big-20240803

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 August 3, 2024

☐ 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.

(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 o

Accelerated filer þ

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 September 6, 2024, was 29,694,012.

Table of Contents

BIG LOTS, INC.

FORM 10-Q

FOR THE FISCAL QUARTER ENDED AUGUST 3, 2024

TABLE OF CONTENTS


		Page
Part I. Financial Information		2

Item 1.	Financial Statements (Unaudited)	2

a)	Condensed Consolidated Statements of Operations and Comprehensive Loss for the Thirteen and Twenty-six Weeks Ended August 3, 2024 and July 29, 2023	2

b)	Condensed Consolidated Balance Sheets at August 3, 2024 and February 3, 2024	3

c)	Condensed Consolidated Statements of Shareholders’ Equity /(Deficit) for the Thirteen and Twenty-six Weeks Ended August 3, 2024 and July 29, 2023	4

d)	Condensed Consolidated Statements of Cash Flows for the Thirteen and Twenty-six Weeks Ended August 3, 2024 and July 29, 2023	5

e)	Notes to Condensed Consolidated Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37

Item 4.	Controls and Procedures	37

Part II. Other Information		38

Item 1.	Legal Proceedings	38

Item 1A.	Risk Factors	38

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	43

Item 3.	Defaults Upon Senior Securities	43

Item 4.	Mine Safety Disclosures	43

Item 5.	Other Information	43

Item 6.	Exhibits	44

Signature		45

Table of Contents

Part I. Financial Information

Item 1. Financial Statements


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


	Thirteen Weeks Ended				Twenty-six Weeks Ended
	August 3, 2024		July 29, 2023		August 3, 2024		July 29, 2023
Net sales	$	1,046,552	$	1,139,361	$	2,055,664	$	2,262,938
Cost of sales (exclusive of depreciation expense shown separately below)	681,386		763,477		1,318,799		1,494,585
Gross margin	365,166		375,884		736,865		768,353
Selling and administrative expenses	553,725		460,082		1,086,729		1,080,947
Depreciation expense	33,254		41,282		64,805		77,864
Gain on sale of real estate	—		(3,393)		—		(7,192)
Operating loss	(221,813)		(122,087)		(414,669)		(383,266)
Interest expense	(16,295)		(11,175)		(28,284)		(20,324)
Other income (expense)	2		—		3		5
Loss before income taxes	(238,106)		(133,262)		(442,950)		(403,585)
Income tax expense (benefit)	350		116,575		541		52,325
Net loss and comprehensive loss	$	(238,456)	$	(249,837)	$	(443,491)	$	(455,910)

Earnings (loss) per common share
Basic	$	(8.04)	$	(8.56)	$	(15.04)	$	(15.67)
Diluted	$	(8.04)	$	(8.56)	(15.04)		$	(15.67)

Weighted-average common shares outstanding
Basic	29,642		29,175		29,496		29,096
Dilutive effect of share-based awards	—		—		—		—
Diluted	29,642		29,175		29,496		29,096

Cash dividends declared per common share	$	—	$	—	$	—	$	0.30

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

Table of Contents


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


	August 3, 2024		February 3, 2024
ASSETS
Current assets:
Cash and cash equivalents	$	53,480	$	46,411
Inventories	837,275		953,302
Other current assets	86,784		86,310
Total current assets	977,539		1,086,023
Operating lease right-of-use assets	1,425,327		1,637,845
Property and equipment - net	472,699		563,185
Deferred income taxes	—		—
Other assets	42,278		38,256
Total assets	$	2,917,843	$	3,325,309

LIABILITIES AND SHAREHOLDERS’ EQUITY/(DEFICIT)
Current liabilities:
Accounts payable	$	271,366	$	320,682
Current operating lease liabilities	243,036		242,384
Property, payroll, and other taxes	73,810		72,517
Accrued operating expenses	113,801		116,900
Current maturities of long-term debt obligations	569,550		—
Insurance reserves	29,849		33,458
Accrued salaries and wages	23,916		43,182
Income taxes payable	1,948		1,896
Total current liabilities	1,327,276		831,019
Long-term debt - net	—		406,271
Noncurrent operating lease liabilities	1,531,621		1,616,634
Deferred income taxes	459		459
Insurance reserves	57,384		57,384
Unrecognized tax benefits	5,510		5,223
Other liabilities	150,194		123,824
Shareholders’ equity/(deficit):
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 29,694 shares and 29,224 shares, respectively	1,175		1,175
Treasury shares - 87,801 shares and 88,271 shares, respectively, at cost	(3,069,326)		(3,092,046)
Additional paid-in capital	606,280		624,618
Retained earnings	2,307,270		2,750,748
Total shareholders’ equity/(deficit)	(154,601)		284,495
Total liabilities and shareholders’ equity/(deficit)	$	2,917,843	$	3,325,309

