FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 28, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from............ to ...........
Commission File No.: 1-8739
BURLINGTON COAT FACTORY WAREHOUSE CORPORATION
---------------------------------------------
(Exact Name of Registrant as specified in its charter)
State or other jurisdiction: Delaware
I.R.S. Employer incorporation or
organization Identification No.: 22-1970303
1830 Route 130, Burlington, New Jersey 08016
-----------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code: (609) 387-7800
Securities registered pursuant to Section 12(b) of the Act:
Title of each class: Common Stock, $1.00 par value per share
Name of each exchange
on which registered: New York Stock Exchange, Inc.
Securities Registered pursuant to Section 12(g) of the Act:
Title of Class: None
Page 1 of 118<PAGE>
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 registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES X NO___.
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ ]
The aggregate market value of the Common Stock, $1.00 par value
("Common Stock"), of the registrant held by non-affiliates of the
registrant, as determined by reference to the closing price of
the Common Stock on the New York Stock Exchange as of August 29,
1997, was $349,910,822.
As of August 29, 1997, the number of shares of Common Stock,
$1.00 par value, outstanding was 41,257,921.
The documents incorporated by reference into this Form 10K:
Registrant's Proxy Statement to be filed pursuant to Regulation 14A
The Part of the Form 10-K into which the document is incorporated
Part III
Page 2 of 118<PAGE>
PART I
Item 1. Business
--------
Burlington Coat Factory Warehouse Corporation and its
subsidiaries (the "Company" or "Burlington Coat") operate a
chain of "off-price" apparel stores which offer a broad range of
moderate to higher priced, current brand name merchandise for
men, women and children at prices substantially below traditional
full retail prices generally charged by department and specialty
stores. In addition, Burlington Coat offers customers a complete
line of men's, women's and children's wear as well as a linens,
bath shop items, gifts and accessories department in 191 of its
stores and a children's furniture department in approximately 166
of its stores. The Company's policy of buying significant
quantities of merchandise throughout the year, maintaining
inventory control and using a "no-frills" merchandising approach,
allows it to offer merchandise at prices below traditional full
retail prices. The sale of irregular or discontinued merchandise
represents only a small portion of the Company's business.
Merchandise is displayed on easy access racks, and sales assistance
generally is available. Clothing alteration services are available
on a limited basis in many stores for an additional charge.
Burlington Coat's practice of purchasing outerwear early in
each fashion season and of reordering in rapid response to sales
has enabled it to maintain a large, current and varied selection
of outerwear throughout each year. Although the Company believes
that this practice helps attract customers to its stores, to the
extent the Company maintains a relatively large volume of merchandise,
particularly outerwear, the risks related to style changes, weather
and other seasonal factors, and economic conditions are necessarily
greater than if the Company maintained smaller inventories.
An important factor in Burlington Coat's operations has been
its continued ability to purchase desirable, first-quality
current brand labeled merchandise directly from manufacturers on
terms at least as favorable as those offered large retail department
and specialty stores. The Company estimates that over 1,000
manufacturers of apparel, including over 300 manufacturers of
outerwear, are represented at the Company's stores, and that no
Page 3 of 118<PAGE>
manufacturer accounted for more than 5% of the Company's purchases
during the last full fiscal year. The Company does not maintain
any long term or exclusive commitments or arrangements
to purchase from any manufacturer. No assurance can be given
that the Company will be able to continue to purchase such
merchandise directly from manufacturers or to continue its
current selling price structure. See "Competition."
The Company sells its merchandise to retail customers for
cash and accepts checks and most major credit cards. The Company's
"Cohoes" division also offers its own credit card. In addition, the
Company sells on a layaway plan and offers special orders on selected
merchandise. It does not offer refunds, except on furs, defective
merchandise and certain sales from specialty retail operations,
but will exchange or give store credit slips for merchandise returned
within a prescribed period of time.
The Company advertises primarily on television and, to a
lesser extent, in regional and local newspapers and radio.
During the past three fiscal years, advertising expenditures have
averaged approximately 2.7% of total revenues.
The Stores
- ----------
As of August 31, 1997, the Company operated 250 stores, all
but 19 of which are located in leased facilities ranging in size
(including storage space) from approximately 16,000 to approximately
163,000 square feet, with an average area of approximately 66,000
square feet. Selling space accounts for over four-fifths of the
total area in most stores.
All of the Company's stores are either free-standing or are
located in shopping malls or strip shopping centers. The Company
believes that its customers are attracted to its stores principally
by the availability of a large assortment of first-quality current
brand name merchandise at attractive prices.
The Company also operates stores under the names "Cohoes
Fashions," "Decelle," "Luxury Linens," "Totally 4 Kids," and
"Baby Depot". Cohoes Fashions offers merchandise in the middle
to higher price range. Decelle offers merchandise in the moder-
Page 4 of 118<PAGE>
ate price range for the entire family with an emphasis on children's
and youth wear. Luxury Linens is a specialty store for linens,
bath shop items, gifts and accessories and offers merchandise in
the middle to higher range. Totally 4 Kids is a moderate to upscale
concept store offering maternity wear, baby furniture, children's
wear from toddlers up to teens, children's books, toys, computer
software for kids, and educational tapes, all in a family
environment. Baby Depot is a concept store specializing in infant
to toddler apparel, baby and juvenile furniture and furnishings
and accessories.
In general, Burlington Coat generally has selected sites for
its stores where there are suitable existing structures which can
be refurbished, and, if necessary, enlarged, in a manner consistent
with the Company's merchandising concepts. In some cases, space has
been substantially renovated or built to specifications given by
Burlington Coat to the lessor. Such properties have been available
to the Company on lease terms which it believes have been favorable.
See "Growth and Expansion."
The stores generally are located in close proximity to
population centers, department stores and other retail operations
and are usually established near a major highway or thoroughfare,
making them easily accessible by automobile. Since the Company's
stores are generally located outside of urban centers and the
Company believes that some of its customers drive long distances
to visit store locations, it is likely that the Company would be
adversely affected by any conditions which were to result in the
reduction of automobile use.
The Company owns substantially all the equipment used in its
stores and believes that its selling space is well utilized and
that its equipment is well maintained and suitable for its
requirements.
At August 31, 1997, a majority of the Company's stores
contained one or more departments leased by unaffiliated parties
for the sale of jewelry and fragrance. During the fiscal year
ended June 28, 1997, the Company's rental income from all of its
leased departments aggregated less than 1% of the Company's total
revenues.
Page 5 of 118<PAGE>
Central Distribution
- --------------------
Central distribution, warehousing, ticketing and marking
services are extended to approximately fifty percent of the
dollar volume of the Company's merchandise through its office and
warehouse/distribution facility in Burlington, New Jersey. This
facility services the Company's present stores. The Company is
leasing approximately 85,000 square feet of warehouse space nearby
to its existing warehouse distribution center for the purpose of
warehousing and distributing its juvenile furniture inventory.
Growth and Expansion
- --------------------
Since 1972 when its first store was opened in Burlington,
New Jersey, the Company has expanded to two hundred twenty-four
Burlington Coat stores, four Cohoes Fashions stores, nine Decelle
stores, six stand-alone Luxury Linens stores, five Totally 4 Kids
store, and two stand alone Baby Depot stores as of August 31,
1997.
At August 31, 1997 the Company operated stores in 42 states
and is exploring expansion opportunities both within its current
market areas and in other regions. For fiscal 1998, the Company
has opened or plans to open approximately twelve to twenty
additional Burlington Coat Factory stores. The Company continues
to monitor store profitability and should economic factors
change, some store closings could be possible.
The Company believes that its ability to find satisfactory
locations for its stores is essential for the continued growth of
its business. The opening of stores generally is contingent upon
a number of factors, including the availability of desirable
locations with suitable structures and the negotiation of acceptable
lease terms. There can be no assurance, however, that the
Company will be able to find suitable locations for new stores or
that even if such locations are found and acceptable lease terms
are obtained, the Company will be able to open the number of new
stores presently planned.
Page 6 of 118<PAGE>
The Company operates its own jewelry department in sixteen
stores as of August 31, 1997. The jewelry program consists of
karat gold and precious and semi-precious stone jewelry, and in
some stores may include brand-name watches.
In May of 1994, the Company opened its first "Totally 4
Kids" store in Sterling, Virginia. The store caters to the
moderate to upscale market and offers maternity wear, baby
furniture, children's wear up to teens, children's books,
educational tapes, computer software for kids, and toys in a family
environment. As of August 31, 1997, the Company operated five
Totally 4 Kids stores in four states, one each in Virginia, New
Jersey, Tennessee, and two in California.
In September, 1994, the Company entered into a license
arrangement with a vendor to supply department store brand or
better fragrance and cosmetics to 127 stores on a test basis.
The program was expanded to 220 stores and the arrangement has
been extended through January 31, 1998.
In fiscal 1997 the Company began to operate its own shoe
department. At August 31, 1997 the Company operated this department
in approximately forty-five Burlington Coat Factory stores with
plans to expand to approximately 100 stores by the end of fiscal
1998. The shoe department offers a full line of mens and womens
shoes in many brands and styles.
Also in fiscal 1997, the Company began offering merchandise
for sale through its internet web site (http://www.coat.com).
Currently, ladies coats, kids clothing and baby and infant
products are available for purchase via this medium. If this
experiment is successful, the Company plans to expand the merchandise
mix offered through its web site; however, no assurance
can be given that this venture will be successful. To date,
sales generated from its internet web site have been negligible.
The Company seeks to maintain its competitive position and
improve its prospects by periodically reevaluating its methods of
operation, including its pricing and inventory policies, the
format of its stores and its ownership or leasing of stores.
Page 7 of 118<PAGE>
Seasonality
- -----------
The Company's business is seasonal, with its highest sales
occurring in the second fiscal quarter of each year. For the
past six fiscal years, approximately 57% of the Company's net
sales have occurred during the period from September through
January. Weather, however, continues to be an important contributing
factor to the sale of clothing in the fall, winter and spring seasons.
Generally, the Company's sales are higher if the weather is cold
during the fall and warm during the early spring. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
Operations
- ----------
Each store has a manager and one or more assistant managers,
as well as department managers. The Company also employs regional
and district managers to supervise overall store operating and
merchandising policies. Major merchandising decisions are made,
overall policies are set, and accounting and general financial
functions for the Company's stores are conducted, at corporate
headquarters. In addition, the Company employs directors of
administration, store operations, loss prevention and merchandise
presentation who are in charge of those functions on a Company-
wide basis.
Merchandise purchased by the Company is either shipped
directly from manufacturers to store locations or distributed
through the Company's warehousing and distribution facility. See
"Central Distribution." A computerized merchandise information
system provides regular detailed reports of sales and inventory
levels for each store and assists the merchandise managers and
buyers in monitoring and adjusting inventory levels.
At June 28, 1997, the Company had approximately 17,600
employees, including a large number of part-time and seasonal
employees which varies throughout the year. Of the Company's
employees, only those employed at one of its stores and at its
warehousing facility (aggregating up to 500 persons at its peak
and approximately 400 persons at June 28, 1997) are covered by
collective bargaining agreements. The Company cannot predict
Page 8 of 118<PAGE>
whether any future attempts to unionize its employees will be
successful. The Company believes that its relationship with its
employees has been and remains satisfactory.
Competition
- -----------
General. The retail apparel business is highly competitive.
Competitors include other individual, regional and national "off-
price" retailers offering similar merchandise at comparable
prices as well as individual and chain stores, some of which are
regional and national department and discount store chains. At
various times throughout the year department store chains and
specialty shops offer brand name merchandise at substantial
markdowns, which can result in prices approximating those offered
by the Company. Some of the Company's competitors are considerably
larger than the Company and have substantially greater financial
and other resources.
Resale Price Maintenance. Since it is the general policy of
the Company to sell at lower than the traditional full retail
price, its business may be adversely affected by manufacturers
who attempt to maintain the resale price of their merchandise by
refusing to sell, or to grant advertising allowances, to purchasers
who do not adhere to their suggested retail prices. Federal
legislation and regulations have been proposed from time to time
which, if enacted, would be helpful to manufacturers attempting
to establish minimum prices or withhold allowances. In addition,
the rules against resale price maintenance have been subject to
challenge in the courts from time to time.
The Company has, on several occasions in the past, brought
lawsuits against certain manufacturers and department store
chains and complained to the Federal Trade Commission seeking
more vigorous enforcement of existing Federal laws, as well as
testified before Congress in connection with proposed legislation
concerning the Federal antitrust laws.
Item 2. Properties
----------
The Company owns the land and building for nineteen of its
stores and is a 50% partner in a partnership which owns the
Page 9 of 118<PAGE>
building in which one store is located. Generally, however, the
Company's policy has been to lease its stores. Store leases
generally provide for fixed monthly rental payments, plus the
payment, in most cases, of real estate taxes and other charges
with escalation clauses. In certain locations, the Company's
store leases contain formulas providing for the payment of
additional rent based on sales.
<TABLE>
The following table shows the years in which store leases
existing at August 31, 1997 expire:
<CAPTION>
Fiscal Years Number of Leases Expiring with
Ending June 30 Expiring Renewal Options
- -------------- ---------------- ---------------
<S> <C> <C>
1998-1999 49 43
2000-2001 33 27
2002-2003 19 11
2004-2005 36 22
2006-2007 25 16
Thereafter 77 32
--- ---
Total 239 151
=== ===
</TABLE>
The Company owns five buildings in Burlington, New Jersey.
Of these buildings, two are used by the Company as retail space.
In addition, the Company owns approximately 97 acres of land in
the Townships of Burlington and Florence, New Jersey on which the
Company has constructed its office and warehouse/distribution
facility. The Company leases approximately 85,000 square feet of
space nearby to the warehouse/distribution facility to store its
juvenile furniture inventory. The Company leases approximately
20,000 square feet of office space in New York City with a right
of occupancy that expires in January, 2001.
Item 3. Legal Proceedings
-----------------
In late September 1994, three putative class action lawsuits,
P. Gregory Buchanan v. Monroe G. Milstein, et al., No. 94-
Page 10 of 118<PAGE>
CV-4663, Jacob Turner v. Monroe G. Milstein, et al., No. 94-CV-4737,
and Ronald Abramoff v. Monroe G. Milstein, et al., No. 94-CV-4751
(collectively, the "Class Actions"), were filed against
the Company, Monroe G. Milstein, Stephen E. Milstein and Robert
L. LaPenta, Jr. in the United States District Court for the
District of New Jersey. By Order entered November 15, 1994, the
Court consolidated the Class Actions under the caption In re
Burlington Coat Factory Securities Litigation. On January 17,
1995, plaintiffs filed their Consolidated Amended and Supplemental
Class Action Complaint (the "Amended Complaint"), naming as
defendants, in addition to those originally named in September
1994, Andrew R. Milstein and Mark A. Nesci. The Amended Complaint
sought unspecified damages in connection with alleged violations
of Sections 10(b) (and Rule 10b-5 promulgated thereunder) and 20(a)
of the Securities Exchange Act of 1934, as amended. The Amended
Complaint alleged material misstatements and omissions by the Company
and certain of its officers and directors that plaintiffs alleged
caused the Company's common stock to be artificially inflated during
the proposed Class Period, which was defined in the Amended Complaint
as the period from October 4, 1993 through September 23, 1994.
On March 3, 1995, the Company and the individual defendants served
a motion to dismiss plaintiffs' Amended Complaint. On February 20, 1996,
the District Court granted the Company's motion and dismissed the
plaintiffs' Amended Complaint in its entirety. In March, 1996,
the plaintiffs filed an appeal from the District Court's decision
in the United States Court of Appeals for the Third Circuit (the
"Appeal"). The Appeal was orally argued before a panel of three
judges on December 12, 1996. On June 10, 1997 the panel rendered
an unanimous decision affirming the District Court's dismissal of
the action but ruled that the District Court should allow the
plaintiffs to attempt to replead two of the six claims. The
matter has since been remanded to the District Court.
In the past, the Company has initiated several lawsuits in
its effort to stop what it believes to be unlawful practices on
the part of certain manufacturers and large retailers to control
the prices at which certain items of merchandise may be sold at
the Company's stores.
Page 11 of 118<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
The Company did not submit any matter to a vote of its
security holders during the fourth quarter of fiscal 1997.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
---------------------------------------------------------------------
The Company's Common Stock is traded on the New York Stock
Exchange, Inc. and its trading symbol is "BCF."
The following table provides the high and low closing prices
on the New York Stock Exchange for each fiscal quarter for the
period from July 2, 1995 to June 28, 1997 and for the two months
ended August 31, 1997.
<TABLE>
<CAPTION>
Period Low Price High Price
------ --------- ----------
<S> <C> <C>
July 2, 1995 to
September 30, 1995 10 14 1/8
October 1, 1995 to
December 30, 1995 10 1/4 13 1/4
December 31, 1995 to
March 30, 1996 9 3/8 12 1/4
March 31, 1996 to
June 29, 1996 10 1/8 12 1/8
June 30, 1996 to
September 28, 1996 10 11 1/8
September 29, 1996 to
December 28, 1996 10 7/8 13 1/4
December 29, 1996 to
March 29, 1997 12 3/8 17 3/4
Page 12 of 118<PAGE>
March 30, 1997 to
June 28, 1997 17 1/2 20
June 29, 1997 to
August 31, 1997 15 3/16 23
</TABLE>
At August 31, 1997 there were 405 record holders of the
Company's Common Stock. The number of record holders does not
reflect the number of beneficial owners of the Company's Common
Stock for whom shares are held by Cede & Co., certain brokerage
firms and others.
Dividend Policy
- ---------------
On September 8, 1997 the Board of Directors of the Company
declared the Company's first cash dividend in the amount of two
cents ($.02) per share payable annually. Maintenance of the cash
dividend policy or any change thereto in the future will be at the
discretion of the Company's Board of Directors and will depend
upon the financial condition, capital requirements and earnings
of the Company as well as other factors which the Board of
Directors may deem relevant. At present, the policy of the Board
of Directors of the Company is to retain the majority of earnings
to finance the growth and development of the Company's business.
Item 6. Selected Financial Data
-----------------------
The following table sets forth certain selected financial data:
<TABLE>
<CAPTION>
7/3/93 7/2/94 7/1/95 6/29/96 6/28/97
(In thousands of dollars, except per share data)
<S> <C> <C> <C> <C> <C>
Statement of Operations:
Revenues $1,214,783 $1,480,676 $1,597,028 $1,610,892 $1,776,823
Net Income 42,903(1) 45,383 14,866 29,013 56,515
Net Income per Share 1.06(1)(3) 1.12 .37 .71 1.41
Pro Forma Net Income .88(2) .93(2) .30(2) .59(2) 1.17(2)
per Share
Balance Sheet Data:
Total Assets $ 585,481 $ 725,439 $ 735,269 $ 704,731 $ 775,077
Working Capital 275,113 278,590 245,468 288,107 319,736
Long-Term Debt 91,428 91,369 83,298 74,907 62,274
Stockholders' Equity 323,111 369,857 385,019 413,745 460,215
</TABLE>
Page 13 of 118<PAGE>
__________________
[FN]
<F1>
(1) Effective June 28, 1992, the Company adopted Statement
of Financial Accounting Standards No. 109, "Accounting
for Income Taxes." The Company reflected the cumulative
effect of change in accounting for income taxes by
recording a benefit of $.6 million ($.02 per share)
during fiscal 1993.
