20230930-DK-Butterfly-1 (BBBYQ) 10-Q 2006 Q1 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended May 28, 2005

Commission File Number   0-20214

BED BATH & BEYOND INC.

(Exact name of registrant as specified in its charter)

New York	11-2250488
(State of incorporation)	(I.R.S. Employer Identification No.)

650 Liberty Avenue, Union, New Jersey 07083

(Address of principal executive offices)(Zip code)

Registrant’s telephone number, including area code: (908) 688-0888

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),

and (2) has been subject to such filing requirements for the past 90 days. Yes ý  No o

Indicate by check mark whether the registrant is an accelerated filer (as defined by Rule 12b-2 of the Securities Exchange Act).

Yes ý  No o

Number of shares outstanding of the issuer’s Common Stock:

Class	Outstanding at May 28, 2005
Common Stock - $0.01 par value	295,737,578

BED BATH & BEYOND INC. AND SUBSIDIARIES

INDEX

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Certifications

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BED BATH & BEYOND INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(in thousands, except per share data)

	May 28, 2005			February 26, 2005
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	224,528		$	222,108
Short term investment securities	651,983			629,339
Merchandise inventories	1,238,976			1,152,028
Other current assets	108,943			93,527
Total current assets	2,224,430			2,097,002
Long term investment securities	362,436			324,209
Property and equipment, net	616,315			609,631
Goodwill	147,559			147,559
Other assets	21,602			21,578
	$	3,372,342		$	3,199,979
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	481,949		$	450,525
Accrued expenses and other current liabilities	255,429			254,643
Merchandise credit and gift card liabilities	92,660			87,061
Income taxes payable	89,955			81,364
Total current liabilities	919,993			873,593
Deferred rent and other liabilities	132,046			122,624
Total liabilities	1,052,039			996,217
Shareholders’ equity:
Preferred stock - $0.01 par value; authorized - 1,000 shares; no shares issued or outstanding	—			—
Common stock - $0.01 par value; authorized - 900,000 shares; issued 304,500 and 302,825 shares, respectively; outstanding 295,738 and 294,063 shares, respectively	3,045			3,028
Additional paid-in capital	541,842			491,508
Retained earnings	2,158,280			2,059,377
Deferred compensation	(32,713		)	—
Treasury stock, at cost; 8,762 shares	(350,151		)	(350,151		)
Total shareholders’ equity	2,320,303			2,203,762
	$	3,372,342		$	3,199,979

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
	May 28, 2005		May 29, 2004
Net sales	$	1,244,421	$	1,100,917
Cost of sales	723,640		644,143
Gross profit	520,781		456,774
Selling, general and administrative expenses	369,897		328,067
Operating profit	150,884		128,707
Interest income	7,108		3,098
Earnings before provision for income taxes	157,992		131,805
Provision for income taxes	59,089		49,756
Net earnings	$	98,903	$	82,049
Net earnings per share - Basic	$	0.34	$	0.27
Net earnings per share - Diluted	$	0.33	$	0.27
Weighted average shares outstanding - Basic	294,413		300,417
Weighted average shares outstanding - Diluted	299,055		306,584

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
	May 28, 2005			May 29, 2004
Cash Flows from Operating Activities:
Net earnings	$	98,903		$	82,049
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation	25,760			22,427
Amortization	1,787			270
Tax benefit from exercise of stock options	7,873			2,707
Deferred income taxes	(325		)	535
Increase in assets:
Merchandise inventories	(86,948		)	(53,185		)
Other current assets	(13,847		)	(14,513		)
Other assets	(45		)	(30		)
Increase (decrease) in liabilities:
Accounts payable	31,424			29,644
Accrued expenses and other current liabilities	738			(17,646		)
Merchandise credit and gift card liabilities	5,599			4,627
Income taxes payable	8,591			(1,423		)
Deferred rent and other liabilities	8,130			4,640
Net cash provided by operating activities	87,640			60,102
Cash Flows from Investing Activities:
Purchase of held-to-maturity investment securities	(102,736		)	(143,145		)
Redemption of held-to-maturity investment securities	10,715			50,000
Purchase of available-for-sale investment securities	(515,975		)	(530,102		)
Redemption of available-for-sale investment securities	546,300			547,965
Capital expenditures	(32,327		)	(22,618		)
Net cash used in investing activities	(94,023		)	(97,900		)
Cash Flows from Financing Activities:
Proceeds from exercise of stock options	8,803			4,018
Net cash provided by financing activities	8,803			4,018
Net increase (decrease) in cash and cash equivalents	2,420			(33,780		)
Cash and cash equivalents:
Beginning of period	222,108			294,500
End of period	$	224,528		$	260,720

See accompanying Notes to Consolidated Financial Statements.

