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EXHIBIT 13
1995
BED BATH & BEYOND
ANNUAL REPORT
BEYOND ANY STORE OF ITS KIND.(R)
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TABLE OF CONTENTS
Company Profile and Store
Locations Inside Front Cover
Selected Financial Data 1
Letter to Shareholders 2-3
Questions & Answers 4-8
Management's Discussion and
Analysis of Financial
Condition and Results of Operations 9-11
Consolidated Financial Statements 12-20
Corporate Data Inside Back Cover
COMPANY PROFILE
BED BATH & BEYOND IS A NATIONWIDE CHAIN OF "SUPERSTORES" SELLING BETTER QUALITY
DOMESTICS MERCHANDISE AND HOME FURNISHINGS. FOUNDED IN 1971 WITH TWO STORES IN
NEW YORK AND NEW JERSEY THAT PRIMARILY SOLD BED LINENS AND BATH ACCESSORIES, THE
COMPANY ORIGINATED ITS SUPERSTORE FORMAT IN 1985 WITH THE OPENING OF ITS FIRST
FACILITY CARRYING A FULL LINE OF BOTH DOMESTICS MERCHANDISE AND HOME
FURNISHINGS. ALL STORES OPENED BY THE COMPANY SINCE 1985 HAVE ADOPTED THIS
INNOVATIVE AND DYNAMIC FORMAT. TODAY, BED BATH & BEYOND IS THE PREEMINENT
MARKETER IN THE SUPERSTORE SEGMENT OF THE HOME GOODS INDUSTRY. IT CURRENTLY
OPERATES 86 STORES IN 22 STATES ENCOMPASSING NEARLY 3.5 MILLION SQUARE FEET, AND
HAS BEEN EXPANDING ITS SQUARE FOOTAGE BY AT LEAST 30% A YEAR. BED BATH & BEYOND
STORES PRINCIPALLY RANGE FROM 30,000 TO 50,000 SQUARE FEET, WITH SOME STORES AS
LARGE AS 85,000 SQUARE FEET. THEY COMBINE SUPERIOR SERVICE AND A HUGE SELECTION
OF ITEMS AT EVERYDAY LOW PRICES WITHIN A CONSTANTLY EVOLVING SHOPPING
ENVIRONMENT THAT HAS PROVEN TO BE BOTH FUN AND EXCITING FOR CUSTOMERS. BED BATH
& BEYOND'S SHARES ARE TRADED ON THE NASDAQ NATIONAL MARKET SYSTEM UNDER THE
SYMBOL "BBBY."
STORE LOCATIONS
Number
State of Stores
- - - ----- ---------
Alabama 1
Arizona 2
California 11
Colorado 1
Connecticut 3
Florida 10
Georgia 4
Illinois 6
Indiana 2
Kansas 1
Maryland 4
Massachusetts 2
Michigan 3
Missouri 1
New Jersey 6
New York 8
Ohio 3
Oklahoma 1
Pennsylvania 2
Texas 10
Virginia 4
Washington 1
TOTAL NUMBER OF STORE LOCATIONS 86
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SELECTED FINANCIAL DATA
Fiscal Year Ended
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(In thousands, except per share February 25, February 26, February 27, February 28, March 1,
and selected operating data) 1996 1995 1994 1993 1992
======================================================================================================================
INCOME STATEMENT DATA:
Net sales $ 601,252 $ 440,261 $ 305,767 $ 216,712 $167,595
Gross profit 250,036 183,819 127,972 90,528 70,039
Operating profit 67,585 51,685 36,906 26,660 19,973
Net earnings(1) 39,459 30,013 21,887 15,960 11,952
Net earnings per share(1)(2) $ .57 $ .43 $ .32 $ .24 $ .18
- - - ----------------------------------------------------------------------------------------------------------------------
SELECTED OPERATING DATA:
Number of stores open
(at period end) 80 61 45 38 34
Total square feet of store space
(at period end) 3,214,000 2,339,000 1,512,000 1,128,000 917,000
Net sales per average square foot of
total store space $ 217 $ 229 $ 232 $ 212 $ 217
Percentage increase in comparable
store net sales 3.8% 12.0% 10.6% 7.2% 1.1%
- - - ----------------------------------------------------------------------------------------------------------------------
BALANCE SHEET DATA (AT PERIOD END):
Working capital $ 87,727 $ 71,902 $ 54,432 $ 34,501 $ 31,955
Total assets 235,810 176,678 121,468 76,654 55,477
Long-term debt 5,000 16,800 13,300 -- 11,780
Shareholders' equity $ 151,446 $ 108,939 $ 77,305 $ 54,643 $ 30,853
(1) Bed Bath & Beyond Inc. was an S corporation for Federal and certain state
income tax purposes until June 9, 1992. Provision for income taxes and net
earnings in fiscal years 1992 and 1991 reflect a provision for pro forma
income taxes as if the Company and its subsidiaries had been liable for
Federal, state and local income taxes as taxable corporate entities
throughout the periods that the S corporation was in effect.
(2) Net earnings per share amounts have been adjusted for two-for-one stock
splits of the Company's common stock (each of which was effected in the form
of a 100% stock dividend), which were distributed on June 21, 1993 and April
30, 1996.
91 92 93 94 95
----- ----- ----- ----- -----
NET SALES ($ IN MILLIONS) 167.6 216.7 305.8 440.3 601.3
NET EARNINGS ($ IN MILLIONS) 12.0 16.0 21.9 30.0 39.5
NET EARNINGS PER SHARE
(IN DOLLARS) 0.18 0.24 0.32 0.43 0.57
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TO OUR FELLOW SHAREHOLDERS
Bed Bath & Beyond continued to produce outstanding results in fiscal 1995 thanks
to the skills, hard work and determination of our nationwide family of managers
and associates. At the same time, we took advantage of the public's growing
enthusiasm for our lively, innovative style of merchandising by expanding our
chain of superstores selling better quality domestics merchandise and home
furnishings.
1995 HIGHLIGHTS
Net sales for fiscal 1995 were $601.3 million, an increase of 36.6% from the
prior year's $440.3 million. Comparable store net sales for fiscal 1995 were
3.8% ahead of the prior year.
Net earnings of $39.5 million exceeded fiscal 1994's total of $30.0 million by
31.5%. On a per share basis, net earnings grew from $.43 to $.57.
In order to increase and broaden our shareholder base and improve the liquidity
of our stock, the Company's Board of Directors on March 28, 1996 declared a
two-for-one split of the Company's common stock in the form of a 100% stock
dividend. The stock dividend was distributed on April 30, 1996 to shareholders
of record on April 10, 1996.
