020 and the year-to-date 2019 were immaterial and 0.1 million, respectively. Antidilutive stock options generally consist of outstanding stock options where the exercise price per share is greater than the weighted-average market price per share for our common shares for each period. Antidilutive stock options, restricted stock units(“PSUs”), and performance restricted share units (“PRSUs”), are excluded from the calculation because they decrease the number of diluted shares outstanding under the treasury stock method. The restricted stock units, PSUs, and ~~performance share units~~PRSUs that were antidilutive, as determined under the treasury stock method, were ~~immaterial~~0.2 million and ~~0.5 million~~immaterial for the ~~third~~second quarter of 2021 and the second quarter of 2020, ~~and the third quarter of 2019,~~ respectively, and ~~immaterial~~0.1 million and ~~0.4~~0.3 million for the year-to-date ~~2020~~2021 and the year-to-date ~~2019,~~2020, respectively.

Share Repurchase Programs

On August 27, 2020, our Board of Directors authorized the repurchase of up to $500 million of our common shares (“2020 Repurchase Authorization”). Pursuant to the 2020 Repurchase Authorization, we may 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 2020 Repurchase Authorization will be available to meet obligations under our equity compensation plans and for general corporate purposes. The 2020 Repurchase Authorization has no scheduled termination date.

~~During the third quarter of 2020, we acquired approximately 2.2 million of our outstanding common~~The Company repurchased shares ~~for $100.0 million~~ under the 2020 Repurchase Authorization during the year-to-date 2021 as follows:


	Number of Shares Repurchased	Amount of Repurchased Shares
2021:	(In thousands)	(In thousands)
First quarter	1,149	$	77,533
Second quarter	2,405	152,883
Total	3,554	$	230,416

As of July 31, 2021, we had $96.8 million available for future repurchases under the 2020 Repurchase Authorization.

In addition to shares repurchased under the 2020 Repurchase Authorization, purchases of common shares reported in the consolidated statements of shareholders’ equity include shares repurchased to satisfy income tax withholdings associated with the vesting of share-based awards.

Dividends

The Company declared and paid cash dividends per common share during the quarterly periods presented as follows:


		Dividends Per Share		Amount Declared		Amount Paid			Dividends Per Share		Amount Declared		Amount Paid
2020:				(In thousands)		(In thousands)
2021:								2021:			(In thousands)		(In thousands)
First quarter	First quarter	$	0.30	$	11,905	$	12,478	First quarter	$	0.30	$	11,206	$	12,460
Second quarter	Second quarter	0.30		12,335		11,807		Second quarter	0.30		10,611		10,204
Third quarter		0.30		11,993		11,540
Total	Total	$	0.90	$	36,233	$	35,825	Total	$	0.60	$	21,817	$	22,664

The amount of dividends declared may vary from the amount of dividends paid in a period due to the vesting of restricted stock units, PSUs, and ~~performance share units, which accrue dividend equivalent rights that are paid when the award vests.~~PRSUs. The payment of future dividends will be at the discretion of our Board of Directors and will depend on our financial condition, results of operations, capital requirements, compliance with applicable laws and agreements and any other factors deemed relevant by our Board of Directors.

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NOTE 5 – SHARE-BASED PLANS

We have issued ~~nonqualified stock options,~~ restricted stock units, PSUs, PRSUs, and ~~performance share units~~nonqualified stock options under our shareholder-approved equity compensation plans. At ~~October~~July 31, ~~2020, the number of~~2021, we had no outstanding PRSUs and no outstanding nonqualified stock ~~options outstanding was immaterial. Our restricted stock units and performance share units, as described below, are expensed and reported as non-vested shares.~~options. We recognized share-based compensation expense of ~~$10.9~~$11.0 million and ~~$3.2~~$4.5 million in the ~~third~~second quarter of 2021 and the second quarter of 2020, ~~and the third quarter of 2019,~~ respectively, and ~~$18.3~~$22.9 million and ~~$11.7~~$7.4 million for the year-to-date ~~2020~~2021 and the year-to-date ~~2019,~~2020, respectively.

Non-vested Restricted Stock Units

The following table summarizes the non-vested restricted stock units activity for the year-to-date ~~2020:~~2021:


		Number of Shares	Weighted Average Grant-Date Fair Value Per Share			Number of Shares	Weighted Average Grant-Date Fair Value Per Share
Outstanding non-vested restricted stock units at February 1, 2020		648,510	$	38.52
Outstanding non-vested restricted stock units at January 30, 2021					Outstanding non-vested restricted stock units at January 30, 2021	1,214,212	$	22.71
Granted	Granted	921,309	15.82		Granted	206,685	70.77
Vested	Vested	(239,856)	43.07		Vested	(390,116)	22.74
Forfeited	Forfeited	(1,511)	38.06		Forfeited	(31,181)	25.26
Outstanding non-vested restricted stock units at May 2, 2020		1,328,452	$	21.95
Outstanding non-vested restricted stock units at May 1, 2021					Outstanding non-vested restricted stock units at May 1, 2021	999,600	$	32.56
Granted	Granted	74,244	33.20		Granted	34,847	64.55
Vested	Vested	(24,498)	27.99		Vested	(37,454)	32.85
Forfeited	Forfeited	(41,074)	25.26		Forfeited	(12,851)	25.39
Outstanding non-vested restricted stock units at August 1, 2020		1,337,124	$	22.35
Granted		33,868	49.83
Vested		(33,628)	37.45
Forfeited		(108,120)	21.93
Outstanding non-vested restricted stock units at October 31, 2020		1,229,244	$	22.68
Outstanding non-vested restricted stock units at July 31, 2021					Outstanding non-vested restricted stock units at July 31, 2021	984,142	$	33.77

The non-vested restricted stock units granted in the year-to-date ~~2020~~2021 generally vest and are expensed on a ratable basis over three years from the grant date of the award, if a threshold financial performance objective is achieved and the grantee remains employed by us through the vesting dates.

Non-vested Restricted Stock Units Granted to Non-Employee Directors

In the second quarter of ~~2020, 44,229~~2021, 22,850 common shares underlying the restricted stock units granted in ~~2019~~2020 to the non-employee members of our Board vested on the trading day immediately preceding our ~~2020~~2021 Annual Meeting of Shareholders (“~~2020~~2021 Annual Meeting”). These units were part of the annual compensation of the non-employee directors of the Board. Additionally, in the second quarter of ~~2020,~~2021, the chairman of our Board received an annual restricted stock unit grant having a grant date fair value of approximately ~~$210,000.~~$245,000. The remaining non-employees elected to our Board at our ~~2020~~2021 Annual Meeting each received an annual restricted stock unit grant having a grant date fair value of approximately $145,000. The ~~2020~~2021 restricted stock units will vest on the earlier of (1) the trading day immediately preceding our ~~2021~~2022 Annual Meeting of Shareholders, or (2) the non-employee director’s death or disability. However, the non-employee directors will forfeit their restricted stock units if their service on the Board terminates before either vesting event occurs.

Performance Share Units

In the year-to-date 2020, we awarded ~~performance share units with a restriction feature~~PRSUs to certain members of senior management, which ~~vest~~were subject to vesting based on the achievement of share price performance goals and a minimum service requirement of one ~~year (“RPSUs”).~~year. The ~~RPSUs have~~PRSUs had a contractual term of three years. We use a Monte Carlo simulation to estimate the fair value of the RPSUs on the grant date and recognize expense over the derived service period. If the share price performance goals applicable to the RPSUs are not achieved prior to expiration, the unvested portion of the awards will be forfeited. Shares issued in connection with vested ~~RPSUs~~PRSUs are generally restricted from sale, transfer, or other disposition prior to the third anniversary of the grant date except under certain circumstances, including death, disability, or change in control. All of the PRSUs awarded in 2020 vested in the year-to-date 2021.

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Prior to 2020, and in the year-to-date 2021, we ~~awarded performance share units (“PSUs”)~~issued PSUs to certain members of management, which will vest if certain financial performance objectives are achieved over a three-year performance period and the grantee remains employed by us during the performance period. ~~Typically, the~~The financial performance objectives for each fiscal year within the three-year performance period will be approved by the Compensation Committee of our Board of Directors during the first quarter of the respective fiscal year. In 2020, due to the lack of business visibility resulting from the COVID-19 pandemic, the Compensation Committee chose to defer the establishment of the 2020 performance objectives until the third quarter of 2020.

As a result of the process used to establish the financial performance objectives, we will only meet the requirements for establishing a grant date for ~~the~~ PSUs when we communicate the financial performance objectives for the third fiscal year of the

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award to the award recipients, which will then trigger the service inception date, the fair value of the awards, and the associated expense recognition period. If we meet the applicable threshold financial performance objectives over the three-year performance period and the grantee remains employed by us through the end of the performance period, the PSUs will vest on the first trading day after we file our Annual Report on Form 10-K for the last fiscal year in the performance period.

In the third quarter of 2020, the Compensation Committee established the financial performance objectives for the third fiscal year of PSUs issued in 2018; therefore, the 2018 PSUs were deemed granted in August 2020.

We have begun or expect to begin recognizing expense related to PSUs ~~and RPSUs~~ as follows:

Issue Year

Outstanding PSUs and RPSUs at October 31, 2020

Actual Grant Date

Expected Valuation (Grant) Date

Actual or Expected Expense Period

Issue Year

Outstanding PSUs at July 31, 2021

Actual Grant Date

Expected Valuation (Grant) Date

Actual or Expected Expense Period

2018

136,199

August 2020

Fiscal 2020

2019

266,118

March 2021

Fiscal 2021

2019

254,860

March 2021

Fiscal 2021

2020

339,568

April 2020

Fiscal 2020 - 2021

2021

174,576

March 2023

Fiscal 2023

Total

741,885

Total

429,436

The number of shares to be distributed upon vesting of the PSUs depends on the average performance attained during the three-year performance period compared to the performance targets established by the Compensation Committee, and may result in the distribution of an amount of shares that is greater or less than the number of PSUs granted, as defined in the ~~related~~ award agreement. During the first quarter of 2021, the PSUs issued in 2018 vested with an average performance attainment higher than the targets established.

We recognized ~~$7.8~~$7.2 million and ~~$0.2~~$1.2 million in the ~~third~~second quarter of ~~2020~~2021 and ~~2019,~~2020, respectively, and ~~$9.4~~$15.8 million and ~~$2.5~~$1.6 million in the year-to-date ~~2020~~2021 and ~~2019~~2020 respectively, of share-based compensation expense related to ~~PSUs.~~PSUs and PRSUs.

