8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

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

Date of Report (Date of earliest event reported): August 17, 2005

BIG LOTS, INC.

(Exact name of registrant as specified in its charter)

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

300 Phillipi Road, Columbus, Ohio 43228
(Address of principal executive office) (Zip Code)

(614) 278-6800
(Registrant’s telephone number, including area code)

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

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

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

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

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

TABLE OF CONTENTS

EX-10.1

EX-10.3

EX-99.1

EX-99.2

Item 1.01 Entry into a Material Definitive Agreement.

In connection with his planned retirement, Kent Larsson, Senior Vice President of Marketing, entered into an employment agreement (the “Employment Agreement”) with Big Lots, Inc. (the “Company”) on August 17, 2005. The Employment Agreement replaces Mr. Larsson’s prior employment agreement dated February 1, 2004 (the “Prior Agreement”). The Employment Agreement is intended to assure the Company that it will have the dedication, undivided loyalty, and objective advice and counsel from Mr. Larsson. The Employment Agreement requires that Mr. Larsson devote his full business time to the affairs of the Company and prohibits him from competing with the Company during his employment and for a one-year period thereafter. The non-competition period is reduced to six months in the event that Mr. Larsson’s employment is terminated following a Change of Control, as such term is defined in the Employment Agreement.

Under the terms of the Employment Agreement, Mr. Larsson is entitled to receive an annual base salary of $350,000, which amount is not subject to an automatic increase. An annual bonus is not payable under the Employment Agreement unless the Company achieves a minimum threshold of its performance targets for the applicable fiscal year. For fiscal 2005, Mr. Larsson’s bonus is subject to a maximum of 100.0% of his annual base salary. The Nominating and Compensation Committee (the “Committee”) of the Company’s Board of Directors annually reviews the performance of the Company’s executive officers to determine whether their respective base salaries and/or bonus targets should be adjusted; provided, however, that Mr. Larsson’s base salary and bonus opportunity may not be reduced below the levels established in the Employment Agreement without his consent.

The Employment Agreement provides that Mr. Larsson may be terminated by the Company at any time for Cause, as such term is defined in the Employment Agreement, or without Cause beginning on September 1, 2006. If Mr. Larsson is terminated for Cause, the Company has no further obligation to pay any compensation or to provide benefits to Mr. Larsson. Should Mr. Larsson be terminated without Cause, he will become entitled to receive continued salary payments and benefits for twenty-eight weeks following termination and will receive a pro rata bonus (if a bonus is earned) for the fiscal year in which the termination occurs. The Employment Agreement also provides that in the event Mr. Larsson is terminated in connection with a Change of Control, he will receive a lump sum payment (net of any applicable withholding taxes) in an amount equal to 200% of his annual base salary and 200% of his maximum annual bonus opportunity, and will be entitled to receive certain plan benefits for two years. A Change of Control would also cause Mr. Larsson to receive a payment in the amount necessary to hold him harmless from the effects of Section 280G and 4999 of the Internal Revenue Code, which sections could subject the payments due under the Employment Agreement to excise tax liability. The compensation payable on account of a Change of Control may be subject to the deductibility limitations of Sections 162(m) and 280G of the Internal Revenue Code.

This summary is qualified in its entirety by reference to the full text of Mr. Larsson’s Employment Agreement attached as Exhibit 10.1 to this Form 8-K.

Additionally, on August 16, 2005, the Nominating and Compensation Committee of the Company’s Board of Directors amended the Big Lots, Inc. 1996 Performance Incentive Plan (“1996 Incentive Plan”). The amendment had the effect of limiting the maximum number of the Company’s common shares that may be issued as restricted stock, stock equivalent units and performance units issued on or after May 18, 2005. This amendment was made as a result of the Company’s shareholders’ approval of Big Lots 2005 Incentive Plan at the 2005 Annual Meeting of Shareholders.

This summary is qualified in its entirety by reference to the full text of the amendment attached as Exhibit 10.3 to this Form 8-K.

Item 1.02 Termination of a Material Definitive Agreement.

In connection with his planned retirement and contemporaneous with the Employment Agreement becoming effective, Mr. Larsson and the Company terminated the Prior Agreement. The terms of the Prior Agreement were substantially similar to the Employment Agreement, except that beginning on September 1, 2006, Mr. Larsson’s employment may be terminated by the Company without cause and Mr. Larsson will be entitled to receive his base salary for twenty-eight weeks, as opposed to the twelve months provided for under the Prior Agreement. The Prior Agreement is incorporated by reference to Exhibit 10(q) from the Company’s Annual Report on Form 10-K for the year ended January 31, 2004. The summary of the Prior Agreement is qualified in its entirety by reference to Exhibit 10.2 of this Form 8-K.

Item 2.02 Results of Operations and Financial Condition.

On August 17, 2005, the Company issued a press release and conducted a conference call, both of which reported the Company’s unaudited second quarter results. The press release and conference call both included “non-GAAP financial measures” as that term is

defined by Rule 101 of Regulation G (17 CFR Part 244) and Item 10 of Regulation S-K (17 CFR Part 229). Specifically, the following non-GAAP financial measures were included: (i) adjusted selling and administrative expenses; (ii) adjusted operating profit (loss); (iii) adjusted income (loss) before income taxes; (iv) adjusted income tax expense (benefit); (v) adjusted net income (loss); and (vi) adjusted income (loss) per common share — basic and diluted.

These non-GAAP financial measures exclude from the most directly comparable financial measures calculated and presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”) an after-tax charge to continuing operations of $3.8 million related to the partial charge-off of a note received when the Company sold KB Toys in December 2000. As required by Rule 100 of Regulation G and Item 10 of Regulation S-K, the press release, which was posted on the Company’s website and referred to during the conference call, contained a presentation of the most directly comparable financial measures calculated and presented in accordance GAAP and a reconciliation of the differences between the non-GAAP financial measures and the most directly comparable financial measures calculated and presented in accordance with GAAP.

The Company’s management believes that the disclosure of these non-GAAP financial measures provides useful information to investors because the non-GAAP financial measures present an alternative and more relevant method for measuring the Company’s operating performance, excluding special items included in the most directly comparable GAAP financial measures, that management believes is more indicative of the Company’s on-going operating results and financial condition. The Company’s management uses these non-GAAP financial measures, along with the most directly comparable GAAP financial measures, in evaluating the Company’s operating performance and as a measure of performance for incentive compensation purposes.

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

Attached as exhibits to this Form 8-K are copies of the Company’s August 17, 2005 press release (Exhibit 99.1) and the transcript of the Company’s August 17, 2005 conference call (Exhibit 99.2), including information concerning forward-looking statements and factors that may affect the Company’s future results. The information in Exhibits 99.1 and 99.2 is being furnished, not filed, pursuant to Item 2.02 of this Form 8-K. By furnishing the information in this Form 8-K and the attached exhibits, the Company is making no admission as to the materiality of any information in this Form 8-K or the exhibits.

Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

As previously disclosed, the Company’s $500 million five-year unsecured credit facility dated October 29, 2004 (the “2004 Credit Agreement”) provides the Company with access to revolving loans and includes a $30 million swing loan sub-limit, a $50 million bid loan sub-limit, and a $150 million letter of credit sub-limit. At August 17, 2005, the total indebtedness under the 2004 Credit Agreement was $232.3 million, comprised of $150.0 million in revolving credit loans, $15.6 million in swing loans, no bid loans, and $66.7 million in letters of credit. The Company expects borrowings and letters of credit through early-September 2005 to range between $230.0 million and $265.0 million. Given the seasonality of the Company’s business, the amount of borrowings under the 2004 Credit Agreement may fluctuate materially depending on various factors, including the time of year and the Company’s need to acquire merchandise inventory.

The 2004 Credit Agreement permits, at the Company’s option, borrowings at various interest rate options based on the prime rate or London Interbank Offering Rate plus applicable margin. The 2004 Credit Agreement also permits, as applicable, borrowings at various interest rate options mutually agreed upon by the Company and the lenders. The weighted average interest rate of the outstanding loans at August 17, 2005 was 4.19%. The Company typically repays and/or borrows on a daily basis in accordance with the terms of the 2004 Credit Agreement. The daily activity is a net result of the Company’s liquidity position which is affected by (i) cash inflows such as store cash, credit card settlements, and other miscellaneous deposits, and (ii) cash outflows such as check clearings, wire and other electronic transactions, and other miscellaneous disbursements.

The 2004 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. A violation of these covenants could result in a default under the 2004 Credit Agreement which would permit the lenders to restrict the Company’s ability to further access the 2004 Credit Agreement for loans and letters of credit, and require the immediate repayment of any outstanding loans under the 2004 Credit Agreement.

Item 9.01 Financial Statements and Exhibits.

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

Exhibit No.	Description
10.1*	Employment Agreement with Kent Larsson dated August 17, 2005.
10.2	Employment Agreement with Kent Larsson dated February 1, 2004 (Exhibit 10(q) to the Company’s Annual Report on Form 10-K for the year ended January 31, 2004, and incorporated herein by reference).
10.3*	Amendment to the Big Lots, Inc. 1996 Performance Incentive Plan.
10.4	Big Lots, Inc. 1996 Performance Incentive Plan (Exhibit 10 to the Company’s Post-Effective Amendment No. 1 to Form S-8 Registration Statement Under the Securities Act of 1933, and incorporated herein by reference).
99.1*	Big Lots, Inc. press release dated August 17, 2005.
99.2*	Transcript of Big Lots, Inc. conference call dated August 17, 2005.

Signature

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

	BIG LOTS, INC.
Dated: August 22, 2005	By:	/s/ Charles W. Haubiel II
		Charles W. Haubiel II
		Senior Vice President, General Counsel and Corporate Secretary

EX-10.1

Exhibit 10.1

EMPLOYMENT AGREEMENT
BY AND AMONG
BIG LOTS, INC.,
BIG LOTS STORES, INC.
AND
KENT LARSSON

This employment agreement (“Agreement”) by and among Big Lots, Inc. (“BLI”), Big Lots Stores, Inc. (“Big Lots”) and their affiliates, predecessor, successor, subsidiaries and other related companies (collectively the “Company”) and Kent Larsson (“Executive”), collectively, the “Parties,” is effective as of August 17, 2005 (“Effective Date”) and supersedes and replaces [1] any other oral or written agreement or understanding concerning the terms of the Executive’s employment with the Company including Executive’s Employment Agreement dated March 29, 2004, but does not supersede or replace [2] any agreement or arrangement between the Executive or any Group Member (as defined in Section 4.02[1]) relating to the payment of compensation or benefits earned (or deemed earned) on account of services performed for a Group Member before the Effective Date.

1.00 Duration

This Agreement will remain in effect from the Effective Date until it terminates as provided in Section 5.00 (“Term”). Any notice of termination required to be given under this Agreement must be given as provided in Section 6.00 and will be effective on the date prescribed in Section 5.00.

2.00 Executive’s Employment Function

2.01 Position. The Executive agrees to serve the Company in an executive capacity. The Executive agrees at all times to observe and to be bound by all Company rules, policies, practices, procedures and resolutions which apply to Company employees with a similar title and position and which do not conflict with the specific terms of this Agreement.

2.02 Place of Performance. Unless the Company requires the Executive to perform duties at another location, the Executive’s duties will be performed principally in Columbus, Ohio, except for travel on the business of any Group Member.

3.00 Compensation

The Company will pay the Executive the amounts described in Sections 3.00 and 5.00 as compensation for the services described in this Agreement and in exchange for the duties and responsibilities described in Section 4.00.

3.01 Base Salary. The Company will pay to the Executive an annualized base salary of $350,000, which, at the discretion of the Company, may be adjusted from time to time in a manner that is consistent with the Company’s compensation policies in effect for Company employees with a similar title and position (“Base Amount”) but may not be adjusted to any amount lower than $350,000 without the Executive’s consent. The Executive’s Base Salary will be paid in installments that correspond with the Company’s normal payroll practices.

3.02 Bonus. The Executive will be eligible to receive bonus compensation (“Bonus”) under and subject to the terms of the Company’s 1998 Big Lots, Inc. Key Associate Annual Compensation Plan, as amended (or any such successor plan, hereinafter, “Bonus Program”) for the fiscal year beginning January 30, 2005 and for each subsequent fiscal year during the Term of this Agreement. The Executive’s Bonus will be an amount equal to the Base Salary at the end of each fiscal year multiplied by the Bonus Payout percentage as determined under the Bonus Program. The Bonus Program is based upon the achievement of the Company’s annual financial plan. The Executive’s Bonus Payout percentage consists of a Target Bonus of 50 percent of Base Salary and a Stretch Bonus of 100 percent of Base Salary. Both “Target Bonus” and a “Stretch Bonus” are defined in the Bonus Program and are subject to adjustment as provided in the Bonus Program; provided, however, the Executive’s Target Bonus will never be set at less than 50 percent of Base Salary and the Executive’s Stretch Bonus will never be set at less than 100 percent of Base Salary. The Payment of any earned Bonuses is subject to the terms of the Bonus Program and any agreements issued thereunder. The term “fiscal year” means the period beginning on the first Sunday after the Saturday closest to January 31^st of each calendar year and ending on the Saturday closest to January 31^st of the following calendar year.

3.03 Benefit and Other Compensatory Plans. Subject to their terms (which the Company may amend at any time), the Executive may participate in any Company-sponsored employee pension or welfare benefit plan at a level commensurate with the Executive’s title and position. The Executive also may participate in any other deferred incentive or similar compensation program maintained by the Company and generally made available to Company employees with a similar title and position.

3.04 Vacation and Sick Leave. The Executive will be entitled to the same periods of vacation and sick leave each year that the Company provides under its vacation and sick leave policy to other Company employees with a similar title and position.

3.05 Expenses. Consistent with the terms of its business expense reimbursement policies and procedures, the Company will reimburse Executive for all normal and reasonable expenses incurred while performing services under this Agreement, including reasonable travel expenses. Reimbursement for these expenses will be made as soon as administratively feasible after the date the Executive submits appropriate evidence of the expenditure and otherwise complies with the Company’s business expense reimbursement policies and procedures.

3.06 Automobile Allowance. The Company will provide the Executive with an automobile or a monthly automobile allowance in accordance with applicable Company policies for employees with a similar title and position; provided, however, that the automobile allowance may not be adjusted to a value lower than the value the Executive is entitled to receive as of the Effective Date.

3.07 Termination Benefits. The Company will provide the Executive with only those termination benefits described in Section 5.00.

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4.00 Executive’s Obligations

The amounts described in Sections 3.00 and 5.00 of this Agreement are provided by the Company in exchange for (and have a value to the Company equivalent to) the Executive’s performance of the obligations described in this Agreement, including performance of the duties and the covenants made and entered into by and between the Executive and the Company in this Agreement.

4.01 Scope of Duties. The Executive will:

[1] Devote all available business time, best efforts and undivided attention to the Company’s business and affairs; and

[2] Not engage in any other business activity, whether for gain, profit or other pecuniary benefit except for services benefiting the Group or any Group Member.

However, the restrictions described in Sections 4.01[1] and [2] will not preclude the Executive from:

[3] Making or holding passive investments; or

[4] Serving on corporate, civic, religious, educational and/or charitable boards or committees but only if this activity [a] does not interfere with the Executive’s performance of the duties assumed under this Agreement and [b] is approved in writing by the Company.

