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 30, 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) (I.R.S. Employer Identification No.)
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Registrant's telephone number, including area code: (908) 688-0888
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
NUMBER OF SHARES OUTSTANDING OF THE ISSUER'S COMMON STOCK:
CLASS OUTSTANDING AT JULY 10, 1998
----- ----------------------------
Common Stock - $0.01 par value 138,768,852 (gives effect to a two-for-
one stock split in the form of a
stock dividend to be effected July
31, 1998)
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INDEX
PAGE NO.
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PART I - FINANCIAL INFORMATION
Consolidated Balance Sheets
May 30, 1998 and February 28, 1998 3
Consolidated Statements of Earnings
Three Months Ended May 30, 1998 and May 31, 1997 4
Consolidated Statements of Cash Flows
Three Months Ended May 30, 1998 and May 31, 1997 5
Notes 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 - 10
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)
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May 30, February 28,
1998 1998
---- ----
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 57,212 $ 53,280
Merchandise inventories 316,546 270,357
Prepaid expenses and other current assets 5,376 2,323
-------- --------
Total current assets 379,134 325,960
-------- --------
Property and equipment, net 115,745 111,381
Other assets 23,150 20,989
-------- --------
$518,029 $458,330
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $103,723 $ 64,718
Accrued expenses and other current liabilities 75,380 73,610
Income taxes payable 11,232 12,015
-------- --------
Total current liabilities 190,335 150,343
-------- --------
Deferred rent 13,562 12,590
-------- --------
Total liabilities 203,897 162,933
-------- --------
Shareholders' equity:
Preferred stock - $0.01 par value; authorized -
1,000,000 shares; no shares issued or
outstanding -- --
Common stock - $0.01 par value;
authorized - 150,000,000 shares;
issued and outstanding - May 30, 1998,
138,555,706 shares and February 28, 1998
138,087,946 shares 1,386 1,381
Additional paid-in capital 67,087 61,348
Retained earnings 245,659 232,668
-------- --------
Total shareholders' equity 314,132 295,397
-------- --------
$518,029 $458,330
======== ========
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See accompanying Notes to Consolidated Financial Statements.
BED BATH & BEYOND INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
Three Months Ended
------------------------------
May 30, May 31,
1998 1997
---- ----
Net sales $ 269,571 $ 213,662
Cost of sales, including buying,
occupancy and indirect costs 159,392 126,304
------------ ------------
Gross profit 110,179 87,358
Selling, general and administrative expenses 89,435 71,548
------------ ------------
Operating profit 20,744 15,810
Interest income 817 637
------------ ------------
Earnings before provision for income taxes 21,561 16,447
Provision for income taxes 8,570 6,540
------------ ------------
Net earnings $ 12,991 $ 9,907
============ ============
Net earnings per share - Basic $ 0 .09 $ 0 .07
Net earnings per share - Diluted $ 0 .09 $ 0 .07
Weighted average shares outstanding - Basic 138,320,504 137,257,010
Weighted average shares outstanding - Diluted 142,749,912 141,400,422
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See accompanying Notes to Consolidated Financial Statements.
BED BATH & BEYOND INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS, UNAUDITED)
Three Months Ended
----------------------
May 30, May 31,
1998 1997
---- ----
Cash Flows from Operating Activities:
Net earnings $ 12,991 $ 9,907
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 5,252 4,078
Deferred income taxes (1,178) (498)
(Increase) decrease in assets:
Merchandise inventories (46,189) (47,448)
Prepaid expenses and other current assets (3,053) (1,405)
Other assets (983) 22
Increase (decrease) in liabilities:
Accounts payable 39,005 42,602
Accrued expenses and other current liabilities 1,770 5,212
Income taxes payable (783) 1,129
Deferred rent 972 830
-------- --------
Net cash provided by operating activities 7,804 14,429
-------- --------
Cash Flows from Investing Activities:
Capital expenditures (9,616) (10,051)
-------- --------
Net cash used in investing activities (9,616) (10,051)
-------- --------
Cash Flows from Financing Activities:
Proceeds from exercise of stock options 5,744 952
-------- --------
Net cash provided by financing activities 5,744 952
-------- --------
Net increase in cash and cash equivalents 3,932 5,330
Cash and cash equivalents:
Beginning of period 53,280 38,765
-------- --------
End of period $ 57,212 $ 44,095
======== ========
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See accompanying Notes to Consolidated Financial Statements.