The following table summarizes the activity related to PSUs and ~~RPSUs~~PRSUs for the year-to-date ~~2020:~~2021:


		Number of Units	Weighted Average Grant-Date Fair Value Per Share			Number of Units	Weighted Average Grant-Date Fair Value Per Share
Outstanding PSUs and RPSUs at February 1, 2020		181,922	$	31.89
Outstanding PSUs and PRSUs at January 30, 2021					Outstanding PSUs and PRSUs at January 30, 2021	474,031	$	24.31
Granted	Granted	408,340	11.70		Granted	263,787	70.24
Vested	Vested	(181,062)	31.89		Vested	(470,808)	24.27
Forfeited	Forfeited	(860)	31.89		Forfeited	(8,300)	70.24
Outstanding PSUs and RPSUs at May 2, 2020		408,340	$	11.70
Outstanding PSUs and PRSUs at May 1, 2021					Outstanding PSUs and PRSUs at May 1, 2021	258,710	$	69.74
Granted	Granted	4,682	29.44		Granted	—	—
Vested	Vested	0	0		Vested	(3,223)	29.93
Forfeited	Forfeited	(12,450)	11.70		Forfeited	(627)	70.24
Outstanding PSUs and RPSUs at August 1, 2020		400,572	$	11.90
Granted		167,263	55.71
Vested		0	0
Forfeited		(92,068)	26.81
Outstanding PSUs and RPSUs at October 31, 2020		475,767	$	24.42
Outstanding PSUs and PRSUs at July 31, 2021					Outstanding PSUs and PRSUs at July 31, 2021	254,860	$	70.24

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The following activity occurred under our share-based plans during the respective periods shown:


		Third Quarter				Year-to-Date					Second Quarter				Year-to-Date
(In thousands)	(In thousands)	2020		2019		2020		2019		(In thousands)	2021		2020		2021		2020
Total intrinsic value of stock options exercised	Total intrinsic value of stock options exercised	$	4	$	0	$	16	$	42	Total intrinsic value of stock options exercised	$	—	$	12	$	—	$	12
Total fair value of restricted stock vested	Total fair value of restricted stock vested	1,694		1,051		6,584		6,434		Total fair value of restricted stock vested	2,417		849		29,318		4,890
Total fair value of performance shares vested	Total fair value of performance shares vested	$	0	$	143	$	924	$	9,849	Total fair value of performance shares vested	$	219	$	—	$	37,387	$	924

The total unearned compensation cost related to all share-based awards outstanding, excluding PSUs issued in ~~2018 and 2019,~~2021, at ~~October~~July 31, ~~2020~~2021 was approximately ~~$25.0~~$37.0 million. This compensation cost is expected to be recognized through ~~September 2023~~July 2024 based on existing vesting terms with the weighted-average remaining expense recognition period being approximately ~~1.7~~1.6 years from ~~October~~July 31, ~~2020.~~2021.

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NOTE 6 – INCOME TAXES

We have estimated the reasonably possible expected net change in unrecognized tax benefits through ~~October~~July 30, ~~2021,~~2022, based on (1) expected cash and noncash settlements or payments of uncertain tax positions, and (2) lapses of the applicable statutes of limitations for unrecognized tax benefits. The estimated net decrease in unrecognized tax benefits for the next 12 months is approximately ~~$3.0~~$4.0 million. Actual results may differ materially from this estimate.

NOTE 7 – CONTINGENCIES

~~California Wage and Hour Matters~~

We currently are defending several wage and hour matters in California. The cases were brought by various current and/or former California associates alleging various violations of California wage and hour laws. During the first quarter of 2019, upon consideration of these matters, including outcomes of cases against other retailers, we determined a loss from these matters was probable and we increased our accrual for litigation by recording a $7.3 million charge as our best estimate for these matters in aggregate.

During the third quarter of 2020, we reached settlement agreements in our two largest wage and hour class action matters in California and the settlements were preliminarily approved by the court. The settlements were consistent with the previously accrued loss contingencies for these matters. We intend to defend ourselves vigorously against the allegations levied in the remaining lawsuits.

~~Other Matters~~Legal Proceedings

We are involved in ~~other~~ legal actions and claims arising in the ordinary course of business. We currently believe that each such action and claim will be resolved without a material effect on our financial condition, results of operations, or liquidity. However, litigation involves an element of uncertainty. Future developments could cause these actions or claims to have a material effect on our financial condition, results of operations, and liquidity.

NOTE 8 – BUSINESS SEGMENT DATA

We use the following seven merchandise categories, which ~~match~~are consistent with our internal management and reporting of merchandise net sales: Food; Consumables; Soft Home; Hard Home; Furniture; Seasonal; and Apparel, Electronics, ~~Toys,~~ & ~~Accessories.~~Other. The Food category includes our beverage & grocery; ~~candy & snacks;~~specialty foods; and ~~specialty foods~~pet departments. The Consumables category includes our health, beauty and cosmetics; plastics; paper; ~~chemical;~~ and ~~pet~~chemical departments. The Soft Home category includes ~~the~~our home décor; frames; fashion bedding; utility bedding; bath; window; decorative textile; ~~home organization;~~ and area rugs departments. The Hard Home category includes our small appliances; table top; food preparation; stationery; ~~greeting cards;~~home maintenance; home organization; and ~~home maintenance~~toys departments. The Furniture category includes our upholstery; mattress; ready-to-assemble; and case goods departments. The Seasonal category includes our lawn & garden; summer; Christmas; and other holiday departments. The Apparel, Electronics, & Other department includes our apparel; electronics; jewelry; hosiery; and candy & snacks departments, as well as the assortment for The Lot, our cross-category presentation solution, and the assortment for the Queue Line, our streamlined checkout experience.

In the year-to-date 2021, we realigned our merchandise categories and renamed our Electronics, Toys, & Accessories merchandise category ~~includes our electronics; jewelry; hosiery; apparel; and toys departments.~~as Apparel, Electronics, & Other. See the reclassifications section of note 1 to the consolidated financial statements for further discussion.

We periodically assess, and make minor adjustments to, our product hierarchy, which can impact the roll-up of our merchandise categories. Our financial reporting process utilizes the most current product hierarchy in reporting net sales by merchandise category for all periods presented. Therefore, there may be minor reclassifications of net sales by merchandise category compared to previously reported amounts.

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The following table presents net sales data by merchandise category:


		Third Quarter				Year-to-Date					Second Quarter				Year-to-Date
(In thousands)	(In thousands)	2020		2019		2020		2019		(In thousands)	2021		2020		2021		2020
Furniture	Furniture	$	429,305	$	344,103	$	1,284,743	$	1,031,357	Furniture	$	409,078	$	439,737	$	890,509	$	855,438
Seasonal										Seasonal	259,682		299,700		563,600		496,021
Soft Home	Soft Home	253,700		206,493		770,078		606,397		Soft Home	183,249		242,664		407,103		439,416
Food										Food	178,167		205,797		358,464		420,911
Consumables	Consumables	216,515		198,467		679,007		581,925		Consumables	159,301		177,236		321,689		372,931
Food		181,710		180,687		570,540		530,970
Seasonal		100,829		94,225		596,850		523,822
Electronics, Toys, & Accessories		100,294		64,180		272,704		198,143
Hard Home	Hard Home	95,572		79,833		287,349		243,584		Hard Home	145,241		174,291		297,002		304,834
Apparel, Electronics, & Other										Apparel, Electronics, & Other	122,656		104,772		244,559		193,795
Net sales	Net sales	$	1,377,925	$	1,167,988	$	4,461,271	$	3,716,198	Net sales	$	1,457,374	$	1,644,197	$	3,082,926	$	3,083,346

NOTE 9 – GAIN ON SALE OF DISTRIBUTION CENTERS

On June 12, 2020, we completed sale and leaseback transactions for our distribution centers located in Columbus, OH; Durant, OK; Montgomery, AL; and Tremont, PA. The aggregate sale price for the transactions was $725.0 million. Due to sale-leaseback accounting requirements, the proceeds received in the transactions were allocated between proceeds on the sale of the distribution centers and financing proceeds. Accordingly, aggregate net proceeds, before income taxes, on the sales of the distribution centers were $586.9 million and the aggregate gain on the sales was $463.1 million. Additionally, we incurred $4.0 million of additional selling and administrative expenses in connection with the transaction, which primarily consisted of consulting services. The remainder of consideration received was financing liability proceeds of $134.0 million. The current portion of the financing liability was recorded in accrued operating expenses in our consolidated balance sheets. The noncurrent portion of the financing liability was recorded in other liabilities in our consolidated balance sheets. Interest expense will be recognized on the financing liability using the effective interest method and the financing liability will be accreted over the duration of the lease agreements. Future payments to the buyer-lessor will be allocated between the financing liability and the lease liabilities.

The leases for the Columbus, OH and Montgomery, AL distribution centers each have an initial term of 15 years and multiple five-year extension options. The leases for the Durant, OK and Tremont, PA distribution centers each have an initial term of 20 years and multiple five-year extension options. At lease commencement, we determined that none of the extension options were reasonably certain to be exercised. Therefore, none of the extension options were included in the computation of the operating lease liabilities and operating lease right-of-use assets. At commencement of the leases, we recorded aggregate operating lease liabilities of $466.1 million and aggregate operating lease right-of-use assets of $466.1 million. The weighted average discount rate for the leases was 6.2%. All of the leases are absolute net. Additionally, all of the leases include a right of first refusal beginning after the fifth year of the initial term which allows us to purchase the leased property if the buyer-lessor receives a bona fide purchase offer from a third-party. In connection with our entrance into the sale and leaseback transactions, we agreed to repay all borrowings outstanding under the 2018 Credit Agreement and restrict our borrowings under the 2018 Credit Agreement for 90 days following closing of the transactions.

Aggregate initial annual cash payments to the buyer-lessor, including payments of the financing liability and lease payments, are approximately $50 million and the payments escalate two percent annually. Aggregate annual straight-line rent expense for the four leases is approximately $46 million. Aggregate initial annual interest expense on the financing liability, which will decrease over the term, is approximately $8 million.

~~In the third quarter of 2019, we completed the sale of our distribution center in Rancho Cucamonga, CA for a gain on the sale of $178.5 million.~~

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS FOR PURPOSES OF THE SAFE HARBOR PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

The Private Securities Litigation Reform Act of 1995 (“Act”) provides a safe harbor for forward-looking statements to encourage companies to provide prospective information, so long as those statements are identified as forward-looking and are accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those discussed in the statements. We wish to take advantage of the “safe harbor” provisions of the Act.

Certain statements in this report are forward-looking statements within the meaning of the Act, and such statements are intended to qualify for the protection of the safe harbor provided by the Act. The words “anticipate,” “estimate,” “approximate,” “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, developments related to the COVID-19 ~~coronavirus~~ pandemic, the current economic and credit conditions, 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 report 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.

Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date they are made. We undertake no obligation to publicly update forward-looking statements whether as a result of new information, future events or otherwise. Readers are advised, however, to consult any further disclosures we make on related subjects in our public announcements and SEC filings.

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OVERVIEW

The discussion and analysis presented below should be read in conjunction with the accompanying consolidated financial statements and related notes. Each term defined in the notes has the same meaning in this item and the balance of this report.

The following are the results from the ~~third~~second quarter of ~~2020~~2021 that we believe are key indicators of our operating performance when compared to our operating performance from the ~~third~~second quarter of ~~2019:~~2020:

•Net sales ~~increased $209.9~~decreased $186.8 million, or ~~18.0%~~11.4%.

•Comparable sales for stores open at least fifteen months, plus our e-commerce operations, ~~increased $196.2~~decreased $211.3 million, or ~~17.8%~~13.2%.

•Gross margin dollars ~~increased $94.5~~decreased $105.8 million, while gross margin rate ~~increased 80~~decreased 200 basis points to ~~40.5%~~39.6% of net sales.

•Selling and administrative expenses ~~increased $45.6~~decreased $15.3 million. As a percentage of net sales, selling and administrative expenses ~~decreased 240~~increased 280 basis points to ~~35.0%~~33.5% of net sales.

