UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 1,August 31, 2002
Commission File Number 0-20214
BED BATH & BEYOND INC.
New York (State of incorporation) | 11-2250488 | |
(I.R.S. Employer Identification No.) |
650 Liberty Avenue, Union, New Jersey 07083 |
Registrant’s telephone number, including area code:(908) 688-0888
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X[X] No [ ]
Number of shares outstanding of the issuer’s Common Stock:
Class | Outstanding at | |||
Common Stock | 292,600,820 |
BED BATH & BEYOND INC. AND SUBSIDIARIES
INDEX
Page No. | |||||
PART I — FINANCIAL INFORMATION | |||||
Item 1. Financial Statements | |||||
Consolidated Balance Sheets August 31, 2002 and March 2, 2002 | 3 | ||||
Consolidated Statements of Earnings Three Months Ended August 31, 2002 and | 4 | ||||
Consolidated Statements of Cash Flows Six Months Ended and September 1, | 5 | ||||
Notes to Consolidated Financial Statements | 6 | ||||
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations | |||||
7 – 11 | |||||
Item 4. | |||||
PART II — OTHER INFORMATION | |||||
Item 6. Exhibits and Reports on Form 8-K | 12 | ||||
Signatures | 12 | ||||
Certifications | 13 - 16 | ||||
Exhibit Index |
BED BATH & BEYOND INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except per share data)
(unaudited)
June 1, | March 2, | August 31, | March 2, | ||||||||||||||||||
2002 | 2002 | 2002 | 2002 | ||||||||||||||||||
Assets | Assets | Assets | |||||||||||||||||||
Current assets: | Current assets: | Current assets: | |||||||||||||||||||
Cash and cash equivalents | $ | 380,435 | $ | 429,496 | Cash and cash equivalents | $ | 333,626 | $ | 429,496 | ||||||||||||
Merchandise inventories | 850,041 | 753,972 | Short term investment securities | 100,000 | — | ||||||||||||||||
Other current assets | 50,935 | 43,249 | Merchandise inventories | 859,891 | 753,972 | ||||||||||||||||
Other current assets | 54,011 | 43,249 | |||||||||||||||||||
Total current assets | 1,281,411 | 1,226,717 | |||||||||||||||||||
Total current assets | 1,347,528 | 1,226,717 | |||||||||||||||||||
Investment securities | 146,673 | 51,909 | |||||||||||||||||||
Long term investment securities | Long term investment securities | 126,426 | 51,909 | ||||||||||||||||||
Property and equipment, net | Property and equipment, net | 357,914 | 361,741 | Property and equipment, net | 381,761 | 361,741 | |||||||||||||||
Other assets | Other assets | 23,951 | 7,150 | Other assets | 23,944 | 7,150 | |||||||||||||||
$ | 1,809,949 | $ | 1,647,517 | $ | 1,879,659 | $ | 1,647,517 | ||||||||||||||
Liabilities and Shareholders’ Equity | Liabilities and Shareholders’ Equity | Liabilities and Shareholders’ Equity | |||||||||||||||||||
Current liabilities: | Current liabilities: | Current liabilities: | |||||||||||||||||||
Accounts payable | $ | 329,317 | $ | 270,917 | Accounts payable | $ | 311,604 | $ | 270,917 | ||||||||||||
Accrued expenses and other current liabilities | 225,813 | 190,923 | Accrued expenses and other current liabilities | 233,065 | 190,923 | ||||||||||||||||
Income taxes payable | 58,327 | 49,438 | Income taxes payable | 49,791 | 49,438 | ||||||||||||||||
Total current liabilities | 613,457 | 511,278 | Total current liabilities | 594,460 | 511,278 | ||||||||||||||||
Deferred rent and other liabilities | Deferred rent and other liabilities | 45,232 | 41,889 | Deferred rent and other liabilities | 47,481 | 41,889 | |||||||||||||||
Total liabilities | 658,689 | 553,167 | Total liabilities | 641,941 | 553,167 | ||||||||||||||||
Shareholders’ equity: | Shareholders’ equity: | Shareholders’ equity: | |||||||||||||||||||
Preferred stock — $0.01 par value; authorized - 1,000 shares; no shares issued or outstanding | — | — | Preferred stock — $0.01 par value; authorized - 1,000 shares; no shares issued or outstanding | — | — | ||||||||||||||||
Common stock — $0.01 par value; | Common stock — $0.01 par value; authorized - 900,000 shares; issued and outstanding - August 31, 2002, 292,601 shares and March 2, 2002, 291,441 shares | 2,926 | 2,914 | ||||||||||||||||||
authorized - 900,000 shares; issued and outstanding – June 1, 2002, 292,068 shares and March 2, 2002, 291,441 shares | 2,921 | 2,914 | Additional paid-in capital | 260,270 | 238,672 | ||||||||||||||||
Additional paid-in capital | 249,276 | 238,672 | Retained earnings | 974,522 | 852,764 | ||||||||||||||||
Retained earnings | 899,063 | 852,764 | |||||||||||||||||||
Total shareholders’ equity | 1,237,718 | 1,094,350 | |||||||||||||||||||
Total shareholders’ equity | 1,151,260 | 1,094,350 | |||||||||||||||||||
$ | 1,879,659 | $ | 1,647,517 | ||||||||||||||||||
$ | 1,809,949 | $ | 1,647,517 | ||||||||||||||||||
See accompanying Notes to Consolidated Financial Statements.