BED BATH & BEYOND INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1) BASIS OF PRESENTATION
The accompanying consolidated financial statements, except for the February 28, 1998 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 30, 1998 and February 28, 1998 and the results of their operations and their cash flows for the three months ended May 30, 1998 and May 31, 1997, 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 28, 1998 for additional disclosures, including a summary of the Company's significant accounting policies.
2) SUBSEQUENT EVENTS
In June 1998, the Board of Directors approved a two-for-one stock split of the Company's common stock to be effected in the form of a stock dividend. The stock dividend will be distributed on July 31, 1998, to shareholders of record on July 10, 1998. Accordingly, all shareholders' equity, share and per share amounts for all periods presented have been retroactively adjusted to give effect to the stock split.
In June 1998, the Company's Certificate of Incorporation was amended to increase the number of authorized shares of common stock (par value $.01 per share) from 150,000,000 shares to 350,000,000 shares.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Three Months May 30, 1998 vs. Three Months May 31, 1997
Net sales for the first quarter ended May 30, 1998 were $269.6 million, an increase of $55.9 million or approximately 26.2% over net sales of $213.7 million for the corresponding quarter last year. Approximately 88.3% of the increase was attributable to new store net sales. The increase in comparable store net sales in the first quarter of 1998 was 3.3%. 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 1998 was $110.2 million or 40.9% of net sales compared with $87.4 million or 40.9% of net sales during the first quarter of 1997.
Selling, general and administrative expenses ("SG&A") were $89.4 million in the first quarter of 1998 compared with $71.5 million in the same quarter last year and as a percentage of net sales were 33.2% and 33.5%, respectively. The decrease in SG&A, as a percentage of net sales, primarily reflects a relative decrease in costs associated with new store openings which was partially offset by a relative increase in occupancy costs.
Operating profit in the first quarter of 1998 increased to $20.7 million from $15.8 million in the first quarter of 1997, reflecting primarily the increase in net sales which was partially offset by increases in cost of sales and SG&A.
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 149 stores at the end of the first quarter of 1998 compared with 116 stores at the end of the corresponding quarter last year. Total square footage grew to 6,111,000 square feet at the end of the first quarter of 1998, from 4,644,000 square feet at the end of the first quarter of last year.
During the first quarter of fiscal 1998, the Company opened eight new stores and expanded one existing unit resulting in an aggregate addition of 344,000 square feet to total store space. The Company anticipates opening approximately 32 additional stores and expanding several existing stores by the end of the fiscal year, aggregating approximately 1,400,000 square feet of store space.
FINANCIAL CONDITION
Total assets at May 30, 1998 were $518.0 million compared with $458.3 million at February 28, 1998, an increase of $59.7 million. Of the total increase, $53.2 million represented an increase in current assets and $6.5 million represented an increase in non-current assets. The increase in current assets was primarily attributable to an increase in merchandise inventories, which resulted from new store space and, to a lesser extent, the changes in merchandising mix.
Total liabilities at May 30, 1998 were $203.9 million compared with $162.9 million at February 28, 1998, an increase of $41.0 million. The increase was primarily attributable to a $39.0 million increase in accounts payable (resulting from an increase in inventories) and a $1.8 million increase in accrued expenses and other current liabilities.
Shareholders' equity was $314.1 million at May 30, 1998 compared with $295.4 million at February 28, 1998. The increase primarily reflects net earnings for the first three months of fiscal 1998 and additional paid-in capital from the exercise of stock options.
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 28, 1998.
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Company's Annual Meeting was held on June 26, 1998. At the Annual Meeting, the following items were voted upon:
1. The election of two directors.
2. The ratification of the appointment of KPMG Peat Marwick LLP as independent auditors for the fiscal year ending February 27, 1999.
3. The approval of an amendment to the Company's Certificate of Incorporation to increase the number of authorized shares of common stock.
4. The ratification of the adoption of the Bed Bath & Beyond Inc. 1998 Stock Option Plan.
The results of the voting were as follows:
SHARES VOTED
------------
Against/
Description For Withheld
----------- --- --------
Election of the Board
of Directors:
Warren Eisenberg 58,142,957 1,035,458
Robert J. Swartz 58,145,937 1,032,478
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Against/
For Withheld Abstentions
--- -------- -----------
Appointment of Auditors:
KPMG Peat Marwick LLP 59,127,124 27,366 23,925
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Against/
For Withheld Abstentions
--- -------- -----------
Amend the Company's
Certificate of Incorporation: 55,508,509 3,511,266 158,640
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SHARES VOTED
------------
Against/ Broker
Description For Withheld Abstentions Non-Votes
----------- --- -------- ----------- ---------
Adopt the Bed Bath &
Beyond Inc.1998 Stock
Option Plan: 53,510,63 5,107,876 319,653 240,249
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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 30, 1998.
