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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 November 27, 1999
COMMISSION FILE NUMBER 0-20214
BED BATH & BEYOND INC.
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(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
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (908) 688-0888
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
NUMBER OF SHARES OUTSTANDING OF THE ISSUER'S COMMON STOCK:
CLASS OUTSTANDING AT NOVEMBER 27, 1999
----- --------------------------------
Common Stock - $0.01 par value 140,340,662
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BED BATH & BEYOND INC. AND SUBSIDIARIES
INDEX
PAGE NO.
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PART I - FINANCIAL INFORMATION
Consolidated Balance Sheets
November 27, 1999 and February 27, 1999 ................. 3
Consolidated Statements of Earnings
Three Months and Nine Months Ended
November 27, 1999 and November 28, 1998 ................. 4
Consolidated Statements of Cash Flows
Nine Months Ended November 27, 1999 and November 28, 1998 5
Note to Consolidated Financial Statements ................. 6
Management's Discussion and Analysis of Financial Condition
and Results of Operations ............................... 7 - 9
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K ................. 10
Exhibit Index ............................................. 11
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BED BATH & BEYOND INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
November 27, February 27,
1999 1999
------------ ------------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents ................................ $107,635 $ 90,396
Merchandise inventories .................................. 522,433 360,337
Prepaid expenses and other current assets ................ 9,749 4,546
-------- --------
Total current assets .................................. 639,817 455,279
-------- --------
Property and equipment, net ................................. 202,362 150,438
Other assets ................................................ 33,186 27,431
-------- --------
$875,365 $633,148
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable ........................................ $201,997 $ 99,370
Accrued expenses and other current liabilities .......... 124,205 89,725
Income taxes payable .................................... 20,783 16,610
-------- --------
Total current liabilities ........................... 346,985 205,705
-------- --------
Deferred rent ................................................ 19,067 16,356
-------- --------
Total liabilities ................................... 366,052 222,061
-------- --------
Shareholders' equity:
Preferred stock - $0.01 par value; authorized -
1,000,000 shares; no shares issued or
outstanding .............................................. -- --
Common stock - $0.01 par value; authorized -350,000,000 shares;
issued and outstanding - November 27, 1999, 140,340,662
shares and February 27, 1999, 139,418,120 shares ........... 1,403 1,394
Additional paid-in capital ................................. 95,059 79,679
Retained earnings .......................................... 412,851 330,014
-------- --------
Total shareholders' equity ............................ 509,313 411,087
-------- --------
$875,365 $633,148
======== ========
See accompanying Note to Consolidated Financial Statements.
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BED BATH & BEYOND INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
Three Months Ended Nine Months Ended
------------------ -----------------
November 27, November 28, November 27, November 28,
1999 1998 1999 1998
------------ ------------ ------------ ------------
Net sales .............................................. $ 486,457 $ 363,431 $ 1,303,415 $ 977,948
Cost of sales, including buying,
occupancy and indirect costs ......................... 289,673 214,958 774,847 577,353
------------ ------------ ------------ ------------
Gross profit .................................... 196,784 148,473 528,568 400,595
Selling, general and administrative expenses ........... 146,177 108,319 396,366 297,937
------------ ------------ ------------ ------------
Operating profit ................................ 50,607 40,154 132,202 102,658
Interest income ........................................ 1,371 761 3,596 2,149
------------ ------------ ------------ ------------
Earnings before provision for income taxes ...... 51,978 40,915 135,798 104,807
Provision for income taxes ............................. 20,271 16,264 52,961 41,661
------------ ------------ ------------ ------------
Net earnings.................................... $ 31,707 $ 24,651 $ 82,837 $ 63,146
============ ============ ============ ============
Net earnings per share - Basic ......................... $ 0.23 $ 0.18 $ 0.59 $ 0.46
Net earnings per share - Diluted ....................... $ 0.22 $ 0.17 $ 0.57 $ 0.44
Weighted average shares outstanding - Basic ............ 140,179,414 138,971,762 139,828,298 138,667,458
Weighted average shares outstanding - Diluted .......... 144,172,597 143,079,852 144,125,462 142,921,542
See accompanying Note to Consolidated Financial Statements.
