Operator: Good day, ladies and gentlemen, and welcome to today's Big Lots First Quarter 2013 Conference Call. As a reminder, today's conference is being recorded.
At this time, I would like to turn the conference over to your host today, Mr. Andy Regrut, Director of Investor Relations. Please go ahead, sir.
Andrew D. Regrut - Director, Investor Relations: Thanks, Casey, and thank you everyone for joining us for our first quarter conference call. With me here today in Columbus are David Campisi, our newly appointed CEO and President; Chuck Haubiel, Executive Vice President and Chief Administrative Officer; and Tim Johnson, Senior Vice President, Chief Financial Officer.
Before we get started, 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.
All commentary today is focused on adjusted non-GAAP results from continuing operations. For the first quarter of fiscal 2013, this excludes a non-recurring after-tax charge of $3.2 million or $0.06 per diluted share which Chuck will touch on in a moment. Reconciliations of GAAP to non-GAAP adjusted earnings for both this year and last year's results are available in today's press release.
Given our Annual Meeting of Shareholders begins at 9.00 am; our comments will be brief to allow for Q&A to be completed by 8.45.
It's now my pleasure to introduce David Campisi.
David Campisi - President and CEO: Thanks Andy, and good morning, everyone. I am going to spend the next few minutes this morning sharing some of my background and experiences along with some of my early observations after three weeks on the job here in Columbus.
I want to start by telling you how excited I am to be here and be part of the Columbus community. Big Lots is a great company. We have an energized and talented workforce, a loyal fan base, and we are a financially strong company and generate significant amounts of cash to reinvest and return to shareholders each year. I look forward to the opportunity to help the team take this great Company to the next level.
For those of you not familiar with my background, I'm a merchant. I spent the last 30 years in retail with many well-known companies including The May Department Stores, Fred Meyer which is a division of the Kroger Company, Kohl's, The Sports Authority and most recently a startup apparel company, Respect Your Universe. I have a direct experience in many of the merchandise categories you see in Big Lots today, including General Merchandise, Home, Electronics, Apparel, Accessories, and Sporting Goods. Based on my own experience as a consumer as well as my professional experience over the last 30 years, I understand the potential for our brand and retail strategy. Additionally, consumer trends suggest we will at some point need a strategy for omnichannel presence as well.
Big Lots offers a unique and compelling shopping experience for millions of customers across America. The Company's growth has elevated Big Lots as a closeout retailer and created value for some of our longer-term shareholders, but that doesn't mean that there isn't work to be done to enhance our consumer appeal through merchandising strategy and marketing message. From my own research and perspective, and from discussions with the Big Lots board members and from my interactions with the associates, I have met thus far, I have a growing appreciation for the opportunity at hand. My top priority in the coming weeks and months ahead will be to engage with our executive leadership team, our merchants and our planning groups, our store operations team as together we will travel to stores and our single focus will be to learn more about the business and our customers' wants and desires and develop a vision on how best to move Big forward.
Merchandising, marketing and execution all the way through the stores are the engine which needs to accelerate in this business at a much quicker pace and with a sense of urgency.
The team has already identified a handful of initiatives which are in test mode and I believe some have potential; coolers and freezers, store remodels, and the loyalty program, all of which you have heard on prior calls. I have some level of experience with each of these items. From my Fred Meyer days, I clearly understand the value of consistency and food and consumables. More recently with my time at Sports Authority, I again clearly understand my firsthand – firsthand how market remodels can create a better customer experience by improving the physical layouts and appearance of our stores. And while I'm studying the tactical details, I believe that these programs have the kind of potential necessary to be important elements in the next phase of our growth. But at the end of the day, I'm a merchant at heart and future growth and decisions will be focused on the customer. She has to come first and we're up to the task.
I am delighted to join Big Lots and welcome the opportunity to build on the strong franchise the team and the Board created for the benefit of our shareholders. I can assure you that we are moving quickly and I look forward to updating you on our progress.
Now, I like to turn the call over to Chuck.
Charles W. Haubiel II - EVP, Legal and Real Estate, General Counsel & Corporate Secretary: Thanks David, and good morning, everyone. Before I provide and update on our progress in real estate, I like to discuss a couple of legal items which probably deserves a mention. First, as Andy referenced in his opening comments, we incurred a non-recurring accounting charges pass quarter. It related to a customer accident that occurred many, many years ago in one of our stores. The matter has been in dispute in the Texas court system for some time, although we have every intention of continuing the appeals process, a recent decision made it necessary to record a $3.2 million charge identified in our press release this morning.
Second, you may have noticed the 8-K we filed last week providing an update on the SEC and U.S. attorney inquiries detailed in our Form 10-K. In our filing last week we disclosed the SEC had notified us in writing that they have completed their investigation and will not recommend any enforcement action. In addition, we have also highlighted a similar subject the U.S. attorney has not requested any additional information from us after our response to the subpoena received last in 2012.
