-----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, OunL6uVPRcUcse6Zqv4JrelLcc6VlGR8FgAtLo5N2d08bllP8Fvr2uWmWpCYyRAO zYd3f/LgLbsB2wlHDAHycA== 0000096287-02-000019.txt : 20020419 0000096287-02-000019.hdr.sgml : 20020419 ACCESSION NUMBER: 0000096287-02-000019 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20020202 FILED AS OF DATE: 20020419 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BOMBAY COMPANY INC CENTRAL INDEX KEY: 0000096287 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-FURNITURE STORES [5712] IRS NUMBER: 751475223 STATE OF INCORPORATION: DE FISCAL YEAR END: 0128 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-07288 FILM NUMBER: 02615237 BUSINESS ADDRESS: STREET 1: 550 BAILEY AVE STE 700 CITY: FORT WORTH STATE: TX ZIP: 76107 BUSINESS PHONE: 8173478200 MAIL ADDRESS: STREET 1: 550 BAILEY AVENUE STREET 2: SUITE 700 CITY: FORT WORTH STATE: TX ZIP: 76107 FORMER COMPANY: FORMER CONFORMED NAME: TANDY BRANDS INC DATE OF NAME CHANGE: 19901114 10-K 1 edgar10k.txt 2001 ANNUAL REPORT ON FORM 10-K 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED, EFFECTIVE OCTOBER 7, 1996] For the fiscal year ended February 2, 2002 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from _______________ to ___________________ Commission file number 1-7288 The Bombay Company, Inc. (Exact name of registrant as specified in its charter) A Delaware Corporation 75-1475223 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 550 Bailey Avenue Fort Worth, Texas 76107 (Address of principal executive (Zip Code) offices) (Registrant's telephone number, including area code) (817) 347-8200 Securities registered pursuant to Section 12(b) of the Act: Title of Each Class Name of Each Exchange on Which Registered Common Stock, Par Value, $1 Per Share New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: NONE 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 __ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.____ The aggregate market value of the voting stock held by nonaffiliates of the registrant based on the closing price of the stock on April 1, 2002 was approximately $71,012,438. Shares outstanding at April 1, 2002: Common Stock, $1 Par Value: 33,082,542 DOCUMENTS INCORPORATED BY REFERENCE: Portions of the Definitive Proxy Statement for the Annual Meeting to be held May 16, 2002 (as expressly incorporated by reference in Part III). Page 1 of 37 2 Form 10-K PART I ITEM 1. Business. (a) General Development of Business The Bombay Company, Inc. and its wholly-owned subsidiaries (the "Company" or "Bombay") design, source and market a unique line of home accessories, wall decor and furniture through a network of retail locations throughout the United States and Canada, through specialty catalogs, over the internet and internationally through licensing arrangements. Bombay's unique position in the market place is a result of its core competencies in design and sourcing. Approximately 80% of its product is sourced from over 20 foreign countries. Over 95% of the product has been designed or styled to Bombay's specifications. To capitalize on its strengths in design and sourcing, the Company is developing other business opportunities in addition to its core retail operations. Bailey Street Trading Company, the Company's wholesale operations, was introduced in Fiscal 2000 and reached sales of approximately $2 million in Fiscal 2001. Bailey Street is proving to be a viable, low-risk growth vehicle for the Company, with sales projected at $5 million for Fiscal 2002. International expansion has progressed with licensed international stores currently operating in the Dominican Republic, Puerto Rico and Kuwait. There are commitments with the Company's current international licensees to open three additional stores in Fiscal 2002 including one each in the Dominican Republic, Saudi Arabia and Turkey. The Company plans to continue expansion abroad through licensing and distribution agreements in markets identified as appropriate for the Bombay brand. In the third quarter of Fiscal 2001, the Company launched Bombay KIDS, its new line of children's furniture, textiles and accessory collections, with initial offerings exclusively through separate catalog and internet channels. During Fiscal 2002, Bombay KIDS will be tested in several retail stores with the first opening in Dallas, TX in March. To date, the operations and financial results of the wholesale operations, international licenses and Bombay KIDS have been immaterial to the Company as a whole. Unless specified otherwise, the discussions in this Annual Report on Form 10-K relate to the Bombay retail operations. (b) Financial Information About Segments The Company operates primarily in one business segment consisting of the retail sale of decorative home furnishings, furniture and related items. (c) Narrative Description of Business Merchandise Sales, Purchasing and Distribution Bombay operates a chain of stores, located primarily in regional shopping malls, certain secondary malls and selected urban and suburban locations. As of February 2, 2002, there were 365 Bombay stores in 41 states in the United States and 54 stores in nine Canadian provinces. Bombay also markets its products through its mail order operations in the United States and Canada and through e-commerce over the internet at www.bombaycompany.com. The Company offers a diverse selection of products consisting of approximately 5,000 SKUs (stock keeping units) of which over 95% of the product has been designed or styled to Bombay's specifications. Bombay's proprietary product offers unique design, quality and exceptional value to a wide audience of consumers. While furniture has always been a significant part of the business and will continue to play an important role in the merchandise assortment, more focus has recently and will continue to be given to the smaller "take with" items such as wood and decorative accessories, crystal, florals, candles and a wide assortment of gift items. The Company regularly updates its merchandise assortment by introducing new products and discontinuing others as they approach the end of their life cycles. Approximately 2,600 new SKUs were introduced in both Fiscal 2001 and Fiscal 2000. Typically, new product introductions are concentrated during the Company's spring, fall and Christmas marketing periods. The principal categories of merchandise include the following: 3 Furniture - This category includes both wood and metal ready-to-assemble furniture focusing on the bedroom, living room, dining room and home office as well as occasional pieces. Furniture represented 43%, 45% and 45% of total sales in Fiscal 2001, 2000 and 1999, respectively. Bombay's furniture is manufactured by contract manufacturers located principally in China, Taiwan, Malaysia, Mexico, the Philippines, Indonesia, India and the United States. Accessories - This is the broadest category and represented 43%, 41% and 40% of total sales in Fiscal 2001, 2000 and 1999, respectively. This category includes both functional and decorative accessories including lamps, jewelry and memorabilia boxes, baskets, candles and scents, crystal, ceramics, frames and desktop, textiles, floral and holiday. The items are imported from over 15 countries in Asia, North America and Europe. Wall Decor - This category includes prints, mirrors and wall accessories which represented 14%, 14% and 15% of total sales in Fiscal 2001, 2000 and 1999, respectively. This merchandise is sourced primarily from the United States, various countries in Asia, Canada and Italy. Merchandise is manufactured to Company specifications through a network of contract manufacturers located principally in Asia and North America. Approximately 80% of production needs are provided from foreign countries. Branch offices located in Taiwan, Malaysia, Indonesia, China and Vietnam and agents in various countries locate prospective vendors, coordinate production requirements with manufacturers and provide technical expertise and quality control. Bombay is not dependent on any particular supplier and has had long standing relationships with many of its vendors. Approximately 70% of the Company's merchandise requirements are supplied by 35 contract manufacturers in seven countries. No long-term production agreements are in place; however, agreements are in place with major manufacturers that prohibit the production of proprietary product for other parties. Additional manufacturing capacity and alternative sources, both domestic and international, continue to be added through new vendors and plant expansions by existing vendors. The Company does business with its vendors principally in United States currency and has not historically experienced any material difficulties as a result of any foreign political, economic or social instabilities. Usually it takes several months from the time a merchandise order is placed with a manufacturer until the goods are received at centralized distribution centers in the United States and Canada. Depending on the category, the source country and whether an item is new or a reordered product, lead times can vary from as little as two months to as much as twelve months from order placement until arrival at the stores. Order times are slightly less for North American manufacturers principally due to shorter shipping times. Lead times may also be impacted by seasonality factors especially in months when manufacturers are producing at or near peak capacity to meet seasonal demands. As a result, Bombay strives to maintain an adequate inventory position in its distribution centers to ensure a sufficient supply of products to its customers. Store inventories are replenished from regional distribution centers located in Fort Worth, Texas; Atlanta, Georgia; Gilbertsville, Pennsylvania; Mira Loma, California and Mississaugua, Ontario. The distribution centers are strategically located and provide the capability to replenish the majority of store inventories within 48 hours of when the order is processed. The Company uses dedicated trucks and less-than- truckload carriers to transport its product from its distribution centers to the stores. Channels of Distribution Stores and Real Estate The Company locates its stores primarily in regional shopping malls, certain secondary malls and selected urban and suburban locations that satisfy its demographic and financial return criteria. Significant attention is given to visual merchandising opportunities to maximize the ability to display product in the most attractive setting. In selecting store locations, the Company's real estate department conducts extensive analyses of potential store sites and bases its selection on the performance of other specialty retail tenants, the size of the market and the demographics of the surrounding area. In evaluating a store location, placement of the store relative to retail traffic patterns and customer base of other retailers in the nearby vicinity are important considerations. During Fiscal 2000, the Company, working closely with Thompson Associates, the largest, independent full-service retail-consulting firm in the United States specializing in store location and market research, developed a comprehensive real estate strategy. Based upon the analysis, the Company believes that it has the opportunity to increase its total square footage through both an increase in store counts and through larger stores. The strategy incorporates an off-mall opportunity that will complement the current real estate portfolio. Currently 83% of the stores are mall based, down from approximately 90% last year, reflecting the Company's current real estate strategy. The Company has opened stores in, and will continue 4 to seek alternative locations including street and upscale, open air lifestyle centers. The Company will seek out the most potentially profitable locations for the opening of new stores regardless of the venue. The Company is currently targeting store sizes in the 4,000 to 5,000 square foot range. In addition to building new stores, the Company will continue to selectively convert its existing regular stores which average approximately 1,800 square feet to the larger format. As of February 2, 2002, there were 59 regular stores left in the chain. During Fiscal 2001, 2000 and 1999, the Company opened 32 new stores, 10 new stores and 19 new stores, respectively. An additional 18 stores were converted to the larger format in Fiscal 2001, 20 in Fiscal 2000 and 11 in Fiscal 1999. The store expansion plan includes approximately 25 new store openings and four to six conversions in Fiscal 2002. During Fiscal 2001, 2000 and 1999, the Company's store openings included twelve, four and eight outlet stores, respectively, which were typically located in traditional outlet malls. At February 2, 2002, the store chain included a total of 36 outlet stores. The Company views the use of outlets as an opportunity to increase sales to a different customer base, to assist in the orderly clearance of merchandise and to further capitalize on its strength in designing and sourcing proprietary product. Of the estimated 25 stores planned for Fiscal 2002, Bombay expects to open approximately seven outlet locations. The Company's average cost of leasehold improvements, furniture, fixtures and machinery for stores (excluding outlets) opened or converted in Fiscal 2001, net of landlord allowances, was approximately $220,000 per store or $55 per square foot. In addition, other investments which consist primarily of inventory in the store location, averaged approximately $115,000 per large format store. The average cost of leasehold improvements, furniture, fixtures and machinery for outlet stores opened in Fiscal 2001, net of landlord allowances, was approximately $95,000 per store while the inventory investment averaged approximately $80,000 per store. Bombay stores typically achieve store level operating profitability during their first year of operations. As of February 2, 2002, 365 stores were operating in 41 states in the United States and 54 stores were operating in nine provinces in Canada as illustrated in the map below. {The paper version of the Annual Report on Form 10-K contains herein a map of the United States and Canada with states and provinces outlines, labeled with the appropriate number of Bombay stores located in each, as follows: UNITED STATES: AL - 6 LA - 7 OH - 14 AR - 1 MA - 10 OK - 4 AZ - 6 MD - 11 OR - 3 CA - 49 MI - 8 PA - 15 CO - 6 MN - 5 RI - 1 CT - 7 MO - 5 SC - 5 DE - 2 MS - 2 TN - 11 FL - 35 NC - 11 TX - 29 GA - 17 NE - 1 UT - 4 ID - 1 NH - 3 VA - 14 IL - 14 NJ - 17 WA - 4 IN - 5 NM - 1 WI - 2 KS - 4 NV - 3 WV - 1 KY - 3 NY - 18 CANADA: AB - 3 NB - 1 ON - 27 BC - 8 NF - 1 PQ - 9 MB - 1 NS - 3 SK - 1 } 5 Internet The Company has maintained a conservative posture on its investment in the