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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended February 28, 1998
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) (IRS 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
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
------------------- ----------------
None None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK (PAR VALUE $0.01 PER SHARE)
(Title of class)
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
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
As of May 8, 1998, the aggregate market value of the common stock held by
non-affiliates (which was computed by reference to the closing price on such
date of such stock on the NASDAQ National Market) was $2,964,434,769.*
The number of shares outstanding of the issuer's common stock (par value $0.01
per share) at May 8, 1998: 69,232,181.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's definitive proxy statement filed on May 15, 1998
pursuant to Regulation 14A are incorporated by reference in Part III hereof.
Portions of the Registrant's Annual Report to Shareholders for the fiscal
year-ended February 28, 1998 are incorporated by reference in Part II hereof.
* For purposes of this calculation, all outstanding shares of common stock
have been considered held by non-affiliates other than the 12,091,958 shares
beneficially owned by directors and executive officers, including in the
case of the Co-Chief Executive Officers and trusts and foundations
affiliated with them. In making such calculation, the Registrant does not
determine the affiliate or non-affiliate status of any shares for any other
purpose.
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TABLE OF CONTENTS
FORM 10-K
ITEM NO. NAME OF ITEM PAGE
PART I
Item 1. Business...................................................... 3
Item 2. Properties.................................................... 13
Item 3. Legal Proceedings............................................. 13
Item 4. Submission of Matters to a Vote of
Security Holders.......................................... 14
PART II
Item 5. Market for the Registrant's Common Equity
And Related Shareholder Matters........................... 14
Item 6. Selected Financial Data....................................... 14
Item 7. Management's Discussion and Analysis
of Financial Condition and Results of
Operations................................................ 15
Item 8. Financial Statements and Supplementary
Data...................................................... 15
Item 9. Changes in and Disagreements with
Accountants on Accounting and Financial
Disclosure................................................ 15
PART III
Item 10. Directors and Executive Officers of
the Registrant............................................ 15
Item 11. Executive Compensation........................................ 15
Item 12. Security Ownership of Certain Beneficial
Owners and Management..................................... 15
Item 13. Certain Relationships and Related
Transactions.............................................. 15
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K....................................... 16
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PART I
Unless otherwise indicated, the terms "Company" and "Bed Bath & Beyond"
refer collectively to Bed Bath & Beyond Inc. and its subsidiaries. Effective
February 26, 1996, the Company changed its fiscal year-end from the 52 or 53
week period ending on the Sunday nearest February 28 to the 52 or 53 week period
ending on the Saturday nearest February 28. Accordingly, the 1997 fiscal year
represented 52 weeks and ended on February 28, 1998; the 1996 fiscal year
represented 52 weeks and 6 days and ended on March 1, 1997; and the 1995 fiscal
year represented 52 weeks and ended on February 25, 1996. Unless otherwise
indicated, all references herein to periods of time (e.g., quarters and years)
are to fiscal periods.
ITEM 1 - BUSINESS
INTRODUCTION
Bed Bath & Beyond believes that it is the nation's largest operator of
"superstores" selling predominantly better quality domestics merchandise and
home furnishings typically found in better department stores. The term
"superstore" as used herein means a store, other than a department store, that
is larger in size than the typical stores in its market selling similar product
categories and offers a breadth and depth of selection in most of its product
categories that far exceeds what is available in such stores. The Company offers
a wide assortment of merchandise at everyday low prices that are substantially
below regular department store prices and generally comparable to or below
department store sale prices. The Company's domestics merchandise line includes
items such as bed linens, bath accessories and kitchen textiles, and the
Company's home furnishings line includes items such as cookware, dinnerware,
glassware and basic housewares. The Company believes that it offers a breadth
and depth of selection in most of its product categories that far exceeds what
is generally available in department stores or other specialty retail stores and
that this enables it to offer customers the convenience of one-stop shopping for
most household items.
As of May 8, 1998, the Company operated 148 stores in 29 states:
Alabama (2), Arizona (3), California (17), Colorado (3), Connecticut (3),
Florida (16), Georgia (7), Illinois (9), Indiana (2), Kansas (1), Kentucky (1),
Maryland (5), Massachusetts (5), Michigan (5), Minnesota (1), Missouri (4), New
Jersey (9), New Mexico (1), New York (12), North Carolina (2), Ohio (4),
Oklahoma (1), Oregon (1), Pennsylvania (5), Tennessee (3), Texas (16), Virginia
(8), Washington (1) and Wisconsin (1). 144 of these stores use the superstore
format that was pioneered by the Company in 1985. These stores are on average
approximately 42,000 square feet in size and carry the Company's full line of
both domestics merchandise and home furnishings. The other four stores, all
established prior to 1986, are smaller stores that primarily carry domestics
merchandise.
HISTORY
The Company was founded in 1971. Leonard Feinstein and Warren
Eisenberg, the Co-Chief Executive Officers and founders of the Company, each has
more than 35 years of experience in the retail industry.
