<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended April 26, 1997
Commission file number 333-25511
BJ'S WHOLESALE CLUB, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 04-3360747
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Mercer Road
Natick, Massachusetts 01760
(Address of principal executive offices) (Zip Code)
(508) 651-7400
(Registrant's telephone number, including area code)
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 No X*.
--- ---
The number of shares of the Registrant's common stock outstanding as of June
27, 1997: 100
* The Registrant is a wholly-owned subsidiary of Waban Inc. On June 5, 1997,
the Registrant's Registration Statement on Form S-1 (File No. 333-25511) was
declared effective by the Securities and Exchange Commission. This report is
being filed in accordance with the requirements of Rule 15d-13 of the
Securities Exchange Act of 1934. The Registrant meets the conditions set forth
in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing
this form utilizing the reduced disclosure format provided for by such General
Instruction.
<PAGE>
<TABLE>
PART I FINANCIAL INFORMATION
BJ'S WHOLESALE CLUB, INC.
COMBINED STATEMENTS OF INCOME
(Unaudited)
<CAPTION>
Thirteen Weeks Ended
-----------------------
April 26, April 27,
1997 1996
----------- -----------
(In Thousands)
<S> <C> <C>
Net sales $665,922 $610,300
Membership fee income 13,025 12,088
-------- --------
Total revenues 678,947 622,388
-------- --------
Cost of sales, including buying and occupancy costs 612,199 562,309
Selling, general and administrative expenses 51,374 47,015
Interest on debt and capital leases (net) 3,882 4,254
-------- --------
Total expenses 667,455 613,578
-------- --------
Income before income taxes 11,492 8,810
Provision for income taxes 4,435 3,427
-------- --------
Net income $ 7,057 $ 5,383
======== ========
Note: In accordance with SEC rules, historical earnings per share for periods
prior to the public issuance of common stock are not presented.
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
<TABLE>
BJ'S WHOLESALE CLUB, INC.
COMBINED BALANCE SHEETS
(Unaudited)
<CAPTION>
April 26, January 25, April 27,
1997 1997 1996
----------- ----------- -----------
(Dollars In Thousands)
<S> <C> <C> <C>
ASSETS
Current assets:
Accounts receivable $ 22,320 $ 34,006 $ 26,821
Merchandise inventories 317,056 295,216 285,142
Current deferred income taxes 6,186 6,549 8,194
Prepaid expenses 5,312 6,091 5,862
--------- --------- ---------
Total current assets 350,874 341,862 326,019
--------- --------- ---------
Property at cost:
Land and buildings 270,265 265,971 246,352
Leasehold costs and improvements 34,831 34,764 33,371
Furniture, fixtures and equipment 188,243 186,696 167,080
--------- --------- ---------
493,339 487,431 446,803
Less accumulated depreciation
and amortization 114,822 106,821 89,969
--------- --------- ---------
378,517 380,610 356,834
--------- --------- ---------
Property under capital leases 6,219 6,219 3,993
Less accumulated amortization 1,659 1,618 2,071
--------- --------- ---------
4,560 4,601 1,922
--------- --------- ---------
Other assets 10,385 10,138 8,041
--------- --------- ---------
Total assets $ 744,336 $ 737,211 $ 692,816
========= ========= =========
LIABILITIES
Current liabilities:
Accounts payable $ 187,158 $ 200,024 $ 179,066
Accrued expenses and other
current liabilities 58,736 66,302 51,138
Accrued federal and state
income taxes 9,508 12,431 3,858
Obligations under capital leases
due within one year 174 163 210
--------- --------- ---------
Total current liabilities 255,576 278,920 234,272
--------- --------- ---------
Obligations under capital leases,
less portion due within one year 2,553 2,592 2,703
Other noncurrent liabilities 28,269 28,466 27,054
Deferred income taxes 3,485 3,545 3,534
Loans and advances from Waban Inc. 171,789 148,081 197,887
STOCKHOLDER'S EQUITY
Common stock, par value $.01,
authorized 180,000,000 shares,
issued and outstanding 32,872,244
shares 329 329 329
Retained earnings 282,335 275,278 227,037
--------- --------- ---------
Total stockholder's equity 282,664 275,607 227,366
--------- --------- ---------
Total liabilities and
stockholder's equity $ 744,336 $ 737,211 $ 692,816
========= ========= =========
The accompanying notes are an integral part of the financial statements.
</TABLE>
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<TABLE>
BJ'S WHOLESALE CLUB, INC.