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

Table of Contents


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


	Common			Treasury			Additional Paid-In Capital		Retained Earnings
	Shares	Amount		Shares	Amount						Total
Thirteen Weeks Ended July 29, 2023
Balance - April 29, 2023	29,139	$	1,175	88,356	$	(3,095,791)	$	620,971	$	3,025,004	$	551,359
Comprehensive loss	—	—		—	—		—		(249,837)		(249,837)
Dividends declared ($0.00 per share)	—	—		—	—		—		119		119
Purchases of common shares	(6)	—		6	(49)		—		—		(49)
Restricted shares vested	59	—		(59)	2,061		(2,061)		—		—

Share-based compensation expense	—	—		—	—		4,437		—		4,437
Balance - July 29, 2023	29,192	$	1,175	88,303	$	(3,093,779)	$	623,347	$	2,775,286	$	306,029

Twenty-six Weeks Ended July 29, 2023
Balance - January 28, 2023	28,959	$	1,175	88,536	$	(3,105,175)	$	627,714	$	3,240,193	$	763,907
Comprehensive loss	—	—		—	—		—		(455,910)		(455,910)
Dividends declared ($0.30 per share)	—	—		—	—		—		(8,997)		(8,997)
Purchases of common shares	(134)	—		134	(1,466)		—		—		(1,466)
Restricted shares vested	367	—		(367)	12,862		(12,862)		—		—
Share-based compensation expense	—	—		—	—		8,495		—		8,495
Balance - July 29, 2023	29,192	$	1,175	88,303	$	(3,093,779)	$	623,347	$	2,775,286	$	306,029

Thirteen Weeks Ended August 3, 2024
Balance - May 4, 2024	29,515	$	1,175	87,980	$	(3,075,788)	$	610,330	$	2,545,724	$	81,441
Comprehensive loss	—	—		—	—		—		(238,456)		(238,456)
Dividends declared ($0.00 per share)	—	—		—	—		—		2		2
Purchases of common shares	(6)	—		6	(14)		—		—		(14)
Restricted shares vested	185	—		(185)	6,476		(6,476)		—		—


Share-based compensation expense	—	—		—	—		2,426		—		2,426
Balance - August 3, 2024	29,694	$	1,175	87,801	$	(3,069,326)	$	606,280	$	2,307,270	$	(154,601)

Twenty-six Weeks Ended August 3, 2024
Balance - February 3, 2024	29,224	$	1,175	88,271	$	(3,092,046)	$	624,618	$	2,750,748	$	284,495
Comprehensive loss	—	—		—	—		—		(443,491)		(443,491)
Dividends declared ($0.00 per share)	—	—		—	—		—		13		13
Purchases of common shares	(201)	—		201	(761)		—		—		(761)
Restricted shares vested	671	—		(671)	23,481		(23,481)		—		—
Share-based compensation expense	—	—		—	—		5,143		—		5,143
Balance - August 3, 2024	29,694	$	1,175	87,801	$	(3,069,326)	$	606,280	$	2,307,270	$	(154,601)

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

Table of Contents


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


	Twenty-six Weeks Ended
	August 3, 2024		July 29, 2023
Operating activities:
Net loss	$	(443,491)	$	(455,910)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense	66,519		79,216
Non-cash lease expense	122,991		178,890
Deferred income taxes	—		56,787
Non-cash impairment charge	167,337		84,389
Loss (gain) on disposition of property and equipment	1,259		(6,144)
Non-cash share-based compensation expense	5,143		8,495

Change in assets and liabilities:
Inventories	116,027		164,724
Accounts payable	(49,317)		(83,207)
Operating lease liabilities	(120,470)		(183,638)
Current income taxes	4,685		1,005
Other current assets	(7,365)		42
Other current liabilities	(26,495)		8,021
Other assets	(498)		(1,953)
Other liabilities	(917)		(1,328)
Net cash used in operating activities	(164,592)		(150,611)
Investing activities:
Capital expenditures	(24,606)		(29,998)
Cash proceeds from sale of property and equipment	1,754		9,630
Other	(2,255)		(10)
Net cash used in investing activities	(25,107)		(20,378)
Financing activities:
Net proceeds from 2022 Credit Agreement & 2024 Term Loan	168,029		191,800
Repayments of sale and leaseback financing	(1,685)		(1,517)
Proceeds from litigation financing arrangements	29,844		—
Payment of finance lease obligations	(1,302)		(1,356)
Dividends paid	(213)		(9,740)
Proceeds from other financing liabilities	13,593
Payments for other financing liabilities	(8,847)		(5,428)
Payment for treasury shares acquired	(761)		(1,466)
Payment for debt issuance cost	(1,890)		—
Net cash provided by financing activities	196,768		172,293
Increase in cash and cash equivalents	7,069		1,304
Cash and cash equivalents:
Beginning of period	46,411		44,730
End of period	$	53,480	$	46,034