Moving on to current business and real estate, in the U.S. we opened 14 new stores in the first quarter and closed 4 leaving us with 1505 stores and total selling square footage of 32.9 million. As we mentioned in our last call, the plan for the full year of fiscal 2013 is to open 50 new stores, close 45 for a net add of 5 stores.
From a testing standpoint, there are two I'd like to update you on. First, we reported on our last call 75 stores in five markets had been selected for our coolers and freezers test. The markets are located across the country with a variety of consumer demographics represented. The merchandise in the coolers and freezers is being replenished by a third party providers and includes convenience items like milk, eggs, cheese, and meat, as well as branded frozen foods, including pizzas, dinner entrees, breakfast foods, and ice cream. The goal of the test was to offer an expanded assortment of food related items in classifications of merchandise which would position us towards becoming SNAP eligible.
SNAP or supplemental nutritional assistance programs provide government assistance to economically challenged households throughout the country. It's reported that over 47 million Americans are now enrolled in the SNAP program. We believe this could provider higher traffic to our stores given today our inability to accept this form of tender which could be a barrier for entry for customers who would prefer to shop our stores. Also 75 stores were fully merchandised with fresh product, and over the last couple of months our current customer response has been encouraging. While still early in the test, sales of refrigerated and frozen products have met our expectations and the categories which were either eliminated or downsized to make room for the new program have had minimal impact on our results.
As recently as last week, we began accepting SNAP benefits in our stores which is designed to encourage customer traffic which will ultimately determine the success of this test. We will begin to advertise the program locally highlighting this new form of tender.
The next testing initiative is full market remodels. As we noted on our last call, the first two markets tested last year Miami, Florida and the Modesto, Fresno area of California experienced an encouraging lift in the business from that test and the trend continued on through the first quarter of 2013. We previously announced our intention to expand the test in 2013 with three additional markets, representing approximately 30 stores. The markets for 2013 are located in Florida, California and the Tennessee, Virginia area. The work for these stores is planned to occur in phases over the spring and summer, with the first wave have started last month.
Similar to last year, the investment per store is expected to be approximately $300,000 and the remodel will address all physical aspects of the store including new fixtures, floors, ceilings, doors, lighting, and signs. Once again, we will continue to provide updates as the test progresses.
A new test which we've not spoken about in detail revolves around an urban store strategy. During the second quarter, we will be taking a group of approximately 20 locations and we're working the store layout to expand the presence and consistency of product flow of consumables and food. All but one of these stores will have coolers, freezers, and SNAP qualification, while downsizing other categories which may not be as relevant to a customer located in an urban stratus. The process of changing the store is not as extensive as a full market remodel nor is cost or capital-intensive. However, we believe this type of change can be impactful and we're anxious to see what is possible with a more tailored merchandise assortment in this type of location.
Moving on to Canada, we opened our first Big Lots store in April. It's located in Orillia, which is in the Southern Ontario. The store is similar in size and has the same look and feel of a new Big Lots store in the U.S. The initial customer response has been very strong and the volume levels we're achieving rival those of some of our most productive Big Lots stores here in the last few years. We did not close any locations in Canada during the quarter, so we have 80 stores across the country. We will open one additional Big Lots store in Canada during the summer, and we will test rebranding of a handful of stores in Ontario over the next few weeks.
With that, I'll turn the call over to T.J.
Timothy A. Johnson - SVP, Finance: Thanks, Chuck, and good morning, everyone. I'm going to briefly cover Q1 adjusted results and then discuss our guidance for Q2 and the outlook for the full year.
Net sales for the consolidated Company for the first quarter of fiscal 2013 were $1.311 billion, an increase of 1.3% over the $1.294 billion we reported last year. Comparable store sales for the consolidated Company decreased 2.5% for the quarter, which was in line with our initial guidance of a 1% to 3% decline.
Adjusted income from continuing operations for the consolidated Company was $35.5 million, or $0.61 per diluted share, also consistent with our guidance, which was $0.53 to $0.65 per diluted share. This results compare to last year's adjusted income from continuing operations of $44.2 million or $0.68 per diluted share.
For our U.S. operations, sales were $1.275 billion, an increase of 1% compared to the first quarter of last year. Comparable store sales for U.S. stores open at least 15 months decreased 2.9%. Comp trends experienced a soft start to the quarter as federal income tax refund delays have slowed consumer buying. The trends did improve as tax refund activity normalized; however, cool weather conditions, particularly in the latter part of March and throughout much of the month of April, impacted results. Not surprisingly, we did see noticeable differences in performance by region of the country, with markets such as Florida, California and other warmer-weather areas outperforming the balance of the Company.