<F2>
(2) Adjusted to give retroactive effect to six for five stock
split effective in October, 1997.
<F3>
(3) Adjusted to give retroactive effect to three for two stock
split effective September, 1993.
</FN>
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
-------------------------------------------------
The Company maintains its records on the basis of a 52-53
week fiscal year ending on the Saturday closest to June 30.
Fiscal 1997 ended on June 28, 1997, fiscal 1996 ended on June 29,
1996 and fiscal 1995 ended on July 1, 1995 and comprised 52 weeks
each.
Results of Operations
- ---------------------
Fiscal Years Ended July 1, 1995,
June 29, 1996, and June 28, 1997
--------------------------------
The following table sets forth certain items in the
consolidated statements of operations as a percentage of net
sales for the fiscal years ended July 1, 1995, June 29, 1996 and
June 28, 1997.
Page 14 of 118<PAGE>
<TABLE>
<CAPTION>
Percentage of Net Sales
-----------------------
Fiscal Year Ended
- -----------------------------------------------------------------------------
7/01/95 6/29/96 6/28/97
<S> <C> <C> <C>
Net Sales 100.0% 100.0% 100.0%
Costs and expenses:
Cost of sales 66.9 65.4 64.1
Selling and administrative 29.7 30.1 29.3
expenses
Depreciation and amortization 1.7 1.9 1.8
Interest expense 0.9 0.7 0.4
------ ------ ------
99.2 98.1 95.6
------ ------ ------
Other income 0.7 1.2 1.0
------ ------ ------
Income before income taxes 1.5 3.1 5.4
Provision for income taxes 0.6 1.3 2.2
------ ------ ------
Net income 0.9% 1.8% 3.2%
====== ====== ======
</TABLE>
Results of Operations
- ---------------------
Performance in 1997 compared with 1996
- --------------------------------------
Net sales increased $166.4 million (10.5%) for fiscal 1997
compared with fiscal 1996. Comparative store sales increased
7.4%. The Company believes the increase in comparative sales in
fiscal 1997 was due mainly to an improved retail environment
relative to fiscal 1996. Eight new Burlington Coat Factory
Warehouse stores opened during fiscal 1997 contributed $42.8
million to this year's sales. Stores which were in operation a
year ago, but which were closed prior to this year, contributed
$10.2 million to last year's sales.
The Cohoes stores showed a comparative stores sales increase
of 6.1%, while contributing $42.2 million to consolidated sales
for the fiscal year. During fiscal 1997, one Cohoes store was
closed. This store contributed $5.9 million to net sales in
fiscal 1997 compared with $6.6 million in fiscal 1996.
Page 15 of 118<PAGE>
Sales in fiscal 1997 for the Decelle stores were $37.5
million compared with $34.6 million in fiscal 1996. Fiscal 1997
comparative store sales were flat for the Decelle division.
During fiscal 1997, there was one new store opening within the
Decelle division. This store contributed $1.2 million to net
sales.
In addition, fiscal 1997 saw the opening of a new Totally 4
Kids store in Ontario, California and a Baby Depot store in
Arlington Heights, Illinois. In addition to the store closings
in the Burlington Coat Factory Warehouse, Cohoes, and Decelle
divisions, one Luxury Linens store, one Totally 4 Kids store, and
the Fit for Men store were closed during fiscal 1997.
Other income (consisting of rental income from leased
departments, investment income and miscellaneous items) decreased
to $18.5 million for the year ended June 28, 1997 compared with
$18.9 million for the year ended June 29, 1996. An increase in
investable funds in fiscal 1997 generated an increase of approx-
imately $4.5 million in investment income over fiscal 1996.
Offsetting this increase was a decrease of approximately $1.7
million in rental income during fiscal 1997 compared with fiscal
1996. The Company recorded a net loss on the disposition of
property of $1.1 million during fiscal 1997. During fiscal 1996
the Company recorded a net loss in the disposition of property
from closed stores of $1.8 million. Offsetting this loss in
fiscal 1996 was a $1.8 million gain on the sale of the Company's
Secaucus, New Jersey facility. In addition, the Company recorded
miscellaneous non-recurring income items of approximately $1.1
million during fiscal 1997 compared with $4.0 million during
fiscal 1996.
Cost of sales increased $86.6 million (8.3%) for fiscal 1997
compared with fiscal 1996. The dollar increase in cost of sales
was due to the increase in net sales during the current fiscal
year compared with the prior year. Cost of sales, as a per-
centage of net sales, decreased from 65.4% in fiscal 1996 to
64.1% in fiscal 1997. This decrease is due mainly to higher
initial markons maintained throughout fiscal 1997 compared with
the prior year. In addition, markdowns, as a percentage of
sales, were down slightly in fiscal 1997 compared with fiscal
1996 due to lower comparative inventory levels.
Page 16 of 118<PAGE>
Selling and administrative expenses increased $35.1 million
(7.3%) from fiscal 1996 to fiscal 1997. This increase in expense
was due mainly to an increase in payroll and payroll related
expenses. Comparative store payroll costs increased 5.0% in
fiscal 1997 compared with fiscal 1996. Annual pay increases and
increased staffing levels at the stores contributed to this
change. In addition, the Company incurred increased staffing
levels at both the home office and the distribution center during
fiscal 1997. As a percentage of net sales, selling and admini-
strative expenses were 29.3% in the 1997 fiscal year compared
with 30.1% for the prior fiscal year, a decrease of .8%. This
improvement is primarily the result of the increase in comparative
store sales realized by the Company in fiscal 1997.
Depreciation and amortization expense amounted to $31.0
million in fiscal 1997 compared with $29.9 million in fiscal
1996. This increase of $1.1 million in the fiscal 1997 period
compared with fiscal 1996 is attributable to new stores opened
during the year as well as remodeling and fixturing of existing
stores.
Interest expense decreased $3.7 million for the fiscal year
ended June 28, 1997 compared with the fiscal year ended June 29,
1996. The decrease in interest expense is the result of decreases
in borrowing levels associated with the Company's revolving
credit and term loan agreements, the refinancing of its industrial
development bonds, and the repayment of $13.4 million of its
subordinated bonds.
The provision for income taxes increased to $39.2 million
for the fiscal year ended June 28, 1997 from $20.0 million for
the fiscal year ended June 29, 1996. The effective tax rate was
41.0% for the year ended June 28, 1997 compared with 40.8% for
fiscal 1996.
Net income increased $27.5 million to $56.5 million for
fiscal 1997 from $29.0 million for fiscal 1996. Income per share
was $1.41 per share for fiscal 1997 compared with $.71 for fiscal
1996.
The Company's business is seasonal, with its highest sales
occurring in the months of September, October, November, December,
and January of each year. The Company's net income generally
reflects the same seasonal pattern as its net sales. In the
Page 17 of 118<PAGE>
past, substantially all of the Company's profits have been
derived from operations during the months of September,
October, November, December, and January.
Performance in 1996 compared with 1995
- --------------------------------------
Net sales increased $7.0 million (.4%) for fiscal 1996
compared with fiscal 1995. Comparative store sales decreased
7.2%. The Company believes the decrease in comparative store
sales in fiscal 1996 from fiscal 1995 was due mainly to a weak
apparel retail environment. Burlington Coat Factory Warehouse
stores opened during fiscal 1996 contributed $100.2 million to
fiscal 1996's sales. Stores which were in operation in fiscal
1995, but which were closed prior to fiscal 1996, contributed
$15.9 million to fiscal 1995's sales. The Cohoes stores showed a
comparative stores sales decrease of 11.3%, while contributing
$40.8 million to consolidated sales for the fiscal year. Sales
in fiscal 1996 for the Decelle stores were $34.6 million compared
with $33.1 million in fiscal 1995. Two Totally 4 Kids stores and
one Luxury Linens store opened during fiscal 1996 contributed
sales of $6.0 million to net sales. Sales from leased departments,
included in the twelve month net sales figure, were $34.9
million compared with $27.4 million fiscal 1995.
The Company closed nine stores during fiscal 1996. These
stores contributed $15.5 million to net sales for fiscal 1996
compared with $23.3 million in fiscal 1995.
Other income (consisting primarily of rental income from
leased departments, investment income and miscellaneous items)
increased to $18.9 million for the year ended June 29, 1996
compared with $12.1 million for the year ended July 1, 1995. The
increase for the fiscal year was due in part to a gain of approximately
$1.8 million on the sale of the Company's Secaucus, New Jersey
facility, a portion of which the Company had been leasing
to third parties and a portion of which it uses as a store. In
addition, increases in interest income of $4.2 million were the
result of increases in investable funds generated by the Company
through its continued plan of maintaining lower inventory levels
compared with inventory levels of a year ago. Furthermore,
during the third quarter of fiscal 1996, the Company recorded
non-recurring miscellaneous income of $4.0 million. Partially
Page 18 of 118<PAGE>
offsetting these increases was a loss of $1.8 million for the
twelve month period ended June 29, 1996 recorded for the writeoff
of leasehold improvements of stores closed during this fiscal
year.
Cost of sales decreased $19.8 million (1.9%) for fiscal 1996
compared with fiscal 1995. The dollar decrease in cost of sales
was due in part to a 7.2% decline in comparative store sales.
This was partially offset by cost of sales from new stores opened
during the year. Cost of sales as a percentage of net sales
decreased from 66.9% in fiscal 1995 to 65.4% in fiscal 1996. Cost
of sales declined in fiscal 1996 as a percentage of net sales due
to higher initial markups as a result of better opportunistic
buys. In addition, markdowns as a percentage of sales were down
due to the significantly lower inventory levels carried at the
stores. Freight as a percentage of purchases was down approximately
0.3% percent in fiscal 1996 over fiscal 1995.
Selling and administrative expenses increased by $7.9
million (1.7%) from fiscal 1995 to fiscal 1996. This increase in
expense was due primarily to costs associated with new store
operations. As a percentage of net sales, selling and adminis-
trative expenses were 30.1% in the 1996 fiscal year compared with
29.7% for the prior fiscal year, an increase of 0.4%.
Depreciation and amortization expense amounted to $29.9
million in fiscal 1996 compared with $26.3 million in fiscal
1995. This increase of $3.6 million in the fiscal 1996 period
compared with fiscal 1995 is attributable to new stores opened
during the year as well as remodeling and fixturing of existing
stores.
Interest expense decreased $1.9 million for the fiscal year
ended June 29, 1996 compared with the fiscal year ended July 1,
1995. The decrease in interest expense is the result of decreases
in borrowing levels associated with the Company's revolving
credit and term loan agreements and the refinancing of its
industrial development bonds.
The provision for income taxes increased to $20.0 million
for the fiscal year ended June 29, 1996 from $10.1 million for
the fiscal year ended July 1, 1995. The effective tax rate was
Page 19 of 118<PAGE>
40.8% for the year ended June 29, 1996 compared with 40.4% for
fiscal 1995.
Net income increased $14.1 million to $29.0 million for
fiscal 1996 from $14.9 million for fiscal 1995. Income per share
was $.71 per share for fiscal 1996 compared with $.37 for fiscal
1995.
Liquidity and Capital Resources
- -------------------------------
During the year ended June 28, 1997, the Company opened
eleven stores, including eight Burlington Coat Factory Warehouse
stores, one "Baby Depot" store, one "Totally 4 Kids" store and
one Decelle store. The Company closed six stores during the
fiscal year ended June 28, 1997. Expenditures incurred to acquire,
set up and fixture new stores opened during fiscal 1997
were approximately $7.7 million. In addition, the Company
expended approximately $13.9 million for capital improvements and
refurbishing of existing stores. During fiscal 1997, the Company
purchased the land and building associated with one of its stores
for $2.5 million. The Company estimates that it will spend
approximately $27.0 million for capital expenditures (i.e.,
fixtures, equipment and leasehold improvements) in connection
with the opening of from twelve to twenty new stores and remodeling
of existing stores during fiscal 1998.
The Company repurchased 857,900 shares of its stock, costing
approximately $10.8 million in the current fiscal year. These
purchases are reflected as treasury stock in the equity section
of the balance sheet. As of June 28, 1997 the Company had
authority to purchase an additional $6.0 million of its stock.
In July 1997, the Company's Board of Directors authorized the
Company to purchase an additional $10.0 million of treasury
stock. In July 1997, the Company repurchased 447,800 shares of
its stock costing $6.8 million.
Working capital increased to $319.7 million at June 28, 1997
from $288.1 million at June 29, 1996. At July 1, 1995, working
capital was $245.5 million.
Total funds provided from operations for the fiscal years
ended July 1, 1995, June 29, 1996, and June 28, 1997 were $45.5
Page 20 of 118<PAGE>
million, $66.9 million, and $97.1 million, respectively. Total
funds from operations are calculated by adding back to net income
non-cash expenditures such as depreciation and deferred taxes.
Net cash provided by operating activities of $141.5 million
for the fiscal year ended June 28, 1997, decreased from $163.4
million in net cash provided from operating activities for fiscal
1996. This decrease in net cash from operations was due mainly
to a reduction in merchandise inventory in the current year of
$4.2 million versus an $81.6 million reduction in inventory
during fiscal 1996. This variance in inventory was offset in
part by the increases in earnings during fiscal 1997 versus
fiscal 1996 and to the early funding of insurance programs at the
end of fiscal 1996 compared with fiscal 1997.
The Company's long-term borrowings at June 28, 1997 include
$59.2 million of long term subordinated notes issued by the
Company to institutional investors in June, 1990 ("the Notes")
and an industrial development bond of $9.7 million issued by the
New Jersey Economic Development Authority.
The Notes mature on June 27, 2005 and bear interest at the
rate of 10.6% per annum. The Notes have a remaining average
maturity of 4.5 years and are subject to mandatory payment in
installments of $8.0 million each without premium on June 27 of
each year beginning in 1996. The Notes are subordinated to
senior debt, including, among others, bank debt and indebtedness
for borrowed money. In July 1996, the Company repurchased an
additional $5.4 million of the Notes, which reduced the Company's
mandatory prepayment to $7.4 million annually. The Company has
no current plans to repurchase or repay any additional amounts
earlier than scheduled but may consider doing so in the future
should conditions favorable to the Company present themselves.
The interest rate on the industrial development bond financ-
ing was originally fixed at 9.78% over the life of these serial
and term bonds (the "Bonds"). The Company refinanced its indus-
trial development bonds with the New Jersey Economic Development
Authority on September 1, 1995. The original bonds were called
at 103 and refinanced with credit enhanced bonds (the "Refunding
Bonds"). The Refunding Bonds consist of serial and term bonds
having the same maturity as the original issue. The serial bonds
aggregate $3.6 million and mature in series annually on September
Page 21 of 118<PAGE>
1, beginning in 1996 and continuing to and including 2003. The
term bonds consist of two portions, $1.4 million maturing on
September 1, 2005 and $5.0 million maturing on September 1, 2010.
The serial bonds bear interest ranging from 3.75% to 5.4% per
annum, and the term bonds bear interest at the rates of 5.60% for
the portion maturing on September 1, 2005 and 6.125% per annum
for the portion maturing on September 1, 2010. The average
interest rate and average maturity of the Refunding Bonds are
5.6% and 9 years, respectively. During the current year's first
fiscal quarter, the Company expended approximately $.3 million
for the repayment of the Refunding Bonds.
The Company has in place a committed line of credit agree-
ment in the amount of $50.0 million and $100.0 million in uncom-
mitted lines of credit. The Company had no borrowings under
these credit lines during fiscal 1997. During fiscal 1996, the
Company had available $50.0 million under a committed line of
credit and $150.0 million under uncommitted lines of credit. The
maximum borrowings outstanding under these lines were $120.4
million during the first quarter of fiscal 1996. The average
borrowings outstanding under the lines were $98.1 million during
the first quarter of fiscal 1996 at an average interest rate of
6.2%. During the second quarter of fiscal 1996, the Company had
a maximum borrowings under these agreements of $84.3 million.
The average borrowing during this period was $65.1 million with
an average borrowing interest rate of 6.2%. As of December 30,
1995, all borrowings under these agreements had been repaid.
There were no additional borrowings under these lines of credit
during the last two quarters of fiscal 1996.
The decrease in short term borrowings, during fiscal 1997,
over the similar period of a year ago is the direct result of
continued maintenance of lower inventory levels in the stores.
In addition, liquidity was enhanced by a significant increase in
profitability during fiscal 1996 and fiscal 1997. Also, reductions
in capital expenditures during fiscal 1996 and fiscal 1997
resulted in lower borrowing requirements.
The Company believes that its current capital expenditures
and operating requirements can be satisfied from internally
generated funds, from short term borrowings under its revolving
credit and term loan agreement as well as uncommitted lines of
credit and from its long term borrowings. The Company may
Page 22 of 118<PAGE>
consider replacing some of its short term borrowings with long
term financing. Furthermore, to the extent that the Company
decides to purchase additional store locations, it may be necessary
to finance such acquisitions with additional long term borrowings.
On or about September 23, 1994 three separate putative class
actions were filed against the Company. These three actions were
consolidated and an amended complaint was served on January 17,
1995. The Company filed a motion to dismiss on May 17, 1995 and a
hearing on the motion was held on July 20, 1995. On February 20,
1996, the District Court dismissed the plaintiff's amended
complaint in its entirety. In March, 1996, plaintiffs filed an
appeal from the District Court's decision. In June, 1997 the
U.S. Court of Appeals for the Third Circuit affirmed the District
Court's dismissal of the class action suits but held that plaintiffs
should be granted leave to attempt to replead two of the six claims
that were dismissed. (See part II - Other Information, Item 1 Legal
Proceedings.) The Company is unable to determine the probability of
any potential loss with respect to these class action suits or the
materiality thereof at this time and accordingly has not established
any reserve for this matter. However, the Company believes the actions
are without merit and intends to vigorously defend them.
Inflation
- ---------
Historically, the Company has been able to increase its
selling prices as the costs of merchandising and related operating
expenses have increased, and therefore, inflation has not had
a significant effect on operations.
Item 8. Financial Statements and Supplementary Data
-------------------------------------------
See Index to Financial Statements and following pages.
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure
---------------------------------------------
None
Page 23 of 118<PAGE>
PART III
Item 10. Directors and Executive Officers of the
Registrant
---------------------------------------
Item 11. Executive Compensation
----------------------
Item 12. Security Ownership of Certain Beneficial
Owners and Management
----------------------------------------
Item 13. Certain Relationships and Related Transactions
----------------------------------------------
In accordance with General Instruction G(3) of the General
Instructions to Form 10-K, the information called for by Items
10, 11, 12 and 13 is omitted from this Report and is incorporated
by reference to the definitive Proxy Statement to be filed by the
Company pursuant to Regulation l4A of the General Rules and
Regulations under the Securities Exchange Act of 1934, which the
Company will file not later than 120 days after June 28, 1997.
PART IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K
----------------------------------------
(a) The following documents are filed as part of this Report.
Page No.
1. Financial Statements
Index to Consolidated Financial 31
Statements
Independent Auditors' Report 32
Consolidated Balance Sheets 33
June 28, 1997 and June 29, 1996
Page 24 of 118<PAGE>
Page No.