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

Table of Contents


BIG LOTS, INC. AND SUBSIDIARIES Notes to Condensed 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 home discount retailer in the United States (“U.S.”). At August 3, 2024, we operated 1,389 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 condensed consolidated financial statements and these notes have been prepared in accordance with the rules and regulations of the SEC for interim financial information. The condensed 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 condensed 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, particularly as a result of the filing of the Chapter 11 Cases (as defined below). 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 condensed consolidated financial statements and these notes should be read in conjunction with the audited condensed consolidated financial statements and notes included in our Annual Report on Form 10-K for the fiscal year ended February 3, 2024 (“2023 Form 10-K”).

On September 9, 2024 (the “Petition Date”), we filed voluntary petitions for relief (collectively, the “Bankruptcy Petitions”) under chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”). The Bankruptcy Court has granted a motion seeking joint administration of the cases (the “Chapter 11 Cases”) under the caption In re: Big Lots, Inc., et al., Case No. 24-11967 (JKS). We expect to continue to manage our operations as a “debtor-in-possession” under the jurisdiction of the Bankruptcy Court, and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court. In general, as a debtor in-possession, we are authorized to continue to operate as an ongoing business but not to engage in transactions outside the ordinary course of business without the prior approval of the Bankruptcy Court. See Note 11 for additional information regarding the Chapter 11 Cases. See “Part II - Item 1A. Risk Factors” in this Quarterly Report on Form 10-Q for a discussion of certain risks presented by the Chapter 11 Cases.

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 2024 (“2024”) is comprised of the 52 weeks that began on February 4, 2024 and will end on February 1, 2025. Fiscal year 2023 (“2023”) was comprised of the 53 weeks that began on January 29, 2023 and ended on February 3, 2024. The fiscal quarters ended August 3, 2024 (“second quarter of 2024”) and July 29, 2023 (“second quarter of 2023”) were both comprised of 13 weeks. The year-to-date periods ended August 3, 2024 (“year-to-date 2024”) and July 29, 2023 (“year-to-date 2023”) were both comprised of 26 weeks.

Liquidity
The accompanying unaudited condensed consolidated financial statements are prepared in accordance with GAAP applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

The filing of the Bankruptcy Petitions constituted an event of default under the 2022 Credit Agreement and the 2024 Term Loan (each as defined in Note 2) which accelerated our obligations under those instruments. The 2022 Credit Agreement and the 2024 Term Loan provide that, as a result of the commencement of the Chapter 11 Cases, any principal amount, together with accrued interest thereon, are immediately due and payable. As such, substantially all of the Company’s debt, with balances of approximately $556.1 million in the aggregate as of the Petition Date, is in default and accelerated. However, any efforts to enforce the payment obligations under the 2022 Credit Agreement and the 2024 Term Loan and such other instruments and agreements are automatically stayed as a result of the Chapter 11 Cases, and the creditors’ rights of enforcement in respect of the 2022 Credit Agreement and the 2024 Term Loan and such other instruments and agreements are subject to the applicable

Table of Contents

provisions of the Bankruptcy Code. As a result of the foregoing acceleration event, all of our outstanding indebtedness has been classified as current debt in the accompanying condensed consolidated balance sheet of the Company as of August 3, 2024.

The uncertainties associated with the Chapter 11 Cases raise substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is contingent upon, among other things, our ability to, subject to the approval by the Bankruptcy Court, implement a plan of reorganization, successfully emerge from bankruptcy as a new company and generate sufficient liquidity following our emergence from bankruptcy to meet our liquidity needs. Most of these steps are outside of our management’s control and, as a result, at this stage management’s plans do not alleviate substantial doubt about the Company's ability to continue as a going concern.

The accompanying condensed consolidated financial statements do not include any adjustments that may result from the outcome of the uncertainties referenced above.

Additionally, we cannot provide any assurance that our shareholders will receive any recovery from the Chapter 11 Cases. As a result, we expect that trading in the Company’s common shares during the pendency of the Chapter 11 Cases will be highly speculative and pose substantial risks. Trading prices for the Company’s common shares may bear little or no relationship to the actual recovery, if any, by holders of the Company’s common shares in the Chapter 11 Cases. The Company expects that holders of the Company’s common shares will not receive a recovery through any plan of reorganization unless the holders of more senior claims and interests, such as secured and unsecured indebtedness (which is currently trading at a significant discount), are paid in full. Consequently, there is a significant risk that the holders of the Company’s common shares would receive no recovery under the Chapter 11 Cases and that the Company’s common shares will be worthless. Accordingly, the Company urges extreme caution with respect to existing and future investments in its common shares.