GROWING MARKET PENETRATION
We took advantage of our reputation as a desirable anchor tenant in strip
centers and malls by opening nineteen new superstores in fiscal 1995. Total
store space at year-end was 3.2 million square feet, a 37.4% increase over the
2.3 million square feet at the end of the prior fiscal year. Bed Bath & Beyond
plans to open 24 to 26 new stores in both new and existing markets during the
current fiscal year, adding to the 80 stores in 21 states that existed at the
end of fiscal 1995.
We compete successfully against the department stores and national chains that
dominate the domestics and home furnishings industry. Spearheading the effort
for Bed Bath & Beyond is our decentralized team of store managers who apply
their merchandising knowledge and experience to meet the needs of our customers.
[PHOTO OF WARREN EISENBERG AND LEONARD FEINSTEIN]
WARREN EISENBERG AND LEONARD FEINSTEIN
Co-Chief Executive Officers
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STORE EXPANSION
91 92 93 94 95
---- ----- ----- ----- -----
STORE EXPANSION 34 38 45 61 80
TOTAL SQUARE FOOTAGE
(IN THOUSANDS) 917 1,128 1,512 2,339 3,214
We are ever mindful of the growing competitive environment. We believe we are
the only chain in our retailing segment that has been able to demonstrate
consistently profitable results. Furthermore, because our share of the total
market is under one and one-half percent, we believe there are many
opportunities for future growth.
STRONG FINANCIAL BASE
Bed Bath & Beyond continues to be in robust financial health. Long-term debt at
February 25, 1996, the end of our fiscal year, was $5.0 million. This
represented 3.2% of total capitalization, down from 13.4% at the end of the
prior fiscal year. Although our bank credit facility has been expanded to
provide $45.0 million in borrowing capacity, we expect that internally generated
cash flow will fund a major portion of this year's store expansion program.
Working capital at the end of fiscal 1995 amounted to $87.7 million, compared
with $71.9 million at the prior fiscal year-end.
LOOKING AHEAD
Our financial position as we enter the new fiscal year is strong, and getting
stronger, which affords us considerable flexibility to take advantage of
opportunities as they arise.
Enhanced computer systems, which we have installed in our stores and
offices, are enabling us to improve our operations and serve our customers
better.
In the pages that follow, we respond to some of the questions asked by
people interested in Bed Bath & Beyond. We thank you, our fellow shareholders,
for your loyal support over the past year. We are all dedicated to making
fiscal 1996, our Twenty-Fifth Anniversary Year, another year of outstanding
growth for our Company.
Sincerely,
/s/ WARREN EISENBERG /s/ LEONARD FEINSTEIN
- - - --------------------- ------------------------
WARREN EISENBERG LEONARD FEINSTEIN
Chairman and Co-Chief President and Co-Chief
Executive Officer Executive Officer
May 1, 1996
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QUESTIONS & ANSWERS
ON THE FOLLOWING PAGES, WE RESPOND TO SOME OF THE QUESTIONS WE ARE ASKED ABOUT
BED BATH & BEYOND.
WHAT CURRENT TRENDS IN RETAILING ARE AFFECTING THE GROWTH OF YOUR BUSINESS?
The U.S. population is getting older and spending more time at home, which
creates tremendous opportunities for our market segment -- upscale domestics and
home furnishings. The overriding trend is that people are more willing to spend
money fixing up or improving their homes to enhance their comfort and
convenience levels. If anything, this trend will intensify as the average age of
the population continues to increase.
OTHER COMPANIES HAVE TRIED TO COPY BED BATH & BEYOND. WHY IS IT SO HARD TO
REPLICATE YOUR OPERATING STYLE AND, MORE IMPORTANTLY, YOUR RESULTS?
Competitors can copy an idea here and there, but try as they may they can't copy
an organization or a culture that we've spent 25 years building and perfecting.
They can duplicate our racetrack layout, for example, which features 11
specialty stores under one roof, but they can't copy the enormous selection
within those 11 specialty stores that makes shopping such a rewarding experience
for our customers. What's more, we operate on a decentralized basis, empowering
and challenging our employees to be creative and entrepreneurial. Even as our
competitors improve, Bed Bath & Beyond continues to get better, widening our
leadership position in the industry.
OPERATING PROFIT
($ IN MILLIONS)
91 92 93 94 95
---- ---- ---- ---- ----
20.0 26.7 36.9 51.7 67.6
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[PHOTO OF BEDDING ENSEMBLE]
YOU'RE THE ONLY PUBLICLY-REPORTING COMPANY IN YOUR SEGMENT OF RETAILING THAT HAS
MANAGED TO SHOW A GOOD PROFIT. WHY DO YOU THINK THAT'S SO?
We've proven year after year that we can offer customers everyday low prices and
still earn an attractive operating margin. One way we accomplish this is through
"merchandising the mix." Store managers in our decentralized organization must
be -- and indeed are -- savvy merchants. They know full well that it's not just
buying and pricing an item that controls gross profit, but selling a better mix
of products that results in the higher margin. We also enhance profitability
through our low cost and expense structure. We ship directly to our stores,
eliminating the need for distribution centers or warehouses. Much of our
inventory is displayed in inexpensive, 10 to 14 feet high fixtures on the
selling floor. We further control overhead expense by maintaining an extremely
lean management structure.
HOW DOES YOUR CUSTOMER SERVICE COMPARE WITH THE REST OF THE INDUSTRY?
Consider this: on any Saturday of the year, you'll find our senior managers
working on the selling floor of our stores, waiting on customers and showing
future store managers what we expect of them. That says a lot, we believe, about
the culture at Bed Bath & Beyond where virtually everyone -- from store
assistants to top managers -- wants to and works diligently to ensure that the
customer is well cared for. This means things like friendly and helpful store
personnel, fast and
[PHOTO OF COFFEE POT]
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[PHOTO OF TOWELS]
convenient checkout lanes and, on the rare occasion when a store doesn't have a
requested item, a pledge to do anything possible to secure it for the customer.
We believe this passion for service clearly sets us apart from most others in
the industry.
HOW HAVE YOU ACHIEVED YOUR OUTSTANDING RESULTS WITH YOUR LOW ADVERTISING BUDGET?
It's true our advertising expenses are unusually low for this industry. Except
to introduce new stores, and except for several multi-store circulars each year,
you won't see us in print, or on TV, or hear about us on the radio. We rely
primarily on word-of-mouth in lieu of advertising. Obviously, this strategy has
worked. Our sales volume keeps growing as people seem to truly enjoy shopping in
our stores. As a result, our nominal advertising expenses have enabled us to
more tightly control costs.
GIVEN YOUR FINANCIAL RESOURCES, ARE YOU PLANNING TO ACCELERATE YOUR STORE
OPENING PROGRAM?