internet. The current site utilizes IBM's net.commerce software running on an AS400 platform and is designed to be scaleable in order to respond to the growing e-commerce demand. Typically, the Company offers up to 1,200 SKUs for sale on its website each season. Business to consumer revenues over the internet were approximately $4.5 million in Fiscal 2001 and are expected to grow to approximately $8 million in Fiscal 2002. The Company is also developing supporting websites to support its international growth and wholesale distribution business. Wholesale During Fiscal 2000, the Company created a new wholesale division, Bailey Street Trading Company. The brand is separate from Bombay and allows the Company to capitalize on its strengths in product design and sourcing. The initial product offerings are focused on furniture but may be expanded to include wall decor and accessories in the future. Bailey Street Trading Company distributes its merchandise to specialty gift stores, furniture stores, department stores, customer-direct merchants and mass merchandisers through a network of independent regional sales representatives. To date, the operations and financial results of Bailey Street Trading Company have been immaterial to the Company as a whole. International International expansion has progressed with licensed international stores currently operating in the Dominican Republic, Puerto Rico and Kuwait. There are commitments with the Company's current international partners to open three additional stores in Fiscal 2002 including one each in the Dominican Republic, Saudi Arabia and Turkey. The Company plans to continue expansion abroad through licensing and distribution agreements with local partners in markets identified as appropriate for the Bombay brand, limiting the Company's risk and capital requirements. Intangibles The Company owns a number of the trademarks and service marks used in its business, including federal registrations for the marks "The Bombay Company" and "Bombay", and the palm tree logo. The Company's trademarks are also registered or are the subject of pending applications in a number of foreign countries. Each registration is renewable indefinitely if the mark is still in use at the time of renewal. Appropriate applications are on file for the new wholesale business. The Company believes that its trademarks have significant value and that these marks enhance the Bombay brand and are instrumental in the Company's ability to create, sustain demand for and market its product. From time to time, the Company discovers products in the marketplace that are counterfeit reproductions of the Company's product or that otherwise infringe upon trademark or tradedress rights held by the Company. The Company has and will continue to vigorously defend it rights under the marks as necessary. Seasonality Operating results are subject to seasonal variation. Historically, the largest proportion of sales and substantially all of the income occurs in the fiscal quarter that includes the Christmas season. Inventory balances are generally built to their highest levels prior to the Christmas selling season. Inventories decline and cash balances increase significantly in December due to the Christmas business. Competition The home furnishings and decorative accessories market is highly fragmented. The Company faces competition from furniture stores, department stores and other specialty retailers. The Company believes that it competes primarily on the basis of selection, quality and value of merchandise. 6 Employees The Company has approximately 5,000 employees, which include approximately 3,000 part-time employees, and is not a party to any union contract. Employee relations are considered to be good. Risks and Uncertainties All statements in this Annual Report on Form 10-K, including those incorporated herein by reference, that do not reflect historical information are forward-looking statements made in reliance upon the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, but are not limited to, the following: the impact on consumer spending generally, and on the Company, in particular, in light of the events of September 11, 2001; competition; seasonality; success of operating initiatives; new product development and introduction schedules; acceptance of new product offerings; advertising and promotional efforts; adverse publicity; expansion of the store chain; availability, locations and terms of sites for store development; changes in business strategy or development plans; availability and terms of capital; labor and employee benefit costs; changes in government regulations; risks associated with international business and regional weather conditions. (d) Financial Information About Geographic Areas The Company operates in one industry segment, specialty retailing. Substantially all revenues result from the sale of home furnishings and accessories through retail stores in the United States and Canada. The Company's wholesale operations have been immaterial to the operations and financial results of the Company to date. Long-lived assets include all non-current assets except deferred taxes. The following table shows net revenues and long-lived assets by geographic area (in thousands): Year Ended
February 2 February 3 January 29 2002 2001 2000 Net revenues: United States $388,789 $375,275 $351,225 Canada 48,668 48,184 41,353 Total $437,457 $423,459 $392,578 Long-lived assets: United States $ 51,367 $ 53,448 $ 51,992 Canada 4,226 4,006 4,010 Total $ 55,593 $ 57,454 $ 56,002
7 ITEM 2. Properties. The Company owns its United States headquarters office complex of which it occupies approximately 85,000 square feet. The Company leases stores, distribution centers, regional and Canadian offices under numerous operating leases. Owned and leased facilities are summarized following: Square Feet
Description Owned Leased Stores: Outlet -- 151,000 Regular -- 107,000 Large format -- 1,244,000 Distribution centers: Mira Loma, CA -- 156,000 McDonnaugh,GA -- 254,000 Gilbertsville,PA -- 200,000 Fort Worth, TX -- 250,000 Mississauga,ON CAN -- 114,000 Offices and storage: Mississauga,ON,CAN -- 9,000 Regional sites -- 2,000 Fort Worth, TX 121,000 35,000 121,000 2,522,000
Leases generally have 10 year terms, expiring between 2002 and 2013. The store leases are generally based upon a minimum rental plus a percentage of the store sales in excess of specified levels. Store lease terms generally require additional payments covering taxes, common area charges and certain other costs. Rental expense for Fiscal 2001, Fiscal 2000 and Fiscal 1999 totaled $47,366,000, $45,137,000 and $42,991,000, respectively. The minimum rental commitments for future fiscal years are as follows (in thousands):
Fiscal 2002 $44,422 2003 39,535 2004 28,819 2005 21,400 2006 19,406 Thereafter 63,196 $216,778
Bombay believes that the insurance coverage maintained on all properties is adequate. ITEM 3. Legal Proceedings. The Company has certain contingent liabilities resulting from litigation and claims incident to the ordinary course of business. Management believes that the probable resolution of such contingencies will not materially affect the financial position or results of operations of the Company. ITEM 4. Submission of Matters to a Vote of Security Holders. There were no matters submitted to a vote of security holders during the fourth quarter of Fiscal 2001. 8 PART II ITEM 5. Market for the Registrant's Common Equity and Related Stockholder Matters. (a) The principal market for the registrant's common stock is the New York Stock Exchange. The high and low trading prices, quoted by fiscal quarter, follow:
Year ended Year ended February 2, 2002 High Low February 3, 2001 High Low First quarter $3.29 $2.26 First quarter $4.44 $2.63 Second quarter 3.65 2.50 Second quarter 4.13 2.56 Third quarter 3.13 2.01 Third quarter 3.06 2.25 Fourth quarter 2.88 2.10 Fourth quarter 3.06 1.50
(b) The approximate number of record holders of common stock on March 31, 2002 was 2,000. (c) The Company has bank credit agreements with restrictions related to payment of dividends. The Company has not paid dividends the past two years and will continue to utilize available funds primarily for the expansion of its retail stores and operating purposes. 9 ITEM 6. Selected Financial Data. The following selected financial data has been derived from the consolidated financial statements of The Bombay Company, Inc. The data set forth below should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Company's consolidated financial statements and notes thereto.
Year Ended Financial Data: February 2 February 3 January 29 January 30 January 31 2002 2001 2000 1999 1998 Net revenues $437,457 $423,459 $392,578 $358,565 $333,645 Net revenues increase (decrease) 3% 8% 9% 7% (1)% Same store sales increase (decrease) (2)% 5% 5% 6% -% Net income* $ 3,724 $ 8,645 $ 7,342 $ 4,010 $ 4,450 Basic and diluted earnings per share .11 .26 .20 .11 .12 Total assets* 206,889 206,651 201,872 193,519 195,462 Stockholders' equity* 158,707 154,727 156,248 156,143 158,238 Return on average assets 1.8% 4.2% 3.7% 2.1% 2.3% Return on average equity 2.4% 5.6% 4.7% 2.6% 2.9% Operating Data: Average sales per store $1,012 $1,012 $926 $863 $788 open for full fiscal year* Average sales per square foot $288 $306 $288 $278 $263 Number of stores: Beginning of year 408 415 412 415 427 Opened 32 10 19 15 2 Closed 21 17 16 18 14 End of year 419 408 415 412 415 Store composition: Outlet 36 24 20 13 8 Regular 59 93 125 148 179 Large format 324 291 270 251 228 Retail square footage:* Outet 151 92 72 50 30 Regular 107 163 216 253 303 Large format 1,244 1,116 1,049 989 910 Total 1,502 1,371 1,337 1,292 1,243 The Company has paid no cash dividends during the periods presented. * In thousands.
10 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. General The Bombay Company, Inc. ("Company" or "Bombay") designs, sources and markets a unique line of home accessories, wall decor and furniture through 419 retail stores in 42 states in the United States and nine Canadian provinces, through specialty catalogs and over the Internet in the U.S. and internationally. Merchandise is manufactured to Company specification through a network of contract manufacturers located principally in Asia and North America. In addition to its primary retail operations, the Company has several other initiatives underway. Bailey Street Trading Company ("Bailey Street") represents the Company's wholesale operations, begun in Fiscal 2000. Bailey Street reached the $2 million sales mark in Fiscal 2001 and is proving to be a viable, low-risk growth vehicle for the Company. Sales are projected at $5 million for 2002 and modest, positive earnings per share contributions are expected as early as the current year. International expansion has progressed with licensed international stores currently operating in the Dominican Republic, Puerto Rico and Kuwait. There are commitments with the Company's current international partners to open three additional stores in Fiscal 2002 including one each in the Dominican Republic, Saudi Arabia and Turkey. The Company plans to continue expansion of the Bombay brand abroad through licensing and distribution agreements with local partners in various markets, limiting the Company's risk by initially entering smaller, opportunistic markets with growth potential. Finally, in the third quarter of Fiscal 2001, the Company launched Bombay KIDS ("KIDS"), its new line of children's furniture, textile and accessory collections, with initial offerings exclusively through separate catalog and Internet channels. During Fiscal 2002, KIDS will be tested in several retail stores. The largest percentage of the Company's sales and operating income is realized in the fiscal quarter that includes December (Christmas season). Because the majority of the Company's products are proprietary, the impact of inflation on operating results is typically not significant. The Company attempts to alleviate inflationary pressures by increasing selling prices (subject to competitive conditions), improving designs and finding alternative production sources in lower cost countries. The Company has a retail (52-53 week) fiscal year which ends on the Saturday nearest January 31. Fiscal 2001 and Fiscal 1999 represent 52 week periods while Fiscal 2000 included 53 weeks. Special Note Regarding Forward-Looking Statements Certain statements in this Annual Report to Shareholders under "Management's Discussion and Analysis" constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the following: the impact on consumer spending generally, and on the Company, in particular, in light of the events of September 11, 2001; downward pressure in retail due to continuing economic pessimism; competition; seasonality; success of operating initiatives; new product development and introduction schedules; acceptance of new product offerings; advertising and promotional efforts; adverse publicity; expansion of the store chain; availability, locations and terms of sites for store development; changes in business strategy or development plans; availability and terms of capital; labor and employee benefit costs; changes in government regulations; risks associated with international business and regional weather conditions. 11 Net Revenues Net revenues consist of sales to retail customers and wholesale sales through Bailey Street and to our international licensees as well as shipping fees. Shipping fees reflect revenue from customers for delivery of merchandise. Wholesale sales are immaterial for all periods, representing less than 1% of total revenue and as such are not separately reported. (In millions)
Fiscal 2001 Fiscal 2000 Fiscal 1999 Sales $434.7 $421.5 $390.9 Shipping 2.8 2.0 1.7 Total $437.5 $423.5 $392.6