Long-Lived Assets

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, which may include market comparative information for similar properties. In the second quarter of 2024, the Company announced the closure of 296 stores in the third quarter of 2024 as part of its strategy to aggressively pursue operating expense and capital outlay reductions. In relation to these stores, the Company recognized accelerated right-of-use asset amortization of $9.3 million and accelerated depreciation expense of $2.8 million as a result of changing the estimated useful life of the store long-lived assets based on the estimated closure date.

During the second quarter of 2024, the Company recorded aggregate asset impairment charges of $99.2 million related to 241 store locations, which were comprised of $84.0 million of operating lease right-of-use assets and $16.8 million of property and equipment - net, partially offset by gains on extinguishment of lease liabilities from lease cancellations of previously impaired stores of $1.6 million. The asset impairment charges were recorded within selling and administrative expenses in our condensed consolidated statements of operations and comprehensive loss. Of the aggregate asset impairment charges recorded in the second quarter of 2024, $98.5 million related to the store closures planned for the third quarter of 2024. In the second quarter of 2023, the Company recorded no asset impairment charges.

In the year-to-date 2024, the Company recorded aggregate asset impairment charges of $167.4 million related to 344 underperforming store locations, which were comprised of $128.1 million of operating lease right-of-use assets and $40.9 million of property and equipment - net partially offset by gains on extinguishment of lease liabilities from lease cancellations of previously impaired stores of $1.6 million. The asset impairment charges were recorded within selling and administrative expenses in our condensed consolidated statements of operations and comprehensive loss. Of the aggregate asset impairment charges recorded in the year to date 2024, $145.0 million were related to the store closures planned for the third quarter of 2024.

A significant decline in our financial performance could negatively affect the results of our assessments of the recoverability of our property and equipment-net and operating lease right-of-use assets and estimated fair value at the store level, resulting in future asset impairment charges.

In the year-to-date 2023, the Company recorded aggregate asset impairment charges of $82.9 million related to 237 underperforming store locations, which were comprised of $62.1 million of operating lease right-of-use assets, $22.3 million of property and equipment - net, partially offset by a gain on extinguishment of a lease liability resulting from a lease cancellation of a previous impaired store of $1.5 million. The asset impairment charges were recorded in selling and administrative expenses in our condensed consolidated statements of operations and comprehensive loss.

Table of Contents

In the year-to-date 2023, the Company completed the sale of two owned store locations that were classified as held for sale at the end of fiscal 2022 with an aggregate net book value of $2.2 million. The net cash proceeds on the sale of real estate were $9.3 million and resulted in a gain after related expenses of $7.2 million.

Fair Value of Financial Instruments

The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy, as defined below, gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs.

Level 1, defined as observable inputs such as unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2, defined as observable inputs other than Level 1 inputs. These include quoted prices for similar assets or liabilities in an active market, quoted prices for identical assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

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

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 $72.6 million and $63.8 million for the second quarter of 2024 and the second quarter of 2023, respectively, and $147.9 million and $204.1 million for the year-to-date 2024 and year-to-date 2023, respectively. Distribution and outbound transportation costs in the second quarter of 2023 included $2.0 million of closing costs associated with the closure of our forward distribution centers (“FDCs”). Distribution and outbound transportation costs in the year-to-date 2023 included $10.6 million of FDC closing costs and $53.6 million of costs related to the exit from our Prior Synthetic Lease.

Advertising Expense

Advertising costs, which are expensed as incurred, consist primarily of television, 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 $9.8 million and $19.4 million for the second quarter of 2024 and the second quarter of 2023, respectively, and $33.9 million and $44.3 million for the year-to-date 2024 and year-to-date 2023, respectively.

Supplemental Cash Flow Disclosures

The following table provides supplemental cash flow information for the year-to-date 2024 and the year-to-date 2023:

Table of Contents


	Twenty-six Weeks Ended
(In thousands)	August 3, 2024		July 29, 2023
Supplemental disclosure of cash flow information:
Cash paid for interest	$	27,208	$	17,992
Cash paid for income taxes, excluding impact of refunds	675		570
Gross proceeds from the 2022 Credit Agreement	762,000		910,500
Gross proceeds from the 2024 Term Loan, excluding debt issuance costs	115,000		—
Gross payments of debt under 2022 Credit Agreement	708,800		718,700



Cash paid for operating lease liabilities	184,987		241,652
Non-cash activity:
Assets acquired under finance lease	—		6,680
Accrued property and equipment	10,188		8,653
Deemed acquisition in “failed sale-leaseback transaction”	—		100,000
Operating lease assets obtained in exchange for operating lease liabilities	34,552		112,743
Valuation allowance on deferred tax assets	—		147,850

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

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures, which updates reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses. The amendments are effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The amendments should be applied retrospectively to all prior periods presented in the financial statements. Management is currently evaluating this ASU to determine its impact on the Company's disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which expands the requirements for income tax disclosures in order to provide greater transparency. The amendments are effective for fiscal years beginning after December 15, 2024. Early adoption is permitted. The amendments should be applied prospectively. Management is currently evaluating this ASU to determine its impact on the Company's disclosures.