We are exactly where we want to be in terms of growth. Chain-wide, our square
footage at the end of fiscal year 1995 was approximately 3.2 million, an
increase of 37.4% over the prior year. Our plan going forward is to continue to
grow our square footage by at least 30% a year. With a presence in less than
one-third of the country's 112 markets with populations of more than 450,000,
there is obviously tremendous room for expansion. At Bed Bath & Beyond, however,
we absolutely will not open a store unless we have the management talent --
which we groom and promote from within -- available to properly staff it. We
also want to be sure that the corporate infrastructure needed to support our
expansion is firmly in place.
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SHAREHOLDERS' EQUITY
($ IN MILLIONS)
91 92 93 94 95
---- ---- ---- ----- -----
30.9 54.6 77.3 108.9 151.4
WHAT KINDS OF NEW RETAIL OPPORTUNITIES ARE MOST ATTRACTIVE TO YOU? DO YOU HAVE
ANY PLANS TO GO INTERNATIONAL?
We're quite flexible. Because we're a proven success in strip centers, off-price
malls, conventional malls and free-standing buildings, and because we attract
the best customer -- typically an upscale, affluent, sophisticated female
shopper -- we are a very sought after anchor tenant. Increasingly today, doors
are being opened to us as an unconventional anchor tenant in conventional malls.
As for possible international growth, our position is this: though we believe
our format would be successful in other countries, as long as there are so many
opportunities to expand domestically, we will not, in the immediate future at
least, pursue global markets.
WHAT ROLE IS TECHNOLOGY PLAYING IN ENHANCING YOUR BUSINESS?
More and more, integrated computer systems in our stores and offices are helping
us to improve operations, enhance our in-stock position while reducing inventory
investment, control expenses and generally position us for continued growth. In
the Spring of 1995, we completed chain-wide implementation of our new perpetual
inventory system. Coupled with our satellite communications capability (which
links our stores directly to our corporate, administrative and buying offices in
New Jersey and New York), our
[PHOTO OF DINNERWARE]
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[PHOTO OF PILLOWS]
stores now have an on-line order information capability. We also provide our
associates with the real-time inventory and sales data necessary to support
planned sales and customer service activities. Within the next year or so, we
also plan to implement an automated inventory replenishment system to further
control stock levels and reduce operating expenses, and are developing a number
of client-server applications to provide more useful data at the desktop.
IT SEEMS THAT A BROAD RANGE OF COMPETITION IS REGULARLY ENTERING THE HOME GOODS
FIELD. WHAT IMPACT MIGHT THESE NEW ENTRANTS HAVE ON YOUR FUTURE GROWTH?
We've always lived with competition, and managed to do very well in spite
of it. Our competitors not only include department stores, national chains and
other superstore operators, but also category-specific specialty stores which
carry some, but not all of the types of merchandise that we offer. Regardless of
the retailing format, we strongly believe that Bed Bath & Beyond offers a
greater breadth and depth of merchandise -- and customer service -- than do our
competitors. Department stores, for example, typically devote 20,000 square feet
to home furnishings. We offer customers double, triple or even quadruple the
shoppable area. In addition, Bed Bath & Beyond's everyday prices are generally
lower than department store sale prices. We're not so naive to think, however,
that our results over the past 25 years guarantee our success over the next 25
years. For that reason, we're working harder than ever to build a stronger, more
profitable business.
TOTAL ASSETS
($ IN MILLIONS)
1991 55.5
1992 76.7
1993 121.5
1994 176.7
1995 235.8
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated (i) selected
income statement data of the Company expressed as a percentage of net sales and
(ii) the percentage change from the prior year in selected income statement
data:
FISCAL YEAR ENDED
-------------------------------------------------------------------------------------------
PERCENTAGE OF NET SALES PERCENTAGE CHANGE FROM PRIOR YEAR
-------------------------------------------------------------------------------------------
FEBRUARY 25, FEBRUARY 26, FEBRUARY 27, FEBRUARY 25, FEBRUARY 26,
1996 1995 1994 1996 1995
- - - ------------------------------------------------------------------------------------------------------------------------------------
Net sales 100.0% 100.0% 100.0% 36.6% 44.0%
Cost of sales, including buying,
occupancy and indirect costs 58.4 58.2 58.1 37.0 44.2
Gross profit 41.6 41.8 41.9 36.0 43.6
Selling, general and
administrative expenses 30.3 30.0 29.8 38.1 45.1
Operating profit 11.2 11.7 12.1 30.8 40.0
Earnings before provision
for income taxes 11.1 11.6 12.1 31.5 37.7
Net earnings 6.6 6.8 7.2 31.5 37.1
FISCAL 1995 COMPARED WITH
FISCAL 1994
In 1995, the Company expanded store space by 37.4%, from 2,339,000 square
feet at fiscal year-end 1994 to 3,214,000 square feet at fiscal year-end 1995.
The 875,000 square feet increase was the result of opening nineteen new
superstores and expanding two existing stores.
Net sales in 1995 increased $161.0 million to $601.3 million, representing
an increase of 36.6% over the $440.3 million net sales volume of 1994.
Approximately 91% of the increase is attributable to new store net sales and the
balance to an increase in comparable store net sales. The Company estimates that
bed linens accounted for approximately 21% and 20% of net sales during fiscal
1995 and fiscal 1994, respectively. No other individual product category
accounted for 10% or more of net sales during either fiscal year.
Gross profit for 1995 was $250.0 million or 41.6% of net sales compared
with $183.8 million or 41.8% of net sales, a year ago. The decrease in gross
profit as a percentage of net sales was attributable to a number of factors,
including a different mix of sales during fiscal 1995 compared to the mix of
sales during the prior year, and an increase in coupons redeemed associated with
the circular marketing program.
The percentage increase in comparable store net sales was 3.8% in fiscal
1995 compared with 12.0% in fiscal 1994. The slower rate of growth in comparable
store net sales relative to the prior year primarily reflects the general
slowdown in the retail sector.
Net sales per average square foot of store space declined to $217 from $229
in fiscal 1994, due principally to the timing of the significant new store space
added in fiscal 1995.
Selling, general and administrative expenses ("SG&A"), were $182.5 million
or 30.3% of net sales in 1995 compared to $132.1 million (restated to include
franchise fee income) or 30.0% of net sales in 1994. The increase in SG&A as a
percentage of net sales primarily reflects an increase in occupancy costs, which
was partially offset by a decrease in payroll and payroll related items.
Expenses associated with new, relocated or expanded stores are charged to
earnings as incurred.
The costs associated with the Company's computer systems, including
personnel costs, hardware leasing costs and software costs, were approximately
$6.9 million in 1995, $4.8 million in 1994 and $2.9 million in 1993, and the
Company estimates will be approximately $9.6 million in 1996.
Operating profit was $67.6 million in 1995, an increase of $15.9 million or
30.8% from 1994, reflecting primarily the increase in net sales which was
partially offset by increases in cost of sales and SG&A.
