-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HGFDdtdX4NEKmoRCWW5065nULx2/NQO4XEGw8WoaZi30v0v87cCqSFjQoJIjgiAb f+wINqmopufEaO3xuxiWNQ== 0000950123-98-008898.txt : 19981012 0000950123-98-008898.hdr.sgml : 19981012 ACCESSION NUMBER: 0000950123-98-008898 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980829 FILED AS OF DATE: 19981009 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: BED BATH & BEYOND INC CENTRAL INDEX KEY: 0000886158 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-HOME FURNITURE, FURNISHINGS & EQUIPMENT STORES [5700] IRS NUMBER: 112250488 STATE OF INCORPORATION: NY FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-20214 FILM NUMBER: 98723420 BUSINESS ADDRESS: STREET 1: 650 LIBERTY AVENUE CITY: UNION STATE: NJ ZIP: 07083 BUSINESS PHONE: 2013791520 MAIL ADDRESS: STREET 1: 715 MORRIS AVENUE CITY: SPRINGFIELD STATE: NJ ZIP: 07081 10-Q 1 BED, BATH & BEYOND 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended August 29, 1998 COMMISSION FILE NUMBER 0-20214 BED BATH & BEYOND INC. (Exact name of registrant as specified in its charter) NEW YORK 11-2250488 (State of incorporation) (I.R.S. Employer Identification No.) 650 LIBERTY AVENUE, UNION, NEW JERSEY 07083 (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code: (908) 688-0888 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No NUMBER OF SHARES OUTSTANDING OF THE ISSUER'S COMMON STOCK:
CLASS OUTSTANDING AT AUGUST 29, 1998 ----- ------------------------------ Common Stock - $0.01 par value 138,800,836 (gives effect to a two-for-one stock split in the form of a stock dividend effected July 31, 1998)
2 BED BATH & BEYOND INC. AND SUBSIDIARIES INDEX
PAGE NO. PART I - FINANCIAL INFORMATION Consolidated Balance Sheets August 29, 1998 and February 28, 1998 3 Consolidated Statements of Earnings Three Months and Six Months Ended August 29, 1998 and August 30, 1997 4 Consolidated Statements of Cash Flows Six Months Ended August 29, 1998 and August 30, 1997 5 Notes to Consolidated Financial Statements 6 Management's Discussion and Analysis of Financial Condition and Results of Operations 7 - 9 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 10 Exhibit Index 11
3 BED BATH & BEYOND INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
August 29, February 28, 1998 1998 ---- ---- (unaudited) ASSETS Current assets: Cash and cash equivalents $ 58,908 $ 53,280 Merchandise inventories 342,525 270,357 Prepaid expenses and other current assets 5,787 2,323 -------- -------- Total current assets 407,220 325,960 -------- -------- Property and equipment, net 126,070 111,381 Other assets 24,636 20,989 -------- -------- $557,926 $458,330 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $109,506 $ 64,718 Accrued expenses and other current liabilities 83,110 73,610 Income taxes payable 7,979 12,015 -------- -------- Total current liabilities 200,595 150,343 -------- -------- Deferred rent 14,380 12,590 -------- -------- Total liabilities 214,975 162,933 -------- -------- Shareholders' equity: Preferred stock - $0.01 par value; authorized - 1,000,000 shares; no shares issued or outstanding -- -- Common stock - $0.01 par value; authorized - 350,000,000 shares; issued and outstanding - August 29, 1998, 138,800,836 shares and February 28, 1998, 138,087,946 shares 1,388 1,381 Additional paid-in capital 70,398 61,348 Retained earnings 271,165 232,668 -------- -------- Total shareholders' equity 342,951 295,397 -------- -------- $557,926 $458,330 ======== ========
See accompanying Notes to Consolidated Financial Statements. -3- 4 BED BATH & BEYOND INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) (UNAUDITED)
Three Months Ended Six Months Ended August 29, August 30, August 29, August 30, 1998 1997 1998 1997 ------------ ------------ ------------ ------------ Net sales $ 344,946 $ 266,895 $ 614,517 $ 480,557 Cost of sales, including buying, occupancy and indirect costs 203,003 157,395 362,395 283,699 ------------ ------------ ------------ ------------ Gross profit 141,943 109,500 252,122 196,858 Selling, general and administrative expenses 100,183 77,730 189,618 149,278 ------------ ------------ ------------ ------------ Operating profit 41,760 31,770 62,504 47,580 Interest income 571 504 1,388 1,141 ------------ ------------ ------------ ------------ Earnings before provision for income taxes 42,331 32,274 63,892 48,721 Provision for income taxes 16,827 12,827 25,397 19,367 ------------ ------------ ------------ ------------ Net earnings $ 25,504 $ 19,447 $ 38,495 $ 29,354 ============ ============ ============ ============ Net earnings per share - Basic $ 0.18 $ 0.14 $ 0.28 $ 0.21 Net earnings per share - Diluted $ 0.18 $ 0.14 $ 0.27 $ 0.21 Weighted average shares outstanding - Basic 138,740,110 137,604,276 138,530,307 137,430,644 Weighted average shares outstanding - Diluted 142,934,866 142,234,532 142,842,389 141,817,478
See accompanying Notes to Consolidated Financial Statements. -4- 5 BED BATH & BEYOND INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS, UNAUDITED)
Six Months Ended ----------------------- August 29, August 30, 1998 1997 ---- ---- Cash Flows from Operating Activities: Net earnings $ 38,495 $ 29,354 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 10,743 8,415 Deferred income taxes (2,356) (1,366) Increase in assets: Merchandise inventories (72,168) (70,532) Prepaid expenses and other current assets (3,464) (847) Other assets (1,291) (600) Increase (decrease) in liabilities: Accounts payable 44,788 45,670 Accrued expenses and other current liabilities 9,500 14,501 Income taxes payable (4,036) (389) Deferred rent 1,790 1,682 ------- -------- Net cash provided by operating activities 22,001 25,888 ------- -------- Cash Flows from Investing Activities: Capital expenditures (25,432) (19,769) ------- -------- Net cash used in investing activities (25,432) (19,769) ------- -------- Cash Flows from Financing Activities: Proceeds from exercise of stock options 9,059 4,278 ------- -------- Net cash provided by financing activities 9,059 4,278 ------- -------- Net increase in cash and cash equivalents 5,628 10,397 Cash and cash equivalents: Beginning of period 53,280 38,765 ------- -------- End of period $ 58,908 $ 49,162 ======== ========