4.02 Confidential Information.

[1] Obligation to Protect Confidential Information. The Executive acknowledges that the Company, its parent, affiliates, predecessor, successor, subsidiaries and other related companies, including entities that become related entities after the Effective Date (collectively, “Group” and separately, “Group Member”) have a legitimate and continuing proprietary interest in the protection of Confidential Information (as defined in Section 4.02[2]) and Intellectual Property (as defined in Section 4.02[3]) and have invested, and will continue to invest, substantial sums of money to develop, maintain and protect Confidential Information and Intellectual Property. The Executive agrees [a] during and after employment with the Company and as to all Group Members [i] that any Confidential Information and Intellectual Property will be held in confidence and treated as proprietary to the Group, [ii] not to use or disclose any Confidential Information or Intellectual Property except to promote and advance the Group’s business interests and [b] immediately upon termination for any reason from employment with the Company, to return to the Company any Confidential Information and Intellectual Property.

[2] Definition of Confidential Information. For purposes of this Agreement, Confidential Information includes any confidential data, figures, projections, estimates, pricing data, customer lists, buying manuals or procedures, distribution manuals or procedures, other policy and procedure manuals or handbooks, supplier information, tax

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records, personnel histories and records, information regarding sales, information regarding properties and any other information of a similar confidential nature regarding the business, operations, properties or personnel of the Group, the Company or any other Group Member which are disclosed to or learned by the Executive while employed by a Group Member, but will not include [a] the Executive’s own personal personnel records or [b] any information that [i] the Executive possessed before the date of initial employment (including periods before the Effective Date) with the Group that was a matter of public knowledge, [ii] became or becomes a matter of public knowledge through authorized sources independent of the Executive, [iii] has been or is disclosed by any Group Member without restriction on its use, [iv] has been or is required to be disclosed by law or governmental order or regulation or [v] is germane (but only to the extent that it is germane) to enforcement of the Executive’s rights under this Agreement and only if its disclosure is a necessary part of any proceedings described in Section 9.00. The Executive also agrees that, if there is any reasonable doubt whether an item is public knowledge, to not regard the item as public knowledge until and unless the Company’s General Counsel or Chief Executive Officer confirms to the Executive that the information is public knowledge or an adjudicator finally decides that the information is public knowledge.

[3] Intellectual Property. The Executive expressly acknowledges that all right, title and interest to all inventions, designs, discoveries, works of authorship, and ideas conceived, produced, created, discovered, authored or reduced to practice during the Executive’s performance of services under this Agreement, whether individually or jointly with any Group Member and whether or not it is deemed to be “work made for hire” (the “Intellectual Property”) will be owned solely by the Group, and will be subject to the restrictions set forth in Section 4.02[1]. All Intellectual Property that constitutes copyrightable subject matter under the copyright laws of the United States will, from its conception, be deemed to be a “work made for hire” under the United States copyright laws and all right, title and interest in and to such copyrightable works will vest in the Company or the Group. All right, title and interest in and to all Intellectual Property developed or produced under this Agreement by the Executive, whether constituting patentable subject matter or copyrightable subject matter (to the extent deemed not to be a “work made for hire”) or otherwise, will be assigned and is hereby irrevocably assigned to the Company or the Group by the Executive. Without any additional consideration, the Executive will execute all documents and take all other actions the Company reasonably believes are needed to convey the Executive’s complete ownership interest in any Intellectual Property to the Company or the Group so that the Company or the Group will own and may protect the Intellectual Property and obtain patent, copyright and trademark registrations for it. The Executive agrees that any Group Member may alter or modify the Intellectual Property at the Group Member’s sole discretion, and the Executive waives all right to claim or disclaim ownership.

4.03 Solicitation of Employees. The Executive agrees that during employment, and for two years after terminating employment with all Group Members [1] not, directly or indirectly, to solicit (or facilitate the solicitation of) any employee of any Group Member to leave employment with the Group or any Group Member, [2] not, directly or indirectly, to employ, seek to employ or facilitate the employment of any employee of any Group Member by an entity that is not a

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Group Member and [3] not to cause or induce any entity described in Section 4.05[1] to solicit or employ (or to facilitate the solicitation or employment of ) any employee of any Group Member.

4.04 Solicitation of Third Parties. The Executive agrees that during employment, and for two years after terminating employment with all Group Members not, directly or indirectly, to recruit, solicit or otherwise induce or influence any customer, supplier, sales representative, lender, lessor, lessee or any other person having a business relationship with the Group, the Company or any other Group Member to discontinue or reduce the extent of that relationship except in the course of discharging the duties described in this Agreement and with the good faith objective of advancing the Company’s or the Group’s (or any other Group Member’s) business interests.

4.05 Non-Competition. The Executive acknowledges the nature of the Group’s Business (as defined in Section 4.05[3][a] and that the Group is one of the limited number of entities which has developed this type of business; that the Group’s Business is national in scope and the Executive’s work for the Group, the Company and other Group Members will give Executive access to the confidential affairs of the Company and other Group Members, to Confidential Information and to Intellectual Property as defined in Sections 4.02[2] and 4.02[3] respectively; and that the agreements and covenants of the Executive contained in Section 4.00 are essential to preserving the Group’s Business and good will. Accordingly, the Executive covenants and agrees that:

[1] During the Restriction Period (as defined in Section 4.05[3][c]) and within the Restricted Area (as defined in Section 4.05[3][b]) the Executive will not [a] engage in the Group’s Business for the Executive’s own account, [b] render any services to any person engaged in the Group’s Business (other than to an entity that is a Group Member when those services are rendered); or [c] become employed in any manner by, or consult with, Wal-Mart, Sam’s Club, Kmart, Target, Dollar General, Family Dollar, Dollar Tree, Value City/Schottenstein Stores Corporation, Fred’s, 99¢ Stores, Canned Foods, Tuesday Morning and TJX Corporation. Further, the Executive agrees during the Restricted Period to not become employed in any manner by or to act as consultant to any successor, parent or subsidiary of the entities (or types of entities) listed above other than in the course of discharging the duties described in this Agreement.

[2] Maximum Enforceable Restriction. If any or all of the covenants set forth in this Section 4.05 are determined by a court of competent jurisdiction to be unenforceable by reason of the temporal restrictions being too great, the geographic areas covered too great, the range of activities too great or for any other reason, the Court is authorized and will interpret them to extend over the maximum period of time, the maximum geographic area and the maximum range of activities or, as to any provision, in such a manner that all provisions may be given maximum restrictive effect in accordance with applicable law.

[3] Definition Relating to Section 4.05.

[a] Group Business. For purposes of this Agreement, “Group Business” includes the operation of Big Lots retail outlets, the inventories of which are

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acquired primarily through special purchases such as overstocks, close-outs, liquidations, bankruptcies, wholesale distribution of overstock, distress, liquidation and other volume inventories, the operation of Big Lots furniture stores, and related wholesale operations and other lines of business any Group Member develops during the Term of this Agreement.

[b] Restricted Area. For purposes of this Agreement, “Restricted Area” means the 50 mile radius surrounding any location in which the Group’s Business is conducted during the Term of this Agreement.

[c] Restriction Period. For purposes of this Agreement, “Restriction Period” means the Term of this Agreement and one year following termination of the Executive’s employment with all Group Members, regardless of the reason for termination; provided, however, that in the event of a Change of Control as defined in Section 5.07[3] of this Agreement, the Restricted Period shall be for a period of six (6) months.

4.06 Post-Termination Cooperation. The Executive agrees that during and after employment with the Group and without additional compensation (other than reimbursement for reasonable associated expenses), to cooperate with the Group, the Company and any other Group Member in the following areas:

[1] Cooperation With the Group, the Company and Other Group Members. The Executive agrees [a] to be reasonably available to answer questions for any Group Member’s officers or directors regarding any matter, project, initiative or effort with which the Executive was involved while employed by any Group Member and [b] to cooperate with the Group, the Company and any other Group Member during the course of all proceedings arising out of the Group’s Business about which the Executive has knowledge or information. For purposes of this Agreement, [c] “proceedings” includes internal investigations, administrative investigations or proceedings and lawsuits (including pre-trial discovery and trial testimony) and [d] “cooperation” includes [i] the Executive’s being reasonably available for interviews, meetings, depositions, hearings and/or trials without the need for subpoena or assurances by the Group, the Company or any other Group Member, [ii] providing any and all documents in the Executive’s possession that relate to the proceeding and [iii] providing assistance in locating any and all relevant notes and/or documents relevant to any proceedings.

[2] Cooperation With Third Parties. Unless compelled to do so by lawfully-served subpoena or court order or to the extent it is germane (but only to the extent that it is germane) to enforcement of the Executive’s rights under this Agreement and only as a necessary part of any proceedings under this Agreement, the Executive agrees not to communicate with, or give statements or testimony to, any opposing attorney, opposing attorney’s representative (including a private investigator) or current or former employee relating to any matter (including pending or threatened lawsuits or administrative investigations) about which the Executive has knowledge or information except in cooperation with the Group, the Company and other Group Members. The Executive also agrees to notify the Company’s Chief Executive Officer or General Counsel

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immediately after being contacted by a third party or receiving a subpoena or court order to appear and testify with respect to any matter affected by this section.

[3] Cooperation With Media. The Executive agrees not to communicate with, or give statements to, any member of the media (including print, television, radio or electronic media) relating to any matter (including pending or threatened lawsuits or administrative investigations) about which the Executive has knowledge or information except in cooperation with the Group, the Company or any other Group Member. The Executive also agrees to notify the Company’s Chief Executive Officer or General Counsel immediately after being contacted by any member of the media with respect to any matter affected by this section.

4.07 Non-Disparagement. The Executive and the Company agree (on its behalf and in behalf of the Group and other Group Members) that after the Executive’s employment with the Group has ended neither will make any disparaging remarks about the other and the Executive will not make any disparaging remarks about the Company, the Company’s Chairman, Chief Executive Officer or any of the Company’s executives or directors or any other Group Member or their executives and directors. However, this section will not preclude [1] any remarks that may be made by the Executive [a] under the terms of Section 4.06[2], [b] that are required to discharge the duties described in this Agreement or [c] are germane (but only to the extent that it is germane) to enforcement of the Executive’s rights under this Agreement and only as a necessary part of any proceedings under this Agreement or [2] the Company or any other Group Member from making (or eliciting from any person) disparaging remarks about the Executive [a] concerning any conduct that may have led to a termination for Cause, as defined in Section 5.04[3] (including initiating an inquiry or investigation that may result in a termination for Cause) or [b] that are germane (but only to the extent that it is germane) to defending against any action begun by the Executive under this Agreement.

4.08 Notice of Subsequent Employment. The Executive agrees to notify the Company of any subsequent employment during the Restriction Period and any period during which any payment described in Section 5.00 is due or is being paid.

4.09 Remedies. The Executive:

[1] Acknowledges that the obligations and restrictions described in Sections 4.02 through 4.08 are reasonable in light of the nature of the Group’s Business and the nature of the Executive’s relationship with the Group and the Company; that the Group, the Company and all other Group Members have legitimate business reasons for requiring the Executive’s agreement to all provisions of Section 4.00; and that the Executive understands these restrictions, has had an opportunity to fully discuss these restrictions with the Company and accepts the restrictions.

[2] Agrees that if any of the obligations to the Company under Sections 4.02 through 4.08 are breached, the periods during which the obligations described in Sections 4.02 through 4.08 apply will be extended for the length of time that the Executive failed to fulfill the obligations under Sections 4.02 through 4.08.

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[3] Agrees that [a] any breach of any of the terms of this Section 4.00 would result in irreparable injury and damage to the Group, the Company and all other Group Members for which none would have an adequate remedy at law, [b] in the event of a breach or any threat of breach by the Executive, the Group, the Company and any Group Member will be entitled to an immediate injunction and restraining order to prevent that breach and/or threatened breach and/or continued breach by the Executive and/or any and all persons and/or entities acting for, with and/or through the Executive, without having to prove damages [c] no bond will be required of the Group, the Company or any other Group Member in connection with an action described in Section 4.09[3][a] and [d] not to defend any action seeking injunctive or other equitable relief on the basis that the Group, the Company or any other Group Member has an adequate remedy at law in money damages or otherwise. The terms of this Section 4.09 will not prevent the Company from pursuing any other available remedies for any breach or threatened breach by the Executive of Section 4.00, including, but not limited to, the recovery of monetary damages from the Executive or specific performance. In addition to any other available remedies, the Group, the Company or any Group Member may require the Executive to account for and pay over to the Company all compensation, profits, accruals, increments or other benefits derived or received by the Executive as a result of any transaction constituting a breach of any portion of Section 4.00. The Company may set off any amounts finally determined by a court of competent jurisdiction to be due under this section against any amount that may be owed to the Executive under this Agreement or under any other compensatory arrangement (other than a tax-qualified retirement plan) between the Executive and the Group, the Company or any other Group Member. The Parties agree that any action for breach of any of the provisions of Section 4.00 and/or injunctive relief will be venued in the Court of Common Pleas, Franklin County, Ohio.

4.10 Return of Group Property. Upon termination of employment, the Executive agrees to promptly return to the Company all property belonging to the Group or any Group Member; provided, however, that in the event the Executive’s employment is terminated pursuant to Section 5.06 and the Executive is then utilizing an automobile provided by the Company, the Executive shall retain the automobile in accordance with the terms of Section 5.06[5].

4.11 Effect of Termination of Agreement. The provisions of Section 4.00 will survive any termination of this Agreement and the existence of any claim or cause of action by the Executive against the Company or any Group Member, whether predicated on this Agreement or otherwise, will not constitute a defense to the enforcement by the Group, the Company or any other Group Member of the covenants and agreements of this Section 4.00; provided, however, that this Section 4.11 will not, in and of itself, preclude the Executive from defending against the enforceability of the covenants and agreements of Section 4.00.

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5.00 Termination and Related Benefits

This Agreement will terminate upon the occurrence of any of the events described in this section, although all of the obligations, restrictions and duties described in Sections 4.02 through 4.08 will continue after the Agreement terminates and will apply and continue to apply to the Executive and the Executive’s estate, heirs and assigns for the period described in Sections 4.02 through 4.08.

5.01 Rules of General Application. The following rules apply generally to the implementation of Section 5.00:

[1] Method of Payment. The Company, at its option and at any time, may elect to pay, as a lump sum, any installment payments due under Section 5.00. If the Company decides to pay any installment obligation due under Section 5.00 as a lump sum, the amount paid will be reduced to reflect the value of the acceleration. This reduction will be based on the rate paid on 90-day U.S. Treasury Bills issued on the last issue date before the lump sum payment is made.

[2] Application of Pro Rata. Any pro rata amount to be paid under Section 5.00 [a] will be calculated as provided in the program through which the payment is due or [b] if the payment obligation arises solely under this Agreement, will be based on the number of days between the first day of the fiscal year during which the Executive terminates employment and the date that the Executive terminates employment divided by the number of days in the fiscal year during which the Executive terminates employment.

[3] Limit on Time and Form of Payment. Subject to Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), the payments described in this section will be made at the time and in the form described in this section. Any amount deferred by application of Section 409A of the Code will be paid as a lump sum on the first payment date permitted under Section 409A of the Code and will be increased by interest calculated as described in Section 5.01[1][b] or on another basis permitted under Section 409A of the Code.

5.02 Termination Due to Executive’s Death. This Agreement will terminate automatically on the date the Executive dies. If all requirements of this Agreement are met (including those described in Section 7.00), as of the Executive’s date of death, and subject to Section 5.04[5], the Company will make the following payments to the beneficiary the Executive designates on a form acceptable to the Company. If the Executive has not made an effective beneficiary designation (or has revoked all beneficiary designations), these payments will be made to the Executive’s surviving spouse or, if the Executive dies without a surviving spouse, to the Executive’s estate.

[1] Base Salary. The unpaid Base Salary the Executive earned to the date of termination. This amount will be paid on the Company’s next regularly schedule payroll date for similarly situated employees.