•~~Diluted~~Operating profit decreased to $53.9 million from $608.6 million and diluted earnings per share decreased to ~~$0.76~~$1.09 per share from ~~$3.25~~$11.29 per share.

•In the ~~third~~second quarter of ~~2019,~~2020, we recorded a pre-tax gain on sale of distribution ~~center~~centers of ~~$178.5~~$463.1 million and consulting and other expenses of $4.0 million related to the sale and leaseback of our four owned distribution ~~center located~~centers. The combined gain on sale of distribution centers and associated consulting and other expenses increased our operating profit in ~~Rancho Cucamonga, CA, which~~the second quarter of 2020 by $459.1 million and increased our diluted earnings per share ~~for the third quarter of 2019~~ by approximately ~~$3.49~~$8.54 per share.

•~~Inventory decreased by 2.5%, or $28.2 million, to $1,089.1 million from the third quarter of 2019.~~

•Cash and cash equivalents ~~increased~~decreased by ~~$486.0~~$605.2 million to ~~$547.8~~$293.3 million from the ~~third~~second quarter of ~~2019.~~2020.

•Inventory increased by 32.3%, or $230.3 million, to $943.8 million from the second quarter of 2020.

•Long-term debt decreased $43.1 million following the prepayment of the 2019 Term Note in the second quarter of 2021. We ended the second quarter of 2021 with no long-term debt.

•We declared and paid a quarterly cash dividend in the amount of $0.30 per common share in the ~~third~~second quarter of ~~2020~~2021 consistent with the quarterly cash dividend of $0.30 per common share paid in the ~~third~~second quarter of ~~2019.~~2020.

•We acquired ~~2.2~~2.4 million of our outstanding common shares for ~~$100.0~~$152.9 million under our 2020 Repurchase Authorization.

See the discussion and analysis below for additional details regarding our operating results.

STORES

The following table presents stores opened and closed during the year-to-date ~~2020~~2021 and the year-to-date ~~2019:~~2020:


			2020	2019			2021	2020
Stores open at the beginning of the fiscal year	Stores open at the beginning of the fiscal year		1,404	1,401	Stores open at the beginning of the fiscal year		1,408	1,404
Stores opened during the period	Stores opened during the period		24	50	Stores opened during the period		25	11
Stores closed during the period	Stores closed during the period		(17)	(33)	Stores closed during the period		(15)	(11)
		Stores open at the end of the period	1,411	1,418		Stores open at the end of the period	1,418	1,404

We ~~do not expect to open any stores, while closing approximately three stores in the fourth quarter of 2020. Therefore, we~~ expect our store count at the end of ~~2020~~2021 to beincrease by approximately ~~1,408 stores.~~20 stores compared to our store count at the end of 2020.

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RESULTS OF OPERATIONS

The following table compares components of our consolidated statements of operations and comprehensive income as a percentage of net sales at the end of each period:


		Third Quarter				Year-to-Date					Second Quarter				Year-to-Date
		2020		2019		2020		2019			2021		2020		2021		2020
Net sales	Net sales	100.0	%	100.0	%	100.0	%	100.0	%	Net sales	100.0	%	100.0	%	100.0	%	100.0	%
Cost of sales (exclusive of depreciation expense shown separately below)	Cost of sales (exclusive of depreciation expense shown separately below)	59.5		60.3		59.4		60.2		Cost of sales (exclusive of depreciation expense shown separately below)	60.4		58.4		60.0		59.3
Gross margin	Gross margin	40.5		39.7		40.6		39.8		Gross margin	39.6		41.6		40.0		40.7
Selling and administrative expenses	Selling and administrative expenses	35.0		37.4		32.4		36.4		Selling and administrative expenses	33.5		30.7		32.0		31.2
Depreciation expense	Depreciation expense	2.4		3.0		2.3		2.6		Depreciation expense	2.4		2.1		2.2		2.3
Gain on sale of distribution center		0.0		(15.3)		(10.4)		(4.8)
Gain on sale of distribution centers										Gain on sale of distribution centers	0.0		(28.2)		0.0		(15.0)
Operating profit	Operating profit	3.1		14.6		16.3		5.6		Operating profit	3.7		37.0		5.7		22.2
Interest expense	Interest expense	(0.2)		(0.5)		(0.2)		(0.4)		Interest expense	(0.2)		(0.2)		(0.2)		(0.2)
Other income (expense)	Other income (expense)	(0.0)		(0.0)		(0.1)		(0.0)		Other income (expense)	(0.0)		0.1		0.0		(0.1)
Income before income taxes	Income before income taxes	2.9		14.1		16.0		5.3		Income before income taxes	3.5		36.9		5.6		21.9
Income tax expense	Income tax expense	0.7		3.2		4.1		1.3		Income tax expense	0.9		9.5		1.3		5.6
Net income	Net income	2.2	%	10.9	%	11.9	%	4.0	%	Net income	2.6	%	27.5	%	4.3	%	16.3	%

~~THIRD~~SECOND QUARTER OF ~~2020~~2021 COMPARED TO ~~THIRD~~SECOND QUARTER OF ~~2019~~2020

Net Sales

Net sales by merchandise category (in dollars and as a percentage of total net sales), net sales change (in dollars and percentage), and comparable sales (“comp” or “comps”) in the ~~third~~second quarter of 2021 compared to the second quarter of 2020 ~~compared to the third quarter of 2019~~ were as follows:


Third Quarter
Second Quarter																Second Quarter
($ in thousands)	($ in thousands)	2020				2019				Change				Comps		($ in thousands)	2021				2020				Change				Comps
Furniture	Furniture	$	429,305	31.2	%	$	344,103	29.4	%	$	85,202	24.8	%	23.7	%	Furniture	$	409,078	28.1	%	$	439,737	26.7	%	$	(30,659)	(7.0)	%	(9.5)	%
Seasonal																Seasonal	259,682		17.8		299,700		18.2		(40,018)		(13.4)		(14.6)
Soft Home	Soft Home	253,700		18.4		206,493		17.7		47,207		22.9		23.0		Soft Home	183,249		12.6		242,664		14.8		(59,415)		(24.5)		(26.1)
Food																Food	178,167		12.2		205,797		12.5		(27,630)		(13.4)		(14.9)
Consumables	Consumables	216,515		15.7		198,467		17.0		18,048		9.1		9.8		Consumables	159,301		10.9		177,236		10.8		(17,935)		(10.1)		(11.4)
Food		181,710		13.2		180,687		15.5		1,023		0.6		0.9
Seasonal		100,829		7.3		94,225		8.1		6,604		7.0		7.5
Electronics, Toys, & Accessories		100,294		7.3		64,180		5.5		36,114		56.3		56.1
Hard Home	Hard Home	95,572		6.9		79,833		6.8		15,739		19.7		19.9		Hard Home	145,241		10.0		174,291		10.6		(29,050)		(16.7)		(18.0)
Apparel, Electronics, & Other																Apparel, Electronics, & Other	122,656		8.4		104,772		6.4		17,884		17.1		15.2
Net sales	Net sales	$	1,377,925	100.0	%	$	1,167,988	100.0	%	$	209,937	18.0	%	17.8	%	Net sales	$	1,457,374	100.0	%	$	1,644,197	100.0	%	$	(186,823)	(11.4)	%	(13.2)	%

~~We periodically assess, and make minor adjustments to, our product hierarchy, which can impact~~In the ~~roll-up of~~year-to-date 2021, we realigned our merchandise ~~categories. Our financial reporting process utilizes the most current product hierarchy in reporting net sales by~~categories and renamed our Electronics, Toys, & Accessories merchandise category as Apparel, Electronics, & Other. See the reclassifications discussion in note 1 to the consolidated financial statements for ~~all~~additional information. In order to provide comparative information, we have reclassified our results into the revised merchandise category alignment for both periods presented. ~~Therefore, there may be minor reclassifications of net sales by merchandise category compared to previously reported amounts.~~

Net sales ~~increased $209.9~~decreased $186.8 million, or ~~18.0%~~11.4%, to ~~$1,377.9~~$1,457.4 million in the ~~third~~second quarter of ~~2020,~~2021, compared to ~~$1,168.0~~$1,644.2 million in the ~~third~~second quarter of ~~2019.~~2020. The ~~increase~~decrease in net sales was primarily driven by a ~~17.8% increase~~13.2% decrease in our comps, which decreased net sales by $211.3 million. This decrease was partially offset by our non-comparable sales, which increased net sales by ~~$196.2 million. Additionally, our non-comparable sales increased net sales by $13.7~~$24.5 million, driven by increased sales in our new and relocated stores compared to closed ~~stores.~~stores, and a higher store count compared to the second quarter of 2020. Our comps are calculated based on the results of all stores that were open at least fifteen months plus our e-commerce net sales.

Our comps and net sales declined during the second quarter of 2021 in comparison to the second quarter of 2020 primarily due to the relatively larger impact of government stimulus on consumer behavior during the height of quarantining in the second quarter of 2020.

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~~We experienced a favorable impact to~~Comps and net sales ~~during the third quarter of 2020 driven by demand for~~in our home products categories, which ~~includes~~include our Furniture, Seasonal, Soft Home, and Hard Home ~~merchandise~~ categories, ~~due~~decreased in the second quarter of 2021 compared to ~~customers spending more time at their homes as~~the second quarter of 2020. We believe this decrease was primarily attributable to a ~~result~~relatively larger impact of government-sponsored relief funding on consumer behavior in the ~~ongoing COVID-19 coronavirus pandemic. We also experienced a favorable impact to net sales~~first half of 2020 and the easing of nesting trends driven by the ~~addition~~COVID-19 pandemic in the second quarter of 2021 compared to the second quarter of 2020. Additionally, we believe our comps and net sales in our home products categories were negatively impacted by supply chain constraints which reduced inventory availability in the second quarter of 2021, and by the impact of labor challenges in our distribution centers, particularly those servicing our stores located on the east coast, which resulted in fewer shipments from our distribution centers to our stores. With the planned opening of our forward distribution centers, small-format distribution centers designed to process bulky and full-pallet shipments, in the third quarter of 2021 and our continuing sourcing efforts, we believe we will begin to mitigate the challenges we are encountering in our supply chain. Despite these challenges, our home products categories performed in line with our expectations in the second quarter of 2021 and we believe that our customers continued to respond positively to our trend-right home offerings and the Broyhill® brand.

Comps and net sales in our Food and Consumables merchandise categories also decreased during the second quarter of 2021 compared to the second quarter of 2020. The decrease was partly driven by lower demand for essential products, which we define as food, consumables, health products, and pet supplies, compared to the second quarter of 2020. We experienced greater demand for these products in the early stages of the COVID-19 pandemic when customers were stocking up on these products. Similar to our home products categories above, comps and net sales in our Food and Consumables categories were also negatively impacted by supply chain constraints and labor challenges in our distribution centers.

Partially offsetting our decreased comps and net sales in the second quarter of 2021 was an increase in comps and net sales in our Apparel, Electronics, & Other category driven by the product assortments found in The Lot and ~~the~~ Queue ~~Line to approximately 50% our stores.~~Line. The Lot is a cross-category presentation solution with a curated assortment to promote life’s ~~occasions, which drove increased sales in our Electronics, Toys, and Accessories merchandise category through apparel and toys. The~~occasions. Queue Line offers our customers a streamlined checkout experience with a new and expanded convenience assortment and a smaller footprint. Additionally, we experienced the early benefits of our Pantry Optimization project completed late in the third quarter of 2020, which reallocated linear square footage from our Food merchandise categoryfootprint that provides additional floor space to our Consumables category. Overall, we believe our net sales in the third quarter of 2020 were favorably impacted by a strong alignment of our product assortment with current customer demand, successful retention of new customers we attracted as a result of our position as an essential retailer during COVID-19 related shutdowns in the earlier part of 2020, and a favorable customer response to our strategic initiatives such as The Lot, Queue Line, and Pantry Optimization.