Fiscal 2001 Net revenues increased $14.0 million, or 3%, to $437.5 million, compared to $423.5 million in Fiscal 2000 primarily due to new store openings. During the year, the Company opened 32 new stores, including 12 outlets, and 18 regular stores were converted to the large store format. These increases were partially offset by the closure of 21 stores. Same store sales (stores in existence for one year or more) declined 2% for the year. The lack of a 53rd week during Fiscal 2001 adversely impacted sales comparisons by approximately 2%. At the end of Fiscal 2001, the Company had 324 large stores, 59 regular stores and 36 outlets resulting in a 10% increase in retail square footage. Our customer's resistance to big-ticket purchases during the year resulted in a shift in the overall product mix. Furniture sales were 43% of the total during Fiscal 2001 compared to 45% in Fiscal 2000. Accessories represented 43% in the current year compared to 41% last year, while wall decor (principally prints, mirrors and sconces) accounted for 14% in both years. Total transactions for the year increased 2% while the average ticket remained constant at $79. The growth in the accessories business resulted in an increase in the average number of items per transaction year over year, offsetting the impact of shifts in the product mix. All regions of the U.S. and Canada reported low single-digit same store sales declines for the year. Outlet stores continued to perform well during Fiscal 2001, reporting low single-digit same store sales gains. Fiscal 2000 Net revenues increased $30.9 million, or 8%, to $423.5 million, compared to $392.6 million in Fiscal 1999. Sales increases were attributable to a 5% increase in same store sales. A 53rd week in the Fiscal 2000 calendar added less than 2% to the total sales increase. Sales increases were also realized with the opening of 10 new stores during the year and the conversion of another 20 regular stores to the larger store format. These increases were partially offset by the closure of 17 stores which were either under-performing or at the end of their lease lives. On a net basis, the number of stores went from 415 at the end of Fiscal 1999 to 408 at the end of Fiscal 2000, including 291 large stores, 93 regular stores and 24 outlet stores, while total retail square footage increased approximately 2.5%. Sales growth was fairly consistent across all categories with the product mix remaining virtually unchanged. Sales in Fiscal 2000 consisted of 45% furniture, 41% accessories and 14% wall decor. In Fiscal 1999 the product mix was 45% furniture, 40% accessories and 15% wall decor. The number of transactions increased by 9% and the average ticket remained virtually unchanged at $79. Same store sales gains were strongest in the Company's Canadian subsidiary, with other strong performances in the western and northeastern portions of the U.S. All regions reported positive or flat same store sales. Outlets also performed well, driven by the continued infusion of outlet only merchandise. 12 Cost of Sales, Buying and Store Occupancy Costs (In millions)
Fiscal 2001 Fiscal 2000 Fiscal 1999 Cost of sales, buying and occupancy costs $309.6 $291.7 $273.5 Shipping 3.9 2.3 2.0 Total $313.5 $294.0 $275.5
Fiscal 2001 Cost of sales, including buying and store occupancy costs, for Fiscal 2001 was $313.5 million or 71.7% of revenues. As a percentage of revenues, these costs increased from 69.4% of revenues in Fiscal 2000. Product margins declined 130 basis points as a result of the more promotionally driven retail environment. Same stores sales declines which contributed to a lower sales per square foot resulted in negative leverage of the buying and occupancy costs. These costs were 20.4% of revenues, an increase of 90 basis points compared to the prior year. Buying and occupancy costs included an impairment charge of $715,000 to write down the fixed assets related to eleven unprofitable stores. Fiscal 2000 Cost of sales, including buying and store occupancy costs, for Fiscal 2000 was $294.0 million or 69.4% of revenues. As a percentage of revenues, these costs decreased from 70.2% of revenues in Fiscal 1999. Product margins improved 20 basis points from the prior year due to an improved product mix and good in-stock positions of key merchandise, more than offsetting higher distribution center and domestic freight costs. Buying and occupancy costs declined 60 basis points to 19.5% of revenues while increasing $3.4 million. The higher dollar costs were primarily driven by investments in new stores and technology. The improvement in buying and occupancy costs as a percentage of revenues is due to the relatively fixed nature of these costs measured against a higher revenue base. Selling, General and Administrative Expenses Fiscal 2001 Selling, general and administrative expenses were $117.6 million compared to $115.6 million in Fiscal 2000. Although the dollars increased $2.0 million or 1.8%, as a percentage of revenues, selling, general and administrative costs declined from 27.3% in Fiscal 2000 to 26.9% in Fiscal 2001. The 40 basis point decline is the result of strong controls over expenses throughout the year. Fiscal 2000 Selling, general and administrative expenses were $115.6 million, an increase of $9.6 million or 9%, compared to $106.0 million in Fiscal 1999. The largest component of the dollar increase was higher payroll and related costs. However, as a percentage of revenues these costs remained relatively constant. The Company's investments in infrastructure and technology also contributed to higher selling, general and administrative expenses with increased depreciation, amortization and related costs. As a percentage of revenues, selling, general and administrative expenses increased from 27.0% in Fiscal 1999 to 27.3% in Fiscal 2000. 13 Interest Fiscal 2001 The Company had interest income of $248,000 and interest expense of $566,000, compared to interest income of $967,000 and interest expense of $424,000 in Fiscal 2000. Changes in interest amounts resulted from lower average cash balances and greater utilization of credit facilities due to the Company's lower operating profits, higher average inventory levels and capital expenditures. Fiscal 2000 The Company had interest income of $967,000 and interest expense of $424,000, compared to interest income of $1.1 million and interest expense of $59,000 in Fiscal 1999. The changes in these amounts are due to lower average cash balances and greater utilization of seasonal borrowings to support the Company's investments in store expansion, infrastructure and technology, the stock repurchase program and higher inventory levels. Income Taxes The Company provided income taxes of $2.3 million, $5.8 million and $4.8 million in Fiscal 2001, Fiscal 2000 and Fiscal 1999, respectively. The effective rates were 38.6%, 40.0% and 39.6% in the respective periods. Fluctuations in the effective rate are primarily related to foreign taxes which change in accordance with earnings in the Canadian subsidiary and in state tax expenses which have not changed proportionately to income before income taxes. Liquidity and Capital Resources The primary sources of liquidity and capital resources are cash flows from operations and a line of credit with banks. The Company has an unsecured, revolving credit agreement with a group of banks, with an aggregate commitment of up to $50.0 million for working capital and letter of credit purposes. The bank commitment is limited to 45% of eligible inventory. At February 2, 2002, the bank commitment was $40.2 million, and $32.5 million was available for borrowings or additional letters of credit. The credit facility expires June 5, 2002. The Company expects to be able to renew or replace its current facility under similar or more favorable terms upon expiration. Fiscal 2001 At February 2, 2002, cash and short-term investments were $38.4 million, $16.3 million higher than at February 3, 2001. The primary sources of cash were net income, including non-cash depreciation and amortization expense, and decreases in inventory levels. These sources were partially offset by capital expenditures for store construction and routine equipment purchases. At February 2, 2002, inventory levels were $15.1 million lower than at the previous year end reflecting the Company's conservative balance sheet management during the second half of the year in light of economic uncertainties and the events of September 11th. The lower inventory levels resulted in less clearance product as of the end of the year and are expected to contribute to improved gross margins and inventory turns for Fiscal 2002. Capital expenditures totaled $14.1 million and included the costs of 32 new stores and the conversion of 18 regular stores to the larger format, as well as continued investments in software and equipment. The capital expenditures program for Fiscal 2002 is planned at approximately $12 million and includes approximately 25 store openings, including 7 outlets and 6 KIDS stores. Additionally, approximately 4 to 6 stores are expected to be converted to the larger format. Generally, a new or converted store is profitable in its first full year of operations. The Company's development of its wholesale business and international opportunities are expected to have modest capital requirements during Fiscal 2002. The Company anticipates funding the growth of these initiatives through working capital. In connection with continuing operations, the Company has various contractual obligations and commercial commitments requiring payment in future periods, summarized in the table below. The Company did not incur any direct losses or significant expenses in connection with the events of September 11, 2001. However, as a result of those events and the surrounding economic uncertainties, the Company took a conservative approach to managing its balance sheet. Inventory levels were more tightly managed and less new product was introduced during January and February 2002, which may have adversely impacted sales. After the first quarter of Fiscal 2002, inventory receipts are expected to return to more normalized levels and the Company expects the negative trend in same store sales to reverse. 14 The Company believes that its current cash position, cash flows from operations and credit line facilities will be sufficient to fund its current operations and capital expenditures program. (In thousands)
Payments Due by Period Less than 1-3 4-5 After 5 Total 1 Year Years Years Years Contractual Obligations Real estate operating leases $216,778 $44,422 $89,754 $37,718 $44,884 Unconditional purchase orders 61,822 61,822 - - - Equipment operating leases 2,070 632 1,438 - - Employment contracts 1,581 1,581 - - - Other contractual obligations 1,135 912 223 - - Total contractual cash obligations $283,386 $109,369 $91,415 $37,718 $44,884 Commercial Commitments Import letters of credit $6,520 $6,520 $ - $ - $ - Standby letters of credit 1,206 1,206 - - - Guarantees of travel cards 88 88 - - - Total commercial commitments $7,814 $7,814 $ - $ - $ -
Fiscal 2000 As of February 3, 2001, cash and short-term investments were $22.2 million, a decrease of $17.0 million from January 29, 2000. The primary uses of cash were inventory purchases, new store construction and information technology upgrades, as well as purchases of treasury stock. These uses were partially offset by net income, including non-cash depreciation and amortization expense, and by increases in payables. At February 3, 2001, inventory levels were $14.3 million higher than at January 29, 2000, an increase of 16% compared to an 8% growth in sales. Several factors contributed to this increase. Spring product arrived earlier than in the previous year in order to ensure a good in-stock position for the introduction of the catalog in early March. Additionally, the timing of Chinese New Year shifted from February to January resulting in more of this season's inventory requirement being shipped just prior to the Company's fiscal year end. Finally, the inventory mix changed with a larger investment in bedroom furniture and a refined furniture assortment, which resulted in higher average price per unit. Capital expenditures totaled $16.7 million and included the costs of 10 new stores and the conversion of 20 regular stores to the larger format, as well as routine purchases of machinery and equipment. During Fiscal 2000, the Company spent $10.3 million under its stock repurchase program to acquire approximately 3.0 million shares of the Company's common stock. Critical Accounting Policies In the course of preparing the financial statements, management makes certain judgments relative to accounting policies that are appropriate in the circumstances and the application of those policies. The following policies are those deemed to be most critical. Inventory Valuation Policy Inventories are valued at the lower of cost or market, cost being determined based upon the weighted average inventory method. Cost is calculated based upon the actual landed cost of an item at the time it is received in the warehouse based upon actual vendor invoices or estimates of costs for which an invoice is not present or for which an allocation of shared costs is required. In addition, the Company includes the cost of warehousing and transporting product to the stores in its costs. The Company regularly evaluates its compliance with the lower of cost or market principle. Items are evaluated by SKU (stock keeping unit) and to the extent that the cost of the item exceeds the current selling price, provision is made to reduce the carrying cost of the item. Additionally, the Company reviews the aging of its inventory by SKU. The carrying cost of the item is reduced based upon certain age criteria and product category. Since the determination of carrying value of inventory involves both estimation and judgment of cost and market value, differences in these estimates could result in valuations that vary from the recorded asset. 