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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended May 29, 1999
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COMMISSION FILE NUMBER 0-20214
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BED BATH & BEYOND INC.
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(Exact name of registrant as specified in its charter)
NEW YORK 11-2250488
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(State of incorporation) (I.R.S. Employer Identification No.)
650 LIBERTY AVENUE, UNION, NEW JERSEY 07083
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (908) 688-0888
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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 MAY 29, 1999
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Common Stock - $0.01 par value 139,676,356
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INDEX
PAGE NO.
PART I - FINANCIAL INFORMATION
Consolidated Balance Sheets
May 29, 1999 and February 27, 1999 3
Consolidated Statements of Earnings
Three Months Ended May 29, 1999 and May 30, 1998 4
Consolidated Statements of Cash Flows
Three Months Ended May 29, 1999 and May 30, 1998 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 4. Submission of Matters to a Vote of Security Holders 10
Item 6. Exhibits and Reports on Form 8-K 11
Exhibit Index 12
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BED BATH & BEYOND INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
May 29, February 27,
1999 1999
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(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $123,758 $ 90,396
Merchandise inventories 415,076 360,337
Prepaid expenses and other current assets 6,392 4,546
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Total current assets 545,226 455,279
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Property and equipment, net 150,591 150,438
Other assets 28,831 27,431
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$724,648 $633,148
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $150,253 $ 99,370
Accrued expenses and other current liabilities 100,632 89,725
Income taxes payable 22,773 16,610
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Total current liabilities 273,658 205,705
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Deferred rent 17,291 16,356
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Total liabilities 290,949 222,061
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Shareholders' equity:
Preferred stock - $0.01 par value; authorized -
1,000,000 shares; no shares issued or
outstanding -- --
Common stock - $0.01 par value; authorized - 350,000,000 shares;
issued and outstanding - May 29, 1999, 139,676,356 shares and
February 27, 1999,
139,418,120 shares 1,397 1,394
Additional paid-in capital 84,404 79,679
Retained earnings 347,898 330,014
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Total shareholders' equity 433,699 411,087
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$724,648 $633,148
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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
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May 29, May 30,
1999 1998
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Net sales $ 359,372 $ 269,571
Cost of sales, including buying,
occupancy and indirect costs 213,158 159,392
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Gross profit 146,214 110,179
Selling, general and administrative expenses 118,199 89,435
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Operating profit 28,015 20,744
Interest income 1,302 817
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Earnings before provision for income taxes 29,317 21,561
Provision for income taxes 11,434 8,570
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Net earnings $ 17,883 $ 12,991
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Net earnings per share - Basic $ 0 .13 $ 0 .09
Net earnings per share - Diluted $ 0 .12 $ 0 .09
Weighted average shares outstanding - Basic 139,527,503 138,320,504
Weighted average shares outstanding - Diluted 144,036,940 142,749,912
See accompanying Notes to Consolidated Financial Statements.
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BED BATH & BEYOND INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS, UNAUDITED)
Three Months Ended
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May 29, May 30,
1999 1998
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Cash Flows from Operating Activities:
Net earnings $ 17,883 $ 12,991
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 6,881 5,252
Deferred income taxes (1,353) (1,178)
Increase in assets:
Merchandise inventories (54,739) (46,189)
Prepaid expenses and other current assets (1,846) (3,053)
Other assets (47) (983)
Increase (decrease) in liabilities:
Accounts payable 50,883 39,005
Accrued expenses and other current liabilities 10,907 1,770
Income taxes payable 6,163 (783)
Deferred rent 935 972
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Net cash provided by operating activities 35,667 7,804
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Cash Flows from Investing Activities:
Capital expenditures (7,034) (9,616)
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Net cash used in investing activities (7,034) (9,616)
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Cash Flows from Financing Activities:
Proceeds from exercise of stock options 4,729 5,744
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Net cash provided by financing activities 4,729 5,744
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Net increase in cash and cash equivalents 33,362 3,932
Cash and cash equivalents:
Beginning of period 90,396 53,280
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End of period $ 123,758 $ 57,212
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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
February 27, 1999 consolidated balance sheet, have been prepared
without audit. In the opinion of Management, the accompanying
consolidated financial statements contain all adjustments (consisting
of only normal recurring accruals) necessary to present fairly the
financial position of Bed Bath & Beyond Inc. and subsidiaries (the
"Company") as of May 29, 1999 and February 27, 1999 and the results of
their operations and their cash flows for the three months ended May
29, 1999 and May 30, 1998, respectively. Because of the seasonality of
the specialty retailing business, operating results of the Company on a
quarterly basis may not be indicative of operating results for the full
year.
The accompanying unaudited consolidated financial statements are
presented in accordance with the requirements for Form 10-Q and
consequently do not include all the disclosures normally required by
generally accepted accounting principles. Reference should be made to
Bed Bath & Beyond Inc.'s Annual Report for the fiscal year ended
February 27, 1999 for additional disclosures, including a summary of
the Company's significant accounting policies.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS
Three Months May 29, 1999 vs. Three Months May 30, 1998
Net sales for the first quarter ended May 29, 1999 were $359.4 million, an
increase of $89.8 million or approximately 33.3% over net sales of $269.6
million for the corresponding quarter last year. Approximately 72.7% of the
increase was attributable to new store net sales. The increase in comparable
store net sales in the first quarter of 1999 was 9.9%. 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 first quarter were attributable
to sales of domestics merchandise and home furnishings merchandise,
respectively.
