FORM 10-Q
UNITED STATES
SECURITIES & EXCHANGE COMMISSION
Washington, D.C. 20549
(MARK ONE)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended August 29, 1998
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)
Delaware 22-1970303
- ------------------------------ -------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1830 Route 130 North
Burlington, New Jersey 08016
- ------------------------------ -------------------------------
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code (609)387-7800
Indicate by check mark whether the Registrant
(1) has filed all reports required by Section
13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for
such shorter period that the registrant was
required to file such reports) and (2) has
been subject to such filing requirements for
the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of
each of the issuer's classes of common stock,
as of the latest practicable date.
Class Outstanding at October 2, 1998
- -------------------------- -------------------------------
Common stock, par value $1 47,093,135
Page 1 of 20
<PAGE>
BURLINGTON COAT FACTORY WAREHOUSE CORPORATION
AND SUBSIDIARIES
I N D E X
Page
Part I - Financial Information:
Item 1. Financial Statements:
Condensed consolidated balance sheets - August 29, 1998 3
(unaudited) and May 30, 1998
Condensed consolidated statements of operations - 4
Three months ended August 29, 1998 and August 30, 1997
(unaudited)
Condensed consolidated statements of cash flows - Three 5
months ended August 29, 1998 and August 30, 1997
(unaudited)
Notes to condensed consolidated financial statements 6 - 9
Item 2. Management's discussion and analysis of 10 - 16
results of operations and financial condition
Part II - Other Information:
Item 1. Legal Proceedings 17
Item 6. Exhibits and reports on Form 8-K 18
SIGNATURES 19
* * * * * * * * * * * *
Page 2 of 20
<PAGE>
BURLINGTON COAT FACTORY WAREHOUSE CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(All amounts in thousands)
<TABLE>
<CAPTION>
August 29, May 30,
1998 1998
(Unaudited) (Note A)
----------- --------
ASSETS
<S>
Current Assets: <C> <C>
Cash and Cash Equivalents $39,031 $153,964
Accounts Receivable 21,458 17,578
Merchandise Inventories 586,169 474,817
Deferred Tax Asset 19,101 11,207
Prepaid and Other Current Asset 14,883 22,993
------- -------
Total Current Assets 680,642 680,559
Property and Equipment (Net of Accumulated
Depreciation and Amortization) 228,828 222,813
Other Assets 8,314 6,435
------- -------
Total Assets $917,784 $909,807
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable $242,513 $198,597
Income Taxes Payable 2,937 10,372
Other Current Liabilities 85,513 94,339
Current Maturities of Long Term Debt 8,792 8,792
------- -------
Total Current Liabilities 339,755 312,100
Long Term Debt 53,083 60,890
Other Liabilities 16,931 16,977
Deferred Tax Liability 3,852 3,771
Stockholders' Equity:
Unearned Compensation (23) (29)
Preferred Stock - -
Common Stock 49,602 49,594
Capital in Excess of Par Value 18,763 18,710
Retained Earnings 457,481 468,958
Less Treasury Stock at Cost (21,660) (21,164)
------- -------
Total Stockholders' Equity 504,163 516,069
------- -------
Total Liabilities and Stockholders' Equity $917,784 $909,807
======= =======
See notes to the condensed consolidated financial statements.
NOTE A: The balance sheet at May 30, 1998 has been derived from the audited
financial statements at that date.
</TABLE>
Page 3 of 20
<PAGE>
BURLINGTON COAT FACTORY WAREHOUSE CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited)
(All amounts in thousands except share data)
<TABLE>
<CAPTION>
Three Months Ended
August 29, August 30,
1998 1997
--------- ----------
REVENUES:
<S> <C> <C>
Net Sales $ 347,187 $ 305,366
Other Income 3,511 4,247
--------- ---------
350,698 309,613
--------- ---------
COSTS AND EXPENSES:
Cost of Sales (Exclusive of Depreciation
and Amortization) 227,165 197,191
Selling and Administrative Expenses 133,104 121,730
Depreciation and Amortization 7,820 8,366
Interest Expenses 1,728 1,870
--------- ---------
369,817 329,157
--------- ---------
Loss Before Income Tax Benefit (19,119) (19,544)
Income Tax Benefit ( 7,642) ( 7,986)
--------- ---------
Net Loss $ (11,477) $ (11,558)
========= =========
Earnings Per Share:
Basic and Diluted Net Loss Per Share $ (.24) $ (.24)
========== ==========
Weighted Average Shares Outstanding 47,362,196 47,554,415
See notes to the condensed consolidated financial statements.