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BED BATH & BEYOND INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS, UNAUDITED)
Nine Months Ended
----------------------------
November 27, November 28,
1999 1998
------------ ------------
Cash Flows from Operating Activities:
Net earnings ............................................................... $ 82,837 $ 63,146
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization ......................................... 22,367 16,642
Deferred income taxes ................................................. (3,761) (3,533)
Increase in assets:
Merchandise inventories .......................................... (162,096) (131,392)
Prepaid expenses and other current assets ........................ (5,203) (5,194)
Other assets ..................................................... (1,994) (1,279)
Increase (decrease) in liabilities:
Accounts payable ................................................. 102,627 98,636
Accrued expenses and other current liabilities ................... 34,480 11,587
Income taxes payable ............................................. 4,173 (2,195)
Deferred rent .................................................... 2,711 2,777
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Net cash provided by operating activities .................................. 76,141 49,195
--------- ---------
Cash Flows from Investing Activities:
Capital expenditures ....................................................... (74,291) (42,512)
--------- ---------
Net cash used in investing activities ...................................... (74,291) (42,512)
--------- ---------
Cash Flows from Financing Activities:
Proceeds from exercise of stock options .................................... 15,389 14,587
--------- ---------
Net cash provided by financing activities .................................. 15,389 14,587
--------- ---------
Net increase in cash and cash equivalents .................................. 17,239 21,270
Cash and cash equivalents:
Beginning of period ........................................................ 90,396 53,280
--------- ---------
End of period .............................................................. $ 107,635 $ 74,550
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See accompanying Note to Consolidated Financial Statements.
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BED BATH & BEYOND INC. AND SUBSIDIARIES
NOTE TO CONSOLIDATED FINANCIAL STATEMENTS
1) BASIS OF PRESENTATION
The accompanying consolidated financial statements, except for the February 27,
1999 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 November 27, 1999 and February 27, 1999 and
the results of their operations for the three months and nine months ended
November 27, 1999 and November 28, 1998, respectively, and their cash flows for
the nine months ended November 27, 1999 and November 28, 1998. Because of the
seasonality of the specialty retailing business, operating results of the
Company on a quarterly basis may not be indicative of operating results for the
full year.
The accompanying unaudited consolidated financial statements are presented in
accordance with the requirements for Form 10-Q and consequently do not include
all the disclosures normally required by generally accepted accounting
principles. Reference should be made to Bed Bath & Beyond Inc.'s Annual Report
for the fiscal year ended February 27, 1999 for additional disclosures,
including a summary of the Company's significant accounting policies.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Three Months November 27, 1999 vs. Three Months November 28, 1998
Net sales for the third quarter ended November 27, 1999 were $486.5 million, an
increase of $123.0 million or approximately 33.9% over net sales of $363.4
million for the corresponding quarter last year. Approximately 79.1% of the
increase was attributable to new store net sales. The increase in comparable
store net sales in the third quarter of 1999 was approximately 7.8%. The
increase in net sales reflects a number of factors, including but not limited
to, the continued consumer acceptance of the Company's merchandise offerings
and customer service and the generally favorable retailing environment.
Approximately 55% and 45% of net sales for the third quarter were attributable
to sales of domestics merchandise and home furnishings merchandise,
respectively.
Gross profit for the third quarter of 1999 was $196.8 million or 40.5% of net
sales compared with $148.5 million or 40.9% of net sales during the third
quarter of 1998. The decrease as a percentage of net sales in gross profit in
the third quarter of 1999, as compared to the same period a year ago, was
attributable to a number of factors, including a different mix of sales as well
as a continued emphasis on providing value pricing to the customer.
Selling, general and administrative expenses ("SG&A") were $146.2 million in the
third quarter of 1999 compared with $108.3 million in the same quarter last year
and as a percentage of net sales were 30.0% and 29.8%, respectively. The
increase in SG&A, as a percentage of net sales, primarily reflects an increase
in costs associated with new store openings, including the Company's new
electronic service site.
Nine Months November 27, 1999 vs. Nine Months November 28, 1998
Net sales for the nine months ended November 27, 1999 were $1,303.4 million, an
increase of $325.5 million or approximately 33.3% over net sales of $977.9
million for the corresponding period last year. Approximately 75.0% of the
increase was attributable to new store net sales. The increase in comparable
store net sales for the first nine months of 1999 was approximately 9.0%.