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MANAGEMENT'S DISCUSSION AND ANALYSIS, CONTINUED
FISCAL 1994 COMPARED WITH
FISCAL 1993
In 1994, the Company expanded store space by 54.7%, from 1,512,000 square
feet at fiscal year-end 1993 to 2,339,000 square feet at fiscal year-end 1994.
The 827,000 square feet increase was the result of opening sixteen new
superstores and expanding four existing stores.
Net sales in 1994 were $440.3 million, representing an increase of 44.0%
over the $305.8 million net sales volume of 1993. Of the $134.5 million
year-to-year net sales increase, approximately 78% is attributable to new stores
and the balance to an increase in comparable store net sales. The Company
estimates that bed linens accounted for approximately 20% of net sales during
fiscal 1994 and fiscal 1993. During fiscal 1993, towels accounted for 10% of net
sales. No other individual product category accounted for 10% or more of net
sales during either fiscal year.
Gross profit for 1994 was $183.8 million or 41.8% of net sales compared
with $128.0 million or 41.9% of net sales in the prior year. The decrease in
gross profit as a percentage of net sales was primarily attributable to
increases in freight costs and in coupons redeemed associated with the five
circulars that were distributed in 1994 compared with four in the prior year,
which was partially offset by decreases in buying, occupancy and indirect costs.
The percentage increase in comparable store net sales was 12.0% in fiscal
1994 compared with 10.6% in fiscal 1993. The increases in comparable store net
sales can be primarily attributable to store maturation and expansion of the
circular marketing program.
Net sales per average square foot of store space was $229 compared with
$232 in fiscal 1993, due principally to the significant new store space added in
fiscal 1994.
SG&A was $132.1 million or 30.0% of net sales in 1994 compared to $91.1
million or 29.8% of net sales in 1993 (restated to include franchise fee
income). The increase in SG&A as a percentage of net sales reflects increases in
rent expense, and depreciation and amortization, which were partially offset by
a decrease in salary costs.
Operating profit was $51.7 million in 1994, up $14.8 million or 40.0% from
1993, reflecting primarily the increase in net sales which was partially offset
by the increase in SG&A.
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
replacement of existing stores with new, larger stores. In the five year period
from the beginning of fiscal 1991 to the end of fiscal 1995, the chain has grown
from 27 stores to 80 stores. Total square footage grew from 625,000 square feet
at the beginning of fiscal 1991 to 3,214,000 square feet at the end of fiscal
1995.
A major portion of the increase in the Company's net sales during each of
the preceding five years was attributable to new store net sales as
distinguished from increases in comparable store net sales, with new store net
sales accounting for approximately 91%, 78%, 75%, 70% and 96% of the increase in
net sales in fiscal 1995, 1994, 1993, 1992 and 1991, respectively.
The Company intends to continue its expansion program and currently
anticipates that in fiscal 1996 it will open approximately 24 to 26 new stores
(see details under "Liquidity and Capital Resources" below). The Company
believes that a predominant portion of any increase in the Company's net sales
in 1996 will continue to be attributable to new store net sales. Accordingly,
the continued growth of the Company is dependent, in large part, upon the
Company's ability to execute its expansion program successfully, of which there
can be no assurance.
LIQUIDITY AND CAPITAL RESOURCES
The Company has been able to finance both its normal operations and its
expansion program principally through internally generated funds during the
preceding five years. For the foreseeable future, the Company intends to retain
all earnings for use in the operation and expansion of its business.
The Company's merchandise inventory has grown from $75.0 million at the end
of 1993 to $108.4 million at the end of 1994, and to $148.4 million at the end
of 1995. In each of the fiscal years, the increase in merchandise inventories
was attributable to the addition of new store space.
The Company's working capital increased from $54.4 million at the end of
1993 to $71.9 million at the end of 1994, and to $87.7 million at the end of
1995. The increase between the end of 1994 and the end of 1995 was primarily
reflected in an increase in merchandise inventories, which was partially offset
by increases in accounts payable and accrued expenses and other current
liabilities. The increase between the end of 1993 and the end of 1994 was
primarily reflected in an increase in merchandise inventories and cash and cash
equivalents, which was partially offset by increases in accounts payable and
accrued expenses and other current liabilities.
The Company's expansion program requires the Company to make capital
expenditures for furniture and fixtures and leasehold improvements on an ongoing
basis. The Company's total capital expenditures were $24.5 million, $24.5
million and $19.7 million during 1995, 1994 and 1993, respectively. The
Company's capital expenditures included $150,000 and $233,000 for lease
purchases in 1995 and 1993, respectively. No lease purchases were made in 1994.
Under a credit agreement (the "Credit Agreement") concluded in November
1994, and subsequently amended in October 1995, the company may borrow up to
$45.0 million under a revolving credit
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commitment for loans and letters of credit. The Credit Agreement matures in
October 1998, at which time any revolving credit loans outstanding may be
converted to a term loan payable in twelve quarterly installments maturing in
October 2001.
The Credit Agreement contains certain covenants which, among other things,
place limitations on payment of dividends, capital expenditures and certain
expenses. Additionally, there are restrictions on additional borrowings, and a
requirement that the Company maintain certain financial ratios. The Company does
not believe that any of these covenants have materially affected its business or
will affect its expansion program as currently planned.
The Company borrowed under the Credit Agreement primarily in order to meet
seasonal cash requirements as well as capital expenditures and inventory
requirements for new store space opened during the year. The outstanding amounts
of indebtedness under the Credit Agreement were $5.0 million, $16.8 million and
$13.3 million and the weighted average interest rates on such indebtedness were
7.27%, 6.96% and 5.41% at the end of 1995, 1994 and 1993, respectively. During
fiscal 1995, the outstanding amount of indebtedness did not exceed $30.1
million.
The Company believes that during fiscal 1996, internally generated funds,
supplemented by borrowings under the Credit Agreement, will be sufficient to
fund both its normal operations and its expansion program.
As of March 22, 1996, the Company had already leased sites for sixteen new
superstores planned for opening in fiscal 1996, including four new stores
already opened in Independence, Missouri (the Company's first store in that
state); Northridge, California; Alpharetta, Georgia; and Houston, Texas. Other
new stores expected to open during fiscal 1996 will be located in Ontario and
Tustin, California; Denver, Colorado; Atlanta, Georgia; Rockford, Illinois;
Burlington, Massachusetts; Munsey Park, New York; Canton, Ohio; Memphis,
Tennessee; and Charlottesville, Chesapeake and Virginia Beach, Virginia.
Approximate aggregate costs for the sixteen leased stores are $38.5 million
for merchandise inventories, $11.0 million for furniture and fixtures and
leasehold improvements, and $3.9 million for preopening expenses (which will be
expensed as incurred). In addition to the foregoing sixteen locations, the
Company expects to open an additional eight to ten locations. The costs that the
Company is expected to incur in connection with the anticipated opening of other
superstores for which sites have not yet been leased, cannot presently be
determined.