The Company commenced operations in 1971 with the opening of two
stores, one in New York and one in New Jersey. These stores operated under the
name "bed n bath" and sold primarily bed linens and bath accessories. The
Company continued to open bed n bath stores and by 1985 had opened stores in New
York, New Jersey, Connecticut and California. In 1985, the Company introduced
its superstore format with the opening of its first store carrying a full line
of domestics merchandise and home furnishings. All stores opened by the Company
after 1985 use this format and carry the Company's full line of domestics
merchandise and home furnishings. The Company began using the name "Bed Bath &
Beyond" in 1987 in order to reflect the expanded product line offered by its
superstores and to distinguish its superstores from conventional specialty
retail stores offering only domestics merchandise or only home furnishings.
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The Company has been engaged in an ongoing expansion program involving
the opening of new superstores (including 33 in 1997, 28 in 1996, and 19 in
1995) and the expansion of existing stores (including three in 1997, two in 1996
and two in 1995). As a result of its expansion program, the Company's store
space has increased from approximately 917,000 square feet at the beginning of
1992 to approximately 5,767,000 square feet at the end of 1997. The Company's
expansion program is continuing, and the Company currently anticipates that in
1998 it will open approximately 40 new superstores, which includes the seven new
superstores opened through May 8, 1998.
MERCHANDISING AND MARKETING
The Company's strategy for merchandising and marketing is to offer
better quality merchandise at everyday low prices; to maintain a breadth and
depth of selection in most of its product categories that far exceeds what is
generally available in department stores or other specialty retail stores; to
present merchandise in a distinctive manner designed to maximize customer
convenience and reinforce customer perception of wide selection; and to
emphasize dedication to customer service and satisfaction.
MERCHANDISE SELECTION
The Company's superstores offer both domestics merchandise and home
furnishings, including:
Domestics Merchandise
- bed linens and related items: sheets, comforters, duvet
covers, bedspreads, quilts, window treatments, decorative
pillows, blankets, dust ruffles, bed pillows and mattress
pads.
- bath items: towels, shower curtains, waste baskets, mirrors,
hampers, robes, scales, bathroom rugs, wall hardware and bath
accessories.
- kitchen textiles: tablecloths, placemats, cloth napkins, dish
towels and chair pads.
Home Furnishings
- kitchen and tabletop items: cookware, cutlery, kitchen
gadgets, dinnerware, bakeware, flatware, drinkware, serveware,
glassware, food storage containers, tea kettles, trash cans
and cleaning supplies.
- basic housewares: storage items, closet-related items (such as
hangers, organizers and shoe racks), general housewares (such
as brooms, garbage pails and ironing boards), lifestyle
accessories (such as lamps, chairs, ready to assemble
furniture, furniture covers, accent rugs, wicker and clocks)
and small electric appliances (such as blenders, food
processors, coffee makers, vacuums, irons, toaster ovens and
hair dryers).
- general home furnishings: giftwrap, candles, personal care
products (such as soaps and fragrances), picture frames, wall
art, juvenile items (such as toys and children's books),
artificial plants and flowers and seasonal merchandise (such
as summer and holiday related items).
The Company, on an ongoing basis, tests new merchandise categories and
adjusts the categories of merchandise carried in its stores and may add new
departments or adjust the size of existing departments as required. The Company
believes that the process of adding new departments and expanding or reducing
the size of various departments in response to changing conditions is an
important part of its merchandising strategy.
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The Company's merchandise consists primarily of better quality
merchandise typically found at better department stores. For those product lines
that have brand names associated with them, the Company generally offers leading
brand name merchandise (including Wamsutta, Martex, Fieldcrest, Cannon,
Croscill, Laura Ashley, Calphalon, Mikasa, Krups, J.A. Henckels, All-Clad,
Portmeirion, Black & Decker, Rubbermaid, Springs, Braun, Kitchenaid, Cuisinart,
Hoover, Brita, Pillowtex and Waverly). The Company estimates that brand name
merchandise accounts for a significant portion of its net sales.
The Company offers a breadth and depth of product selection that
enables customers to select among a wide assortment of styles, brands, colors
and designs within each of the Company's major product lines. The Company also
generally maintains consistent in-stock availability of merchandise in order to
reinforce customer perception of wide selection and build customer loyalty. The
Company estimates that many of its superstores carry in excess of 30,000
stock-keeping units.
PRICING POLICY
The Company's pricing policy is to maintain everyday low prices that
are substantially below regular department store prices and generally comparable
to or below department store sale prices. The Company regularly monitors price
levels at its competitors in order to ensure that the Company's prices are being
maintained in accordance with its pricing policy. The Company believes that the
application of its everyday low price policy is essential to maintaining the
integrity of this policy and is an important factor in establishing its
reputation among customers.