COMBINED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Thirteen Weeks Ended
--------------------
April 26, April 27,
1997 1996
--------- ---------
(In Thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 7,057 $ 5,383
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization of property 9,092 7,978
Loss on property disposals 128 48
Deferred income taxes 303 (202)
Increase (decrease) in cash
due to changes in:
Accounts receivable 11,686 4,121
Merchandise inventories (21,840) (13,704)
Prepaid expenses 779 870
Other assets (247) 365
Accounts payable (12,866) 9,951
Accrued expenses (4,393) (4,984)
Accrued income taxes (2,923) (6,244)
Other noncurrent liabilities (197) 1,020
------- -------
Net cash provided by (used in) operating
activities (13,421) 4,602
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions (10,293) (20,686)
Property disposals 34 -
------- -------
Net cash used in investing activities (10,259) (20,686)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of capital lease obligations (28) (73)
Increase in loans and advances from Waban Inc. 23,708 16,157
------- -------
Net cash provided by financing
activities 23,680 16,084
------- -------
Net increase (decrease) in cash - -
Cash at beginning of year - -
------- -------
Cash at end of period $ - $ -
======= =======
Supplemental cash flow information:
Interest paid $ 3,891 $ 4,263
Income taxes paid 7,055 9,873
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
<TABLE>
BJ'S WHOLESALE CLUB, INC.
COMBINED STATEMENTS OF STOCKHOLDER'S EQUITY
(Unaudited)
<CAPTION>
(In Thousands Except Per Share Amounts)
----------------------------------------------
Common
Stock Total
Par Value Retained Stockholder's
$.01 Earnings Equity
---------- ---------- ------------
<S> <C> <C> <C>
Balance, January 27, 1996 $ 329 $221,654 $221,983
Net income - 5,383 5,383
---- ------- -------
Balance, April 27, 1996 $ 329 $227,037 $227,366
==== ======= =======
Balance, January 25, 1997 $ 329 $275,278 $275,607
Net income - 7,057 7,057
---- ------- -------
Balance, April 26, 1997 $ 329 $282,335 $282,664
==== ======= =======
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
NOTES TO COMBINED FINANCIAL STATEMENTS
1. BJ's Wholesale Club, Inc. (the "Company") is a newly formed Delaware
corporation which is a wholly-owned subsidiary of Waban Inc. ("Waban"). Waban
currently operates two divisions: BJ's Wholesale Club, a food and general
merchandise warehouse club business, and HomeBase, a home improvement warehouse
business. Waban's 1997 Annual Meeting of Stockholders, at which various
proposals relating to Waban's proposed spin-off (the "Distribution") of its
BJ's Wholesale Club division will be considered, will be held on July 10,
1997. Assuming stockholder approval of such proposals and subject to certain
conditions, including declaration of the distribution of shares of BJ's
Wholesale Club, Inc. by Waban's Board of Directors, the Distribution is
expected to be effected by the end of July 1997. However, Waban's Board of
Directors has reserved discretion to abandon, defer or modify the Distribution
at any time prior to the date on which the Distribution is made.
Prior to the Distribution, Waban will transfer all of the assets and
liabilities of its BJ's Wholesale Club Division to the Company. The combined
financial statements of the Company present the financial results of the BJ's
Wholesale Club Division.
2. The results for the first three months are not necessarily
indicative of the results for the full fiscal year because the Company's
business, in common with the business of retailers generally, is subject to
seasonal influences. The Company's sales and operating income have typically
been strongest in the Christmas holiday season and lowest in the first
quarter of each fiscal year.
3. The financial statements are unaudited and reflect all normal
recurring adjustments considered necessary by the Company for a fair
presentation of its financial statements in accordance with generally
accepted accounting principles.
4. These interim financial statements should be read in conjunction
with the combined financial statements and related notes for the fiscal year
ended January 25, 1997 contained in the Company's Registration Statement on
Form S-1 (Registration No. 333-25511) filed with the Securities and Exchange
Commission.
5. Interest on debt and capital leases (net) includes interest on
intercompany indebtedness to Waban of $3.9 million in the quarter ended April
26, 1997 and $4.4 million in the quarter ended April 27, 1996.
Selling, general and administrative expenses include certain allocations of
overhead incurred by Waban that support the Company's business. These
allocated expenses totalled $1.2 million in the quarter ended April 26, 1997
and $1.0 million in the quarter ended April 27, 1996.
6. Under Waban's cash management system, checks issued by its divisions
but not yet presented to banks may result in overdraft balances for accounting
purposes. The Company had overdraft balances of $8.5 million, $2.3 million and
$2.8 million as of April 26, 1997, January 25, 1997 and April 27, 1996,
respectively. These balances are included in accrued expenses and other
current liabilities on the balance sheet.
7. The historical capitalization of the Company has been retroactively
restated to reflect the anticipated issuance of 32,872,244 shares of common
stock for all periods presented in order to reflect the equity of the Company
on an ongoing basis, as a result of Waban's planned Distribution. (Waban had
32,872,244 common shares outstanding as of April 26, 1997.)
8. The Company operated 80 membership warehouse clubs as of April 26,
1997 versus 72 clubs a year earlier.
<PAGE>
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Thirteen Weeks (First Quarter) Ended April 26, 1997 versus Thirteen Weeks Ended
April 27, 1996.
Results of Operations
- ---------------------
Total revenues for the quarter ended April 26, 1997 were $678.9 million, 9.1%
higher than last year's first quarter. This increase was due to the opening of
new stores since the end of last year's first quarter and a comparable store
sales increase of 2.6%. Total revenues included membership fee income of $13.0
million, 7.8% higher than last year's $12.1 million in the same period.