Consistent with the first and second quarters of 2020, in the third quarter of 2020, we made the decision to cancel our Friends and Family promotion to address social distancing concerns related to the COVID-19 coronavirus pandemic. In response, we ran a “Your Deal, Your Day” promotion to offset the sales decrease caused by cancellation of the Friends and Family promotion.

Throughout the COVID-19 coronavirus pandemic, our stores have remained open and operating, with the exception of a small number of temporary closures for cleaning. We believe the impact of temporary closings and shortened operating hours and selling restrictions due to the COVID-19 coronavirus pandemic was immaterial to our results for the third quarter of 2020 and we expect the impact of shortened operating hours and selling restrictions due to the COVID-19 coronavirus pandemic to be immaterial to our results for the remainder of 2020.

~~All of our merchandise categories generated increased net sales and positive comps in the third quarter of 2020 compared to the third quarter of 2019:~~

•other categories. Our~~Furniture~~ category experienced increased net sales and positive comps during the third quarter of 2020, driven by increased demand as customers have chosen to invest in home furnishings due to spending more time at their homes as a result of the ongoing COVID-19 coronavirus pandemic. Additionally, our customers have continued to respond positively to ~~our brand-name mattress~~these strategic initiatives and we believe the product assortment offered by The Lot and ~~our new Broyhill~~® ~~furniture assortment.~~

•~~The~~ ~~Soft Home~~ category experienced increased net sales and comps during the third quarter of 2020, driven by an increase in demand as our customers chose to invest more in their home environment due to spending more time at their homes as a result of the ongoing COVID-19 coronavirus pandemic. Additionally, our Soft Home category benefited from a favorable response to our new Broyhill® ~~offerings.~~

•~~The~~ ~~Seasonal~~ category experienced increased net sales and comps during the third quarter of 2020, driven by our Christmas and harvest departments, partially offset by decreased net sales and comps in our lawn & garden department. The increase in the Christmas and harvest departments resulted from strong alignment of our holiday assortments toQueue Line is aligned with customer demand ~~increased demand due~~and leading to our customers’ desire to invest in their home environments as a result of the ongoing COVID-19 coronavirus pandemic, and favorable response to holiday promotions during the third quarter of 2020. For our Christmas department in particular, we experienced the annual ramp up in Christmas-related net sales activity earlier during the third quarter of 2020 compared to the third quarter of 2019 and years prior. The decrease in net sales and comps in our lawn & garden department was principally due to lower remaining lawn & garden inventory entering the third quarter of 2020 compared to the third quarter of 2019.

•~~The~~ increased net sales and positive comps in our Apparel, Electronics, ~~Toys,~~ & ~~Accessories~~ ~~category was driven by our toys, apparel, and accessories departments. The increase was driven by~~Other category. At the ~~introduction~~end of ~~these products into~~the second quarter of 2021, The Lot and ~~the~~ Queue Line ~~in many~~had each been rolled out to approximately 1,225 stores, compared to approximately 570 stores at the end of ~~our stores, as well as a traffic-driving, brand-name toy promotion run in~~ the ~~third~~second quarter of 2020. The increased sales and comps in apparel were driven by graphic tees, which were introduced to our stores late in the fourth quarter of 2019, and several brand-name apparel closeouts in the third quarter of 2020.

•~~The~~ ~~Hard Home~~ category experienced increased net sales and comps during the third quarter of 2020, driven by increased net sales in our table top, small appliances, and food prep categories. As a result of various state-wide closures of dine-in restaurants, our customer has chosen to invest in our offerings from these departments to focus on her in-home dining experience. Additionally, our Hard Home net sales and comps increased due to several brand-name closeouts during the third quarter of 2020.

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•~~Our~~ ~~Consumables~~ ~~and~~ ~~Food~~ categories experienced increased net sales and comps compared to the third quarter of 2019 driven by increased sales in our Consumables category driven by health, beauty, and cosmetics, housekeeping supplies, and household chemicals. We also saw increased sales in our Food category driven by candy & snack and beverage & groceries departments. Additionally, our Consumables category benefited from the completion of our Pantry Optimization project in the third quarter of 2020, which reallocated linear square footage from our Food category to our Consumables category and improved our brand name, “never out” product assortment.

Gross Margin

Gross margin dollars ~~increased $94.5~~decreased $105.8 million, or ~~20.4%~~15.5%, to ~~$557.9~~$577.8 million for the ~~third~~second quarter of ~~2020,~~2021, compared to ~~$463.4~~$683.6 million for the ~~third~~second quarter of ~~2019.~~2020. The ~~increase~~decrease in gross margin dollars was primarily due to ~~an increase~~a decrease in net sales, which ~~increased~~decreased gross margin dollars by ~~$83.3~~$77.7 million, and a decrease in gross margin rate, which decreased gross margin dollars by $28.1 million. Gross margin as a percentage of net sales ~~increased 80~~decreased 200 basis points to ~~40.5%~~39.6% in the ~~third~~second quarter of ~~2020~~2021 as compared to ~~39.7%~~41.6% in the ~~third~~second quarter of ~~2019.~~2020. The gross margin rate ~~increase~~decrease was primarily a result of higher inbound freight costs driven by increased ocean carriage rates as demand outpaced container and carrier supply. The ocean carriage demand and supply imbalance was exacerbated by temporary COVID-19-related port shutdowns during the second quarter of 2021. Additionally, inbound freight costs increased due to higher domestic transportation rates, related to increased demand following the easing of COVID-19-related restrictions, and increased fuel costs compared to the second quarter of 2020. This increase was partially offset by a lower markdown rate ~~and higher comps in our higher margin merchandise categories, partially offset by higher shrink and lower initial markup~~compared to the second quarter of ~~products, which was driven by higher freight costs and receipts skewed toward domestic purchases, which carry a slightly lower average initial markup.~~2020.

Selling and Administrative Expenses

Selling and administrative expenses were ~~$482.3~~$488.7 million for the ~~third~~second quarter of ~~2020,~~2021, compared to ~~$436.7~~$504.0 million for the ~~third~~second quarter of ~~2019.~~2020. The ~~increase~~decrease of ~~$45.6~~$15.3 million in selling and administrative expenses was ~~comprised~~driven by a decrease in store-related payroll expense of ~~increases~~$17.7 million, accrued bonus expense of $9.2 million, and the absence of sale and leaseback transaction-related expenses of $4.0 million, partially offset by an increase in distribution and transportation costs of ~~$17.5 million, store-related payroll of $11.5 million, accrued bonus expense of $10.5~~$12.2 million, share-based compensation expense of ~~$7.7~~$6.6 million, health benefit expense of $2.9 million, and ~~advertising expense~~$2.6 million of ~~$6.2 million, partially offset by a~~store occupancy expense. The decrease in ~~health benefit costs~~store-related payroll expense was primarily due to the absence of ~~$7.8 million and~~a temporary $2 per hour wage increase that was in place during a portion of the second quarter of 2020 for most of our non-exempt workforce. The decrease in accrued bonus expense was driven by the absence of ~~$3.6 million related~~a one-time discretionary bonus granted in the second quarter of 2020 to recognize our non-exempt associates in our stores and distribution centers, as well as decreased performance in the second quarter of 2021 relative to our ~~transformational restructuring initiative announced~~bonus targets as compared to our performance in ~~2019,~~the second quarter of 2020 relative to our bonus targets. The sale and leaseback transaction-related expenses, which ~~consisted~~included consulting costs, were incurred in completing the sale and leaseback of ~~consulting expenses and employee separation costs.~~our distribution centers in the second quarter of 2020. The increase in distribution and transportation costs was driven by rent on our leased distribution centers, for which we recognized rent expense for the full second quarter of 2021 compared to approximately half of the second quarter of 2020. Additionally, our distribution ~~centers, all of which are now leased,~~and transportation costs increased due to higher ~~inbound~~volume, increased labor costs, and outbound ~~shipment volume to support~~transportation costs, partially offset by the ~~increased sales, and higher transportation rates. The~~absence of the aforementioned temporary $2 per hour wage increase in ~~store-related payroll was~~the second quarter of 2020. Our share-based compensation expense increased primarily due to ~~additional payroll hours~~the timing of the establishment of the grant date of our 2019 PSUs, for which

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the grant date was established in the first quarter of 2021, compared to ~~support~~ our ~~increased sales. The increase in accrued bonus expense~~2018 PSUs, for which the grant date was ~~driven by increased performance~~established in the third quarter of 2020 and higher anticipated performance for the fourth quarter of 2020 relative to our quarterly and annual operating plans as compared to our performance in the third quarter of 2019 relative to our quarterly and annual operating plans.2020. The increase in share-based compensation expense was driven by a higher grant date fair value, higher estimated performance, and timing of the grant date of the 2018 PSUs for which we will recognize expense during 2020, compared to 2017 PSUs for which expense was recognized in 2019. The increase in advertising expense was driven by increased investments in digital and social media engagement leading into the holiday season and increased investments in our loyalty and rewards programs through purchase intelligence insights. The decrease in health benefit ~~costs~~expense was due to a ~~lower amount~~higher volume of ~~benefits~~ claims ~~during~~in the ~~third~~second quarter of 2021 compared to the second quarter of 2020, as many medical providers halted elective care in the second quarter of 2020. The increase in store occupancy expense was due to an increase in net store count since the second quarter of 2020, relocated stores which have higher rents than the stores closed, and normal rent increases resulting from lease renewals.

As a percentage of net sales, selling and administrative expenses ~~decreased 240~~increased 280 basis points to ~~35.0%~~33.5% for the ~~third~~second quarter of ~~2020~~2021 compared to ~~37.4%~~30.7% for the ~~third~~second quarter of ~~2019.~~2020.

Depreciation Expense

Depreciation expense ~~decreased $1.7~~increased $1.3 million to ~~$33.1~~$35.3 million ~~in the third quarter of 2020, compared to $34.8 million for the third quarter of 2019. The decrease in depreciation expense was due to the absence of depreciation for our distribution centers sold~~ in the second quarter of 2021, compared to $34.0 million for the second quarter of 2020. The increase in depreciation expense was driven by investments in our strategic initiatives, such as The Lot and Queue Line, new stores, and supply chain improvements in the last twelve months.

Depreciation expense as a percentage of sales ~~decreased 60~~increased 30 basis points compared to the ~~third~~second quarter of ~~2019.~~2020.

Gain on Sale of Distribution Centers

Gain on sale of distribution centers decreased $463.1 million to $0 in the second quarter of 2021, compared to $463.1 million in the second quarter of 2020. The gain on sale of distribution centers in the second quarter of 2020 was attributable to the sale and leaseback of our distribution centers in Durant, OK; Tremont, PA; Montgomery, AL; and Columbus, OH.