Consolidated Statements of Operations 34
Fiscal Years Ended June 28, 1997,
June 29, 1996, and July 1, 1995
Consolidated Statements of 35
Stockholders' Equity for the
Fiscal Years Ended June 28, 1997,
June 29, 1996, and July 1, 1995
Consolidated Statements of Cash 36
Flows for the Fiscal Years
Ended June 28, 1997,
June 29, 1996 and July 1, 1995
Notes to Consolidated Financial 38
Statements
2. Financial Statement Schedules
Schedule II - Valuation and 56
Qualifying Accounts
Schedules I, III, IV and V are omitted
because they are not applicable or
not required or because the required
information is included in the consol-
idated financial statements or notes
thereto.
3. Exhibits
3.1 Articles of Incorporation,
as amended 1/
3.2 By-laws 1/
____________________
(1) Incorporated by reference to the Exhibits filed with the
Company's Annual Report on Form 10-K for the year ended July
3, 1993, File No. 1-8739.
Page 25 of 118<PAGE>
Page No.
*10.1 1993 Stock Incentive Plan 1/
--
10.2 Revolving Credit Agreement dated 2/
August 30, 1985 between the --
Company and BancOhio National
Bank, as amended through Amendment
No. 6.
10.3 Burlington Coat Factory Warehouse 62
Corporation 401(k) Profit-Sharing
Plan (as amended and restated
effective June 29, 1997.)
10.4 Loan Agreement dated as of August 1, 3/
1995 by and between New Jersey --
Economic Development Authority and
Burlington Coat Factory Warehouse
of New Jersey, Inc.
10.5 Assignment of Leases dated as of 3/
August 1, 1995 from Burlington --
Coat Factory Warehouse of New
Jersey, Inc. to First Fidelity
Bank, National Association
10.6 Mortgage and Security Agreement 3/
dated as of August 1, 1995 --
between Burlington Coat Factory
Warehouse of New Jersey, Inc. and
First Fidelity Bank, National
Association
____________________
(2) Incorporated by reference to the Exhibits filed with the
Company's Annual Report on Form 10-K for the year ended June
29, 1996, File No. 1-8739.
(3) Incorporated by reference to the Exhibits filed with the
Company's Annual Report on Form 10-K for the year ended July
1, 1995. File No. 1-8739.
Page 26 of 118<PAGE>
Page No.
10.7 Indenture of Trust dated as of 3/
August 1, 1995 by and between --
New Jersey Economic Development
Authority and Shawmut Bank
Connecticut, National Association
10.8 Guaranty and Suretyship dated as of 3/
August 1, 1995 from the Company to --
First Fidelity Bank, National
Association
10.9 Letter of Credit Reimbursement 3/
Agreement dated as of August 1, 1995 --
between Burlington Coat Factory
Warehouse of New Jersey,
Inc. and First Fidelity Bank,
National Association
10.10 Environmental Indemnity Agreement dated 3/
as of August 1, 1995 between Burlington --
Coat Factory Warehouse of New Jersey,
Inc. and First Fidelity Bank,
National Association
10.11 Note Agreement dated June 27, 1990 3/
--
21 Subsidiaries of Registrant 113
23 Consent of Deloitte & Touche LLP, 115
independent certified public
accountants, to the use of
their report on the financial
statements of the Company for
the fiscal year ended June 28,
1997 in the Registration Statements
of the Company on Form S-8,
Registration No. 2-96332,
No. 33-21569, No. 33-51965 and
No. 33-61351
27 Financial Data Schedule 117
*Executive Compensation Plan
Page 27 of 118<PAGE>
EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS
Description Location
----------- --------
1) 1993 Stock Incentive Plan Filed as Exhibit 10.1
to the Company's Annual
Report on Form 10-K for
the year ended July 3,
1993, Pages 103-130
(b) Reports on Form 8-K
During the period ended June 28, 1997 the Company did not
file any report on Form 8-K.
Page 28 of 118<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
BURLINGTON COAT FACTORY WAREHOUSE CORPORATION
(Registrant)
By: /s/Monroe G. Milstein
Monroe G. Milstein, President
Dated: September 26, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Name Title Date
- ---- ----- ----
/s/Monroe G. Milstin Chief Executive Officer September 26, 1997
Monroe G. Milstein and President (Principal
Executive Officer);
Director
/s/Robert L. LaPenta,Jr. Controller (Principal September 26, 1997
Robert L. LaPenta, Jr. Financial and
Accounting Officer)
/s/Henrietta Milstein Director September 26, 1997
Henrietta Milstein
/s/Harvey Morgan Director September 26, 1996
Harvey Morgan
/s/Andrew R. Milstein Director September 26, 1997
Andrew R. Milstein
/s/Stephen E. Milstein Director September 26, 1997
Stephen E. Milstein
/s/Mark A. Nesci Director September 26, 1997
Mark A. Nesci
/s/Irving Drillings Director September 26, 1997
Irving Drillings
Page 29 of 118<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
Page 30 of 118<PAGE>
BURLINGTON COAT FACTORY WAREHOUSE CORPORATION
AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page No.
Independent auditors' report 32
Consolidated balance sheets 33
June 28, 1997 and June 29, 1996
Consolidated statements of operations for the 34
fiscal years ended June 28, 1997, June 29, 1996
and July 1, 1995
Consolidated statements of stockholders' 35
equity for the fiscal years ended July 1, 1995,
June 29, 1996 and June 28, 1997.
Consolidated statements of cash flows for 36
the fiscal years ended June 28, 1997,
June 29, 1996 and July 1, 1995.
Notes to consolidated financial statements 38
Financial Statement Schedules
Schedule II -- Valuation and Qualifying Accounts 56
Schedules I, III, IV and V are omitted because
they are not applicable or not required
because the required information is included
in the consolidated financial statements or
notes thereto.
Page 31 of 118<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
Burlington Coat Factory Warehouse Corporation
Burlington, New Jersey
We have audited the accompanying consolidated balance
sheets of Burlington Coat Factory Warehouse Corporation and its
subsidiaries as of June 28, 1997 and June 29, 1996, and the
related consolidated statements of operations, stockholders'
equity, and cash flows for each of the three fiscal years in the
period ended June 28, 1997. Our audits also included the finan-
cial statement schedule listed in the Index at Item 14(a)(2).
These financial statements and financial statement schedule are
the responsibility of the Company's management. Our responsibility
is to express an opinion on the financial statements and
financial statement schedule based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe our
audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements
present fairly, in all material respects, the financial position
of Burlington Coat Factory Warehouse Corporation and subsidiaries
at June 28, 1997 and June 29, 1996, and the results of their
operations and their cash flows for each of the three fiscal
years in the period ended June 28, 1997 in conformity with
generally accepted accounting principles. Also, in our opinion,
such financial statement schedule, when considered in relation to
the basic consolidated financial statements taken as a whole,
presents fairly in all material respects the information set
forth therein.
DELOITTE & TOUCHE LLP
Philadelphia, Pennsylvania
September 8, 1997
Page 32 of 118<PAGE>
<TABLE>
<CAPTION>
BURLINGTON COAT FACTORY WAREHOUSE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(All amounts in thousands except share data)
June 28, June 29,
1997 1996
-------- --------
<S> <C> <C>
Current Assets:
Cash and Cash Equivalents $157,394 $ 73,560
Accounts Receivable (Net of Allowance for Doubtful
Accounts of 1997--$953 and 1996--$990) 17,160 15,003
Merchandise Inventories 366,233 370,437
Deferred Tax Asset 9,201 9,762
Prepaid and Other Current Assets 7,150 19,808
--------- ---------
Total Current Assets 557,138 488,570
Property and Equipment Net of Accumulated
Depreciation and Amortization 209,864 206,582
Other Assets 8,075 9,579
--------- ---------
Total Assets $775,077 $704,731
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable $143,840 $118,900
Income Taxes Payable 10,657 5,227
Accrued Insurance Costs 16,500 17,407
Other Current Liabilities 58,574 50,538
Current Maturities of Long-Term Debt 7,831 8,391
--------- ---------
Total Current Liabilities 237,402 200,463
Long-Term Debt 62,274 74,907
Other Liabilities 8,763 8,237
Deferred Tax Liability 6,423 7,379
Commitments and Contingencies
Stockholders' Equity:
Preferred Stock, Par Value $1; Authorized
5,000,000 shares; none issued and outstanding -- --
Common Stock, Par Value $1; Authorized 100,000,000 shares;
41,258,621 shares issued and outstanding at June 28, 1997
41,164,848 shares issued and outstanding at June 29, 1996 41,259 41,165
Capital in Excess of Par Value 25,997 25,384
Retained Earnings 406,123 349,608
Unearned Compensation (54) (87)
Treasury Stock at Cost; 1997-1,326,887 shares;
1996-468,987 shares (13,110) (2,325)
---------
Total Stockholders' Equity 460,215 413,745
---------
Total Liabilities and Stockholders' Equity $775,077 $704,731
=========
See notes to consolidated financial statements
</TABLE>
Page 33 of 118<PAGE>
<TABLE>
<CAPTION>
BURLINGTON COAT FACTORY WAREHOUSE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(All amounts in thousands except share data)
Year Ended
----------------------------------------
June 28, June 29, July 01,
1997 1996 1995
REVENUES: --------- -------- --------
<S> <C> <C> <C>
Net Sales $1,758,368 $1,591,964 $1,584,942
Other Income 18,455 18,928 12,086
---------- ---------- ----------
1,776,823 1,610,892 1,597,028
---------- ---------- ----------
COSTS AND EXPENSES:
Cost of Sales (Exclusive of
Depreciation and Amortization) 1,126,975 1,040,388 1,060,212
Selling and Administrative Expenses 514,959 479,852 471,947
Depreciation and Amortization 31,047 29,913 26,327
Interest Expense 8,080 11,735 13,602
---------- ---------- ----------
1,681,061 1,561,888 1,572,088
---------- ---------- ----------
Income Before Provision for
Income Taxes 95,762 49,004 24,940
Provision for Income Taxes 39,247 19,991 10,074
---------- ---------- ----------
Net Income $56,515 $29,013 $ 14,866
========== ========== ==========
Net Income Per Share $ 1.41 $ 0.71 $ 0.37
========== ========== ==========
Weighted Average Shares Outstanding 40,211,663 40,730,516 40,710,683
========== ========== ==========
Dividends Per Share -- -- --
========== ========== ==========
Pro Forma Data (See Note B):
Pro Forma Net Income per Share $ 1.17 $ 0.59 $ 0.30
========== ========== ==========
Pro Forma Weighted Average 48,253,996 48,876,619 48,852,819
Shares Outstanding ========== ========== ==========
See notes to consolidated financial statements
</TABLE>
Page 34 of 118<PAGE>
<TABLE>
<CAPTION>
BURLINGTON COAT FACTORY WAREHOUSE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED JULY 1, 1995,JUNE 29, 1996 and JUNE 28, 1997
(All amounts in thousands)
Capital in
Common Excess of Retained Treasury Unearned Valuation
Stock Par Value Earnings Stock Compensation Allowance Total
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at July 02, 1994 $41,122 $24,592 $305,729 ($1,850) - $264 $369,857
Net Income 14,866 14,866
Stock Options Exercised 17 551 568
Net Unrealized Loss on Noncurrent
Marketable Securities 12 12
Equity Adjustment for Translation (284) (284)
----------------------------------------------------------------------------------------
Balance at July 01, 1995 41,139 25,143 320,595 ( 1,850) - (8) 385,019
Net Income 29,013 29,013
Stock Options Exercised 16 142 158
Net Unrealized Gain on Noncurrent
Marketable Securities 8 8
Unearned Compensation 10 99 (87) 22
Treasury Stock Transactions (475) (475)
----------------------------------------------------------------------------------------
Balance at June 29, 1996 41,165 25,384 349,608 ( 2,325) (87) - 413,745
Net Income 56,515 56,515
Stock Options Exercised 94 613 707
Unearned Compensation 33 - 33
Treasury Stock Transactions (10,785) (10,785)
----------------------------------------------------------------------------------------
Balance at June 28, 1997 $41,259 $25,997 $406,123 ($13,110) ($54) - $460,215
========================================================================================
See notes to consolidated financial statements
</TABLE>
Page 35 of 118<PAGE>
<TABLE>
<CAPTION>
BURLINGTON COAT FACTORY WAREHOUSE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(All amounts in thousands)
Year Ended
__________________________________________
June 28, June 29, July 01,
1997 1996 1995
------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net Income $ 56,515 $ 29,013 $14,866
Adjustments to Reconcile Net Income to Net Cash
Provided by (Used in) Operating Activities:
Depreciation and Amortization 31,047 29,913 26,327
Provision for Losses on Accounts Receivable 7,203 6,068 5,162
Provision for Deferred Income Taxes (395) 489 (2,920)
(Gain) Loss on Disposition of Fixed Assets 1,165 (100) 536
Non-Cash Rent Expense and Other 1,521 1,438 1,521
Changes in Assets and Liabilities:
Accounts Receivable (9,865) (5,965) (3,032)
Merchandise Inventories 4,204 81,589 16,895
Prepaids and Other Current Assets 12,652 (13,876) 11,962
Accounts Payable 24,940 17,854 (32,660)
Accrued and Other Current Liabilities 12,559 16,931 4,389
--------- --------- ---------
Net Cash Provided by Operating Activities 141,546 163,354 43,046
--------- --------- ---------
INVESTING ACTIVITIES
Acquisition of Property and Equipment (35,797) (29,346) (66,900)
Proceeds From Sale of Fixed Assets 390 17,839 27
Issuance of Long-Term Notes Receivable - (516) (5,202)
Receipts Against Long-Term Notes Receivable 1,085 4,539 1,611
Acquisition of Leaseholds - - (2,652)
Minority Interest (110) (62) (66)
Other (42) (2,485) 2,031
--------- --------- ---------
Net Cash (Used in) Investing Activities (34,474) (10,031) (71,151)
--------- --------- ---------
FINANCING ACTIVITIES
Principal Payments on Long-Term Debt (13,193) (8,066) (59)
Issuance of Common Stock Upon Exercise of
Stock Options 740 158 568
Purchase of Treasury Stock (10,785) (475) -
Net (Payments)Borrowings Under Lines of Credit - (85,900) 20,880
--------- --------- ---------
Net Cash (Used in) Provided by Financing Activities (23,238) (94,283) 21,389
--------- --------- ---------
Increase (Decrease) in Cash and
Cash Equivalents 83,834 59,040 (6,716)
Cash and Cash Equivalents at
Beginning of Period 73,560 14,520 21,236
Cash and Cash Equivalents at -------- --------- ---------
End of Period $157,394 $ 73,560 $14,520
======== ========= =========
Interest Paid $ 8,092 $ 12,062 $13,490
======== ========= =========
Income Taxes Paid $ 34,212 $ 16,339 $10,900
======== ========= =========
See notes to consolidated financial statements
</TABLE>
Page 36 of 118<PAGE>
BURLINGTON COAT FACTORY WAREHOUSE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Supplemental Schedule of Non-Cash Financing and Investing Activities:
During fiscal 1996, the Company granted a restricted stock
award of 10,000 shares of its common stock to an officer of the
Company with a fair market value of $108,800 as of the award's
measurement date. This award vests over a four year period from
the date of grant.
See notes to consolidated financial statements
Page 37 of 118<PAGE>
Notes to Consolidated Financial Statements
- -----------------------------------------------------------------------------
A. Summary of Significant Accounting Policies
1. Business
Burlington Coat Factory Warehouse Corporation operates
249 stores, in 42 states, which sell "off-price" apparel for
men, women and children. A majority of those stores offer a
home linens department and a baby room furniture department.
The Company operates stores under the names "Burlington Coat
Factory Warehouse"(two hundred twenty-three stores),
"Cohoes Fashions" (four stores), "Decelle" (nine stores),
"Luxury Linens" (six stores), "Totally 4 Kids" (five
stores), and "Baby Depot" (two stores). Cohoes Fashions
offers merchandise in the middle to higher price range.
Decelle offers merchandise in the moderate price range for
the entire family with an emphasis on children's and youth
wear. Luxury Linens is a specialty store for linens, bath
shop items, gifts and accessories and offers merchandise in
the middle to higher range. Totally 4 Kids is a moderate to
upscale concept store offering maternity wear, baby furniture,
children's wear from toddlers up to teens, children's
books, toys, computer software for kids and educational
tapes in a family environment. Baby Depot is a stand alone
infant and toddler store specializing in infant and toddler
apparel, furnishings and accessories.
2. Principles of Consolidation
The consolidated financial statements include the
accounts of Burlington Coat Factory Warehouse Corporation
and its subsidiaries (the "Company"). All intercompany
transactions and balances have been eliminated in consolidation.
3. Use of Estimates
The Company's consolidated financial statements have
been prepared in conformity with generally accepted account-
Page 38 of 118<PAGE>
ing principles. Certain amounts included in the consolidated
financial statements are estimated based on currently
available information and management's judgment as to the
outcome of future conditions and circumstances. While every
effort is made to ensure the integrity of such estimates,
including the use of third party specialists where appropriate,
actual results could differ from these estimates.
4. Inventories
Inventories are stated at the lower of the First In
First Out (FIFO) cost or market, as determined by the retail
inventory method.
5. Property and Equipment
Property and equipment are stated at cost and depreciation
is computed on the straight line method over the estimated
useful lives of the assets. The estimated useful
lives are between 20 and 40 years for buildings, depending
upon the expected useful life of the facility, and three to
ten years for store fixtures and equipment. Leasehold
improvements are amortized over a ten year period or lease
term, whichever is less. Repairs and maintenance expenditures
are charged to expense as incurred. Renewals and
betterments which significantly extend the useful lives of
existing property and equipment are capitalized.
6. Store Opening Expenses
Expenses related to new store openings are charged to
operations in the period incurred.
7. Income Taxes
The Company accounts for income taxes in accordance
with Statement of Financial Accounting Standards No. 109
"Accounting for Income Taxes." Deferred income taxes have
been recorded to recognize temporary differences which
Page 39 of 118<PAGE>
result from revenues and expenses being recognized in different
periods for financial reporting purposes than for income tax purposes.
8. Net Income per Share
Net Income per share is based on the weighted average
number of shares outstanding during each period. The
dilutive effect of stock options is not material.
9. Cash and Cash Equivalents
Cash and cash equivalents represent cash and short-term, highly
liquid investments with maturities of three months or less at
the time of purchase. Cash equivalent investments amounted to
$142.3 million at June 28, 1997 and $59.8 million at June 29, 1996.
10. Fiscal Year End Date
The Company's fiscal year is a 52-53 week year with its
year ending on the Saturday closest to June 30th of each
year. Fiscal 1997, Fiscal 1996, and Fiscal 1995 ended June
28, 1997, June 29, 1996 and July 1, 1995, respectively, and
comprised 52 weeks each.
11. Other Income
Other income is primarily rental income received from
leased departments and interest income. In addition, the
Company realized approximately $1.1 million and $4.0 million
in non-recurring income from settlement of contractual
obligations during fiscal 1997 and fiscal 1996, respectively.
Page 40 of 118<PAGE>
12. Reclassifications
Certain reclassifications have been made to the prior
year's financial statements to conform to the classification
used in the current year.
