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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to _____________
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 X No
NUMBER OF SHARES OUTSTANDING OF THE ISSUER'S COMMON STOCK:
CLASS OUTSTANDING AT AUGUST 30, 1997
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Common Stock - $0.01 par value 68,868,588
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INDEX
PAGE NO.
PART I - FINANCIAL INFORMATION
Consolidated Balance Sheets
As of August 30, 1997 and March 1, 1997 3
Consolidated Statements of Earnings
For the Three Month and Six Month Periods Ended
August 30, 1997 and August 25, 1996 4
Consolidated Statements of Cash Flows
For the Six Month Periods Ended
August 30, 1997 and August 25, 1996 5
Notes 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)
August 30, March 1,
1997 1997
---- ----
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 49,162 $ 38,765
Merchandise inventories 257,717 187,185
Prepaid expenses and other current assets 2,452 1,605
-------- --------
Total current assets 309,331 227,555
-------- --------
Property and equipment, net 99,686 88,332
Other assets 16,004 14,038
-------- --------
$425,021 $329,925
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 93,491 $ 47,821
Accrued expenses and other current liabilities 62,424 47,923
Income taxes payable 9,743 10,132
-------- --------
Total current liabilities 165,658 105,876
-------- --------
Deferred rent 11,370 9,688
-------- --------
177,028 115,564
-------- --------
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 - 150,000,000 shares;
issued and outstanding - August 30, 1997,
68,868,588 shares and March 1, 1997,
68,603,022 shares 689 686
Additional paid-in capital 58,424 54,149
Retained earnings 188,880 159,526
-------- --------
Total shareholders' equity 247,993 214,361
-------- --------
$425,021 $329,925
======== ========
See accompanying Notes 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 Six Months Ended
------------------ ----------------
August 30, August 25, August 30, August 25,
1997 1996 1997 1996
---- ---- ---- ----
Net sales $ 266,895 $ 203,503 $ 480,557 $ 363,161
Cost of sales, including buying,
occupancy and indirect costs 157,395 119,566 283,699 213,436
----------- ----------- ----------- -----------
Gross profit 109,500 83,937 196,858 149,725
Selling, general and administrative expenses 77,730 58,903 149,278 112,030
----------- ----------- ----------- -----------
Operating profit 31,770 25,034 47,580 37,695
Interest income 504 37 1,141 179
----------- ----------- ----------- -----------
Earnings before provision for income taxes 32,274 25,071 48,721 37,874
Provision for income taxes 12,827 9,966 19,367 15,055
----------- ----------- ----------- -----------
Net earnings $ 19,447 $ 15,105 $ 29,354 $ 22,819
=========== =========== =========== ===========
Net earnings per share $ 0.27 $ 0.21 $ 0.41 $ 0.32
=========== =========== =========== ===========
Weighted average shares outstanding 71,117,266 70,439,687 70,914,456 70,464,644
=========== =========== =========== ===========
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)
Six Months Ended
----------------
August 30, August 25,
1997 1996
---- ----
Cash Flows from Operating Activities:
Net earnings $ 29,354 $ 22,819
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 8,415 6,132
Increase in assets:
Merchandise inventories (70,532) (41,644)
Prepaid expenses and other current assets (847) (716)
Other assets (1,966) (2,046)
Increase (decrease) in liabilities:
Accounts payable 45,670 20,255
Accrued expenses and other current liabilities 14,501 11,026
Income taxes payable (389) 47
Deferred rent 1,682 1,290
-------- --------
Net cash provided by operating activities 25,888 17,163
-------- --------
Cash Flows from Investing Activities:
Capital expenditures (19,769) (13,938)
-------- --------
Net cash used in investing activities (19,769) (13,938)
-------- --------
Cash Flows from Financing Activities:
Net decrease in long-term debt -- (5,000)
Proceeds from exercise of stock options 4,278 5,267
-------- --------
Net cash provided by financing activities 4,278 267
-------- --------
Net increase in cash and cash equivalents 10,397 3,492
Cash and cash equivalents:
Beginning of period 38,765 10,267
-------- --------
End of period $ 49,162 $ 13,759
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See accompanying Notes to Consolidated Financial Statements.
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BED BATH & BEYOND INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1) BASIS OF PRESENTATION
The accompanying consolidated financial statements, except for the March 1, 1997
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 August 30, 1997 and March 1, 1997 and the results of their
operations for the three month and six month periods ended August 30, 1997 and
August 25, 1996, respectively, and cash flows for the six month periods ended
August 30, 1997 and August 25, 1996. 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 March 1, 1997 for additional disclosures, including a
summary of the Company's significant accounting policies.
2) CLASSIFICATION OF THE BOARD OF DIRECTORS
In June 1997, the Company's Certificate of Incorporation was amended to provide
for the classification of the Board of Directors into three separate classes.
3) RECENT ACCOUNTING PRONOUNCEMENT
In February 1997, Statement of Financial Accounting Standards No. 128,
"Earnings per Share" (SFAS No. 128), was issued. SFAS No. 128 simplifies the
standards for computing earnings per share and makes the United States
standards for computing earnings per share more comparable to international
standards. SFAS No. 128 requires presentation of "basic" earnings per share
(which excludes dilution) and "diluted" earnings per share. SFAS No. 128 is
effective for financial statements issued for periods ending after December 15,
1997 and requires restatement of all prior period earnings per share presented.