From a merchandise perspective, we saw strength in our furniture business, which comped up mid-single-digits on top of a mid-single-digit increase last year. Upholstery and case goods were the best performers. Consumables also increased in the low-single-digits (indiscernible) content and chemicals, housekeeping and paper. While on the food side of the business, our comps were down to last year as we continue to work towards providing more balance and assortment across classifications. Electronics and other were down low-single-digits for the quarter, and our home business was down mid-single-digits. In home, we expect near-term trends to remain difficult and promotional to make room for new product. We believe that customer will start to recognize some level of change of inventory content in the early fall timeframe.
As you might expect, the categories with the highest level of weather sensitivity, namely seasonal and hardlines, were the toughest businesses for the quarter. Our seasonal business, which is key to Q1 sales and customer traffic, comped down mid-single-digits. Clearly, in warmer weather areas, the results were much different as the customer recognized our quality and content changes compared to last year. However, in markets where temperatures were 10, 20 degrees or more below last year, which was the case in most of the country, customers are either waiting or deferring this type of purchase this year. We're not sure which is the case, but we'll have our answers soon enough in Q2.
For the first quarter of fiscal 2013, adjusted operating profit dollars for our U.S. operations were $66 million as our adjusted rate declined to 5.2% compared to 6.4% last year. As anticipated, our gross margin rate of 39.5% was down 60 basis points compared to last year due to higher markdowns and increased promotional activity and an unfavorable sales mix due to lower comps in the higher margin seasonal and home categories.
Total adjusted expense dollars were $437 million and the first quarter adjusted expense rate was 34.3% compared to 33.7% last year. Expense deleverage resulted from growth of certain fixed expenses such as depreciation and occupancy-related costs along with higher bonus expense given our close proximity to our operating plan in Q1. Expense performance in our operational area such as stores and DCs was essentially flat as a percent of sales despite the negative low single-digit comps.
Interest expense of our U.S. operations was slightly higher than last year, an outcome of higher debt levels on our credit facility, and our adjusted U.S. tax rate was 38.8% compared to 37.3% last year.
In total, our U.S. business reported adjusted income from continuing operations of $40 million or $0.69 per diluted share for the first quarter of fiscal 2013, compared to last year's adjusted income from continuing operations of $0.77 per diluted share. This result was consistent with the better end of our guidance provided to investors in early March.
In Canada, sales were $36.6 million in the first quarter of fiscal 2013, a 13.5% increase compared to the first quarter of last year. Comparable store sales increased 13.2%, and the net loss for the quarter was $4.4 million or $0.08 per diluted share. All of these results were in line with our guidance provided to investors in early March.
Moving on to the balance sheet, inventory on a consolidated basis ended the first quarter of fiscal 2013 at $885 million, up 4% to last year, driven by an increase in U.S. store count. Average store inventory levels in U.S. stores were essentially flat to last year.
CapEx for the first quarter of fiscal 2013 totaled $17.3 million compared to $18.3 million last year, and depreciation expense was $27.5 million, an increase of $2.2 million to last year.
Consolidated cash flow, defined as cash from operating less investing activities for the quarter was $44 million compared to $108 million last year. The change in cash flow year-over-year was directly attributable to payables leverage. Our LY rate of approximately 50% was unusually high and was a function of our conversion to new inventory systems, which initially slowed our payables cycle. This year's AP leverage of approximately 40% is more typical.
We ended the quarter with $72 million of cash and cash equivalents and $137 million of borrowings under our credit facility compared to $83 million of cash and cash equivalents and no borrowings under our credit facility for the same period last year. Our net use of cash and debt over the last 12 months was focused on share repurchase activity, funding our Canadian operations and repaying borrowings under our credit facility.
As noted in our press release this morning, we've also extended our current $700 million five-year unsecured revolver. The strength of our credit profile and operations and our strong balance sheet and cash flow generation enabled us to work collaboratively with our existing bank group to extend our credit facility by nearly two years. The facility now covers a five-year period expiring in March 2018, provides us lower rates and fees and maintains the same structure, bank participants and financial covenants as our previous facility.
Turning to forward guidance. For Q2, we expect income from continuing operations in the range of $0.27 to $0.32 per diluted share compared to $0.42 per diluted share in the second quarter of fiscal 2012. This is based on total U.S. sales in the range of plus 1% to minus 1% and comparable store sales in the range of minus 2% to minus 4%. The gross margin rate for the second quarter of fiscal 2013 is expected to be lower than last year's second quarter rate, while our expense rate is expected to increase, driven by higher depreciation and occupancy-related costs.