13. Impairment of Long Lived Assets
In March 1995, the Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting Standards
("SFAS") No. 121, Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to Be Disposed of.
The Company adopted this statement in the first fiscal
quarter of the current fiscal year as required by this
statement. This statement requires that long-lived assets
and certain identifiable intangibles to be held and used by
an entity be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount
of an asset may not be recoverable. Also, in general, long-
lived assets and certain intangibles to be disposed of
should be reported at the lower of carrying amount or fair
value less cost to sell. The Company considers historical
performance and future estimated results in its evaluation
of potential impairment and then compares the carrying
amount of the asset to the estimated future cash flows
expected to result from the use of the asset. If the
carrying amount of the asset exceeds estimated expected un-
discounted future cash flows, the Company measures the
amount of the impairment by comparing the carrying amount of
the asset to its fair value. The estimation of fair value
is generally measured by discounting expected future cash
flows at the rate the Company utilizes to evaluate potential
investments. The Company estimates fair value based on the
best information available making whatever estimates,
judgments and projections are considered necessary.
Adoption of this statement did not have a material impact on
the Company's financial statements for the fiscal year ended
June 28, 1997.
Page 41 of 118<PAGE>
14. Stock-Based Compensation
SFAS No. 123, Accounting for Stock Based Compensation,
encourages, but does not require companies to record
compensation cost for stock-based employee compensation
plans at fair value. The Company has chosen to continue to
account for stock-based compensation using the intrinsic
method prescribed in Accounting Principles Board Opinion No.
25, Accounting for Stock Issued to Employees, and related
Interpretations. Accordingly, compensation cost for stock
options is measured as the excess, if any, of the quoted
market price of the Company's stock at the date of the grant
over the amount an employee must pay to acquire the stock
(See Note L).
15. Recent Accounting Pronouncements
a. In February 1997, the Financial Accounting
Standards Board issued Statement of Financial Accounting
Standards No. 128, Earnings Per Share. This Statement will
be effective for financial reporting purposes, for both
interim and year-end financial statements ending after
December 15, 1997. The Company anticipates that this
Statement will not have a material effect on its financial
statements.
b. The Financial Accounting Standards Board has
issued SFAS No. 130. Reporting Comprehensive Income which
will result in disclosure of comprehensive income and its
components (revenues, expenses, gains and losses) in a full
set of general-purpose financial statements. The Company is
not required to adopt this standard until fiscal 1999. At
this time, the Company has not determined the impact this
standard will have on the Company's financial statements.
c. The Financial Accounting Standards Board has
issued SFAS No. 131. Disclosures about Segments of an
Enterprise and Related Information which establishes
standards for the way public business enterprises report
information about operating segments in annual financial
statements and requires that those enterprises report
selected information about operating segments in interim
Page 42 of 118<PAGE>
financial reports issued to shareholders. It also
establishes standards for related disclosures about products
and services, geographic areas, and major customers. The
Company is not required to adopt this standard until 1999.
At this time, the Company has not determined the impact this
standard will have on the Company's financial statements.
B. Stock Split
On September 8, 1997, the Board of Directors declared a
six-for-five split of the Company's common stock effective
October 16, 1997, to stockholders of record on October 1,
1997. This stock split is to be effected in the form of a
20% stock dividend by the distribution of one additional
share for every five shares of stock already issued. Pro
forma net income per share data presented for each of the
three fiscal years in the period ended June 28, 1997 represent
net income divided by the pro forma weighted average number
of shares of common stock outstanding during the periods
adjusted to give retroactive effect to the stock split.
C. Property and Equipment
<TABLE>
<CAPTION>
Property and equipment consists of:
- ------------------------------------------------------------------
June 28, June 29,
1997 1996
(in thousands)
- ------------------------------------------------------------------
<S> <C> <C>
Land $ 19,044 $ 18,345
Buildings 71,409 66,926
Store Fixtures and Equipment 191,871 180,862
Leasehold Improvements 67,871 65,683
Construction in Progress 526 146
--------- ---------
350,721 331,962
Less Accumulated Depreciation --------- ---------
and Amortization (140,857) (125,380)
--------- ---------
$209,864 $206,582
========= =========
</TABLE>
Page 43 of 118<PAGE>
D. Accounts Payable
<TABLE>
<CAPTION>
Accounts payable consists of:
- -------------------------------------------------------------------
June 28, June 29,
1997 1996
(in thousands)
- -------------------------------------------------------------------
<S> <C> <C>
Accounts Payable-Trade $125 827 $ 98,441
Accounts Payable-Due Banks 7,657 10,247
Other 10,356 10,212
-------- --------
$143,840 $118,900
======== ========
</TABLE>
E. Lines of Credit
The Company had a committed line of credit of $50.0 million
at both June 28, 1997 and June 29, 1996. The Company also had an
uncommitted line of credit of $150.0 million at both June 28,
1997 and June 29, 1996. As of August 31, 1997, the Company reduced
its uncommitted lines of credit to $100.0 million. Letters of
credit outstanding against these lines were $53.3 million and
$38.6 million at June 28, 1997 and June 29, 1996, respectively.
The Company had no borrowings under these credit lines
during fiscal 1997. For fiscal 1996, the maximum borrowings
outstanding under these lines were $120.4 million. During the
period of borrowing, in fiscal 1996, the average outstanding
balances under these lines were $38.7 million.
The weighted average interest rate on outstanding borrowings
during fiscal 1996 was 6.2%.
Short-term borrowings against these lines of credit bear
interest at or below the lending bank's prime rate. The $50
million committed line of credit requires a commitment fee on the
unused portion of 1/4 of 1 percent.
The Company's committed line of credit renews annually and
is available through 1998. The uncommitted lines of credit are
cancelable at any time.
Page 44 of 118<PAGE>
F. Long-Term Debt
<TABLE>
<CAPTION>
Long-term debt consists of:
______________________________________________________________________
June 28, June 29,
1997 1996
(in thousands)
- ----------------------------------------------------------------------
<S> <C> <C>
Subordinated Notes, 10.6%,
due in annual $7.4 million
payments from June 1996
to June 2005 $ 59,200 $ 72,000
Industrial Revenue Bonds, 5.84%,
due in semi-annual payments of
various amounts from September 1,
1996 to September 1, 2010 9,680 10,000
Urban Development Action Grant, non-
interest bearing, due April 1999 917 917
Promissory note, due at various dates
through 2000 (interest rate
imputed at 10.6%) 308 381
--------- ---------
Subtotal 70,105 83,298
Less current portion (7,831) (8,391)
--------- ---------
Long-Term Debt $ 62,274 $ 74,907
========= =========
</TABLE>
The Industrial Revenue Bonds and Urban Development Action
Grant were issued in connection with the construction of the
Company's distribution center. The Bonds are secured by a first
mortgage on the Company's distribution center. The Urban
Development Action Grant was secured by a second mortgage on the
facility.
On September 1, 1995 the Company called the Industrial
Revenue Bonds at 103 and simultaneously refinanced these bonds
with fixed rate bonds with an average interest rate of 5.84%.
The new Industrial Revenue Bonds have the same maturity schedule
as the original bonds and are also secured by a first mortgage on
the Company's home office and distribution center. The average
interest rate before the refinancing was 9.78%. Indebtedness
totaling $10.6 million are secured by land and buildings with a
net book value of $18.9 million at June 28, 1997.
Page 45 of 118<PAGE>
On July 1, 1996 the Company paid $5.4 million of the
Subordinated Notes as an early retirement of debt. Associated
with the $5.4 million was a $.4 million charge for the early
retirement. As a result of this payment, the annual installments
due from June 1997 to June 2005 have decreased to $7.4 million
from $8.0 million.
Long-term debt maturing in each of the next five fiscal
years is as follows: million; 1998 - $7.8 million; 1999 - $8.8
million; 2000 - $7.9 million; 2001 - $7.9 million; and 2002 -
$7.9 million.
As of June 28, 1997, the Company was in compliance with all
covenants related to its loan agreements. Several loan
agreements of the Company contain restrictions which, among other
things, require maintenance of certain financial ratios, restrict
encumbrance of assets and creation of indebtedness, and limit the
payment of dividends. At June 28, 1997, $234.3 million of the
Company's retained earnings of $406.1 million were unrestricted
and available for the payment of dividends under the most
restrictive terms of the agreements.
G. Sales from Leased Departments
Retail sales from certain leased departments, included in
net sales, amounted to $34.8 million, $34.9 million, and $27.4
million in fiscal 1997, fiscal 1996 and fiscal 1995,
respectively.
H. Lease Commitments
The Company leases 231 stores and office spaces under
operating leases that will expire principally during the next
twenty years. The leases typically include renewal options and
escalation clauses and provide for contingent rentals based on a
percentage of gross sales.
The following is a schedule of future minimum lease payments
under the operating leases:
Page 46 of 118<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
Fiscal Year (in thousands)
- ---------------------------------------------------------------------------
<S> <C>
1998 $ 64,288
1999 61,040
2000 55,512
2001 51,254
2002 47,178
Thereafter 306,833
--------
Total minimum lease payments $586,105
========
</TABLE>
The above schedule of future minimum lease payments has not
been reduced by future minimum sublease rental income of $8.7
million under non-cancelable subleases and other contingent
rental agreements.
Total rental expenses under operating leases for the periods
ended June 28, 1997, June 29, 1996 and July 1, 1995 were $67.0
million, $62.7 million and $57.1 million, respectively, including
contingent rentals of $1.8 million, $1.8 million and $2.5
million, respectively. Rent expense for the above periods has
not been reduced by sublease rental income of $4.0 million, $5.7
million and $6.1 million which has been included in other income
for the periods ended June 28, 1997, June 29, 1996 and July 1,
1995, respectively.
The Company has irrevocable letters of credit in the amount
of $14.3 million to guarantee payment and performance under
certain leases, insurance contracts and utility agreements.
I. Employee Retirement Plans
The Company has a noncontributory profit-sharing plan
covering employees who meet age and service requirements.
Effective September 1, 1995, the Company amended and restated the
plan to provide additional retirement security to participants by
adding a cash or deferred (salary deferral) feature qualifying
under Section 401(k) of the Internal Revenue Code. Membership
in the salary deferment feature is voluntary. Employees may, up
to certain prescribed limits, contribute to the 401(k) plan and a
portion of these contributions are matched by the Company. In
Page 47 of 118<PAGE>
addition, under the profit sharing feature, the Company's
contribution to the plan is determined annually by the Board of
Directors. The provision for Company profit sharing and 401(k)
contributions was $5.4 million for fiscal 1997. The provision
for profit sharing contributions were $4.2 million and $5.0
million, respectively, for the periods ended June 29, 1996 and
July 1, 1995.
J. Income Taxes
The provision for income taxes is summarized as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
Year ended 1997 1996 1995
(in thousands)
- ---------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $32,504 $17,112 $10,737
State and Other 7,138 2,390 2,257
-------- ------- --------
Subtotal 39,642 19,502 12,994
Deferred (395) 489 (2,920)
-------- ------- --------
Total $39,247 $19,991 $10,074
======== ======= ========
</TABLE>
A reconciliation of the Company's effective tax rate with
the statutory federal tax rate is as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
Year ended 1997 1996 1995
- ------------------------------------------------------------------
<S> <C> <C> <C>
Tax at statutory rate 35.0% 35.0% 35.0%
State income taxes, net
of federal benefit 4.8 3.9 4.7
Other charges 1.2 1.9 .7
----- ----- -----
Effective tax rate 41.0% 40.8% 40.4%
===== ===== =====
</TABLE>
Deferred income taxes for 1997, 1996 and 1995 reflect the
impact of "temporary differences" between amounts of assets and
liabilities for financial reporting purposes and such amounts as
Page 48 of 118<PAGE>
measured by tax laws. These temporary differences are determined
in accordance with SFAS No. 109.
Temporary differences which give rise to deferred tax assets
and liabilities at June 28, 1997 and June 29, 1996 are as
follows:
<TABLE>
<CAPTION>
_________________________________________________________________________________________________
Year Ended 1997 1996
Deferred Tax Deferred Tax Deferred Tax Deferred Tax
Assets Liabilities Assets Liabilities
(in thousands)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Current:
Allowance for doubtful
accounts $ 384 $ 399
Compensated absences 781 692
Inventory costs
capitalized for tax
purposes 2,548 2,805
Insurance reserves 6,459 6,630
Prepaid items deductible
for tax purposes $ 1,276 $ 1,413
Other 305 649
------ ------- ------ -------
10,477 1,276 11,175 1,413
------ ------- ------ -------
Non-Current:
Depreciation 10,287 11,111
Accounting for rent
expense 1,476 1,152
Pre-opening costs 2,410 2,615
Other 22 35
------ ------- ------ -------
$3,886 $10,309 $3,767 $11,146
------ ------- ------ -------
</TABLE>
No valuation account is deemed necessary.
K. Supplementary Income Statement Information
<TABLE>
<CAPTION>
___________________________________________________________________________
Year ended 1997 1996 1995
(in thousands)
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Advertising $45,409 $44,172 $42,345
Repairs and Maintenance $19,913 $16,631 $15,533
</TABLE>
All other required items are omitted since they are less
than 1% of total revenues.
L. Incentive Plans
In April 1983, the stockholders of the Company adopted a
Stock Option and Stock Appreciation Rights Plan (the "1983 Plan")
Page 49 of 118<PAGE>
which authorized the granting of options for the issuance of
1,125,000 shares of common stock. During 1988 the stockholders
authorized the issuance of an additional 675,000 shares of common
stock for a total of 1,800,000 shares under this Plan. The 1983
Plan provided for the issuance of incentive stock options,
nonqualified stock options and stock appreciation rights. This
plan expired in April, 1993. In November, 1993, the stockholders
of the Company approved a stock incentive plan (the "1993 Plan"),
authorizing the granting of incentive stock options, non-
qualified stock options, stock appreciation rights, restricted
stock, performance stock and other stock based compensation. A
total of 450,000 shares of common stock have been reserved for
issuance under the 1993 Plan. A summary of stock options
transactions in fiscal 1995, 1996 and 1997 is as follows:
<TABLE>
<CAPTION>
___________________________________________________________
Number Option Price
of Shares Per Share
- -----------------------------------------------------------
<S> <C> <C>
Options outstanding
July 2, 1994 . . . . . . 318,045 $ 4.74 to $24.69
Options issued . . . . . . 38,200 $11.50
Options cancelled. . . . . (5,290) $ 4.74 to $ 7.37
Options exercised. . . . . (16,404) $ 4.74 to $ 7.37
-------- ----------------
Options outstanding
July 1, 1995 . . . . . . 334,551 $ 4.74 to $24.69
Options issued . . . . . . 38,900 $11.38
Options cancelled. . . . . (6,525) $ 4.74 to $ 7.37
Options exercised. . . . . (15,456) $ 4.74 to $ 7.37
Options outstanding -------- ----------------
June 29, 1996. . . . . . 351,470 $ 4.74 to $24.69
Options issued . . . . . . 17,400 $10.63 to $11.06
Options cancelled. . . . . (168) $ 5.48
Options exercised. . . . . (93,599) $ 4.74 to $11.50
-------- ----------------
Options outstanding
June 28, 1997. . . . . . 275,103 $ 4.74 to $24.69
Options exercisable. . . . 257,703 $ 4.74 to $24.69
------- ----------------
</TABLE>
The Company adopted the disclosure requirements of Statement
of Financial Accounting Standards No. 123 ("SFAS 123"),
Accounting for Stock Based Compensation, effective with the 1997
financial statements, but elected to continue to measure compen-
sation expense in accordance with APB Opinion No. 25, Accounting
for Stock Issued to Employees. Accordingly, no compensation
Page 50 of 118<PAGE>
expense for stock options has been recognized. If compensation
expense had been determined based on the estimated fair value of
options granted in 1996 and 1997, consistent with the methodology
in SFAS 123, the pro forma effects on the Company's net income
per share would have been as follows (in thousands, except per
share amounts):
1997 1996
Net Income: ------- -------
As reported $56,515 $29,013
Pro forma $56,146 $28,971
Net Income per Share:
As reported $1.41 $0.71
Pro forma $1.40 $0.71
The fair value of each stock option granted is estimated on
the date of grant using the Black-Scholes option pricing model
with the following weighted average assumptions used for grants
in 1997 and 1996:
1997 1996
---- ----
Risk-free interest rate 6.5% 6.5%
Expected volatility 42.9% 42.9%
Expected life 10 years 10 years
Contractual life 10 years 10 years
Fair value of options granted $117,309 $303,385
During the fiscal year ended June 29, 1996, a restricted
stock award of 10,000 shares of the Company's common stock was
made to an officer of the Company. The fair market value on the
date of the award was $108,800. The shares become vested to the
officer over a four year period based on certain employment
criteria. The unearned compensation related to this award is
being amortized over the vesting period.
Page 51 of 118<PAGE>
M. Interim Financial Information (Unaudited)
(All amounts in thousands except per share data.)
<TABLE>
<CAPTION>
Provision Net Income Pro Forma
(Benefit) (Loss) Net Income
Gross for Income Net Income per Share (Loss) per
Net Sales Profit Taxes (Loss) (1) Share (2)
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1997:
First $307,240 $103,930 ($ 7,430) ($10,874) ($0.27) ($0.22)
Second 739,958 268,534 45,519 66,049 1.64 1.36
Third 382,420 134,171 2,885 3,852 0.10 0.08
Fourth 328,750 124,758 ( 1,727) ( 2,512) ( 0.06) ( 0.05)
1996:
First $291,227 $ 97,086 ($ 7,761) ($11,161) ($0.27) ($0.23)
Second 658,631 233,760 33,769 48,784 1.20 1.00
Third 323,234 108,070 ( 3,089) ( 4,567) ( 0.11) ( 0.09)
Fourth 318,872 112,660 ( 2,928) ( 4,043) ( 0.10) ( 0.09)
____________________
<FN>
<F1>
(1) Net income per share is based on the weighted average number
of shares outstanding during each of the quarters. The sum
of the four quarters may not equal the full year computation
due to rounding.
<F2>
(2) Adjusted to give retroactive effect to six for five stock
split effective October, 1997.
</FN>
</TABLE>
On an interim basis the Company values inventory using the
gross profit method and at year-end values inventory at the lower
of FIFO cost or market as determined by the retail inventory
method. The annual adjustment for the difference between actual
gross profit and interim estimated gross profit is recorded in
the fourth quarter of the fiscal year. Results of quarterly
operations are impacted by the highly seasonal nature of the
Company's business, timing of certain holiday selling seasons and
the comparability of calendar weeks within a quarter as a result
of the 52/53 week fiscal years.
Page 52 of 118<PAGE>
N. Fair Value of Financial Instruments
The carrying values of cash and cash equivalents, short-term
investments, accounts receivable and accounts payable approximate
fair value because of the short maturities of these items.