15 Each month, the Company records an allowance for shrinkage to provide for the cost of lost or stolen inventory. The amount of the allowance is determined based upon the historical shrinkage results and is adjusted at least annually to reflect current circumstances. Inventory is physically counted at all locations at least once each year, at which time actual results are reflected in the financial statements. Physical counts were taken at all stores and the distribution centers during January 2002. Impairment of Long-Lived Assets Long-lived assets are reviewed at least annually and whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. This review includes the evaluation of individual under - -performing retail stores and assessing the recoverability of the carrying value of the fixed assets related to the store. Future cash flows are projected for the remaining lease life considering such factors as future sales levels, gross margins, changes in rent and other expenses as well as the overall operating environment specific to that store. If the future undiscounted cash flows are less than the carrying value of the assets, a charge is recorded to write down the cost of the assets. Since the projection of future cash flows involves judgment and estimates, differences in circumstances or estimates could produce different results. During Fiscal 2002, the Company will adopt the provisions of Statement of Accounting Standards No.144, Accounting for Impairment or Disposal of Long- Lived Assets ("FAS 144"). FAS 144 modifies previous guidance on the impairment of long-lived assets. Among other provisions, it permits the use of a probability-weighted estimation approach in evaluating future cash flows for a group of assets. The impact of the adoption of FAS 144 is not expected to have a material impact on the Company's consolidated financial position or results of operations. Deferred Taxes The Company currently has recorded $9.7 million of deferred tax assets representing the difference between the timing of deductions taken for financial statement purposes and for tax purposes. Underlying the assumption that the benefit of those assets will be recoverable in some future period is the concept that the Company will have future taxable income. If future conditions indicate that the benefit of the deferred tax assets will not be fully realized, a valuation allowance will be recorded to reduce the assets to their estimated realizable value. Insurance The Company is self-insured with respect to medical and dental insurance coverage offered to its eligible employees, up to a maximum of $125,000 per claim. Above that amount, medical insurance coverage is in place. In connection with the self-insured portion, the Company maintains a liability for claims that are in the process of being paid and those that have been incurred but not yet reported to the Company's insurance carrier. The amount of the liability is estimated based upon historical claims experience and upon information provided by the Company's independent benefits broker regarding other similar insurance programs. At February 2, 2002, the balance of the medical and dental liability was $1.4 million. Beginning in Fiscal 2001, the Company also maintains workers' compensation insurance coverage with a deductible of $100,000 per claim. At February 2, 2002, the Company has a liability of $644,000 representing the estimated amount that will have to be paid in future periods related to the settlement of claims under the insurance policy. The amount of the liability reflects expected remaining workers' compensation claims based upon historical claims experience and other information obtained by the Company, including projections made by the underwriters of the Company's insurance carrier. As these claims are paid, the liability will be reduced. Furthermore, the liability will be adjusted if circumstances change or if information becomes available that would indicate that the future payments would be different than what was previously estimated. Prior to Fiscal 2001, the Company's workers' compensation insurance was not subject to a deductible. Since the amounts recorded for insurance liabilities are based upon various estimates, actual future requirements could vary from the recorded liabilities. 16 ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk. As of February 2, 2002, the Company had no market risk sensitive instruments. ITEM 8. Financial Statements and Supplementary Data. The index to the consolidated financial statements is found on page 20. The Company's consolidated financial statements and notes to the consolidated financial statements follow the index. ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures. There have been no changes in or disagreements with accountants on accounting or financial disclosures. 17 PART III ITEM 10. Directors and Executive Officers of the Registrant. The information required by this item appears under the captions "Election of Directors", "Executive Officers of the Company" and "Section 16(a) Beneficial Ownership Reporting Compliance" in the Definitive Proxy Statement of The Bombay Company, Inc. relating to the Company's Annual Meeting of Shareholders, which information is incorporated herein by reference. ITEM 11. Executive Compensation. The information required by this item appears under the captions "Executive Compensation" and "Compensation of Directors" in the Definitive Proxy Statement of The Bombay Company, Inc. relating to the Company's Annual Meeting of Shareholders, which is incorporated herein by reference. ITEM 12. Security Ownership of Certain Beneficial Owners and Management. The information required by this item appears under the caption "Security Ownership" and in the Definitive Proxy Statement of The Bombay Company, Inc. relating to the Company's Annual Meeting of Shareholders, which information is incorporated herein by reference. ITEM 13. Certain Relationships and Related Transactions. The information required by this item appears under the caption "Certain Transactions" in the Definitive Proxy Statement of The Bombay Company, Inc. relating to the Company's Annual Meeting of Shareholders, which information is incorporated herein by reference. 18 PART IV ITEM 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K. (a) The following documents are filed as a part of this Annual Report for The Bombay Company, Inc. and its subsidiaries: (1) Financial Statements: Report of Independent Accountants Consolidated Statements of Income for the years ended February 2, 2002, February 3, 2001 and January 29, 2000 Consolidated Balance Sheets at February 2, 2002 and February 3, 2001 Consolidated Statements of Cash Flows for the years ended February 2, 2002, February 3, 2001 and January 29, 2000 Consolidated Statements of Stockholders' Equity for the years ended February 2, 2002, February 3, 2001, and January 29, 2000 Notes to Consolidated Financial Statements (2) Financial statement schedules not included in this Form 10-K Annual Report have been omitted because they are not applicable or the required information is shown in the financial statements or notes thereto. (3) Exhibits: A list of exhibits required to be filed as part of this report is set forth in the Index to Exhibits, which immediately precedes such exhibits, and is incorporated herein by reference. (b) Reports on Form 8-K. No reports on Form 8-K were filed during the quarter ended February 2, 2002. 19 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. THE BOMBAY COMPANY, INC. (Registrant) Date: April 17, 2002 /s/ CARMIE MEHRLANDER Carmie Mehrlander Chairman of the Board, President and Chief Executive Officer Pursuant to the requirements of the Securities and Exchange Act of 1934, this has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Name Position Date Director Barbara Bass /s/ JOHN H. Director April 15, 2002 COSTELLO John H. Costello /s/ GLENN E. Director April 16, 2002 HEMMERLE Glenn E. Hemmerle /s/ JAMES A. Director April 15, 2002 MARCUM James A. Marcum /s/ CARMIE President, Chief April 17, 2002 MEHRLANDER Executive Officer Carmie Mehrlander and Director Director Julie L. Reinganum Director Bruce R. Smith /s/ NIGEL TRAVIS Director April 17, 2002 Nigel Travis /s/ ELAINE D. Sr. Vice President, April 17, 2002 CROWLEY Chief Financial Elaine D. Crowley Officer and Treasurer 20 Index to Financial Statements and Supplementary Data Page No. Report of Independent Accountants 21 Consolidated Statements of Income for the Years Ended February 2, 2002,February 3, 2001 and January 29, 2000 22 Consolidated Balance Sheets at February 2, 2002 and February 3, 2001 23 Consolidated Statements of Cash Flows for the Years Ended February 2, 2002,February 3, 2001 and January 29, 2000 24 Consolidated Statements of Stockholders' Equity for the Years Ended February 2, 2002, February 3, 2001 and January 29, 2000 25 Notes to Consolidated Financial Statements 26-34 Unaudited Quarterly Financial Data 35 21 Report of Independent Accountants To the Board of Directors and Stockholders of The Bombay Company, Inc. In our opinion, the consolidated financial statements listed in the accompanying index on page 20 present fairly, in all material respects, the financial position of The Bombay Company, Inc. and its subsidiaries at February 2, 2002 and February 3, 2001, and the results of their operations and their cash flows for each of the three years in the period ended February 2, 2002, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. PRICEWATERHOUSECOOPERS LLP March 12, 2002 Fort Worth, Texas 22 Consolidated Statements of Income The Bombay Company, Inc. and Subsidiaries (In thousands, except per share amounts)
Year Ended February 2 February 3 January29 2002 2001 2000 Net revenues $437,457 $423,459 $392,578 Costs and expenses: Cost of sales, buying and store occupancy costs 313,484 294,043 275,496 Selling, general and administrative expenses 117,589 115,559 105,958 Interest expense (income), net 318 (543) (1,029) 431,391 409,059 380,425 Income before income taxes 6,066 14,400 12,153 Provision for income taxes 2,342 5,755 4,811 Net income $3,724 $8,645 $7,342 Basic earnings per share $.11 $.26 $.20 Diluted earnings per share $.11 $.26 $.20 Average common shares outstanding 32,967 33,262 36,408 Average common shares outstanding and dilutive potential common shares 32,992 33,292 36,672 The accompanying notes are an integral part of these consolidated financial statements.
23 Consolidated Balance Sheets The Bombay Company, Inc. and Subsidiaries (In thousands, except shares)
February 2 February 3 2002 2001 Assets Current assets: Cash and cash equivalents (short-term investments of $31,437 and $15,244,respectively) $38,415 $22,157 Inventories, at lower of cost or market 89,798 104,914 Other current assets 16,893 15,380 Total current assets 145,106 142,451 Property and equipment, at cost: Land 892 990 Building 5,198 5,198 Leasehold improvements 80,291 76,991 Furniture and equipment 30,622 28,844 117,003 112,023 Accumulated depreciation (68,290) (63,517) Net property and equipment 48,713 48,506 Deferred taxes and other assets 12,640 15,237 Goodwill, less amortization of $604 and $577, respectively 430 457 Total assets $206,889 $206,651 Liabilities and stockholders' equity Current liabilities: Accounts payable and accrued expenses $27,281 $28,445 Income taxes payable 3,220 5,969 Accrued payroll and bonuses 5,015 5,649 Gift certificates redeemable 5,724 4,765 Total current liabilities 41,240 44,828 Accrued rent and other liabilities 6,942 7,096 Stockholders' equity: Preferred stock, $1 par value, 1,000,000 shares authorized - - Common stock, $1 par value, 50,000,000 shares authorized,38,149,646 shares issued 38,150 38,150 Additional paid-in capital 75,267 75,735 Retained earnings 69,144 65,420 Accumulated other comprehensive income (loss) (1,776) (1,267) Common shares in treasury, at cost, 5,112,696 and 5,455,919 shares, respectively (20,861) (22,320) Stock purchase loans and accrued interest (950) (991) Deferred compensation (267) - Total stockholders' equity 158,707 154,727 Commitments and contingencies (Note 5) Total liabilities and stockholders' equity $206,889 $206,651 The accompanying notes are an integral part of these consolidated financial statements.
24 Consolidated Statements of Cash Flows The Bombay Company, Inc. and Subsidiaries (In thousands)
Year Ended February 2 February 3 January 29 2002 2001 2000 Cash flows from operating activities: Net income $3,724 $8,645 $7,342 Adjustments to reconcile net income to net cash from operations: Depreciation 13,000 11,748 10,706 Amortization 3,472 3,003 1,955 Restricted stock compensation 298 98 174 Deferred taxes and other (707) 248 (491) Change in assets and liabilities: (Increase) decrease in inventories 14,090 (14,692) (15,615) (Increase) decrease in other current assets (807) (2,113) 38 Increase in accounts payable and accrued expenses 50 256 3,081 Increase (decrease) in income taxes payable (2,700) 764 3,477 Increase (decrease) in accrued payroll and bonuses (607) 1,137 1,291 (Increase) decrease in noncurrent assets 74 62 (84) Increase in noncurrent liabilities (563) 9 462 Net cash provided by operations 29,324 9,165 12,336 Cash flows from investing activities: Purchases of property, equipment and other (14,127) (16,721) (18,011) Proceeds from sale of property and equipment 614 375 249 Net cash used by investing activities (13,513) (16,346) (17,762) Cash flows from financing activities: Purchases of treasury stock (103) (10,303) (8,527) Sale of stock to employee benefit plans 193 291 269 (Issuance) collection of stock purchase loans 86 - (43) Exercise of stock options - - 290 Net cash provided (used) by financing activities 176 (10,012) (8,011) Effect of exchange rate change on cash 271 176 (198) Net increase (decrease) in cash and cash equivalents 16,258 (17,017) (13,635) Cash and cash equivalents at beginning of year 22,157 39,174 52,809 Cash and cash equivalents at end of year $38,415 $22,157 $39,174 Supplemental disclosures of cash flow information: Interest paid $566 $424 $48 Income taxes paid 5,687 4,254 1,490 Non-cash financing activities: Distributions of director fees 75 6 189 Issuance of restricted stock 826 154 73 Loans issued to purchase Company stock - 314 574 The accompanying notes are an integral part of these consolidated financial statements.
25 Consolidated Statements of Stockholders' Equity The Bombay Company, Inc. and Subsidiaries (In thousands)
Accumulated Common Stock Treasury Stock Additional Stock Other Annual Paid-In Purchase Deferred Retained Comprehensive Comprehensive Shares Amount Shares Amount Capital Loans Comp. Earnings Income (Loss) Income 1999 38,150 $38,150 (1,171) $ (5,983) $76,044 $ - $ - $ 49,433 $(1,501) Purchases of treasury shares - - (1,777) (8,527) - - - - - Shares contributed or sold to employee benefit plans - - 80 405 (43) (93) - - - Exercise of stock options - - 66 336 (22) - - - - Distributions of deferred director fees - - 31 153 36 - - - - Restricted stock distributions - - 13 65 8 - - - - Shares sold to officers with stock purchase - - 81 422 59 (481) - - - Loans to officers for purchases of Company stock - - - - - (43) - - - Net income - - - - - - - 7,342 - $7,342 Foreign currency translation 488 adjustments - - - - - - - - 488 488 Total, January 29, 2000 38,150 38,150 (2,677) (13,129) 76,082 (617) - 56,775 (1,013) $7,830 Purchases of treasury shares - - (3,040) (10,303) - - - - - Shares contributed or sold to employee benefit plans - - 130 541 (250) - - - - Director fee distributions - - 2 7 (1) - - - - Restricted stock distributions - - 28 130 24 - - - - Shares sold to officers with stock purchase loans - - 101 434 (120) (314) - - - Interest charged on stock purchase loans - - - - - (60) - - - Net income - - - - - - - 8,645 - $8,645 Foreign currency translation adjustments - - - - - - - - (254) (254) Total, February 3, 2001 38,150 38,150 (5,456) (22,320) 75,735 (991) - 65,420 (1,267) $8,391 Purchases of treasury shares - - (39) (103) - - - - - Shares contributed or sold to employee benefit plans - - 102 418 (225) - - - - Director fee distributions - - 30 123 (48) - - - - Restricted stock distributions - - 250 1,021 (195) - (552) - - Deferred compensation expense - - - - - - 285 - - Collections of stock purchase loans - - - - - 86 - - - Interest (charges) collections on stock purchase loans, net - - - - - (45) - - - Net income - - - - - - - 3,724 - $3,724 Foreign currency translation adjustments - - - - - - - - (509) (509) Total, February 2, 2002 $38,150 $38,150 (5,113) $(20,861) $75,267 $(950) $(267) $69,144 $(1,776) $3,215 The accompanying notes are an integral part of these consolidated financial statements.
