UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
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 27, 2000
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Common Stock - $0.01 par value 141,335,147
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BED BATH & BEYOND INC. AND SUBSIDIARIES
INDEX
PAGE NO.
PART I - FINANCIAL INFORMATION
Consolidated Balance Sheets
May 27, 2000 and February 26, 2000 3
Consolidated Statements of Earnings
Three Months Ended May 27, 2000 and May 29, 1999 4
Consolidated Statements of Cash Flows
Three Months Ended May 27, 2000 and May 29, 1999 5
Note to Consolidated Financial Statements 6
Management's Discussion and Analysis of Financial Condition
and Results of Operations 7 - 8
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 9
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 PER SHARE DATA)
May 27, February 26,
2000 2000
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(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $136,387 $144,031
Merchandise inventories 548,018 470,433
Prepaid expenses and other current assets 42,064 32,904
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Total current assets 726,469 647,368
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Property and equipment, net 218,019 208,911
Other assets 10,131 9,521
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$954,619 $865,800
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $188,218 $145,114
Accrued expenses and other current liabilities 114,973 108,079
Income taxes payable 29,666 33,590
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Total current liabilities 332,857 286,783
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Deferred rent 20,788 19,972
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Total liabilities 353,645 306,755
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Shareholders' equity:
Preferred stock - $0.01 par value; authorized -
1,000 shares; no shares issued or
outstanding -- --
Common stock - $0.01 par value; authorized - 350,000 shares;
issued and outstanding - May 27, 2000, 141,335 shares and
February 26, 2000, 140,406 shares 1,413 1,404
Additional paid-in capital 114,954 96,398
Retained earnings 484,607 461,243
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Total shareholders' equity 600,974 559,045
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$954,619 $865,800
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See accompanying Note to Consolidated Financial Statements.
BED BATH & BEYOND INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
Three Months Ended
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May 27, May 29,
2000 1999
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Net sales $462,735 $359,372
Cost of sales, including buying,
occupancy and indirect costs 275,389 213,158
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Gross profit 187,346 146,214
Selling, general and administrative expenses 151,007 118,199
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Operating profit 36,339 28,015
Interest income 1,962 1,302
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Earnings before provision for income taxes 38,301 29,317
Provision for income taxes 14,937 11,434
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Net earnings $ 23,364 $ 17,883
======== ========
Net earnings per share - Basic $ 0.17 $ 0.13
Net earnings per share - Diluted $ 0.16 $ 0.12
Weighted average shares outstanding - Basic 140,859 139,528
Weighted average shares outstanding - Diluted 144,977 144,037
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See accompanying Note to Consolidated Financial Statements.
BED BATH & BEYOND INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS, UNAUDITED)
Three Months Ended
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May 27, May 29,
2000 1999
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Cash Flows from Operating Activities:
Net earnings $ 23,364 $ 17,883
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 9,928 6,881
Tax benefit from exercise of stock options 11,470 2,856
Deferred income taxes (1,932) (1,353)
Increase in assets:
Merchandise inventories (77,585) (54,739)
Prepaid expenses and other current assets (7,475) (1,846)
Other assets (363) (47)
Increase (decrease) in liabilities:
Accounts payable 43,104 50,883
Accrued expenses and other current liabilities 6,894 10,907
Income taxes payable (3,924) 6,163
Deferred rent 816 935
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Net cash provided by operating activities 4,297 38,523
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Cash Flows from Investing Activities:
Capital expenditures (19,036) (7,034)
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Net cash used in investing activities (19,036) (7,034)
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Cash Flows from Financing Activities:
Proceeds from exercise of stock options 7,095 1,873
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Net cash provided by financing activities 7,095 1,873
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Net (decrease) increase in cash and cash equivalents (7,644) 33,362
Cash and cash equivalents:
Beginning of period 144,031 90,396
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End of period $ 136,387 $ 123,758
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See accompanying Note to Consolidated Financial Statements.
BED BATH & BEYOND INC. AND SUBSIDIARIES
NOTE TO CONSOLIDATED FINANCIAL STATEMENTS
1) BASIS OF PRESENTATION
The accompanying consolidated financial statements, except for the February 26, 2000 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 27, 2000 and February 26, 2000 and the results of their operations and their cash flows for the three months ended May 27, 2000 and May 29, 1999, 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 26, 2000 for additional disclosures, including a summary of the Company's significant accounting policies.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Three Months May 27, 2000 vs. Three Months May 29, 1999
Net sales for the first quarter ended May 27, 2000 were $462.7 million, an increase of $103.3 million or approximately 28.8% over net sales of $359.4 million for the corresponding quarter last year. Approximately 83.4% of the increase was attributable to new store net sales. The increase in comparable store net sales in the first quarter of 2000 was approximately 5.0%. 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 first quarter were attributable to sales of domestics merchandise and home furnishings merchandise, respectively.
Gross profit for the first quarter of 2000 was $187.3 million or 40.5% of net sales compared with $146.2 million or 40.7% of net sales during the first quarter of 1999. The decrease in gross profit, as a percentage of net sales, in the first quarter of 2000, 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 $151.0 million in the first quarter of 2000 compared with $118.2 million in the same quarter last year and as a percentage of net sales were 32.6% and 32.9%, respectively. The decrease in SG&A, as a percentage of net sales, primarily reflects a relative decrease in occupancy costs which was partially offset by a relative increase in payroll and payroll related items.