Because the Company has an everyday low price policy, the Company does
not run sales. However, the Company uses periodic markdowns and semi-annual
clearances for merchandise that it has determined to discontinue carrying. In
addition, the Company's full-color circulars and mailing pieces include a
coupon, which is redeemed at the point-of-sale. The Company also honors
competitor coupons.
MERCHANDISE PRESENTATION
The Company has developed a distinctive style of merchandise
presentation. In each superstore, groups of related product lines are presented
together in separate areas of the store, creating the appearance that a Bed Bath
& Beyond superstore is comprised of several individual specialty stores for
different product lines. A "racetrack layout" that runs throughout the store
facilitates moving between areas and encourages customers to shop the entire
store. The Company believes that its format of merchandise presentation makes it
easy for customers to locate products, reinforces customer perception of wide
selection and communicates to customers that Bed Bath & Beyond superstores offer
a level of customer service generally associated with smaller specialty stores.
Merchandise is displayed in each of these separate areas from floor to
ceiling (generally 10 to 14 feet high) and, in addition, seasonal merchandise
and impulse items are prominently displayed in the front of the store. The
Company believes that its extensive merchandise selection, rather than
fixturing, should be the focus of customer attention and, accordingly, uses
simple modular fixturing throughout the store. This fixturing is designed so
that it can be easily reconfigured to adapt to changes in the Company's
merchandise mix and presentation. The Company believes that its floor to ceiling
displays create an exciting and attractive shopping environment that encourages
impulse purchases of additional items.
CUSTOMER SERVICE
The Company places great emphasis on customer service and satisfaction
and, over the past 27 years, has sought to make this a defining feature of its
corporate culture. All managers provide leadership by example in this area by
regularly spending time assisting customers on the selling floor. The Company
believes that its success in the area of customer service is evidenced by its
ability to rely primarily on "word of mouth advertising".
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The Company seeks to make shopping at its stores as pleasant and
convenient as possible. Each area within a store is staffed with knowledgeable
sales personnel who are available to assist customers in choosing merchandise,
to answer questions and to resolve any problems that may arise. In order to make
checking out convenient, check-out lines are continually monitored and
additional cashiers are added as necessary in order to minimize waiting time.
Returning merchandise is simplified through a return policy that permits
customers to return most items without presenting a sales receipt. Most Bed Bath
& Beyond stores are open seven days (and six evenings) a week in order to enable
customers to shop at times that are convenient for them.
ADVERTISING
In general, the Company relies on "word of mouth advertising" and on
its reputation for offering a wide assortment of quality merchandise at everyday
low prices, supplemented by the use of paid advertising. The Company uses
full-color circulars and mailing pieces distributed during key selling periods
of the year as its primary vehicles of paid advertising. In certain instances,
paid radio and television advertising may be used. Also, to support the opening
of new stores, the Company uses "grand opening" full-color circulars and
newspaper advertising. The Company believes that its ability to rely primarily
on "word of mouth advertising" will continue and that its limited use of paid
advertising permits it to spend less on advertising than a number of its
competitors.
EXPANSION
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 from 34 at the beginning of 1992 to 141
at the end of 1997, and the total square footage of store space has increased
from approximately 917,000 square feet at the beginning of 1992 to approximately
5,767,000 square feet at the end of 1997. During the current fiscal year, the
Company opened 33 new superstores and expanded three stores, which resulted in
the addition of approximately 1,420,000 square feet of store space.
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The table below sets forth information concerning the Company's
expansion program for the periods indicated:
STORE SPACE NUMBER OF STORES
-------------------------- -----------------------
REPLACED NEW CLOSED BEGINNING END BEGINNING END
YEAR STORES (1) STORES (2) STORES OF YEAR OF YEAR OF YEAR OF YEAR
- - ---- ---------- ---------- ------ ------- ------- ------- -------
(IN SQUARE FEET)
1993 4 9 2 1,128,000 1,512,000 38 45
1994 4 16 -- 1,512,000 2,339,000 45 61
1995 2 19 -- 2,339,000 3,214,000 61 80
1996 2 28 -- 3,214,000 4,347,000 80 108
1997 3 33 -- 4,347,000 5,767,000 108 141
(1) A replaced store is an existing store that was either expanded or
replaced by a new store in the same area.
(2) Excludes any new store that replaced an existing store in the same
area.
The Company intends to continue its expansion program and believes that
the continued growth of the Company is dependent, in large part, on the success
of this program. As part of its expansion program, the Company expects to open
new superstores and, in addition, expects to expand existing stores as
opportunities arise.
The Company expects to open new superstores in existing markets and new
markets. In determining where to open new superstores, the Company evaluates a
number of factors, including the availability of prime real estate and
demographic information (such as data relating to income and education levels,
age and occupation). The Company believes that because it does not use central
distribution centers and since it relies on paid advertising to only a limited
extent, it has the flexibility to enter a new market with only a single store.