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[2] Bonus. The Bonus (or pro rata share of any Bonus) due under the terms of the Bonus Program and Section 3.02.

[3] Other. Any rights accruing to the Executive under any other compensatory program and any employee benefit plan, fund or program maintained by the Company will be distributed or made available as required by the terms of the program, plan or fund or as required by law.

5.03 Termination Due to Executive’s Disability. The Company may terminate this Agreement after ascertaining that the Executive is Disabled (as defined in Section 5.03[4]) by delivering to the Executive a written notice of termination for Disability that includes the date termination for Disability is to be effective. If all requirements of this Agreement are met (including those imposed under Section 7.00) and subject to Section 5.04[5], the Company will make the following payments to the Executive.

[1] Base Salary. The unpaid Base Salary the Executive earned to the date of termination. This amount will be paid on the Company’s next regularly schedule payroll date for similarly situated employees.

[2] Bonus. The Bonus (or pro rata share of any Bonus) due under the terms of the Bonus Program and Section 3.02.

[3] Other. Any rights accruing to the Executive under any other compensatory program and employee benefit plan, fund or program maintained by the Company will be distributed or made available as required by the terms of the program, plan or fund or as required by law.

[4] Definition of Disability. For purposes of this Agreement, “Disability” (and any of its forms) means that, for more than six consecutive months, the Executive is unable, with reasonable accommodation, to perform the duties described in Section 4.01 on a full-time basis due to a physical or mental disability or infirmity.

5.04 Termination for Cause. The Company may terminate the Executive’s employment for Cause (as defined in Section 5.04[3]). A termination for Cause shall only be effective after [a] the Company has delivered a written notice to the Executive stating that in the Company’s opinion, the Executive may be terminated for Cause, specifying the details and [b] if the failure or action is one that can be cured, the Executive does not cure the issue giving rise to the Cause determination within 30 days after receiving notice. If the Executive is terminated for Cause and if all requirements of this Agreement are met (including those imposed under Section 7.00), the Company will make the following payments to the Executive:

[1] Base Salary. The unpaid Base Salary the Executive earned to the date of termination. This amount will be paid on the Company’s next regularly schedule payroll date for similarly situated employees.

[2] Other. Any rights accruing to the Executive under any other compensatory program and employee benefit plan, fund or program maintained by the Company will be

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distributed or made available as required by the terms of the program, plan or fund or as required by law.

[3] Definition of Cause. For purposes of this Agreement, Cause means the Executive’s [a] failure to comply with Company’s policies and procedures which the Company reasonably determines has had or is likely to have a material adverse effect on the Group, the Company or any other Group Member; [b] willful or illegal misconduct or grossly negligent conduct that is materially injurious to the Group, the Company or any other Group Member, monetarily or otherwise; [c] violation of laws or regulations governing the Group, the Company or any other Group Member (including the Sarbanes-Oxley Act of 2002) or violation of the Company’s code of ethics; [d] breach of any fiduciary duty owed to the Group, the Company or any other Group Member; [e] misrepresentation or dishonesty which the Company reasonably determines has had or is likely to have a material adverse effect on the Group, the Company or any other Group Member; [f] breach of any provision of Section 4.00 of this Agreement; [g] involvement in any act of moral turpitude that has a materially injurious effect on the Group, the Company or any other Group Member or their reputation; or [h] breach of the terms of any non-solicitation or confidentiality clauses contained in an employment agreement(s) with a former employer.

[4] Date of Termination for Cause. Subject to Section 5.04[5], termination for Cause will be deemed to have occurred on the date the Company specifies in the notice described in Section 5.04[a] or, if later and if applicable the end of the period described in Section 5.04[b].

[5] Subsequent Information. The terms of Section 5.04 also will apply if, within 6 consecutive calendar months beginning after the Executive terminates under any other provision of Section 5.00, the Company learns of an event that, had it been known before the Executive terminated employment, would have justified a termination for Cause. In this case, the Company will be entitled to recover any amounts that the Executive or any beneficiary received under any other provision of Section 5.00, reduced by the amount the Executive is entitled to receive under this Section 5.04 and any other legally protected benefits paid or made available under this Agreement that originally was applied when the Executive terminated.

5.05 Voluntary Termination by Executive. The Executive may voluntarily terminate employment with the Company at any time. In this case, and if all other requirements of this Agreement are met, and subject to Section 5.04[5], the Company will make the following payments to the Executive:

[1] Base Salary. The unpaid Base Salary the Executive earned to the date of termination. This amount will be paid in a single lump sum on the Company’s next regularly schedule payroll date for similarly situated employees.

[2] Other. Any rights accruing to the Executive under any other compensatory program and employee benefit plan, fund or program maintained by the Company will be

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distributed or made available as required by the terms of the program, plan or fund or as required by law.

5.06 Involuntary Termination Without Cause. Beginning September 1, 2006, the Company may terminate the Executive’s employment at any time without Cause by delivering to the Executive a written notice specifying the date termination is to be effective. If all requirements of this Agreement are met (including those imposed under Section 7.00) and subject to Section 5.04[5], the Company will make the following payments to the Executive:

[1] Base Salary. The unpaid Base Salary the Executive earned to the date of termination. This amount will be paid in a single lump sum on the Company’s next regularly schedule payroll date for similarly situated employees.

[2] Bonus. The bonus (or pro rata share of any Bonus) due under the terms of the Bonus Program and Section 3.02.

[3] Income Continuation. The Executive will be entitled to continue to receive his Base Salary until the last day of the twenty-eighth complete calendar week beginning after the termination date.

[4] Health Care. The Company will reimburse the Executive for the cost of continuing health coverage under COBRA, less the amount the Executive is expected to pay as an employee premium for this coverage, if any, until the earlier of [a] the last day of the twenty-eighth complete calendar week beginning after the termination date or [b] the date the Executive becomes eligible for the same or similar coverage under another benefit program. The amounts payable under this section will be increased to reimburse the Executive for federal, state and local income, employment and wage taxes associated with that reimbursement.

[5] Transportation. The Executive will be entitled to continue to receive the automobile benefits described in Section 3.06 until the last day of the twenty-eighth complete calendar week beginning after the termination date.

[6] Other. Any rights accruing to the Executive under any other compensatory program and employee benefit plan, fund or program maintained by the Company will be distributed or made available as required by the terms of the program, plan or fund or as required by law.

5.07 Termination in Connection With Change of Control. If the Executive is Terminated in Connection With a Change of Control (as defined in Section 5.07[5]) at any time during the Protection Period (as defined in Section 5.07[4]) and if all other conditions of this Agreement have been met (including those imposed under Section 7.00) and subject to Section 5.04[5], the Change Entity (as defined in Section 5.07[2] will pay or make available the Change Benefits (as defined in Section 5.07[1]) in lieu of any other amounts of benefits that might otherwise be due under this Agreement on account of that termination.

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[1] Change Benefits. For purposes of this Agreement, “Change Benefits” means the aggregate of the following, adjusted if appropriate under Sections 5.07[6] and [7]:

[a] Base Salary. The sum of [i] the Base Salary earned to the date of termination plus [ii] 200 percent of the Executive’s Base Salary at the highest rate in effect at any time during the Protection Period. This amount will be paid in a lump sum cash payment on the Change Entity’s first regular payroll date for employees with a similar title or position following the effective date of the Executive’s Termination in Connection With a Change of Control.

[b] Bonus. Two hundred percent of the Executive’s Stretch Bonus opportunity as it existed on the Effective Date of this Agreement under the Bonus Program. This amount will be paid in a single lump sum on the Change Entity’s next regularly scheduled payroll date for executives of similar title and position following the date of the Executive’s Termination in Connection With a Change of Control.

[c] Health Care. The Change Entity will reimburse the Executive for the cost of continuing health coverage under COBRA, less the amount the Executive is expected to pay as an employee premium at the lowest rate in effect at any time during the Protection Period for this coverage, until the earlier of [i] the last day of the 24th complete calendar month beginning after the date the Executive is Terminated in Connection With a Change of Control or [ii] the date the Executive becomes eligible for comparable benefits at comparable costs to the Executive under another employer sponsored benefit program. The amounts payable under this section will be increased to reimburse the Executive for federal, state and local income, employment and wage taxes associated with that reimbursement.

[d] Other. Any rights (including those arising on account of the Change of Control) accruing to the Executive under any other compensatory program and employee benefit plan, fund or program maintained by the Change Entity will be distributed or made available as required by the terms of the program, plan or fund or as required by law.

[2] Change Entity. For purposes of this Agreement, “Change Entity” means the Company, BLI and any other entity that is a party to the Change of Control.

[3] Definition of Change of Control. For purposes of this Agreement, “Change of Control” means [a] any person or group [as defined for purposes of Section 13(d) of the Securities Exchange Act of 1934] that becomes the beneficial owner of, or has the right to acquire (by contract, option, warrant, conversion of convertible securities or otherwise), 20 percent or more of the outstanding equity securities of BLI entitled to vote for the election of directors; [b] a majority of the Board of Directors of BLI is replaced within any 24 consecutive month period or less by directors not nominated and approved by a majority of the directors of BLI in office at the beginning of such period (or their successors so nominated and approved), or a majority of the Board of Directors of BLI at any date consists of persons not so nominated and approved; [c] the stockholders of BLI

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approve an agreement to reorganize, merge or consolidate with another corporation (other than Big Lots Stores, Inc. or an affiliate); [d] the stockholders of BLI adopt a plan or approve an agreement to sell or otherwise dispose of all or substantially all of BLI’s assets (including without limitation, a plan of liquidation or dissolution), in a single transaction or series of related transactions. The effective date of any such Change of Control will be the date upon which the last event occurs or last action is taken such that the definition of such Change of Control (as set forth above) has been met. For purposes of this Agreement, the term “affiliate” will mean: [i] any person or entity qualified as part of an affiliated group which includes BLI pursuant to Section 1504 of the Internal Revenue Code of 1986, as amended (the “Code”); or [ii] any person or entity qualified as part of a parent-subsidiary group of trades and businesses under common control within the meaning of Treasury Regulation Section 1.414(c)(2)(b). Determination of affiliate will be tested as of the date immediately prior to any event constituting a Change of Control. The other provisions of this Section 5.07 notwithstanding, the term “Change of Control” will not mean any transaction, merger, consolidation or reorganization in which BLI exchanges or offers to exchange newly issued or treasury shares in an amount less than 50 percent of the then-outstanding equity securities of BLI entitled to vote for the election of directors, for 51 percent or more of the outstanding equity securities entitled to vote for the election of at least the majority of the directors of a corporation other than BLI or an affiliate thereof (the “Acquired Corporation”), or for all or substantially all of the assets of the Acquired Corporation.

[4] Protection Period. For purposes of this Agreement, “Protection Period” means the period beginning on the first day of the third full consecutive calendar month beginning before the date of the Change of Control and ending on the last day of the twenty-fourth consecutive full calendar month beginning after the date of the Change of Control.

[5] Termination in Connection With a Change of Control. For purposes of this Agreement, “Termination in Connection With a Change of Control” means, at any time during the Protection Period, the Change Entity:

[a] Involuntarily terminates the Executive without Cause (as defined in Section 5.06), in which case, the termination will be deemed to have occurred on the date the notice of termination is delivered to the executive;

[b] Breaches any term of this Agreement, in which case the termination will be deemed to have occurred on the date of the breach, even if the breach became apparent at a later date;

[c] Unsuccessfully attempts to terminate the Executive for Cause (as defined in Section 5.04), in which case the termination will be deemed to have occurred on the date the Change Entity gives the notice of termination for Cause described in Section 5.04 even if the date on which it is determined that the Change Entity had no basis for terminating the executive for Cause is beyond the Protection Period;

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[d] Attempts to terminate the Executive for any reason without following the procedures described in this Agreement (including an acceleration of the periods described in Section 5.03[4] and 5.04[b]), in which case the termination will be deemed to have occurred on the date the Change Entity first failed to comply with those procedures;

[e] Revokes or attempts to revoke or accelerate the duration of any leave of absence protected by law or authorized by the Company before the Protection Period or by the Change Entity at any time during the Protection Period, in which case the termination will be deemed to have occurred on the day the Company or the Change Entity revoked or attempted to revoke or accelerate the leave of absence even if the date on which it is determined that the Change Entity had no basis for revoking or acceleration the leaves of absence is beyond the Protection Period; or

[f] Refuses to allow the Executive to return to active employment at the end of any leave of absence protected by law or authorized by the Company before the Protection Period or the Change Entity at any time during the Protection Period, in which case the termination will be deemed to have occurred on the earlier of [i] the date the Executive attempts to return to active employment or [ii] the last day or the leave of absence.

[6] Treatment of Taxes. If payments under this Agreement, when combined with payments and benefits under all other plans and programs maintained by the Company or the Change Entity, constitute “excess” parachute payments as defined in Section 280G(b) of the Code, the Change Entity, subject to Section 5.07[7], will either:

[a] Reimburse the Executive for the amount of any excise tax due under Code §4999, if this procedure provides the Executive with an after-tax amount that is larger than the after-tax amount produced under Section 5.07[6][b]; or

[b] Reduce the Executive’s benefits under this Agreement so that the Executive’s total “parachute payment” as defined in Code §280G(b)(2)(A) under this Agreement and all other agreements will be $1.00 less than the amount that would generate “excess” parachute payment penalties if this procedure provides the Executive with an after-tax amount that is larger than the after-tax amount produced under Section 5.07[6][a].

This comparison will be made as of the date of the corporate event generating the “parachute payments” although any reimbursement provided under Section 5.07[6][a] will be made when the parachute payment is actually made or distributed.

Within 10 business days of the date the Change Entity determines that Section 5.07[6][b] should be applied, the Change Entity will apprise the Executive of the amount of the reduction (“Notice of Reduction”). Within 10 business days of receiving that information, the Executive may specify how (and against which benefit or payment source) the reduction is to be applied (“Notice of Allocation”). The Change Entity will

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be required to implement these directions within 10 business days of receiving the Notice of Allocation. If the Change Entity has not received a Notice of Allocation from the Executive within 10 business days of the date of the Notice of Reduction or if the allocation provided in the Notice of Allocation is not sufficient to fully implement Section 5.07[6][b], the Change Entity will apply Section 5.07[6][b] proportionately based on the amounts otherwise payable under this Agreement or, if a Notice of Allocation has been returned that does not sufficiently implement Section 5.07[6][b], on the basis of the reductions specified in the Notice of Allocation.

[7] Effect of Subsequent Tax Claim. The Change Entity will establish procedures that will apply to any inquiries regarding the treatment of tax payments under this Section 5.07. Within 30 days following the termination of the Executive’s employment under Section 5.07, the Change Entity will provide the Executive with a copy of such procedures.

6.00 Notice

6.01 How Given. Any notice permitted or required to be given under this Agreement must be given in writing and delivered in person or by registered, U.S. mail, return receipt requested, postage prepaid; or through Federal Express, UPS, DHL or any other reputable professional delivery service that maintains a confirmation of delivery system. Any delivery must be [1] in the case of notices to the Company or the Change Entity, addressed to the Company’s Chief Executive Office at the Company’s then-current corporate offices and [2] in the case of notices to the Executive, addressed to the Executive’s last mailing address contained in the Executive’s personnel file.

6.02 Effective Date. Any notice permitted or required to be given under this Agreement will be deemed to have been given and will be effective on the date it is delivered.