Interest rates that are currently available to the Company
for issuance of notes payable and long-term debt (including
current maturities) with similar terms and remaining maturities
are used to estimate fair value for debt issues. The estimated
fair value of notes payable and long-term debt (including current
maturities) are as follows:
<TABLE>
<CAPTION>
________________________________________________________________________________
June 28, June 29,
1997 1996
Carrying Fair Carrying Fair
Amount Value Amount Value
(in thousands)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Long-Term Debt
(including current maturities) $70,105 $71,132 $83,298 $83,556
- --------------------------------------------------------------------------------
</TABLE>
The fair values presented herein are based on pertinent
information available to management as of the respective year
ends. Although management is not aware of any factors that could
significantly affect the estimated fair value amounts, such
amounts have not been comprehensively revalued for purposes of
these financial statements since that date, and current estimates
of fair value may differ from amounts presented herein.
O. Legal Matters
In late September, 1994, the Company received summons and
complaint in three separate purported class action lawsuits.
Each of the complaints was consolidated into a single amended
complaint which sought unspecified damages and alleged a cause of
action arising under certain federal securities laws for alleged
material misstatements and omissions in public statements by the
Company and five executive officers purportedly causing the
market price of the Company's common stock to be artificially
inflated during the period October 4, 1993 through September 23,
1994, inclusive. On February 20, 1996, the District Court
dismissed the plaintiff's amended complaint in its entirety. In
March, 1996, plaintiffs filed an appeal from the District Court's
Page 53 of 118<PAGE>
decision in the United States Court of Appeals for the Third
Circuit. The appeal was orally argued before a panel of three
judges on December 12, 1996. On June 12, 1997 the panel rendered
an unanimous decision affirming the District Court's dismissal of
the action but ruled that the District Court should allow the
plaintiffs to attempt to replead two of the six claims. The matter
has been remanded to the District Court. The Company is unable to
determine the probability of any settlement loss with respect to
these class action suits or the materiality thereof at this time
and accordingly has not established any reserve for this matter
in the accompanying consolidated financial statements.
Dividend Policy
On September 8, 1997, the Board of Directors of the Company
declared the Company's first cash dividend in the amount of two
cents ($.02) per share payable annually. Maintenance of the cash
dividend policy or any change thereto in the future will be at
the discretion of the Company's Board of Directors and will
depend upon the financial condition, capital requirements and
earnings of the Company as well as other factors which the Board
of Directors may deem relevant. At present, the policy of the
Board of Directors is to retain the majority of earnings to
finance the growth and development of the Company's business. At
June 29, 1996, $234.3 million of the Company's retained earnings
were unrestricted and available for the payment of dividends
under the most restrictive terms of certain loan agreements.
Market for the Registrant's Common Equity and Related Stockholder
Matters
The Company's Common Stock is traded on the New York Stock
Exchange, Inc. and its trading symbol is "BCF." The following
table provides the high and low closing prices on the New York
Stock Exchange for each fiscal quarter for the period from July
2, 1995 to June 28, 1997 and for the two months ended August 31,
1997:
Page 54 of 118<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
Period Low Price High Price
- ----------------------------------------------------------------
<S> <C> <C>
July 2, 1995 to
September 30, 1995 10 14 1/8
- -----------------------------------------------------------------
October 1, 1995 to
December 30, 1995 10 1/4 13 1/4
- -----------------------------------------------------------------
December 31, 1995 to
March 30, 1996 9 3/8 12 1/4
- -----------------------------------------------------------------
March 31, 1996
June 29, 1996 10 1/8 12 1/8
- -----------------------------------------------------------------
June 30, 1996 to
September 28, 1996 10 11 1/8
- -----------------------------------------------------------------
September 29, 1996 to
December 28, 1996 10 7/8 13 1/4
- -----------------------------------------------------------------
December 29, 1996 to
March 29, 1997 12 3/8 17 3/4
- -----------------------------------------------------------------
March 30, 1997 to
June 28, 1997 17 1/2 20
- -----------------------------------------------------------------
June 29, 1997 to
August 31, 1997 15 3/16 23
- -----------------------------------------------------------------
</TABLE>
As of August 31, 1997, there were 405 record holders of the
Company's Common Stock. The number of record holders does not
reflect that number of beneficial owners of the Company's Common
Stock for whom shares are held by Cede & Co., certain brokerage
firms and others.
Page 55 of 118<PAGE>
<TABLE>
<CAPTION>
BURLINGTON COAT FACTORY WAREHOUSE CORPORATION
Schedule II - Valuation and Qualifying Accounts
(All amounts in thousands)
________________________________________________________________________________________
COL.A COL.B COL.C COL D COL.E
- ----------------------------------------------------------------------------------------
BALANCE AT CHARGED TO BALANCE
BEGINNING CHARGED TO OTHER ACCOUNTS AT END OF
DESCRIPTION OF PERIOD EXPENSE ACCOUNTS WRITTEN OFF PERIOD
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Period ended 6/28/97
- ----------------------
ALLOWANCE FOR DOUBTFUL
ACCOUNTS-
ACCOUNTS RECEIVABLE $ 990 $7,203 $0 $(7,240) $ 953
Period ended 6/29/96
- ----------------------
ALLOWANCE FOR DOUBTFUL
ACCOUNTS-
ACCOUNTS RECEIVABLE $3,711 $6,068 $0 $(8,789) $ 990
Period ended 7/01/95
- ----------------------
ALLOWANCE FOR DOUBTFUL
ACCOUNTS-
ACCOUNTS RECEIVABLE $4,995 $5,162 $0 $(6,446) $3,711
</TABLE>
Page 56 of 118<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
Page 57 of 118<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
Page 58 of 118<PAGE>
File No. 1-8739
=============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
EXHIBITS FILED WITH
FORM 10-K
FOR FISCAL YEAR ENDED
JUNE 28, 1997
under
The Securities Exchange Act of 1934
BURLINGTON COAT FACTORY WAREHOUSE CORPORATION
(Exact Name of Registrant as specified in its Charter)
- ------------------------------------------------------------------------------
Page 59 of 118<PAGE>
INDEX TO EXHIBITS
Exhibits Page No.
- -------- --------
3.1 Articles of Incorporation, as Amended 1/
--
3.2 By-laws 1/
--
10.1 1993 Stock Incentive Plan 1/
--
10.2 Revolving Credit Agreement dated 1/
August 30, 1985 between the Company --
and BancOhio National Bank as amended
through Amendment No. 6
10.3 Burlington Coat Factory Warehouse 62
Corporation 401(k) Profit Sharing Plan
(as amended and restated effective
June 19, 1997)
10.4 Loan Agreement dated as of 3/
August 1, 1995 by and between --
New Jersey Economic Development
Authority and Burlington Coat Factory
Warehouse of New Jersey, Inc.
10.5 Assignment of Leases dated as of 3/
August 1, 1995 from Burlington --
Coat Factory Warehouse of New
Jersey, Inc. to First Fidelity Bank,
National Association
10.6 Mortgage and Security Agreement dated 3/
as of August 1, 1995 between Burlington --
Coat Factory Warehouse of New Jersey,
Inc. and First Fidelity Bank, National
Association
________________________
(1) Incorporated by reference to Exhibits filed with the Company's Annual
Report on Form 10-K for the year ended July 3, 1993, File No. 1-8739.
(2) Incorporated by reference to Exhibit filed with the Company's Annual
Report on Form 10-K for the year ended June 29, 1996, File No. 1-8739
(3) Incorporated by reference to Exhibit filed with the Company's Annual
Report on Form 10-K for the year ended July 1, 1995. File No. 1-8739.
Page 60 of 118
Exhibits Page No.
- -------- --------
10.7 Indenture of Trust dated as of 3/
August 1, 1995 by and between --
New Jersey Economic Development
Authority and Shawmut Bank
Connecticut, National Association
10.8 Guaranty and Suretyship Agreement dated 3/
as of August 1, 1995 from the Company --
to First Fidelity Bank, National
Association
10.9 Letter of Credit Reimbursement Agreement 3/
dated as of August 1, 1995 between --
Burlington Coat Factory Warehouse of
New Jersey, Inc. and First Fidelity
Bank, National Association
10.10 Environmental Indemnity Agreement dated 3/
as of August 1, 1995 between Burlington --
Coat Factory Warehouse of New Jersey,
Inc. and First Fidelity Bank, National
Association
10.11 Note Agreement dated June 27, 1990 3/
--
21 Subsidiaries of Registrant 113
23 Consent of Deloitte & Touche LLP 115
independent certified public accountants,
to the use of their report on the financial
statements of the Company for the fiscal
year ended June 28, 1997 in the Registration
Statements of the Company on Form S-8,
Registration No. 2-96332, No. 33-21569,
No. 33-51965 and No. 33-61351
27 Financial Data Schedule 117
Page 61 of 118<PAGE>
EXHIBIT 10.3
Page 62 of 118<PAGE>
BURLINGTON COAT FACTORY WAREHOUSE CORPORATION
401(k) PROFIT SHARING PLAN
As Amended and Restated Effective as of June 29, 1997
September, 1997
Page 63 of 118<PAGE>
BURLINGTON COAT FACTORY WAREHOUSE CORPORATION
401(k) PROFIT SHARING PLAN
As Amended and Restated Effective as of June 29, 1997
TABLE OF CONTENTS
-----------------
Page
----
Definitions . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE I Participation . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE II Participant Deferral Contributions. . . . . . . . . . . 8
ARTICLE III Employer Matching Contributions . . . . . . . . . . . . 12
ARTICLE IV Profit Sharing Contributions. . . . . . . . . . . . . . 15
ARTICLE V Rollover Contributions; Direct Transfers. . . . . . . . 16
ARTICLE VI Contribution Limitations. . . . . . . . . . . . . . . . 19
ARTICLE VII Investment of Funds . . . . . . . . . . . . . . . . . . 22
ARTICLE VIII Vesting of Interest . . . . . . . . . . . . . . . . . . 28
ARTICLE IX Payments From Accounts. . . . . . . . . . . . . . . . . 31
ARTICLE X Loans . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE XI Administration. . . . . . . . . . . . . . . . . . . . . 40
ARTICLE XII Trustee . . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE XIII Termination and Amendment . . . . . . . . . . . . . . . 42
ARTICLE XIV Miscellaneous . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE XV Top Heavy Provisions. . . . . . . . . . . . . . . . . . 43
APPENDIX A
Page 64 of 118<PAGE>
BURLINGTON COAT FACTORY WAREHOUSE CORPORATION
401(k) PROFIT SHARING PLAN
As Amended and Restated Effective as of June 29, 1997
This Burlington Coat Factory Warehouse Corporation Employees' Profit
Sharing Plan was originally established by the Board of Directors of Burlington
Coat Factory Warehouse Corporation, effective November 1, 1983, for the
exclusive benefit of eligible employees of the Company and their beneficiaries.
The Plan, as renamed, was amended and restated, effective July 1, 1989 (with
certain later effective dates), in order to comply with the provisions of the
Tax Reform Act of 1986 as well as certain other subsequent legislative and
regulatory changes, and, effective September 1, 1995, to incorporate a cash or
deferred arrangement qualifying under section 401(k) of the Internal Revenue
Code of 1986, as amended. The purpose of this amendment and restatement of the
Plan, effective June 29, 1997, is (i) to implement certain changes required
by the Small Business Job Protection Act of 1996, (ii) to change the Plan
Year to a calendar year, commencing January 1, 1998, (iii) to make certain minor
changes to conform to current administrative practice, and (iv) to add,
effective at such time as determined in the discretion of the Committee, the
Stock Fund as an additional Investment Fund available to Participants.
Except as otherwise expressly provided, the provisions of the Plan,
as set forth in this document and as may be amended from time to time, establish
the rights and obligations with respect to Participants on and after the
Effective Date. Rights and obligations under the Plan with respect to any
Employee who terminated employment with the Employer for any
Page 65 of 118 <PAGE>
- 2 -
reason prior to the Effective Date shall be determined in accordance with the
provisions of the Plan as in effect on the date of such termination.
Definitions:
The following words and phrases shall have the meanings provided be-
low, except as otherwise required by the context. As used in the Plan, the mas-
culine pronoun shall be deemed to include the feminine, and the singular number,
the plural, unless a different meaning is clearly indicated by the context.
"Accounts" means the Profit Sharing Account, Company Account, Deferral
Account, Rollover Account, Transfer Account and Prior Plan Account, as
applicable, maintained for a Participant or inactive Participant (as
defined in Section 1.4).
"Affiliate" means the Company and any corporation which is a member
of a controlled group of corporations (as defined in Code section 414(b))
which includes the Company, or any trade or business (whether or not
incorporated) which is under common control (within the meaning of Code
section 414(c)) with the Company.
"Allocation Date" means the date as soon as practicable after each
Valuation Date on which income, gains and profits are credited to, and
losses and expenses are debited from, a Participant's Prior Plan Account.
"Board of Directors" means the Board of Directors of the Company.
"Break in Service" means a Plan Year during which a Participant fails
to complete at least 501 Hours of Service. For purposes of determining
whether a Break in Service has occurred, a Participant who is absent from
employment because of a Leave of Absence, pregnancy, the birth of the
Participant's child, the placement of a child with the Participant for
adoption, or the need to care for such child during the period immediately
following such birth or placement shall be given credit for each Hour of
Service which otherwise would normally have been credited to such
Participant but for such absence. If the Committee is unable to determine
the number of such hours, eight Hours of Service shall be credited per day
of absence. No more than 501 Hours of Service shall be credited to a
Participant under this paragraph because of such Leave of Absence,
pregnancy or placement. Hours of Service shall not be credited to a
Page 66 of 118<PAGE>
- 3 -
Participant under this paragraph unless such Participant furnishes to the
Committee such timely information as the Committee may require to establish
that the absence from employment is for reasons described above and to
establish the number of days for which there was such an absence.
Hours of Service credited under this paragraph shall be credited only for
the Plan Year in which the absence begins, if the Participant would be
prevented from incurring a Break in Service in such Plan Year solely
because the period of absence is treated as Hours of
Service or, in any other case, in the immediately following Plan Year.
"Code" means the Internal Revenue Code of 1986, as may be amended from
time to time, and the regulations promulgated thereunder.
"Committee" means the committee appointed by the Board of Directors
pursuant to Section 11.1.
"Company" means Burlington Coat Factory Warehouse Corporation, or any
successor entity.
"Company Account" means the separate account maintained for each
Participant to which Employer matching contributions and related earnings
are credited under ARTICLE III.
"Compensation" means the total annual wages and salary (not in excess
of $160,000, as may be adjusted by the Secretary of the Treasury from time
to time) of an Employee from the Employer, but excluding other contribu-
tions to this Plan or contributions to other employee benefit plans of the
Employer.
"Deferral Account" means the separate account maintained for each
Participant to which a Participant's deferral contributions and related
earnings are credited under ARTICLE II.
"Effective Date" means June 29, 1997, the effective date of this
amendment and restatement of the Plan.
"Eligible Employee" means each Employee who meets the eligibility
requirements for Plan participation under ARTICLE I. Notwithstanding the
foregoing, for purposes of Sections 2.4 and 2.5, an Eligible Employee
includes an Employee whose
Page 67 of 118<PAGE>
- 4 -
eligibility to make contributions to the Plan has been suspended because of
a hardship withdrawal pursuant to Section 9.9.
"Employee" means an individual in the regular employment of the
Employer, but excluding a non-resident alien with no U.S. - source income,
and an employee covered by a collective bargaining unit whose retirement
benefits were the subject of good faith bargaining between the Employer and
the Employee's representative representing such unit unless agreed upon
between such representative and Employer. The term "Employee" shall
also not include any person who performs services for an Employer under an
agreement or arrangement (which may be written, oral and/or evidenced by
the Employer's payroll practice) with the individual or with another
organization that provides the services of the individual to the
Employer, pursuant to which the person is treated as an independent
contractor or is otherwise treated as an employee of an entity other than
the Employer, irrespective of whether the individual is treated as an
employee of the Employer under common law employment principles or pursuant
to the provisions of Code section 414(m), 414(n) or 414(o).
"Employer" means the Company or a Participating Affiliate.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
it may be amended from time to time, and the regulations promulgated
thereunder.
"Highly Compensated Employee" means (a) any Employee who is a 5% owner
(as defined in Code section 416(i)(1)) at any time during the current year
or the immediately preceding year, or (b) during the year immediately
preceding the current year, had compensation (as defined in Code section
414(q)(4)) from the Employer in excess of $80,000 (as adjusted pursuant to
Code section 415(d), except that the base period for determining any such
adjustment shall be the calendar quarter ending September 30, 1996).
Notwithstanding the foregoing, at the election of the Company, the
determination of Highly Compensated Employees pursuant to (b) above, shall
be limited to those Employees who are in the "top paid group" (as defined
in Code section 414(q)(3)) for such preceding year.
"Hour of Service" means each hour for which an Employee either is
directly or indirectly paid, or entitled to payment by the Employer or an
Affiliate. The number of Hours of Service, and the period to which such
hours shall be credited, will be determined in accordance with Department
of Labor regulations Section 2530.200b-2. An hour for which an Employee is
paid at an overtime or premium rate shall be included
Page 68 of 118<PAGE>
- 5 -
only as a single hour. An Employee with respect to whom the Employer or an
Affiliate does not maintain records reflecting the number of hours for
which he is paid shall be credited with 45 Hours of Service for each week
or part thereof he is paid or entitled to be paid by the Employer or an
Affiliate.
"Investment Funds" means each of the investment funds as may be
authorized by the Committee from time to time for the investment of Plan
assets.
"Key Employee" means an individual described in Code section
416(i)(1).
"Leave of Absence" means a period of absence from employment because
(i) an Employer grants an Employee a leave of absence for a specified
period of time (not to exceed two years) and such leaves are granted on a
nondiscriminatory basis; (ii) an Employee is on active military duty but
not only to the extent his employment rights are protected by the Military
Selective Service Act or the Uniformed Services Employment and Reemployment
Rights Act of 1994; or (iii) the Employee is temporarily laid off by an
Employer.
"Participant" means an Eligible Employee participating in the Plan in
accordance with ARTICLE I.
"Participating Affiliate" means an Affiliate to which the Board of
Directors has extended the Plan and which adopts the Plan as a
participating employer by action of its board of directors or other
governing body.
"Plan" means the Burlington Coat Factory Warehouse Corporation 401(k)
Profit Sharing Plan, as set forth herein (including any Appendices hereto),
and as may be amended from time to time.
"Plan Year" means (i) in the case of Plan Years commencing before
June 29, 1997, the 12 month period beginning on the first day of the
Company's fiscal year and ending on that Saturday of the following calendar
year which falls closest to June 30, (ii) in the case of the Plan Year
commencing on June 29, 1997, the period from June 29, 1997 to December 31,
1997, and (iii) in the case of Plan Years commencing on and after January
1, 1998, the calendar year.
"Prior Plan" means the Burlington Coat Factory Warehouse Corporation
Employees Profit Sharing Plan, as in effect prior to September 1, 1995.
Page 69 of 118<PAGE>
- 6 -
"Prior Plan Account" means the separate account for a Participant in
which the Participant's account balance under the Prior Plan and related
earnings are credited. The Trustee may establish one or more subaccounts
within a Participant's Prior Plan Account to reflect the portion of such
Prior Plan Account which is invested in one or more of the Investment
Funds, in accordance with Section 7.3.
"Profit Sharing Account" means the separate account for a Participant
in which the Participant's profit sharing contributions and related
earnings are credited under ARTICLE IV.