In Canada, second quarter sales are expected to be in the range of $37 million to $41 million, an increase of 6% to 17%, with comps up in the range of 4% to 14%. This level of performance is expected to result in a net loss in the range of $3 million to $6 million or $0.05 to $0.10 per diluted share.
For the consolidated Company, income from continuing operations is estimated to be in the range of $0.17 to $0.27 per diluted share compared to income of $0.36 per diluted share for the second quarter of fiscal 2012. This guidance is based on estimated sales for the consolidated Company in the range of plus 1% to minus 1% to last year for the second quarter of fiscal 2013 and comparable store sales in the range of negative 2% to negative 4%.
Our updated outlook for the full year fiscal 2013 calls for adjusted income from continuing operations from the consolidated Company to be in the range of $2.87 to $3.12 per diluted share. This compares to previous guidance of $3.05 to $3.25 per diluted share, and last year's adjusted results of $2.99 per diluted share. Our updated outlook is based on an estimated net sales increase for the consolidated Company in the range of 1% to 2% for fiscal 2013 and comparable store sales in the range of flat to minus 1%. We expect this level of financial performance will result in cash flow of approximately $175 million.
For our U.S. operations, we're forecasting adjusted income from continuing operations to be in the range of $3 to $3.20 per diluted share. This update compares to adjusted income from continuing operations of $3.21 per diluted share last year, and it's based on a total sales increase of 1% to 2% and comparable store sales in the range of flat to minus 1%.
For our Canadian operations, we expect sales in the range of $175 million to $185 million, resulting in a net loss of $5 million to $8 million or $0.08 to $0.13 per diluted share. This compares to previous guidance of sales of $180 million to $190 million and a net loss of $0.05 to $0.10 per diluted share.
So, with that, I'll turn it back over to Andy.
Andrew D. Regrut - Director, Investor Relations: Thanks, T.J. Casey, we would now like to open the lines for questions.
Operator: Nathan Rich, Citi Research.
Nathan Rich - Citi Research: David, welcome, and I appreciate the color that you provided at the beginning of the call. Could you maybe talk to us about how you envision your first hundred days at Big Lots and how it all looked like and what you're looking for?
David Campisi - President and CEO: Absolutely. I actually have somewhat laid out a 100-day plan with the early focus this last three weeks on meeting a lot of our folks in the building here at many critical levels, including VP level and directors. And now that I'm pretty much through that, the next 70 days are going to be heavily focused on the merchandising, marketing, and store operations and visiting the stores with very, what I would call, detailed and somewhat intense business overviews with the merchants and the whole team in place in the stores. And once I understand the business much deeper and understand the issues at hand and the opportunities candidly because that's what really they are, then I will be coming back to you guys with a very clearly laid out vision of where I think we need to go. My plans are to develop a deeper focus on the merchandising side and along with, quite honestly, what Steve laid out as far as making our stores more exciting.
Nathan Rich - Citi Research: T.J., could you talk to us about how you feel about the content of inventories right now? Given some of the weakness that you've seen in seasonal, how do you feel about the seasonal aspect of inventories as well?
Timothy A. Johnson - SVP, Finance: That's a good question, Nathan. I guess, clearly, we had some challenges in the first quarter in terms of the velocity of selling on our seasonal product, lawn and garden and summer in particular. And then also, it may not register with everybody that there are others seasonally-sensitive categories in other parts of the business, like Freon and air conditioners, fans, sandals, things like that, that are also impacted when weather's a challenge. I think I'd answer it this way, Nathan. In warmer weather areas of the country we think we got a pretty good read from the customer that, generally speaking, they liked what we had. So whereas 12 months ago on this call, we would have been talking about some challenges we thought we had in price points and quality. We're not hearing that from the customer today, which is a good sign. The challenge is, we may not be able to fully recognize all the benefits of the hard work that the merchants put into doing that because of some of the challenges in weather. So, I think, from a content standpoint, I don't want to pretend that we've got 100% of the SKUs right. There are SKUs that we certainly need to address. But as we go into the second quarter, it's really going to be about kind of who blinks first and are we ready to be promotional and move through the inventory because I can't imagine that we're the only retailer out there that's had impact of weather on their business. So we try to provide for, in our guidance, recognizing where trends are in the month of May and where they were for Memorial Day weekend and also, looking forward, that we would need to be more aggressive on price to make sure that we exit second quarter at appropriate levels and owning it properly.
Operator: Meredith Adler, Barclays.
Meredith Adler - Barclays Capital: I was wondering if you could maybe just talk a little bit more about what you're seeing with consumer behavior. I don't know if you can comment on what you're seeing so far in the second quarter. When the weather gets to be warmer, do you find that people in, say, New York area or Ohio actually do shop? And is there – are people staying away from discretionary or are you seeing that it really is, just when people are in the stores, they are shopping?