The Company will consider opening additional stores in that market, once the
store has been proven successful.
From the end of fiscal 1997 through May 8, 1998, the Company has opened
seven stores which are located in: San Mateo, California; Boynton Beach, Oviedo,
and Pembroke Pines, Florida; Fairview Heights, Illinois; Roseville, Michigan;
and Knoxville, Tennessee. During the balance of 1998, the Company currently
anticipates that it will open approximately 33 additional stores. The Company
has already leased sites for 22 additional stores to be located in: Chandler,
Arizona; Dublin, Pasadena and Valencia, California; North Colorado Springs,
Colorado; Brandywine, Delaware; Aventura and St. Petersburg, Florida; Crystal
Lake and Geneva, Illinois; Shawnee, Kansas; Frederick and Towson, Maryland;
Auburn Hills and Grand Rapids, Michigan; Lincoln, Nebraska; Columbus, Ohio;
Oklahoma City, Oklahoma; Newport News and Richmond, Virginia; and Redmond and
Seattle, Washington; and is in lease negotiations for several additional sites.
The Company has built its management structure with a view towards its
expansion and believes that as a result the Company has the management depth
necessary to support its anticipated expansion program. Each of the Company's
area managers typically supervise from three to five stores. Each of the
Company's district managers typically supervise four to eight stores, even
though the Company believes that each district manager has the capacity to
supervise up to ten stores.
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STORE OPERATIONS
MERCHANDISING
The Company maintains its own central buying staff, comprised of four
general merchandise managers and twenty buyers. Senior members of this buying
staff report to the Vice President of Merchandising. The merchandise mix for
each store is selected by the central buying staff, in consultation with store
managers and other local store personnel. The central buying staff is
responsible for selecting the merchandise and for ordering the initial inventory
required upon the opening of each store and for ordering the first shipment of
any new product line that may be subsequently added to a store's merchandise
mix.
After a store is opened, local store personnel are primarily
responsible for monitoring inventory levels and reordering merchandise as
required. In addition, local store personnel are encouraged to monitor local
sales trends and market conditions and tailor the merchandise mix as appropriate
to respond to changing trends and conditions. The Company believes that its
policy of having the reordering performed at the local store level, rather than
centrally, and having local store personnel determine the appropriate quantity
to reorder encourages entrepreneurship at the store level and better ensures
that in-stock availability will be maintained in accordance with the specific
requirements of each store. The factors taken into account in selecting the
merchandise mix for a particular store include store size and configuration and
local market conditions such as climate and demographics.
The Company purchases its merchandise from approximately 3,000
suppliers. In 1997, the Company's largest supplier accounted for approximately
6% of the Company's merchandise purchases and the Company's 10 largest suppliers
accounted for approximately 25% of such purchases. The Company purchases
substantially all of its merchandise in the United States, the majority from
domestic manufacturers and the balance from importers, although the Company is
seeking to increase its direct purchases from overseas sources. Such direct
purchases do not presently represent a significant portion of the Company's
merchandise requirements. The Company has no long-term contracts for the
purchase of merchandise. The Company believes that most merchandise, other than
brand name goods, is available from a variety of sources and that most brand
name goods can be replaced with comparable merchandise.
WAREHOUSING
Merchandise is shipped to each store from the Company's vendors, making
it unnecessary for the Company to maintain any central distribution centers. As
a result of the floor to ceiling displays used by the Company, a substantial
amount of merchandise is displayed on the sales floor of each store at all
times. Additional merchandise not displayed on the sales floor is stored in
separate warehouse space that is included in each store (with an estimated 10%
to 15% of the space of each store being dedicated to warehouse and receiving
space). In the case of several stores, merchandise is also stored at nearby
supplemental storage space leased by the Company. At present, the warehouse
space included in the Company's stores provides approximately 90% of the
Company's warehouse space requirements and such nearby supplemental storage
space provides the balance.
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MANAGEMENT
The Company seeks to encourage responsiveness and entrepreneurship at
the store level by providing its managers with a relatively high degree of
autonomy relating to operations and merchandising. This is reflected in the
Company's policy of having all reordering done at the store level, as well as in
the Company's policy of encouraging managers to tailor the merchandise mix of
each store in response to local sales trends and market conditions.
In general, stores are staffed with one to three assistant managers and
three to six department managers who report to a store manager, who in turn is
supervised by an area or district manager. Area and district managers report to
one of several regional managers who in turn report to the Vice President of
Stores. Decisions relating to pricing, advertising and markdowns for all stores
are made centrally in the Company's Buying Office, and certain store support
functions (such as finance and management information systems) are performed
centrally in the Company's Corporate Office.
TRAINING
The Company places great emphasis on the training of store level
management. All entry management personnel are generally required to work in
different departments of the store in order to acquire an overall understanding
of store operations. In addition, all associates receive formalized training
including sales techniques and product knowledge through the Bed Bath & Beyond
University program.