"Retirement" means the later of (i) a Participant's termination of
employment with the Employer on or after age 65 (other than on account of a
transfer of employment to an Affiliate) or (ii) the fifth anniversary of
the date on which he commenced participation in the Plan.
"Rollover Account" means the separate account maintained for a
Participant to which the Participant's rollover contributions and related
earnings are credited under Section 5.1.
"Stock" means the Company's common stock, par value $1.00 per share.
"Stock Fund" means the Investment Fund which is invested in Stock.
"Total Disability" means the incapacity of a Participant, either
mental or physical, resulting in his inability to perform the usual duties
of his employment with his Employer, such incapacity to be deemed to exist
when so declared by the Committee in its judgment and discretion, supported
by the written opinion of at least one physician approved by the
Committee.
"Transfer Account" means the separate account maintained for a
Participant to which amounts transferred on behalf of a Participant and
related earnings are credited under Section 5.2.
"Trust Agreement" means the agreement between the Trustee and the
Company pursuant to which the Trust Fund is established and maintained, as
provided in ARTICLE XII.
"Trustee" means the trustee under the Trust Agreement.
Page 70 of 118<PAGE>
- 7 -
"Trust Fund" means the trust under the Plan established pursuant to
the Trust Agreement, as provided for in ARTICLE XII.
"Valuation Date" means (i) in the case of the portion of a
Participant's Prior Plan Account which is not Participant-directed pursuant
to Section 7.5(b), the last business day of each calendar month and (ii) in
the case of the portion of a Participant's Accounts which is Participant-
directed, each business day, and, in each case, such other date as may be
determined by the Committee in its sole discretion.
"Year of Service" means a Plan Year during which a Participant
completes at least 1,000 Hours of Service; provided, that for purposes of
determining an Employee's eligibility to participate in the Plan, pursuant
to ARTICLE I, a Year of Service shall mean any twelve (12) consecutive
month period, beginning on or after the Employee's date of employment
with an Affiliate, during which he completes at least 1,000 Hours of
Service; and further provided, that an Employee who is credited with at
least 1,000 Hours of Service in both his first 12 consecutive months of
employment and the Plan Year which begins during such 12 month period shall
be credited with two Years of Service at the end of such Plan Year.
ARTICLE I
PARTICIPATION
1.1 Participation in the Plan shall be offered only to Eligible Employees
of the Employer. Each Employee shall become an Eligible Employee immediately
following the attainment of age 21 and the completion of one Year of Service.
Once an Employee has become an Eligible Employee, he will continue to be an
Eligible Employee until he ceases to be an Employee.
1.2 Each Eligible Employee on the Effective Date who was a Participant in
the Plan immediately prior to the Effective Date shall continue as a Participant
as of the Effective Date.
Page 71 of 118<PAGE>
- 8 -
Each other Employee shall become a Participant in the profit sharing feature of
the Plan, as described in ARTICLE IV, immediately upon becoming an Eligible
Employee.
1.3 At the time an Employee becomes an Eligible Employee, he will be
provided with a written application for participation in the salary deferral
feature of the Plan, as described in ARTICLE II, and an explanation of the
Plan. Each such Eligible Employee shall become a Participant with respect to
the salary deferral feature of the Plan as soon as administratively feasible
following the date on which his properly completed application is received by
the Committee.
1.4 A Participant who (a) ceases to be an Employee or (b) enters the
military service of the United States, shall be an inactive Participant. Any
interest of such inactive Participant in the Investment Funds shall be allowed
to remain, subject to ARTICLE IX.
ARTICLE II
PARTICIPANT DEFERRAL CONTRIBUTIONS
2.1 Subject to Sections 2.4 and 2.5 and ARTICLE VI, a Participant may
elect to defer prospectively by payroll deduction from 1% to 15% of his
Compensation.
2.2 A Participant may change or suspend his deferral percentage at any
time, effective as of the next administratively feasible payroll date (but in no
event later than one month after
Page 72 of 118<PAGE>
- 9 -
such Participant requests such a change or suspension), by timely delivering
the appropriate form to the Committee.
2.3 The Employer shall contribute to the Plan, on behalf of each
Participant who elects pursuant to Section 2.1 to defer a percentage of his
Compensation, an amount in cash equal to the amount deferred by the Participant.
All such contributions, together with any related earnings, shall be credited to
the Participant's Deferral Account.
2.4 (a) If the actual deferral percentage (as defined in paragraph (c)
below) of Compensation paid during the Plan Year, or within two and one-half
months thereafter attributable to services performed in such Plan Year, for
Participants who are Highly Compensated Employees is more than the amount
permitted under the deferral limitations set forth in paragraph (b) below,
there shall be a reduction in the portion of the contributions credited to the
Deferral Accounts of those Participants who are Highly Compensated Employees and
who elected to defer the highest percentage of Compensation such that the
deferral limitations are satisfied. The Employer shall attempt to distribute to
such Participants any excess deferral contributions, and any related
earnings, no later than 2 1/2 months following the Plan Year in which such
excess deferral contributions are made. In addition, if the Employer believes
that contributions would be in excess of the deferral limitations set forth in
paragraph (b) below, the Employer may in its sole discretion suspend, in whole
or part, deferral contributions to the Plan made on behalf of Participants who
are Highly Compensated Em-
Page 73 of 118<PAGE>
- 10 -
ployees. In such case the amounts which would ordinarily be deferred in a
payroll period shall be paid directly to such Participants.
(b) The actual deferral percentage for any Plan Year of all Eligible
Employees who are Highly Compensated Employees shall not exceed, alternatively:
(i) 125% of the actual deferral percentage for all Eligible Employees who are
not Highly Compensated Employees; or (ii) 200% of the actual deferral percentage
for Eligible Employees who are not Highly Compensated Employees; provided that,
solely for purposes of clause (ii) above, the actual deferral percentage for all
Eligible Employees who are Highly Compensated Employees does not exceed the
actual deferral percentage for all Eligible Employees who are not Highly
Compensated Employees by more than two percentage points, or such other amount
that the Secretary of the Treasury shall prescribe.
(c) For purposes of this Section 2.4, the actual deferral percentage
for a specified group of Eligible Employees for a Plan Year shall be the average
of the ratios, calculated separately for each Eligible Employee in such group,
of (i) the amount of contributions under all plans of the Employer which are
subject to Code section 401(k) (other than plans which may not be permissively
aggregated) to the Deferral Account and Company Account (to the extent taken
into account for purposes of the actual deferral percentage test) made on behalf
of each Eligible Employee for such Plan Year to (ii) the Eligible Employee's
Compensation for such Plan Year. For purposes of determining the actual
deferral percentage test, deferral
Page 74 of 118<PAGE>
- 11 -
contributions and Employer matching contributions must be made before the last
day of the 12-month period immediately following the Plan Year to which
contributions relate.
(d) If a reduction in the amount of deferral contributions on behalf
of a Participant is required because of the application of paragraph (a) above,
the reduction shall be treated as taxable earnings to the Participant for the
pay period in which the reduction occurs, and the Employer shall withhold any
taxes required by law on such taxable earnings.
(e) If a distribution of excess deferral contributions (and related
earnings) is required because of the application of paragraph (a) above, the
Employer shall withhold any taxes required by law on such distribution.
2.5 Notwithstanding anything contained herein to the contrary, the maximum
amount of contributions credited to the Deferral Account on behalf of a
Participant in any calendar year may not exceed $9,500 (as may be adjusted by
the Secretary of the Treasury to reflect increases in the cost of living), and
any such contributions made to the Deferral Account in excess of such amount (as
adjusted), plus any related earnings on such excess amount, may be distributed
to the Participant no later than April 15 following the close of the calendar
year in which such excess contributions are made.
Page 75 of 118<PAGE>
- 12 -
ARTICLE III
EMPLOYER MATCHING CONTRIBUTIONS
3.1 Subject to the provisions of Sections 3.2 and 3.3 and ARTICLE VI, the
Employer shall contribute in cash to the Plan an amount equal to 100% of a
Participant's deferral contributions (but not in excess of $250 annually for any
Participant) made pursuant to Section 2.1 on behalf of each Participant;
provided however, that the Company may, in its discretion, contribute Stock,
valued at its fair market value, in lieu of cash for all or any part of its
contribution under this Section 3.1. Employer matching contributions shall be
credited as soon as practicable after, and as of, the end of each Plan Year to
the Company Accounts of Participants who are in the employ of an Employer on the
last day of the Plan Year. Notwithstanding the foregoing, the Company may, in
its sole discretion and on a nondiscriminatory basis, contribute matching
contributions to the Plan at such other times during the Plan Year as it
determines, and credit such contributions to the Company Accounts of the
Participants at such time regardless of whether such Participants are in the
employ of an Employer on the last day of such Plan Year.
3.2 (a) If the contribution percentage (as defined in paragraph (c)
below) of Compensation for Participants who are Highly Compensated Employees is
more than the amount permitted under the special limitations set forth in
paragraph (b) below, there shall be a reduction in the Employer matching
contributions credited to the Company Accounts of those
Page 76 of 118<PAGE>
- 13 -
Participants who are Highly Compensated Employees and whose contribution
percentages are the highest so that such special limitations are satisfied. Any
excess Employer matching contributions made to the Trust Fund (plus any related
earnings) shall, to the extent possible, be distributed to such Participants
before the end of the Plan Year following the Plan Year in which such excess
Employer matching contributions are made. In addition, if the Employer or the
Committee determines that Employer matching contributions would be in excess of
the special limitations set forth in paragraph (b) below, the Employer may, in
its sole discretion, suspend, in whole or in part, deferral contributions to the
Plan made on behalf of Participants who are Highly Compensated Employees and,
therefore, related Employer matching contributions with respect to such
Participants (in which case the deferral contributions that would ordinarily be
contributed to the Trust Fund on such Participants' behalf in a payroll period
shall be paid directly to such Participants).
(b) The contribution percentage for any Plan Year of all Eligible
Employees who are Highly Compensated Employees shall not exceed, alternatively:
(i) 125% of the contribution percentage for all Eligible Employees who are not
Highly Compensated Employees, or (ii) 200% of the contribution percentage for
Eligible Employees who are not Highly Compensated Employees; provided that,
solely for purposes of clause (ii) above, the contribution percentage for
Eligible Employees who are Highly Compensated Employees does not exceed the
contribution percentage for Eligible Employees who are not Highly Compensated
Employees by
Page 77 of 118<PAGE>
- 14 -
more than two percentage points, or such other amount that the Secretary of the
Treasury shall prescribe.
(c) For purposes of this Section 3.2, the contribution percentage for
a specified group of Eligible Employees for a Plan Year shall be the average of
the ratios, calculated separately for each Eligible Employee in such group, of
(i) the amount of Employer matching contributions under all plans of the
Employer which are subject to Code section 401(m) (other than plans which may
not be permissively aggregated) made on behalf of each Eligible Employee for
such Plan Year (to the extent not taken into account for purposes of the
actual deferral percentage test) to (ii) the Eligible Employee's Compensation
for such Plan Year. For purposes of determining the contribution percentage
test, Employer matching contributions will be considered made for a Plan Year if
made before the last day of the 12-month period immediately following
the Plan Year to which contributions relate.
(d) If a distribution of excess Employer matching contributions (and
related earnings) is required because of the application of (a) above, the
Employer shall withhold any taxes required by law on such distribution.
(e) In the event an active Participant is required to reduce his
deferral contributions to the Plan as a result of the application of the
provisions of Section 2.4(a), the Employer matching contribution under Section
3.1(a) made on behalf of the Participant for the remainder of the Plan
Year shall be applied to the reduced amount of deferral contributions.
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3.3 If both the actual deferral percentage and the actual contribution
percentage of Highly Compensated Employees exceeds 1.25 multiplied by the actual
deferral percentage and contribution percentage of the non-Highly Compensated
Employees, multiple use will occur. In the event of multiple use, if one or
more Highly Compensated Employees participate in a plan(s) subject to both the
actual deferral percentage and contribution percentage tests and the sum of the
two percentages of those Highly Compensated Employees subject to either or both
tests exceeds the "aggregate limit," then the average contribution percentage of
those Highly Compensated Employees who also participate in a salary deferral
arrangement will be reduced (beginning with the Highly Compensated Employee
whose contribution percentage is the highest) so that the limit is not exceeded.
For the purposes of this Section, "aggregate limit" shall mean the sum of (i)
125% of the greater of the actual deferral percentage or the average
contribution percentage for non-Highly Compensated Employees for the Plan Year
and (ii) the lesser of 200% of, or two percentage points plus, the smaller of
such actual deferral percentage or average contribution percentage.
ARTICLE IV
PROFIT SHARING CONTRIBUTIONS
4.1 Subject to ARTICLE VI, the Company shall contribute to the Plan for
each Plan Year such amount in cash as shall be authorized by the Board of
Directors in its sole discretion.
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4.2 The amount contributed for any Plan Year shall be allocated propor-
tionately among the Profit Sharing Accounts of Eligible Employees who are
employed on the last day of such Plan Year. The Profit Sharing Account of each
Eligible Employee shall be credited with a proportionate amount of the
contribution for such Plan Year equal to the proportion that his Compensation
for such Plan Year bears to the total Compensation of all those Eligible
Employees who are employed on the last day of the Plan Year.
ARTICLE V
ROLLOVER CONTRIBUTIONS; DIRECT TRANSFERS
5.1 Subject to the provisions of the Plan and to rules of uniform
application to be promulgated by the Committee, an Eligible Employee, or
Employee who is not yet an Eligible Employee, may make a contribution to the
Plan in cash which qualifies as a "rollover amount," "rollover contribution," or
"eligible rollover distribution" under Code section 403(a)(4), 408(d)(3)
or 402(f)(2)(A), respectively. An Employee who wishes to make such a
contribution shall timely file with the Committee a written notice requesting
approval for such contribution, affirming that his contribution qualifies as a
rollover amount, rollover contribution or eligible rollover distribution.
Investment of such contribution, as between or among the Investment Funds, as
applicable, shall be as directed by the Employee in accordance with the
provisions of Sections 7.3 and 7.4. In addition to the written notice required
under this Section 5.1, the
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Committee may require such further documentation from the Employee, or the
applicable trustee, plan sponsor, custodian or other appropriate person, as
evidence of the contribution being qualified as a rollover amount, rollover
contribution or eligible rollover distribution, and until such written notice
and documentary evidence satisfactory to the Committee have been so provided,
the Committee shall not approve such contribution to the Plan. The Committee
shall be fully protected in relying on such written and documentary evidence
presented by or on behalf of the Employee. Contributions made by the Employee
pursuant to this Section 5.1 shall be credited to the Employee's Rollover
Account.
5.2 Subject to the provisions of the Plan and to rules of uniform
application to be promulgated by the Committee, and in addition to deferral
contributions or rollover contributions to the Plan in accordance with
ARTICLE II and Section 5.1, an Eligible Employee, or Employee who has not yet
become an Eligible Employee, may have transferred directly to the Plan on his
behalf his accrued benefit in another retirement plan qualified under Code
section 401(a) (provided such plan is not described in Code section
401(a)(11)(B)). An Employee who wishes to have such an amount transferred
shall timely file with the Committee a written notice requesting approval for
such transfer, affirming that the transfer is from a tax-qualified plan.
Such transfer shall be effected directly from the transferor plan without
distribution to the Employee, as soon as practicable after receipt of such
notice and approval by the Committee. Investment of such transferred amount,
as between or among the Investment Funds, as
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applicable, shall be as directed by the Employee in accordance with the
provisions of Sections 7.3 and 7.4. In addition to the written notice required
under this Section 5.2, the Committee may require such further documentation
from the Employee, or the applicable trustee, plan sponsor, custodian or other
appropriate person, as evidence of the transfer being from a plan qualified
under Code section 401(a), and until such written notice and documentary
evidence satisfactory to the Committee have been so provided, the Committee
shall not approve such transfer to the Plan. The Committee shall be fully
protected in relying on such written and documentary evidence presented by or on
behalf of the Employee. Transfers made by the Employee pursuant to this Section
5.2 shall be credited to the Employee's Transfer Account.
5.3 Upon the occurrence of an event of distribution as described in
Section 9.1, and notwithstanding any other provisions of the Plan to the
contrary that would otherwise limit a distributee's election under this Section
5.3, a distributee may elect, at the time and in the manner prescribed by the
Company, to have any portion of an eligible rollover distribution paid directly
to an eligible retirement plan specified by the distributee in a direct
rollover. For purposes of this Section 5.3, the following definitions apply:
"Eligible rollover distribution" is any distribution of all or any
portion of the balance to the credit of the distributee, except that
an eligible rollover distribution does not include: any distribution
that is one of a series of substantially equal periodic payments (not
less frequently than annually) made for the life (or life expectancy)
of the distributee or the joint lives (or joint life expectancies) of
the distributee and the distributee's designated beneficiary, or for
a specified period of ten years or more; any distribution to the
extent such distribution is required under
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Code section 401(a)(9); and the portion of any distribution that is
not includible in gross income (determined without regard to the
exclusion for net unrealized appreciation with respect to employer
securities).
"Eligible retirement plan" is an individual retirement account
described in Code section 408(a), an individual retirement annuity
described in Code section 408(b), an annuity plan described in Code
section 403(a), or a qualified trust described in Code section 401(a),
that accepts the distributee's eligible rollover distribution.
However, in the case of an eligible rollover distribution to the
surviving spouse, an eligible retirement plan is an individual
retirement account or individual retirement annuity.
"Distributee" includes an Employee or former Employee. In addition,
the Employee's or former Employee's surviving spouse and the
Employee's or former Employee's spouse or former spouse who is the
alternate payee under a qualified domestic relations order, as defined
in Code section 414(p), are distributees with regard to the interest
of the spouse or former spouse.
"Direct rollover" is a payment by the Plan to the eligible retirement
plan specified by the distributee.
ARTICLE VI
CONTRIBUTION LIMITATIONS
6.1 (a) Any provision of the Plan to the contrary notwithstanding, no
Employer contributions or other annual additions to a Participant's Accounts
will be made in any Plan Year in excess of the lesser of $30,000 (as adjusted
from time to time by the Secretary of the Treasury) or 25% of the Participant's
"compensation" (within the meaning of Code section 415(c)(3)).
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(b) Any provision of the Plan to the contrary notwithstanding, in the
case of a Participant who is a participant in a defined benefit plan of the
Company, his maximum annual additions shall not exceed the amount which will
result in a defined contribution plan fraction which when added to the defined
benefit plan fraction of such Participant will exceed 1.0 for any Plan Year.
(c) For purposes of applying this Section 6.1, all defined benefit
plans of the Company and any Affiliates (as determined in accordance with Code
section 415(h)), and all defined contribution plans of the Company and any
Affiliates (as determined in accordance with Code section 415(h)), including the
Plan, shall be combined or aggregated and the maximum benefit or annual
additions limitation shall be determined on the basis of a Participant's annual
additions and benefits under all such plans.