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

Table of Contents

NOTE 2 – DEBT

The filing of the Bankruptcy Petitions constituted an event of default under the 2022 Credit Agreement and the 2024 Term Loan (each as defined below) which accelerated our obligations under those instruments. The 2022 Credit Agreement and the 2024 Term Loan provide that, as a result of the commencement of the Chapter 11 Cases, any principal amount, together with accrued interest thereon, are immediately due and payable. As such, substantially all of the Company’s debt, with balances of approximately $556.1 million in the aggregate as of the Petition Date, is in default and accelerated. However, any efforts to enforce the payment obligations under the 2022 Credit Agreement and the 2024 Term Loan and such other instruments and agreements are automatically stayed as a result of the Chapter 11 Cases, and the creditors’ rights of enforcement in respect of the 2022 Credit Agreement and the 2024 Term Loan and such other instruments and agreements are subject to the applicable provisions of the Bankruptcy Code. As a result of the foregoing acceleration event, all of the Company’s outstanding indebtedness has been classified as current debt in the accompanying condensed consolidated balance sheet as of August 3, 2024. See Note 11 for additional information regarding the Chapter 11 Cases, including a summary of the DIP Facilities (as defined in Note 11) that we entered into in connection with the Chapter 11 Cases.

As of August 3, 2024, the Company was in full compliance with the provisions and covenants associated with the debt agreements referenced below.

Bank Credit Facility

On September 21, 2022, we entered into a five-year asset-based revolving credit facility (as amended, the “2022 Credit Agreement”) in an aggregate committed amount of up to $900 million (the “Commitments”) that expires on September 21, 2027. In connection with our entry into the 2022 Credit Agreement, we paid bank fees and other expenses in the aggregate amount of $3.4 million, which are being amortized over the term of the 2022 Credit Agreement.

On April 18, 2024, concurrent with our entry into the 2024 Term Loan (as defined below), the Company entered into the First Amendment to the 2022 Credit Agreement (the “First ABL Amendment”). The First ABL Amendment amended the 2022 Credit Agreement to, among other things, (1) permit the 2024 Term Loan, (2) expand the scope of collateral to include non-working capital assets and a mortgage on the Company’s corporate headquarters located in Columbus, Ohio, (3) revise the borrowing base formula to include the Term Loan Pushdown Reserve (as defined below), (4) increase the interest rate spreads and replace CDOR with CORRA, (5) replace the fixed charge coverage ratio covenant with the Excess Availability Covenant (as defined below), and (6) make other changes to the 2022 Credit Agreement to conform with the 2024 Term Loan. In connection with our entry into the First ABL Amendment, we paid bank fees and other expenses in the aggregate amount of $2.2 million, which are being amortized over the term of the 2022 Credit Agreement. The bank fees and other expenses related to the First ABL Amendment and the remaining unamortized fees from the 2022 Credit Agreement are recorded within other assets on the condensed consolidated balance sheets.

On July 31, 2024, the Company entered into the Second Amendment to the 2022 Credit Agreement (the “Second ABL Amendment”). The Second ABL Amendment amended the 2022 Credit Agreement to, among other things, (1) increase the number of permitted store closings from 150 to 315, (2) reduce the Commitments from $900 million to $800 million, (3) increase the interest rate applicable to borrowings under the 2022 Credit Agreement by 50 bps and (4) require the Company to deliver certain additional reports to the lenders. In connection with our entry into the Second ABL Amendment, we paid bank fees and other expenses in the aggregate amount of $0.5 million, which are being amortized over the term of the 2022 Credit Agreement. In connection with the Second ABL Amendment the Company expensed $0.5 million of previously capitalized debt issuance costs, proportionate with the reduction in aggregate commitments. The bank fees and other expenses related to the Second ABL Amendment and the remaining unamortized fees from the 2022 Credit Agreement and First ABL Amendment are recorded within other assets on the condensed consolidated balance sheets.