RECENT ACCOUNTING PRONOUNCEMENTS
In October 1995, Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" (SFAS 123) was issued. SFAS 123
encourages companies to adopt a fair value based method of accounting for
stock-based compensation plans in place of the intrinsic value based method
provided for by Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" (APB 25). Companies which continue to apply the
provisions of APB 25 must make pro forma disclosures in the notes to their
financial statements of net income and earnings per share as if the fair value
based method of accounting defined in SFAS 123 had been applied. The Company
plans to adopt SFAS 123 in fiscal 1996 on a pro forma disclosure basis.
In March 1995, Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of" (SFAS 121) was issued. SFAS 121 establishes accounting standards
for the impairment of long-lived assets, certain identifiable intangibles and
goodwill related to those assets to be held and used, or to be disposed of. The
Company does not believe the adoption of SFAS 121 in fiscal year 1996 will have
a significant impact on the Company's financial condition or results of
operations.
FORWARD LOOKING STATEMENTS
This Annual Report contains forward looking statements within the meaning
of Section 21E of the Securities Exchange Act of 1934, as amended. The Company's
actual results of operations 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 beyond the Company's control. Such factors
include, without limitation: overall economic conditions, changes in the retail
environment, demographics and other macroeconomic factors that may impact the
level of spending for the types of merchandise sold by the Company; unusual
weather patterns; pricing pressures; competition from existing and potential
competitors; the availability of trained qualified management personnel to
support the Company's expansion; and the cost of labor, merchandise, and other
costs and expenses.
INFLATION AND SEASONALITY
The Company does not believe that its operating results have been
materially affected by inflation during the three preceding years. There can be
no assurance, however, that the Company's operating results will not be affected
by inflation in the future.
The Company's business 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.
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CONSOLIDATED BALANCE SHEETS
BED BATH & BEYOND INC. AND SUBSIDIARIES
FEBRUARY 25, FEBRUARY 26,
(IN THOUSANDS, EXCEPT SHARE DATA) 1996 1995
=================================================================================================================================
ASSETS
Current assets:
Cash and cash equivalents $ 10,267 $ 6,463
Merchandise inventories 148,383 108,388
Prepaid expenses and other current assets 1,630 3,160
- - - ---------------------------------------------------------------------------------------------------------------------------------
Total current assets 160,280 118,011
- - - ---------------------------------------------------------------------------------------------------------------------------------
Property and equipment, net (note 2) 66,635 52,201
Other assets (notes 5 and 6) 8,895 6,466
- - - ---------------------------------------------------------------------------------------------------------------------------------
$235,810 $176,678
=================================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 39,025 $ 27,503
Accrued expenses and other current liabilities (note 3) 26,947 14,824
Income taxes payable 6,581 3,782
- - - ---------------------------------------------------------------------------------------------------------------------------------
Total current liabilities 72,553 46,109
- - - ---------------------------------------------------------------------------------------------------------------------------------
Long-term debt (note 4) 5,000 16,800
Deferred rent 6,811 4,830
- - - ---------------------------------------------------------------------------------------------------------------------------------
84,364 67,739
- - - ---------------------------------------------------------------------------------------------------------------------------------
Commitments and contingencies (notes 4, 7 and 9)
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 - 100,000,000 shares; issued
and outstanding - February 25, 1996, 68,067,972 shares and
February 26, 1995, 67,768,882 shares 681 339
Additional paid-in capital 46,254 43,548
Retained earnings 104,511 65,052
- - - ---------------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 151,446 108,939
- - - ---------------------------------------------------------------------------------------------------------------------------------
$235,810 $176,678
=================================================================================================================================
See accompanying Notes to Consolidated Financial Statements.
12
15
CONSOLIDATED STATEMENTS OF EARNINGS
BED BATH & BEYOND INC. AND SUBSIDIARIES
FISCAL YEAR ENDED
-----------------------------------------------------------------
FEBRUARY 25, FEBRUARY 26, FEBRUARY 27,
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) 1996 1995 1994
===============================================================================================================================
Net sales $ 601,252 $ 440,261 $ 305,767
Cost of sales, including buying, occupancy
and indirect costs 351,216 256,442 177,795
- - - -------------------------------------------------------------------------------------------------------------------------------
Gross profit 250,036 183,819 127,972
Selling, general and administrative expenses 182,451 132,134 91,066
- - - -------------------------------------------------------------------------------------------------------------------------------
Operating profit 67,585 51,685 36,906
Interest (expense) income, net (705) (816) 34
- - - -------------------------------------------------------------------------------------------------------------------------------
Earnings before provision for
income taxes 66,880 50,869 36,940
Provision for income taxes (note 5) 27,421 20,856 15,053
- - - -------------------------------------------------------------------------------------------------------------------------------
Net earnings $ 39,459 $ 30,013 $ 21,887
===============================================================================================================================
Net earnings per share $ .57 $ .43 $ .32
===============================================================================================================================
Weighted average shares outstanding 69,412,170 69,138,766 68,820,980
===============================================================================================================================
See accompanying Notes to Consolidated Financial Statements.
13
16
CONSOLIDATED STATEMENTS OF CHANGES IN
SHAREHOLDERS' EQUITY
BED BATH & BEYOND INC. AND SUBSIDIARIES
COMMON STOCK ADDITIONAL
------------ PAID-IN RETAINED
(IN THOUSANDS) SHARES AMOUNT CAPITAL EARNINGS TOTAL
===================================================================================================================
Balance at February 28, 1993 67,500 $169 $41,322 $ 13,152 $ 54,643
Net earnings 21,887
Shares sold under employee stock option
plan (note 9) 92 775
Reclassification of additional paid-in
capital to common stock in connection
with the 2 for 1 stock split (note 1 (i)) 169 (169)
- - - -------------------------------------------------------------------------------------------------------------------
Balance at February 27, 1994 67,592 338 41,928 35,039 77,305
Net earnings 30,013
Shares sold under employee stock option
plan (note 9) 177 1 1,620
- - - -------------------------------------------------------------------------------------------------------------------
Balance at February 26, 1995 67,769 339 43,548 65,052 108,939
Net earnings 39,459
Shares sold under employee stock option
plan (note 9) 299 2 3,046
Reclassification of additional paid-in
capital to common stock in connection
with the 2 for 1 stock split (note 1 (i)) 340 (340)
- - - -------------------------------------------------------------------------------------------------------------------
BALANCE AT FEBRUARY 25, 1996 68,068 $681 $46,254 $104,511 $151,446
===================================================================================================================
See accompanying Notes to Consolidated Financial Statements.