(d) For purposes of this Section 6.1, (i) annual additions means, for
each Plan Year, (A) a Participant's deferral contributions; plus (B) such
Participant's share of Employer matching contributions; plus (C) such
Participant's share of Company profit sharing contributions (if any); plus
(D) any forfeitures allocated to such Participant's Accounts; (ii) defined
contribution plan means a plan which provides for an individual account for each
participant and for benefits based solely upon the amount contributed to the
participant's account, and any income, expenses, gains and losses, and any
forfeitures of accounts of other participants which may be allocated to
such participant's accounts except to the extent provided in (ii) below;
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(iii) a defined benefit plan means any plan which is not a defined contribution
plan; provided however, in the case of a defined benefit plan which provides a
benefit derived from employer contributions which is based partly on the balance
of the separate account of a participant, such plan shall be treated as a
defined contribution plan to the extent benefits are based on the separate
account of a participant and as a defined benefit plan with respect to the
remaining portion of the benefits under the plan; (iv) the defined benefit plan
fraction for a participant shall be a fraction the numerator of which
is the lesser of (A) the product of 1.25 multiplied by the dollar limitation in
effect for the plan, or (B) the product of 1.4 multiplied by an amount equal to
100% of the participant's average compensation for his high three years
projected annual benefit under the plan, if such plan provided the maximum
benefit allowed by law; and (v) the defined contribution plan fraction for
a Participant shall be a fraction the numerator of which is the sum of the
annual additions to the Participant's accounts under a defined contribution plan
of the Company and Affiliates (as determined in accordance with Code section
415(h)) and the denominator of which is the sum of the lesser of the following
amounts for such Plan Year and for each prior Plan Year: (A) the product of
1.25 multiplied by the dollar limitation in effect for such Plan Year, or
(B) the product of 1.4 multiplied by the 25% of Participant's compensation
(within the meaning of Code section 415(c)(3)).
(e) If necessary to limit the total annual additions for a
Participant for a Plan Year, the Participant's deferral contributions shall be
repaid to him out of his Deferral Account
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to the extent necessary to reduce the annual additions for each Plan Year so
that they do not exceed the maximum limitations pursuant to Section 6.1(a).
ARTICLE VII
INVESTMENT OF FUNDS
7.1 The Employer on a monthly basis, or more frequently, will pay over to
the Trustee, or its agent, contributions made to the Plan to be held in trust
and invested as provided herein and in the Trust Agreement.
7.2 The Trust Fund will be invested in the Investment Funds; provided,
however, that no investment in the Stock Fund shall be permitted until the
effective date of a resolution by the Committee permitting such an investment.
7.3 Each Participant's Profit Sharing Account, Company Account, Deferral
Account, Rollover Account, Transfer Account and the Participant-directed portion
of his Prior Plan Account, as applicable, will be invested in one or more of the
Investment Funds. Each Participant will designate the portion (expressed as a
percentage in multiples of 10%) of his Accounts (other than the portion of his
Prior Plan Account which is not Participant-directed) to be invested in each
Investment Fund. Such designation, once made, may be changed at any time.
The Participant may also transfer the amount equivalent to his interest, or any
partial interest (expressed as a percentage in multiples of 10%), in an
Investment Fund from such Investment Fund to another Investment Fund at any
time. Changes will be made by a
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Participant's direction in writing to the Committee, or pursuant to a voice
response system approved by the Committee, and will be made effective as soon
as possible after receipt of such direction.
7.4 Each Participant shall have an interest in each Investment Fund in
which he has elected to have invested all or any part of his deferral
contributions under Section 2.1, his Employer matching contributions under
Section 3.1, his profit sharing contribution under Section 4.1, his rollover
contributions under Section 5.1, his transfer amounts under Section 5.2, and the
Participant-directed portion of his Prior Plan Account pursuant to Section
7.5(b). His interest at any time in the Investment Funds shall be equal to the
sum of such contributions and transfer amounts, adjusted from time to time to
reflect his proportionate share of the income and losses realized by such
Investment Funds and of the net appreciation or depreciation in the value of
such Investment Funds. The Committee shall maintain accounts to reflect the
interest of each Participant in each Investment Fund including, with respect to
the Stock Fund, a record of the number of shares of Stock allocated to the
Participant's Accounts and the cost basis of each such share of Stock. As of
each Valuation Date, the Committee shall ascertain from the Trustee the
value of each Investment Fund and shall on such basis determine the value of the
interests of Participants. The determinations of the Trustee and the Committee
shall be conclusive. Each Participant will be furnished a statement of his
Accounts at least quarterly.
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7.5 (a) Each Participant's Prior Plan Account, if any, will be invested
by the Trustee in its sole discretion and in accordance with the terms of the
Trust Agreement. Each such Participant's Prior Plan Account shall be credited
on each Allocation Date with a proportionate share of all income, gains or
profits earned from the investment of the portion of the Trust Fund containing
the Participant's Prior Plan Account. Each such Participant's Prior Plan
Account shall be debited on each Allocation Date with a proportionate share of
any losses sustained by the Trustee from the investment of the Trust Fund
containing the Participant's Prior Plan Account on other transactions, and of
any expense incurred by the Trustee in the administration of the Prior
Plan Account under the Trust Fund.
(b) The Trustee may, in its discretion and on a uniform and
nondiscriminatory basis, designate that the investment of any portion of the
assets in a Participant's Prior Plan Account shall be governed by the
Participant's designation of Investment Funds pursuant to Section 7.3.
7.6 (a) Before each annual and special meeting of the shareholders of
the Company, and at such other times when shareholder action is required,
the Trustee shall send to each Participant and beneficiary having an
investment in the Stock Fund the proxy or consent solicitation materials
that are sent to the Company's shareholders of record. Each such Participant
shall have the right to instruct the Trustee confidentially as to the method
of voting the shares of Stock allocated to his Account as of the record date
for determining the shares of
Page 88 of 118<PAGE>
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Stock that are entitled to vote at the meeting of shareholders or that are
entitled to give or withhold consent to corporate action. Full and fractional
shares of Stock held in the Stock Fund and allocated to a Participant's Account
shall be voted by the Trustee in accordance with the instructions received from
such Participant. The Trustee shall not vote shares of Stock for which voting
instructions are not received from Participants. Management and others may
solicit such Participants' voting rights under the same proxy rules applicable
to all shareholders. The Company shall ensure that the requisite voting
forms, together with all information distributed to shareholders of the Company
in general regarding the exercise of voting rights, are furnished to the Trustee
and by the Trustee to Participants within a reasonable time before such voting
rights are to be exercised with respect to Stock held in the Trust Fund.
(b) In the event that a Tender Offer is made generally to
shareholders of the Company to purchase Stock, the following procedures shall
apply and the following actions shall be taken with respect to the Stock held in
the Trust Fund:
(i) The Trustee or its authorized delegate shall, in a timely
manner, give to each Participant having, at that time, an investment
in the Stock Fund notice of the terms and conditions of such Tender
Offer.
(ii) Each Participant shall instruct the Trustee, in accordance
with procedures established by the Committee or Trustee and designed
to protect the confidentiality of the Participants' exercise of the
Tender Offer rights under this Section 7.6(b) in accordance with
Department of Labor regulation section 2550.404(c)-1, to accept or
decline such Tender Offer with respect to all or any portion of the
shares of Stock allocated to the Participant's Account.
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(iii) The response of the Trustee to a Tender Offer, as to
whether the Tender Offer is accepted or rejected, shall be made in
accordance with instructions of the Participants given to the Trustee
on forms provided for that purpose by the Trustee. The Trustee shall
reject the Tender Offer with respect to shares for which the Trustee
does not receive instructions from a Participant.
(iv) In the event the Trustee is instructed to tender shares of
Stock pursuant to the terms of a Tender Offer but less than all of the
shares of Stock for which the Trustee receives instructions pursuant
to Section 7.6(b)(ii) are accepted for tender pursuant to such Tender
Offer, the Trustee shall tender the percentage of shares of Stock from
each Participant's Account for which the Trustee received instructions
to tender pursuant to Section 7.6(b)(ii) (rounded to the nearest whole
share) which bears the same ratio as the total shares accepted for
tender bears to the total number of shares for which the Trustee
originally received instructions to tender pursuant to Section
7.6(b)(ii). The proceeds of any sale pursuant to this Section
7.6(b)(iv) shall be allocated to the Accounts from which the shares
were sold. If any Tender Offer is accepted (in whole or in part)
pursuant to this Section 7.6(b), the Trustee shall have the power to
transfer Stock in order to effect such acceptance with no further
direction from the Participant or the Committee.
(v) For purposes of this Section 7.6(b), the following
definition shall apply:
"Tender Offer" means any offer to acquire the
Stock which is subject to either section 13(e) or
14(d) of the Securities Exchange Act of 1934, as
amended, and which under the applicable rules and
regulations is required to be the subject of a filing
with the Securities and Exchange Commission on
either Schedule 13E-4 or Schedule 14D-9.
(c) Each Participant shall have right to instruct the Trustee
confidentially as to whether and how stock options, warrants or other similar
rights relating to Stock allocated to the Participant's Account should be
exercised. The Committee or the Trustee shall establish
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procedures to notify timely each such Participant regarding such rights and the
terms and conditions for exercising such rights. If the Trustee fails to
receive timely instructions from the Participant, such rights shall not be
exercised.
(d) For purposes of this Section 7.6, references to Participants
include their beneficiaries and, pursuant to Section 9.7, alternate payees for
whom a separate Account has been established pursuant to the terms of a
qualified domestic relations order. References to the Trustee shall include any
independent fiduciary appointed by the Committee pursuant to Department of
Labor regulations section 2550.404c-1 to safeguard the confidentiality of
Participants' exercise of rights under this Section 7.6 where the Committee has
determined that such an appointment is warranted.
7.7 All transactions involving Stock, including distributions, purchases
and sales, shall be made only in compliance with applicable federal and state
laws, regulations and rules. All such transactions shall also be subject to all
restrictions and limitations imposed by the Company's articles of incorporation
and bylaws as amended from time to time, and by limitations and restrictions
applied by the applicable stock exchange in which shares of Stock are publicly
traded.
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ARTICLE VIII
VESTING OF INTEREST
8.1 A Participant's interest in his Deferral Account, Rollover Account and
Transfer Account, adjusted for his share of income or losses and appreciation or
depreciation therein, shall be fully vested at all times.
8.2 (a) A Participant's interest in his Profit Sharing Account, Company
Account and Prior Plan Account, adjusted for the share of income or losses and
appreciation or depreciation therein, shall become vested in accordance with the
following schedule based on the Participant's Years of Service:
Years of Service Vested Percentage
less than 3 0%
3 but less than 4 20%
4 but less than 5 40%
5 but less than 6 60%
6 but less than 7 80%
7 or more 100%
(b) Notwithstanding the foregoing,
(i) a Participant's interest in his Profit Sharing Account,
Company Account and Prior Plan Account shall become fully and
immediately vested upon the first to occur of the following:
(1) the Participant's Retirement,
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(2) the Participant's Total Disability, or
(3) the Participant's death; and
(ii) a Participant who was a participant in the Prior Plan shall
be no less vested in his Prior Plan Account than he was under the
Prior Plan.
Notwithstanding anything contained herein to the contrary, a Participant shall
become fully and immediately vested upon the later of (i) his attainment of age
65 or (ii) the fifth anniversary of the date on which he commenced participation
in the Plan.
(c) For purposes of this Section 8.2, a Participant's Years of
Service shall include his entire Years of Service; provided however:
(i) in the case of a Participant who was not vested in any
portion of his Profit Sharing Account, Company Account and Prior Plan
Account, his Years of Service shall not include his Years of Service
completed before a Break in Service if the number of consecutive
one-year Breaks in Service equals or exceeds the greater of five or
the aggregate number of Years of Service, whether or not consecutive,
completed before such Break in Service (such aggregate number of
Years of Service shall not include any Years of Service not taken into
account by reason of any prior Break in Service);
(ii) in the case of a Participant who has a Break in Service of
less than 12 months, his Years of Service shall include both the Years
of Service before and after such Break in Service; and
(iii) in the case of a Participant who was a participant in the
Prior Plan, his Years of Service shall include the period of his
service for which he was credited for vesting purposes under the Prior
Plan prior to September 1, 1995.
8.3 In the event a Participant's employment terminates before his
interests in his Profit Sharing Account, Company Account and Prior Plan Account
become fully vested, the portion
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of such Accounts which is not vested shall be forfeited and, subject to the
provisions of Section 8.5, allocated in the manner described in Section 4.2 to
the Profit Sharing Accounts of the remaining active Participants for the Plan
Year in which such forfeiture occurs.
8.4 Notwithstanding the provisions of Section 8.2, in the event the Plan
shall be terminated or partially terminated, or upon a complete discontinuance
of contributions, the interest of an affected Participant in his Profit Sharing
Account, Company Account and Prior Plan Account shall become fully vested.
8.5 In the case of a former Participant who has received a distribution of
his entire vested benefit under the Plan and forfeited his nonvested interest in
his Accounts by reason of termination of employment for any reason, and who
subsequently becomes a Participant prior to the occurrence of five consecutive
one-year Breaks in Service, he shall be entitled to repay to the Plan the full
amount of such distribution. Upon such repayment, any interest in such
Participant's Accounts which was forfeited at the time of his termination of
employment shall be restored and his right to receive such interest upon a
subsequent termination of employment shall be determined in accordance with
Section 8.2 based upon his total Years of Service at that time, if applicable.
Such restoration shall be made from amounts forfeited under Section 8.3 in the
year in which an Employee's right to such restoration arises. To the extent
that current forfeitures are insufficient to make such restoration, the
Company shall make a special contribution to the Plan to restore the
forfeited amount.
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ARTICLE IX
PAYMENTS FROM ACCOUNTS
9.1 The entire vested interest of a Participant in his Accounts shall
become payable upon any of the following events:
(i) the Participant's Retirement;
(ii) the Participant's Total Disability;
(iii) the Participant's death;
(iv) the Participant's other termination of
employment with the Employer (other than
on account of a transfer of employment to
an Affiliate);
(v) upon the Participant's request in
accordance with Section 9.8, on or
after the Participant's attainment
of age 59 1/2; or
(vi) as a hardship withdrawal under
Section 9.9.
9.2 A Participant may, prior to termination of his employment with the
Employer, designate a beneficiary to whom distribution of his interest in the
Trust Fund shall be paid in the event of his death prior to the full receipt of
such interest; provided however, that in the event the Participant is married on
the date of his death, such beneficiary shall be deemed to be the Participant's
surviving spouse. The Participant may elect to change or revoke his designated
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beneficiary at any time; provided however, that in the event prior to such
change or revocation such beneficiary is the Participant's surviving spouse,
such election shall not be effective unless such surviving spouse provides
written consent which acknowledges the effect of such election and is witnessed
by a Plan representative or a notary public. The affirmative designation of any
beneficiary and any elected change or revocation thereof by a Participant shall
be made on forms provided by the Committee and shall not in any event be
effective unless and until filed with the Committee. If no designated or deemed
beneficiary survives the Participant or inactive Participant, or if an unmarried
Participant or inactive Participant fails to designate a beneficiary under the
Plan, the amount payable upon the death of the Participant or inactive
Participant shall be paid to his estate.
9.3 Upon termination of employment for any reason, any part of a
Participant's interest in his Accounts that has not vested shall be forfeited
and applied in accordance with Section 8.3, and his active participation under
the Plan will terminate subject to the provisions of Section 9.4. If the amount
of the vested portion of a Participant's Profit Sharing Account, Company Account
and Prior Plan Account at the time of the Participant's termination of
employment is zero, the Participant shall be deemed to have received a
distribution of such zero vested interest in such Accounts.
9.4 Notwithstanding the foregoing provisions of this ARTICLE IX, and
subject to Section 9.10, payments will be made from a Participant's Accounts
only upon the approval and
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direction of the Committee, at the time and in the manner determined by the
Committee in accordance with the provisions of the Plan. When the vested
interest of a Participant becomes payable in accordance with the provisions of
Section 9.1, the Committee shall direct the Trustee to pay from the Trust Fund
an amount equal to the value of such vested interest as determined under
Sections 7.4 and 7.5 (i) in the case of the portion of a Participant's Prior
Plan Account which is not Participant-directed, as of the next Valuation Date
following the event giving rise to the right to payment and (ii) in the case of
the portion of a Participant's Accounts which is Participant-directed, the
Valuation Date immediately preceding the date of payment. Unless the
Participant (or, if applicable, his beneficiary) does not consent to such
payment, pursuant to Section 9.5, any such amount shall be paid to the
Participant (or his beneficiary) no later than the earlier of (i) 60 days
after the close of the Plan Year in which such Participant's employment
terminates or (ii) the date the payment first becomes administratively feasible.
9.5 The amounts payable from the Trust Fund shall be paid as a single sum;
provided however, that such single sum payment shall not be made without the
consent of the Participant (or, if applicable, his beneficiary) if such amount
exceeds $3,500. Notwithstanding anything contained herein to the contrary,
regardless of the form of payment, all distributions shall comply with Code
section 401(a)(9) and the Internal Revenue Service Regulations thereunder,
including the minimum distribution incidental death benefit requirement of Code
section 401(a)(9)(G).
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9.6 If any person who is entitled to receive a payment from the Plan shall
die prior to such payment, the amount remaining to be paid shall be paid in a
single sum to the beneficiary previously designated by the Participant whose
interest is involved, or, if no such beneficiary survives, to the estate of the
Participant.
9.7 Except as otherwise provided by law or the issuance of a "qualified
domestic relations order" (within the meaning of Code section 414(p)), no person
shall have the right to assign, alienate, transfer, hypothecate or otherwise
subject to lien his interest in or his benefit under the Plan, nor shall
benefits under the Plan be subject to the claims of any creditor. Any
other provision of the Plan to the contrary notwithstanding, if the amount
payable to an alternate payee under a qualified domestic relations order is less
than or equal to $3,500, such amount shall be paid as soon as practicable
following the qualification of the order. If such amount exceeds $3,500, it may
be paid as soon as practicable following the qualification of the order if the
alternate payee consents thereto and if such order provides for such payment;
otherwise, it may not be payable prior to the Participant's "earliest retirement
age" (within the meaning of Code section 414(p)(4)(B)).
9.8 Subject to Section 10.4, upon written application to the Committee,
in such form and manner as the Committee may prescribe, a Participant who is
also an Employee may, on or after attainment of age 59 1/2, make a withdrawal
once in each Plan Year from any or all of
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his Accounts. The minimum withdrawal a Participant may make under this
Section 9.8 shall be the lesser of $500 or the balance in his Accounts, as
applicable.
9.9 (a) Upon written application of a Participant, the Committee shall
determine whether the Participant is entitled to make a hardship withdrawal from
his Deferral Account (excluding earnings on such Account), from the vested
portion of his Company Account, or from his Profit Sharing Account, Prior
Plan Account, Rollover Account or Transfer Account, as applicable, subject to
the provisions of this Section 9.9. A hardship entitling a Participant to make
a withdrawal will exist if the Committee determines, pursuant to subsection
(b) of this Section 9.9, that the Participant has an immediate and heavy
financial need. A distribution based upon financial hardship cannot exceed the
amount required to meet the immediate and heavy financial need created by the
hardship and not reasonably available from reserves or other resources of the
Participant. The amount of immediate and heavy financial need may include any
amount necessary to pay any Federal, state or local income taxes or penalties
reasonably anticipated to result from the distribution. The determination of
the existence of financial hardship and the amount required to be distributed
to meet the need created by the hardship shall be made by the Committee,
pursuant to subsection (b) of this Section 9.9, in accordance with uniform
and nondiscriminatory standards. Such withdrawal shall be made in cash upon
30 days' prior written application to the Committee. In no event may the
amount of such hardship
Page 99 of 118<PAGE>
- 36 -
withdrawal exceed the amount necessary to constitute security for
repayment of any outstanding loan made pursuant to ARTICLE X.