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BED BATH & BEYOND INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(unaudited)

1) Basis of Presentation

The accompanying consolidated financial statements, except for the February 26, 2005 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 and elimination of intercompany balances and transactions) necessary to present fairly the financial position of Bed Bath & Beyond Inc. and subsidiaries (the “Company”) as of May 28, 2005 and February 26, 2005 and the results of its operations and its cash flows for the three months ended May 28, 2005 and May 29, 2004, respectively.

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 U.S. generally accepted accounting principles.  Reference should be made to Bed Bath & Beyond Inc.’s Annual Report on Form 10-K for the fiscal year ended February 26, 2005 for additional disclosures, including a summary of the Company’s significant accounting policies.

The Company exhibits less seasonality than many other retail businesses, although sales levels are generally higher in August, November and December and generally lower in February and March.

Operating results of the Company on a quarterly basis may not be indicative of operating results for the full year.

Certain reclassifications have been made to the fiscal 2004 consolidated financial statements to conform to the fiscal 2005 consolidated financial statement presentation.

2) Recent Accounting Pronouncements

In March 2005, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation (“FIN”) No. 47, “Accounting for Conditional Asset Retirement Obligations.”  FIN No. 47 clarifies the term “conditional asset retirement obligation” as used in FASB Statement No. 143, “Accounting for Asset Retirement Obligations.”  This interpretation requires companies to recognize a liability for the fair value of a legal obligation to perform asset-retirement activities that are conditional on a future event if the amount can be reasonably estimated.  FIN No. 47 also clarifies when an entity would have sufficient information to reasonably estimate the fair value of an asset retirement obligation.  FIN No. 47 is effective no later than the end of fiscal years ending after December 15, 2005. The Company does not believe that the adoption of FIN No. 47 will have a material impact on the Company’s consolidated financial statements.

In November 2004, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 151, “Inventory Costs, an Amendment of ARB No. 43, Chapter 4.”  SFAS No. 151 amends the guidance to clarify that abnormal amounts of idle facility expense, freight, handling costs, and wasted materials should be recognized as current period charges.  In addition, SFAS No. 151 requires that allocation of fixed production overhead to the costs of conversions be based on the

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normal capacity of the production facilities.  The statement is effective for inventory costs incurred during fiscal years beginning after June 15, 2005.  The Company does not believe that the adoption of SFAS No. 151 will have a material impact on the Company’s consolidated financial statements.

3) Stock-Based Compensation

The FASB issued Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment” (“SFAS No. 123R”) which requires companies to measure all employee stock-based compensation awards using a fair value method and record such expense in its consolidated financial statements.  In addition, the adoption of SFAS No. 123R requires additional accounting and disclosure related to income tax and cash flow effects resulting from share-based payment arrangements. The SEC delayed the effective date of adoption for SFAS No. 123R to the beginning of the first annual reporting period after June 15, 2005.  Per SFAS No. 123R, early adoption is encouraged.

In anticipation of adopting SFAS 123R during its fiscal third quarter of 2005, the Company revised its overall approach to compensation for its employees, including stock-based compensation. As a result, awards consisting of a combination of restricted stock and stock options were granted to executive officers and other executives during the first quarter of 2005.  The restricted stock granted to these executives is subject to performance criteria as well as time based vesting.  Additionally, awards consisting solely of restricted stock were granted to the Company’s other employees who traditionally have received solely stock options.  The restricted stock granted to these employees is subject only to time based vesting.  All awards generally become exercisable in five equal annual installments beginning one to three years from the date of grant.

For the quarter ended May 28, 2005, the Company has elected not to adopt the fair value based method of accounting for its stock-based compensation plans, but continues to apply the provisions of Accounting Principles Board Opinion (“APB”) No. 25, “Accounting for Stock Issued to Employees,” as permitted under SFAS No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure – an amendment of FASB Statement No.123.”  The Company has complied with the disclosure requirements of SFAS No. 148.