7.00 Execution of Release

The Executive agrees that as a condition of receiving any post-termination benefit as set forth in Section 5.00 except for earned but unpaid Base Salary to the date of termination and any legally protected rights the Executive has under any employee benefit plan maintained by the Company, the Executive or, in the case of any amounts due after the Executive’s death, the person to whom those amounts are payable (collectively, the “Payee”) must execute a comprehensive release in the form determined from time to time by the Company in its sole discretion. Generally, the release will require the Payee and the Payee’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees, legatees and assigns to release and forever discharge the Group, the Company and all other Group Members, past, present and future, and their executives, officers, directors, agents, attorneys, successors and assigns from any and all claims, suits and/or causes of action that grow out of or are in any way related to the Executive’s recruitment and employment with the Company that arose on or before the date of the release, other than any claim that the Company has breached this Agreement. This release will include, but not be limited to, any claim that the Company violated the Employee Retirement Income Security Act of 1974; the Age Discrimination in Employment Act; the Older Worker’s Benefit Protection Act; the Americans with Disabilities Act; Title VII of the Civil

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Rights Act of 1964, the Family and Medical Leave Act; any state, federal law or local ordinance prohibiting discrimination, harassment or retaliation in employment; any claim for wrongful discharge in violation of public policy, claims of promissory estoppel or detrimental reliance, defamation, intentional infliction of emotional distress; or the public policy of any state; or any federal, state or local law (each as in effect on the Effective Date and as subsequently amended) relating to any matter within the purview of this Agreement. Upon the Executive’s termination of employment with all Group Members, the Payee will be presented with a release and if the Payee fails to execute the release, the Payee agrees to forego any payment described in the first sentence of this section. The Executive acknowledges that the Executive is an experienced senior executive knowledgeable about the claims that might arise in the course of employment with and termination from the Company and any other Group Member and knowingly agrees that the payments upon termination provided for in this Agreement are satisfactory consideration for the release of all possible claims described in the release.

8.00 Insurance

The Company will indemnify Executive (including his heirs, executors and administrators) to the fullest extent permitted under the Company’s Regulations and Ohio law. This obligation to provide insurance for the Executive will survive termination of this Agreement with respect to proceedings or threatened proceedings based on acts or omissions occurring during the Executive’s employment with or termination from the Group, the Company or with any other Group Member.

9.00 Arbitration

9.01 Acknowledgement of Arbitration. Unless stated otherwise in this Agreement or any other compensatory or any employee benefit plan, fund or program maintained by the Company, the Parties agree that arbitration is the sole and exclusive remedy for each of them to resolve (except as specifically provided in Section 4.09) and redress any dispute, claim or controversy involving the interpretation or application of this Agreement, the terms, conditions or termination of this Agreement and the terms, conditions or termination of the Executive’s employment with the Company, including any claims for any tort, breach of contract, violation of public policy or discrimination, whether such claim arises under federal, state law or local law.

9.02 Scope of Arbitration. The Executive expressly understands and agrees that claims subject to arbitration under this section include asserted violations of the Employee Retirement Income Security Act of 1974; the Age Discrimination in Employment Act; the Older Worker’s Benefit Protection Act; the Americans with Disabilities Act; Title VII of the Civil Rights Act of 1964 (as amended); the Family and Medical Leave Act; any federal, state or local law or ordinances prohibiting discrimination, harassment or retaliation in employment; any claim for wrongful discharge in violation of public policy, claims of promissory estoppel or detrimental reliance, defamation, intentional infliction of emotional distress; or the public policy of any state, or any federal, state or local law (each as in effect on the Effective Date or as subsequently amended) relating to any matter within the purview of this Agreement.

9.03 Effect of Arbitration. The Parties intend that any arbitration award relating to any matter described in Section 9.01 will be final and binding on them and that a judgment on the

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award may be entered in any court of competent jurisdiction and that enforcement may be had according to the terms of that award. This Section 9.03 will survive the termination of this Agreement.

9.04 Location and Conduct of Arbitration. Arbitration will be held in Columbus, Ohio, and will be conducted by a retired federal judge or other qualified arbitrator. The arbitrator will be mutually agreed upon by the Parties and the arbitration will be conducted in accordance with the National Rules for the Resolution of Employment Disputes of the American Arbitration Association. The Parties will have the right to conduct discovery pursuant to the Federal Rules of Civil Procedure; provided, however, that the arbitrator will have the authority to establish an expedited discovery schedule and cutoff and to resolve any discovery disputes. The arbitrator will have no jurisdiction or authority to change any provision of this Agreement by alterations of, additions to or subtractions from the terms of this Agreement. The arbitrator’s sole authority will be to interpret or apply any provision(s) of this Agreement or any public law alleged to have been violated. The arbitrator has the authority to award damages and other relief expressly provided by law.

9.05 Time for Initiating Arbitration. Any claim or controversy relating to any matter described in Section 9.01 not sought to be submitted to arbitration, in writing, within 60 days of the date the Party asserting the claim knew, or through reasonable diligence should have known, of the facts giving rise to that Party’s claim, will be deemed waived and the Party asserting the claim will have no further right to seek arbitration or recovery with respect to that claim or controversy. Both Parties agree to strictly comply with the time limitation specified in this section. For purposes of this section, a claim or controversy is sought to be submitted to arbitration on the date the complaining Party gives written notice to the other that [1] an issue has arisen or is likely to arise that, unless resolved otherwise, may be resolved through arbitration under this Section 9.00 and [2] unless the issue is resolved otherwise, the complaining Party intends to submit the matter to arbitration under the terms of Section 9.00.

9.06 Costs of Arbitration and Attorney’s Fees. The Company will bear the arbitrator’s fee and other costs associated with any arbitration, unless the arbitrator, acting under Federal Rule of Civil Procedure 54(d)(1), elects to award these fees to the Company. Attorney’s fees [1] may be awarded to the prevailing party if expressly authorized by statute, or otherwise each party will bear its own attorney’s fees and costs but [2] Executive’s attorney’s fees and other associated costs and expenses will be borne by the Change Entity with respect to any claim arising under Section 5.07 but only if the arbitrator concludes the claim legitimately relates to matters within the contemplation of Section 5.07 (otherwise, the rule described in Section 9.06[1] will apply).

9.07 Arbitration Exclusive Remedy. The Parties acknowledge that, because arbitration is the exclusive remedy for resolving the issues described in Section 9.01, neither Party may resort to any federal, state or local court or administrative agency concerning those issues and that the decision of the arbitrator will be a complete defense to any suit, action or proceeding instituted in any federal, state or local court before any administrative agency with respect to any arbitrable claim or controversy.

9.08 Waiver of Jury. The Executive (personally and in behalf of all the Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees,

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legatees and assigns) and the Company (on its own behalf’s and in behalf of its successors, including any Change Entity) each waive the right to have a claim or dispute with one another decided in a judicial forum or by a jury, except as otherwise provided in this Agreement.

10.00 General Provisions

10.01 Representation of Executive. The Executive represents and warrants that the Executive is an experienced senior executive knowledgeable about the issues (and their effect) within the purview of this Agreement and is not under any contractual or legal restraint that prevents or prohibits the Executive from entering into this Agreement or performing the duties and obligations described in this Agreement.

10.02 Modification or Waiver; Entire Agreement. No provision of this Agreement may be modified or waived except in a document signed by the Executive and the Company’s Chief Executive Officer or other person designated by the Company’s Board of Directors. This Agreement, and any attachments referenced in the Agreement, constitute the entire agreement between the Parties regarding the employment relationship described in this Agreement, and, except as otherwise specifically provided in this Agreement, any other agreements are terminated and of no further force or legal effect. No agreements or representations, oral or otherwise, with respect to the Executive’s employment relationship with the Company have been made or relied upon by either Party which are not set forth expressly in this Agreement.

10.03 Governing Law; Severability. This Agreement is intended to be performed in accordance with, and only to the extent permitted by, all applicable laws, ordinances, rules and regulations. If any provision of this Agreement, or the application of any provision of this Agreement to any person or circumstance, is, for any reason and to any extent, held invalid or unenforceable, such invalidity and unenforceability will not affect the remaining provisions of this Agreement of its application to other persons or circumstances, all of which will be enforced to the greatest extent permitted by law and the Parties agree that any invalid or enforceable provision may and will be reformed and applied [1] as provided in Section 4.05, with respect to the matters specifically contemplated in Section 4.00 and [2] with respect to other matters, [a] to the extent needed to avoid that invalidity or unenforceability and [b] in a manner that is as similar as possible to the Parties’ intent (as described in this Agreement). The validity, construction and interpretation of this Agreement and the rights and duties of the Parties will be governed by the laws of the State of Ohio, without reference to the Ohio choice of law rules.

10.04 No Waiver. Except as otherwise provided in Section 9.05, failure to insist upon strict compliance with any term of this Agreement will not be considered a waiver of any such term or any other term of this Agreement.

10.05 Withholding. All payments made to or on behalf of the Executive under this Agreement will be reduced by any amount:

[1] That the Company is required by law to withhold in advance payment of the Executive’s federal, state and local income, wage and employment tax liability; and

[2] To the extent allowed by law, that the Executive owes (or, after employment is deemed to owe) to the Group, the Company or any other Group Member.

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Application of Section 10.05[2] will not extinguish the Company’s right to seek additional amounts from the Executive (or to pursue other appropriate remedies) to the extent that the amount recovered by application of Section 10.05[2] does not fully discharge the amount the Executive owes to the Group, the Company or other Group Member and does not preclude the Group, the Company or any other Group Member from proceeding directly against the Executive without first exhausting its right of recovery under Section 10.05[2].

10.06 Survival. The Parties agree that the covenants and promises set forth in this Agreement will survive the termination of this Agreement and continue in full force and effect after this Agreement terminates to the extent that their performance is required to occur after this Agreement terminates.

10.07 Miscellaneous.

[1] The Executive may not assign any right or interest to, or in, any payments payable under this Agreement; provided, however, that this prohibition does not preclude the Executive from designating in writing one or more beneficiaries to receive any amount that may be payable after the Executive’s death and does not preclude the legal representative of the Executive’s estate from assigning any right under this Agreement to the person or persons entitled to it.

[2] This Agreement will be binding upon and will inure to the benefit of the Executive, the Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees, legatees and assigns and the Company and its successors and, to the extent applicable, the Group and all Group Members.

[3] The headings in this Agreement are inserted for convenience of reference only and will not be a part of or control or affect the meaning of any provision of the Agreement.

10.08 Successors to Company. This Agreement may and will be assigned or transferred to, and will be binding upon and will inure to the benefit of, any successor of the Company, including any Change Entity, and any successor will be substituted for the Company under the terms of this Agreement. As used in this Agreement, the term “successor” means any person, firm, corporation or business entity which at any time, whether by merger, purchase or

20

otherwise, acquires all or essentially all of the assets of the business of the Company. Notwithstanding any assignment, the Company will remain, with any successor, jointly and severally liable for all its obligations under this Agreement.

IN WITNESS WHEREOF, the Parties have duly executed and delivered this Agreement, which includes an arbitration provision, and consists of 21 pages.

BIG LOTS, INC.
By:	/s/ Charles W. Haubiel II
Signed: August 17, 2005

BIG LOTS STORES, INC.
By:	/s/ Brad A. Waite
Signed: August 17, 2005

KENT LARSSON
 

/s/ Kent Larsson  

Signed: August 17, 2005 

21

EX-10.3

Exhibit 10.3

AMENDMENT
TO THE
BIG LOTS, INC.
1996 PERFORMANCE INCENTIVE PLAN

     This Amendment to the Big Lots, Inc. 1996 Performance Incentive Plan (“Amendment”) is made effective as of May 18, 2005 (“Effective Date”), by the Nominating and Compensation Committee (“Committee”) of the Board of Directors (“Board”) of Big Lots, Inc. (“Company”).

     Whereas, the Company has adopted and maintains the Big Lots, Inc. 1996 Performance Incentive Plan, as previously amended (“1996 Incentive Plan”), and desires to amend various terms thereof as set forth herein;

     Whereas, Section 23.7 of the 1996 Incentive Plan authorizes the Committee to amend the 1996 Incentive Plan as it deems necessary or appropriate to better achieve the purposes of the 1996 Incentive Plan, except that no amendment shall be made without the approval of the Company’s shareholders if such amendment would (i) increase the total number of shares available for issuance under the 1996 Incentive Plan, or (ii) cause the 1996 Incentive Plan not to comply with Rule 16b-3 under the Securities Exchange Act of 1934 or any successor rule;

     Whereas, the 1996 Performance Incentive Plan expires on December 31, 2005, and in anticipation of said expiration, the Company sought and received at the 2005 Annual Meeting of Shareholders the approval of its shareholders for the Big Lots 2005 Long-Term Incentive Plan (“2005 Incentive Plan”) as a replacement equity compensation plan;

     Whereas, in connection with its proxy solicitation process for the 2005 Annual Meeting of Shareholders, the Company represented to its shareholders that if the 2005 Incentive Plan was approved, the Board would cause the terms of the 1996 Incentive Plan to be amended such that the maximum aggregate number of shares of restricted stock, stock equivalent units, and performance units remaining available for grant would be restricted to no more than 33 1/3 percent of all remaining awards issued under the 1996 Inventive Plan;

     Whereas, the Board has, as is permitted by the 1996 Incentive Plan, delegated to the Committee the duty to amend the 1996 Incentive Plan for the purpose of restricting the maximum aggregate number of shares of restricted stock, stock equivalent units, and performance units remaining available for grant to be restricted to no more than 33 1/3 percent of all remaining awards issued under the 1996 Inventive Plan; and

     Whereas, such an amendment by the Committee is not prohibited by the 1996 Incentive Plan.

     Now, therefore, the Committee amends the 1996 Incentive Plan as follows:

1. Defined Terms; References. Terms not otherwise defined in this Amendment shall have the respective meanings ascribed to them in the 1996 Incentive Plan. Each reference to “hereof,” “hereunder,” “herein,” “hereby,” and similar references contained in the 1996 Incentive Plan, and each reference to “the Plan” and similar references contained in the 1996 Incentive Plan, shall refer to the 1996 Incentive Plan as and to the extent amended hereby.

2. Amendment of Agreement. The following shall be added to the 1996 Incentive Plan as Section 11.4:

     “11.4 Further Restrictions. In addition to the restrictions imposed by Sections 11.2 and 11.3 of the Plan, the maximum aggregate number of shares of Restricted Stock, Stock Equivalent Units and Performance Units that may be issued under the Plan on or after May 18, 2005, shall not exceed 33 1/3 percent of all Awards granted under the Plan on or after May 18, 2005.”

3. Effectiveness of Amendment. This Amendment shall become effective as of the Effective Date. Upon and to the extent of the effectiveness hereof, the 1996 Incentive Plan shall be amended hereby in accordance with the terms hereof, and this Amendment and the 1996 Incentive Plan shall hereafter be one agreement and any reference to the 1996 Incentive Plan in any document, instrument, or agreement shall hereafter mean and include the 1996 Incentive Plan as amended hereby. In the event of irreconcilable inconsistency between the terms or provisions hereof and the terms or provisions of the 1996 Incentive Plan, the terms and provisions hereof shall control. Except as specifically amended by the provisions hereof, the 1996 Incentive Plan shall remain in full force and effect.

     In witness whereof, the Committee has caused this Amendment to be duly executed and delivered by its proper and duly authorized member as of the Effective Date.

NOMINATING AND COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS OF BIG LOTS, INC.
By:	/s/ David T. Kollat
Name:		David T. Kollat

EX-99.1

Exhibit 99.1

PRESS RELEASE

	Contact: Timothy A. Johnson
	Vice President, Strategic
FOR IMMEDIATE RELEASE	Planning and Investor Relations
	614-278-6622

BIG LOTS REPORTS SECOND QUARTER RESULTS

Columbus, Ohio — August 17, 2005 — Big Lots, Inc. (NYSE: BLI) today reported a second quarter net loss of $13.8 million, or $0.12 per share, which included an after tax charge of $3.8 million related to KB Toys, a former subsidiary of the Company, compared to a net loss of $7.7 million, or $0.07 per share, for the second quarter of fiscal 2004. Excluding this charge, the second quarter net loss in fiscal 2005 was $9.9 million, or $0.09 per share, which is consistent with the Company’s guidance and ahead of Thomson Financial/First Call’s consensus estimate of a net loss of $0.11 per share.