Gross profit for the first nine months of 1999 was $528.6 million or 40.6% of
net sales compared with $400.6 million or 41.0% of net sales during the same
period last year. The decrease in gross profit for the nine months of 1999 as a
percentage of net sales, as compared to the same period a year ago, was
attributable to a number of factors, including a different mix of sales as well
as a continued emphasis on providing value pricing to the customer.
SG&A was $396.4 million in the first nine months of 1999 compared with $297.9
million for the same period last year and as a percentage of net sales were
30.4% and 30.5%, respectively.
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EXPANSION PROGRAM
The Company is engaged in an ongoing expansion program involving the opening of
new stores in both existing and new markets and the expansion or replacement of
existing stores with larger stores. As a result of this program, the total
number of stores has increased to 237 stores at the end of the third quarter of
1999 compared with 185 stores at the end of the corresponding quarter last year.
Total square footage grew to 9,696,000 square feet at the end of the third
quarter of 1999, from 7,653,000 square feet at the end of the third quarter of
last year. During the fiscal third quarter, the Company opened 36 new
superstores as compared with 26 new superstores in the corresponding quarter a
year ago.
During the first nine months of fiscal 1999, the Company opened 51 new
superstores and expanded four existing stores resulting in an aggregate addition
of 2,008,000 square feet to total store space. The Company anticipates opening
approximately four additional stores by the end of the fiscal year, aggregating
approximately 119,000 square feet of store space.
FINANCIAL CONDITION
Total assets at November 27, 1999 were $875.4 million compared with $633.1
million at February 27, 1999, an increase of $242.2 million. Of the total
increase, $184.5 million represented an increase in current assets and $57.7
million represented an increase in non-current assets. The increase in current
assets was primarily attributable to an increase in merchandise inventories,
which resulted from new store space and, to a lesser extent, changes in
merchandising mix.
Total liabilities at November 27, 1999 were $366.1 million compared with $222.1
million at February 27, 1999, an increase of $144.0 million. The increase was
primarily attributable to a $102.6 million increase in accounts payable
(resulting from an increase in inventories) and a $34.5 million increase in
accrued expenses and other current liabilities.
Shareholders' equity was $509.3 million at November 27, 1999 compared with
$411.1 million at February 27, 1999. The increase primarily reflects net
earnings for the first nine months of fiscal 1999 and additional paid-in capital
from the exercise of stock options.
Capital expenditures for the first nine months of fiscal 1999 were $74.3 million
compared with $42.5 million for the corresponding period last year. The increase
is primarily attributable to expenditures for furniture, fixtures and leasehold
improvements for the 51 new superstores opened and four stores expanded during
the first nine months and for the electronic service site, compared to
furniture, fixtures and leasehold improvements for the 44 new superstores
opened and three stores expanded in the same period last year.
For the foreseeable future, the Company believes that it will be able to
finance both its normal operations and its expansion program through internally
generated funds.
YEAR 2000
To date, the Year 2000 issue has not had a material adverse effect on the
Company. The Company's information systems are operating effectively. At this
time, the Company is not aware of any vendors or principal suppliers that are
not Year 2000 compliant; however, it will continue to maintain contingency plans
with respect to its third-party relationships. The Company's costs incurred
associated with the Year 2000 issue were not material.
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FORWARD LOOKING STATEMENTS
This Form 10-Q may contain forward looking statements. Important factors which
may affect these statements are contained in the Company's Annual Report to
shareholders for the fiscal year ended February 27, 1999.
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PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) The exhibits to this report are listed on the Exhibit Index included
elsewhere herein.
(b) No reports on Form 8-K were filed by the Company during the three
month period ended November 27, 1999.
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: January 10, 2000 By: /s/ Ronald Curwin
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Ronald Curwin
Chief Financial Officer and Treasurer
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EXHIBIT INDEX
Exhibit No. Exhibit Page No.
- ----------- ------- --------
10.1 Stock Option Agreement between the Company 12-14
and Warren Eisenberg, dated as of August 13, 1999
10.2 Stock Option Agreement between the Company and 15-17
Leonard Feinstein, dated as of August 13, 1999
10.3 Form of Standard Stock Option Agreement 18-19
27 Financial Data Schedule 20
(Filed electronically with SEC only)
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