The Company's policy is to generally build its management organization
from within. Each of the Company's area, district and regional managers was
recruited from the ranks of the Company's store managers and each of the
Company's store managers joined the Company in an entry level position. The
Company believes that its policy of promoting from within, as well as the
opportunities for advancement generated by its ongoing expansion program, serve
as an incentive to persons to seek and retain employment with the Company and
results in low turnover among its managers.
EMPLOYEES
As of February 28, 1998, the Company employed approximately 8,200
persons, of whom approximately 5,300 were full-time employees and 2,900 were
part-time employees. None of the Company's employees are covered by collective
bargaining agreements. The Company believes that its relations with its
employees are excellent and that the labor turnover rate among its management
employees is lower than that experienced in the industry.
SEASONALITY
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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COMPETITION
The market for domestics merchandise and home furnishings is fragmented
and highly competitive. While the Company believes it is the preeminent marketer
in the superstore segment of the home goods industry, it competes directly with
a number of chains of superstores selling domestics merchandise and home
furnishings. In addition, the Company competes with many different types of
retail stores that sell many or most of the products sold by the Company. Such
competitors include: (i) better department stores, which often carry many of the
same product lines as the Company but do not typically have the same depth or
breadth of product selection, (ii) specialty stores (such as specialty linens or
housewares retailers), which often have a depth of product selection but
typically carry only a limited portion of the product lines carried by the
Company, and (iii) discount and mass merchandise stores. In addition, the
Company competes to a more limited extent with factory outlet stores that
typically offer limited quantities or limited lines of better quality
merchandise at discount prices. Some of the Company's competitors operate
substantially more stores and have substantially greater financial and other
resources than the Company, including, in a few cases, better name recognition.
The Company believes that it is the largest operator of superstores
selling predominantly better quality domestics merchandise and home furnishings
typically found in better department stores, and that it is well positioned to
compete successfully in its markets as measured by several factors, including
pricing, breadth and quality of product selection, in-stock availability of
merchandise, effective merchandise presentation, customer service and store
locations.
The visibility of the Company has encouraged superstore competitors to
imitate the Company's format and methods. Other retail chains continue to
introduce new store concepts which include many of the product lines carried by
the Company. There can be no assurance that the operation of competitors,
including those companies operating stores similar to those of Bed Bath &
Beyond, will not have a material effect on the Company.
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TRADE NAMES AND SERVICE MARKS
The Company uses its nationally recognized "Bed Bath & Beyond" name
and logo and its "Beyond any store of its kind" tag line as service marks in
connection with retail services. The Company has registered these marks with the
United States Patent and Trademark Office. The Company also has registered or
has applications pending with the trademark registries of several foreign
countries. Management believes that its nationally recognized name and its
service marks are an important element of the Company's merchandising strategy.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth the name, age and business experience of
the Executive Officers of the Registrant:
NAME AGE POSITIONS
- - ---- --- ---------
Warren Eisenberg 67 Chairman, Co-Chief Executive Officer
and Director
Leonard Feinstein 61 President, Co-Chief Executive Officer
and Director
Steven H. Temares 39 Executive Vice President - Chief Operating
Officer
Ronald Curwin 68 Chief Financial Officer and Treasurer
Arthur Stark 43 Vice President - Merchandising
Matthew Fiorilli 41 Vice President - Stores
Jonathan Rothstein 40 Vice President - Product Development and
Marketing
Mr. Eisenberg, a co-founder of the Company, has been a director and
officer of the Company since the Company commenced operations in 1971 (serving
as President and Co-Chief Executive Officer until 1992, thereafter as Chairman
and Co-Chief Executive Officer).
Mr. Feinstein, a co-founder of the Company, has been a director and
officer of the Company since the Company commenced operations in 1971 (serving
as Co-Chief Executive Officer, Treasurer and Secretary until 1992, thereafter as
President and Co-Chief Executive Officer).
Mr. Temares was promoted to Executive Vice President - Chief Operating
Officer of the Company in January 1997. Prior to 1997, Mr. Temares served as
Director of Real Estate and General Counsel. Prior to joining the Company in
1992, Mr. Temares engaged in the private practice of law.
Mr. Curwin, a certified public accountant, joined the Company in 1994
as Chief Financial Officer and Treasurer. Prior to joining the Company, Mr.
Curwin was engaged as a registered representative in the financial services
industry. Prior to 1992, Mr. Curwin was Chief Financial Officer of Channel Home
Centers, Inc., a retailer of home improvement products.
Mr. Stark joined the Company in 1977. Mr. Stark was promoted to Vice
President - Merchandising in April 1998. Mr. Stark was Director of Store
Operations - Western Region from 1994 until April 1998 and previously was
Regional Manager - Western Region.
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Mr. Fiorilli joined the Company in 1973. Mr. Fiorilli was promoted to
Vice President - Stores in April 1998. Mr. Fiorilli was Director of Store
Operations - Eastern Region from 1994 until April 1998 and previously was
Regional Manager - Eastern Region.