Year to date fiscal 2005 net loss was $6.0 million, or $0.05 per share, which included the $3.8 million after tax charge, compared to a net loss of $1.4 million, or $0.01 per share, for the same period of fiscal 2004. Excluding this charge, the year to date fiscal 2005 net loss was $2.1 million, or $0.02 per share.

The second quarter and year to date results for fiscal 2005 include an after tax charge of $3.8 million related to the efforts of KB Toys to emerge from bankruptcy protection. The Company believes this activity is not directly related to its ongoing operations and has provided non-GAAP financial measures in order to facilitate analysis by investors and others who follow the Company’s financial performance. To further aid in this analysis, the Company has included supplemental schedules, entitled “Unaudited Adjusted Results and Reconciliation,” that exclude this charge.

Net sales for the second quarter ended July 30, 2005 were $1,051.1 million, a 5.6% increase compared to net sales of $995.0 million for the same period of fiscal 2004. Comparable store sales for stores open two years at the beginning of the fiscal year increased 0.2% for the quarter consisting of a 2.5% increase in the value of the average basket and a 2.3% decrease in customer transactions. On a year to date basis, net sales increased 6.8% to $2,150.1 million in fiscal 2005 compared to $2,014.1 million in fiscal 2004. Comparable store sales increased 1.3% for the year to date period with the value of the average basket increasing 4.0% and the number of customer transactions decreasing 2.7%.

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

For the second quarter of fiscal 2005, the 0.2% increase in comparable store sales came in at the low end of the Company’s guidance with the growth of the average basket offset by a decline in customer transactions. The value of the average basket increased 2.5% with sales of seasonal merchandise and furniture as the key drivers. For the quarter, comparable sales of seasonal merchandise increased in the mid-single digits benefiting from the pent up demand created by unseasonable weather in the first four months of the year. Furniture sales were driven by an increase in the number of furniture departments and improved inventory position compared to the prior year. In contrast, customer traffic remained very challenging during the second quarter. While the current economic environment continues to impact the discount retail sector, the Company believes opportunities exist to improve customer traffic through more impactful advertising circulars, a higher concentration of closeout merchandise, and more consistent merchandising across all categories in the store.

The second quarter fiscal 2005 loss of $0.09 per share, excluding the KB Toys related charge, was in line with the Company’s guidance. As expected, flat comparable store sales and cost challenges, specifically inbound freight rates due to higher fuel prices, pressured the Company’s gross margin results compared to last year. Expenses were tightly managed and essentially flat to last year on a per store basis. Disciplined management of store payroll and the planned elimination of one advertising circular during the quarter led to expense leverage of approximately 40 basis points compared to last year. Additionally, interest expense declined for the second quarter of fiscal 2005 compared to fiscal 2004 due to lower average borrowings and the Company’s new debt structure which was put in place at the end of the third quarter of fiscal 2004.

The Company ended the second quarter of fiscal 2005 with inventory at $913 million, or essentially flat per store compared to the second quarter of fiscal 2004. Bank debt at the end of the second quarter of fiscal 2005 was $174 million, down $30 million to last year principally due to lower levels of capital spending.

As a reminder, the Company updated guidance for fiscal 2005 on July 7, 2005. This guidance calls for a third quarter fiscal 2005 loss per share in the range of $0.18 to $0.22, compared to the third quarter fiscal 2004 loss per share from continuing operations of $0.23. This guidance is based on a 1% to 3% comparable store sales increase.

KB Toys Matters

The Company has entered into a Stipulation and Agreed Order with KB Toys and the Official Committee of Unsecured Creditors to support their First Amended Joint Plan of Reorganization. Under the plan, the Company expects to receive approximately $0.9 million from its unsecured claim related to a $45 million note taken by the Company in connection with the sale of the KB Toys business in December of 2000. Based upon this agreement and a current net book value of $7.3 million related to the $45 million note, the Company has recorded a $3.8 million charge (net after a $2.6 million tax benefit) related to the partial charge-off of the note in the second quarter of fiscal 2005.

Big Lots, Inc. will host a conference call at 8:30 a.m. eastern time to discuss the Company’s financial results. The Company invites you to listen to the live webcast of the conference call. The Company is hosting the live webcast at www.biglots.com.

If you are unable to join the live webcast, an archive of the call will be available at www.biglots.com in the Investor Relations section of our website two hours after the call ends and will remain available through midnight eastern time on Wednesday, August 31. A replay of the call will be available beginning August 17 at 12:00 noon eastern time through August 31 at midnight eastern time by dialing: (800) 207-7077 (United States and Canada) or (913) 383-5767 (International). The access number is 4051.

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

Big Lots, Inc. is the nation’s largest broadline closeout retailer. The Company operates a total of 1,535 stores in 47 states operating as BIG LOTS and BIG LOTS FURNITURE. Wholesale operations are conducted through BIG LOTS WHOLESALE, CONSOLIDATED INTERNATIONAL, WISCONSIN TOY and with online sales at www.biglotswholesale.com. The Company’s website is located at www.biglots.com.

Cautionary Statement Concerning Forward-Looking Statements for Purposes of “Safe Harbor” Provisions of the Private Securities Litigation Reform Act of 1995

The Private Securities Litigation Reform Act of 1995 (the “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. The Company wishes to take advantage of the “safe harbor” provisions of the Act.

This release, as well as other verbal or written statements or reports made by or on the behalf of the Company, may contain or may incorporate material by reference which includes forward-looking statements within the meaning of the Act. By their nature, all forward-looking statements involve risks and uncertainties. Statements, other than those based on historical facts, which address activities, events, or developments that the Company expects or anticipates will or may occur in the future, including such things as future capital expenditures (including the amount and nature thereof), business strategy, expansion and growth of the Company’s business and operations, future earnings, store openings and new market entries, anticipated inventory turn, and other similar matters, as well as statements expressing optimism or pessimism about future operating results or events, are forward-looking statements, which are based upon a number of assumptions concerning future conditions that may ultimately prove to be inaccurate. The words “believe,” “anticipate,” “project,” “plan,” “expect,” “estimate,” “objective,” “forecast,” “goal,” “intend,” and similar expressions generally identify forward-looking statements. The 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 the Company believes the expectations expressed in forward-looking statements are based on reasonable assumptions within the bounds of its knowledge of its business, actual events and results may materially differ from anticipated results described in such statements.

The Company’s ability to achieve the results contemplated by forward-looking statements is subject to a number of factors, any one, or a combination, of which could materially affect the Company’s business, financial condition, results of operations, or liquidity. These factors may include, but are not limited to:

• the Company’s ability to source and purchase merchandise on favorable terms;

• interruptions and delays in merchandise supply from the Company’s and its vendors’ foreign and domestic sources;

• risks associated with purchasing, directly or indirectly, merchandise from foreign sources, including increased import duties and taxes, imposition of more restrictive quotas, loss of “most favored nation” trading status, currency fluctuations, work stoppages, transportation delays, foreign government regulations, political unrest, natural disasters, war, terrorism, and trade restrictions including retaliation by the United States against foreign practices;

• the ability to attract new customers and retain existing customers;

• the Company’s ability to establish effective advertising, marketing, and promotional programs;

• economic and weather conditions which affect buying patterns of the Company’s customers;

• changes in consumer spending and consumer debt levels;

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

• the Company’s ability to anticipate buying patterns and implement appropriate inventory strategies;

• continued availability of capital and financing on favorable terms;

• competitive pressures and pricing pressures, including competition from other retailers;

• the Company’s ability to comply with the terms of its credit facilities (or obtain waivers for noncompliance);

• significant interest rate fluctuations and changes in the Company’s credit rating;

• the creditworthiness of the purchaser of the Company’s former KB Toys business;

• the Company’s indemnification and guarantee obligations with respect to approximately 390 KB Toys store leases and other real property leases, some or all of which may be rejected or materially modified in connection with the pending KB Toys bankruptcy proceedings, as well as other potential costs arising out of the KB Toys bankruptcy;

• litigation risks and changes in laws and regulations, including changes in accounting standards, the interpretation and application of accounting standards, and tax laws;

• transportation and distribution delays or interruptions that adversely impact the Company’s ability to receive and/or distribute inventory;

• the impact on transportation costs from the driver hours of service regulations adopted by the Federal Motor Carriers Safety Administration that became effective in January 2004;

• the effect of fuel price fluctuations on the Company’s transportation costs and customer purchases;

• interruptions in suppliers’ businesses;

• the Company’s ability to achieve cost efficiencies and other benefits from various operational initiatives and technological enhancements;

• the costs, interruptions, and problems associated with the implementation of, or failure to implement, new or upgraded systems and technology;

• the effect of international freight rates and domestic transportation costs on the Company’s profitability;

• delays and costs associated with building, opening, and modifying the Company’s distribution centers;

• the Company’s ability to secure suitable new store locations under favorable lease terms;

• the Company’s ability to successfully enter new markets;

• delays associated with constructing, opening, and operating new stores;

• the Company’s ability to attract and retain suitable employees; and

• other risks described from time to time in the Company’s filings with the SEC, in its press releases, and in other communications.

The foregoing list is not exhaustive. There can be no assurances that the Company has correctly and completely identified, assessed, and accounted for all factors that do or may affect its business, financial condition, results of operations, and liquidity. Additional risks not presently known to the Company or that it believes to be immaterial also may adversely impact the Company. Should any risks or uncertainties develop into actual events, these developments could have material adverse effects on the Company’s business, financial condition, results of operations, and liquidity. Consequently, all of the forward-looking statements are qualified by these cautionary statements, and there can be no assurance that the results or developments anticipated by the Company will be realized or that they will have the expected effects on the Company or its business or operations.

Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date thereof. The Company undertakes no obligation to publicly release any revisions to the forward-looking statements contained in this release, or to update them to reflect events or circumstances occurring after the date of this release, or to reflect the occurrence of unanticipated events. Readers are advised, however, to consult any further disclosures the Company may make on related subjects in its public announcements and SEC filings.

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

BIG LOTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)

	JULY 30		JULY 31
	2005		2004
	(Unaudited)		(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents	$	10,173	$	7,622
Short-term investments		0		3,800
Inventories		912,941		878,444
Deferred income taxes		73,078		67,391
Other current assets		86,731		82,188
Total Current Assets		1,082,923		1,039,445
Property and equipment — net		630,523		643,477
Deferred income taxes		22,457		16,835
Other assets		30,107		25,631
	$	1,766,010	$	1,725,388
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Notes payable and current maturities of long-term obligations	$	0	$	174,000
Accounts payable		156,340		149,005
Accrued liabilities		264,882		248,405
Total Current Liabilities		421,222		571,410
Long-term obligations		173,600		30,000
Other liabilities		92,963		80,329
Shareholders’ equity		1,078,225		1,043,649
	$	1,766,010	$	1,725,388

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

	13 WEEKS ENDED						13 WEEKS ENDED
	JULY 30						JULY 31
	2005			%			2004			%
	(Unaudited)						(Unaudited & Restated)
Net sales	$	1,051,053			100.0		$	994,950			100.0
Gross margin		421,746			40.1			406,268			40.8
Selling and administrative expenses		412,421			39.2			388,216			39.0
Depreciation expense		28,513			2.7			26,268			2.6
Operating (loss) profit		(19,188	)		(1.8	)		(8,216	)		(0.8	)
Interest expense		1,315			0.1			4,631			0.5
Interest income		0			0.0			(135	)		(0.0	)
Loss before income taxes		(20,503	)		(2.0	)		(12,712	)		(1.3	)
Income tax (benefit) expense		(6,751	)		(0.6	)		(4,981	)		(0.5	)
Net loss		($13,752	)		(1.3	)		($7,731	)		(0.8	)
Loss per common share — basic		($0.12	)					($0.07	)
Weighted average common shares outstanding		113,244						114,686
Loss per common share — diluted		($0.12	)					($0.07	)
Weighted average common and common equivalent shares outstanding		113,244						114,686

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

	26 WEEKS ENDED						26 WEEKS ENDED
	JULY 30						JULY 31
	2005			%			2004			%
	(Unaudited)						(Unaudited & Restated)
Net sales	$	2,150,143			100.0		$	2,014,148			100.0
Gross margin		870,415			40.5			826,538			41.0
Selling and administrative expenses		820,759			38.2			770,954			38.3
Depreciation expense		55,464			2.6			50,246			2.5
Operating (loss) profit		(5,808	)		(0.3	)		5,338			0.3
Interest expense		2,489			0.1			9,241			0.5
Interest income		(31	)		(0.0	)		(493	)		(0.0	)
Loss before income taxes		(8,266	)		(0.4	)		(3,410	)		(0.2	)
Income tax (benefit) expense		(2,314	)		(0.1	)		(2,030	)		(0.1	)
Net loss		($5,952	)		(0.3	)		($1,380	)		(0.1	)
Loss per common share — basic		($0.05	)					($0.01	)
Weighted average common shares outstanding		113,107						115,981
Loss per common share — diluted		($0.05	)					($0.01	)
Weighted average common and common equivalent shares outstanding		113,107						115,981

UNAUDITED ADJUSTED RESULTS
Schedule Provided for Informational Purposes Only

BIG LOTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
EXCLUDING PARTIAL CHARGE-OFF OF KB NOTE
(In thousands, except per share data)

	13 WEEKS ENDED						13 WEEKS ENDED
	JULY 30						JULY 31
	2005			%			2004			%
	(Unaudited)						(Unaudited & Restated)
	Adjusted Results
	Excluding Partial Charge-
	Off of KB Note
	(non-GAAP)
Net sales	$	1,051,053			100.0		$	994,950			100.0
Gross margin		421,746			40.1			406,268			40.8
Selling and administrative expenses		406,032			38.6			388,216			39.0
Depreciation expense		28,513			2.7			26,268			2.6
Operating (loss) profit		(12,799	)		(1.2	)		(8,216	)		(0.8	)
Interest expense		1,315			0.1			4,631			0.5
Interest income		0			0.0			(135	)		(0.0	)
Loss before income taxes		(14,114	)		(1.3	)		(12,712	)		(1.3	)
Income tax (benefit) expense		(4,200	)		(0.4	)		(4,981	)		(0.5	)
Net loss		($9,914	)		(0.9	)		($7,731	)		(0.8	)
Loss per common share — basic		($0.09	)					($0.07	)
Weighted average common shares outstanding		113,244						114,686
Loss per common share — diluted		($0.09	)					($0.07	)
Weighted average common and common equivalent shares outstanding		113,244						114,686

UNAUDITED ADJUSTED RESULTS
Schedule Provided for Informational Purposes Only

BIG LOTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
EXCLUDING PARTIAL CHARGE-OFF OF KB NOTE
(In thousands, except per share data)