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BED BATH & BEYOND INC. AND SUBSIDIARIES
Consolidated Statements of Earnings
(in thousands, except per share data)
(unaudited)
Three Months Ended | Three Months Ended | Six Months Ended | ||||||||||||||||||||||||
June 1, | June 2, | August 31, | September 1, | August 31, | September 1, | |||||||||||||||||||||
2002 | 2001 | 2002 | 2001 | 2002 | 2001 | |||||||||||||||||||||
Net sales | Net sales | $ | 776,798 | $ | 575,833 | Net sales | $ | 903,044 | $ | 713,636 | $ | 1,679,842 | $ | 1,289,469 | ||||||||||||
Cost of sales | Cost of sales | 458,436 | 340,874 | Cost of sales | 532,709 | 422,294 | 991,145 | 763,168 | ||||||||||||||||||
Gross profit | 318,362 | 234,959 | Gross profit | 370,335 | 291,342 | 688,697 | 526,301 | |||||||||||||||||||
Selling, general and administrative expenses | Selling, general and administrative expenses | 245,661 | 189,357 | Selling, general and administrative expenses | 250,648 | 206,670 | 496,309 | 396,027 | ||||||||||||||||||
Operating profit | 72,701 | 45,602 | Operating profit | 119,687 | 84,672 | 192,388 | 130,274 | |||||||||||||||||||
Interest income | Interest income | 2,582 | 3,190 | Interest income | 3,010 | 3,058 | 5,592 | 6,248 | ||||||||||||||||||
Earnings before provision for income taxes | 75,283 | 48,792 | Earnings before provision for income taxes | 122,697 | 87,730 | 197,980 | 136,522 | |||||||||||||||||||
Provision for income taxes | Provision for income taxes | 28,984 | 18,785 | Provision for income taxes | 47,238 | 33,776 | 76,222 | 52,561 | ||||||||||||||||||
Net earnings | $ | 46,299 | $ | 30,007 | Net earnings | $ | 75,459 | $ | 53,954 | $ | 121,758 | $ | 83,961 | |||||||||||||
Net earnings per share — Basic | Net earnings per share — Basic | $ | .16 | $ | .10 | Net earnings per share — Basic | $ | 0.26 | $ | 0.19 | $ | 0.42 | $ | 0.29 | ||||||||||||
Net earnings per share — Diluted | Net earnings per share — Diluted | $ | .15 | $ | .10 | Net earnings per share — Diluted | $ | 0.25 | $ | 0.18 | $ | 0.40 | $ | 0.28 | ||||||||||||
Weighted average shares outstanding — Basic | Weighted average shares outstanding — Basic | 291,726 | 288,467 | Weighted average shares outstanding — Basic | 292,441 | 289,791 | 292,083 | 289,129 | ||||||||||||||||||
Weighted average shares outstanding — Diluted | Weighted average shares outstanding — Diluted | 300,674 | 297,479 | Weighted average shares outstanding — Diluted | 300,737 | 298,816 | 300,705 | 298,148 |
See accompanying Notes to Consolidated Financial Statements.