Gross profit for the first quarter of 1999 was $146.2 million or 40.7% of net
sales, compared with $110.2 million or 40.9% of net sales during the first
quarter of 1998. The decrease in gross profit, as a percentage of net sales, was
primarily attributable to a different mix of sales during the first quarter of
1999 compared to the mix of sales during the first quarter of 1998.
Selling, general and administrative expenses ("SG&A") were $118.2 million in the
first quarter of 1999 compared with $89.4 million in the same quarter last year
and as a percentage of net sales were 32.9% and 33.2%, respectively. The
decrease in SG&A, as a percentage of net sales, primarily reflects a relative
decrease in payroll and payroll related items and a relative decrease in costs
associated with new store openings.
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 191 stores at the end of the first quarter of
1999 compared with 149 stores at the end of the corresponding quarter last year.
Total square footage grew to 7,938,000 square feet at the end of the first
quarter of 1999, from 6,111,000 square feet at the end of the first quarter of
last year.
During the first quarter of fiscal 1999, the Company opened five stores and
expanded two existing stores resulting in an aggregate addition of 250,000
square feet to total store space. The Company anticipates opening approximately
44 additional stores and expanding several existing stores by the end of the
fiscal year, aggregating approximately 1,900,000 square feet of additional store
space for the year.
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FINANCIAL CONDITION
Total assets at May 29, 1999 were $724.6 million compared with $633.1 million at
February 27, 1999, an increase of $91.5 million. Of the total increase, $89.9
million represented an increase in current assets and $1.6 million represented
an increase in non-current assets. The increase in current assets was primarily
attributable to an increase in merchandise inventories, which resulted from new
store space and, to a lesser extent, changes in merchandising mix.
Total liabilities at May 29, 1999 were $290.9 million compared with $222.1
million at February 27, 1999, an increase of $68.9 million. The increase was
primarily attributable to a $50.9 million increase in accounts payable
(resulting from an increase in inventories) and a $10.9 million increase in
accrued expenses and other current liabilities.
Shareholders' equity was $433.7 million at May 29, 1999 compared with $411.1
million at February 27, 1999. The increase reflects net earnings for the first
three months of fiscal 1999 and additional paid-in capital from the exercise of
stock options.
Capital expenditures for the first three months of fiscal 1999 were $7.0 million
compared with $9.6 million for the corresponding period last year. The decrease
is primarily attributable to expenditures for furniture and fixtures and
leasehold improvements for the five new superstores opened and two stores
expanded during the first three months compared to expenditures for furniture
and fixtures and leasehold improvements for the eight new superstores opened and
one store expanded in the same period last year.
YEAR 2000
The Company has conducted an extensive review of its computer systems and
operations to identify the areas that could be affected by the Year 2000 issue.
A plan was developed which focuses on the Company's information systems and
third-party relationships.
With respect to the Company's information systems, the Company has completed
remediation and testing of its mission critical systems and believes that its
own information systems are Year 2000 compliant. The Company will test new
installations, versions or changes implemented during the remainder of fiscal
1999. The Company expects to complete developing contingency plans to address
the most reasonably likely worst case Year 2000 scenarios by the third quarter
of fiscal 1999.
With respect to its third-party relationships, the Company has contacted its
largest suppliers, vendors and service providers to assess their state of Year
2000 readiness. This process is effectively complete. The Company has completed
contingency plans with respect to certain suppliers, vendors and service
providers and is in the process of developing contingency plans for others.
Potential sources of risk include the inability of principal vendors and
suppliers to be Year 2000 compliant, which could result in delays in product
deliveries from vendors, and disruption of the Company's distribution channel.
The Company believes the geographically diverse nature of its business and its
large vendor and supplier base should minimize such potential sources of risk.
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Based on the efforts to date, the Company does not believe that the Year 2000
issue will have a material adverse effect on its consolidated financial
condition or results of operations. The Company's costs incurred to date
associated with the Year 2000 issue are not material. The Company estimates that
the costs associated with the completion of the Year 2000 project, excluding any
costs that may be incurred by the Company as a result of the failure of any
third-parties to become Year 2000 compliant, will also not be material.
FORWARD LOOKING STATEMENTS
This Form 10-Q may contain forward looking statements. Important factors which
may affect these statements are contained in the Company's Annual Report to
shareholders for the fiscal year ended February 27, 1999.
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PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Company's Annual Meeting was held on June 25, 1999. At the Annual Meeting,
the following items were voted upon:
1. The election of two directors of the Corporation.
2. The ratification of the appointment of KPMG LLP as independent auditors
for the fiscal year ending February 26, 2000.
3. The shareholder proposal concerning diversified representation on the
Board of Directors.
The results of the voting were as follows:
SHARES VOTED
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Against/
Description For Withheld
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Election of the Board
of Directors:
Leonard Feinstein 119,662,613 3,364,074
Robert S. Kaplan 119,662,613 3,364,074
Against/
For Withheld Abstentions
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Appointment of Auditors:
KPMG LLP 122,884,321 77,929 64,437
Against/ Broker
For Withheld Abstentions Non-Votes
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Diversified representation
on the Board of Directors: 11,469,080 94,977,506 4,202,476 12,377,625
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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 May 29, 1999.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BED BATH & BEYOND INC.
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(Registrant)
Date: July 13, 1999 By: /s/ Ronald Curwin
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Ronald Curwin
Chief Financial Officer and Treasurer
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EXHIBIT INDEX
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Exhibit No. Exhibit Page No.
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27 Financial Data Schedule 13
(Filed electronically with SEC only)
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