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Interest Expense

Interest expense was ~~$2.6~~$2.3 million in the ~~third~~second quarter of ~~2020,~~2021, compared to ~~$5.4~~$2.5 million in the ~~third~~second quarter of ~~2019.~~2020. The decrease in interest expense was primarily driven by a decrease in total average ~~borrowings.~~borrowings, partially offset by an increase in our average interest rate. We had total average borrowings (including finance leases and the sale and leaseback financing liability) of ~~$185.9~~$148.3 million in the ~~third~~second quarter of ~~2020~~2021 compared to total average borrowings of ~~$536.0~~$249.4 million in the ~~third~~second quarter of ~~2019.~~2020. The decrease in total average borrowings was driven by our repayment of all outstanding borrowings under the ~~2018~~ Credit Agreement ~~during~~late in the second quarter of 2020 and ~~payments made toward~~the repayment of all borrowings under the 2019 Term Note ~~since~~in the ~~third~~second quarter of ~~2019,~~2021, partially offset by the establishment of a financing liability in connection with the sale and leaseback transactions for our distribution centers late in the second quarter of 2020. The increase in our average interest rate was driven by a higher average interest rate on the sale and leaseback financing liability compared to our other outstanding borrowings.

Other Income (Expense)

Other income (expense) was ~~$(0.5)~~$(0.1) million in the ~~third~~second quarter of ~~2020,~~2021, compared to ~~$(0.3)~~$1.4 million in the ~~third~~second quarter of ~~2019.~~2020. The change was driven by ~~increased losses~~decreased gains on our diesel fuel derivatives in ~~third~~second quarter of ~~2020~~2021 compared to ~~losses~~the gains on diesel fuel derivatives during the ~~third~~second quarter of ~~2019.~~2020, as well as the $0.5 million loss on debt extinguishment recognized in connection with the prepayment of the 2019 Term Note in the second quarter of 2021.

Income Taxes

The effective income tax rate for the ~~third~~second quarter of ~~2020~~2021 was ~~24.1%~~26.7% compared to ~~22.9%~~25.6% in the ~~third~~second quarter of ~~2019.~~2020. The increase in the effective income tax rate in the ~~third~~second quarter of ~~2020~~2021 compared to the ~~third~~second quarter of ~~2019~~2020 was primarily attributable to an increase in nondeductible executive compensation, partially offset by an increase in employment-related tax credits compared to the ~~impact of the gain on sale of distribution center in California in 2019. The tax rate on the gain was less than our normalized tax rate and, thereby reduced our effective tax rate in the third~~second quarter of ~~2019. The impact of the discrete items on the effective income tax rate in the third quarter of 2020 was not meaningfully different from the impact in the third quarter of 2019.~~

2020.

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YEAR-TO-DATE ~~2020~~2021 COMPARED TO YEAR-TO-DATE ~~2019~~2020

Net Sales

Net sales by merchandise category (in dollars and as a percentage of total net sales) in the year-to-date ~~2020~~2021 and the year-to-date ~~2019,~~2020, and the change in net sales (in dollars and percentage) and the change in comps (in percentage) from the year-to-date ~~2020~~2021 compared to the year-to-date ~~2019~~2020 were as follows:


Year-to-Date	Year-to-Date															Year-to-Date
($ in thousands)	($ in thousands)	2020				2019				Change				Comps		($ in thousands)	2021				2020				Change				Comps
Furniture	Furniture	$	1,284,743	28.8	%	$	1,031,357	27.7	%	$	253,386	24.6	%	23.1	%	Furniture	$	890,509	28.9	%	$	855,438	27.7	%	$	35,071	4.1	%	1.8	%
Seasonal																Seasonal	563,600		18.4		496,021		16.1		67,579		13.6		12.2
Soft Home	Soft Home	770,078		17.3		606,397		16.3		163,681		27.0		27.0		Soft Home	407,103		13.2		439,416		14.3		(32,313)		(7.4)		(9.0)
Food																Food	358,464		11.6		420,911		13.6		(62,447)		(14.8)		(16.0)
Consumables	Consumables	679,007		15.2		581,925		15.7		97,082		16.7		17.3		Consumables	321,689		10.4		372,931		12.1		(51,242)		(13.7)		(14.8)
Seasonal		596,850		13.4		523,822		14.1		73,028		13.9		14.0
Food		570,540		12.8		530,970		14.3		39,570		7.5		7.7
Hard Home	Hard Home	287,349		6.4		243,584		6.6		43,765		18.0		18.5		Hard Home	297,002		9.6		304,834		9.9		(7,832)		(2.6)		(4.0)
Electronics, Toys, & Accessories		272,704		6.1		198,143		5.3		74,561		37.6		38.6
Apparel, Electronics, & Other																Apparel, Electronics, & Other	244,559		7.9		193,795		6.3		50,764		26.2		24.4
Net sales	Net sales	$	4,461,271	100.0	%	$	3,716,198	100.0	%	$	745,073	20.0	%	19.7	%	Net sales	$	3,082,926	100.0	%	$	3,083,346	100.0	%	$	(420)	—	%	(1.7)	%

Net sales ~~increased $745.1~~decreased $0.4 million, or ~~20.0%~~0%, to ~~$4,461.3~~$3,082.9 million in the year-to-date ~~2020,~~2021, compared to ~~$3,716.2~~$3,083.3 million in the year-to-date ~~2019.~~2020. The ~~increase~~decrease in net sales was driven by a comp ~~increases in each~~decrease of 1.7%, which decreased net sales by $52.0 million, partially offset by our ~~merchandise categories, with an overall comp increase of 19.7%,~~non-comparable sales which increased net sales by ~~$694.2 million. Additionally, our non-comparable sales~~$51.6 million as a result of increased net ~~sales by $50.9 million, driven by increased~~ sales in our new and relocated stores compared to closed ~~stores.~~stores, and an increase in net store count compared to the second quarter of 2020.

~~Overall, we experienced a favorable impact to~~Our net sales ~~during~~in the year-to-date 2021 were in line with our net sales in the year-to-date 2020, ~~due~~despite a greater impact of government sponsored relief funds distributed in the year-to-date 2020 compared to ~~our position as~~the year-to-date 2021. In the year-to-date 2021, we experienced an ~~“essential retailer” during the COVID-19 coronavirus pandemic and the increased~~increase in demand for our ~~home products while~~Furniture and Seasonal categories which we believe was bolstered by government stimulus and unemployment funds, particularly in the first quarter of 2021, together with the continuation of nesting trends we experienced in 2020 due to customers ~~are spending~~investing more time atand discretionary funds in their home. In the first quarter of ~~2020,~~2021, these nesting trends shifted toward patio furniture and other outdoor products which drove increased net sales and comps in the lawn & garden and summer departments of our Seasonal merchandise category. Nesting trends abated in the second quarter of 2021 as COVID-19 vaccines became widely available and many consumers began spending more time outside their homes. Despite the easing of the nesting trends and stimulus spending that were driven by the COVID-19 pandemic, we believe that our customers continued to respond positively to our product assortments and our Broyhill® brand in particular. While our Furniture and Seasonal comps and net sales were negatively impacted by supply chain constraints and labor challenges in our distribution centers in the second quarter of 2021, we were pleased with the performance of these categories in the year-to-date 2021 and we believe we can overcome the challenges we are encountering in our supply chain.

Our Soft Home and Hard Home categories each experienced a decrease in net sales and comps in the year-to-date 2021 compared to the year-to-date 2020, primarily due to lower on-hand product availability in the second quarter of 2021, which was primarily driven by global supply chain challenges. Despite the decrease in net sales and comps in the year-to-date 2021, both categories performed in line with our expectations.

Our Apparel, Electronics, & Other category also experienced increased net sales and positive comps in the year-to-date 2021 driven by our customers responding positively to our strategic initiatives - including The Lot and Queue Line, which led to our increased net sales and positive comps in the year-to-date 2021. We believe our product assortment is strongly aligned with customer demand and that the Apparel, Electronics, & Other category is a significant ~~increase~~growth opportunity for us.

Our Food and Consumables categories each experienced a decrease in net sales and comps in the year-to-date 2021 compared to the year-to-date 2020, primarily due to a decrease in demand for ~~“essential~~essential products,” which we define as food, consumables, health products, and pet supplies, with the primary impact in our Food and Consumables merchandise categories, as concern over the COVID-19 coronavirus pandemic grew and customers began stocking up on essential products. Beginning in mid-April, wesupplies. We experienced ~~a shift in~~greater demand ~~from essential~~for these products to products in our Furniture, Seasonal, Soft Home and Hard Home categories driven by the release of government stimulus and enhanced unemployment funds. Despite the conclusion of government stimulus and enhanced unemployment programs at the beginning of the third quarter of 2020, the increased demand continued through the third quarter of 2020. Our customers have chosen to invest more in their homes as a result of spending more time at home and our product assortment has a strong alignment with current customer demand. Furthermore, we have successfully retained many of the new customers we attracted as a result of our position as an essential retailer during COVID-19 and we have seen a positive response to our strategic initiatives.

In the year-to-date 2020, we introduced The Lot and the Queue Line in approximately 50% of our stores, which contributed to the increased net sales and positive comps compared to the year-to-date 2019. Additionally, the early impact of our Pantry Optimization project, which was completed late in the third quarter of 2020, contributed to the increased net sales and positive comps compared to the year-to-date 2019.

~~All of our merchandise categories generated increased net sales and positive comps~~ in the year-to-date 2020 ~~compared to the year-to-date 2019:~~

•~~Our~~ ~~Furniture~~ category experienced increased net sales and positive comps during the year-to-date 2020, driven by our customers choosing to invest in home furnishings as a result of spending more time at home during the COVID-19 coronavirus pandemic, as well as a surge in demand following the release of government stimulus and enhanced unemployment funds during the year-to-date 2020. Additionally, our customers have responded positively to our brand-name mattress assortment and Broyhill® ~~furniture offerings in the year-to-date 2020.~~

•~~The positive comps and increased net sales in our~~ ~~Soft Home~~ category were primarily driven by an increase in demand due to our customers’ decision to invest more in their homes as a result of spending more time at home. Additionally, our Soft Home category benefited from a favorable response to our new Broyhill® ~~assortment.~~

•~~Our~~ ~~Food and Consumables~~ ~~categories experienced increased sales and positive comps driven by high demand for “essential products”~~ during the early stages of the COVID-19 ~~coronavirus pandemic. While~~pandemic, which has since declined as customers are no longer stocking up on these products. Our Food and Consumables ~~net sales and comps decelerated~~categories were also negatively impacted by supply chain constraints in the second quarter of 2021 and ~~third quarters of 2020, the categories continued to outperform the~~by labor challenges in our distribution centers.

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~~second and third quarters of 2019. Additionally, our Consumables category benefited from the completion of our Pantry Optimization project in the third quarter of 2020.~~

•~~We experienced increased net sales and positive comps in our~~ ~~Seasonal~~ category, driven by the lawn & garden, summer, Christmas, and harvest departments. We experienced an increase in sales of high-ticket items such as patio furniture following the release of government stimulus and enhanced unemployment funds in mid-April 2020. Our customers have chosen to invest in our outdoor furniture, lawn maintenance assortments, and holiday decorations as a result of spending more time at home. Additionally, our customers continue to respond well to our new Broyhill® ~~assortment of patio furniture.~~

•~~The increased net sales and positive comps in~~ ~~Hard Home~~ was driven by an increase in our small appliances, table top, and food preparation departments. Despite space reductions and the exit from our greeting card offering, we experienced high demand for products that improve our customers’ at-home dining experience.