26 Notes to Consolidated Financial Statements Note 1 - Statement of Accounting Policies ______________________________________________________________ Basis of Presentation The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany transactions, balances and profits have been eliminated. The Company has a retail (52 - 53 week) fiscal year which ends on the Saturday nearest January 31. The periods ended February 2, 2002 ("Fiscal 2001") and January 29, 2000 ("Fiscal 1999") represent 52 weeks. The period ended February 3, 2001 ("Fiscal 2000") represents 53 weeks. Certain prior year amounts have been reclassified to conform to current year presentation. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates. Actual results could differ from those estimates. Foreign Currency Translation The functional currency of the Company's Canadian operations is the Canadian dollar. Fiscal year end exchange rates are used to translate assets and liabilities to U.S. dollars. Monthly average exchange rates are used to translate income and expenses. The cumulative effect of foreign currency translation adjustments is reported in accumulated other comprehensive income (loss) within stockholders' equity. Cash and Cash Equivalents Cash in stores, deposits in banks and short-term investments with original maturities of three months or less are considered as cash and cash equivalents for the purposes of the financial statements. Short - term investments are recorded at the lower of cost or fair market value. Inventories Inventories are primarily finished merchandise and are valued at the lower of cost or market, cost being determined based upon the weighted average inventory method. Property and Equipment Property and equipment are depreciated over the estimated useful lives of the assets using the straight - line method over the lives shown: Building Forty years Furniture and equipmen Two to ten years Leasehold improvements The lesser of the life of the lease or asset Maintenance and repairs are charged to expense as incurred. Renewals and betterments which materially prolong the useful lives of the assets are capitalized. The cost and related accumulated depreciation of property retired or sold are removed from the accounts, and gains or losses are recognized in the statements of income. Capitalized Software Costs The Company capitalizes certain external and internal costs associated with computer software and significant enhancements to software features of existing products, after technological feasibility has been established. The costs are amortized utilizing the straight-line method over the estimated economic lives of the software, which range from three to seven years. Total costs capitalized were $18,703,000 and $17,287,000 at February 2, 2002 and February 3, 2001, respectively. Accumulated amortization related to these assets was $12,517,000 and $9,103,000 in Fiscal 2001 and Fiscal 2000, respectively. 27 Goodwill Goodwill recorded in association with acquisitions accounted for using the purchase method is amortized using the straight - line method over the estimated useful life of 40 years. Effective February 3, 2002, the Company will adopt the provisions of Statement of Financial Accounting Standards No. 142, Accounting for Goodwill and Other Intangibles ("FAS 142"). FAS 142 establishes accounting and reporting standards for the valuation and impairment of goodwill and other intangible assets. The adoption of FAS 142 is not expected to have a material impact on the Company's consolidated financial position or results of operations. With the adoption of FAS 142, the Company will cease amortization of goodwill. Impairment of Long-Lived Assets Long-lived assets, including goodwill, are reviewed whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. An impairment loss is recognized if the expected future undiscounted net cash flows are less than the net book value of the assets. The amount of the impairment loss is measured as the difference between carrying value and the estimated fair value of the assets. Effective February 3, 2002, the Company will adopt the provisions of Statement of Financial Accounting Standards No. 144, Accounting for Impairment or Disposal of Long-Lived Assets ("FAS 144"). FAS 144 modifies previous guidance on the impairment of long-lived assets. Among other provisions, it permits the use of a probability-weighted cash flow estimation approach in assessing the expected future undiscounted net cash flows for a group of assets. The impact of the adoption of FAS 144 is not expected to have a material impact on the Company's consolidated financial position or results of operations. Revenue Recognition Revenue is recognized when delivery has occurred, the sales price is fixed or determinable, and collectibility is reasonably assured. Revenues are net of returns and exclude sales tax. The Company includes in revenues amounts collected from customers for shipping and handling orders. In Fiscal 2001, Fiscal 2000 and Fiscal 1999, these revenues totaled $2,779,000, $1,945,000 and $1,697,000, respectively. The associated shipping and handling expenses are included in cost of sales. Gift Certificates Proceeds from the sale of gift cards and certificates are recorded as a liability at the time they are received. When the holder of the card or certificate redeems it for merchandise, the liability is relieved and revenue is recognized. Advertising Costs Advertising costs are expensed the first time the advertising takes place. During Fiscal 2001, Fiscal 2000 and Fiscal 1999 advertising expense was $14,597,000, $14,701,000 and $14,645,000, respectively. Income Taxes The Company uses the liability method of computing deferred income taxes on all material temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. The Company assesses realizability of deferred tax assets and, if necessary, a valuation allowance is provided. Comprehensive Income Comprehensive income represents the change in equity (net assets) of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners. Such amounts are included in accumulated other comprehensive income (loss) within stockholders' equity and consist of the cumulative effect of foreign currency translation adjustments. Earnings per Share Basic earnings per share are based upon the weighted average number of shares outstanding. Diluted earnings per share are based upon the weighted average number of shares outstanding plus the shares that would be outstanding assuming exercise of dilutive stock options and distribution of deferred director compensation. 28 The computations for basic and diluted earnings from continuing operations per share are as follows (in thousands, except per share amounts): Year Ended
February 2 February 3 January 29 2002 2001 2000 Numerator: Net income $3,724 $8,645 $7,342 Denominator for basic earnings per share: Average common shares outstanding 32,967 33,262 36,408 Denominator for diluted earnings earnings per share: Average common shares outstanding 32,967 33,262 36,408 Stock options 1 - 217 Restricted stock - 11 23 Deferred director compensation 24 19 24 32,992 33,292 36,672 Basic earnings per share $.11 $.26 $.20 Diluted earnings per share $.11 $.26 $.20
Note 2 - Store Impairments and Closing Liability Long-lived assets are reviewed at least annually and whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. Following the holiday selling season, the Company reviewed its real estate portfolio focusing on stores for which store profitability was negative. Of the 419 Company owned stores open as of February 2, 2002, eleven stores were identified for which the expected undiscounted future cash flows were less than the net book value of the fixed assets related to those stores. As a result of the review, the Company has recorded a charge to buying and occupancy costs of $715,000 to write down the assets to fair value. The Company has established a liability for obligations associated with closing under-performing stores. At February 2, 2002 and February 3, 2001, the liability was $342,000 and $715,000, respectively. Costs of $373,000 and $222,000 were charged against the liability in Fiscal 2001 and Fiscal 2000, respectively. Note 3 - Income Taxes _______________________________________________________________ The components of the provision for domestic and foreign income taxes are shown below (in thousands):
Year Ended February 2 February 3 January 29 2002 2001 2000 Income before income taxes: Domestic $5,447 $12,503 $12,049 Foreign 619 1,897 104 $6,066 $14,400 $12,153 Provision (benefit)for income taxes: Current: Federal $2,290 $3,950 $4,895 Foreign 339 919 (20) State and local 147 527 387 2,776 5,256 5,402 Deferred (prepaid): Federal (423) 389 (692) Foreign 29 44 149 State and local (40) 66 (48) (434) 499 (591) Total provision for income taxes $2,342 $5,755 $4,811
29 The effective tax rate differs from the federal statutory tax rate for the following reasons:
Year Ended February 2 February 3 January 29 2002 2001 2000 Federal statutory tax rate 34.0% 35.0% 35.0% Increase in effective tax rate due to: Foreign income taxes 2.6 2.1 .8 State and local taxes, net of federal income tax benefit 1.1 2.2 3.0 Other, net .9 .7 .8 Effective tax rate 38.6% 40.0% 39.6%
Deferred taxes reflect the net tax impact of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and amounts used for income tax purposes. Deferred tax assets (liabilities) are comprised of the following (in thousands):
February 2 February 3 2002 2001 Deferred tax liabilities ($1,279) ($1,661) Deferred tax assets: Accrued rent 2,617 2,900 Depreciation 2,391 2,661 Inventory valuation 2,014 1,727 Other 2,639 2,321 9,661 9,609 Net deferred tax assets $8,382 $7,948 Deferred tax assets, net of liabilities: Current $2,192 $1,202 Non-Current 6,190 6,746 Total $8,382 $7,948
Note 4 - Debt ______________________________________________________________ The Company has an unsecured, revolving credit agreement with a group of banks, with an aggregate commitment of up to $50,000,000. The credit facility is available for working capital and letter of credit purposes. Borrowings under the facility bear interest, at the Company's option, at either the lead bank's prime lending rate plus a margin of 0% to .5% or the LIBOR rate plus a margin of 1.0% to 2.0%, with the margin depending on the Company's leverage ratio. Under terms of the agreement, the Company is required to maintain certain financial ratios and other financial conditions. The agreement prohibits the Company from making certain investments, advances or loans and limits the dollar amounts of capital expenditures, purchases of treasury shares, cash dividends and asset sales. In the event that the Company is in default of certain provisions of the agreement, the lenders would be permitted to file liens against the Company's inventory located in the United States and perfect the pledge of 65% of the stock of the Company's Canadian subsidiary, thereby securing the indebtedness. The agreement expires June 5, 2002 and is expected to be renewed under similar terms. The bank commitment is limited to 45% of eligible inventory. At February 2, 2002, the bank commitment was $40,210,000. Letters of credit totaling $7,726,000 were outstanding under the facility, and $32,484,000 was available for borrowings or additional letters of credit. Interest expense and negotiated fees for Fiscal 2001, Fiscal 2000 and Fiscal 1999 totaled $884,000, $610,000 and $257,000, respectively. 30 Note 5 - Commitments and Contingencies _____________________________________________________________ Store, distribution and field office facilities and equipment are leased under operating leases expiring through 2013. The store leases are generally based upon a minimum rental plus a percentage of the store sales in excess of specified levels. Store lease terms generally require additional payments covering taxes, common area charges and certain other costs. Rental expense for Fiscal 2001, Fiscal 2000 and Fiscal 1999 totaled $47,366,000, $45,137,000 and $42,991,000, respectively. The minimum rental commitments for future fiscal years are as follows (in thousands):
Fiscal 2002 $45,054 2003 40,225 2004 29,508 2005 21,459 2006 19,406 Thereafter 63,196 $218,848
The Company has certain contingent liabilities resulting from litigation and claims incident to the ordinary course of business. Management believes that the probable resolution of such contingencies will not materially affect the financial position or results of operations of the Company. The Company is party to employment agreements with certain executives which provide for compensation and certain other benefits. The agreements also provide for severance payments under certain circumstances. Note 6 - Employee Benefit Plans _____________________________________________________________ The Bombay Company, Inc. Employee 401(k) Savings and Stock Ownership Plan ("401(k) Plan") is open to substantially all employees who have been employed for one year and who work at least 1,000 hours per year. Under the 401(k) Plan, a participant may contribute up to 15% of earnings with the Company matching 100% of the initial 3% contribution, and 50% of the next 2% contributed by the participant. Participant contributions and Company match are paid to a corporate trustee and invested in various funds or Company stock, as directed by the participant. Company matching contributions made to participants' accounts are fully vested immediately. Similar benefit plans are in effect for eligible foreign employees. To the extent employees are unable to contribute up to 5% of their earnings to the 401(k) Plan because of limitations imposed by IRS regulations, a Supplemental Stock Program was adopted. Under this program, employee contributions in excess of IRS limitations, along with Company matching contributions, are distributed annually in the form of Company common stock. The Bombay Company, Inc. Stock Purchase Program ("SPP") is open to all full- time employees who have at least 90 days of service. Each participant may contribute 1% to 10% of qualifying compensation, to a maximum annual contribution of $21,250. Contributions are used to purchase shares of Company common stock at a discount of 15% from current market rates. The participants' shares are fully vested upon purchase. Participants' shares are held by a third-party administrator until the respective participant requests a distribution. Total Company contributions to these plans for Fiscal 2001, Fiscal 2000 and Fiscal 1999 were $644,000, $738,000 and $480,000, respectively. 