Revolving loans under the 2022 Credit Agreement are available in an aggregate amount equal to the lesser of (1) the aggregate Commitments and (2) a borrowing base consisting of eligible credit card receivables and eligible inventory (including in-transit inventory), subject to customary exceptions and reserves, including the Term Loan Pushdown Reserve (the “ABL Borrowing Base”). Under the 2022 Credit Agreement, we may obtain additional Commitments on no more than five occasions in an aggregate amount of up to $300 million, subject to agreement by the lenders to increase their respective Commitments and certain other conditions. The 2022 Credit Agreement includes a swing loan sublimit of 10% of the then applicable aggregate Commitments and a $90 million letter of credit sublimit. The 2022 Credit Agreement requires mandatory prepayments in connection with the incurrence of certain additional debt, certain issuances of additional equity and the receipt of certain extraordinary receipts, subject to certain exceptions. Loans made under the 2022 Credit Agreement may be prepaid without penalty. Borrowings under the 2022 Credit Agreement are available for general corporate purposes, working capital and to repay certain of our indebtedness as of closing. Our obligations under the 2022 Credit Agreement are guaranteed by the Loan

Table of Contents

Parties (as defined below)(other than the Borrowers (as defined below)) and are secured by (a) a first priority lien on substantially all of the Loan Parties’ working capital assets, including credit card receivables and inventory, and (b) a second priority lien on substantially all of the Loan Parties’ non-working capital personal property assets, including fixtures, machinery, equipment, and intellectual property, and a second priority mortgage on the Company’s corporate headquarters located in Columbus, Ohio, in each case subject to certain permitted liens. The pricing and certain fees under the 2022 Credit Agreement fluctuate based on our borrowing availability under the 2022 Credit Agreement. The 2022 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, adjusted daily simple SOFR or one, three or six month adjusted Term SOFR. We will also pay an unused commitment fee of 0.20% per annum on the unused Commitments. The 2022 Credit Agreement contains an environmental, social and governance (“ESG”) provision, which may provide favorable pricing and fee adjustments if we meet ESG performance criteria to be established by a future amendment to the 2022 Credit Agreement.

The 2022 Credit Agreement contains customary affirmative and negative covenants (including, where applicable, restrictions on our ability to, among other things, incur additional indebtedness, pay dividends, redeem or repurchase stock, prepay certain indebtedness, make certain loans and investments, dispose of assets, enter into restrictive agreements, engage in transactions with affiliates, modify organizational documents, incur liens and consummate mergers and other fundamental changes) and events of default, including a cross default to other material indebtedness. The 2022 Credit Agreement also contains customary events of default that include, among other things, non-payment defaults, inaccuracy of representations and warranties defaults, covenant defaults, cross default to material indebtedness, bankruptcy and insolvency defaults, material judgment defaults, ERISA defaults, structural defaults under the loan documents and a change of control default. Under certain circumstances, a default interest rate will apply on any amount payable under the 2022 Credit Agreement during the existence of an event of default at a per annum rate equal to 2.00% above the applicable interest rate for any principal and 2.00% above the rate applicable for base rate loans for any other interest. In addition, the 2022 Credit Agreement requires us to maintain minimum excess availability (“Excess Availability Covenant”) of at least the greater of (i) $80.0 million or (ii) 10% of the lesser of the aggregate Commitments under the 2022 Credit Agreement (currently $800.0 million) and the ABL Borrowing Base (without giving effect to the Term Loan Pushdown Reserve). The Chapter 11 Cases further described in Note 11 constituted an event of default and accelerated our obligations under the 2022 Credit Agreement.

The fair values of our obligations under the 2022 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. We believe the carrying value of our debt is a reasonable approximation of fair value.

Term Loan Facility

On April 18, 2024, the Company entered into a credit agreement (the “2024 Term Loan”) among the Company and Big Lots Stores, LLC, as borrowers (the “Borrowers”), all other domestic subsidiaries of the Company, as guarantors (together with the Borrowers, the “Loan Parties”), 1903P Loan Agent, LLC (the “Term Loan Agent”), as administrative agent and collateral agent, and the other lenders named therein. The 2024 Term Loan provides for a “first in, last out” delayed draw 2024 Term Loan in an aggregate committed amount of up to $200 million (the “2024 Term Loan Commitments”). At commencement of the 2024 Term Loan, the Company drew down $50 million in total borrowings under the 2024 Term Loan.

On July 31, 2024, the Company entered into the First Amendment to the 2024 Term Loan (“Term Loan Amendment”). The Term Loan Amendment amends the 2024 Term Loan to, among other things, (1) increase the number of permitted store closings from 150 to 315, (2) require all additional borrowings under the 2024 Term Loan to be made in accordance with an Approved Budget (as defined in the Term Loan Amendment) and (3) require the Company to deliver certain additional reports to the lenders. In connection with our entry into the Term Loan Amendment, we paid fees and other expenses in the aggregate amount of $0.3 million, which are being amortized over the term of the 2024 Term Loan. The fees and other expenses related to the Term Loan Amendment and the remaining unamortized fees from the 2024 Term Loan Agreement are recorded as deferred financing costs and presented within net outstanding borrowings under the 2024 Term Loan on the condensed consolidated balance sheets.