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BED BATH & BEYOND INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(in thousands, unaudited)
Three Months Ended | Six Months Ended | ||||||||||||||||||||||
June 1, | June 2, | August 31, | September 1, | ||||||||||||||||||||
2002 | 2001 | 2002 | 2001 | ||||||||||||||||||||
Cash Flows from Operating Activities: | Cash Flows from Operating Activities: | Cash Flows from Operating Activities: | |||||||||||||||||||||
Net earnings | $ | 46,299 | $ | 30,007 | Net earnings | $ | 121,758 | $ | 83,961 | ||||||||||||||
Adjustments to reconcile net earnings to net cash provided by operating activities: | Adjustments to reconcile net earnings to net cash provided by operating activities: | ||||||||||||||||||||||
Depreciation and amortization | 17,195 | 14,418 | Depreciation and amortization | 39,319 | 29,729 | ||||||||||||||||||
Tax benefit from exercise of stock options | 6,947 | 13,113 | Tax benefit from exercise of stock options | 11,973 | 18,856 | ||||||||||||||||||
Deferred income taxes | (3,177 | ) | (288 | ) | Deferred income taxes | (6,355 | ) | (363 | ) | ||||||||||||||
(Increase) decrease in assets, net of effect of acquisition: | (Increase) decrease in assets, net of effect of acquisition: | ||||||||||||||||||||||
Merchandise inventories | (80,159 | ) | (90,192 | ) | Merchandise inventories | (90,009 | ) | (126,453 | ) | ||||||||||||||
Other current assets | (3,961 | ) | (3,360 | ) | Other current assets | (4,734 | ) | (3,112 | ) | ||||||||||||||
Other assets | (1 | ) | 47 | Other assets | 6 | (335 | ) | ||||||||||||||||
Increase in liabilities, net of effect of acquisition: | Increase (decrease) in liabilities, net of effect of acquisition: | ||||||||||||||||||||||
Accounts payable | 52,496 | 67,720 | Accounts payable | 34,783 | 103,765 | ||||||||||||||||||
Accrued expenses and other current liabilities | 30,771 | 16,632 | Accrued expenses and other current liabilities | 38,023 | 28,015 | ||||||||||||||||||
Income taxes payable | 7,139 | 3,264 | Income taxes payable | (1,397 | ) | (339 | ) | ||||||||||||||||
Deferred rent and other liabilities | 4,218 | 843 | Deferred rent and other liabilities | 7,342 | 1,650 | ||||||||||||||||||
Net cash provided by operating activities | 77,767 | 52,204 | Net cash provided by operating activities | 150,709 | 135,374 | ||||||||||||||||||
Cash Flows from Investing Activities: | Cash Flows from Investing Activities: | Cash Flows from Investing Activities: | |||||||||||||||||||||
Purchase of investment securities | (94,764 | ) | — | Purchase of short term investment securities | (100,000 | ) | — | ||||||||||||||||
Acquisition, net of cash acquired | (24,097 | ) | — | Purchase of long term investment securities | (144,517 | ) | — | ||||||||||||||||
Capital expenditures | (11,631 | ) | (24,421 | ) | Redemption of long term investment securities | 70,000 | — | ||||||||||||||||
Acquisition, net of cash acquired | (24,097 | ) | — | ||||||||||||||||||||
Net cash used in investing activities | (130,492 | ) | (24,421 | ) | Capital expenditures | (57,602 | ) | (49,779 | ) | ||||||||||||||
Net cash used in investing activities | (256,216 | ) | (49,779 | ) | |||||||||||||||||||
Cash Flows from Financing Activities: | Cash Flows from Financing Activities: | Cash Flows from Financing Activities: | |||||||||||||||||||||
Proceeds from exercise of stock options | 3,664 | 8,855 | Proceeds from exercise of stock options | 9,637 | 13,847 | ||||||||||||||||||
Net cash provided by financing activities | 3,664 | 8,855 | Net cash provided by financing activities | 9,637 | 13,847 | ||||||||||||||||||
Net (decrease) increase in cash and cash equivalents | (49,061 | ) | 36,638 | Net (decrease) increase in cash and cash equivalents | (95,870 | ) | 99,442 | ||||||||||||||||
Cash and cash equivalents: | Cash and cash equivalents: | Cash and cash equivalents: | |||||||||||||||||||||
Beginning of period | 429,496 | 239,328 | Beginning of period | 429,496 | 239,328 | ||||||||||||||||||
End of period | $ | 380,435 | $ | 275,966 | End of period | $ | 333,626 | $ | 338,770 | ||||||||||||||
See accompanying Notes to Consolidated Financial Statements.