14
17
CONSOLIDATED STATEMENTS OF CASH FLOWS
BED BATH & BEYOND INC. AND SUBSIDIARIES
FISCAL YEAR ENDED
----------------------------------------
FEBRUARY 25, FEBRUARY 26, FEBRUARY 27,
(IN THOUSANDS) 1996 1995 1994
======================================================================================================
Cash Flows from Operating Activities:
Net earnings $ 39,459 $ 30,013 $ 21,887
Adjustments to reconcile net earnings to net
cash provided by (used in) operating activities:
Depreciation and amortization 9,902 7,193 4,200
Loss from disposal of property and equipment 192 29 288
(Increase) decrease in assets:
Merchandise inventories (39,995) (33,406) (31,893)
Prepaid expenses and other current assets 1,530 1,163 (3,651)
Other assets (2,429) (1,875) (1,438)
Increase (decrease) in liabilities:
Accounts payable 11,522 10,498 7,201
Accrued expenses and other current liabilities 12,123 5,673 3,450
Income taxes payable 2,799 2,393 (2,461)
Deferred rent 1,981 1,512 662
- - - ------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities 37,084 23,193 (1,755)
- - - ------------------------------------------------------------------------------------------------------
Cash Flows from Investing Activities:
Capital expenditures-leasehold purchases (150) -- (233)
Capital expenditures-leasehold improvements and
furniture and fixtures (24,378) (24,523) (19,510)
- - - ------------------------------------------------------------------------------------------------------
Net cash used in investing activities (24,528) (24,523) (19,743)
- - - ------------------------------------------------------------------------------------------------------
Cash Flows from Financing Activities:
Proceeds from long-term debt 55,060 64,500 35,250
Repayment of long-term debt (66,860) (61,000) (21,950)
Proceeds from exercise of stock options 3,048 1,621 775
- - - ------------------------------------------------------------------------------------------------------
Net cash (used in) provided by financing activities (8,752) 5,121 14,075
- - - ------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 3,804 3,791 (7,423)
Cash and cash equivalents:
Beginning of period 6,463 2,672 10,095
- - - ------------------------------------------------------------------------------------------------------
End of period $ 10,267 $ 6,463 $ 2,672
======================================================================================================
See accompanying Notes to Consolidated Financial Statements.
15
18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RELATED MATTERS
A. PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
Bed Bath & Beyond Inc. and its subsidiaries, all of which are wholly owned.
All significant intercompany balances and transactions have been eliminated
in consolidation.
B. FISCAL YEAR
The Company's fiscal year is the 52 or 53 week period ending the Sunday
nearest February 28. Fiscal years 1995, 1994 and 1993 (all 52 week periods)
ended on February 25, 1996, February 26, 1995 and February 27, 1994,
respectively.
C. CASH EQUIVALENTS
The Company considers all highly liquid instruments purchased with maturities
of three months or less to be cash equivalents.
D. MERCHANDISE INVENTORIES
Merchandise inventories are stated at the lower of cost or market, determined
by means of the retail inventory method of accounting.
E. PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation of furniture,
fixtures and equipment is computed primarily by the straight-line method over
the estimated useful lives of the assets, generally five to ten years. Leasehold
costs are amortized by the straight-line method over the life of the lease and
leasehold improvements are amortized by the straight-line method over the lesser
of their estimated useful life or the life of the lease.
The cost of maintenance and repairs is charged to earnings as incurred;
significant renewals and betterments are capitalized. Maintenance and repairs
amounted to $6.9 million, $4.7 million and $3.1 million for fiscal 1995, 1994
and 1993, respectively.
F. PREOPENING EXPENSES
Expenses associated with new, relocated or expanded stores are charged to
earnings as incurred.
G. OCCUPANCY COSTS
The Company accounts for scheduled rent increases contained in its leases on
a straight-line basis over the noncancelable lease term. At February 25, 1996
and February 26, 1995, the accompanying consolidated balance sheets include
deferred rent liabilities of $6.8 million and $4.8 million, respectively,
relating to such scheduled rent increases.
H. INCOME TAXES
The Company files a consolidated Federal income tax return. Separate state
income tax returns are filed with each state in which the Company conducts
business.
Effective March 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS No. 109").
The cumulative effect of the adoption of SFAS No. 109 was not material to the
Company's consolidated financial statements and, therefore, not presented
separately.
Under the asset and liability method of SFAS No. 109, 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. Under SFAS No.
109, the effect on deferred tax assets and liabilities of a change in tax rates
is recognized in earnings in the period that includes the enactment date.
I. STOCK SPLITS
On June 7, 1993, the Board of Directors of the Company approved a two-for-one
split of the Company's common stock in the form of a 100% stock dividend. The
stock split was distributed on July 8, 1993, to shareholders of record on June
21, 1993.
On March 28, 1996, the Board of Directors of the Company approved a
two-for-one split of the Company's common stock in the form of a 100% stock
dividend. The stock split was distributed on April 30, 1996, to shareholders of
record on April 10, 1996.
Share and per share data have been adjusted to give effect to the stock
splits.
16
19
J. EARNINGS PER SHARE
Earnings per share is calculated using the weighted average shares and
dilutive common equivalent shares (stock options) outstanding during the period.
K. FAIR VALUE OF FINANCIAL INSTRUMENTS
In fiscal 1994, the Company adopted SFAS No. 107 "Disclosures about Fair
Value of Financial Instruments" which requires all entities to disclose the fair
value of financial instruments for which it is practicable to estimate fair
value.
The Company's financial instruments include cash and cash equivalents,
accounts payable, accrued expenses and other current liabilities, and long-term
debt. The book value of cash and cash equivalents, accounts payable, and accrued
expenses and other current liabilities are representative of their fair values
due to the short-term maturity of these instruments. The book value of the
Company's long-term debt is considered to approximate its fair value, based on
current market rates and conditions.
L. USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles (GAAP) requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities as of the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates.
2. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
FEBRUARY 25, FEBRUARY 26,
(IN THOUSANDS) 1996 1995
================================================================================
Furniture, fixtures and equipment $ 47,495 $ 33,505
Leasehold improvements 43,507 33,729
Leasehold purchases 4,331 4,181
- - - --------------------------------------------------------------------------------
95,333 71,415
Less: Accumulated depreciation and
amortization (28,698) (19,214)
- - - --------------------------------------------------------------------------------
$ 66,635 $ 52,201
================================================================================
Depreciation and amortization expense was $9.9 million, $7.2 million and $4.2
million for fiscal 1995, 1994 and 1993, respectively.
3. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities consist of the following:
FEBRUARY 25, FEBRUARY 26,
(IN THOUSANDS) 1996 1995
================================================================================
Sales and payroll taxes payable $ 4,934 $ 2,989
Merchandise credits 2,945 2,044
Other 19,068 9,791
- - - --------------------------------------------------------------------------------
$26,947 $14,824
================================================================================
4. LONG-TERM DEBT
Under a credit agreement (the "Credit Agreement") concluded in November 1994,
and subsequently amended in October 1995, the Company may borrow up to $45.0
million under a revolving credit commitment for loans and letters of credit. The
Credit Agreement matures in October 1998, at which time any revolving credit
loans outstanding may be converted to a term loan payable in twelve quarterly
installments maturing in October 2001. Interest on all borrowing is determined
based upon several alternative rates as stipulated in the Credit Agreement.
During fiscal 1995, 1994 and 1993, interest rates on outstanding debt ranged
from 5.92% to 9.00%, 5.00% to 9.00% and 4.88% to 6.25%, respectively. As of
February 25, 1996, there was $5.0 million in outstanding borrowings and
approximately $125,000 in outstanding letters of credit.
The Credit Agreement contains certain covenants which, among other things,
place limitations on payment of dividends, capital expenditures and certain
expenses; restrict additional borrowings; and require maintenance of certain
financial ratios.
Under the terms of these covenants approximately $20.0 million was available
for the payment of dividends at February 25, 1996.
17
20
5. PROVISION FOR INCOME TAXES
The components of the provision for income taxes are as follows:
FISCAL YEARS
--------------------------------------
(IN THOUSANDS) 1995 1994 1993
================================================================================
Historical income taxes:
Current:
Federal $22,383 $17,156 $13,019
State and local 6,901 5,410 3,459
- - - --------------------------------------------------------------------------------
29,284 22,566 16,478
- - - --------------------------------------------------------------------------------
Deferred:
Federal (1,635) (1,557) (1,244)
State and local (228) (153) (181)
- - - --------------------------------------------------------------------------------
(1,863) (1,710) (1,425)
- - - --------------------------------------------------------------------------------
Income taxes $27,421 $20,856 $15,053
================================================================================
Included in other assets are deferred income taxes which reflect the net tax
effects of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income tax
purposes. The significant components of the Company's deferred tax assets
consist of the following:
FEBRUARY 25, FEBRUARY 26,
(IN THOUSANDS) 1996 1995
================================================================================
Deferred tax assets:
Deferred rent $2,816 $2,028
Inventories 2,679 1,870
Other 1,200 935
- - - --------------------------------------------------------------------------------
Deferred tax assets $6,695 $4,833
================================================================================
Reconciliations of the Federal statutory income tax rate to the effective tax
rates are as follows:
FISCAL YEARS
----------------------------------
(IN THOUSANDS) 1995 1994 1993
================================================================================
Federal statutory income tax rate 35.00% 35.00% 35.00%
State income taxes, net of
Federal tax benefit 6.48 6.72 5.77
Other (.48) (.72) (.02)
- - - --------------------------------------------------------------------------------
Effective tax rate 41.00% 41.00% 40.75%
================================================================================
6. TRANSACTIONS AND BALANCES WITH RELATED PARTIES
a. The Company has an interest in certain life insurance policies on the
lives of its Chairman and President. The beneficiaries of these policies are
related to the aforementioned individuals. The Company's interest in these
policies is equivalent to the net premiums paid by the Company. At February 25,
1996 and February 26, 1995, other assets include $1.8 million and $1.3 million,
respectively, representing the Company's interest in the life insurance
policies.
b. The Company obtains certain payroll services from a related party. The
Company paid fees for such services of $161,000, $121,000 and $95,000 for fiscal
years 1995, 1994 and 1993, respectively.
c. The Company made charitable contributions to the Mitzi and Warren
Eisenberg Family Foundation, Inc. (the "Eisenberg Foundation") and the Feinstein
Family Foundation, Inc. (the "Feinstein Foundation") in the aggregate amounts of
$190,000, $179,000 and $115,000 for fiscal 1995, 1994 and 1993, respectively.
The Eisenberg Foundation and the Feinstein Foundation are each not-for-profit
corporations of which Messrs. Eisenberg and Feinstein and their family members
are the trustees and officers.
7. LEASES
The Company leases retail stores, as well as warehouses, office facilities,
and equipment under agreements expiring at various dates through 2013. Certain
leases provide for contingent rents (based upon store sales exceeding stipulated
amounts), scheduled rent increases and renewal options ranging from five to
fifteen years. The Company is obligated under a majority of the leases to pay
for taxes, insurance, and common area maintenance charges.
18
21
As of February 25, 1996, future minimum lease payments under noncancelable
operating leases are as follows:
FISCAL YEAR (IN THOUSANDS) AMOUNTS
================================================================================
1996 $ 40,140
1997 38,648
1998 37,511
1999 35,900
2000 34,814
Thereafter 226,273
- - - --------------------------------------------------------------------------------
Total minimum lease payments $413,286
================================================================================
As of March 22, 1996, the Company had executed leases for sixteen stores
planned for opening in fiscal 1996.
Expenses for all operating leases were $37.3 million, $26.1 million and $17.5
million for fiscal years 1995, 1994 and 1993, respectively.
8. EMPLOYEE BENEFIT PLAN
Effective January 1, 1991, the Company established a defined contribution
401(k) savings plan (the "Plan") covering all eligible employees. Participants
may defer between 1% and 15% of annual pre-tax compensation not to exceed
$9,500, $9,240 and $9,240 for calendar years 1996, 1995 and 1994, respectively;
the Company has an option to contribute an amount as determined by the Board of
Directors. In addition, each participant may elect to make voluntary, non-tax
deductible contributions in excess of the pre-tax compensation limit up to 15%
of compensation. As of February 25, 1996, the Company has made no contributions
to the Plan.
9. EMPLOYMENT AGREEMENTS AND STOCK OPTION PLAN
A. EMPLOYMENT AGREEMENTS
Under terms of employment agreements with its Chairman and President
extending through June 1997, the Company is required to pay each a base salary
(which may be increased by the Board of Directors) of $750,000 per annum. The
agreements also provide for other terms and conditions of employment, including
termination payments.
B. STOCK OPTION PLAN
The 1992 Stock Option Plan (the "Stock Option Plan"), provides for the
granting of options to purchase not more than an aggregate of 5,600,000 shares
of the Company's common stock, subject to adjustment under certain
circumstances. Some or all of such options may be "incentive stock options"
within the meaning of the Internal Revenue Code of 1986. Options have been
granted at market value and are exercisable at a rate of 20% per year over a
five-year period commencing with the date of grant, or one or two years
thereafter.