Loans under the 2024 Term Loan are available in an aggregate amount equal to the lesser of (1) the aggregate 2024 Term Loan Commitments and (2) a borrowing base calculated based on specified percentages of eligible inventory, credit card receivables, real estate, fixtures, machinery and equipment, subject to customary exceptions and reserves (the “Term Loan Borrowing Base”). If at any time the amounts borrowed under the 2024 Term Loan exceed the Term Loan Borrowing Base, the Company is required to maintain a reserve against the ABL Borrowing Base in an amount equal to such excess (the “Term Loan Pushdown Reserve”). Borrowings under the 2024 Term Loan are available for general corporate purposes, working capital and to repay a portion of our indebtedness outstanding under the 2022 Credit Agreement.

Table of Contents

The 2024 Term Loan requires mandatory prepayments in connection with certain sales or dispositions of assets, the incurrence of certain additional debt, certain issuances of additional equity, the receipt of certain extraordinary receipts, subject to certain exceptions and, in the case of certain sales or other dispositions, reinvestment rights. Some mandatory prepayments are subject to a prepayment fee. Subject to compliance with applicable provisions and tests under the 2022 Credit Agreement, voluntary prepayments under the 2024 Term Loan are permitted at any time upon proper notice and, in certain instances, a prepayment fee. The 2024 Term Loan also contains customary events of default that include, among other things, non-payment defaults, inaccuracy of representations and warranties defaults, covenant defaults, cross default to material indebtedness, bankruptcy and insolvency defaults, material judgment defaults, ERISA defaults, structural defaults under the loan documents and a change of control default. The occurrence of an event of default could result in the acceleration of our obligations under the 2024 Term Loan. Under certain circumstances, a default interest rate will apply on any amount payable under the 2024 Term Loan during the existence of an event of default at a per annum rate equal to 2.00% above the applicable interest rate for any principal and 2.00% above the rate applicable for base rate loans for any other interest. The Chapter 11 Cases further described in Note 11 constituted an event of default and accelerated our obligations under the 2024 Term Loan.

Amounts borrowed under the 2024 Term Loan bear interest at a variable rate indexed to SOFR plus a pricing margin ranging from 9.25% to 10.00% per annum based on our total borrowings under the 2024 Term Loan. Interest payments under the 2024 Term Loan are due on the first day of each calendar month. As of August 3, 2024, the interest rate on the outstanding 2024 Term Loan borrowings was 14.6%.

The 2024 Term Loan requires the Borrowers to satisfy the Excess Availability Covenant. In addition, the 2024 Term Loan contains customary covenants and restrictions on the Company’s and its subsidiaries’ activities, including, but not limited to, limitations on the incurrence of additional indebtedness, liens, negative pledges, guarantees, investments, loans, asset sales, mergers, acquisitions, prepayment of other debt, distributions, dividends, the repurchase of capital stock, transactions with affiliates, the ability to change the nature of its business or its fiscal year, and permitted activities of the Company.

All obligations under the 2024 Term Loan are guaranteed by the Loan Parties (other than the Borrowers) and secured by (a) a second priority lien on substantially all of the Loan Parties’ working capital assets, including credit card receivables and inventory, and (b) a first priority lien on substantially all of the Loan Parties’ non-working capital personal property assets, including fixtures, machinery, equipment, and intellectual property, and a first priority mortgage on the Company’s corporate headquarters located in Columbus, Ohio, in each case, subject to certain permitted liens.

The Company recorded deferred financing costs associated with the issuance and amendment of the 2024 Term Loan. As of August 3, 2024, the debt financing costs associated with the 2024 Term Loan were $4.9 million and had unamortized costs of $4.5 million. These costs will be amortized over the respective contractual term of the 2024 Term Loan. The aggregate outstanding principal amount of the 2024 Term Loan is presented on the condensed consolidated balance sheets, net of unamortized costs.

The fair values of our obligations under the 2024 Term Loan 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. We believe the carrying value of our debt is a reasonable approximation of fair value.

As of August 3, 2024, we had a combined borrowing base under the 2022 Credit Agreement and 2024 Term Loan of $779.3 million.

Secured Insurance Premium Financing Obligation

In the second quarter of 2023, we entered into three individual financing agreements (“2023 Term Notes”) in an aggregate amount of $16.2 million, which were secured by unearned prepaid insurance premiums. The 2023 Term Notes were paid in full as of May 4, 2024. The 2023 Term Notes carried annual interest rates ranging from 7.1% to 8.5%. The Company did not receive any cash in connection with its entry into the 2023 Term Notes.