Cost of sales (including buying and occupancy costs) as a percentage of total
revenues was 90.2% in the first quarter versus 90.3% in last year's first
quarter as a favorable merchandise mix resulted in a slightly higher
merchandise gross margin in 1997.
Selling, general and administrative expenses were 7.6% of total revenues in the
first quarter of both years.
The components of net interest expense were as follows (in thousands):
<TABLE>
<CAPTION>
Thirteen Weeks Ended
--------------------
April 26, April 27,
1997 1996
---- ----
<S> <C> <C>
Interest expense on debt (net) $3,811 $4,177
Interest on capital leases 71 77
----- -----
Interest on debt and capital leases (net) $3,882 $4,254
===== =====
</TABLE>
Interest expense on debt was net of capitalized interest of $80,000 in this
year's first quarter and $240,000 in last year's first quarter.
The Company's first quarter provision for income taxes was 38.6% of pre-tax
income this year versus 38.9% last year.
Net income in the first quarter was $7.1 million, or 1.0% of total revenues,
versus $5.4 million, or 0.9% of total revenues, in last year's first quarter.
The Company's business, in common with the business of retailers generally, is
subject to seasonal influences. The Company's sales and operating income have
typically been strongest in the Christmas holiday season and lowest in the
first quarter of each fiscal year.
Liquidity and Capital Resources
- -------------------------------
Net cash provided by net income plus depreciation in this year's first quarter
was $16.1 million versus $13.4 million in last year's comparable period. A
total of $13.4 million was used in operating activities in the first quarter
this year; $4.6 million was provided by operating activities last year. This
variance was attributable mainly to a decrease in the Company's accounts
payable-to-inventory ratio during the first quarter as compared to last year.
Year-to-date cash expended for property additions was $10.3 million this year
versus $20.7 million in the same period last year. No new clubs were opened in
this year's first quarter, while one new club was opened in last year's first
quarter. One club in the Hartford, Connecticut market was closed in the first
quarter this year.
The Company's capital expenditures are expected to total approximately $80
million in the current fiscal year, based on opening approximately ten new
clubs. The Company recently announced its plans to enter the Cleveland, Ohio
market with three or four new clubs in 1998. The timing of actual club openings
and the amount of related expenditures could vary from these estimates due,
among other things, to the complexity of the real estate development process.
To date, the Company's operations and expansion have been financed through
loans advanced by Waban as needed. The Company expects to establish its own
credit agreement to finance its operations and expansion after the
Distribution.
The Distribution will be considered along with several related proposals at
Waban's Annual Meeting of Stockholders on July 10, 1997. Assuming stockholder
approval of such proposals and subject to certain conditions, including
declaration of the distribution of shares of BJ's Wholesale Club, Inc. by
Waban's Board of Directors, the Distribution is expected to be effected by the
end of July 1997. However, Waban's Board of Directors has reserved discretion
to abandon, defer or modify the Distribution at any time prior to the date on
which the Distribution is made.
Forward-Looking Information
- ---------------------------
This report contains "forward-looking statements," including certain
information with respect to the Company's plans and strategy. For this
purpose, any statements contained herein that are not statements of historical
fact may be deemed to be forward-looking statements. Without limiting the
foregoing, the words "believes," "anticipates," "plans," "expects" and similar
expressions are intended to identify forward-looking statements. There are a
number of important factors that could cause actual events or the Company's
actual results to differ materially from those indicated by such forward-
looking statements. These factors include, without limitation, the outcome of
Waban's proposed Distribution and related transactions described above and the
factors included in the Company's Registration Statement on Form S-1, File No.
333-25511 under the heading "Risk Factors."
<PAGE>
PART II. OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
27.0 Financial Data Schedule
(b) The Company did not file any reports on Form 8-K with the
Securities and Exchange Commission during the quarter ended
April 26, 1997.
<PAGE>
SIGNATURES
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.
BJ'S WHOLESALE CLUB, INC.
-------------------------
(Registrant)
Date: June 27, 1997 /S/ JOHN J. NUGENT
------------- -------------------------
John J. Nugent
President
(Principal Executive Officer)
Date: June 27, 1997 /S/ FRANK D. FORWARD
------------- -------------------------
Frank D. Forward
Treasurer
(Principal Financial and
Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the BJ's
Wholesale Club, Inc. combined statements of income and consolidated balance
sheets filed with the Form 10-Q for the quarter ended April 26, 1997 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-END> APR-26-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 22,320
<ALLOWANCES> 0
<INVENTORY> 317,056
<CURRENT-ASSETS> 350,874
<PP&E> 499,558
<DEPRECIATION> 116,481
<TOTAL-ASSETS> 744,336
<CURRENT-LIABILITIES> 255,576
<BONDS> 2,553
<COMMON> 329
0
0
<OTHER-SE> 282,335
<TOTAL-LIABILITY-AND-EQUITY> 744,336
<SALES> 665,922
<TOTAL-REVENUES> 678,947
<CGS> 612,199
<TOTAL-COSTS> 612,199
<OTHER-EXPENSES> 51,374
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,882
<INCOME-PRETAX> 11,492
<INCOME-TAX> 4,435
<INCOME-CONTINUING> 7,057
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,057
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