31 Note 7 - Common Stock and Stock Options _______________________________________________________________ The Company's Board of Directors has authorized a stock repurchase program to purchase up to an aggregate of $30 million of the Company' stock. The shares may be purchased from time to time, through open market purchases and privately negotiated transactions. During Fiscal 2001, Fiscal 2000 and Fiscal 1999, 39,000, 3,039,550, and 1,777,416 shares, respectively, were acquired at an aggregate cost of $103,000, $10,303,000 and $8,527,000, respectively. Treasury shares are used for various employee and director stock plans as the need arises. Non - employee directors are eligible to participate in the Non-Employee Director Equity Plan, which allows such directors the option to defer receipt of retainer payments and meeting fees which are credited to an account for such director in units equivalent to Company common stock. The Bombay Company, Inc. 1986 Stock Option Plan and 1996 Long Term Incentive Stock Plan ("Employee Plans") provide for the granting of options (and other types of stock-related awards under the 1996 plan) to officers and key management employees. At February 2, 2002, the option shares reserved for the Employee Plans were 5,633,595. The option price is fixed at the market price or higher on the date of the grant. Options are generally exercisable annually at a rate of 33% per year beginning one year after the grant date. Shares available for additional grants were 1,459,552; 1,732,538 and 2,046,273 at February 2, 2002, February 3, 2001 and January 29, 2000, respectively. During Fiscal 1998, restricted stock aggregating 90,000 shares was granted under the 1996 Long Term Incentive Stock Plan to three key executives. The respective shares are issuable in designated increments contingent upon continued employment of the respective executive after 12 months, 24 months and 36 months. During Fiscal 2001, Fiscal 2000 and Fiscal 1999, 49,500, 27,500 and 13,000 shares, respectively, became vested and were issued under these grants. Compensation expense of $13,000, $98,000 and $174,000 was recognized during Fiscal 2001, Fiscal 2000 and Fiscal 1999, respectively, in connection with the restricted stock. During Fiscal 2001, restricted stock aggregating 200,000 shares was granted and issued under the 1996 Long Term Incentive Stock Plan to three key executives. The respective shares become vested in designated increments contingent upon continued employment of the respective executive after 12 months, 24 months and 36 months. If each of the executives remains employed by the Company under the terms of the grant, 40,000, 60,000 and 100,000 shares will be vested in Fiscal 2002, Fiscal 2003 and Fiscal 2004, respectively. Compensation expense of $285,000 was recognized during Fiscal 2001 in connection with the restricted stock. The Bombay Company, Inc. Non-Employee Director Equity Plan ("Director Plan") provides for the granting of options to members of the Board of Directors who are neither employees nor officers of the Company. At February 2, 2002, the option shares reserved for the Director Plan were 745,267. The option price is fixed at the market price on the date of the grant. The option grant, initial and annual, is currently the lesser of 8,000 shares or $75,000 in face value. The initial grant becomes exercisable at a rate of 20% per year beginning one year after the grant date. Each additional annual grant becomes fully exercisable six months after the grant date. Shares available for additional grants were 354,210, 481,696 and 10,946 at February 2, 2002, February 3, 2001 and January 29, 2000, respectively. 32 The following table includes option information for the Employee Plans and Director Plan:
Option Price Weighted Average Stock Option Activity Number of Shares Per Share Option Price January 30, 1999 2,109,144 $3.33-25.75 $6.28 Options granted 1,151,610 3.81- 8.00 4.73 Options exercised (44,316) 4.00- 7.25 4.84 Options canceled (359,053) 3.33-17.94 6.36 January 29, 2000 2,857,385 3.60-25.75 5.67 Options granted 1,027,500 1.75- 5.00 3.77 Options canceled (207,644) 2.50-15.88 4.61 February 3, 2001 3,677,241 1.75-25.75 5.20 Options granted 1,157,200 2.35- 4.00 2.77 Options canceled (603,856) 2.31-25.75 4.83 February 2, 2002 4,230,585 1.75-25.75 4.59 Exercisable at: January 29, 2000 827,492 3.60-25.75 7.15 February 3, 2001 2,100,473 3.60-25.75 5.60 February 2, 2002 2,502,548 1.75-25.75 5.27
The following table summarizes stock options outstanding at February 2, 2002:
Outstanding Exercisable Exercise Weighted Average Weighted Average Weighted Average Price Range Shares Remaining Life Exercise Price Shares Exercise Price $ 1.75-2.75 154,500 9.1 $2.50 35,170 $ 2.50 2.76-2.94 894,000 9.0 2.77 46,168 2.83 3.00-3.75 170,475 8.8 3.25 51,676 3.67 3.81-3.94 1,195,202 7.6 3.88 857,360 3.88 4.00-4.94 635,641 5.9 4.51 600,008 4.51 5.00-5.95 379,438 6.4 5.55 311,704 5.53 6.00-6.94 556,986 6.4 6.56 384,519 6.58 7.25-25.75 244,343 3.4 11.21 215,943 11.61 4,230,585 7.2 $ 4.59 2,502,548 $ 5.27
The exercise of non-qualified stock options in Fiscal 1999 resulted in income tax benefits of $25,000 which were credited to additional paid-in capital. The income tax benefits are the tax effect of the difference between the market price on the date of exercise and the option price. 33 The Company has adopted the disclosure-only provisions of Statement of Financial Accounting Standards No. 123, Accounting for Stock - Based Compensation ("FAS 123"). Accordingly, no compensation cost has been recognized for options granted. Had compensation cost for the Company's stock option plans been determined based on the fair value at the grant date for awards in Fiscal 1995 through Fiscal 2001 in accordance with the provisions of FAS 123, the Company's net income and earnings per share would have been reduced to the pro forma amounts indicated below (in thousands, except per share amounts):
Year Ended February 2 February 3 January 29 2002 2001 2000 Net income, as reported $3,724 $8,645 $7,342 Net income, pro forma 2,760 7,521 5,876 Basic earnings per share, as reported .11 .26 .20 Diluted earnings per share, as reported .11 .26 .20 Basic earnings per share,pro forma .08 .23 .16 Diluted earnings per share .08 .23 .16
The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model based upon the following assumptions:
Year Ended February 2 February 3 January 29 2002 2001 2000 Expected volatility 59.9% 59.8% 59.4% Expected life years 6 6 5 Expected dividends - - - Risk-free interest rate 5.0-5.5% 5.2-6.8% 5.3-6.7%
The weighted average fair value of options granted during Fiscal 2001, Fiscal 2000 and Fiscal 1999 was $1.69, $2.34 and $2.64, respectively. Note 8 - Shareholders' Rights Plan _______________________________________________________________ The Company has a shareholders' rights plan under which each share of Company common stock includes one Preferred Share Purchase Right ("Right") entitling the holder to buy one one-thousandth of a share of Series A Junior Participating Preferred Stock of the Company at an exercise price of $50. The Rights, which have ten year terms expiring in 2005, are exercisable if a person or group acquires 15% or more of the common stock of the Company or announces a tender offer for 15% or more of the common stock. If a person or group acquires 15% or more of the outstanding common stock of the Company, each Right will entitle the holder to purchase, at the Right's exercise price, a number of shares of Company common stock having a market value of twice the Right's exercise price. If the Company is acquired in a merger or other business combination transaction after a person or group acquires 15% or more of the Company's common stock, each Right will entitle its holder to purchase, at the Right's exercise price, a number of shares of the acquiring company's common stock having a market value of twice the Right's exercise price. The Rights are redeemable at one cent per Right at any time before they become exercisable. 34 Note 9 - Stock Purchase Loans ______________________________________________________________ On August 26, 1999, the Board of Directors adopted an executive stock purchase program as a vehicle to enable executive officers to increase their ownership in the Company by purchasing Company stock, further aligning the interests of the officers with those of the shareholders. Under the program, certain key executive officers may be given the opportunity to purchase shares of the Company's common stock at market prices from time to time over a specified period of time, and the Company will finance 100% of the purchase price of such stock. The unsecured, full recourse loans bear interest at Applicable Federal Rates and have due dates ranging from August 31, 2002 to May 31, 2003. At February 2, 2002 and February 3, 2001, $846,000 and $931,000, respectively, were outstanding under these terms, and the notes receivable are reflected as a reduction in stockholders' equity. Of the total, $43,000 was used to purchase shares through open market transactions while the remainder was purchased from the Company's treasury at then current market prices. The shares purchased from the Company are unregistered and, therefore, are restricted when received by participants. During Fiscal 2001 and Fiscal 2000, $53,000 and $60,000, respectively, in interest income was recognized related to the loans. Note 10 - Geographic Areas ______________________________________________________________ The Company operates in one industry segment, specialty retailing. Substantially all revenues result from the sale of home furnishings and accessories through retail stores in the United States and Canada. Long- lived assets include all non-current assets except deferred taxes. The following table shows net revenues and long-lived assets by geographic area (in thousands):
Year Ended February 2 February 3 January 29 2002 2001 2000 Net revenues: United States $388,789 $375,275 $351,225 Canada 48,668 48,184 41,353 Total $437,457 $423,459 $392,578 Long-lived assets: United States $ 51,367 $ 53,448 $ 51,992 Canada 4,226 4,006 4,010 Total $ 55,593 $ 57,454 $ 56,002
35 Unaudited Quarterly Financial Data The Bombay Company, Inc. and Subsidiaries (In thousands, except per share amounts) Unaudited quarterly financial data for the quarters ended:
February 2 November 3 August 4 May 5 2002 2001 2001 2001 Net sales $152,506 $96,945 $97,030 $90,976 Gross profit 51,150 25,156 24,180 23,487 Net income (loss) 11,673 (2,233) (2,680) (3,036) Basic earnings (loss) per share .35 (.07) (.08) (.09) Diluted earnings (loss) per share .35 (.07) (.08) (.09) February 2 October 28 July 29 April 29 2001 2000 2000 2000 Net sales $157,285 $90,855 $89,594 $85,725 Gross profit 56,273 25,779 23,929 23,435 Net income (loss) 12,991 (1,637) (1,034) (1,675) Basic earnings (loss) per share .40 (.05) (.03) (.05) Diluted earnings (loss) per share .40 (.05) (.03) (.05)
36 THE BOMBAY COMPANY, INC. AND SUBSIDIARIES INDEX TO EXHIBITS Filed with the Annual Report on Form 10-K for the fiscal year ended February 2, 2002. Number Description 3(a) - Restated Certificate of Incorporation dated January 1, 1993 and Certificate of Amendment of the Restated Certificate of Incorporation dated March 31, 1993. (1) 3(b) - Bylaws, as amended and restated effective May 21, 1997. (9) 4 - Preferred Stock Purchase Rights Plan. (2) 10(a) - Form of Indemnification Agreement. (3) 10(b) - The Bombay Company, Inc. Supplemental Stock Program. (4) 10(c) - Executive Long Term Disability Plan. (5) 10(d) - The Bombay Company, Inc. 1996 Long-Term Incentive Stock Plan. (6) 10(e) - Form of Award Agreement under the 1996 Long-Term Incentive Stock Plan.(8) 10(f) - Executive Officers Incentive Compensation Plan. (7) 10(g) - Employment Contract with Executive Officer. (8) 10(h) - Employment Contracts with Executive Officers. (9) 10(i) - The Bombay Company, Inc. Amended and Restated 2001 Non-Employee Directors' Equity Plan. 10(j) - Form of Agreement used to evidence stock option grants under The Bombay Company, Inc. Amended and Restated 2001 Non-Employee Directors' Equity Plan. 21 - Subsidiaries of the Registrant. (9) 22 - Definitive Proxy Statement of the Company relating to Annual Meeting of Shareholders (certain portions of such Proxy Statement are incorporated herein by reference and are identified by reference to caption in the text of this report). (10) 23 - Consent of Independent Accountants. 37 (1)Filed with the Commission as an Exhibit to the Company's Annual Report on Form 10-K for the year ended July 4, 1993. Such Exhibit is incorporated herein by reference. (2)Filed with the Commission as an Exhibit to the Company's Registration Statement on Form 8A filed June 12, 1995. Such Exhibit is incorporated herein by reference. (3)Filed with the Commission as an Exhibit to the Company's Definitive Proxy Statement dated October 10, 1986, which Proxy Statement was filed with the Commission as an Exhibit to the Company's Annual Report on Form 10-K for the year ended June 30, 1986. Such Exhibit is incorporated herein by reference. (4)Filed with the Commission as an Exhibit to the Company's Annual Report on Form 10-K for the year ended June 28, 1992. Such Exhibit is incorporated herein by reference. (5)Filed with the Commission as an Exhibit to the Company's Annual Report on Form 10-K for the year ended July 3, 1994. Such Exhibit is incorporated herein by reference. (6)Filed with the Commission as an Exhibit to the Company's Definitive Proxy Statement dated April 3, 1996, which Proxy Statement was filed with the Commission as an Exhibit to the Company's Annual Report on Form 10-K for the year ended February 3, 1996. Such Exhibit is incorporated herein by reference. (7)Filed with the Commission as an Exhibit to the Company's Annual Report on Form 10-K for the year ended January 31, 1998. Such Exhibit is incorporated herein by reference. (8)Filed with the Commission as an Exhibit to the Company's Annual Report on Form 10-K for the year ended January 30, 1999. Such Exhibit is incorporated herein by reference. (9)Filed with the Commission as an Exhibit to the Company's Annual Report on Form 10-K for the year ended January 29, 2000. Such Exhibit is incorporated herein by reference. (10) Filed with the Commission on April 11, 2002. EX-10 3 ex10i.txt EX 10(I) 2001 NON-EMPLOYEE DIRECTOR EQUITY PLAN EXHIBIT 10(i) The Bombay Company, Inc. Amended and Restated 2001 Non-Employee Directors' Equity Plan Introduction The Bombay Company, Inc. Amended and Restated 2001 Non- Employee Directors' Equity Plan (the "Plan") is hereby adopted effective as of February 1, 2001 to amend and restate The Bombay Company, Inc. 2000 Non-Employee Directors' Equity Plan (the "Original Plan"), which was adopted to continue the purposes of the expiring 1991 Directors' Stock Option Plan that was originally adopted by the Board of Directors (the "Board") of The Bombay Company, Inc., a Delaware corporation (the "Company"), on August 14, 1991, and approved by shareholders on November 12, 1991, and subsequently amended by shareholder approval on October 13, 1994, and further amended by the Board on March 1, 1998 and on April 17, 1998 and again by shareholders on May 21, 1998. The Original Plan incorporated and superseded the 1993 Stock Deferral Plan for Non-Employee Directors, which was originally adopted by the Board on August 5, 1993 and approved by shareholders on October 13, 1993, and subsequently amended by the Board on March 12, 1997. The Plan was subsequently amended by the Board on May 17, 2001. 1. Purpose (a) The purpose of the Plan is to provide a means by which each member of the Board who is not an employee of the Company or of any Affiliate (each such person being hereafter referred to as a "Non-Employee Director") will be given an opportunity to purchase common stock of the Company. The Plan also permits Non- Employee Directors to elect to receive their annual and Committee Chair retainer fees and meeting attendance fees in the form of common stock of the Company or to defer such payments. The word "Affiliate" as used in the Plan means any person or entity that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, the Company. (b) The Company, by means of the Plan, seeks to retain the services of persons now serving as Non-Employee Directors, to secure and retain the services of persons capable of serving in such capacity, and to provide incentives for such persons to exert maximum efforts for the success of the Company. 