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BED BATH & BEYOND INC. AND SUBSIDIARIES
1) Basis of Presentation
The accompanying consolidated financial statements, except for the March 2, 2002 consolidated balance sheet, have been prepared without audit. In the opinion of Management, the accompanying consolidated financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the financial position of Bed Bath & Beyond Inc. and subsidiaries (the “Company”) as of June 1,August 31, 2002 and March 2, 2002 and the results of their operations for the three months and six months ended August 31, 2002 and September 1, 2001, respectively, and their cash flows for the threesix months ended June 1,August 31, 2002 and June 2,September 1, 2001, respectively. Because of the seasonality of the specialty retailing business, operating results of the Company on a quarterly basis may not be indicative of operating results for the full year.
The accompanying unaudited consolidated financial statements are presented in accordance with the requirements for Form 10-Q and consequently do not include all the disclosures normally required by accounting principles generally accepted in the United States of America. Reference should be made to Bed Bath & Beyond Inc.’s Annual Report for the fiscal year ended March 2, 2002 for additional disclosures, including a summary of the Company’s significant accounting policies.
2) Earnings Per Share
The Company presents earnings per share on a basic and diluted basis. Basic earnings per share has been computed by dividing net earnings by the weighted average number of shares outstanding. Diluted earnings per share has been computed by dividing net earnings by the weighted average number of shares outstanding including the dilutive effect of stock options.
3) Investment Securities
Investment securities at June 1,August 31, 2002 consist of U.S. Government Agency debt securities. Because the Company has the ability and intent to hold the securities until maturity, it classifies its securities as held-to-maturity. These investment securities are recorded at amortized cost, adjusted for the amortization of premiums.premiums where applicable.
Premiums are amortized over the life of the related held-to-maturity securities as an adjustment to interest using the effective interest method. Interest income is recognized when earned.
4) Acquisition
On March 5, 2002, the Company consummated the all cash acquisition of Harmon Stores, Inc. (“Harmon”), a health and beauty care retailer, operating 28 stores, for $24.1 million, net of cash acquired. The Company believes the acquisition will not have a material effect on its consolidated results of operations or financial condition in fiscal 2002.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations
Three Months Ended June 1,August 31, 2002 vs. Three Months Ended June 2,September 1, 2001
Net sales for the firstsecond quarter ended June 1,August 31, 2002 were $776.8$903.0 million, an increase of $201.0$189.4 million or approximately 34.9%26.5% over net sales of $575.8$713.6 million for the corresponding quarter last year. Approximately 60%69% of the increase was attributable to new store net sales. The increase in comparable store net sales in the firstsecond quarter of 2002 was 13.2%8.0%. The increase in comparable store net sales is due to a number of factors, including but not limited to, the continued consumer acceptance of the Company’s merchandise offerings, a strong focus on customer service and the continued success of the Company’s advertising program. Approximately 55%56% and 45%44% of net sales for the firstsecond quarter were attributable to sales of domestics merchandise and home furnishings, respectively.
Gross profit for the firstsecond quarter of 2002 was $318.4$370.3 million or 41.0% of net sales, compared with $235.0$291.3 million or 40.8% of net sales during the firstsecond quarter of 2001. The increase in gross profit as a percentage of net sales was primarily attributable to a differentan improved markup on the mix of salesproduct purchased partially offset by a relative increase in markdowns recorded during the firstsecond quarter of 2002 compared to the firstsecond quarter of 2001.
Selling, general and administrative expenses (“SG&A”) were $245.7$250.6 million in the firstsecond quarter of 2002 compared with $189.4$206.7 million in the same quarter last year and as a percentage of net sales were 31.6%27.8% and 32.9%29.0%, respectively. The decrease in SG&A as a percentage of net sales was primarily attributed to a relative decrease in occupancy costs and costs associated with new store openings, partially offset by a relative increase in payroll and payroll related items.
As a result of the foregoing, operating profit increased to $72.7$119.7 million, compared with the $45.6$84.7 million during the firstsecond quarter of 2001.
Interest income decreased to $2.6$3.0 million for the firstsecond quarter of 2002 compared to $3.2$3.1 million for the firstsecond quarter of 2001 due to a decrease in the average investment interest rate partially offset by an increase in invested cash.
The effective tax rate was 38.5% for both the firstsecond quarter of 2002 and 2001 due to the weighted average effective tax rate remaining consistent in the states in which the Company currently conducts its business.