Accordingly, the Company currently does not recognize compensation expense for stock options.  The Company recognizes compensation expense for restricted stock awards over the service period.  Set forth below are the Company’s net earnings and net earnings per share “as reported,” and as if compensation expense had been recognized (“pro forma”) in accordance with the fair value provisions of SFAS No. 148:

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	Three Months Ended
(in thousands, except per share data)	May 28, 2005			May 29, 2004
Net earnings:
As reported	$	98,903		$	82,049
Deduct: Total stock-based employee compensation expense determined under fair value based method, net of related tax effects	(8,724		)	(8,309		)
Add: Total stock-based employee compensation expense included in net earnings, net of related tax effects	602			—
Pro forma	$	90,781		$	73,740
Net earnings per share:
Basic:
As reported	$	0.34		$	0.27
Pro forma	$	0.31		$	0.25
Diluted:
As reported	$	0.33		$	0.27
Pro forma	$	0.31		$	0.24

The Company currently plans to adopt SFAS No. 123R at the beginning of its fiscal third quarter under the modified prospective application.  Under this application, the Company will record compensation expense for all awards granted after the adoption date and for a portion of previously granted awards that remain outstanding at the date of adoption. The Company estimates the impact of recording stock-based compensation expense, which includes the expense of stock options in the third and fourth quarters and restricted stock awards from the date of grant, will be approximately $0.07 per share for fiscal 2005.

4) 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-based awards.

Options for which the exercise price was greater than the average market price of common shares for the three months ended May 28, 2005 and May 29, 2004 were not included in the computation of diluted earnings per share as the effect would be anti-dilutive. These consisted of options totaling

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approximately 4,641,000 and 2,693,000 shares for the three months ended May 28, 2005 and May 29, 2004, respectively.

5) Supplemental Cash Flow Information

The Company paid income taxes of $45.2 million and $47.9 million in the first three months of fiscal 2005 and 2004, respectively.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

Bed Bath & Beyond Inc. and subsidiaries (the “Company”) operate specialty retail stores nationwide, including stores of Bed Bath & Beyond (“BBB”), Harmon Stores, Inc. (“Harmon”) and Christmas Tree Shops, Inc. (“CTS”), primarily selling better quality domestics merchandise and home furnishings. The Company’s objective is to be a customer’s first choice for products and services in the categories offered, in the markets in which the Company operates.

The Company’s strategy is to achieve this objective through excellent customer service, an extensive breadth and depth of assortment, everyday low prices, introduction of new merchandising offerings and development of our infrastructure.

Operating in the highly competitive retail industry, the Company, along with other retail companies, is influenced by a number of factors including but not limited to, general economic conditions, consumer preferences and spending habits, competition from existing and potential competitors, unusual weather patterns and the ability to find suitable locations at acceptable occupancy costs to support the Company’s expansion program.

For the three months ended May 28, 2005, the Company’s consolidated net sales increased by 13.0% as compared to the corresponding quarter last year.  The increase in net sales was primarily attributable to the continuing BBB store expansion program and an increase in comparable store sales of approximately 4.4% as compared with an increase of approximately 5.1% for the fiscal first quarter of 2004.  The increase in comparable store sales reflected a number of factors, including but not limited to, the continued consumer acceptance of the Company’s merchandise offerings and a strong focus on customer service with an emphasis on responding to customer feedback.

A store is considered a comparable store when it has been open for twelve full months following its grand opening period (typically four to six weeks).  Stores relocated or expanded are excluded from comparable store sales if the change in square footage would cause meaningful disparity in sales over the prior period.  In the case of a store to be closed, such store’s sales are not considered comparable once the store closing process has commenced.

For the three months ended May 28, 2005, the Company’s consolidated net earnings increased by 20.5% as compared to the corresponding quarter last year.  This increase was primarily a result of a relative increase in gross profit as a percentage of net sales and a relative decrease in selling, general and administrative expenses (“SG&A”) as a percentage of net sales.

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Results of Operations

Net Sales

Net sales for the three months ended May 28, 2005 were approximately $1.244 billion, an increase of $143.5 million or approximately 13.0% over net sales of approximately $1.101 billion for the corresponding quarter last year.