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
BED BATH & BEYOND INC.
(Registrant)
Date: July 14, 1998 By: /s/ Ronald Curwin
-----------------
Ronald Curwin
Chief Financial Officer and Treasurer
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EXHIBIT INDEX
Exhibit No. Exhibit Page No.
----------- ------- --------
3 Certificate of Amendment of Certificate 12
of Incorporation
10 Bed Bath & Beyond Inc. 1998 Stock Option
Plan (incorporated by reference to Exhibit
A to the Registrant's Proxy Statement dated
May 15, 1998)
27 Financial Data Schedule 13
(Filed electronically with SEC only)
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EXHIBIT 3
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
BED BATH & BEYOND INC.
(Under Section 805 of the Business Corporation Law)
It is certified that:
1. The name of the corporation is BED BATH & BEYOND INC. The name under which the corporation was originally formed is B & B TEXTILE CORPORATION.
2. The original Certificate of Incorporation of the corporation was filed by the Department of State of the State of New York on October 5, 1971.
3. Paragraph (a) of Article Fourth of the Certificate of Incorporation is amended as follows to increase the number of shares from the presently authorized 150,000,000 shares of common stock par value $.01 per share to 350,000,000 shares of common stock par value $.01. The 1,000,000 shares of preferred stock par value $.01 shall remain unchanged.
"(a) Authorized Classes of Stock: The total number of shares which the corporation shall have the authority to issue is 351,000,000 of which 350,000,000 are designated Common Stock, par value $.01 per share ("Common Stock"), and 1,000,000 shares are designated Preferred Stock, par value $.01 per share ("Preferred Stock")."
4. The amendment of the Certificate of Incorporation was authorized first by vote of the Board of Directors of the corporation and then by the vote of the holders of a majority of all outstanding shares entitled to vote thereon.
IN WITNESS WHEREOF, we have subscribed this document on June 26, 1998, and do hereby affirm, under the penalties of perjury, that the statements contained herein have been examined by us and are true and correct.
/s/ Leonard Feinstein ------------------------------------- LEONARD FEINSTEIN, President /s/ Warren Eisenberg ------------------------------------- WARREN EISENBERG, Secretary |
| ARTICLE 5 |
| This schedule contains summary financial information extracted from the Consolidated Balance Sheet as of May 30, 1998 and the Consolidated Statement of Earnings for the three months ended May 30, 1998, and is qualified in its entirety by reference to such financial statements. |
| PERIOD TYPE | 3 MOS |
| FISCAL YEAR END | FEB 27 1999 |
| PERIOD START | MAR 01 1998 |
| PERIOD END | MAY 30 1998 |
| CASH | 57,212 |
| SECURITIES | 0 |
| RECEIVABLES | 0 |
| ALLOWANCES | 0 |
| INVENTORY | 316,546 |
| CURRENT ASSETS | 379,134 |
| PP&E | 178,410 |
| DEPRECIATION | (62,665) |
| TOTAL ASSETS | 518,029 |
| CURRENT LIABILITIES | 190,335 |
| BONDS | 0 |
| PREFERRED MANDATORY | 0 |
| PREFERRED | 0 |
| COMMON | 1,386 |
| OTHER SE | 312,746 |
| TOTAL LIABILITY AND EQUITY | 518,029 |
| SALES | 269,571 |
| TOTAL REVENUES | 269,571 |
| CGS | 159,392 |
| TOTAL COSTS | 159,392 |
| OTHER EXPENSES | 89,435 |
| LOSS PROVISION | 0 |
| INTEREST EXPENSE | (817) |
| INCOME PRETAX | 21,561 |
| INCOME TAX | 8,570 |
| INCOME CONTINUING | 12,991 |
| DISCONTINUED | 0 |
| EXTRAORDINARY | 0 |
| CHANGES | 0 |
| NET INCOME | 12,991 |
| EPS PRIMARY | .09 1 |
| EPS DILUTED | .09 |
| 1 | THE AMOUNT IS REPORTED AS EPS BASIC AND NOT FOR EPS PRIMARY. |