Mr. Rothstein joined the Company in 1984. Mr. Rothstein was promoted to
Vice President - Product Development and Marketing in April 1998. Mr. Rothstein
was General Merchandise Manager - Home Furnishings from 1988 until April 1998.
The Company's officers are elected by the Board of Directors for
one-year terms and serve at the discretion of the Board of Directors. No family
relationships exist between any of the executive officers or directors of the
Company.
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ITEM 2 - PROPERTIES
The Company's 148 stores are located in 29 states, principally in
suburban areas of medium and large sized cities. These stores are situated in
strip and power strip shopping centers, as well as in major off-price and
conventional malls, and free standing buildings. The Company's superstores range
in size from 13,000 to 85,000 square feet, but are predominantly between 30,000
and 50,000 square feet in major markets. The Company's four smaller stores range
in size from 7,000 to 11,000 square feet. In both superstores and smaller
stores, approximately 80% to 85% of store space is used for selling areas and
the balance for warehouse, receiving and office space.
The table below sets forth the number of stores located in each state
as of May 8, 1998:
Number
State of Stores
----- ---------
Alabama 2
Arizona 3
California 17
Colorado 3
Connecticut 3
Florida 16
Georgia 7
Illinois 9
Indiana 2
Kansas 1
Kentucky 1
Maryland 5
Massachusetts 5
Michigan 5
Minnesota 1
Missouri 4
New Jersey 9
New Mexico 1
New York 12
North Carolina 2
Ohio 4
Oklahoma 1
Oregon 1
Pennsylvania 5
Tennessee 3
Texas 16
Virginia 8
Washington 1
Wisconsin 1
The Company currently leases all of its existing stores. The leases
provide for original lease terms that generally range from five to fifteen years
and certain leases provide for renewal options, that range from five to fifteen
years, often at increased rents. Certain leases provide for scheduled rent
increases (which, in the case of fixed increases, the Company accounts for on a
straight line basis over the noncancelable lease term) and/or for contingent
rent (based upon store sales exceeding stipulated amounts).
The Company also leases merchandise storage space in four locations
amounting to approximately 90,000 square feet. This space is used to supplement
the warehouse facilities in the Company's stores in proximity to these
locations. See Item 1 "Business--Store Operations--Warehousing."
The Company's Corporate Office is located in 63,500 square feet of
office space that the Company leases in Union, New Jersey. The Company's Buying
Office is located in 26,400 square feet of office space that the Company leases
in Farmingdale, New York. The Company plans to lease additional office space at
both of these locations.
ITEM 3 - LEGAL PROCEEDINGS
There are no material pending legal proceedings, other than ordinary
routine litigation incidental to the business, to which the Company is a party.
13
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ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders through
solicitation of proxies or otherwise during the fourth quarter of the fiscal
year ended February 28, 1998.
PART II
ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS
The following table sets forth the high and low reported sales prices
of the Company's common stock on the NASDAQ National Market System for the
periods indicated. These quotations reflect inter-dealer prices, without retail
markups, markdowns or commissions.
HIGH LOW
---- ---
Fiscal 1996 :
1st Quarter $31 1/2 $19 11/16
2nd Quarter 31 18 1/4
3rd Quarter 29 3/4 20 3/8
4th Quarter 31 3/4 24 1/8
Fiscal 1997 :
1st Quarter $29 1/2 $22 7/8
2nd Quarter 36 1/8 27 3/4
3rd Quarter 36 1/4 28 13/16
4th Quarter 44 7/8 32
Fiscal 1998 :
1st Quarter (through May 8, 1998) $55 1/2 $40
The common stock is quoted through the NASDAQ National Market System
under the symbol BBBY. On May 8, 1998, there were approximately 500
shareholders of record of the common stock (without including individual
participants in nominee security position listings). On May 8, 1998, the last
reported sale price of the common stock was $51 7/8.
For the foreseeable future, the Company intends to retain all
earnings for use in the operation and expansion of its business and,
accordingly, the Company currently has no plans to pay dividends on its common
stock. The payment of any future dividends will be determined by the Board of
Directors in light of conditions then existing, including the Company's
earnings, financial condition and requirements, restrictions in financing
agreements, business conditions and other factors. At present, the Company's
ability to pay dividends is limited under its Credit Agreement. See Item 8 -
Financial Statements and Supplementary Data.
ITEM 6 - SELECTED FINANCIAL DATA
The information required by this item is included in the registrant's
Annual Report to Shareholders for the fiscal year ended February 28, 1998 on the
inside front cover and is incorporated herein by reference.
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ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The information required by this item is included in the registrant's
Annual Report to Shareholders for the fiscal year ended February 28, 1998 on
pages 10 through 13 and is incorporated herein by reference.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements required by this item are included in the
registrant's Annual Report to Shareholders for the fiscal year ended February
28, 1998 on pages 14 through 24 and are incorporated herein by reference. These
financial statements are indexed under Item 14(a)(1).