Approximately 66.6% of the increase in net sales for the three months ended May 28, 2005 was attributable to an increase in the Company’s new store sales with the balance of the increase primarily attributable to the increase in comparable store sales.  The increase in comparable store sales for the first quarter of 2005 was 4.4% as compared to 5.1% for the first quarter of 2004.  As of the beginning of the fiscal third quarter of 2004, CTS is included in the calculation of comparable store sales. The increase in comparable store sales was due to a number of factors, including but not limited to, the continued consumer acceptance of the Company’s merchandise offerings and a strong focus on customer service with an emphasis on responding to customer feedback.

Sales of domestics merchandise accounted for approximately 48% and 50% of net sales for the three months ended May 28, 2005 and May 29, 2004, respectively.  Sales of home furnishings accounted for approximately 52% and 50% of net sales for the three months ended May 28, 2005 and May 29, 2004, respectively.

Gross Profit

Gross profit for the three months ended May 28, 2005 was $520.8 million or 41.8% of net sales, compared with $456.8 million or 41.5% of net sales for the three months ended May 29, 2004.  The increase in gross profit as a percentage of net sales was driven primarily by the reduction of inventory acquisition costs attributable to the Company’s current merchandise offerings.

Selling, General and Administrative Expenses

SG&A was $369.9 million in the first quarter of 2005, compared with $328.1 million in the corresponding quarter last year and as a percentage of net sales was 29.7% and 29.8%, respectively.  The decrease in SG&A as a percentage of net sales was primarily attributable to an improvement in payroll and payroll related items as a percentage of net sales which primarily resulted from increases in store sales.

Operating Profit

Operating profit for the three months ended May 28, 2005 increased to $150.9 million, compared to $128.7million during the comparable period in 2004.  The improvement in operating profit was a result of the increase in net sales, a relative increase in gross profit as a percentage of net sales and a relative decrease in SG&A as a percentage of net sales, as discussed above.

Interest Income

Interest income was $7.1 million for the first quarter of 2005, compared to $3.1 million for the

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corresponding quarter last year.  Interest income increased due to an increase in invested cash and an increase in the Company’s average investment interest rate as a result of the recent upward trend in short term interest rates.

Income Taxes

The effective tax rate was 37.40% for the fiscal three month period of 2005 and 37.75% for the fiscal three month period of 2004.  The decrease is due to a reduction in the weighted average effective tax rate resulting from a change in the mix of the business within the taxable jurisdictions in which the Company operates.

Net Earnings

As a result of the factors described above, net earnings increased to $98.9 million for the first quarter of 2005, compared with $82.0 million for the first quarter of 2004.

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. As a result of this program, the Company operated 671 BBB stores, 26 CTS stores and 35 Harmon stores at the end of the fiscal first quarter of 2005, compared with 592 BBB stores, 24 CTS stores and 31 Harmon stores at the end of the corresponding quarter last year.  At May 28, 2005, Company-wide total square footage was approximately 23.2 million square feet.

The Company opened 11 BBB stores during the first quarter of fiscal 2005.  The Company plans to open approximately 74 additional BBB stores, in both new and existing markets, and several CTS and Harmon stores by the end of the fiscal year.

Liquidity and Capital Resources

Net cash provided by operating activities for the three months ended May 28, 2005 was $87.6 million as compared with $60.1 million in the corresponding period of fiscal 2004.  The increase in net cash provided by operating activities was primarily attributable to an increase in net income, the timing of certain liability payments, an increase in income taxes payable and an increase in the tax benefit received from the exercise of stock options, partially offset by an increase in merchandise inventories (primarily a result of new store space).

Inventory per square foot was $53.29 as of May 28, 2005 and $50.96 as of May 29, 2004.  The Company continues to focus on optimizing inventory productivity while maintaining appropriate in-store merchandise levels to support sales growth.

Net cash used in investing activities for the three months ended May 28, 2005 was $94.0 million as compared with $97.9 million in the corresponding period of fiscal 2004.  The decrease in net cash used in investing activities was attributable to a decrease in purchases of investment securities partially offset by a decrease in redemptions of investment securities and an increase in capital expenditures.  The increase in capital expenditures was primarily attributable to expenditures for

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furniture, fixtures and leasehold improvements for the 11 new stores opened and stores under construction during the first three months of fiscal 2005, a warehouse facility expansion and information technology enhancements, compared to expenditures for furniture, fixtures and leasehold improvements for the 17 new stores opened and stores under construction in the corresponding period last year.