	26 WEEKS ENDED						26 WEEKS ENDED
	JULY 30						JULY 31
	2005			%			2004			%
	(Unaudited)						(Unaudited & Restated)
	Adjusted Results
	Excluding Partial Charge-
	off of KB Note
	(non-GAAP)
Net sales	$	2,150,143			100.0		$	2,014,148			100.0
Gross margin		870,415			40.5			826,538			41.0
Selling and administrative expenses		814,370			37.9			770,954			38.3
Depreciation expense		55,464			2.6			50,246			2.5
Operating (loss) profit		581			0.0			5,338			0.3
Interest expense		2,489			0.1			9,241			0.5
Interest income		(31	)		(0.0	)		(493	)		(0.0	)
Loss before income taxes		(1,877	)		(0.1	)		(3,410	)		(0.2	)
Income tax (benefit) expense		237			0.0			(2,030	)		(0.1	)
Net loss		($2,114	)		(0.1	)		($1,380	)		(0.1	)
Loss per common share — basic		($0.02	)					($0.01	)
Weighted average common shares outstanding		113,107						115,981
Loss per common share — diluted		($0.02	)					($0.01	)
Weighted average common and common equivalent shares outstanding		113,107						115,981

UNAUDITED ADJUSTED RESULTS AND RECONCILIATION
Schedule Provided for Informational Purposes Only

BIG LOTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
EXCLUDING PARTIAL CHARGE-OFF OF KB NOTE
(In thousands, except per share data)

	13 WEEKS ENDED									13 WEEKS ENDED
	JULY 30									JULY 31
	2005									2004
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited &
										Restated)
							Adjusted Results
				Net Partial			Excluding Partial
				Charge-off of KB			Charge-off of KB
	As Reported			Note			Note			As Reported
							(non-GAAP)
Net sales	$	1,051,053					$	1,051,053		$	994,950
Gross margin		421,746						421,746			406,268
Selling and administrative expenses		412,421		$	6,389			406,032			388,216
Depreciation expense		28,513						28,513			26,268
Operating (loss) profit		(19,188	)		(6,389	)		(12,799	)		(8,216	)
Interest expense		1,315						1,315			4,631
Interest income		0						0			(135	)
Loss before income taxes		(20,503	)		(6,389	)		(14,114	)		(12,712	)
Income tax (benefit) expense		(6,751	)		(2,551	)		(4,200	)		(4,981	)
Net loss		($13,752	)		($3,838	)		($9,914	)		($7,731	)
Loss per common share — basic		($0.12	)		($0.03	)		($0.09	)		($0.07	)
Weighted average common shares outstanding		113,244			113,244			113,244			114,686
Loss per common share — diluted		($0.12	)		($0.03	)		($0.09	)		($0.07	)
Weighted average common and common equivalent shares outstanding		113,244			113,244			113,244			114,686

UNAUDITED ADJUSTED RESULTS AND RECONCILIATION
Schedule Provided for Informational Purposes Only

BIG LOTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
EXCLUDING PARTIAL CHARGE-OFF OF KB NOTE
(In thousands, except per share data)

	26 WEEKS ENDED									26 WEEKS ENDED
	JULY 30									JULY 31
	2005									2004
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited &
										Restated)
							Adjusted Results
				Net Partial			Excluding Partial
				Charge-off of KB			Charge-off of KB
	As Reported			Note			Note			As Reported
							(non-GAAP)
Net sales	$	2,150,143					$	2,150,143		$	2,014,148
Gross margin		870,415						870,415			826,538
Selling and administrative expenses		820,759		$	6,389			814,370			770,954
Depreciation expense		55,464						55,464			50,246
Operating (loss) profit		(5,808	)		(6,389	)		581			5,338
Interest expense		2,489						2,489			9,241
Interest income		(31	)					(31	)		(493	)
Loss before income taxes		(8,266	)		(6,389	)		(1,877	)		(3,410	)
Income tax (benefit) expense		(2,314	)		(2,551	)		237			(2,030	)
Net loss		($5,952	)		($3,838	)		($2,114	)		($1,380	)
Loss per common share — basic		($0.05	)		($0.03	)		($0.02	)		($0.01	)
Weighted average common shares outstanding		113,107			113,107			113,107			115,981
Loss per common share — diluted		($0.05	)		($0.03	)		($0.02	)		($0.01	)
Weighted average common and common equivalent shares outstanding		113,107			113,107			113,107			115,981

EX-99.2

Exhibit 99.2

Final Transcript

Thomson StreetEventsSM

Conference Call Transcript

BLI — Q2 2005 Big Lots, Inc. Earnings Conference Call

Event Date/Time: Aug. 17. 2005 / 8:30AM ET
Event Duration: 51 min

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Final Transcript

Aug. 17. 2005 / 8:30AM, BLI — Q2 2005 Big Lots, Inc. Earnings Conference Call

CORPORATE PARTICIPANTS

Tim Johnson
Big Lots, Inc. — VP, Strategic Planning, IR

Joe Cooper
Big Lots, Inc. — SVP, CFO

Chuck Haubiel
Big Lots, Inc. — SVP, Gen. Counsel

Steve Fishman
Big Lots, Inc. — Chairman, CEO

CONFERENCE CALL PARTICIPANTS

David Mann
Johnson Rice — Analyst

David Buchsbaum
Stanford Group — Analyst

Mitch Kaiser
Piper Jaffray — Analyst

Jeff Stein
Keybank — Analyst

John Zolidis
Buckingham Research — Analyst

Ralph Jean
Wachovia Securities — Analyst

Ronald Bookbinder
Sterne, Agee — Analyst

Shakib Alaam
High Fields Capital — Analyst

Jacques Girabaldi
Royal Capital — Analyst

PRESENTATION

Operator

Ladies and gentlemen welcome to the Big Lots second quarter 2005 teleconference. [OPERATOR INSTRUCTIONS] At this time I would like to introduce Vice President of Strategic Planning and Investor Relations, Tim Johnson.

Tim Johnson - Big Lots, Inc. — VP, Strategic Planning, IR

Thanks. Thank you everyone for joining us for our second quarter conference call. Joining us today here in Columbus for his first conference call is Steve Fishman, our new Chairman and CEO. Also here today is Joe Cooper, Senior Vice President and Chief Financial Officer, as well as, Chuck Haubiel, Senior Vice President and General Counsel. I’d like to remind you that any forward-looking statements we make on today’s call involve risks and uncertainties and are subject to our Safe Harbor provisions as stated in our press release and our SEC filings and that actual results can differ materially from those described in our forward-looking statements.

Just to set our agenda for this morning, first Joe is going to hit the highlights of second quarter and provide some perspective on our outlook for the balance of the year then Chuck will provide an update on the KB Toys situation as best we know it today. Then, Steve is going to share with

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Aug. 17. 2005 / 8:30AM, BLI — Q2 2005 Big Lots, Inc. Earnings Conference Call

you some of his initial observations about our business, what his focus has been since joining us six weeks ago, and how we are thinking about the business go forward. With that, I want to turn it over to Joe.

Joe Cooper - Big Lots, Inc. — SVP, CFO

Good morning, everyone. As discussed in detail in this morning’s press release our reported results for the quarter contain a charge related to KB Toys and Chuck will cover those details later in the call. We don’t believe this charge is directly related to the Company’s ongoing operations, therefore, we have provided supplemental non-GAAP second quarter and year-to-date financial statements that exclude these items. A presentation of the most directly comparable financial measures calculated in accordance with GAAP and a reconciliation between the GAAP financial measures and the non-GAAP financial measures are also included in our press release, which is posted on our website at www.biglots.com under the “Investor Relations — Press Releases” caption. We believe that these non-GAAP financial measures should facilitate analysis by investors and others who follow our financial performance. Since we do not view this adjustment as relevant to the ongoing operations of the business all my comments today will be based on results excluding this charge. As an additional reminder, all references to 2004 that we make today relate to results that were restated for certain lease accounting corrections as reflected in our form 10-K filed with the SEC on April 18, of this year.

Earlier today, we reported a second quarter 2005 net loss of $9.9 million or $0.09 per share. That’s compared to a net loss of $7.7 million or $0.07 per share in the second quarter of 2004.

Sales for the second quarter of 2005 were $1.1 billion, an increase of 5.6% over the prior year. Total sales growth was driven by a 0.2% comparable store sales increase and the net year over year addition of 65 stores or 4.4% growth.

Comparable store sales for the quarter were up 0.2% with the value of the average basket increasing 2.5% and customer transactions declining 2.3%. This 0.2% comparable store sales increase for the quarter was at the low end of our guidance as the growth in the average basket was offset by negative customer transactions. Despite the lingering softness in customer traffic, we’re pleased by the continued growth in the average basket. We are particularly encouraged that the basket increase was a result of a balanced mix of both higher units sold per transaction and average item retail. We believe this suggests that we have made some progress on our assortment compared to last year. We just need more footsteps in our stores. From a merchandising perspective, for the quarter, Seasonal sales comps increased in the mid-single digits benefiting from the pent-up demand caused by unseasonable weather the first four months of the year. Furniture sales were driven by an increase in the number of departments and improved in-stock inventory positions compared to last year. Partially offsetting the basket strength in these categories has been the softness in Consumables, where trends have correlated with the customer traffic for the last several quarters.

Our gross margin rate for the quarter was 40.1%, in line with our guidance, but down from 40.8% last year. The principal reason for the decline relates to higher domestic inbound freight cost due to rising prices for diesel fuel. Additionally, our initial markup, or IMU, continues to be challenged by several factors including mix within categories, higher raw materials cost and resin-based products such as plastics and chemicals in a very competitive pricing environment in the consumables area.

Expenses were well managed for the quarter as this year’s second quarter SG&A rate of 41.3% was 40 basis points better than last year. Leverage was achieved primarily through tightly managed store controllable expenses, like payroll and supplies, and the planned elimination of one advertising circular during the quarter. Distribution efficiencies were essentially offset by the impact of higher fuel prices on the transportation side.

Net interest expense was $1.3 million for the quarter, compared to $4.5 million last year due to lower average borrowings and the Company’s new revolving credit facility which was put in place at the end of the third quarter last year.

The effective income tax rate for the quarter was 29.8%, excluding the partial charge-off of the KB Note. The tax benefit on the second quarter loss was lower than expected due to approximately $900,000 of income tax expense related to the write down of deferred income tax assets as a result of Ohio tax reform passed during the second quarter.

Turning to the balance sheet, we ended the quarter with total inventory of $913 million, or essentially flat per average store compared to the second quarter last year. Inventory in the furniture category is above last year due to more departments, but this growth is being offset by lower levels of seasonal and toys inventory compared to a year ago. Spring seasonal inventory, specifically lawn and garden, is up to a year ago because of a later start to the selling season due to weather. Also, strategically we see an opportunity to carry goods further into August in order to maximize sales in certain regions of the country. Inventory levels of fall seasonal merchandise, which includes Halloween, Harvest, and

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Aug. 17. 2005 / 8:30AM, BLI — Q2 2005 Big Lots, Inc. Earnings Conference Call

Christmas are down to last year. This is consistent with our plans as we attempt to better manage our cash and inventory receipts in order to flow the merchandise to our stores closer to the key selling periods.

Bank debt at the end of the second quarter was $174 million, down $30 million to last year, principally due to lower levels of capital spending.

Capital expenditures were $22.4 million for the quarter, down $25.3 million to the second quarter of last year. Year-to-date CapEx was $37.7 million, down $34.7 million to last year. The decreased level of capital spending related to no store remodels, compared to 64 remodels through the second quarter of last year, and lower DC capital spending in 2005, as last year’s capital included the Columbus Distribution Center reengineering initiative and the final construction cost related to finishing our Durant DC. Depreciation expense was $28.5 million, up $2.2 million compared to last year. And year-to-date depreciation expense was $55.5 million, up $5.2 million compared to last year.

During the second quarter, we added a net of 15 stores, consisting of 24 new stores and 9 closed stores. Further, we opened furniture departments in all of the new stores. Year-to-date, we’ve opened 32 net new stores. At the end of the second quarter, we were operating 1,534 stores, including 41 freestanding furniture stores. Total selling square footage at the end of the second quarter was 31.8 million, up 6% to last year.

Looking forward, our guidance for the third quarter remains unchanged from guidance we communicated on July 7, which calls for a third quarter loss per share in the range of $0.18 to $0.22, and a comparable store sales increase of 1% to 3%. I would encourage you to refer to our June sales release where we provided our third quarter guidance in detail, probably more detail than most other retailers. As those of you who have followed the Company know, we take our guidance seriously. When we see trends in the business that suggest the model or trends are different than what we have guided to, we update you and adjust our guidance. However, for competitive purposes, we will no longer be offering monthly comp guidance at the beginning of each quarter. So for the time being, we will continue to provide monthly comp reporting but not the specifics of monthly guidance. Now Chuck will share with you a update on KB.

Chuck Haubiel - Big Lots, Inc. — SVP, Gen. Counsel

Thanks, Joe. As we previously discussed, KB Toys Inc. and 68 of its direct and indirect subsidiaries filed for reorganization relief under Chapter 11 of the United States Bankruptcy Code on January 14, 2004. The KB toys business was sold by the Company pursuant to a stock purchase agreement dated as of December 7, 2000. Along with $258 million in cash and certain warrants, Big Lots received a 10 year $45 million note as consideration for the sale.

On May 16, 2005, KB toys and the Official Committee of Unsecured Creditors filed a Joint Plan of Reorganization which was later amended on July 24. On July 28, Big Lots along with KB Toys and the Official Committee entered into a stipulation and agreed order which, among other things, caused KB’s plan to be further amended.

There’s a confirmation hearing scheduled for tomorrow to determine whether or not KB’s latest plan will be confirmed. Based on information currently available, we believe that this plan will be confirmed. If so, the Company expects to receive approximately $900,000 from its unsecured claim arising from the note. Based upon the note’s current net book value of $7.3 million, the Company’s recorded a $3.8 million charge, net after a $2.6 million tax benefit, related to the partial charge-off of the note in the second quarter of fiscal 2005.

KB’s plan further provides that the Company would be treated on a consolidated basis for all other unsecured operating subsidiary creditors for purposes of its store lease obligations and the Pittsfield DC Note. The Company is not reflected any benefit flowing from KB’s plan in its reserve for the store lease obligations or the Pittsfield DC Note.

Neither the terms of the stipulation and agreed order nor the confirmation of KB’s plan would adversely impact either the debtor’s estates claims to be pursued by the Official Committee against certain KB insiders and shareholders or Big Lots’ own action against certain of KB’s officers, directors, and others who acted in concert with them.

We intend to continue to closely monitor the administration of the estate and the prosecution of its claims. Although we will not serve on the post confirmation committee in charge of the estate’s litigation, under the terms of the Stipulation and Agreed Order, we will be appointed to the Residual Trust Advisory Board and will be directly involved in the administration of the distribution from the estate to KB’s unsecured creditors. Moreover, we expect to be able to continue with the prosecution of our own litigation claims associated with this matter in the next few weeks. With that, I’ll turn the call over to Steve.

Steve Fishman - Big Lots, Inc. — Chairman, CEO

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Final Transcript

Aug. 17. 2005 / 8:30AM, BLI — Q2 2005 Big Lots, Inc. Earnings Conference Call

Thanks, Chuck. And good morning, everyone. I’ve not worked with most of you since I’ve been away from public company life for several years now. And I do look forward to meeting you at some point down the road. First off, I think it makes sense for me to tell you a little bit about my background and what attracted me to Big Lots. I’ve been in retail for over 30 years with merchandising experience in department stores, specialty stores, and general merchandising chains. From assistant buyer through general merchandise manager and ultimately as CEO, I’ve been involved in buying merchandise across all aspects of general merchandise and discount retailing. In fact, I’ve been involved at some level in my career in buying merchandise for every category that we carry in our stores today.