See accompanying Notes to Consolidated Financial Statements. -5- 6 BED BATH & BEYOND INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1) BASIS OF PRESENTATION The accompanying consolidated financial statements, except for the February 28, 1998 consolidated balance sheet, have been prepared without audit. In the opinion of Management, the accompanying consolidated financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the financial position of Bed Bath & Beyond Inc. and subsidiaries (the "Company") as of August 29, 1998 and February 28, 1998 and the results of their operations for the three months and six months ended August 29, 1998 and August 30, 1997, respectively, and their cash flows for the six months ended August 29, 1998 and August 30, 1997. Because of the seasonality of the specialty retailing business, operating results of the Company on a quarterly basis may not be indicative of operating results for the full year. The accompanying unaudited consolidated financial statements are presented in accordance with the requirements for Form 10-Q and consequently do not include all the disclosures normally required by generally accepted accounting principles. Reference should be made to Bed Bath & Beyond Inc.'s Annual Report for the fiscal year ended February 28, 1998 for additional disclosures, including a summary of the Company's significant accounting policies. 2) STOCK SPLIT In June 1998, the Board of Directors approved a two-for-one split of the Company's common stock effected in the form of a stock dividend. The stock dividend was distributed on July 31, 1998 to shareholders of record on July 10, 1998. Accordingly, all shareholders' equity, share and per share amounts for all periods presented have been retroactively adjusted to give effect to the stock split. In June 1998, the Company's Certificate of Incorporation was amended to increase the number of authorized shares of common stock (par value $.01 per share) from 150,000,000 shares to 350,000,000 shares. -6- 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Three Months August 29, 1998 vs. Three Months August 30, 1997 Net sales for the second quarter ended August 29, 1998 were $344.9 million, an increase of $78.1 million or approximately 29.2% over net sales of $266.9 million for the corresponding quarter last year. Approximately 81.1% of the increase was attributable to new store net sales. The increase in comparable store net sales in the second quarter of 1998 was 6.0%. The increase in comparable net sales reflects a number of factors, including but not limited to, the continued consumer acceptance of the Company's merchandise offerings and customer service and the generally favorable retailing environment. Approximately 55% and 45% of net sales for the second quarter were attributable to sales of domestics merchandise and home furnishings merchandise, respectively. Gross profit for the second quarter of 1998 was $141.9 million or 41.1% of net sales compared with $109.5 million or 41.0% of net sales during the second quarter of 1997. Selling, general and administrative expenses ("SG&A") were $100.2 million in the second quarter of 1998 compared with $77.7 million in the same quarter last year and as a percentage of net sales were 29.0% and 29.1%, respectively. Operating profit in the second quarter of 1998 increased to $41.8 million from $31.8 million in the second quarter of 1997, reflecting primarily the increase in net sales which was partially offset by increases in cost of sales and SG&A. Six Months August 29, 1998 vs. Six Months August 30, 1997 Net sales for the six months ended August 29, 1998 were $614.5 million, an increase of $134.0 million or approximately 27.9% over net sales of $480.6 million for the corresponding period last year. Approximately 84.1% of the increase was attributable to new store net sales. The increase in comparable store net sales for the first six months of 1998 was approximately 4.8%. Gross profit for the first six months of 1998 was $252.1 million or 41.1% of net sales compared with $196.9 million or 41.0% of net sales during the same period last year. SG&A was $189.6 million in the first six months of 1998 compared with $149.3 million for the same period last year and as a percentage of net sales were 30.9% and 31.1%, respectively. The decrease in SG&A, as a percentage of net sales, primarily reflects a relative decrease in costs associated with new store openings and a relative decrease in payroll and payroll related items, which were partially offset by a relative increase in occupancy costs. Operating profit in the first six months of 1998 increased to $62.5 million from $47.6 million for the same period last year, primarily resulting from the increase in net sales, which was partially offset by an increase in cost of sales and SG&A. -7- 8 EXPANSION PROGRAM The Company is engaged in an ongoing expansion program involving the opening of new stores in both existing and new markets and the expansion or replacement of existing stores with larger stores. As a result of this program, the total number of stores has increased to 159 stores at the end of the second quarter of 1998 compared with 122 stores at the end of the corresponding