As a result of the factors described above, net earnings increased to $46.3$75.5 million, compared with $30.0$54.0 million in the second quarter of 2001.
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Six Months Ended August 31, 2002 vs. Six Months Ended September 1, 2001
Net sales for the six months ended August 31, 2002 were $1.7 billion, an increase of $390.4 million or approximately 30.3% over net sales of $1.3 billion for the corresponding period last year. Approximately 64% of the increase was attributable to new store sales. The increase in comparable store sales for the first quartersix months of 2002 was 10.4%. The increase in comparable store sales is due to a number of factors, including but not limited to, the continued consumer acceptance of the Company’s merchandise offerings, a strong focus on customer service and the continued success of the Company’s advertising program.
Gross profit for the first six months of 2002 was $688.7 million or 41.0% of net sales, compared with $526.3 million or 40.8% of net sales during the same period last year. The increase in gross profit as a percentage of net sales was primarily attributable to an improved markup on the mix of product purchased partially offset by a relative increase in markdowns recorded during the first six months of 2002 compared to the first six months of 2001.
SG&A was $496.3 million for the first six months of 2002 compared with $396.0 million for the same period last year and as a percentage of net sales were 29.5% and 30.7%, respectively. The decrease in SG&A as a percentage of net sales was primarily attributed to a relative decrease in occupancy costs and costs associated with new store openings, partially offset by an increase in payroll and payroll related items.
As a result of the foregoing, operating profit increased to $192.4 million, compared with the $130.3 million for the first six months of 2001.
Interest income decreased to $5.6 million for the first six months of 2002 compared to $6.2 million for the same period last year due to a decrease in the average investment interest rate partially offset by an increase in invested cash.
The effective tax rate was 38.5% for the first six months of both 2002 and 2001 due to the weighted average effective tax rate remaining consistent in the states in which the Company currently conducts its business.
As a result of the factors described above, net earnings increased to $121.8 million, compared with $84.0 million for the first six months of 2001.
Expansion Program
The Company is engaged in an ongoing expansion program involving the opening of new stores in both new and existing markets and the expansion or relocation of existing stores with larger stores. As a result of this program, the total number of Bed Bath & Beyond stores has increased to 409
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433 stores at the end of the firstsecond quarter of 2002 compared with 322344 Bed Bath & Beyond stores at the end of the corresponding quarter last year. Additionally, the Company operates 28 Harmon stores as a result of thea recent acquisition described below.acquisition. Total square footage of Bed Bath & Beyond stores grew to 15.115.8 million square feet at the end of the firstsecond quarter of 2002 from 12.513.2 million square feet at the end of the firstsecond quarter of last year.
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During the first quartersix months of fiscal 2002, the Company opened thirteen37 Bed Bath & Beyond stores resulting in an aggregate addition of 0.41.0 million square feet to total store space. The Company anticipates opening approximately 7551 additional Bed Bath & Beyond stores by the end of the fiscal year, aggregating approximately 2.51.5 million square feet of additional store space.
Financial Condition
Total assets at June 1,August 31, 2002 were approximately $1.8$1.9 billion compared with approximately $1.6 billion at March 2, 2002, an increase of $162.4$232.1 million. Of the total increase, $54.7$120.8 million represented an increase in current assets and $107.7$111.3 million represented an increase in non-current assets.
The increase in current assets was primarily attributable to ana $105.9 million increase in merchandise inventories and a $100.0 million increase in short term investment securities, partially offset by a $95.9 million decrease in cash and cash equivalents. The decrease in cash and cash equivalents was primarily dueattributable to the purchase of $94.8 millioninvestment in investmentshort term and long term government agency securities. These securities have a maturity between one and two years and are classified as long-term assets. The increase in merchandise inventories was principally the result of new store space. In
The increase in non-current assets the increase in investment securities was primarily attributable to the purchase of the $94.8$74.5 million increase in long term investment securities, the $20.0 million increase in net property and equipment and the $16.8 million increase in other assets, was primarily attributable to the goodwill related to the Harmon acquisition.
Total liabilities at June 1,August 31, 2002 were $658.7$641.9 million compared with $553.2 million at March 2, 2002, an increase of $105.5$88.8 million. The increase was primarily attributable to a $58.4$40.7 million increase in accounts payable (resulting from an increase in inventories) and a $34.9$42.1 million increase in accrued expenses and other current liabilities due to the continued expansion of the Company.