•~~Our~~ ~~Electronics, Toys, & Accessories~~ category experienced increased net sales and positive comps driven by our toys, apparel, and accessories departments. The increased sales and comps were driven by the introduction of these products into the Queue Line and The Lot in the year-to-date 2020.

Gross Margin

Gross margin dollars ~~increased $331.5~~decreased $22.6 million, or ~~22.4%~~1.8%, to ~~$1,812.2~~$1,231.7 million for the year-to-date ~~2020,~~2021, compared to ~~$1,480.7~~$1,254.3 million for the year-to-date ~~2019.~~2020. The ~~increase~~decrease in gross margin dollars was principally due to ~~an increase~~a decrease in ~~net sales, which increased~~ gross margin ~~dollars~~rate, which decreased gross margin by ~~$296.9~~$22.4 million. Gross margin as a percentage of net sales ~~increased 80~~decreased 70 basis points to ~~40.6%~~40.0% in the year-to-date ~~2020,~~2021, compared to ~~39.8%~~40.7% in the year-to-date ~~2019. This~~2020. The gross margin rate ~~increase~~decrease was primarily due to ahigher inbound freight costs, partially offset by lower ~~markdown rate,~~markdowns. Freight costs increased primarily due to higher ~~comps in our higher margin merchandise categories,~~ocean carriage rates, domestic transportation rates and ~~the absence of a $6.0 million impairment of inventory in our greeting cards department, which we chose to exit~~fuel costs, and in the first quarter of ~~2019. The increase was partially offset by higher shrink costs~~2021, detention and ~~a lower initial mark-up compared~~demurrage charges resulting from delayed receipt of inventory related to the year-to-date 2019, as our receipts have skewed toward domestic purchases, which carry a lower average initial markup. Additionally, our initial mark-up was lower compared to the year-to-date 2019 due to increased freight costs in the third quarter of 2020.supply chain constraints.

Selling and Administrative Expenses

Selling and administrative expenses were ~~$1,444.9~~$986.1 million for the year-to-date ~~2020,~~2021, compared to ~~$1,352.3~~$962.6 million for the year-to-date ~~2019.~~2020. The increase of ~~$92.6~~$23.5 million in selling and administrative expenses was attributable to increases in distribution and transportation costs of ~~$41.2~~$26.1 million, ~~store-related payroll~~$15.5 million of ~~$41.0 million, accrued bonus~~share-based compensation expense, ~~of $22.9 million, advertising expense of $11.3 million, transaction fees of $7.6 million, $6.9~~and $4.7 million of store occupancy costs, ~~$6.6 million~~partially offset by a decrease of ~~share-based compensation expense, $4.6~~$15.8 million in ~~store supplies, $4.6 million~~store-related payroll, the absence of ~~employee retirement and separation costs,~~ $4.0 million of sale and leaseback ~~related~~transaction-related expenses, ~~and~~the absence of proxy contest-related costs of $3.7 million, and $3.1 million in store supplies expense. The increase in distribution and transportation costs was driven by rent on our leased distribution centers, four of ~~proxy contest-related~~which were sold and leased back in the second quarter of 2020, and higher volume, transportation costs, and labor costs, partially offset by the absence of ~~$38.3 million in costs incurred for our transformational restructuring initiative, the absence of~~ a $7.3 million loss contingency recorded in the year-to-date 2019, and a decrease in health benefit costs of $12.9 million. The increase in distribution and transportation expenses was due to the transition from our Rancho Cucamonga, CA distribution center to our new Apple Valley, CA distribution center, rent expense on our leased distribution centers, higher inbound and outbound rates and volume to support the increased year-to-date net sales, and a temporary $2 per hour wage increase that was implemented for most of our non-exempt workforce ~~during the COVID-19 coronavirus pandemic. The temporary $2 per hour wage increase began~~beginning in March 2020 ~~and continued~~ through ~~early July 2020.~~June 2020 at the height of the COVID-19 pandemic. The increase in store-related payroll was driven by additional payroll hours allocated to stores to support the increased net sales during the year-to-date 2020 and the aforementioned temporary $2 per hour wage increase. The increase in accrued bonusshare-based compensation expense was driven by increased performance in the year-to-date 2020 and higher anticipated performance for the fourth quarter of 2020 relative to our quarterly and annual operating plans as compared to our performance in the year-to-date 2019 relative to our quarterly and annual operating plans, and a one-time discretionary bonus in the second quarter of 2020 to recognize our non-exempt associates in our stores and distribution centers. Advertising expense increased due to increased investments in social media engagement, our rewards and loyalty program, and video media to promote The Lot and our Store of the Future concept. The increase in transaction fees, which includes credit card fees, debit card fees, and other transaction-driven costs, was primarily due to timing of establishing the ~~increased net sales~~grant date of our 2019 PSUs, for which the grant date was established in the ~~year-to-date 2020~~first quarter of 2021, compared to our 2018 PSUs, for which the ~~year-to-date 2019. The increase~~grant date was established in ~~store-related occupancy costs was due to new stores opened since the end of~~ the third quarter of ~~2019,~~2020. Our store occupancy costs increased primarily due to an increased store count in the year-to-date 2021, new stores opened in the year-to-date 2021, which have higher rents than the stores closed, and normal rent increases resulting from lease renewals. The ~~increase~~decrease in share-based compensation expense was driven by a higher grant date fair value and higher estimated performance for the 2018 PSUs for which we will recognize expense during 2020, compared to the 2017 PSUs for which expense was recognized in 2019. The increase in store supplies expense was driven by safety and cleaning supplies, such as personal protective equipment, hand sanitizer, and disinfectants, distributed to our stores in the year-to-date 2020 to ensure a safe environment for our customers and associates during the COVID-19 coronavirus pandemic. The increase in employee retirement and separation costsstore-related payroll was primarily ~~driven~~due the absence of the above-mentioned $2 per hour wage increase, partially offset by ~~the retirement and separation of senior executives in the year-to-date 2020.~~additional payroll hours to support our sales. The sale and leaseback ~~related~~transaction-related expenses, ~~were due to~~which included consulting costs, were incurred in ~~connection with the completion of~~completing the sale and leaseback ~~transaction for~~of our ~~four~~ distribution centers in the second quarter of 2020. The proxy contest-related costs were comprised of legal, public relations, and advisory fees, and settlement costs incurred to resolve a proxy contest in the first

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quarter of 2020. The ~~costs incurred for our transformational restructuring initiative consisted~~decrease in store supplies was driven by a decrease in distribution of ~~consulting expenses~~safety and ~~employee separation costs recognized~~cleaning supplies, such as personal protective equipment, hand sanitizer, and disinfectants, as the availability and adoption of COVID-19 vaccines continued in the year-to-date 2019. The loss contingency recorded in the year-to-date 2019 was associated with wage and hour claims in the state of California. The decrease in health benefits costs was primarily due to lower benefits claim volume in the year-to-date 2020 as many medical care providers suspended non-emergency care and procedures during the year-to-date 2020 due to the COVID-19 coronavirus pandemic.2021.

As a percentage of net sales, selling and administrative expenses ~~decreased 400~~increased 80 basis points to ~~32.4%~~32.0% for the year-to-date ~~2020~~2021 compared to ~~36.4%~~31.2% for the year-to-date ~~2019.~~2020.

Depreciation Expense

Depreciation expense ~~increased $7.2~~decreased $2.4 million to ~~$104.8~~$69.3 million in the year-to-date ~~2020,~~2021, compared to ~~$97.6~~$71.7 million for the year-to-date ~~2019.~~2020. The ~~increase~~decrease was driven ~~primarily~~ by investments in our Apple Valley, CA distribution center, new store build-outs, and Store of the Future remodels, and the acquisition of our corporate headquarters facility in the third quarter of 2019, partially offset by a decrease from the sale ~~and leaseback~~ of ~~our~~ four distribution centers in the second quarter of ~~2020.~~2020, partially offset by the investments in our strategic initiatives, new stores, and supply chain improvements.

Depreciation expense as a percentage of sales decreased by 3010 basis points compared to the year-to-date ~~2019.~~2020.

Gain on Sale of Distribution Centers

~~The gain~~Gain on sale of distribution centers decreased $463.1 million to $0 in the year-to-date ~~2020 was $463.1 million,~~2021, compared to ~~$178.5~~$463.1 million in the year-to-date ~~2019.~~2020. The gain on sale of distribution centers in the year-to-date 2020 was attributable to the sale and leaseback of our distribution centers in Durant, OK; Tremont, PA; Montgomery, AL; and Columbus, OH during the second quarter of 2020. ~~The gain on sale of distribution centers in the year-to-date 2019 was attributable to the sale of our Rancho Cucamonga, CA distribution center in the third quarter of 2019.~~

Interest Expense

Interest expense was ~~$8.5~~$4.9 million in the year-to-date ~~2020,~~2021, compared to ~~$13.7~~$5.9 million in the year-to-date ~~2019.~~2020. The decrease in interest expense was driven by lower total average borrowings (including finance leases and the sale and leaseback financing liability) ~~and a lower average interest rate on our revolving debt.~~. We had total average borrowings of ~~$282.3~~$164.5 million in the year-to-date ~~2020~~2021 compared to ~~$490.3~~$351.1 million in the year-to-date ~~2019.~~2020. The decrease in total average borrowings was driven by our repayment of all outstanding debt under the ~~2018~~ Credit Agreement following the sale and leaseback transaction completed in the second quarter of 2020, ~~partially offset by timing~~and our prepayment of ~~our entry into~~ the 2019 Term Note ~~as the 2019 Term Note was only~~ in ~~place for~~ the second ~~half~~quarter of ~~2019, and~~2021, partially offset by the establishment of athe financing liability in connection with the sale and leaseback ~~transactions for our distribution centers~~transactions. The decrease in ~~the second quarter of 2020. The~~total average borrowings was partially offset by a higher average interest rate on ~~our revolving debt, which is variable based on LIBOR~~the sale and our credit rating, decreased due to a significant decline in the LIBOR rate in the year-to-date 2020 as a result of the COVID-19 coronavirus pandemic, partially offset by the impact of a decrease in our credit rating during the first quarter of 2020.leaseback financing liability.

Other Income (Expense)

Other income (expense) was ~~$(2.4)~~$0.8 million in the year-to-date ~~2020,~~2021, compared to ~~$(0.2)~~$(2.0) million in the year-to-date ~~2019.~~2020. The change was primarily driven by unrealized ~~losses~~gains on our diesel fuel derivatives ~~due~~in the year-to-date 2021 compared to ~~a sharp decline in current and forward~~unrealized

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losses on diesel fuel ~~prices~~derivatives in the ~~first quarter of 2020 as~~year-to-date 2020. The gains on diesel fuel derivatives in the year-to-date 2021 were partially offset by a ~~result~~$0.5 million loss on debt extinguishment recognized in the year-to-date 2021 related to the prepayment of the ~~COVID-19 coronavirus pandemic.~~2019 Term Note.