Net cash provided by financing activities for the three months ended May 28, 2005 was $8.8 million as compared with $4.0 million in the corresponding period of 2004.  The increase in net cash provided by financing activities is attributable to an increase in proceeds from the exercise of stock options in the current year.

For fiscal 2005, the Company believes that its current operating cash flow, working capital, and cash and cash equivalents on hand should be sufficient to meet its obligations in the ordinary course of business, including capital expenditures and new store openings.

Seasonality

The Company exhibits less seasonality than many other retail businesses, although sales levels are generally higher in August, November and December and generally lower in February and March.

Recent Accounting Pronouncements

The Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment” (“SFAS No. 123R”) which requires companies to measure all employee stock-based compensation awards using a fair value method and record such expense in its consolidated financial statements.  In addition, the adoption of SFAS No. 123R requires additional accounting and disclosure related to income tax and cash flow effects resulting from share-based payment arrangements. The SEC delayed the effective date of adoption for SFAS No. 123R to the beginning of the first annual reporting period after June 15, 2005.  Per SFAS No. 123R, early adoption is encouraged.

The Company currently plans to adopt SFAS No. 123R at the beginning of its fiscal third quarter under the modified prospective application.  Under this application, the Company will record compensation expense for all awards granted after the adoption date and for a portion of previously granted awards that remain outstanding at the date of adoption. The Company estimates the impact of recording stock-based compensation expense, which includes the expense of stock options in the third and fourth quarters and restricted stock awards from the date of grant, will be approximately $0.07 per share for fiscal 2005.

Critical Accounting Policies

The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles 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

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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, judgment is used in areas such as the inventory valuation, impairment of long-lived assets, goodwill and other indefinitely lived intangible assets, income taxes and accruals for self insurance, litigation and store opening, expansion, relocation and closing costs. Actual results could differ from these estimates.

Inventory Valuation:  Merchandise inventories are stated at the lower of cost or market.  Inventory costs for BBB and Harmon are calculated using the retail inventory method and inventory cost for CTS is calculated using the first-in, first-out cost 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 written down to the Company’s best estimate of their realizable value.  Factors considered in estimating realizable value include the age of merchandise and anticipated demand.  Actual realizable value could differ materially from this estimate based upon future customer demand or economic conditions.

The Company estimates its reserve for shrinkage throughout the year, based on historical shrinkage.  Actual shrinkage is recorded at year-end based upon the results of the Company’s physical inventory count.  Historically, the Company’s shrinkage has not been volatile.

Impairment of Long-Lived Assets:  The Company reviews long-lived assets for impairment annually or when events or changes in circumstances indicate the carrying value of these assets may exceed their current fair values.  If it 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 estimated future undiscounted cash flows.  The Company has not historically had any material impairment of long-lived assets.  In the future, if events or market conditions affect the estimated cash flows generated by the Company’s long-lived assets to the extent that an asset is impaired, the Company will adjust the carrying value of these assets in the period in which the impairment occurs.

Goodwill and Other Indefinitely Lived Intangible Assets:  The Company reviews goodwill and other intangibles that have indefinite lives for impairment annually or when events or changes in circumstances indicate the carrying value of these assets might exceed their current fair values.  Impairment testing is based upon the best information available including estimates of fair value which incorporate assumptions marketplace participants would use in making their estimates of fair value.  The Company has not historically recorded an impairment to its goodwill and other indefinitely lived intangible assets.  In the future, if events or market conditions affect the estimated fair value to the extent that an asset is impaired, the Company will adjust the carrying value of these assets in the period in which the impairment occurs.

Income Taxes: The Company accounts for its income taxes using the asset and liability method.  Deferred tax assets and liabilities are recognized for the future tax consequences attributable to the differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the year in which those temporary differences are expected to be recovered or settled.  The effect on

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deferred tax assets and liabilities of a change in tax rates is recognized in earnings in the period that includes the enactment date.

Judgment is required in determining the provision for income taxes and related accruals, deferred tax assets and liabilities.  In the ordinary course of business, there are transactions and calculations where the ultimate tax outcome is uncertain.  Additionally, the Company’s tax returns are subject to audit by various tax authorities.  Although the Company believes that its estimates are reasonable, actual results could differ from these estimates.