Shareholders’ equity was $1.2 billion at June 1,August 31, 2002 compared with $1.1 billion at March 2, 2002. The increase primarily reflects net earnings for the first threesix months of fiscal 2002 and additional paid-in capital from the exercise of stock options.
Capital expenditures for the first threesix months of fiscal 2002 were $11.6$57.6 million compared with $24.4$49.8 million for the corresponding period last year. The decreaseincrease was primarily attributable to the timing of information technology and leasehold improvement expenditures during the first threesix months.
For fiscal 2002, the Company believes that its current operating cash flow, working capital, and cash and cash equivalents on hand are sufficient to meet its obligations in the ordinary course of business including capital expenditures and new store openings.
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Recent Accounting Pronouncements
In June, 2002, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” This statement addresses financial accounting and reporting for costs associated with exit or disposal activities. The Company is required to adopt the provisions of SFAS No. 146 for any exit or disposal activities initiated after December 31, 2002. The Company does not believe that the adoption of SFAS No. 146 will have a material impact on the Company’s consolidated financial statements.
In the first quarter of fiscal 2002, the Company adopted the provisions of the Financial Accounting Standards Board’s Statement of Financial Accounting Standards (“SFAS”)SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” This statement supersedes SFAS No. 121, “ Accounting“Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
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Of,” while retaining many of the fundamental provisions covered by that statement. SFAS No. 144 differs fundamentally from SFAS No. 121 in that goodwill and other intangible assets, that are not amortized, are excluded from the scope of SFAS No. 144. SFAS No. 144 also expands the scope of discontinued operations to include more types of disposal transactions. The adoption of SFAS No. 144 did not have a material impact on the Company’s consolidated financial statements.
Additionally, in the first quarter of 2002, the Company adopted SFAS No. 142, “Goodwill and Other Intangible Assets.” SFAS No. 142 discontinued the amortization of goodwill and other intangible assets with indefinite useful lives and requires periodic goodwill impairment testing. Consequently, the Company will not amortize any goodwill recognized as a result of the Harmon acquisition described below and will perform impairment testing annually as required.of the Company’s fiscal year end date. The Company does not believe that the adoption of SFAS No. 142 willdid not have a material impact on the Company’s consolidated financial statements.
Acquisition
On March 5, 2002, the Company consummated the all cash acquisition of Harmon Stores, Inc., a health and beauty care retailer, for $24.1 million, net of cash acquired. The Company believes the acquisition will not have a material effect on its consolidated results of operations or financial condition in fiscal 2002.
Critical Accounting Policies
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the Company to establish accounting policies and to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company bases its estimates on historical experience and on other assumptions that it believes to be relevant under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. In particular, as further described below, judgment is used in areas such as the provision for sales returns, inventory valuation using the retail inventory method, impairment of assets and accruals for self insurance, litigation and store relocations
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and closings. Actual results could differ from these estimates.
Sales Returns: Sales returns, which are reserved for based on historical experience, are provided for in the period that the related sales are recorded.
Inventory Valuation: Merchandise inventories are stated at the lower of cost or market, using the retail inventory method. Under the retail inventory method, the valuation of inventories at cost and the resulting gross margins are calculated by applying a cost-to-retail ratio to the retail value of inventories. At any one time, inventories include items that have been marked down to the Company’s best estimate of their fair market value.
Impairment of Assets: The Company periodically reviews long-lived assets for impairment by comparing the carrying value of the assets with their estimated future undiscounted cash flows. If it
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is determined that an impairment loss has occurred, the loss would be recognized during that period. The impairment loss is calculated as the difference between asset carrying values and the present value of the estimated net cash flows. The Company does not believe that any material impairment currently exists related to its long-lived assets.
Self Insurance: The Company is self insured for various insurance programs. Self insurance liabilities are based on estimates of claims incurred that are to be paid in the future.
Litigation: The Company records an estimated liability related to various claims and legal actions arising in the ordinary course of business which is based on available information and assistanceadvice from outside counsel, where appropriate. As additional information becomes available, the Company will assess the potential liability related to its pending litigation and may revise its estimates.
Store Opening, Expansion, Relocation and Closing Costs: Store opening and expansion costs are charged to earnings as incurred. Costs related to store relocations and closings are provided for in the period in which management approves the relocation or closing of a store.
