| BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 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 home discount retailer in the United States (“U.S.”). At October 29, 2022, we operated 1,457 stores in 48 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 websites are not 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. We have historically experienced seasonal fluctuations, with a larger percentage of our net sales and operating profit realized in our fourth fiscal quarter. 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 January 29, 2022 (“2021 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 2022 (“2022”) is comprised of the 52 weeks that began on January 30, 2022 and will end on January 28, 2023. Fiscal year 2021 (“2021”) was comprised of the 52 weeks that began on January 31, 2021 and ended on January 29, 2022. The fiscal quarters ended October 29, 2022 (“third quarter of 2022”) and October 30, 2021 (“third quarter of 2021”) were both comprised of 13 weeks. The year-to-date periods ended October 29, 2022 (“year-to-date 2022”) and October 30, 2021 (“year-to-date 2021”) were both comprised of 39 weeks. Long-Lived Assets As a result of the net loss and decline in net sales during year-to-date 2022, we performed impairment analyses at the store level. Our long-lived assets primarily consist of property and equipment - net and operating lease right-of-use assets. If the net book value of a store’s long-lived assets is not recoverable by the expected undiscounted future cash flows of the store, we estimate the fair value of the store’s assets and recognize an impairment charge for the excess net book value of the store’s long-lived assets over its fair value (categorized as Level 3 under the fair value hierarchy). Fair value at the store level is typically based on projected discounted cash flows over the remaining lease term. During the third quarter of 2022, the Company recorded aggregate asset impairment charges of $21.7 million related to 86 underperforming store locations, which were comprised of $16.3 million of operating lease right-of-use assets and $5.4 million of property and equipment - net. In the year-to-date 2022, the Company recorded aggregate asset impairment charges of $45.8 million related to 104 underperforming store locations, which were comprised of $33.8 million of operating lease right-of-use assets and $12.0 million of property and equipment - net. The impairment charges were recorded in selling and administrative expenses in our accompanying consolidated statements of operations and comprehensive income. In the third quarter of 2022, the Company entered into multiple purchase and sale agreements to sell land and building-related assets for 25 owned store locations and one unoccupied land parcel. The Company expects to complete the majority of these sales during the fiscal quarter ended January 28, 2023 (“fourth quarter of 2022”) and the remainder in fiscal 2023, subject to customary closing conditions. Accordingly, at October 29, 2022, land and building-related assets for such 25 owned store locations and one unoccupied land parcel with an aggregate carrying value of $30.6 million were classified as held for sale on the consolidated balance sheets. We expect the proceeds from these asset sales to significantly exceed the carrying value. The assets held for sale were recorded within other current assets within our accompanying 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, distribution, outbound transportation to our stores, advertising, purchasing, insurance, non-income taxes, accepting credit/debit cards, impairment charges, 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 to stores in cost of sales. Distribution and outbound transportation costs included in selling and administrative expenses were $81.8 million and $79.6 million for the third quarter of 2022 and the third quarter of 2021, respectively, and $245.8 million and $217.7 million for the year-to-date 2022 and the year-to-date 2021, respectively. 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 $20.9 million and $18.3 million for the third quarter of 2022 and the third quarter of 2021, respectively, and $64.3 million and $62.1 million for the year-to-date 2022 and the year-to-date 2021, respectively. Supplemental Cash Flow Disclosures The following table provides supplemental cash flow information for the year-to-date 2022 and the year-to-date 2021: Thirty-nine Weeks Ended (In thousands) October 29, 2022 October 30, 2021 Supplemental disclosure of cash flow information: Cash paid for interest $ 14,213 $ 5,167 Cash paid for income taxes, excluding impact of refunds 4,283 109,787 Gross proceeds from long-term debt 1,877,700 1,800 Gross payments of long-term debt 1,421,300 52,064 Cash paid for operating lease liabilities 276,919 251,671 Non-cash activity: Assets acquired under finance lease 3,859 260 Accrued property and equipment 26,210 22,491 Operating lease assets obtained in exchange for operating lease liabilities 200,669 294,327 Reclassifications 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. Recent Accounting Pronouncements |