The following table summarizes stock option transactions:
NUMBER OF OPTION PRICE
SHARES PER SHARE
================================================================================
Balance at February 28, 1993 1,855,800 $ 4.13 -$ 7.94
Options granted 1,015,400 7.38 - 16.38
Options exercised (91,770) 4.13 - 6.00
Options canceled (136,920) 4.25 - 15.38
- - - --------------------------------------------------------------------------------
Balance at February 27, 1994 2,642,510 4.13 - 16.38
- - - --------------------------------------------------------------------------------
Options granted 848,800 12.19 - 16.00
Options exercised (177,080) 4.13 - 11.00
Options canceled (201,140) 4.25 - 15.88
- - - --------------------------------------------------------------------------------
Balance at February 26, 1995 3,113,090 4.13 - 16.38
- - - --------------------------------------------------------------------------------
Options granted 1,121,500 9.47 - 20.03
Options exercised (299,090) 4.13 - 16.38
Options canceled (279,640) 4.25 - 15.88
- - - --------------------------------------------------------------------------------
Balance at February 25, 1996 3,655,860 $ 4.13 -$20.03
================================================================================
Options exercisable
at February 25, 1996 679,540 $ 4.13 -$16.38
================================================================================
The stock option committees appointed pursuant to the Stock Option Plan
determine the number of shares and the option price per share for any additional
options issued under the Stock Option Plan.
10. SUPPLEMENTAL CASH FLOW INFORMATION
The Company paid income taxes of $25.2 million, $19.5 million and $18.6
million in fiscal 1995, 1994 and 1993, respectively.
The Company also paid interest of $991,000, $823,000 and $103,000 in fiscal
1995, 1994 and 1993, respectively.
19
22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
11. SUMMARY OF QUARTERLY RESULTS (UNAUDITED)
FISCAL 1995 QUARTER ENDED
----------------------------------------------------------
MAY 28, AUGUST 27, NOVEMBER 26, FEBRUARY 25,
(IN THOUSANDS, EXCEPT PER SHARE DATA) 1995 1995 1995 1996
=======================================================================================================
Net sales $113,452 $150,110 $161,789 $175,901
Gross profit 46,864 62,224 66,944 74,004
Operating profit 9,787 18,936 17,101 21,761
Earnings before provision
for income taxes 9,594 18,602 16,959 21,725
Provision for income taxes 3,934 7,627 6,953 8,907
Net earnings $ 5,660 $ 10,975 $ 10,006 $ 12,818
Net earnings per share $ .08 $ .16 $ .14 $ .19
FISCAL 1994 QUARTER ENDED
----------------------------------------------------------
MAY 29, AUGUST 28, NOVEMBER 27, FEBRUARY 26,
(IN THOUSANDS, EXCEPT PER SHARE DATA) 1994 1994 1994 1995
=======================================================================================================
Net sales $ 85,853 $111,535 $115,024 $127,849
Gross profit 35,503 46,503 47,821 53,992
Operating profit 7,955 14,820 13,071 15,839
Earnings before provision
for income taxes 7,833 14,660 12,799 15,577
Provision for income taxes 3,212 6,010 5,248 6,386
Net earnings $ 4,621 $ 8,650 $ 7,551 $ 9,191
Net earnings per share $ .07 $ .12 $ .11 $ .13
=======================================================================================================
INDEPENDENT AUDITORS' REPORT
[KPMG LOGO]
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF BED BATH & BEYOND INC.:
We have audited the accompanying consolidated balance sheets of Bed Bath &
Beyond Inc. and subsidiaries as of February 25, 1996 and February 26, 1995, and
the related consolidated statements of earnings, changes in shareholders' equity
and cash flows for each of the fiscal years in the three-year period ended
February 25, 1996. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Bed Bath &
Beyond Inc. and subsidiaries as of February 25, 1996 and February 26, 1995, and
the results of their operations and their cash flows for each of the fiscal
years in the three-year period ended February 25, 1996 in conformity with
generally accepted accounting principles.
New York, New York Sig. KPMG PEAT MARWICK LLP
March 22, 1996
20
23
CORPORATE DATA
EXECUTIVE OFFICERS & DIRECTORS
Warren Eisenberg
Chairman, Co-Chief Executive Officer and Director
Leonard Feinstein
President, Co-Chief Executive Officer and Director
Ronald Curwin
Chief Financial Officer and Treasurer
Klaus Eppler
Director - Partner, Proskauer Rose Goetz & Mendelsohn LLP, New York, New York
Robert S. Kaplan
Director - General Partner, Goldman, Sachs & Co., New York, New York
Robert J. Swartz
Director - Independent Consultant
KEY MANAGERS
Matthew Fiorilli
Director of Store Operations - Eastern Region
Harold Kislik
General Merchandise Manager - Domestics Merchandise
Phillip Kornbluh
Director of Store Planning
Jonathan Rothstein
General Merchandise Manager - Home Furnishings
Arthur Stark
Director of Store Operations - Western Region
Steven H. Temares
Director of Real Estate and General Counsel
CORPORATE HEADQUARTERS
Bed Bath & Beyond Inc.
715 Morris Avenue
Springfield, New Jersey 07081
Telephone: 201/379-1520
SHAREHOLDER INFORMATION
You may obtain, at no cost, copies of Bed Bath & Beyond Inc.'s 1995 Form 10-K
report (excluding exhibits) and quarterly reports by writing to:
Chief Financial Officer and Treasurer
Bed Bath & Beyond Inc.
650 Liberty Avenue
Union, New Jersey 07083
Telephone: 908/688-0888
Fax: 908/810-8813
STOCK LISTING
The Common Stock of Bed Bath & Beyond Inc. is traded through the NASDAQ National
Market System under the symbol "BBBY."
STOCK ACTIVITY
This table sets forth by fiscal quarter the high and low reported sales prices
of the Company's Common Stock on the NASDAQ National Market System during fiscal
1994 and fiscal 1995.
HIGH LOW
========================================================
FISCAL 1994
First Quarter $16 3/8 $11 1/2
Second Quarter 16 1/2 12 1/2
Third Quarter 15 3/8 11 3/8
Fourth Quarter 15 3/4 12 7/8
FISCAL 1995
First Quarter 13 1/4 9
Second Quarter 16 1/2 10 5/16
Third Quarter 18 7/16 12 1/2
Fourth Quarter 22 7/16 15
At April 10, 1996, there were approximately 380 shareholders of record. This
number excludes individual shareholders holding stock under nominee security
position listings.
TRANSFER AGENT
The Transfer Agent should be contacted on questions of change of address, name
or ownership, lost certificates and consolidation of accounts.
Chemical Mellon Shareholder Services
Overpeck Centre
85 Challenger Road
Ridgefield Park, New Jersey 07660
Telephone: 800/851-9677
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
345 Park Avenue
New York, New York 10154
ANNUAL MEETING
The Annual Meeting of Shareholders will be held at 9:00 A.M. Thursday, June 27,
1996, at the Headquarters Plaza Hotel, Three Headquarters Plaza, Morristown, New
Jersey.
Designed and produced by Frankston Associates
24
[BED BATH & BEYOND LOGO]
715 MORRIS AVENUE
SPRINGFIELD, NEW JERSEY 07081
201/379-1520