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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 August 28, 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 AUGUST 28, 1999
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Common Stock - $0.01 par value 139,838,979
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BED BATH & BEYOND INC. AND SUBSIDIARIES
INDEX
PAGE NO.
PART I - FINANCIAL INFORMATION
Consolidated Balance Sheets
August 28, 1999 and February 27, 1999 3
Consolidated Statements of Earnings
Three Months and Six Months Ended
August 28, 1999 and August 29, 1998 4
Consolidated Statements of Cash Flows
Six Months Ended August 28, 1999 and August 29, 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 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 28, February 27,
1999 1999
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(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $130,845 $ 90,396
Merchandise inventories 439,535 360,337
Prepaid expenses and other current assets 7,545 4,546
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Total current assets 577,925 455,279
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Property and equipment, net 160,457 150,438
Other assets 31,703 27,431
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$770,085 $633,148
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $151,558 $ 99,370
Accrued expenses and other current liabilities 109,991 89,725
Income taxes payable 21,124 16,610
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Total current liabilities 282,673 205,705
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Deferred rent 18,177 16,356
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Total liabilities 300,850 222,061
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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 - August 28, 1999, 139,838,979
shares and February 27, 1999, 139,418,120 shares 1,398 1,394
Additional paid-in capital 86,692 79,679
Retained earnings 381,145 330,014
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Total shareholders' equity 469,235 411,087
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$770,085 $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 Six Months Ended
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August 28, August 29, August 28, August 29,
1999 1998 1999 1998
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Net sales $ 457,586 $ 344,946 $ 816,958 $ 614,517
Cost of sales, including buying,
occupancy and indirect costs 272,016 203,003 485,174 362,395
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Gross profit 185,570 141,943 331,784 252,122
Selling, general and administrative expenses 131,990 100,183 250,189 189,618
------------ ------------ ------------ ------------
Operating profit 53,580 41,760 81,595 62,504
Interest income 923 571 2,225 1,388
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Earnings before provision for income taxes 54,503 42,331 83,820 63,892
Provision for income taxes 21,256 16,827 32,690 25,397
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Net earnings $ 33,247 $ 25,504 $ 51,130 $ 38,495
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Net earnings per share - Basic $ 0.24 $ 0.18 $ 0.37 $ 0.28
Net earnings per share - Diluted $ 0.23 $ 0.18 $ 0.35 $ 0.27
Weighted average shares outstanding - Basic 139,777,975 138,740,110 139,652,739 138,530,307
Weighted average shares outstanding - Diluted 144,166,940 142,934,866 144,101,941 142,842,389
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
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August 28, August 29,
1999 1998
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Cash Flows from Operating Activities:
Net earnings $ 51,130 $ 38,495
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 14,198 10,743
Deferred income taxes (2,507) (2,356)
Increase in assets:
Merchandise inventories (79,198) (72,168)
Prepaid expenses and other current assets (2,999) (3,464)
Other assets (1,765) (1,291)
Increase (decrease) in liabilities:
Accounts payable 52,188 44,788
Accrued expenses and other current liabilities 20,266 9,500
Income taxes payable 4,514 (4,036)
Deferred rent 1,821 1,790
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Net cash provided by operating activities 57,648 22,001
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Cash Flows from Investing Activities:
Capital expenditures (24,217) (25,432)
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Net cash used in investing activities (24,217) (25,432)
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Cash Flows from Financing Activities:
Proceeds from exercise of stock options 7,018 9,059
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Net cash provided by financing activities 7,018 9,059
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Net increase in cash and cash equivalents 40,449 5,628
Cash and cash equivalents:
Beginning of period 90,396 53,280
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End of period $ 130,845 $ 58,908
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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 August 28,
1999 and February 27, 1999 and the results of their operations for the
three months and six months ended August 28, 1999 and August 29, 1998,
respectively, and their cash flows for the six months ended August 28,
1999 and August 29, 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 August 28, 1999 vs. Three Months August 29, 1998
Net sales for the second quarter ended August 28, 1999 were $457.6 million, an
increase of $112.6 million or approximately 32.7% over net sales of $344.9
million for the corresponding quarter last year. Approximately 72.3% of the
increase was attributable to new store net sales. The increase in comparable
store net sales in the second quarter of 1999 was 9.7%. The increase in
net sales reflects a number of factors, including but not limited to, the
continued consumer acceptance of the Company's merchandise offerings and
customer service and the generally favorable retailing environment.
