Big Lots, Inc. 2005 Annual Report about our company Headquartered in Columbus, Ohio, Big Lots (NYSE: BLI) is a Big Lots, Inc., 300 Phillipi Road, Columbus, Ohio 43228 Fortune 500 company with over 1,400 stores nationwide. For more than three decades, we’ve delighted our customers with a vibrant mix of exciting brands, unique products, and closeout prices. Big Lots offers new merchandise every week at substantial savings over traditional discount retailers, on average 20 to 40 percent less. Our customers love our unexpected, once-in-a-lifetime deals. We also carry attractive, affordable furniture, home furnishings, seasonal merchandise, and hundreds of everyday items consumers want and need. Through excellent relationships with manufacturers, high-volume purchases, and strict expense control, we pass tremendous savings on to our customers. 1121124_CVR_R421124_CVR_R4 2 44/13/06/13/06 11:51:19:51:19 PPMM Big Lots, Inc. 2005 Annual Report about our company Headquartered in Columbus, Ohio, Big Lots (NYSE: BLI) is a Big Lots, Inc., 300 Phillipi Road, Columbus, Ohio 43228 Fortune 500 company with over 1,400 stores nationwide. For more than three decades, we’ve delighted our customers with a vibrant mix of exciting brands, unique products, and closeout prices. Big Lots offers new merchandise every week at substantial savings over traditional discount retailers, on average 20 to 40 percent less. Our customers love our unexpected, once-in-a-lifetime deals. We also carry attractive, affordable furniture, home furnishings, seasonal merchandise, and hundreds of everyday items consumers want and need. Through excellent relationships with manufacturers, high-volume purchases, and strict expense control, we pass tremendous savings on to our customers. 1121124_CVR_R421124_CVR_R4 2 44/20/06/20/06 44:45:21:45:21 PPMM fi nancial highlights (UNAUDITED ADJUSTED RESULTS) Fiscal Year notice of annual meeting The Unaudited Adjusted Results, which include fi nancial measures that are not calculated in accordance with accounting principles ($ in thousands, except per share amounts and sales per selling square foot) 2005 2004 2003 2002 2001 generally accepted in the United States of America (“GAAP”), are presented in order to improve comparability of fi nancial information for periods presented. The following information and reconciliation exclude charges related to fi scal years 2003 and 2001, as The Annual Meeting of Shareholders will be held at 9:00 a.m. EARNINGS DATA (a) described below. $ 4,149,252 $ 3,248,622 Net sales $ 4,429,905 $ 3,942,653 $ 3,647,771 Fiscal Year 2003 Fiscal Year 2001 EDT on Thursday, May 25, 2006, at the Big Lots, Inc. corporate Net sales increase (b) 5.2% NR 6.8% 8.1% 12.3% Unaudited Unaudited Income from continuing operations (c) $ 15,725 $ 31,432 $ 81,073 $ 68,281 $ 26,614 Reported Adjustments Adjusted Results Reported Adjustments Adjusted Results offi ce, 300 Phillipi Road, Columbus, Ohio. Whether or not you Income from continuing operations increase (decrease) (b) (c) (50.0)% (61.2)% 18.7% 156.6% NR (GAAP) (non-GAAP) (GAAP) (non-GAAP) Income from continuing operations per share - diluted (c) $ 0.14 $ 0.27 $ 0.68 $ 0.59 $ 0.23 ($ in thousands, except per share amounts) plan to attend, you are encouraged to return the proxy card which Income from continuing operations per share - diluted increase $ 3,942,653 100.0 % $ – $ 3,942,653 100.0 % $ 3,248,622 100.0 % $ – $ 3,248,622 100.0 % Net sales accompanies this report to ensure that your shares will be represented. (decrease) (b) (c) (48.1)% (60.3)% 15.3% 156.5% NR Cost of sales 2,292,123 58.1 –2,292,123 58.1 1,983,959 61.1 (62,439) 1,921,520 59.2 Average diluted common shares outstanding 113,677 114,801 117,253 116,707 113,660 Gross margin 1,650,530 41.9 –1,650,530 41.9 1,264,663 38.9 62,439 1,327,102 40.8 In accordance with the accompanying proxy statement, shareholders Gross margin - % of net sales (c) 39.1% 40.7% 41.9% 42.2% 40.8% Selling and administrative expenses 1,439,444 36.5 (18,698) 1,420,746 36.0 1,229,085 37.8 (34,888) 1,194,197 36.8 Selling and administrative expenses - % of net sales (c) 36.0% 36.6% 36.0% 36.3% 36.8% Depreciation expense 88,960 2.3 –88,960 2.3 68,683 2.1 – 68,683 2.1 who attend the meeting may withdraw their proxies and vote in person Depreciation expense - % of net sales (c) 