2. Administration (a) The Plan shall be administered by the Board unless and until the Board delegates administration to a committee, as provided in paragraph 2(c). (b) The Board shall have the power, subject to, and within the limitations of, the express provisions of the Plan: (i) To construe and interpret the Plan and options granted under it ("Options"), and to establish, amend and revoke rules and regulations for its administration. The Board, in the exercise of this power, may correct any defect, omission or inconsistency in the Plan or in any Option agreement, in a manner and to the extent it shall deem necessary or expedient to make the Plan fully effective; (ii) To amend, suspend or terminate the Plan as provided in paragraph 12; and (iii) Generally, to exercise such powers and to perform such acts as the Board deems necessary or expedient to promote the best interests of the Company. (c) The Board may delegate administration of the Plan to a committee (the "Committee") composed of not fewer than two (2) members of the Board who are "non-employee directors" under rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as such rule may be hereafter amended. If administration is delegated to a Committee, the Committee shall have, in connection with the administration of the Plan, the powers theretofore possessed by the Board, subject, however, to such resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to time by the Board. The Board may abolish the Committee at any time and revest in the Board the administration of the Plan. 3. Shares Subject to the Plan (a) Subject to the provisions of paragraph 11 relating to adjustments upon changes in stock, the stock that may be sold pursuant to Options or used to pay Fees (as defined below) shall not exceed in the aggregate Five Hundred Thousand (500,000) shares of the Company's common stock, plus (i) any shares available for delivery under the 1991 Directors' Stock Option Plan and 1993 Stock Deferral Plan for Non-Employee Directors which have not been committed for delivery by grants made or stock units credited under either of such plans, and (ii) any shares subject to options granted under either of such plans which are settled, forfeited, expired or canceled without the delivery of shares. If any Option shall for any reason expire or otherwise terminate without having been exercised in full, the stock not purchased under the Option shall again become available for issuance pursuant to the Plan. (b) All stock sold or otherwise delivered pursuant to the Plan shall be treasury shares. 4. Eligibility Only Non-Employee Directors may participate in the Plan. 5. Non-Discretionary Option Grants (a) Each person who is elected for the first time to be a Non-Employee Director shall, upon the date of his or her initial election to be a Non-Employee Director by the Board or the shareholders of the Company, be granted an Option (an "Initial Option") to purchase the lesser of (i) Eight Thousand (8,000) shares of common stock of the Company or (ii) a number of shares of common stock of the Company having an aggregate Fair Market Value on the date of grant of $75,000 (rounded to the nearest whole number of shares), on the terms and conditions set forth herein. "Fair Market Value" shall mean the last reported sale price of shares of the Company's common stock as reported on the applicable stock exchange on the relevant date of valuation or, if there is no such sale, the last reported sale price of such shares so reported on the nearest preceding date upon which such a sale took place. (b) On the third business day following issuance of the Company's annual earnings release each year each Non-Employee Director shall be granted an Option (an "Annual Option") to purchase the lesser of (i) Eight Thousand (8,000) shares of common stock of the Company or (ii) a number of shares of common stock of the Company having an aggregate Fair Market Value on the date of grant of $75,000 (rounded to the nearest whole number of shares) on the terms and conditions set forth herein. (c) The Company intends that the Options not be incentive stock options as that term is used in Section 422 of the Internal Revenue Code of 1986, as amended. 6. Option Provisions Each Option shall contain the following terms and conditions: (a) No Option shall be exercisable after the expiration of ten (10) years from the date it was granted. (b) The per share exercise price of each Option shall be one hundred percent (100%) of the Fair Market Value of the common stock of the Company on the date the Option is granted. (c) The purchase price of stock acquired pursuant to the exercise of an Option shall be paid, to the extent permitted by applicable statutes and regulations, either (i) in cash at the time the Option is exercised; (ii) by delivery to the Company of shares of common stock of the Company valued at the Fair Market Value of such shares on the date of exercise; or (iii) by a combination of such methods of payment. (d) The Board or the Committee, as applicable, may, in its sole discretion, provide in any Option agreement (or any amendment to any existing Option agreement) such provisions regarding transferability of the Option as the Committee or the Board, as applicable, in its sole discretion, deems appropriate. (e) Options shall vest with respect to each optionee as follows: (i) the Initial Option shall vest and become exercisable at the rate of 20% per year over a five (5) year period after the grant date of the Initial Option, and (ii) each Annual Option shall vest in full and become exercisable six (6) months after the grant date of the Annual Option; provided that in each case the optionee has, during the entire period prior to such vesting date, continuously served as a Non-Employee Director, whereupon such Option shall become fully exercisable in accordance with its terms with respect to that portion of the shares represented by that installment; and provided further that in the event of a conflict between the provisions of this paragraph 6(e) and the provisions of paragraph 6(l) or 6(m), the provisions of paragraph 6(l) or 6(m), as applicable, shall control. (f) The Company may require any optionee, or any person to whom an Option is transferred under paragraph 6(d), as a condition of exercising any such Option: () to give written assurances satisfactory to the Company as to the optionee's knowledge and experience in financial and business matters, and () to give written assurances satisfactory to the Company stating that such person is acquiring the stock subject to the Option for such person's own account and not with any present intention of selling or otherwise distributing the stock. These requirements, and any assurances given pursuant to such requirements, shall be inoperative if (i) the issuance of the shares upon the exercise of the Option has been registered under a then-currently- effective registration statement under the Securities Act of 1933, as amended (the "Securities Act"), or (ii) as to any particular requirement, a determination is made by counsel for the Company that such requirement need not be met in the circumstances under the then-applicable securities laws. (g) Notwithstanding anything to the contrary contained herein, an Option may not be exercised unless the issuance of shares upon exercise of the Option has been registered under the Securities Act or, if such issuance has not been so registered, the Company has determined that such issuance would be exempt from the registration requirements of the Securities Act. (h) Neither an optionee nor any person to whom an Option is transferred under paragraph 6(d) shall be deemed to be the holder of, or to have any of the rights of a holder with respect to, any shares subject to such Option unless and until such person has satisfied all requirements for exercise of the Option pursuant to its terms. (i) Nothing in the Plan or in any instrument executed pursuant hereto shall confer upon any Non-Employee Director any right to continue in the service of the Company or any Affiliate or shall affect any right of the Company, the Board, its shareholders or any Affiliate to terminate the service of any Non- Employee Director with or without cause. (j) No Non-Employee Director, individually or as a member of a group, and no beneficiary or other person claiming under or through him or her, shall have any right, title or interest in or to any shares of the Company's common stock reserved for the purposes of the Plan except as to such shares of common stock, if any, as shall have been reserved for such Non-Employee Director pursuant to an Option granted to him or her or pursuant to an election of such Non-Employee Director pursuant to paragraph 9 or 10. (k) In connection with each Option, it shall be a condition precedent to the Company's obligation to issue or transfer shares to a Non-Employee Director that such Non-Employee Director acknowledge full responsibility for any federal or other tax with respect to such issuance or transfer. (l) If a Non-Employee Director shall terminate performance of services for the Company because of death or disability, all Options outstanding as to such Non-Employee Director shall be fully exercisable, at any time, or from time to time, within the longer of (i) one (1) year after the date of death or termination of performance of services because of disability or (ii) the exercise period presented in the second sentence of paragraph 6(m); provided that in no event shall such Options be exercisable later than the expiration date specified pursuant to paragraph 6(a). In the case of death, exercise may be made by the person or persons to whom the Non-Employee Director's rights under the Option pass by will or applicable law, or if no such person has such rights, by the Non-Employee Director's executors or administrators; provided that such person(s) consent in writing to abide by and be subject to the terms of the Plan and the Option. (m) If a Non-Employee Director's performance of services for the Company shall terminate for any reason other than death or disability, all Options outstanding as to such Non-Employee Director shall at the time of such termination, to the extent not otherwise exercisable, become immediately exercisable for the purchase of the full number of shares subject to such Options; provided that the Non-Employee Director has at the time of such termination completed at least five (5) years of service on the Board. A departing Non-Employee Director shall have twelve (12) months to exercise vested Options for each full three (3) year term and any partial term served on the Board, to a maximum exercise period of thirty-six (36) months; provided that in no event shall such Options be exercisable later than the expiration date specified in paragraph 6(a). 7. Covenants of the Company (a) During the terms of the Options, the Company shall keep available at all times the number of shares of its common stock required to satisfy its obligations under such Options. (b) So long as any Stock Units (as defined below) are in an Account (as defined below), the Company shall keep available at all times the number of shares of its common stock required to satisfy its obligations in respect of such Stock Units. 8. Use of Proceeds from the Exercise of Options Proceeds from the exercise of Options shall constitute general funds of the Company. 9. Payment of Fees in Common Stock (a) A Non-Employee Director may elect to receive payment of all or any portion of his or her annual retainer and Committee Chair retainer fees ("Retainer Fees") and meeting attendance fees ("Meeting Fees") (Retainer Fees and Meeting Fees are referred to collectively herein as "Fees") from the Company in the form of common stock of the Company. Such an election shall be effective with respect to Fees payable commencing with the next fiscal quarter following the date of the election. An election to receive payment of Fees in the form of the Company's common stock may be revoked only by a subsequent election to receive payment of Fees in cash or to defer such Fees pursuant to paragraph 10. Such election shall be effective with respect to Fees payable commencing with the next fiscal quarter. Notwithstanding the above, no election permitted in this paragraph 9 shall be effective if such election would cause the payment of Fees in the Company's common stock to be a non-exempt purchase under Rule 16b- 3 promulgated under the Exchange Act or terminate the Non- Employee Director's status as a non-employee director under Rule 16b-3, unless approved by the Board or the Committee. The number of shares of the Company's common stock to be paid to a Non- Employee Director shall be determined by dividing the amount of Fees payable by the Fair Market Value of the Company's common stock on the date such Fees would have been paid in cash but for the Non-Employee Director's election to receive payment of such Fees in the form of common stock of the Company. The amount of any fractional share shall be paid in cash. (b) If a Non-Employee Director has elected to receive his or her Fees in the form of common stock of the Company, a certificate for the number of shares of common stock to which the Non-Employee Director is entitled shall be issued as soon as reasonably practicable following the date the director is to receive the Fees. 10. Deferral of Fees (a) Commencing on the effective date of the Plan, payment of all or a portion of the Fees may be deferred by election of the Non- Employee Director (a "Deferral Election"). Deferral Elections shall be made on an annual basis; provided that such election shall satisfy the requirements of Rule 16b-3(d) promulgated under the Exchange Act, as such rule may be hereafter amended. (b) Amounts deferred pursuant to paragraph 10(a) shall be credited at the end of each fiscal quarter to a bookkeeping reserve account ("Account") maintained by the Company in stock units ("Stock Units"). The number of Stock Units credited to an Account with respect to any Non-Employee Director shall be determined by dividing the amount of Fees to be deferred by the Fair Market Value of the Company's common stock on the date such Fees would have been paid in cash but for the Deferral Election. (c) All Stock Units credited to a Non-Employee Director's Account pursuant to the Plan shall be at all times fully vested and nonforfeitable. (d) Stock Units credited to a Non-Employee Director's Account shall be payable in an equal number of shares of common stock of the Company in a single distribution made at such time as may be specified by the Non-Employee Director in the applicable Deferral Election; provided that the designated payment date with respect to any Deferral Election must be no earlier than the first day of the calendar year after the calendar year in which the Fees would have been received but for the Deferral Election. The amount of any fractional shares shall be paid in cash. (e) The Company shall issue and deliver to the Non-Employee Director a certificate for the number of shares of its common stock due such director as payment for Stock Units as soon as practicable following the date on which Stock Units are payable. (f) The Plan shall be unfunded with respect to the Company's obligation to pay any amounts due pursuant to Stock Units, and a Non-Employee Director's rights to receive any payment of any Stock Unit shall be not greater than the rights of an unsecured general creditor of the Company. (g) Except as otherwise provided herein or approved by the Board, the right to receive payment with respect to a Stock Unit is not assignable or transferable and shall not be subject to any encumbrances, liens, pledges or charges of the Non-Employee Director or his or her creditors. Any such attempt to assign, transfer or hypothecate any Stock Unit or any right to receive a Stock Unit shall be void and of no force and effect whatsoever. (h) A Non-Employee Director may designate a beneficiary or beneficiaries to receive any distributions under the Plan upon his or her death. (i) In the event a cash dividend is declared with respect to the Company's common stock, the Account of each participating Non-Employee Director shall be credited with a number of Stock Units determined as follows: First, calculate the product of (i) the cash dividend payable with respect to each share of common stock and (ii) the total number of Stock Units credited to the Account as of the record date for such dividend; and Second, divide such product by the Fair Market Value of the Company's common stock on the payment date for such dividend. 