Approximately 55% and 45% of net sales for the second quarter were attributable
to sales of domestics merchandise and home furnishings merchandise,
respectively.
Gross profit for the second quarter of 1999 was $185.6 million or 40.6% of net
sales compared with $141.9 million or 41.1% of net sales during the second
quarter of 1998. The decrease in gross profit in the second quarter of 1999 as
a percentage of net sales, as compared to the same period a year ago, was
attributable to a number of factors, including a different mix of sales as well
as a continued emphasis on providing value pricing to the customer.
Selling, general and administrative expenses ("SG&A") were $132.0 million in the
second quarter of 1999 compared with $100.2 million in the same quarter last
year and as a percentage of net sales were 28.8% and 29.0%, respectively. The
decrease in SG&A, as a percentage of net sales, primarily reflects a relative
decrease in payroll and payroll related items, occupancy costs and costs
associated with new store openings.
Six Months August 28, 1999 vs. Six Months August 29, 1998
Net sales for the six months ended August 28, 1999 were $817.0 million, an
increase of $202.4 million or approximately 32.9% over net sales of $614.5
million for the corresponding period last year. Approximately 72.4% of the
increase was attributable to new store net sales. The increase in comparable
store net sales for the first six months of 1999 was approximately 9.8%.
Gross profit for the first six months of 1999 was $331.8 million or 40.6% of
net sales compared with $252.1 million or 41.1% of net sales during the same
period last year. The decrease in gross profit in the six months of 1999 as a
percentage of net sales, as compared to the same period a year ago, was
attributable to a number of factors, including a different mix of sales as well
as a continued emphasis on providing value pricing to the customer.
SG&A was $250.2 million in the first six months of 1999 compared with $189.6
million for the same period last year and as a percentage of net sales were
30.6% and 30.9%, respectively. The decrease in SG&A, as a percentage of net
sales, primarily reflects a relative decrease in payroll and payroll related
items, costs associated with new store openings and occupancy costs.
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EXPANSION PROGRAM
The Company is engaged in an ongoing expansion program involving the opening of
new stores in both existing and new markets and the expansion or replacement of
existing stores with larger stores. As a result of this program, the total
number of stores has increased to 201 stores at the end of the second quarter of
1999 compared with 159 stores at the end of the corresponding quarter last year.
Total square footage grew to 8,286,000 square feet at the end of the second
quarter of 1999, from 6,539,000 square feet at the end of the second quarter of
last year.
During the first six months of fiscal 1999, the Company opened 15 new
superstores and expanded two existing stores resulting in an aggregate addition
of 598,000 square feet to total store space. The Company anticipates opening
approximately 35 additional stores and expanding two existing stores by the end
of the fiscal year, aggregating approximately 1,500,000 square feet of store
space for the year.
FINANCIAL CONDITION
Total assets at August 28, 1999 were $770.1 million compared with $633.1 million
at February 27, 1999, an increase of $136.9 million. Of the total increase,
$122.6 million represented an increase in current assets and $14.3 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, changes in merchandising
mix.
Total liabilities at August 28, 1999 were $300.9 million compared with $222.1
million at February 27, 1999, an increase of $78.8 million. The increase was
primarily attributable to a $52.2 million increase in accounts payable
(resulting from an increase in inventories) and a $20.3 million increase in
accrued expenses and other current liabilities.
Shareholders' equity was $469.2 million at August 28, 1999 compared with $411.1
million at February 27, 1999. The increase reflects net earnings for the first
six months of fiscal 1999 and additional paid-in capital from the exercise of
stock options.
Capital expenditures for the first six months of fiscal 1999 were $24.2 million
compared with $25.4 million for the corresponding period last year. The decrease
is primarily attributable to expenditures for furniture and fixtures and
leasehold improvements for the 15 new superstores opened and two stores expanded
during the first six months compared to expenditures for furniture and fixtures
and leasehold improvements for the 18 new superstores opened and two stores
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.
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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.
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 has substantially completed 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.
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 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 28, 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: October 12, 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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3.1 Amended By-Laws of Bed Bath & Beyond Inc.
(As amended through September 22, 1999) 12 - 22
27 Financial Data Schedule 23
(Filed electronically with SEC only)
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