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None
PART III
The Executive Officers of the Registrant information required by Part
III, Item 10 - Directors and Executive Officers of the Registrant is included in
this document; all other information required by Part III (Item 10 - Directors
and Executive Officers of the Registrant, Item 11 - Executive Compensation, Item
12 - Security Ownership of Certain Beneficial Owners and Management, and Item 13
- - - Certain Relationships and Related Transactions) is incorporated herein by
reference from the Registrant's definitive Proxy Statement for the Annual
Meeting of Shareholders to be held June 26, 1998 filed with the Commission
pursuant to Regulation 14A. The Compensation Report of the Board of Directors
and the performance graph included in such Proxy Statement shall not be deemed
incorporated herein by reference.
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PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) FINANCIAL STATEMENTS
The following financial statements and reports are incorporated by
reference to pages 14 through 24 of the Company's Annual Report to
Shareholders for the fiscal year ended February 28, 1998:
Consolidated Balance Sheets as of February 28, 1998 and March 1, 1997
Consolidated Statements of Earnings for the fiscal years ended February
28, 1998, March 1, 1997 and February 25, 1996
Consolidated Statements of Shareholders' Equity for the fiscal years
ended February 28, 1998, March 1, 1997 and February 25, 1996
Consolidated Statements of Cash Flows for the fiscal years ended
February 28, 1998, March 1, 1997 and February 25, 1996
Notes to Consolidated Financial Statements
Independent Auditors' Report
(a) (2) FINANCIAL STATEMENT SCHEDULES
All schedules are omitted because they are not required, not applicable
or the information is included in the financial statements or notes
thereto.
(a) (3) EXHIBITS
The exhibits to this Report are listed in the Exhibit Index included
elsewhere herein.
(b) No reports on Form 8-K were filed by the Company during the fourth
quarter of the fiscal year covered by this report.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
BY: /s/ Warren Eisenberg
----------------------------------
WARREN EISENBERG
CHAIRMAN, CO-CHIEF EXECUTIVE
OFFICER AND DIRECTOR
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the registrant
and in the capacities and on the dates indicated.
SIGNATURE CAPACITY DATE
- - --------- -------- ----
Chairman, Co-Chief
Executive Officer and Director
/s/ Warren Eisenberg (principal executive officer) May 29, 1998
- - ---------------------
WARREN EISENBERG
President, Co-Chief
/s/ Leonard Feinstein Executive Officer and Director
- - ---------------------
LEONARD FEINSTEIN May 29, 1998
Chief Financial Officer
and Treasurer (principal financial
/s/ Ronald Curwin and accounting officer)
- - ---------------------
RONALD CURWIN May 29, 1998
/s/ Klaus Eppler Director
- - ---------------------
KLAUS EPPLER May 29, 1998
/s/ Robert S. Kaplan Director
- - ---------------------
ROBERT S. KAPLAN May 29, 1998
/s/ Robert J. Swartz Director
- - ---------------------
ROBERT J. SWARTZ May 29, 1998
18
ANNUAL REPORT ON FORM 10-K
ITEM 14 (a)(3)
EXHIBITS
BED BATH & BEYOND INC.
FISCAL YEAR ENDED FEBRUARY 28, 1998
19
EXHIBIT INDEX
Unless otherwise indicated, exhibits are incorporated by reference to the
correspondingly numbered exhibits to the Company's Registration Statement on
Form S-1 (Commission File No. 33-47250)
EXHIBIT
NO. EXHIBIT
------- -------
3.1 Restated Certificate of Incorporation
3.2 Certificate of Amendment to the Company's Certificate of
Incorporation (incorporated by reference to Exhibit 3 to the
Company's Quarterly Report on Form 10-Q/A for the quarter ended
August 25, 1996)
3.3 Certificate of Amendment to the Company's Certificate of
Incorporation (incorporated by reference to Exhibit 3.1 to the
Company's Quarterly Report on Form 10-Q for the quarter ended
August 30, 1997)
3.4 Certificate of Change of Bed Bath & Beyond Inc. Under Section
805-A of the Business Corporation Law (incorporated by reference
to Exhibit 3.2 to the Company's Quarterly Report on Form 10-Q
for the quarter ended August 30, 1997)
3.5 Amended and Restated By-laws, as amended through June 26, 1997
(incorporated by reference to Exhibit 3.3 to the Company's
Quarterly Report on Form 10-Q for the quarter ended August 30,
1997)
10.1 Credit Agreement among the Company, bed 'n bath Stores, Inc.,
BBBL, Inc., BBBY Management Corporation, Chemical Bank New
Jersey, N.A., Chemical Bank and Chemical Bank New Jersey, N.A.