So I’m a merchant, but a merchant with experience running businesses. Oftentimes these have been businesses that have been troubled or in turnaround situations. In the mid ‘90s, I helped lead the successful repositioning of Pamida, a general merchandise retailer who eventually sold to Shopko stores. After that, I was involved in similar repositioning or turnaround efforts at Frank’s Nursery and Crafts and most recently at Rhodes Furniture. So I’m experienced at working through challenging situations and making the difficult decision needed to improve performance. I want to reiterate, I do not view Big Lots as a turnaround situation. This is a healthy company. It’s financially stable with a rich tradition in the retail business. Granted business has been disappointing recently, however, I believe it’s correctible with focus, sharper execution, and likely some tactical changes to the strategy. I believe any business that desires of being a great business has to dominate a market. And we have a clear niche as a close-out retailer and in my view have an excellent opportunity to truly exploit the niche of broad line closeouts.

As Tim mentioned earlier, I’ve been on board now for about six weeks, and it’s been jam-packed with activity. Coming into a new situation, I always make it a priority in the first 30 to 60 days to touch as many people as possible and to listen to their views of the business and what they see as opportunities. I’ve met hundreds of associates and am trying to absorb as much as I can. I’ve met with the stores’ team and visited stores in different regions of the country. I’ve met with the distribution center team and toured the facility here in Columbus. I visited with some vendors and had the opportunity to attend a trade show with our furniture team a couple of weeks ago. As you might expect, I’ve been spending a significant amount of time with the executive team to gain a clearer understanding of what’s been working, what’s been not working, and brainstorming ideas on how to improve performance. After six weeks on the job, I’m confident that we can improve the performance of our business.

While most of what I want to cover with you is more forward-looking than 2005, let me give you some of my thoughts on our 2005 forecast. Business trends have been disappointing, and although we hit our second quarter guidance, I’m not happy with the results or with the forecast for the balance of this year.

Realistically, though, you should not expect major merchandise changes in the third quarter as the majority of our purchases have been made and strategies are already in motion. However, one of the first conversations I had with the team centered around the fourth quarter and what I’d like to refer to as the nine weeks of Christmas, which ends up being November and December. Over 25% of our annual sales and over a 100% of our profit for the year will be generated in those nine weeks. The marketplace has become very crowded and promotional during the holiday season, and we know that we need to be meaningfully different to earn our share of customer traffic.

Thinking beyond this year, with the help of the team here, I’ve been going through a discovery period, assessing the strengths and weaknesses of the organization. We’re in the initial phases of developing a strategy we are referring here to as WIN, What’s Important Now. WIN will involve tactical plans to improve performance in the next 12 to 18 months and strategic ideas that we will test and eventually implement down the road. WIN will focus on three areas: first merchandising and inventory, our single largest asset and why we are in business; second, real estate, our next largest asset. Are we in the right markets and do we have the right locations within those markets? And lastly, cost structure; are we operating as efficiently as we can? Again, we have not developed the specifics and would not expect to be in a position to elaborate in great detail until later this fall. However, I do want to share some of my initial thoughts.

We do have a meaningful niche in the marketplace. I believe we have the opportunity to further differentiate our merchandise assortment from our competition and become more dominant in specific categories. In the majority of the store, the way we achieve that dominance is through impactful closeouts and more of them. We are growing our level of closeouts, but I’m not sure our sights are set high enough. We must be more aggressive and relentless in our pursuit of deals that leave the customers saying “how did they do that”? I want to be very clear here, closeouts are incredibly important, and after only six weeks, I have a very clear appreciation of that. Closeouts can come in all shapes and sizes, in all categories, and potentially some categories that we don’t carry in our stores everyday. However, seasonal and furniture are two categories which are not heavily closeout but need to play a significant role in our strategy.

Seasonal done right can be a very profitable business. Our selection this year is better than compared to a year ago, but I believe we still have upside opportunity through assortment and better allocation of goods by store or clusters of stores based on demographics. Furniture is another

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Final Transcript

Aug. 17. 2005 / 8:30AM, BLI — Q2 2005 Big Lots, Inc. Earnings Conference Call

business that is not heavily closeout today but we have the opportunity to be the dominant low, entry price point furniture retailer in the country. Furniture is an excellent differentiator and has the benefit of leveraging the customer base that already shops us today for great closeouts.

Customer research will be utilized to gain an in-depth understanding of where opportunities are in the marketplace by merchandise category and by customer segment. This could involve carrying fewer categories or adding a new category, I’m not sure yet. With the help of our new planning and allocation systems, we will also develop store clusters which will play into our merchandising strategy. Then we will test and learn.

The second component of WIN is the real estate strategy. A good real estate strategy focused on the right locations can turn a good merchandising assortment into a great one, in my opinion. I believe the timing on this project is critical, as store level performance can change quickly in our current environment. We are reviewing recent store opening trends and store and market level profitability to understand the attributes that lead to our most profitable stores. I’m not willing to go much further on the details here other than to say cash is very important to us, and we will only invest in stores where we have the highest chance for success.

Last, but certainly not least, is cost structure. Our cost structure, whether you look at it on a percent of sales basis or dollars per square foot basis, is higher than most in our industry. Now, clearly a portion of that variance relates back to merchandise and sales productivity of our current assortment. However, in the last five years, we’ve invested in a business expecting to drive higher sales and leverage the cost structure. It’s not happened yet, and is still the goal, but the business is looking to become more efficient now and not wait on the sales of someday to make this organization more profitable. When we execute in these three areas, incremental cash flow will result.

In this organization, we are very focused on generating cash and managing it to drive shareholder value. Joe and I clearly understand that it is our shareholders’ cash and we are the custodians. And it will always be our goal to provide you with a reasonable return on your investment.

As I’ve reminded our associates, our strategy for the future will be an ever-changing one. Retail is about having a niche or a meaningful reason to exist, having great locations, and being as efficient as you can be on the cost side, and executing the plan on a consistent basis. It’s ever-changing and fun and that’s why we’re in this business. We have a fantastic opportunity here at Big Lots to create value for our shareholders.

Tim Johnson - Big Lots, Inc. — VP, Strategic Planning, IR

That concludes our prepared remarks John, if you can now open it up for questions.

QUESTION AND ANSWER

Operator

[OPERATOR INSTRUCTIONS] Our first question comes from the line of David Mann with Johnson Rice. Please go ahead.

David Mann - Johnson Rice — Analyst

Yes. Good morning. Steve, I wanted to talk to you just a little bit about some of your thoughts about the future, specifically in real estate. Can you just give a sense on, perhaps, the number of stores you’re seeing that are actually losing money on a four wall basis or are most of them making money, generating cash flow?

Steve Fishman - Big Lots, Inc. — Chairman, CEO

David, now is not the time for us to do that. We’re really doing a great analysis of every single solitary location that we have in our portfolio, and as soon as we are available to understand what that strategy’s going to be, we’ll deliver that to you, and I don’t anticipate that taking a long period of time to do it.

David Mann - Johnson Rice — Analyst

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Final Transcript

Aug. 17. 2005 / 8:30AM, BLI — Q2 2005 Big Lots, Inc. Earnings Conference Call

Okay.

Steve Fishman - Big Lots, Inc. — Chairman, CEO

It wouldn’t be fair of me to give you that idea now because we’re really trying to analyze it from every single solitary angle.

David Mann - Johnson Rice — Analyst

But it does sound like you, with the way you’re talking about cash flow, that you’re not necessarily committed to opening any more stores if they’re not showing the kind of pro forma you want.

Steve Fishman - Big Lots, Inc. — Chairman, CEO

I think that’s correct. I mean we have an obligation to open store locations and grow this company with a very high likelihood of a great return in the first 12 to 18 months that we open those locations. And if that means that we’re not opening a significant amount of stores in the next 18 months, then I think so be it. And I think we really want to understand that real estate strategy and it’s really critical to this company. So we’ll have a real good understanding and we’ll let the market know probably in the next 60 to 90 days exactly what we plan on doing next year. That won’t hold us back as we go forward in the future. But what we’re really trying to do is tactically position this business for the next 18 months.

David Mann - Johnson Rice — Analyst

Okay. And then one other question on advertising, you didn’t really comment on that too much in terms of your prepared remarks.

Steve Fishman - Big Lots, Inc. — Chairman, CEO

That was intentional, David. I think the merchandising strategy has got to be refined, and I think the marketing strategy is executed along with what that merchandising strategy is going to be. I think we run media and I think we run print, and I’d like to understand what’s really good about the media and what’s really good about the print, but that’s going to come along after the merchandising strategy is honed.

David Mann - Johnson Rice — Analyst

Okay. Thank you. Good luck.

Operator

And our next question comes from the line of David Buchsbaum with the Stanford Group. David, your line is open.

David Buchsbaum - Stanford Group — Analyst

Thank you. Good morning. I guess to follow what David had said, since you aren’t going to address the advertising until you address the merchandising, from a merchandising perspective, what areas do you see as being difficult in terms of differentiating yourself. For example, consumables does have more difficult comparisons to last year, but also perhaps less differentiation than it’s had in the past from competition. Could you comment on what areas of the store you think are less differentiated than they have been in the past?

Steve Fishman - Big Lots, Inc. — Chairman, CEO

I think that’s a good assessment on the consumables parts of the business. I think from a retail perspective, everybody’s in the consumable business, and I’m not sure that’s as much of a differentiator. Although, it’s important to understand it’s a large percentage of our business today, and it varies on a percent basis from region to region and from urban to suburban. That’s one of the reasons why I think we’re really going to

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Final Transcript

Aug. 17. 2005 / 8:30AM, BLI — Q2 2005 Big Lots, Inc. Earnings Conference Call

understand clusters of stores. I think the furniture business is an unbelievable opportunity for this company. Particularly at the entry level, and I think we really can dominate that business, and actually, it’s the strongest business that we have right now. I think the seasonal business can help continue to differentiate us and has very high upside from a profitability standpoint if it’s executed very well. I think the home furnishings parts of the business and the hardlines parts of the business also offer great opportunity particularly in the closeouts genre.

But really, David, that’s exactly what we’re going to be going through in the next 60 days and really understanding the pluses and minuses and where we operate and execute well and I really want to be prepared to come back to the marketplace and say this is where we’re going to dominate the closeout business. This is where we’re going to execute and dominate a great in and out business, and where we feel we need to supplement that business with great private label parts of our business.

David Buchsbaum - Stanford Group — Analyst

Thank you. And with respect to the cost structure, are there in your discussions with people thus far, are there any call outs there with respect to any low-hanging fruit on the cost structure side?

Steve Fishman - Big Lots, Inc. — Chairman, CEO

I don’t think there have been any big surprises yet.

David Buchsbaum - Stanford Group — Analyst

Okay. Thank you.

Operator

Our next question is from Mitch Kaiser with Piper Jaffray. Please go ahead.

Mitch Kaiser - Piper Jaffray — Analyst

Good morning and welcome Steve.

Steve Fishman - Big Lots, Inc. — Chairman, CEO

Thank you.

Mitch Kaiser - Piper Jaffray — Analyst

I guess the question on the real estate, if I heard you right, you’re going to evaluate pretty much all the stores, then, and potentially there could be some store closings, then.

Steve Fishman - Big Lots, Inc. — Chairman, CEO

I think in the retail environment, any great strategy is constantly opening stores and constantly closing stores. Real estate changes, and we need to make sure every one of our boxes have an operating profit for us and give the Company and the shareholder a return that they expect. If they’re not performing, we take a look at it, we understand it, and we find out what it’s going to take for us to get it to a performance level that is acceptable to us. If we can’t take that performance level to an acceptable return, then I think we need to reallocate our assets.

Mitch Kaiser - Piper Jaffray — Analyst

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Final Transcript

Aug. 17. 2005 / 8:30AM, BLI — Q2 2005 Big Lots, Inc. Earnings Conference Call

Okay. And then how do you think about, you mentioned consumables is not a differentiator, but it’s obviously a traffic driver, and traffic has kind of been the issue. What’s your thought there with respect to kind of balancing the two?

Steve Fishman - Big Lots, Inc. — Chairman, CEO

I think we need to dominate the name brand closeout business in every category we want to be in and it’s particularly going to be focused in the consumables part of the business, that includes health and beauty aids, food, and all the businesses or classifications of business in consumables. I think if we can’t dominate or if we’re in a time frame where we can’t dominate a specific classification of name brand closeouts and be significantly underneath all of the competitors that we have out there, then we need to differentiate ourselves with an offering to our customer that’s a wow-type thing, and I think that’s part of the strategy that we’re thinking about, particularly in the consumables arena, but I’m not so facetious to think that we can dominate the consumables business. I mean, you know and I know and everybody listening to us out there, that every retailer in the United States, including every 7-Eleven on every block is in the consumables business, and from an operations, distribution, logistics, and systems standpoint, we either need to be competitive so that we can offer those classifications at a very competitive price or we need to dominate in classifications of businesses we can be dominant in.

Mitch Kaiser - Piper Jaffray — Analyst

Okay. I think you’ve been alluding to the fact that we might get an update on your analysis of where the business is going forward. Would we expect that on the third quarter update or fourth?

Steve Fishman - Big Lots, Inc. — Chairman, CEO

That would be the earliest. I made a commitment to our Board yesterday that I would try to be prepared at the end of the third quarter at our Board meeting to clarify specifically what we’re going to do to execute our strategies, and I would then be in a position to do it after I present it to the Board of Directors. Probably the earliest would be the third quarter call or slightly thereafter.

Mitch Kaiser - Piper Jaffray — Analyst

Okay. Thank you. Good luck.

Steve Fishman - Big Lots, Inc. — Chairman, CEO

Thank you.

Operator

Our next question is from Jeff Stein with Keybank. Please go ahead.

Jeff Stein - Keybank — Analyst

Good morning, Steve. You referred in your comments to the nine weeks of Christmas, and I’m wondering, number one, you indicated you’re not going to be in a position to influence third quarter merchandising trends. I’m wondering is that also the case with the fourth quarter, and number two, how do you deal with an increasingly competitive environment in seasonal products? And I’m speaking specifically about holiday decorative items where everyone, every retailer now seems to be carrying ornaments, prelit Christmas trees and so forth. Again, these are nonbranded items, there’s a flood of imports out there making it easy for many retailers to source these products. How do you differentiate yourself this year in seasonal?

Steve Fishman - Big Lots, Inc. — Chairman, CEO

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Final Transcript

Aug. 17. 2005 / 8:30AM, BLI — Q2 2005 Big Lots, Inc. Earnings Conference Call

I think the answer is how do we differentiate ourselves in seasonal as we go forward into the spring. I think it’s totally unrealistic to have expectations that we’re significantly differentiating ourselves right now. As I said before, I’ve been on board for six weeks, and anything that I could touch wouldn’t be in the seasonal parts of the business, and I think you understand that. You mentioned the fact that there’s a flood of imports . It’s really not a flood of imports. That’s how the seasonal business is really predominantly done other than domestically in the lawn and garden business where some of the product classifications are domestic. All of the fall seasonal business is an import business. I think what we do is work at differentiating ourselves. It may be in classifications of goods. It may be in packs of what our offerings are or values that we offer versus competition, and I think it can be done, and I think we’ll talk a little bit more about it going into the spring season, so that’s probably the best way I can answer that.

As far as Christmas goes, I think I alluded to the fact that we still have an ample amount of open to buy for the fourth quarter right now because of the fact we’re in the closeout business. So although we’ve committed clearly for the seasonal parts of the business, we still have plenty of cash in open to buy for trying to differentiate ourselves in finding fabulous closeouts that are going to want to encourage our customer to come into our stores and differentiate ourselves in the marketplace, particularly when you get into the weekend and Thanksgiving and into into the five weeks of Christmas. We’re working on those kinds of things. Don’t expect wonders, but we certainly are not sitting back and saying we’re going to lie down in the fourth quarter this year.

Jeff Stein - Keybank — Analyst

Thank you. Good luck.

Steve Fishman - Big Lots, Inc. — Chairman, CEO

Thanks.