Timothy A. Johnson - SVP, Finance: Meredith, it's T.J. I think for the most part in the first quarter, if you think about Marpril, or the March and April combined to eliminate the Easter shift impact, again, in warmer weather in areas, we saw good response to most of our discretionary areas. Again, in the opening remarks we talked about some concerns that we think will live on in categories like Home but for the most part, if you think about Seasonal in warmer weather areas, it performed pretty well. If you think about Furniture, which is highly discretionary, it performed well pretty much everywhere during the quarter, which was very encouraging for us given the late start we got on that selling season, and also given the fact that when the dust settled, there was actually less income tax refund activity year-over-year in terms of dollars out there to be spent. So I guess to answer your question, it's a little bit of a mixed bag. We're seeing good performance in certain of our discretionary categories where we think we're really right for the customer and weather cooperates. In another areas where we don't feel as comfortable with our assortment, clearly the customer is validating that for us too.
Meredith Adler - Barclays Capital: And then maybe talk a little bit about Home, and what you see the issues as being and how you fix them?
David Campisi - President and CEO: Meredith, this is David. I would tell you that I spent a little bit of time in that business a couple weeks ago walking our back-to-school sets, and obviously, it's all about the content and how you fix it is you get focused on the core parts of your business. And I believe that the soft side of the home, which is where we've had some challenges candidly, is better. It still needs to get better, it needs to improve, but we're making progress. That's an area that I know very well. It operates very similar to the apparel business and it will be a heavy focus for me over the next 90 days. But short-term, I think we have some things in play that will get it more stabilized, and then longer term, we'll have a more well thought out strategy.
Meredith Adler - Barclays Capital: Does that mean that you looked at the back-to-school sets and were somewhat disappointed that were building into...?
David Campisi - President and CEO: No, no, no, no, no…
Meredith Adler - Barclays Capital: No!
David Campisi - President and CEO: No, no, I was pleased with what I saw versus what we have in the stores today. My comment is just based on there's still a lots of upside to improve, but it's significantly better than what you see in our stores today.
Meredith Adler - Barclays Capital: And I have one final question. Just, expenses were extremely well controlled; the stuff that was controllable was controlled. Anything in particular to point out? You paid bonuses; that was good. Anything else you're doing to improve efficiency? And what's the prospects for the next three quarters?
Timothy A. Johnson - SVP, Finance: Meredith, I think it's safe to say really expense managements ingrained in the culture, so there are always things that we are doing to try to be more efficient. The first quarter in particular, the stores and distribution center teams to deliver a rate on a negative comp is a pretty heroic effort. There's a lot of work that went into that, I'm sure. The challenge that we have in really flowing through – more through the expense structure, candidly, is we've got to fix the expense base in certain areas; i.e., we're investing in the business for the long-term, so depreciation is rising. We're opening new stores, and they're doing fairly well. But that's a very fixed expense base that on a negative comp, you're going to have a very difficult time leveraging. So to your point, the things we can control we feel very comfortable with. It really comes back to kind of pivoting back to getting some volumes moving in the floors to really leverage the work that's been done.
Operator: Joe Feldman, Telsey Advisory Group.
Joseph Feldman - Telsey Advisory Group: I wanted to ask you, can you give an update on the loyalty program and just kind of where things are at right now? In terms of – I know you've been doing some work on it, and I guess I'm trying to get a better sense of the stickiness of your customer lately and trying to drive traffic into the stores and all that kind of issue.
Timothy A. Johnson - SVP, Finance: Yeah, Joe, we didn't really touch on it in the opening remarks. The test is still going on. I think when we talked about it last we had mentioned there were three different programs we were testing against our existing program. We think we found a winner, and what we're doing now is taking that winner and then going a step lower and saying, okay, what offer within this program that we've designed drives the best response by different customer type? So you, as a core customer, will respond likely differently than Andy, who's a hesitater, or someone else who is an infrequent customer. So that's where we are right now, trying to understand not just what program works, we think we understand that now, but what types of offers need to happen by different types of customers. To-date, what we've seen in the test program that we've done is that we've found an opportunity to improve sales and improve transactions against our loyalty card base with this new program and do it at a lower cost, meaning the markdowns associated with it are not as rich as the prior program. So that's a good combination to have. That's the best update we have right now from an infrastructure and particularly from the stores and an IT perspective. We will be ready to go live in the third quarter with a new program.
Joseph Feldman - Telsey Advisory Group: So third quarter, we should look out for that. And then just another – to drill down into Canada a little bit, just, can you give a little more color on trends up there? I mean, obviously, a very solid comp, the 13%, and guidance is good, up in Canada. Just more flavor on what you're seeing. Do you ultimately maybe rebrand the Liquidation World stores to Big Lots stores, or is it still too soon to tell?