The Company will adopt SFAS No. 128 before its fiscal year end, February 28,
1998, and does not believe the adoption will have a material impact on the
Company's reported earnings per share.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Three Months August 30, 1997 vs. Three Months August 25, 1996
Net sales for the second quarter ended August 30, 1997 were $266.9 million, an
increase of $63.4 million or approximately 31.2% over net sales of $203.5
million for the corresponding quarter last year. Approximately 81.8% of the
increase was attributable to new store net sales. The increase in comparable
store net sales in the second quarter of 1997 was approximately 5.8%. The
increase in comparable 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 second quarter were
attributable to sales of domestics merchandise and home furnishings merchandise,
respectively.
Gross profit for the second quarter of 1997 was $109.5 million or 41.0% of net
sales compared with $83.9 million or 41.2% of net sales during the second
quarter of 1996. 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
the second quarter of 1997 compared to the mix of sales during the second
quarter of 1996, and an increase in coupons redeemed associated with the
Company's marketing program.
Selling, general and administrative expenses ("SG&A") were $77.7 million in the
second quarter of 1997 compared with $58.9 million in the same quarter last year
and as a percentage of net sales were 29.1% and 28.9%, respectively. The
increase in SG&A, as a percentage of net sales, primarily reflects increases in
occupancy costs, which were partially offset by a decrease in payroll and
payroll related items.
Operating profit in the second quarter of 1997 increased to $31.8 million from
$25.0 million in the second quarter of 1996, reflecting primarily the increase
in net sales which was partially offset by increases in cost of sales and SG&A.
Six Months August 30, 1997 vs. Six Months August 25, 1996
Net sales for the six months ended August 30, 1997 were $480.6 million, an
increase of $117.4 million or approximately 32.3% over net sales of $363.2
million for the corresponding period last year. Approximately 80.7% of the
increase was attributable to new store net sales. The increase in comparable
store net sales for the first six months of 1997 was approximately 6.2%.
Gross profit for the first six months of 1997 was $196.9 million or 41.0% of net
sales compared with $149.7 million or 41.2% of net sales during the same period
last year. 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
the first six months of this year compared with the mix of sales in the
corresponding period last year, and an increase in coupons redeemed associated
with the Company's marketing program.
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SG&A was $149.3 million in the second quarter of 1997 compared with $112.0
million in the same quarter last year and as a percentage of net sales were
31.1% and 30.8%, respectively. The increase in SG&A, as a percentage of net
sales, primarily reflects increases in occupancy costs, which were partially
offset by a decrease in payroll and payroll related items.
Operating profit in the first six months of 1997 increased to $47.6 million from
$37.7 million for the same period last year, primarily resulting from the
increase in net sales, which was partially offset by an increase in cost
of sales and SG&A expenses.
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 122 stores at the end of the second quarter of
1997 compared with 90 stores at the end of the corresponding quarter last year.
Total square footage grew to 4,916,000 square feet at the end of the second
quarter of 1997, from 3,619,000 square feet at the end of the second quarter of
last year.
During the first six months of fiscal 1997, the Company opened 14 new
superstores and expanded one store resulting in an aggregate addition of 569,000
square feet to total store space. The Company anticipates opening approximately
19 additional superstores and expanding two stores by the end of the fiscal
year, aggregating approximately 850,000 square feet of store space.
FINANCIAL CONDITION
Total assets at August 30, 1997 were $425.0 million compared with $329.9 million
at March 1, 1997, an increase of $95.1 million. Of the total increase, $81.8
million represented an increase in current assets and $13.3 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, the changes in merchandising mix.
Total liabilities at August 30, 1997 were $177.0 million compared with $115.6
million at March 1, 1997, an increase of $61.5 million. The increase was
primarily attributable to a $45.7 million increase in accounts payable
(resulting from an increase in inventories) and a $14.5 million increase in
accrued expenses and other current liabilities.
Shareholders' equity was $248.0 million at August 30, 1997 compared with $214.4
million at March 1, 1997. The increase primarily reflects net earnings for the
first six months of fiscal 1997 and additional paid-in capital from the exercise
of stock options.
Capital expenditures for the first six months of fiscal 1997 were $19.8 million
compared with $13.9 million for the corresponding period last year. The increase
is primarily attributable to furniture and fixtures and leasehold improvements
for the 14 new superstores opened and one store expanded during the first six
months compared to furniture and fixtures and leasehold improvements for the ten
new superstores opened and one expanded store in the same period last year.
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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 March 1, 1997.
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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 August 30, 1997.
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: October 14, 1997 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.
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3.1 Certificate of Amendment of Certificate 12 - 14
of Incorporation
3.2 Certificate of Change of Bed Bath & Beyond Inc. 15 - 16
(Under Section 805-A of the Business
Corporation Law)
3.3 Amended and Restated By-Laws 17 - 27
(As amended through June 26, 1997)
10.1 Employment Agreement between the Company and 28 - 43
Warren Eisenberg (Dated as of June 30, 1997)
10.2 Employment Agreement between the Company and 44 - 59
Leonard Feinstein (Dated as of June 30, 1997)
10.3 Stock Option Agreement between the Company and 60 - 62
Warren Eisenberg (Dated as of August 26, 1997)
10.4 Stock Option Agreement between the Company and 63 - 65
Leonard Feinstein (Dated as of August 26, 1997)
10.5 Company's 1992 Stock Option Plan 66 - 73
(As amended through August 26, 1997)
10.6 Company's 1996 Stock Option Plan 74 - 80
(As amended through August 26, 1997)
11 Computation of Per Share Earnings 81
27 Financial Data Schedule 82
(Filed electronically with SEC only)
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