In the second quarter of 2024, we entered into four individual financing agreements (“2024 Term Notes”) in an aggregate amount of $13.6 million, which are secured by our unearned insurance premiums. The 2024 Term Notes will expire between January 2025 and May 2025. We are required to make monthly payments over the term of the 2024 Term Notes and are permitted to prepay, subject to penalties, at any time. The 2024 Term Notes carry annual interest rates ranging from 8.0% to 8.5%. The Company did not receive any cash in connection with the 2024 Term Notes.

In 2023, we entered into an immaterial financing arrangement for server and software equipment, which is included within the 2023 Term Notes balance noted within the table below.

Table of Contents

Debt was recorded in our condensed consolidated balance sheets as follows:


Instrument (In thousands)	August 3, 2024		February 3, 2024
2022 Credit Agreement	$	459,300	$	406,100
2024 Term Loan	115,000		—
2024 Term Notes	7,574		—
2023 Term Notes	361		3,021
Total debt	582,235		409,121
Less: Unamortized debt issuance costs related to the 2024 Term Loan	(4,468)		—
Less: Current portion of long-term maturities	(577,767)		(2,850)
Total Long-term debt - net	—		$	406,271

NOTE 3 – SYNTHETIC LEASE

Synthetic Lease

The 2023 Synthetic Lease (as defined below) related to our Apple Valley, CA distribution center was terminated and paid off on August 25, 2023 in connection with the closing of the sale and leaseback transactions that took place in the third quarter of 2023.

On March 15, 2023, AVDC, LLC (“Lessee”), a wholly-owned indirect subsidiary of the Company, Bankers Commercial Corporation (“Lessor”), the rent assignees parties thereto (“Rent Assignees” and, together with Lessor, “Participants”), MUFG Bank, Ltd., as collateral agent for the Rent Assignees (in such capacity, “Collateral Agent”), and MUFG Bank, Ltd., as administrative agent for the Participants, entered into a Participation Agreement (the “Participation Agreement”), pursuant to which the Participants funded $100 million to Wachovia Service Corporation (“Prior Lessor”) to finance Lessor’s purchase of the land and building related to our Apple Valley, CA distribution center (“Leased Property”) from the Prior Lessor.

Also on March 15, 2023, we entered into a Lease Agreement and supplement to the Lease Agreement (collectively, the “Lease” and together with the Participation Agreement and related agreements, the “2023 Synthetic Lease”) pursuant to which the Lessor agreed to lease the Leased Property to Lessee for an initial term of 60 months. The Lease could have been extended for up to an additional five years, in one-year or longer annual periods, with each renewal subject to approval by the Participants. The 2023 Synthetic Lease required Lessee to pay basic rent on the scheduled payment dates in arrears in an amount equal to (a) a per annum rate equal to Term SOFR for the applicable payment period plus a 10 basis point spread adjustment plus an applicable margin equal to 250 basis points multiplied by (b) the portion of the lease balance not constituting the investment by Lessor in the Leased Property. In addition to basic rent, Lessee was required to pay all costs and expenses associated with the use or occupancy of the Leased Property, including without limitation, maintenance, insurance and certain indemnity payments. GAAP treatment of the synthetic lease refinancing transaction required us to treat the assignment of the purchase option from Prior Lessor to Lessor as a deemed acquisition of the Leased Property due to the Company’s control of the Leased Property under GAAP at the time the assigned purchase option was exercised. Accordingly, the Company applied sale and leaseback accounting to the transfer of the property from the Prior Lessor to the Lessor. The transaction met the criteria of a “failed sale-leaseback” under GAAP, which required us to record an asset for the deemed acquisition and an equivalent financing liability that represents the cost to acquire the Leased Property. Subsequently, following the sale and leaseback transactions that took place in the third quarter of 2023, the balances related to the “failed sale-leaseback” were removed.

Concurrently with Lessor’s purchase of the Leased Property from Prior Lessor, the participation agreement and lease agreement associated with our former synthetic lease arrangement, in each case entered into on November 30, 2017, and most recently amended on September 21, 2022 (the “Prior Synthetic Lease”), were terminated effective on March 15, 2023. In connection with the termination of the Prior Synthetic Lease, the Company paid a termination fee of approximately $53.4 million to Prior Lessor using borrowings under the 2022 Credit Agreement. As a result of the termination of the Prior Synthetic Lease, the ABL Borrowing Base is no longer subject to a reserve for the outstanding balance under the Prior Synthetic Lease.

NOTE 4 – SHAREHOLDERS’ EQUITY/(DEFICIT)

Earnings per Share

No adjustments were required to be made to our weighted-average common shares outstanding for purposes of computing basic and diluted earnings per share for all periods presented. At August 3, 2024, performance share units that vest based on a relative

Table of Contents

total shareholder return (“TSR PSUs” see Note 5 for a more detailed description of these awards), shareholder value creation awards (“SVCA PSUs” - see

SEC Form 10-Q filed by Big Lots Inc.