Charles W. Haubiel II - EVP, Legal and Real Estate, General Counsel & Corporate Secretary: Joe, it's Chuck. A couple of things on that. I guess, first of all, we just had our first opening of a Big Lots store up there. So first time the brand has been north of the border. We're encouraged on what we see. But I think what, if Joe Cooper were in here with us what he would tell you is, the stores that we have up there do have a different physical plant than what we have down here. Lot of them are smaller. Liquidation World ran a different business than what Big Lots does from a backroom profile and so forth. So, I think what you're going to see us do is, we kind of said that they're going to have a handful of rebrandings this year. Those are actually closer to the U.S. border than the (indiscernible) store that we opened. And then obviously, everything we're looking at going forward up there when we start adding new stores will have a physical plant the same kind of sized box, if you will, that what we have down here in the States. So, I think at this point, obviously, just getting through the acquisition, getting through moving the merchandise out, introducing the customers to kind of the Big Lots brand, if you will, and also the merchandise categories that are in there now versus what they may have been in the past is enough of the learning going on that we feel very good about the future. But I think ultimately – and obviously, Dave has been here three weeks, I think ultimately you will see some leases up there that will remain Liquidation World through their term and will close. And then you'll see some – obviously, everything we open up there new will be Big Lots. But I do think that we've got kind of a brand up there that we're going to run out rather than putting the capital in to kind of freshen them up and/or change the box size to make them what you would consider to be the typical Big Lots store down here.
Operator: Anthony Chukumba, BB&T Capital Markets.
Anthony Chukumba - BB&T Capital Markets: Just had a question on the Q2 guidance. When you look at the first quarter results, at the high end of your guidance and earnings only down about 10% – or EPS was down only about 10% year-over-year, the midpoint of your guidance for Q2, your EPS is down close to 40%. And I was just wondering, what's the kind of the drivers of that. I mean, is it really the fact that the seasonal is just underperforming and maybe you've got some problems from other categories? Are there other specific factors; weather, et cetera, that might be affecting that?
Timothy A. Johnson - SVP, Finance: Yeah, Anthony, it's T.J. There's nothing specific from an expense standpoint that we're really operating or doing differently first quarter (over) second quarter. Expenses can calendarize differently, but there's nothing from an operational standpoint we're either introducing as a new program or taking a drastic approach on reductions. So the operational side of what we do will continue. The challenge we have, again, relates back to what will be the trend here coming out of Memorial Day in the month of May. Month of May was tough for us. Clearly, the last two weeks of May from a weather perspective on Memorial Day was not anything near what it was a year ago and we're out front and center really promoting and going after that seasonal lawn and garden, summer tools, that type of business, and that was not there. So to answer your question, we do think the trends improve in June and July, but we expect that we will need to be very promotional to make that happen and again, to make sure that we exit the quarter as clean as we can from an inventory perspective in that seasonal business. Because by the way, when you come out of second quarter and you go into third, there's new seasonal product from other areas that's coming in behind it to support fall and then later in the third quarter, to support holiday. So Seasonal, in particular, has a finite time in the store. This is the longest selling season we have, so we have that working for us. From a lawn and garden and summer perspective, that product can sell into early third quarter. But clearly, it will not be at full ticket; it will be a promotional business.
Operator: Joan Storms, Wedbush.
Joan Storms - Wedbush Morgan: That was my question almost basically on the second quarter guidance. So basically, that also – besides the promotional activity, also affects the comps as well, I'm assuming, because the comp guidance seemed to be a little bit lower too?
Timothy A. Johnson - SVP, Finance: Certainly, Joan. I think where we had plans for selling some of these seasonal businesses at ticket a little longer than we will. That certainly impacts the comps. So we'll move through the inventory; we'll move through the units, the question is, what's the average item retail going to need to be to make that happen. Again, it's unfortunate because I think we really believe and the customer kind of validated it for us in the warmer weather areas, that the assortment is much improved to last year, as evidenced by comps in seasonal in the warmer weather areas. It's just unfortunate that 70% or 80% of the country was unseasonal – unseasonably cool in the first quarter and into May. So we have to do the right thing and move on seasonal and come out of the quarter clean.
Joan Storms - Wedbush Morgan: So basically, the majority of the lower annual guide takes place in the quarter because of that, so the rest of your plans, as far as clearing merchandise that was already planned to bring in new goods in areas like home and hardlines, et cetera; that's still on track?
Timothy A. Johnson - SVP, Finance: That is still part of the forecast, absolutely. What we would never want to do is try to change plans of other areas just because we had a tough go of it in seasonal. The team in home, the team in furniture, and all areas of our business, they have their own plans, they have their own open to buy, they have their own strategies that they're held accountable to. So, yes, we are continuing to move forward in other areas of the business and not let what's going on with weather and seasonal impact other areas.