Income Taxes

The effective income tax rate for the year-to-date ~~2020~~2021 and the year-to-date ~~2019~~2020 were ~~25.7%~~23.3% and ~~23.9%~~25.8%, respectively. The ~~increase~~decrease in the effective income tax rate was primarily attributable to ~~impact~~the net tax benefit associated with settlement of ~~the sales of our distribution centers. In~~share-based payment awards during the year-to-date ~~2019, the tax rate on the gain of our California distribution center was less than our normalized tax rate, thereby reducing our effective tax rate~~2021 and an increase in employment-related credits in the year-to-date 2019. While in the year-to-date 2020, the tax rate on the gains of our non-California distribution centers were similar to our normalized tax rate, thereby having a more muted impact on our effective tax rate in the year-to-date 2020. Additionally, the impact of our discrete items was similar in value in the year-to-date 2020 and the year-to-date 2019, but their impact on the tax rate was significantly curtailed in the year-to-date 2020 by the significant growth in income before income taxes in the year-to-date 2020 as2021 compared to the year-to-date ~~2019.~~2020, partially offset by an increase in nondeductible executive compensation compared to the year-to-date 2020.

~~2020~~2021 Guidance

~~In March 2020,~~As we enter the ~~World Health Organization declared~~second half of 2021, we are facing significant supply chain challenges as a result of COVID-19-related shutdowns in Asian factories and ports, which we expect to adversely impact our net sales and gross margin in the ~~COVID-19 coronavirus~~third and fourth quarters of 2021. Additionally, we are facing a ~~pandemic. The rapid spread~~highly competitive domestic labor market, which we expect to result in increased payroll expenses for our stores and distribution centers in the third and fourth quarters of 2021. We have incorporated our current best estimate of the ~~disease throughout~~impacts of the ~~U.S. has significantly impacted~~supply chain and labor headwinds into the ~~U.S. economy, which has reduced our visibility~~guidance below.

As of August 27, 2021, and excluding consideration of potential share repurchase activity, we expect the following in the third quarter of 2021:

•Comparable sales decline in the mid-single digits;

•Gross margin rate down approximately 175 basis points compared to ~~future financial results~~last year, driven by freight headwinds;

•Selling and administrative expenses up slightly compared to last year; and

•Diluted loss per share in ~~comparison~~the range of $0.10 to ~~prior years. Therefore,~~$0.20.

As of August 27, 2021, and excluding consideration of potential share repurchase activity, we expect the following in ~~March 2020,~~ the ~~Company withdrew its~~ full year ~~guidance for 2020. At this time,~~2021:

•Comparable sales decline in the ~~Company still does not believe it has sufficient visibility~~low single digits;

•Gross margin rate down approximately 100 basis points compared to ~~reinstate full year guidance. We expect~~last year;

•Selling and administrative expenses up compared to ~~provide a business update~~last year; and

•Diluted earnings per share in ~~early January 2020 when we have greater visibility~~the range of $5.90 to ~~expected results for the fourth quarter of 2020.~~$6.05.

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Capital Resources and Liquidity

On August 31, 2018, we entered into the ~~2018~~ Credit Agreement, which provides for a $700 million five-year unsecured credit facility. The ~~2018~~ Credit Agreement expires on August 31, 2023. Borrowings under the ~~2018~~ Credit Agreement are available for general corporate purposes, working capital, and to repay certain indebtedness. The ~~2018~~ Credit Agreement includes a $30 million swing loan sublimit, a $75 million letter of credit sublimit, a $75 million sublimit for loans to foreign borrowers, and a $200 million optional currency sublimit. The interest rates, pricing and fees under the ~~2018~~ Credit Agreement fluctuate based on our debt rating. The ~~2018~~ Credit Agreement allows us to select our interest rate for each borrowing from multiple interest rate options. The interest rate options are generally derived from the prime rate or LIBOR. We may prepay revolving loans made under the ~~2018~~ Credit Agreement without penalty. The ~~2018~~ Credit Agreement contains financial and other covenants, including, but not limited to, limitations on indebtedness, liens and investments, as well as the maintenance of two financial ratios – a leverage ratio and a fixed charge coverage ratio. The covenants of the ~~2018~~ Credit Agreement do not restrict our ability to pay dividends. Additionally, we are subject to cross-default provisions associated with the synthetic lease for our distribution center in Apple Valley, CA. A violation of any of the covenants could result in a default under the ~~2018~~ Credit Agreement that would permit the lenders to restrict our ability to further access the ~~2018~~ Credit Agreement for loans and letters of credit and require the immediate repayment of any outstanding loans under the ~~2018~~ Credit Agreement. At ~~October~~July 31, ~~2020,~~2021, we were in compliance with the covenants of the ~~2018~~ Credit Agreement. At July 31, 2021, we had no borrowings outstanding under the Credit Agreement, and the borrowings available under the Credit Agreement were $690.9 million, after taking into account the reduction in availability resulting from outstanding letters of credit totaling $9.1 million.

On August 7, 2019, we entered into the 2019 Term Note, a $70 million term note agreement, which iswas secured by the equipment at our California distribution ~~center. The 2019 Term Note will expire on May 7, 2024. We are required to make monthly payments over~~center and carried a fixed interest rate of 3.3%. In light of our strong liquidity and current market conditions, we prepaid the ~~term of~~remaining $44.3 million principal balance under the 2019 Term Note in the second quarter of 2021. In connection with the prepayment, we incurred a $0.4 million prepayment fee and ~~are permitted to prepay~~recognized a $0.5 million loss on debt extinguishment in the ~~note, subject to penalties, at any time. The interest rate on the note is fixed at 3.3%.~~second quarter of 2021.

~~The primary source~~

Table of our liquidity is cash flows from operations and borrowings under the 2018 Credit Agreement, as necessary. Our net income and, consequently, our cash provided by operations are impacted by net sales volume, seasonal sales patterns, and operating profit margins. Our net sales are typically highest during the nine-week Christmas selling season in our fourth fiscal quarter. However, due to demand volatility weContents

We have ~~experienced during the COVID-19 coronavirus pandemic, the seasonality of our 2020 results may differ from our historical experience. Generally,~~historically funded our working capital ~~requirements peak late in our third fiscal quarter or early in our fourth fiscal quarter. We have typically funded those~~ requirements with borrowings under our credit facility. However, ~~as a result of the sale~~based on our current cash and ~~leaseback transactions completed in the second quarter of 2020~~cash equivalents position and ~~our strong~~projected cash ~~flow~~flows from operations, ~~during the year-to-date 2020,~~ we ~~funded~~intend to fund our working capital requirements, inalong with capital expenditures, share repurchases, and other contractual commitments, for the ~~third~~upcoming quarter ~~of 2020~~ without borrowing under the ~~2018~~ Credit Agreement. At October 31, 2020, we had no borrowings under the 2018 Credit Agreement, and the borrowings available under the 2018 Credit Agreement were $693.7 million, after taking into account the reduction in availability resulting from outstanding letters of credit totaling $6.3 million. We believe that cash on hand, cash equivalents, cash available from future operations, and our 2018 Credit Agreement will provide us with sufficient liquidity to fund our operations for at least the next twelve months. However, we do not anticipate borrowing under the 2018 Credit Agreement for the remainder of 2020. Cash requirements include among other things, capital expenditures, working capital needs, interest payments, and other contractual commitments.

As a measure to secure additional liquidity during a period of economic uncertainty caused by the COVID-19 coronavirus pandemic, on June 12, 2020, we completed the sale and leaseback transactions relating to our distribution centers located in Columbus, OH; Durant, OK; Montgomery, AL; and Tremont, PA for an aggregate selling price of $725 million. Due to sale-leaseback accounting requirements, the proceeds received in the transactions were allocated between proceeds on the sale of the distribution centers and financing proceeds. Accordingly, aggregate net proceeds on the sales of the distribution centers was $586.9 million and the aggregate gain on the sales was $463.1 million. The remainder of consideration received was financing liability proceeds of $134.0 million.

In the second quarter of 2020, we invested a portion of the proceeds from the sale and leaseback of our four distribution centers in money market fund investments and commercial paper investments. These highly liquid investments were recorded in cash and cash equivalents in our consolidated balance sheets. Our aggregate money market fund and commercial paper investments were $205.1 million and $0 at October 31, 2020 and February 1, 2020, respectively.

As a result of the sale and leaseback transactions and our strong cash flow from operations during the year-to-date 2020, our cash and cash equivalents increased $486.0 million to $547.8 million compared to the third quarter of 2019.

In August 2020, our Board of Directors authorized the repurchase of up to $500 million of our common ~~shares. During the third quarter of 2020, we purchased approximately 2.2 million of our common~~ shares ~~for $100.0 million under the~~ (“2020 Repurchase ~~Authorization, at an average price of $45.81.~~Authorization”). Pursuant to the 2020 Repurchase Authorization, we are authorized 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 2020 Repurchase Authorization will be available to meet obligations under our

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equity compensation plans and for general corporate purposes. The 2020 Repurchase Authorization has no scheduled termination date and we intend to fund repurchases under the authorization with cash and cash equivalents on hand and cash generated from operations going forward. During the year-to-date 2021, we purchased 3.6 million of our common shares for $230.4 million under the 2020 Repurchase Authorization, at an average price of $64.83. At July 31, 2021, we had $96.8 million available for future repurchases under the 2020 Repurchase Authorization.

In May 2021, our Board of Directors declared a quarterly cash dividend of $0.30 per common share payable on June 25, 2021 to shareholders of record as of the close of business on June 11, 2021. The cash dividend of $0.30 per common share is consistent with our quarterly dividends declared in 2020. In the year-to-date of 2021, we paid approximately $22.7 million in dividends compared to $24.3 million in the year-to-date of 2020.

In August ~~2020,~~2021, our Board of Directors declared a quarterly cash dividend of $0.30 per common share payable on September ~~25, 2020~~24, 2021 to shareholders of record as of the close of business on September 11, 2020. The cash dividend of $0.30 per common share is consistent with our quarterly dividends declared in 2019. In the year-to-date of 2020, we paid approximately $35.8 million in dividends compared to $36.7 million in the year-to-date of 2019.

In December 2020, our Board of Directors declared a quarterly cash dividend of $0.30 per common share payable on December 30, 2020 to shareholders of record as of the close of business on December 16, 2020.10, 2021.

The following table compares the primary components of our cash flows from the year-to-date ~~2020~~2021 compared to the year-to-date ~~2019:~~2020:


(In thousands)	(In thousands)	2020		2019		Change		(In thousands)	2021		2020		Change
Net cash provided by operating activities	Net cash provided by operating activities	$	267,410	$	80,548	$	186,862	Net cash provided by operating activities	$	142,158	$	468,384	$	(326,226)
Net cash provided by (used in) investing activities		485,209		(41,231)		526,440
Net cash (used in) provided by investing activities								Net cash (used in) provided by investing activities	(77,086)		517,586		(594,672)
Net cash used in financing activities	Net cash used in financing activities	$	(257,509)	$	(23,557)	$	(233,952)	Net cash used in financing activities	$	(331,306)	$	(140,131)	$	(191,175)

Cash provided by operating activities ~~increased $186.9~~decreased $326.2 million to ~~$267.4~~$142.2 million in the year-to-date ~~2020~~2021 compared to ~~$80.5~~$468.4 million in the year-to-date ~~2019.~~2020. The ~~primary drivers of the increase were~~decrease was principally driven by an ~~increase of $382.5 million in net income, a $112.1 million~~ increase in cash ~~inflows~~outflows from ~~accounts payable,~~inventories, due to normalization of inventory levels at the end of the second quarter of 2021 compared to the historically low inventory levels at the end of the second quarter of 2020, and ~~a $60.2 million~~an increase in ~~the change in~~cash outflows from current income taxes, driven by the payment of taxes on the sale of our distribution centers since the second quarter of 2020. These decreases were partially offset by an increase in net income after adjusting for non-cash activities such as non-cash share-based compensation expense, non-cash lease expense, and the add-back for (loss) gain on disposition of equipment and property of $284.8 million, and an increase in the add-back for deferred taxes of $66.8 million. The increase in net income was primarily due to the gain on sale of distribution centers in the second quarter of 2020 and a $745.1 million increase in net sales in the year-to-date 2020. Similarly, the increase in the change in current income taxes was due to higher income before income taxes, which primarily resulted from the gain on sale of distribution centers and increased net sales, partially offset by payment in the third quarter of 2020 of a portion of our income tax liability resulting from the gain on sale of distribution centers. The increase in the change in accounts payable was primarily driven by later inventory receipts leading into the holiday season, which increased our accounts payable balance in the third quarter of 2020 compared to the third quarter of 2019. The increase in the add-back for gain on disposition of equipment and property was principally due to an increase in the gain on sale of distribution centers of $284.6 million compared to the year-to-date 2019. The increase in the add-back for deferred taxes was primarily due to the deferred gain on the sale of our Rancho Cucamonga, CA distribution center in the year-to-date 2019.property.