Self Insurance:  The Company utilizes a combination of insurance and self insurance for a number of risks including workers compensation, general liability, automobile liability and employee related health care benefits (a portion of which is paid by its employees). Liabilities associated with the risks that the Company retains are estimated by considering historical claims experience, demographic factors, severity factors and other actuarial assumptions.  Although the Company’s claims experience has not displayed substantial volatility in the past, actual experience could materially vary from its historical experience in the future.  Factors that affect these estimates include but are not limited to: inflation, the number and severity of claims and regulatory changes.  In the future, if the Company concludes an adjustment to self insurance accruals is required, the liability will be adjusted accordingly.

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 advice from outside counsel, where appropriate.  As additional information becomes available, the Company reassesses the potential liability related to its pending litigation and revises its estimates as appropriate. The Company cannot predict the nature and validity of claims which could be asserted in the future, and future claims could have a material impact on its earnings.

Store Opening, Expansion, Relocation and Closing Costs:  Store opening, expansion, relocation and closing costs, including estimates for markdowns, asset residual values and projected occupancy costs, are charged to earnings as incurred.  Actual costs related to store relocations and closings could differ from these estimates.

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 preferences and 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 acceptable 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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Available Information

The Company makes available as soon as reasonably practicable after filing with the SEC, free of charge, through the Investor Relations section of its website, www.bedbathandbeyond.com, the Company’s annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports, electronically filed or furnished pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

The Company’s exposure to market risk for changes in interest rates relates primarily to the Company’s investment securities.  The Company’s market risks at May 28, 2005 are similar to those disclosed in Item 7a of the Company’s Form 10-K for the year ended February 26, 2005.  The Company continues to regularly evaluate these risks and continues to take measures to mitigate these risks.

Item 4.  Controls and Procedures

(a)Evaluation of disclosure controls and procedures.  The Company’s Principal Executive Officer and Principal Financial Officer have reviewed and evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 240.13a-15(e) and 15d-15(e)) as of May 28, 2005 (the end of the period covered by this quarterly report on Form 10-Q). Based on that evaluation, the Principal Executive Officer and the Principal Financial Officer have concluded that the Company’s current disclosure controls and procedures are effective, providing them with material information relating to the Company as required to be disclosed in the reports the Company files or submits under the Exchange Act on a timely basis.

(b)Changes in internal controls.  There were no changes in the Company’s internal controls over financial reporting that occurred during the Company’s most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

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PART II - OTHER INFORMATION

Item 4.  Submission of Matters to a Vote of Security Holders

The Company’s Annual Meeting was held on June 30, 2005.  At the Annual Meeting, the following items were voted upon:

1.Election of four directors of the Corporation.

2.Ratification of the appointment of KPMG LLP as independent auditors for the fiscal year ending February 25, 2006.

3.Three shareholder proposals.

The results of the voting were as follows:

	SHARES VOTED (in thousands)
Description		For	Withheld
1. Election of the Board of Directors:
Leonard Feinstein		239,411	19,750
Robert Kaplan		240,958	18,203
Dean S. Adler		244,824	14,337
Jordan Heller		244,829	14,332

	For	Against	Abstentions
2. Appointment of Auditors:
KPMG	250,358	7,132	1,671

	For	Against	Abstentions	Broker Non-Votes
3. Shareholder Proposal; Foreign Workplace Monitoring:	41,021	148,689	33,853	35,598

	For	Against	Abstentions	Broker Non-Votes
4. Shareholder Proposal; Executive Stock Holdings:	55,391	154,813	13,350	35,607

	For	Against	Abstentions	Broker Non-Votes
5. Shareholder Proposal; Board Structure:	149,527	71,962	2,061	35,611

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Item 6.  Exhibits

The exhibits to this Report are listed in the Exhibit Index included elsewhere herein.

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: July 6, 2005		By:	/s/ Eugene A. Castagna
			Eugene A. Castagna
			Vice President – Finance and
			Principal Accounting Officer

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EXHIBIT INDEX

Exhibit No.	Exhibit
10.1	Form of Restricted Stock Agreement under 2004 Stock Incentive Plan.
10.2	Performance-Based Form of Restricted Stock Agreement under 2004 Stock Incentive Plan.
31.1	Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes - Oxley Act of 2002.
31.2	Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes - Oxley Act of 2002.
32	Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes - Oxley Act of 2002.

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