2.5% 2.4% 2.3% 2.2% 2.1% Operating profi t - % of net sales (c) 0.6% 1.7% 3.6% 3.6% 1.9% Operating profi t (loss) 122,126 3.1 18,698 140,824 3.6 (33,105) (1.0) 97,327 64,222 1.9 if they so desire. Net interest expense - % of net sales 0.1% 0.6% 0.4% 0.6% 0.6% Interest expense 16,443 0.4 –16,443 0.4 20,489 0.6 – 20,489 0.6 Income from continuing operations - % of net sales (c) 0.4% 0.8% 2.1% 1.9% 0.8% Interest income (1,061) (0.0) – (1,061) (0.0) (287) (0.0) – (287) (0.0) BALANCE SHEET DATA AND FINANCIAL RATIOS Income (loss) from continuing operations before income taxes 106,744 2.7 18,698 125,442 3.2 (53,307) (1.6) 97,327 44,020 1.3 Cash equivalents and short-term investments $ – $ – $ 170,300 $ 143,815 $ 17,500 Inventories 836,092 895,016 829,569 776,210 705,293 Income tax expense (benefi t) 20,833 0.5 23,536 44,369 1.1 (21,038) (0.6) 38,444 17,406 0.5 ceo/cfo certifi cations Property and equipment - net 584,083 648,741 621,998 548,103 527,011 Income (loss) from continuing operations 85,911 2.2 (4,838) 81,073 2.1 (32,269) (1.0) 58,883 26,614 0.8 Total assets 1,625,497 1,733,584 1,800,543 1,655,571 1,470,281 Income (loss) from discontinued operations (5,691) (0.2) 9,720 4,029 0.1 11,287 0.4 (8,480) 2,807 0.1 Long-term obligations 5,500 159,200 204,000 204,000 204,000 Net income (loss) $ 80,220 2.0% $ 4,882 $ 85,102 2.2% $ (20,982) (0.6)% $ 50,403 $ 29,421 0.9 % The most recent certifi cations by our Chief Executive Offi cer and Chief Financial Offi cer Shareholders’ equity 1,078,724 1,075,490 1,108,779 1,020,088 922,533 Working capital 557,231 622,269 718,620 654,626 555,719 pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 are fi led as exhibits to Net debt (d) $ 5,500 $ 159,200 $ 33,700 $ 60,185 $ 186,500 Current ratio 2.3 2.5 2.7 2.7 2.8 Income (loss) per common share - basic: our Form 10-K. We have also fi led with the New York Stock Exchange the most recent Annual Inventory turnover (e) 3.0 2.8 3.0 2.9 2.7 Continuing operations $ 0.74 $ (0.04) $ 0.70 $ (0.28) $ 0.52 $ 0.24 Long-term obligations to total capitalization 0.5% 12.9% 15.5% 16.7% 18.1% Discontinued operations (0.05) 0.08 0.03 0.10 (0.07) 0.03 CEO Certifi cation as required by Section 303A.12(a) of the New York Stock Exchange Listed Return on assets - continuing operations (a) (c) 0.9% 1.8% 4.7% 4.4% 1.8% $ 0.69 $ 0.04 $ 0.73 $ (0.18) $ 0.45 $ 0.27 Company Manual. Return on shareholders’ equity - continuing operations (a) (c) 1.5% 2.9% 7.6% 7.0% 2.9% CASH FLOW DATA Income (loss) per common share - diluted: Depreciation and amortization $ 114,617 $ 101,917 $ 92,407 $ 85,840 $ 69,935 Continuing operations $ 0.73 $ (0.05) $ 0.68 $ (0.28) $ 0.51 $ 0.23 Capital expenditures $ 68,503 $ 135,291 $ 170,175 $ 110,110 $ 113,387 Discontinued operations (0.05) 0.09 0.04 0.10 (0.07) 0.03 $ 0.04 $ (0.18) $ 0.44 $ 0.26 STORE DATA $ 0.68 $ 0.72 company information Stores open at end of the fi scal year 1,401 1,502 1,430 1,380 1,335 Gross square footage (000’s) 41,413 42,975 40,040 37,882 35,528 For a discussion of defi ned terms, refer to the Company’s Annual Report on Form 10-K for fi scal year 2005 (“2005 Form 10-K”). Selling square footage (000’s) 29,856 30,943 29,019 27,593 26,020 The 2005 Form 10-K is included in this Annual Report to Shareholders. TRANSFER AGENT NYSE TRADING SYMBOL Increase (decrease) in selling square footage (3.5)% 6.6% 5.2% 6.0% 5.6% & REGISTRAR Average selling square footage per store 21,310 20,601 20,293 19,995 19,491 FISCAL YEAR 2003 CHARGE National City Bank OTHER SALES DATA In fi scal year 2003, the Company recorded charges related to KB Toys matters and litigation of $4.9 million (net of tax), or $0.04 per Comparable store sales growth 1.8% 0.0% 3.4% 7.7% 2.0% diluted share. The KB Toys charge resulted primarily from KB’s bankruptcy fi ling on January 14, 2004, and represented: a) a $14.3 1900 East Ninth Street $ 3,028 $ 2,582 Average sales per store (f) $ 2,951 $ 2,932 $ 2,809 million (net of tax) charge related to KB store lease guarantee obligations; b) a $10.6 million (net of tax) benefi t related to the partial Cleveland, Ohio 44114 Sales per selling square foot (f) $ 146 $ 144 $ 146 $ 142 $ 134 charge-off of the HCC Note and the write-off of the KB warrant; and c) a $5.8 million (net of tax) benefi t related to the resolution and closure of KB state and local tax matters.