Operator

Our next question is from the line of John Zolidis with Buckingham Research. Please go ahead.

John Zolidis - Buckingham Research — Analyst

Hi. Good morning. A question for you, Steve. You said that you thought Big Lots kind of dominated the closeout niche. I was wondering if you could share with us kind of how you would define that niche, who you think your competitors are, and whether you think that area has become more or is becoming more or less favorable going forward. Thanks.

Steve Fishman - Big Lots, Inc. — Chairman, CEO

I hope you’ll feel I’m addressing it. Let me talk to you about how we talk about our business here inside this company right now. The closeout business is very clear. Unbelievably great values from branded manufacturers, whether they be domestic or imports that you would find in any type of general merchandise specialty retailer, department store, any other retailer that we can show a significant value that our customer understands immediately. That’s number one.

Number two, and I don’t want this misinterpreted, we’re not focused so much about what other people are doing. We really are focused inside this building about what we want to do and how we want to create the greatest closeout niche that there is in our marketplaces and we’re trying to some degree put blinders on and not worry so much about what other people are doing but really focus on what we want to do, execute that strategy better than anybody else. If you ask me who our competition was, clearly it would be anybody who carries any kind of branded merchandise that we may have in our store, and as long as we can carry it at significant values better than they do, then we’re executing our closeout strategy.

John Zolidis - Buckingham Research — Analyst

Okay. And then the last part of that was just do you think looking forward that this particular niche is getting more or less favorable?

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Final Transcript

Aug. 17. 2005 / 8:30AM, BLI — Q2 2005 Big Lots, Inc. Earnings Conference Call

Steve Fishman - Big Lots, Inc. — Chairman, CEO

I can’t speak for anybody else. For us it’s going to be more favorable. I’ve been involved in a lot of businesses out there today and in the last particularly 15 years that have all been challenged, and our availability of really good quality closeout goods only continues to be good and in some cases better and we think it’s going to continue to be better. The retail environment continues to be challenged from a retail standpoint, from a manufacturing standpoint. People are going more than they’re coming at this particular point. And we’re the guys who are stepping up to the bar and going to be ready to take advantage of that.

John Zolidis - Buckingham Research — Analyst

Great. I look forward to hearing more details of the strategy as it comes together.

Steve Fishman - Big Lots, Inc. — Chairman, CEO

Thanks, John.

Operator

Our next question comes from the line of Ralph Jean with Wachovia Securities. Please go ahead.

Ralph Jean - Wachovia Securities — Analyst

Great. Thank you. Many of the home furnishing retailers have struggled recently. Many of them think it’s a macro situation, which is debatable, and you pointed out you see a tremendous opportunity there, particularly at the entry level, so who do you think you would be positioning yourself against and also isn’t financing a pretty important part of driving that business?

Steve Fishman - Big Lots, Inc. — Chairman, CEO

Well, now you’re really kind of are talking about two separate businesses. If you’re talking about furniture, and if that’s what you mean, the answer could be yes if you were a midline or an upper furniture retailer, and I think you’re kind of alluding to that when you said home furnishings. Is that what you meant the furniture business, Ralph?

Ralph Jean - Wachovia Securities — Analyst

Yes.

Steve Fishman - Big Lots, Inc. — Chairman, CEO

I think actually our entry level customer has cash to buy what they need. They may not buy as high a ticket merchandise, but they need to replenish on a more consistent basis because of their mobility, and I really like that business. It is a credit business and a larger credit business, of course, the more midline and upper end economic background customer that you go after. We do have credit. We do have a credit program set up with HSBC which they’re about as good as anybody in the business. But our credit business as a percent to total is not near as significant as my experience has been in the past with, of course, the last furniture retailer that I was in business with. Frankly, I don’t see that as a problem. I see that as an opportunity. It just means we’re getting cash versus credit, and cash is a pretty good thing to have.

Ralph Jean - Wachovia Securities — Analyst

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Final Transcript

Aug. 17. 2005 / 8:30AM, BLI — Q2 2005 Big Lots, Inc. Earnings Conference Call

Yes. Well, I agree with that. One of the things you guys have pointed out as far as declining customer traffic trends is the high gasoline prices eating into discretionary income and spending for your typical customer, so they’re cutting back spending, but furniture tends to be a higher ticket item.

Steve Fishman - Big Lots, Inc. — Chairman, CEO

It does, but let me tell you what we’re talking about here. We alluded, just like every retailer has alluded particularly in the last 24 hours, about gasoline prices costing some customer traffic and the economics of our customer. We’re very focused on executing our strategy and executing it and merchandising it at a store level and I think we really have some great opportunities, Ralph to grow this business because of things we need to do internally and I think we can do things a lot better and we have growth opportunity because of that. We’re not going to allow some of those other economic issues to hold back what we think we have the ability to do. What I’m telling you is, we can do things a lot better internally.

Ralph Jean - Wachovia Securities — Analyst

Okay. That’s fair. Now, on the competitive positioning, though, many of your customers I believe would go to a Rent-a-Center or RentWay. I mean who do you see directly as who you might take share from, one, why this is a great opportunity to get share?

Steve Fishman - Big Lots, Inc. — Chairman, CEO

Well, the nice thing about the furniture business and maybe you’re a little bit more experienced than me. But my background tells me that it’s a regional business or a local business, not a national business. So the answer is, if you felt we had a competitor, it would depend upon region of the country and in many cases it would depend upon the city itself. Clearly there are some good people in the southeast that I know about and there’s some good people on the West Coast but it’s very selective. And most of those dominant players are in midline or upper end type businesses. So although there may be — I’m sure there are Rent-a-Centers and Aaron Rents and some of those other people and selectively in some of our markets, those are on a rental basis and pretty high interest rates. We think we have terrific value in better quality furniture, better quality entertainment areas, the upholstery business, and in some cases the accessory and potentially the bedroom parts of the business; in the entry level parts of the business where none of those regional players want to play.

Ralph Jean - Wachovia Securities — Analyst

Okay. That’s fair, and then just lastly, to confirm something you just said, do you think — or is one of the strategies you’re considering, getting more involved in the credit side of the business?

Steve Fishman - Big Lots, Inc. — Chairman, CEO

No, not at all. You asked me if credit was very, very important. We said selectively, I think it is for mid to upper end-type customers. It clearly is not as prevalent in our entry level customer, and we are involved and have a credit card and have credit available for our customers, but as a normal percent to total in the furniture business, based on my experience, our customer doesn’t look to credit or frankly isn’t approved at the levels that a normal mid to higher economically advantaged customer is approved on a credit basis.

Joe Cooper - Big Lots, Inc. — SVP, CFO

Ralph, this is Joe. Just to clarify, the program with HSBC, our proprietary credit card, is a new program and has been rolled out into this year and is now available in all stores. But that’s in the last quarter.

Ralph Jean - Wachovia Securities — Analyst

Right. That’s what caused my question there and I assume that’s third party.

Joe Cooper - Big Lots, Inc. — SVP, CFO

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Final Transcript

Aug. 17. 2005 / 8:30AM, BLI — Q2 2005 Big Lots, Inc. Earnings Conference Call

I’m sorry. It is. It’s a furniture focused credit card right now. It’s not store- wide at this point in time, so it’s in the introductory phase, and that’s really why the percent of sales on that credit card is lower. Plus, we’re not choosing to be as promotional as some of the destination-type furniture stores that are very heavily focused on long-term financing strategies at the higher end of that market.

Ralph Jean - Wachovia Securities — Analyst

Okay. Thank you very much.

Operator

Our next question comes from the line of Ronald Bookbinder with Sterne, Agee. Please go ahead.

Ronald Bookbinder - Sterne, Agee — Analyst

Good morning. The store payroll cut that helped leverage the SG&A this quarter, do you feel that these cuts can be maintained going forward, and what sort of impact do you think that would have on shrink, customer checkout, and the overall atmosphere of the stores?

Joe Cooper - Big Lots, Inc. — SVP, CFO

Hey, Ron. This is Joe. I’ll take that one. The store payroll you’re characterizing as cuts, we characterize that as just leveraging our store payroll down in a period of declining sales, so we allocate hours based on anticipated sales and we clearly allocate less hours in a period of declining sales, so that’s a leverage or a payroll planning strategy that we have used in the past.

Ronald Bookbinder - Sterne, Agee — Analyst

But you don’t feel there’s a bottom at some point where you don’t want to cut store payroll anymore.

Joe Cooper - Big Lots, Inc. — SVP, CFO

Oh, there is a bottom. We do have minimum payroll in our stores to operate. There’s a bottom for every retailer where you can’t cut anymore. You need a certain number of people in the store.

Ronald Bookbinder - Sterne, Agee — Analyst

Yes. But so you haven’t seen an impact, then, on anything like freight or the cleanliness of stores or the time of customer checkout because I know you spent a lot of money improving the look of the stores and on systems to increase checkout. So this isn’t creating any sort of a loss of the progress that you had made through the renovations?

Steve Fishman - Big Lots, Inc. — Chairman, CEO

Ron, it’s Steve. Let me take that on. I’ll reiterate what Joe said. First off, it’s a function of leveraging, being intelligent in running a business on declining sales. One, we have seen no decline in customer service in stores. Our store operations people have been just terrific about saying what they’re capable of handling and what they’re not capable of handling. If they get to a point where they’re yelling uncle, they will clearly come back to us. Two, we have had no issue with freight in our stores or a reduced level of customer service at our checkouts in any way, shape, or form that I’ve heard or seen, not that I’ve been in 1500 stores, I’ve been in a fair amount of stores from coast to coast almost in the last well, I say six weeks since I’ve been with the Company, but I’ve been in a large number in the last 60 to 90 days.

And thirdly, we’ve seen no decline from a security standpoint because of that, either. So I mean, do we have an opportunity as we go forward? As we get more efficient, as we flow inventory more intelligently, and planning and allocation systems continue to check in and give us better

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Final Transcript

Aug. 17. 2005 / 8:30AM, BLI — Q2 2005 Big Lots, Inc. Earnings Conference Call

opportunities of flowing inventory better to the stores, and our distribution center network continues to become more and more efficient in flowing inventory in the stores, there may be an opportunity there but we’re not seeing any decline in service or flow of inventory

Ronald Bookbinder - Sterne, Agee — Analyst

Okay.

Joe Cooper - Big Lots, Inc. — SVP, CFO

Ron, remember that a piece of that SG&A dollar decline was the planned elimination of an ad circular.

Ronald Bookbinder - Sterne, Agee — Analyst

Right. And you all are planning the same amount of circulars for this coming quarter as last year?

Joe Cooper - Big Lots, Inc. — SVP, CFO

Yes, for the third quarter.

Ronald Bookbinder - Sterne, Agee — Analyst

For the third quarter. Okay. Great. Thank you.

Joe Cooper - Big Lots, Inc. — SVP, CFO

Thanks, Ron.

Operator

Our next question is from the line of Randy Hit with Sigma Capital. Please go ahead. Randy, your line is open. Do you still have a question? Our next question comes from the line of David Mann with Johnson Rice.

David Mann - Johnson Rice — Analyst

Yes. During your prepared comments, Steve, I think you talked about the importance of generating cash and sort of using that to increase shareholder value. Wanted to know if you’d just talk a little more about that? Because it seems like the Company should be generating a decent amount of free cash flow even with the sort of the depressed operating results. So what would your thoughts be, let’s say, on a buyback given that the Company’s done that historically, especially with the stock at historically low levels?

Joe Cooper - Big Lots, Inc. — SVP, CFO

I’ll take that one, David. It’s Joe. Yes. Our free cash flow, as you know, our estimates for this year are about $70 million. That’s at the lower guidance number, and as we’ve said before, since we generate that cash in the fourth quarter principally, we would entertain with the Board a share repurchase after the point that the free cash flow has been generated. And that’s consistent with our prior communication to the Street.

David Mann - Johnson Rice — Analyst

Okay. And then one housekeeping item, the eliminated circular, can you give us a sense on how much in dollars that saved you in the quarter?

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Final Transcript

Aug. 17. 2005 / 8:30AM, BLI — Q2 2005 Big Lots, Inc. Earnings Conference Call

Tim Johnson - Big Lots, Inc. — VP, Strategic Planning, IR

Yes. David, this is Tim. Advertising circulars, depending on the number of pages, can range anywhere between $2 and $2.5 million in terms of cost, so that was a four-page ad that we eliminated, so somewhere in the $2 to $2.5 million range.

David Mann - Johnson Rice — Analyst

Great. Thank you.

Operator

Our next question is from the line of Ralph Jean of Wachovia Securities.

Ralph Jean - Wachovia Securities — Analyst

My real question was just answered on the repurchase. But one thing I just want to confirm with you, everybody in the dollar store space is getting into the coolers, refrigerator coolers to offer perishables, frozen food, accept electronic benefits transfers. Am I hearing today that you’re really not looking to go there and you want to differentiate by staying with broadlines?

Steve Fishman - Big Lots, Inc. — Chairman, CEO

We have freezers and we have perishable-type food in some of our stores. I think I really want to understand if that’s going to continue to give us the kind of return that we expect.

Ralph Jean - Wachovia Securities — Analyst

Okay. Thank you.

Operator

[OPERATOR INSTRUCTIONS]. And our next question comes from the line of Shakib Alaam with High Field Capital. Please go ahead.

Shakib Alaam - High Fields Capital — Analyst

Hi, Steve. It’s Shakib Alaam from High Fields Capital. Have you thought about the capital structure of the business? .

Steve Fishman - Big Lots, Inc. — Chairman, CEO

I’ve been here for six weeks. I want to focus on the merchandising strategy. We’re a retailer, and give me another six weeks to take a look at that.

Shakib Alaam - High Fields Capital — Analyst

Okay. Thanks.

Tim Johnson - Big Lots, Inc. — VP, Strategic Planning, IR

John, any more questions in queue?

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Final Transcript

Aug. 17. 2005 / 8:30AM, BLI — Q2 2005 Big Lots, Inc. Earnings Conference Call

Operator

We do have one more question.

Tim Johnson - Big Lots, Inc. — VP, Strategic Planning, IR

Okay. We’ll take one more question, then.

Operator

Okay. Our next question comes from the line of Jacques Girabaldi with Royal Capital. Please go ahead.

Jacques Girabaldi - Royal Capital — Analyst

Hi. Just a quick question on the real estate. What percent of stores do you own and then for your leased stores, what’s the average term? Is there any value you can capture by closing stores and exiting early?

Steve Fishman - Big Lots, Inc. — Chairman, CEO

The answer is it’s a very small percentage of our stores. It’s almost insignificant.

Joe Cooper - Big Lots, Inc. — SVP, CFO

3%.

Steve Fishman - Big Lots, Inc. — Chairman, CEO

3% that we own. The rest are leased . The average lease I’ll say is five years, but the reality is we have 1500 locations from coast to coast, so they vary dramatically. The answer to your third question is we’re going through that exercise right now.

Jacques Girabaldi - Royal Capital — Analyst

Okay. Thank you.

Tim Johnson - Big Lots, Inc. — VP, Strategic Planning, IR

Okay. John, I think that’s all the questions for now. I’d like to thank everyone for joining us and we look forward to talking to you soon. Have a good day.

Operator

Ladies and gentlemen, this concludes today’s presentation. If you’ve missed any portion of today’s call, a replay will be available to you within the hour. You can access the replay by dialing 1-800-207-7077 and entering pin number 4051. Again, that phone number is 1-800-207-7077, pin number 4051. Once again, this concludes today’s teleconference. You may now disconnect.

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Final Transcript

Aug. 17. 2005 / 8:30AM, BLI — Q2 2005 Big Lots, Inc. Earnings Conference Call

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