11. Adjustments upon Changes in Stock If any change is made in the stock of the Company through merger, consolidation, reorganization, recapitalization, stock dividend, dividend in property other than cash, stock split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure or otherwise, the Plan (including the total number of shares and kind of shares issuable under the Plan and the number of shares issuable pursuant to grants of Options), outstanding Options (including the exercise prices thereof) and Stock Units will be appropriately adjusted by the Board to account for the change. The Options granted under the Plan and the Stock Units created pursuant to the Plan shall not affect in any way the right or power of the Company to issue additional common stock or other securities, make adjustments, reclassifications, reorganizations or other changes in its corporate, capital or business structure, to participate in a merger, consolidation or share exchange or to transfer its assets or dissolve or liquidate. 12. Amendment, Suspension or Termination of the Plan The Board may at any time, and from time to time, amend, suspend or terminate the Plan; provided that no amendment shall be effective unless approved by the shareholders of the Company to the extent the Board determines shareholder approval of such amendment is necessary or desirable; and provided further that rights and obligations under any Option granted or Stock Unit credited or to be credited before any amendment, suspension or termination of the Plan shall not be altered or impaired by such amendment, suspension or termination of the Plan except with the consent of the person to whom the Option was granted or Stock Unit credited. 13. Changes of Control, Acceleration of Right to Exercise and Distribution of Stock Units (a) Notwithstanding anything in the Plan or in an agreement evidencing any Option to the contrary, in the event a Change of Control (as defined below) occurs, then each Option shall become immediately exercisable, on the date of the occurrence of such Change of Control, for the purchase of the full number of shares subject to such Option for a period not to exceed the shorter of thirty-six (36) months or the remaining life of the Option; provided that immediately after the consummation of a Change of Control as defined under paragraph 13(b)(iii), all Options shall, to the extent not previously exercised, terminate and cease to be outstanding except to the extent assumed by the successor corporation (or an affiliate thereof) or otherwise expressly continued in full force and effect pursuant to the terms of the Change of Control. In addition, and notwithstanding the provisions of paragraph 10(d), all Stock Units credited to an Account for a Non-Employee Director shall, on the date of the occurrence of a Change of Control, be immediately payable to such director in the form of shares of common stock of the Company equal in number to the Stock Units held as of the date of the Change of Control. (b) "Change of Control" shall mean the occurrence of any of the following events: (i) the acquisition, other than from the Company, by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) of beneficial ownership of 20% or more of either the then outstanding shares of common stock of the Company or the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors; provided that any acquisition by the Company or any of its subsidiaries, or any employee benefit plan (or related trust) of the Company or its subsidiaries, or any corporation with respect to which following such acquisition, more than 50% of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the common stock and voting securities of the Company immediately prior to such acquisition in substantially the same proportion as their ownership, immediately prior to such acquisition, of the then outstanding shares of common stock of the Company or the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors, as the case may be, shall not constitute a Change of Control; (ii) individuals who, as of February 1, 2001, constituted the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided that any individual becoming a director subsequent to such date whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the directors of the Company (as such terms are used in rule 14a-11 of Regulation 14A promulgated under the Exchange Act); or (iii) approval by the shareholders of the Company of a reorganization, merger or consolidation of the Company and the satisfaction of all conditions precedent to the transaction, in each case, with respect to which the individuals and entities who were the respective beneficial owners of the common stock and voting securities of the Company immediately prior to such reorganization, merger or consolidation do not, following such reorganization, merger or consolidation, beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such reorganization, merger or consolidation, or a complete liquidation or dissolution of the Company or of the sale or other disposition of all or substantially all of the assets of the Company. (c) With respect to a Change of Control as defined under paragraph 13(b)(iii), if the timing and mechanics of the transaction constituting the Change of Control will be such that the holders of Options will not have a reasonable opportunity to exercise their Options prior to the applicable record date with respect to, or the date of consummation of, as applicable, such transaction, the Board or officers of the Company shall make arrangements in the agreement related to such transaction to allow holders of Options to receive the same economic benefit the holders of the Options would have received had the holders exercised their Options prior to the effective date of such Change of Control and held the shares of common stock of the Company issuable upon exercise of such Options as of the applicable record date with respect to, or the date of consummation of, as applicable, the transaction constituting such a Change of Control. 14. Effective Date of Plan The Plan shall be effective as of February 1, 2001. EX-10 4 ex10j.txt EX 10(J) FORM OF AWARD FOR 2001 DIRECTOR EQUITY PLAN EXHIBIT 10(j) DIRECTOR STOCK OPTION AGREEMENT pursuant to THE BOMBAY COMPANY, INC. 2001 NON-EMPLOYEE DIRECTOR EQUITY PLAN This Option Agreement (The "Agreement") is made this _____ day of ________, 2002, between THE BOMBAY COMPANY, INC., a Delaware Corporation (the "Company"), and ________________, a director of the Company (the "Director"). WHEREAS, the Company desires to carry out the purposes of The Bombay Company, Inc. 2001 Non-Employee Director Equity Plan (the "Plan") by affording Director the opportunity to purchase shares of the Company's $1.00 par value common stock. NOW THEREFORE, in consideration of the mutual covenants hereinafter set forth and for other good and valuable consideration, the parties hereto agree as follows: 1. Grant of Option. The Company hereby grants to Director the right and option (the "Option") to purchase an aggregate of 8,000 shares of the Company's $1.00 par value common stock (the "Shares"), such Shares being subject to adjustment as provided in paragraph 8 hereof, and on the terms and conditions herein set forth. The 8,000 Shares are granted as a nonqualified option not entitled to special tax treatment under Internal Revenue Code Section 422A. 2. Purchase Price. The purchase price of the Shares covered by the Option shall be $_________ per Share, such purchase price being 100% of the fair market value of such Shares on _____________, 2002 (the "Date of Grant"). 3. Exercise of Option. Unless expired as provided in paragraph 5 below, and subject to the special provisions of paragraph 6 below, the Option may be exercised from time to time in whole or in part at any time after the completion of six (6) months following the Date of Grant. 4. Manner of Exercise; Payment of Purchase Price. A. Subject to the terms and conditions of this Agreement, the Option shall be exercised by written notice to the Company at its principal office. Such notice shall state the election to exercise the Option and shall specify the number of Shares sought to be exercised pursuant to the notice. Such notice of exercise shall be signed by Director and shall be irrevocable when given. B. The Notice of exercise shall be accompanied by the full payment, in cash, of the purchase price for the Shares or by tendering Shares owned by Director to the Company with a fair market value equal to the purchase price for the Shares or by a combination of such methods of payment. C. Upon receipt of the purchase price, and subject to the terms of paragraph 11, the certificate or certificates representing the Shares exercised shall be registered in the name of the person or persons so exercising the Option. If the Option shall be exercised by Director and, if Director shall so request in the notice exercising the Option, the Shares shall be registered in the name of Director and another person, as joint tenants with right of survivorship, and shall be delivered as provided above to or upon the written order of the person or persons exercising the Option. In the event the Option shall be exercised pursuant to paragraph 7 hereof, by any person or persons other than Director, such notice shall be accompanied by appropriate proof satisfactory to the Company of the right of such person or persons to exercise the Option. All Shares that shall be purchased upon the exercise of the Option as provided therein shall be fully paid and non-assessable. 5. Expiration of Option. A departing Director shall have twelve (12) months to exercise vested options for each full three year term and any partial term served on the Board, to a maximum exercise period of thirty-six (36) months. In no event, however, shall the period to exercise this option extend beyond the date, which is ten (10) years after the Date of Grant. Except as provided in paragraph 6 below, only those portions of this option exercisable as of the date Director ceases to serve as a Director of the Company may be exercised, whether such termination is by retirement or otherwise. Any option not exercised within the permitted exercise period shall expire and become null and void. 6. Acceleration of Exercisable Dates. Notwithstanding the provisions of paragraph 3 above relating to the exercise of this Option: (a) upon Director's death or Disability this Option shall be fully vested and immediately exercisable, until the expiration date provided in paragraph 5 above, for the entire number of Shares covered hereby; (b) upon Director's retirement, or other termination or service, this Option shall be fully vested and immediately exercisable, until the expiration date provided in paragraph 5 above, for the entire number of Shares covered hereby provided Director has completed at least five (5) years service on the Board; and (c) upon any Change in Control of the Company (as defined in the Plan) this Option shall be fully vested and immediately exercisable for a period of the lesser of thirty-six (36) months following the date of the Change of Control or the remaining life of the option (which shall not exceed 10 years from the Date of Grant), for the entire number of Shares covered hereby. 7. Option Nontransferable. Unless otherwise approved by The Board of Directors of The Company, the Option and any right related thereto shall not be transferable by Director otherwise than by will or by the laws of descent and distribution and may be exercised, during Director's lifetime, only by Director. Upon the death of Director, the Option may be exercised by Director's executor, administrator, legatee or distributee, as the case may be, in accordance with paragraphs 4.C and 6. 8. Adjustments of Shares Subject to Option. If the Shares shall at any time prior to exercise be changed or exchanged by reason of reorganization, merger, consolidation, recapitalization, reclassification, stock split, combination of Shares or a dividend payable in stock, then the aggregate number of Shares subject to this Agreement and the purchase price of such Shares shall be automatically adjusted such that Director's proportionate interest shall be maintained as before the occurrence of such event. The determination of any such adjustment by the Administrative Committee shall be final, binding and conclusive. 9. No Right to Continue as a Director. This Agreement does not constitute or be evidence of any agreement or understanding, express or implied, that the Company will retain Director for any period of time or at any particular rate of compensation. 10. Rights as Shareholder. This Option shall not entitle Director or any permitted transferee to any rights of a shareholder of the Company or to any notice of proceedings of the Company with respect to any Shares issuable upon exercise of this Option unless and until the Option has been exercised for such Shares. 11. Restriction on Issuance of Shares. The Company shall not be required to issue or deliver any certificates for Shares purchased upon the exercise of an Option prior to the obtaining of any approval from any governmental agency which the Company shall, in its sole discretion, determine to be necessary or advisable, and the completion of any registration or other qualification of such Shares under any state of federal law or ruling or regulations of any governmental body which the Company shall, in its sole discretion, determine to be necessary or advisable. In addition, if shares reserved for issuance upon exercise of Options shall not then be registered under the Securities Act of 1933 the Company may, upon Director's exercise of the Option, require Director or his permitted transferee to represent in writing that the Shares being acquired are for investment and not with a view to distribution, and may mark the certificate for the Shares with a legend restricting transfer and may issue stop transfer orders relating to such certificate to the transfer agent. 12. Binding Effect. This Agreement shall be binding upon the heirs, executors, administrators, and successors of the parties hereto. 13. Governing Instrument and Law. This Option and any shares issued hereunder shall in all respects be governed by the terms and provisions of the Plan, and by the laws of the State of Texas, and in the event of a conflict between the terms of this Agreement and the terms of the Plan, the terms of the Plan shall control. THE BOMBAY COMPANY, INC. By: _______________________________ Carmie Mehrlander President & Chief Executive Officer Accepted and Agreed: ___________________________ [INSERT DIRECTOR'S NAME HERE] EX-23 5 consent.txt CONSENT OF INDEPENDENT ACCOUNTANTS EXHIBIT 23 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (No. 33-02028, 33-32610, 33- 40736, 33-40743, 33-51076, 33-55306, 333-39057, 333-82758 and 333- 96357) of The Bombay Company, Inc. of our report dated March 12, 2002 relating to the financial statements, which appears in this Form 10-K. PRICEWATERHOUSECOOPERS LLP Fort Worth, Texas April 18, 2002 -----END PRIVACY-ENHANCED MESSAGE-----