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 251 stores at the end of the first quarter of 2000 compared with 191 stores at the end of the corresponding quarter last year. Total square footage grew to approximately 10.1 million square feet at the end of the first quarter of 2000, from approximately 7.9 million square feet at the end of the first quarter of last year. The total number of stores and the total square footage does not include the Company's electronic service site which was launched on November 28, 1999.
During the first quarter of fiscal 2000, the Company opened ten new superstores resulting in an aggregate addition of .3 million square feet to total store space. The Company anticipates opening at least 50 additional stores by the end of the fiscal year, aggregating at least 1.7 million square feet of additional store space.
FINANCIAL CONDITION
Total assets at May 27, 2000 were $954.6 million compared with $865.8 million at February 26, 2000, an increase of $88.8 million. Of the total increase, $79.1 million represented an increase in current assets and $9.7 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 27, 2000 were $353.6 million compared with $306.8 million at February 26, 2000, an increase of $46.9 million. The increase was primarily attributable to a $43.1 million increase in accounts payable (resulting from an increase in merchandise inventories).
Shareholders' equity was $601.0 million at May 27, 2000 compared with $559.0 million at February 26, 2000. The increase primarily reflects net earnings for the first three months of fiscal 2000 and additional paid-in capital from the exercise of stock options.
Capital expenditures for the first three months of fiscal 2000 were $19.0 million compared with $7.0 million for the corresponding period last year. The increase is primarily attributable to expenditures for furniture, fixtures and leasehold improvements for the ten new superstores opened during the first three months and for the electronic service site, compared to expenditures for furniture, fixtures and leasehold improvements for the five new superstores opened and two stores expanded in the same period last year.
The Company believes that it will be able to finance both its normal operations and its expansion program for the foreseeable future through internally generated funds.
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 26, 2000.
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Company's Annual Meeting was held on June 29, 2000. At the Annual Meeting, the following items were voted upon:
1. The election of two directors.
2. The ratification of the appointment of KPMG LLP as independent auditors for the fiscal year ending March 3, 2001.
3. The ratification of the adoption of the Bed Bath & Beyond Inc. 2000 Stock Option Plan.
4. The shareholder proposal concerning diversified representation on the Board of Directors.
The results of the voting were as follows:
SHARES VOTED (in thousands)
Against/
Description For Withheld
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Election of the Board
of Directors:
Steven H. Temares 136,789 2,693
Klaus Eppler 136,788 2,694
For Against Abstain
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Ratify the Appointment of Auditors:
KPMG LLP 139,119 46 317
For Against Abstain
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Ratify the Adoption of the
Bed Bath & Beyond Inc. 2000
Stock Option Plan: 110,029 28,999 454
Broker
For Against Abstain Non-Votes
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Diversified representation
on the Board of Directors: 23,880 94,854 7,018 13,730
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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 27, 2000.
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.
Date: July 11, 2000 By: /s/ Ronald Curwin
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Ronald Curwin
Chief Financial Officer
and Treasurer
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Exhibit No. Exhibit Page No.
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10 Bed Bath & Beyond Inc. 2000 Stock Option Plan
(incorporated by reference to Exhibit A to the
Registrant's Proxy Statement dated May 22, 2000)
27 Financial Data Schedule 12
(Filed electronically with SEC only)
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| ARTICLE 5 |
| This schedule contains summary financial information extracted from the Consolidated Balance Sheet as of May 27, 2000 and the Consolidated Statement of Earnings for the three months ended May 27, 2000, and is qualified in its entirety by reference to such financial statements. |
| PERIOD TYPE | 3 MOS |
| FISCAL YEAR END | MAR 03 2001 |
| PERIOD END | MAY 27 2000 |
| CASH | 136,387 |
| SECURITIES | 0 |
| RECEIVABLES | 0 |
| ALLOWANCES | 0 |
| INVENTORY | 548,018 |
| CURRENT ASSETS | 726,469 |
| PP&E | 339,789 |
| DEPRECIATION | (121,770) |
| TOTAL ASSETS | 954,619 |
| CURRENT LIABILITIES | 332,857 |
| BONDS | 0 |
| PREFERRED MANDATORY | 0 |
| PREFERRED | 0 |
| COMMON | 1,413 |
| OTHER SE | 599,561 |
| TOTAL LIABILITY AND EQUITY | 954,619 |
| SALES | 462,735 |
| TOTAL REVENUES | 462,735 |
| CGS | 275,389 |
| TOTAL COSTS | 275,389 |
| OTHER EXPENSES | 151,007 |
| LOSS PROVISION | 0 |
| INTEREST EXPENSE | (1,962) |
| INCOME PRETAX | 38,301 |
| INCOME TAX | 14,937 |
| INCOME CONTINUING | 23,364 |
| DISCONTINUED | 0 |
| EXTRAORDINARY | 0 |
| CHANGES | 0 |
| NET INCOME | 23,364 |
| EPS BASIC | .17 |
| EPS DILUTED | .16 |