Forward Looking Statements
This Form 10-Q may contain forward-looking statements. Many of these forward-looking statements can be identified by use of words such as may, will, expect, anticipate, estimate, assume, continue, project, plan, and similar words and phrases. The Company’s actual results and future financial condition may differ materially from those expressed in any such forward-looking statements as a result of many factors that may be outside the Company’s control. Such factors include, without limitation: general economic conditions, changes in the retailing environment and consumer spending habits, demographics and other macroeconomic factors that may impact the level of spending for the types of merchandise sold by the Company; unusual weather patterns; competition from existing and potential competitors; competition from other channels of distribution; pricing pressures; the ability to find suitable locations at reasonable occupancy costs to support the Company’s expansion program; and the cost of labor, merchandise and other costs and expenses. The Company does not undertake any obligation to update its forward-looking statements.
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PART II — OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security HoldersControls and Procedures
The Company’s Annual Meeting was held on June 27, 2002. At the Annual Meeting, the following items were voted upon:
The results of the voting were as follows:
SHARES VOTED (in thousands) | ||||||||||||||||||
Against/ | ||||||||||||||||||
Description | For | Withheld | ||||||||||||||||
1. Election of the Board of Directors: | ||||||||||||||||||
Leonard Feinstein | 198,776 | 53,362 | ||||||||||||||||
Robert S. Kaplan | 243,026 | 9,112 | ||||||||||||||||
Dean S. Adler | 240,212 | 11,926 | ||||||||||||||||
Victoria A. Morrison | 240,212 | 11,926 | ||||||||||||||||
Against/ | ||||||||||||||||||
For | Withheld | Abstentions | ||||||||||||||||
2. Appointment of Auditors: | ||||||||||||||||||
KPMG LLP | 237,484 | 13,700 | 954 | |||||||||||||||
Against/ | Broker | |||||||||||||||||
For | Withheld | Abstentions | Non-Votes | |||||||||||||||
3. Shareholder Proposal | 55,157 | 154,826 | 11,368 | 30,787 |
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Item 6. Exhibits and Reports on Form 8-K
(a) | The exhibit to this report is listed on the Exhibit Index included elsewhere herein. | ||
(b) | |||
The Company filed |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
BED BATH & BEYOND INC. | ||||
(Registrant) | ||||
Date: | By: | /s/ Eugene A. Castagna | ||
Eugene A. Castagna Vice President – Finance Principal Accounting Officer |
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CERTIFICATION
I, Warren Eisenberg, Co-Principal Executive Officer, certify that:
1. | I have reviewed this quarterly report on Form 10-Q of Bed Bath & Beyond Inc.; | |
2. | Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; | |
3. | Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; | |
4. | The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: |
a. | designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; | ||
b. | evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and | ||
c. | presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; |
5. | The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors: |
a. | all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and | ||
b. | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and |
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6. | The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. |
Date: October 11, 2002 | /s/ Warren Eisenberg | |
Warren Eisenberg | ||
Co-Chairman and | ||
Co-Chief Executive Officer |
CERTIFICATION
I, Leonard Feinstein, Co-Principal Executive Officer, certify that:
1. | I have reviewed this quarterly report on Form 10-Q of Bed Bath & Beyond Inc.; | |
2. | Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; | |
3. | Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; | |
4. | The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: |
a. | designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; | ||
b. | evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and |
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c. | presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; |
5. | The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors: |
a. | all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and | ||
b. | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and |
6. | The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. |
Date: October 11, 2002 | /s/ Leonard Feinstein | |
Leonard Feinstein | ||
Co-Chairman and | ||
Co-Chief Executive Officer |
CERTIFICATION
I, Eugene A. Castagna, Principal Financial Officer, certify that:
1. | I have reviewed this quarterly report on Form 10-Q of Bed Bath & Beyond Inc.; | |
2. | Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; | |
3. | Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; |
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4. | The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: |
a. | designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; | ||
b. | evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and | ||
c. | presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; |
5. | The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors: |
a. | all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and | ||
b. | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and |
6. | The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. |
Date: October 11, 2002 | /s/ Eugene A. Castagna | |
Eugene A. Castagna | ||
Vice President – Finance and | ||
Assistant Treasurer |
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EXHIBIT INDEX
Exhibit No. | Exhibit | Page No. | ||||||
10.1 | Amended Stock Option Agreement Dated as of | 18-19 |
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