Cash (used in) provided by ~~(used in)~~ investing activities ~~increased~~decreased by ~~$526.4~~$594.7 million to cash used in investing activities of $77.1 million in the year-to-date 2021 compared to cash provided by investing activities of ~~$485.2~~$517.6 million in the year-to-date ~~2020 compared to cash used in investing activities of $41.2 million in the year-to-date 2019.~~2020. The ~~increase~~decrease was ~~primarily~~principally due to ~~an increase of $397.5 million~~the decrease in cash proceeds from sale of property and equipment, ~~coupled with a $128.9 million reduction in capital expenditures. The increase in cash proceeds from sale of property and equipment was~~ due to ~~the completion of~~ the sale and leaseback ~~transactions for our four distribution centers~~transaction completed in the ~~year-to-date 2020, compared to the sale~~second quarter of one distribution center in the year-to-date 2019. The decrease in capital expenditures was driven by our decision to reduce our investments in our Store of the Future concept and new stores in 2020 to preserve liquidity and promote safety during the COVID-19 coronavirus pandemic, and a decrease in investments in our Apple Valley, CA distribution center which opened in late 2019.2020.

Cash used in financing activities increased by ~~$234.0~~$191.2 million to ~~$257.5~~$331.3 million in the year-to-date ~~2020~~2021 compared to ~~$23.6~~$140.1 million in the year-to-date ~~2019.~~2020. The ~~primary driver of the~~increase was primarily driven by an increase in ~~cash used~~payments for treasury shares acquired due to shares repurchased under the 2020 Repurchase Authorization compared to the year-to-date 2020 when we did not have an active share repurchase program, and the absence of financing proceeds from sale and leaseback transactions completed in ~~financing activities~~the second quarter of 2020. The increase was ~~an increase~~partially offset by a decrease in net repayments of long-term debt of $380.6 million and an increase in payment for treasury shares acquired of $47.3 million, partially offset by an increase in net financing proceeds from sale and leaseback of $123.4 million and a decrease in payment of finance lease obligations of $69.5 million. The increase in net repayments of long-term debt was a result ofdue to the repayment of all outstanding borrowings under the ~~2018~~ Credit Agreement ~~following the completion of the sale and leaseback transaction for our four distribution centers~~ in ~~the second quarter of 2020. The increase in payment for treasury shares acquired was driven by the repurchase of $100.0 million of our common shares under the 2020 Repurchase Authorization during~~ the year-to-date 2020 compared to ~~$50.0 million~~repayment of ~~our common shares~~all outstanding borrowings under the 2019 ~~Repurchase Program during~~Term Note, which carried a lower balance at the ~~year-to-date 2019. The increase in net financing proceeds from sale and leaseback was driven by the sale and leaseback transactions completed for our four distribution centers in second quarter~~time of ~~2020. The decrease in payments of finance lease obligations was due~~repayment compared to the ~~absence~~Credit Agreement at the time of repayment, in the year-to-date ~~2020 of our payment of the remainder of the finance lease obligation for our corporate headquarters facility in the year-to-date 2019.~~2021.

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CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of financial statements in conformity with GAAP requires management to make estimates, judgments, and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period, as well as the related disclosure of contingent assets and liabilities at the date of the financial statements. On an ongoing basis, management evaluates its estimates, judgments, and assumptions, and bases its estimates, judgments, and assumptions on historical experience, current trends, and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates. See note 1 to our consolidated financial statements included in our ~~2019~~2020 Form 10-K for additional information about our accounting policies.

The estimates, judgments, and assumptions that have a higher degree of inherent uncertainty and require the most significant judgments are outlined in Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our ~~2019~~2020 Form 10-K. Had we used estimates, judgments, and assumptions different from any of those discussed in our ~~2019~~2020 Form 10-K, our financial condition, results of operations, and liquidity for the current period could have been materially different from those presented.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are subject to market risk from exposure to changes in interest rates on investments that we make from time to time and on borrowings under the ~~2018~~ Credit Agreement. We had no borrowings under the ~~2018~~ Credit Agreement at ~~October~~July 31, ~~2020.~~2021. An increase of 1% in our variable interest rate on our expected future borrowings would not currently materially affect our financial condition, results of operations, or liquidity.

We are subject to market risk from exposure to changes in our derivative instruments associated with diesel fuel. At ~~October~~July 31, ~~2020,~~2021, we had outstanding derivative instruments, in the form of collars, covering ~~4.6~~2.4 million gallons of diesel fuel. The below table provides further detail related to our current derivative instruments, associated with diesel fuel.


Calendar Year of Maturity	Calendar Year of Maturity	Diesel Fuel Derivatives		Fair Value		Calendar Year of Maturity	Diesel Fuel Derivatives		Fair Value
		Puts	Calls	Asset (Liability)			Puts	Calls	Asset (Liability)
		(Gallons, in thousands)		(In thousands)			(Gallons, in thousands)		(In thousands)
2020		960	960	$	(582)
2021	2021	2,400	2,400	(1,410)		2021	1,200	1,200	224
2022	2022	1,200	1,200	(675)		2022	1,200	1,200	404
Total	Total	4,560	4,560	$	(2,667)	Total	2,400	2,400	$	628

Additionally, at ~~October~~July 31, ~~2020,~~2021, a 10% difference in the forward curve for diesel fuel prices could affect unrealized gains (losses) in other income (expense) by approximately ~~$1.2~~$0.8 million.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Principal Executive Officer and Principal Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the period covered by this report. Based on that evaluation, our Principal Executive Officer and Principal Financial Officer have each concluded that such disclosure controls and procedures were effective as of the end of the period covered by this report.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting (as that term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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Part II. Other Information

Item 1. Legal Proceedings

~~No response is required under Item 103 of Regulation S-K.~~ For information regarding certain legal proceedings to which we have been named a ~~discussion of certain litigated matters,~~party or are subject, see note 7 to the accompanying consolidated financial statements.

Item 1A. Risk Factors

During the ~~third~~second quarter of ~~2020,~~2021, there were no material changes to the risk factors previously disclosed in our ~~2019~~2020 Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds


(In thousands, except price per share data)	(In thousands, except price per share data)							(In thousands, except price per share data)
Period	Period	(a) Total Number of Shares Purchased (1)(2)	(b) Average Price Paid per Share		(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	(d) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs		Period	(a) Total Number of Shares Purchased (1)(2)	(b) Average Price Paid per Share (1)(2)		(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2)	(d) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (2)
August 2, 2020 - August 29,2020		—	$	50.05	—	$	500,000
August 30, 2020 - September 26, 2020		2,185	45.82		2,183	400,000
September 27, 2020 - October 31,2020		11	51.44		—	400,000
May 2, 2021 - May 29, 2021								May 2, 2021 - May 29, 2021	46	$	69.07	42	246,750
May 30, 2021 - June 26, 2021								May 30, 2021 - June 26, 2021	1,521	65.81		1,519	146,750
June 27, 2021 - July 31, 2021								June 27, 2021 - July 31, 2021	844	59.26		844	96,751
Total	Total	2,196	$	45.84	2,183	$	400,000	Total	2,411	$	63.58	2,405	96,751

(1) In May, June, and July 2021, in connection with the vesting of certain outstanding restricted stock units and PRSUs, we acquired 4,545, 1,497, and 623 of our common shares, respectively, which were withheld to satisfy minimum statutory income tax withholdings.

(2) The 2020 Repurchase Authorization is comprised of an August 27, 2020 authorization by our Board of Directors for the repurchase of up to $500.0 million of our common shares. During the ~~third~~second quarter of ~~2020,~~2021, we purchased ~~approximately 2.2~~2.4 million of our common shares for approximately ~~$100.0~~$152.9 million under the 2020 Repurchase Authorization. The 2020 Repurchase Authorization has no scheduled termination date.

(2) In August, September, and October 2020, in connection with the vesting of certain outstanding restricted stock units, we acquired 464, 2,496, and 10,664 of our common shares, respectively, which were withheld to satisfy minimum statutory income tax withholdings.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

None.

2724

Table of Contents

Item 6. Exhibits

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

~~Certain portions of the exhibits marked with a pound sign (#) have been excluded from the exhibit pursuant to Item 601(b)(10)(iv) of Regulation S-K.~~


			Exhibit No.						Document

			~~10.1*#~~10.1						~~Lease Agreement, as amended, between~~Form of Big Lots ~~Stores, Inc. and BIGCOOH002, LLC relating~~2020 Long-Term Incentive Plan Performance Share Units Award Agreement (incorporated herein by reference to ~~the registrant’s distribution center located in Columbus, OH.~~Exhibit 10.2 to our Form 8-K dated March 9, 2021).
			10.2						Form of Big Lots 2020 Long-Term Incentive Plan Restricted Stock Units Award Agreement (incorporated herein by reference to Exhibit 10.2 to our Form 8-K dated March 9, 2021).
			31.1*						Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
			31.2*						Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
			32.1*						Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
			32.2*						Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
			101.Def*						XBRL Taxonomy Definition Linkbase Document
			101.Pre*						XBRL Taxonomy Presentation Linkbase Document
			101.Lab*						XBRL Taxonomy Labels Linkbase Document
			101.Cal*						XBRL Taxonomy Calculation Linkbase Document
			101.Sch						XBRL Taxonomy Schema Linkbase Document
			101.Ins						XBRL Taxonomy Instance Document - the instance document does not appear in the Interactive Date File because its XBRL tags are embedded within the Inline XBRL document
			104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

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 thereunto duly authorized.

Dated: ~~December 9, 2020~~September 8, 2021


			BIG LOTS, INC.

			By: /s/ Jonathan E. Ramsden

			Jonathan E. Ramsden
			Executive Vice President, Chief Financial and Administrative Officer
			(Principal Financial Officer, Principal Accounting Officer and Duly Authorized Officer)

2825


(In thousands)	Balance Sheet Location	February 1, 2020		Level 1		Level 2
Assets:
Money market funds	Cash and cash equivalents	$	0	$	0	$	0
Commercial paper	Cash and cash equivalents	0		0		0
Mutual funds - deferred compensation plan	Other Assets	$	33,715	$	33,715	$	0