Operator: Paul Trussell, Deutsche Bank.
Paul Trussell - Deutsche Bank: Welcome, David. A question for you, big picture. I know it's early, but could you give us your view on Big Lots' footprint? Operating 1,500 stores, if you think that is about the right number. Also, just from a merchandise standpoint, are there some categories that immediately come to mind that you would want to add or remove? And also, just speak to the mix of branded goods versus private label.
David Campisi - President and CEO: Thanks Paul. This is David. So, a couple of things. One, I'll start with the merchandising question first. These store walks that I plan to do with each merchant in the building, and we've got 35 buyers. I believe that's the correct number. So there'll be 35 separate walk-throughs over a time period, a deep, deep dive into their businesses, and then I will be making those decisions about businesses that we may want to improve and go after that are significant opportunities and other businesses that may be holding us back. And if there's an exit strategy, there has to be a strategy to offset that exit in a very well-thought-out plan. And so it's very early, Paul, for me to comment on any specifics. Obviously, I spent a great amount of time in the stores prior to joining Big Lots, and I have a pretty strong point of view on what I think. I need to validate that. And once I have that validated, we'll move forward. As far as the door count, I'm going to let Chuck comment on that. I would tell you that he and I just had a conversation, I think, on Tuesday about our strategy, and there's been some work done in Chuck's world, in the real estate world, on what that door count opportunity is in the U.S. operations. So Chuck, do you want to take that?
Charles W. Haubiel II - EVP, Legal and Real Estate, General Counsel & Corporate Secretary: No, I mean, Dave, you're right. And Paul, remember once again, we're very opportunistic in our real estate locations. So, it's not necessarily identifying a corner, if you will, like some other retailers do and putting up a new building. I think that you will or you should think that there'll be some additional growth going forward. Obviously, we do believe it's very healthy to close stores that are not meeting our expectations and/or that may have an older physical plant. That's one of the reasons this year you'll see on guidance that we plan to open 50 and close 45. So we will continue to both relocate when the neighborhood may have moved away from us, if you will, and/or get into the right size box. But I do think, obviously, over the long range, with the Board's approval and consent, that you should expect there to be continued store growth in the fleet size.
Paul Trussell - Deutsche Bank: And then just a quick clarification question for Tim. As we think about the full year guidance and just clarifying your comments, is the change in guidance basically reflecting adjusting 2Q for what you're seeing currently in terms of top line trends and the second half was more or less kept intact with your prior view?
Timothy A. Johnson - SVP, Finance: That's accurate, Paul. So Q2, we tried to reflect best information we have really based on the month of May and Memorial Day weekend. Clearly, that lowered our view from where it might have been 30 or 60 days ago. And then, secondarily, because of that lower view in the second quarter, the only real impact to the back half of the year was a lowered expectation on the ultimate bonus payout by the time we get to the end of the year. So, that lower expense obviously helps the back half of the year because you book your bonus expense where you expect to make your money. So that was really the only noticeable change to the back half of the year guidance.
Paul Trussell - Deutsche Bank: And so since the back half is implying kind of a turn back into positive comps, is that still intact because you feel the pressure that you experienced in the first quarter and in May is more weather and seasonal related.
Timothy A. Johnson - SVP, Finance: The expectation for the back half of the year is that comps will turn positive based on several different factors. I think first off, again, I'll go back to what I mentioned earlier, in certain parts of the country, our business was much better than not. In certain categories where we know we are not totally on our game or have some of the inventory challenges addressed, we expect that to happen as we move through the second quarter and into the third. And as David mentioned, although it's not where we ultimately want to be longer-term, you can see in the back-to-school walk-throughs better content than what you see in the store today. So when we put all those factors together, and also understand that when we get into the back half of the year, we've got a brand new seasonal program and Christmas trim what we have a history of being successful. We've got a furniture business that has been very successful year-to-date even though the stores and store traffic has been challenged. So there are good things happening in certain categories in our business. Again, it's unfortunate here in the first quarter and early parts of second quarter, it's going to be a tough time for us to get full recognition for that.
Operator: Peter Keith, Piper Jaffray.
Jonathan Berg - Piper Jaffray: This is actually Jon Berg on for Peter. I was just curious, and it may be a little bit difficult to tell in Q1 just because of the weather, but with some of the advertising changes you've been making, do you think it's had a positive impact on traffic or business trends in general?