(b) For purposes of this Section 9.9:
(i) A distribution will be made on account of an immediate and
heavy financial need of the Participant if the distribution is on
account of (A) medical expenses described in Code section 213(d)
incurred by the Participant, his spouse, or any dependents (as defined
in Code section 152) or necessary for these persons to obtain medical
care described in Code section 213(d); (B) the purchase (excluding
mortgage payments) of a principal residence for the Participant;
(C) the payment of tuition and related educational fees for the next
12 months of post-secondary education for the Participant, his spouse,
or any dependents; (D) the need to prevent the eviction of the
Participant from, or the foreclosure on the mortgage of, the
Participant's principal residence; or (E) other events or conditions
as prescribed or permitted by the Internal Revenue Service through
publication of documents of general applicability;
(ii) A distribution will be necessary to satisfy an immediate and
heavy financial need of a Participant if (A) the distribution is not
in excess of the amount of the immediate and heavy financial need of
the Participant and (B) the Participant has obtained all distribu-
tions, other than hardship withdrawals, and all nontaxable loans
available under the Plan and any other plan maintained by the Company
in which the Participant participates; and
(iii) A Participant who receives a hardship withdrawal in
accordance with this Section (A) shall have contributions to his
Deferral Account (as well as other employee elective contributions
under any other plan of the Employer) suspended for 12 months after
receipt of the hardship withdrawal and (B) the maximum amount of
contributions to his Deferral Account made on behalf of such
Participant under this Plan or any other plan of the Employer in the
tax year following the tax year in which he receives a hardship
withdrawal shall be the applicable amount described in Section 2.5 for
such tax year reduced by the amount of contributions to his Deferral
Account made on behalf of such Participant in the tax year in which
he receives the hardship withdrawal.
Page 100 of 118<PAGE>
- 37 -
9.10 All distributions made under this ARTICLE IX shall be paid to the
Participant, beneficiary or alternate payee, with respect to a qualified
domestic relations order, in cash; provided however, that a Participant,
beneficiary or alternate payee who receives a distribution and who has all or a
portion of his Accounts invested in the Stock Fund may request that all or a
designated portion of such distribution be made in the form of whole shares of
Stock with the remainder, including any fractional share value, to be paid in
cash.
9.11 Any other provision of the Plan to the contrary notwithstanding,
payment of a benefit under the Plan to a Participant shall commence no later
than the April 1st next following the Plan Year in which the Participant attains
age 70 1/2, regardless of whether such Participant has retired as of such date.
ARTICLE X
LOANS
10.1 Upon application to the Committee in writing, or pursuant to a voice
response system approved by the Committee, a Participant shall be permitted to
borrow from his Accounts in accordance with criteria established by the
Committee on a uniform and nondiscriminatory basis. A Participant shall be
permitted to have no more than two loans outstanding at one time. Any such loan
shall be evidenced by a note.
Page 101 of 118<PAGE>
- 38 -
10.2 The minimum amount that a Participant shall be permitted to borrow is
$500. The maximum aggregate amount of all outstanding loans to a Participant
under this Plan and any other plan of the Employer is the lesser of (i) $50,000
(reduced by the highest outstanding balance of any prior Plan loan during the
one-year period ending on the day before the date the Plan loan is made), or
(ii) 50% of such Participant's accrued vested balances in his Accounts (less the
value of the Participant's Account invested in the Stock Fund).
10.3 Each loan shall be repaid by the Participant through equal payroll
deductions, on a level amortization basis, commencing with the date of the loan,
over a period of not more than 60 months. Notwithstanding the preceding
sentence, the Committee may permit repayment of a loan over a period in excess
of five, but not in excess of twenty, years when the loan is used to acquire any
dwelling unit which within a reasonable time is to be used as a primary resi-
dence of the Participant. Interest on loans shall be charged at a reasonable
rate, as determined by the Committee on a uniform and nondiscriminatory basis.
Such rate will remain fixed for the term of the loan. A Participant may prepay
the entire balance of his loan at any time without penalty.
10.4 No distributions pursuant to ARTICLE IX (other than Section 9.9) shall
be made until the outstanding balance of any loan plus interest thereon is
repaid in full.
10.5 If a loan is in default, the Committee shall liquidate all or any
portion of the Participant's collateral account balance as necessary to
discharge the Participant's obligation under the loan agreement before any
amounts are paid to or on behalf of such Participant. In
Page 102 of 118<PAGE>
- 39 -
no event shall such liquidation occur prior to the time the Participant is
entitled to a distribution under ARTICLE IX. The following events will be
considered a default:
(1) death or Total Disability of the Participant;
(2) termination of the Plan;
(3) retirement or separation from service by the Participant and
(4) failure to make any required payment of loan principal and interest.
10.6 All loans granted under this ARTICLE X shall be granted in a uniform
and nondiscriminatory manner in accordance with written loan procedures
established by the Committee. To the extent required by law and under such
rules as the Committee shall adopt, loans shall be made available on a
reasonably equivalent basis to any beneficiary or former Employee (i) who
maintains a balance in one of more Accounts under the Plan, and (ii) who is a
party-in-interest with respect to the Plan (within the meaning of ERISA
section 3(14)).
10.7 The Company may amend the terms of, or discontinue, the loan program
as it deems appropriate. The Company or the Committee may also restrict or
suspend the making of loans if it determines that the loan program is having
adverse effects on Plan investment earnings or on Participants in general.
Page 103 of 118<PAGE>
- 40 -
ARTICLE XI
ADMINISTRATION
11.1 The Plan shall be administered by a Committee of not less than three
persons appointed by the Board of Directors. The Company shall be the Plan
Administrator and "named fiduciary" (within the meaning of ERISA section 402(a))
and the Committee shall assume the responsibilities and duties set forth in this
ARTICLE XI.
11.2 The Committee shall establish rules for the administration of the
Plan. It shall interpret the Plan in its sole discretion and its determinations
shall be conclusive and binding upon all Participants and their beneficiaries.
11.3 All expenses attributable to the administration of the Plan and the
expenses of the Trustee shall be paid out of the Trust Fund except to the extent
paid by the Employer.
11.4 The Committee shall have the power to assign any of its responsibi-
lities to subcommittees or members of the Committee and may designate one or
more subcommittees or other persons to carry out any of its responsibilities.
11.5 The Committee may employ such agents and such clerical and other
services as it may deem advisable in carrying out the provisions of the Plan,
and may consult with counsel, who may be counsel for the Company.
Page 104 of 118<PAGE>
- 41 -
ARTICLE XII
TRUSTEE
12.1 All assets of the Plan shall be held pursuant to a Trust Agreement
between a Trustee designated by the Board of Directors and the Company.
The Trust Agreement shall provide, among other things, for a Trust Fund, to be
administered by the Trustee, with respect to which all contributions shall be
paid, and the Trustee shall have such rights, powers and duties as the
Board of Directors shall from time to time determine. All assets of the Trust
Fund shall be held, invested and reinvested in accordance with the provisions of
the Plan and the Trust Agreement.
12.2 All Employer contributions to the Plan are expressly conditioned upon
being deductible under Code section 404(a). At no time prior to the
satisfaction of all liabilities with respect to Participants and their
beneficiaries shall any part of the assets of the Plan be used for or diverted
to purposes other than for the exclusive benefit of such persons; provided
however, Employer contributions may be returned to the Employer (a) within one
year after the payment of a contribution, if made by the Employer by reason of a
mistake of fact, or (b) within one year of the disallowance of a deduction, to
the extent a deduction is disallowed for such contribution under Code
section 404(a).
Page 105 of 118<PAGE>
- 42 -
ARTICLE XIII
TERMINATION AND AMENDMENT
13.1 The Company expects to continue the Plan indefinitely, but the
continuance of the Plan and the payment of contributions are not assumed as
contractual obligations.
13.2 The Plan may be terminated at any time by adoption of resolutions by
the Board of Directors. If the Plan shall be terminated, the Trustee shall
continue to hold, invest and administer the Trust Fund in accordance with the
provisions of the Trust Agreement and shall make distributions therefrom in
accordance with the provisions of the Plan, as then in effect, pursuant to
instructions filed with the Trustee by the Committee upon such termination or
from time to time thereafter. Upon a complete discontinuance of contributions,
or upon termination or partial termination of the Plan, each affected
Participant or beneficiary shall have a nonforfeitable interest in his Accounts
in the Plan.
13.3 The Plan may be amended at any time and from time to time, including
retroactively, by adoption of resolutions by the Board of Directors; provided
however, that no amendment shall reduce the vested percentage of a Participant's
accrued benefit derived from Employer contributions below the vested percentage
thereof on the date such amendment is adopted or becomes effective, whichever is
later; and provided further, that no amendment shall decrease the accrued
benefit of a Participant.
Page 106 of 118<PAGE>
- 43 -
ARTICLE XIV
MISCELLANEOUS
14.1 Participation or non-participation in the Plan shall have no effect
upon the employment status of any Employee.
14.2 All benefits payable under the Plan shall be paid solely from the
Plan, and the Employer assumes no liability or responsibility with respect to
such payments.
14.3 In the event of any merger or consolidation of the Plan with, or
transfer of any assets or liabilities of the Plan to, any other plan, each
Participant shall be entitled to receive a benefit immediately after such
merger, consolidation, or transfer (computed as if such other plan had then
terminated) which is equal to or greater than the benefit he would have been
entitled to receive immediately before such merger, consolidation, or transfer
(computed as if the Plan had then terminated).
14.4 The Plan shall be construed and enforced in accordance with the laws
of the State of New Jersey, except to the extent preempted by the laws of the
United States.
ARTICLE XV
TOP HEAVY PROVISIONS
The provisions of this ARTICLE XV shall become applicable only under
the circumstances described hereunder.
Page 107 of 118<PAGE>
- 44 -
15.1 For purposes of this ARTICLE XV, the Plan shall be "top heavy" if, as
of the determination date (the last day of the preceding Plan Year), the present
value of the cumulative account balances for Key Employees under the Plan and
all other plans in the "required aggregation group" or "permissive aggregation
group," as appropriate, exceeds 60% of the present value of the cumulative
account balances under all such plans for all Employees determined as of the
applicable "valuation date." For purposes of this ARTICLE XV, (a) "required
aggregation group" means (i) each qualified plan of any Employer in which at
least one Key Employee participates, and (ii) any other qualified plan of any
Employer which enables a plan described in (i) to meet the requirements of Code
section 401(a)(4) or 410, (b) "permissive aggregation group" means the required
aggregation group of plans plus any other plan or plans of any Employer
which, when considered as a group with the required aggregation group, would
continue to satisfy the requirements of Code sections 401(a)(4) and 410, and
(c) "valuation date" means the most recent Valuation Date within a 12-month
period ending on the determination date. The present value of such account
balances shall be computed in accordance with Code section 416(g), and the
above percentage ratio shall be determined by a fraction, the numerator of which
is the sum of the present value of the account balances of Key Employees under
the Plan and all other plans in the aggregation group, and the denominator of
which is the sum of the present value of the account balances under all such
plans, including the Plan, for all Employees. If an individual has not
performed any service for the Employer at any time
Page 108 of 118<PAGE>
- 45 -
during the five-year period ending on a determination date, any accrued benefit
of such individual shall not be taken into account.
15.2 The following provisions shall be applicable only in a Plan Year with
respect to which the Plan becomes top heavy as defined herein and thereafter to
the extent provided herein:
(a) Notwithstanding ARTICLE III, the Employer shall make a special
contribution on behalf of each non-Key Employee who has satisfied the
eligibility requirements of the Plan, whether or not a Participant in the Plan
and who is in service at the end of the Plan Year, with respect to such Plan
Year in an amount which equals the lesser of (i) 3% of his Compensation (as
defined in Code section 414(s)), or, to the extent required by the Code and
regulations) or (ii) the largest percentage of Compensation provided under
the Plan for any Key Employee for such Plan Year without regard to this Section
15.2. Any such special Employer contribution shall be credited to such
Participant's Company Account. Notwithstanding the foregoing provisions of this
Section 15.2(a), if a Participant in the Plan is also a participant in any
defined benefit plan of the Employer, then for each Plan Year with respect to
which the Plan is top heavy, such Participant's accrual of a minimum benefit
under such defined benefit plan in accordance with Code section 416(c)(1) shall
be deemed to satisfy the special Employer contribution requirement of this
Section 15.2(a). Employer contributions resulting from a salary reduction
election by an Employee or matching contributions shall not be counted toward
meeting the minimum required allocations under this section.
Page 109 of 118<PAGE>
- 46 -
(b) Notwithstanding Article VIII, a Participant's interest in his
Profit Sharing Account, Company Account and Prior Plan Account, adjusted for his
share of income or losses and appreciation or depreciation therein, shall become
vested in accordance with the following schedule based on the Participant's
Years of Service, if the application of such schedule would result in the
Participant having a greater vested percentage in his Profit Sharing Account,
Company Account and Prior Plan Account than he would otherwise have under the
terms of Article VIII of the Plan:
YEARS OF SERVICE VESTED PERCENTAGE
less than 2 0%
2 but less than 3 20%
3 but less than 4 40%
4 but less than 5 60%
5 but less than 6 80%
6 or more 100%
The minimum allocation required (to the extent not forfeitable under
Code section 416(b)) may not be forfeited under Code section 411(a)(3)(B) or
411(a)(3)(D). If the Plan is no longer top-heavy in a later Plan Year, the
foregoing vesting schedule shall continue to apply with respect to employees
with less than three Years of Service except to the extent their benefits have
already vested by application of such schedule.
(c) Notwithstanding the provisions of Section 6.1, if during any Plan
Year an Employee participates in both a defined contribution plan and a defined
benefit plan maintained
Page 110 of 118<PAGE>
- 47 -
by the Company which comprise a "top heavy group," as defined in Code section
416(g)(2)(B), the denominators of the defined benefit plan fraction and the
defined contribution plan fraction, as described in Section 6.1(d), shall be
calculated by substituting "1.0" for "1.25" each place it appears in such
Section; provided however, that this Section 15.2(b) shall not apply with
respect to a plan in the top heavy group if (i) such plan would satisfy the
requirements of Code section 416(h)(2)(A) and (ii) the aggregate accrued
benefits and cumulative account balances of Key Employees under all plans in
the top heavy group do not exceed 90% of the aggregate accrued benefits and
cumulative account balances under all such plans for all Employees.
Page 111 of 118<PAGE>
APPENDIX A
GRANDFATHER PROVISIONS
This Appendix A shall apply to a Participant in the Prior Plan with
respect to his Prior Plan Account. Terms in this Appendix A shall have the same
meanings as described in the Plan document, unless the context otherwise clearly
requires.
Upon the retirement of a Participant on or after the date on which
such Participant attains age 65 or the fifth anniversary of the date on which he
commenced participation in the Plan, whichever is later, such Participant shall
be entitled to have his Prior Plan Account paid in one of the following manners:
(1) Such amounts shall be paid or applied in monthly, quarterly,
semi-annual or annual installments as nearly equal as practicable, over a fixed
reasonable period of time not to exceed the life expectancy of such Participant,
of the joint life expectancy of the Participant and his designated Beneficiary;
or
(2) Such amounts shall be paid in a lump sum; or
(3) Such amounts shall be used to purchase from an insurance company
selected by the Committee, a nontransferable immediate or deferred annuity
contract which shall provide for a fixed number of payments over a reasonable
period of time not to exceed the life expectancy of such Participant or the
joint life expectancy of the Participant and his designated beneficiary and
which shall not require the survival of the Participant or his designated
beneficiary as a condition of payment.
Page 112 of 118<PAGE>
EXHIBIT 21
Page 113 of 118<PAGE>
SUBSIDIARIES OF THE COMPANY
Burlington Coat Factory Warehouse Corporation is the parent
corporation of two hundred fifty subsidiaries which operate
"off-price" retail apparel stores in the United States.
Burlington Coat Factory Realty Corp., a Delaware corporation,
which buys, sells and otherwise deals in real estate in
connection with the Company's business.
Burlington Coat Factory Warehouse, Inc., a Pennsylvania
corporation, which leases the Company's store in Clifton Heights,
Pennsylvania to one of the Company's operating subsidiaries.
Monroe G. Milstein, Inc., a New York corporation, which operates
a wholesale apparel business.
LC Acquisition Corp., a New York corporation, which owns an
interest in a manufacturer of coats.
C.L.B., Inc., a Delaware corporation, through which the Company
collects royalties from its subsidiaries for the use of its trade
names.
C.F.I.C. Corporation, a Delaware corporation, through which the
Company invests excess funds.
C.F.B., Inc., a Delaware corporation, through which the Company
provides financing for its subsidiaries for the acquisition of
their merchandise inventory and store fixtures.
Burlington Coat Factory Direct Corporation, a New Jersey
corporation, formed for direct marketing purposes.
Page 114 of 118<PAGE>
EXHIBIT 23
Page 115 of 118<PAGE>
INDEPENDENT AUDITOR'S CONSENT
We consent to the incorporation by reference in Registration Statements No.
2-96332, No. 33-21569, No. 33-51965 and No. 33-61351 of Burlington Coat Factory
Warehouse Corporation and subsidiaries on Form S-8 of our report dated
September 8, 1997, and appearing in this Annual Report on Form 10-K of
Burlington Coat Factory Warehouse Corporation and subsidiaries for the year
ended June 28, 1997.
DELOITTE & TOUCHE LLP
Philadelphia, Pennsylvania
September 26, 1997
Page 116 of 118<PAGE>
<PAGE>
[THIS PAGE LEFT BLANK INTENTIONALLY]
Page 117 of 118<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION FROM THE REGISTRANT'S AUDITED
FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 28, 1997 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-28-1997
<PERIOD-END> JUN-28-1997
<CASH> 157,394,000
<SECURITIES> 0
<RECEIVABLES> 18,113,000
<ALLOWANCES> (953,000)
<INVENTORY> 366,233,000
<CURRENT-ASSETS> 557,138,000
<PP&E> 350,721,000
<DEPRECIATION> (140,857,000)
<TOTAL-ASSETS> 775,077,000
<CURRENT-LIABILITIES> 237,402,000
<BONDS> 62,274,000
<COMMON> 41,259,000
0
0
<OTHER-SE> 418,956,000
<TOTAL-LIABILITY-AND-EQUITY> 775,077,000
<SALES> 1,758,368,000
<TOTAL-REVENUES> 1,776,823,000
<CGS> 1,126,975,000
<TOTAL-COSTS> 1,126,975,000
<OTHER-EXPENSES> 538,803,000
<LOSS-PROVISION> 7,203,000
<INTEREST-EXPENSE> 8,080,000
<INCOME-PRETAX> 95,762,000
<INCOME-TAX> 39,247,000
<INCOME-CONTINUING> 56,515,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 56,515,000
<EPS-PRIMARY> 1.41
<EPS-DILUTED> 1.41
</TABLE>