as Agent (incorporated by reference to Exhibit 28 to the
Company's Form 8-K dated November 14, 1994)
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10.2* Agreement Concerning "Split Dollar" Life Insurance Plan, dated
May 9, 1994, among the Company, Jay D. Waxenberg, as trustee of
the Warren Eisenberg Life Insurance Trust, Warren Eisenberg and
Maxine Eisenberg (incorporated by reference to Exhibit 10.12 to
the Company's Form 10-K for the year ended February 27, 1994)
10.3* Agreement Concerning "Split Dollar" Life Insurance Plan, dated
May 9, 1994, among the Company, Jay D. Waxenberg, as trustee of
the Leonard Joseph Feinstein Life Insurance Trust, Leonard
Joseph Feinstein and Susan Feinstein (incorporated by reference
to Exhibit 10.13 to the Company's Form 10-K for the year ended
February 27, 1994)
10.4* Agreement Concerning "Split Dollar" Life Insurance Plan, dated
June 16, 1995, among the Company, Jay D. Waxenberg, as trustee
of the Warren Eisenberg Life Insurance Trust, Warren Eisenberg
and Maxine Eisenberg
10.5* Agreement Concerning "Split Dollar" Life Insurance Plan, dated
June 16, 1995, among the Company, Jay D. Waxenberg, as trustee
of the Leonard Joseph Feinstein Life Insurance Trust, Leonard
Joseph Feinstein and Susan Feinstein
10.6 First Amendment to the Credit Agreement among the Company, bed
'n bath Stores, Inc., BBBL, Inc., BBBY Management Corporation,
Chemical Bank New Jersey, N.A., Chemical Bank and Chemical Bank
New Jersey, N.A. as Agent, dated October 1, 1995 (incorporated
by reference to Exhibit 10.9 to the Company's Form 10-K for the
year ended March 1, 1997)
10.7 Second Amendment to the Credit Agreement among the Company, bed
'n bath Stores, Inc., BBBL, Inc., BBBY Management Corporation,
Chemical Bank New Jersey, N.A., Chemical Bank and Chemical Bank
New Jersey, N.A. as Agent, dated February 24, 1997 (incorporated
by reference to Exhibit 10.11 to the Company's Form 10-K for the
year ended March 1, 1997)
10.8 Third Amendment to the Credit Agreement among the Company, bed
'n bath Stores, Inc., BBBL, Inc., BBBY Management Corporation,
and The Chase Manhattan Bank, dated September 11, 1997
(incorporated by reference to Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended November 29,
1997)
10.9 Fourth Amendment to the Credit Agreement among the Company, bed
'n bath Stores, Inc., BBBL, Inc., BBBY Management Corporation,
and The Chase Manhattan Bank, dated September 19, 1997
(incorporated by reference to Exhibit 10.2 to the Company's
Quarterly Report on Form 10-Q for the quarter ended November 29,
1997)
10.10* Employment Agreement between the Company and Warren Eisenberg,
dated as of June 30, 1997 (incorporated by reference to Exhibit
10.1 to the Company's Quarterly Report on Form 10-Q for the
quarter ended August 30, 1997)
20
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10.11* Employment Agreement between the Company and Leonard Feinstein,
dated as of June 30, 1997 (incorporated by reference to Exhibit
10.2 to the Company's Quarterly Report on Form 10-Q for the
quarter ended August 30, 1997)
10.12* Stock Option Agreement between the Company and Warren Eisenberg,
dated as of August 26, 1997 (incorporated by reference to
Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for
the quarter ended August 30, 1997)
10.13* Stock Option Agreement between the Company and Leonard
Feinstein, dated as of August 26, 1997 (incorporated by
reference to Exhibit 10.4 to the Company's Quarterly Report on
Form 10-Q for the quarter ended August 30, 1997)
10.14* Company's 1992 Stock Option Plan, as amended through August 26,
1997 (incorporated by reference to Exhibit 10.5 to the Company's
Quarterly Report on Form 10-Q for the quarter ended August 30,
1997)
10.15* Company's 1996 Stock Option Plan, as amended through August 26,
1997 (incorporated by reference to Exhibit 10.6 to the Company's
Quarterly Report on Form 10-Q for the quarter ended August 30,
1997)
10.16 * ** Employment Agreement between the Company and Steven H. Temares
(dated as of December 1, 1994)
10.17 * ** Form of Employment Agreement between the Company and certain
executives (including all of the executive officers of the
Company other than the Co-Chief Executive Officers, the Chief
Operating Officer and the Chief Financial Officer) (dated as
of December 1, 1994)
13** Company's 1997 Annual Report, certain portions of which have
been incorporated by reference herein
21** Subsidiaries of the Company
Commission File No. 33-1
23** Independent Auditors' Consent
27 Financial Data Schedule (Filed electronically with SEC only)
- - ----------
* This is a management contract or compensatory plan or arrangement.
** Filed herewith.
21