Timothy A. Johnson - SVP, Finance: Yeah, Jon, this is T.J. I think it's way early to make that call or make that assumption. I think that – for a couple of different reasons. I think first off, some of the new signage that will go with the program is not even in stores today and won't be until the back-to-school time frame. But additionally, if you followed our print, which I know you and Peter do, some of the items and deals that have been focused in print, again, have been more weather-sensitive, so it's really difficult to say the tagline or the hook around some of the new marketing and featuring fabulous deals has had a fair chance to be successful yet, again, based on some of the items that – all with good intentions, that were selected to be those big feature deals. So, for the combination of those two reasons, and candidly, allowing David time to get involved in the marketing area of the business and to kind of put his stamp on it for the balance of the year, I think it's way too early to make a call on are we happy, are we unhappy with where we are.
Jonathan Berg - Piper Jaffray: And then, just quickly looking forward now to some of the category performance and how that might look in the second half, I know you're anticipating going towards positive comps in the second half. What categories do you think are really going to lead that charge going forward?
Timothy A. Johnson - SVP, Finance: I think when talking with the merchants and working through the plans that they have in place, I think you look at some of the bigger categories, Jon. I think the comment I made earlier, we have a consistent history of performing well in Christmas trim. I think we have every expectation that will continue this holiday season. I think we have a consistent history of performing in the Furniture business. And albeit not the largest quarters of the year, the fall season is still a meaningful size business for us, so I think there would be an expectation that that business continues. I know that John and the merchant teams have been very focused on trying to improve the assortment, the breadth of assortment, the closeout content in consumables and food. And as you'll recall, we were not necessarily on top of her game last year in those categories. So clearly, the compares are pretty light. I think the one category that we think we've made some content improvement in the home area, that's more of a wait and see, Jon, because we really want to see how the customer responds to it. But those are a couple of the major categories anyway that we would think would perform well and then maybe a couple that are more of a wait and see and how the customer responds.
Operator: David Mann, Johnson Rice.
David Mann - Johnson Rice: David, let me add my welcome. David, if you could talk for a moment about how long investors should expect to hear from you about the strategy that you expect to take the Company on? I mean, how long do you think it will take you to have a plan to be developed and how quickly you think you can start impacting the business.
David Campisi - President and CEO: It's a great question, David. I would tell you, today, it would be my hope that when we have our next call that I have at least a plan that the Board has approved and my team has bought into. There may be some things that aren't quite complete by then. It's really a work in progress. Again as I get into the nuts and bolts of it, but my plan is to have a vision and a strategy taking off of what Steve left me in taking it to the next level. That would be, I think, a reasonable timeline. And hopefully you guys will be excited and show a little patience. As you know, the timeline on this business is, it's not short, there's long lead times but I'm excited about what I see and I would just tell you guys once again, the people in this building are talented and highly committed, and I know that they are going to work with me and we're going to make the right decisions to drive the top line in this Company.
David Mann - Johnson Rice: And in terms of the lead times that you referred to, would you expect to be able to have any impact on the Christmas season and Black Friday, or should we expect most of your impact would really be next year?
David Campisi - President and CEO: Yeah, I would say, very little. There will be some things I might be able to touch but as T.J. talked about, the planned businesses and actually they are performing very well other than the weather-related pieces, the Furniture business is a planned business. The seasonal business for the back half of the year, your Christmas has no real weather related issues with it. Christmas is Christmas. We're very good at it, and I see that as nothing that I need to touch. Hopefully we can find some really, really great closeouts on the Home side of the business and on the Hardlines side with some brands and so on, that might impact the fourth quarter. But I would say certainly that the significant impact is going to be in 2014.
David Mann - Johnson Rice: And in terms of closeout penetration, just your quick thoughts there, would you look to take that up? Do you think it's okay where it is or perhaps take it down?
David Campisi - President and CEO: Again, real hard for me to tell at this point in time, David. But I think there's opportunities in certain areas. We're excited. We haven't really talked a lot about our food and consumables business but I think that there are some things on the horizon there that I'm actually very excited about from a closeout point of view. But again, until I really clearly understand how each of these businesses operate, we have the three outs that I'm sure you've heard these guys talk about the in and outs, the never-outs and the closeouts and it varies by business unit. Once I have a clear understanding of the complexity of that, and hope to help our team simplify it, we will have better execution, and that's really probably how I'll leave it at this point.
David Mann - Johnson Rice: Thank you and good luck.
David Campisi - President and CEO: Thank you, David.
Timothy A. Johnson - SVP, Finance: Thanks everyone.
Operator: Thank you. Ladies and gentlemen, a replay of this call will be available to you within the hour and will end at 11.59 pm on Thursday, June 13, 2013. You can access the replay by dialing toll-free USA and Canada 1-888-203-1112 and entering replay passcode number 6565635. International; 7194570820 and entering replay passcode 6565635. Ladies and gentlemen, this concludes today's presentation. Thank you for your participation. You may now disconnect.