quarter last year. Total square footage grew to 6,539,000 square feet at the end of the second quarter of 1998, from 4,916,000 square feet at the end of the second quarter of last year. During the first six months of fiscal 1998, the Company opened 18 new superstores and expanded two stores resulting in an aggregate addition of 772,000 square feet to total store space. The Company anticipates opening approximately 22 additional superstores and expanding one store by the end of the fiscal year, aggregating approximately 1,700,000 square feet of store space for the year. FINANCIAL CONDITION Total assets at August 29, 1998 were $557.9 million compared with $458.3 million at February 28, 1998, an increase of $99.6 million. Of the total increase, $81.3 million represented an increase in current assets and $18.3 million represented an increase in non-current assets. The increase in current assets was almost entirely attributable to an increase in merchandise inventories, which resulted from new store space. Total liabilities at August 29, 1998 were $215.0 million compared with $162.9 million at February 28, 1998, an increase of $52.0 million. The increase was primarily attributable to a $44.8 million increase in accounts payable (resulting from an increase in inventories) and a $9.5 million increase in accrued expenses and other current liabilities. Shareholders' equity was $343.0 million at August 29, 1998 compared with $295.4 million at February 28, 1998. The increase primarily reflects net earnings for the first six months of fiscal 1998 and additional paid-in capital from the exercise of stock options. Capital expenditures for the first six months of fiscal 1998 were $25.4 million compared with $19.8 million for the corresponding period last year. The increase is primarily attributable to furniture and fixtures and leasehold improvements for the 18 new superstores opened and two stores expanded during the first six months compared to furniture and fixtures and leasehold improvements for the 14 new superstores opened and one store expanded in the same period last year. YEAR 2000 During fiscal 1997, the Company conducted an extensive review of its computer systems and operations to identify the areas that could be affected by the Year 2000 issue. A plan was developed which focuses on the Company's information systems and third-party relationships. With respect to its own information systems, the Company has adopted a five-phase Year 2000 program consisting of: Phase I -- identification and ranking of the components of the Company's systems that may be vulnerable to Year 2000 problems; Phase II -- assessment of items identified in Phase I; Phase III -- remediation or replacement of non-compliant systems and components; Phase IV -- testing of systems and -8- 9 components following remediation; and Phase V -- developing contingency plans to address the most reasonably likely worst case Year 2000 scenarios. The Company has completed Phases I, II, and III, has made substantial progress on Phase IV, and has begun Phase V. With respect to its third-party relationships, the Company contacted its largest suppliers, vendors, and service providers to assess their state of Year 2000 readiness. This process is effectively complete and the Company has commenced contingency planning to address the most reasonably likely worst case Year 2000 scenarios with respect to its third-party relationships, including developing alternate third-party relationships, if necessary. Potential sources of risk include the inability of principal suppliers to be Year 2000 compliant, which could result in delays in product deliveries from such suppliers, and disruption of the Company's distribution channel. Based on the efforts to date, the Company does not believe that the Year 2000 issue will have a material adverse effect on its financial condition or results of operations. The Company's costs incurred to date associated with the Year 2000 issue are not material. The Company estimates that the costs to complete its five-phase program, excluding any costs that may be incurred by the Company as a result of the failure of any third-parties to become Year 2000 compliant, will also not be material. The Company believes that by the end of fiscal 1998, it will have developed contingency plans to address its most reasonably likely worst case Year 2000 scenarios. FORWARD LOOKING STATEMENTS This Form 10-Q may contain forward looking statements. Important factors which may affect these statements are contained in the Company's Annual Report to shareholders for the fiscal year ended February 28, 1998. -9- 10 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) The exhibits to this report are listed on the Exhibit Index included elsewhere herein. (b) No reports on Form 8-K were filed by the Company during the three month period ended August 29, 1998. 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 thereunto duly authorized. BED BATH & BEYOND INC. (Registrant) Date: October 9, 1998 By: /s/Ronald Curwin ----------------------------------------- Ronald Curwin Chief Financial Officer and Treasurer -10- 11 EXHIBIT INDEX
Exhibit No. Exhibit Page No. 27 Financial Data Schedule 12 (Filed electronically with SEC only)
-11- EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AS OF AUGUST 29, 1998 AND THE CONSOLIDATED STATEMENT OF EARNINGS FOR THE SIX MONTHS ENDED AUGUST 29, 1998, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 6-MOS FEB-27-1999 AUG-29-1998 58,908 0 0 0 342,525 407,220 193,814 (67,744) 557,926 200,595 0 0 0 1,388 341,563 557,926 614,517 614,517 362,395 362,395 189,618 0 (1,388) 63,892 25,397 38,495 0 0 0 38,495 .28 .27
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