</TABLE>
Page 4 of 20
<PAGE>
BURLINGTON COAT FACTORY WAREHOUSE CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
(All amounts in thousands)
<TABLE>
<CAPTION>
Three Months Ended
August 29, August 30,
1998 1997
---------- ----------
<S> <C> <C>
OPERATING ACTIVITIES
Net Loss ($11,477) ($11,558)
Adjustments to Reconcile Net Loss to Net Cash
Provided by Operating Activities:
Depreciation and Amortization 7,820 8,366
Provision for Losses on Accounts Receivable 1,307 2,141
Provision for Deferred Income Taxes (7,813) (7,242)
Gain on Disposition of Fixed Assets (3) -
Non-Cash Rent Expense and Other 80 1,357
Changes in Operating Assets and Liabilities:
Accounts Receivable (5,195) (2,490)
Merchandise Inventories (111,352) (93,477)
Prepaids and Other Current Assets 8,110 (11,361)
Accounts Payable 43,916 35,774
Other Current Liabilities ( 16,261) (18,149)
------- -------
Net Cash Used in Operating Activities ( 90,868) (96,639)
------- -------
INVESTING ACTIVITIES
Acquisition of Property and Equipment (13,816) (13,403)
Proceeds From Sale of Fixed Assets 3 -
Acquisition of Leaseholds (2,221) -
Receipts Against Long Term Notes Receivable 154 228
Minority Interest 52 48
Other (1) 1
------- -------
Net Cash Used in Investing Activities (15,829) (13,126)
------- -------
FINANCING ACTIVITIES
Principal Payments on Long Term Debt (7,807) (7,419)
Issuance of Common Stock Upon Exercise
of Stock Options 67 239
Purchase of Treasury Stock (496) (8,895)
------- -------
Net Cash Used in Financing Activities ( 8,236) (16,075)
------- -------
Decrease in Cash and Cash Equivalents (114,933) (125,840)
Cash and Cash Equivalents at Beginning of Period 153,964 197,069
------- -------
Cash and Cash Equivalents at End of Period $ 39,031 $ 71,229
======= =======
Interest Paid: $ 3,407 $ 3,629
======= =======
Income Taxes Paid: $ 7,606 $ 8,920
======= =======
See notes to the condensed consolidated financial statements.
</TABLE>
Page 5 of 20
<PAGE>
BURLINGTON COAT FACTORY WAREHOUSE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED AUGUST 29, 1998 AND AUGUST 30, 1997
1. The condensed consolidated financial statements include the
accounts of the Company and all its subsidiaries. All
significant intercompany accounts and transactions have been
eliminated. The accompanying financial statements are unaudited,
but in the opinion of management reflect all adjustments (which
are of a normal and recurring nature) necessary for a fair
presentation of the results of operations for the interim period.
Because the Company's business is seasonal in nature, the
operating results for the three months ended August 29, 1998 and
the corresponding period ended August 30, 1997 are not
necessarily indicative of results for the fiscal year.
2. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or
omitted. It is suggested that these condensed consolidated
financial statements be read in conjunction with the financial
statements and notes thereto included in the Company's Annual
Report on Form 10-K filed with the Securities and Exchange
Commission on August 27, 1998.
3. During fiscal 1998, the Company changed its fiscal year end
from a 52-53 week fiscal year ending on the Saturday closest to
June 30 of each year to a 52-53 week fiscal year ending on the
Saturday closest to May 31 of each year.
4. Merchandise inventories as of August 29, 1998 and May 30,
1998 are valued at the lower of cost, on a First In First Out
(FIFO) basis or market, as determined by the retail inventory
method. Prior to the first quarter of fiscal 1999, on an interim
basis, the Company stated inventory at the lower of FIFO cost or
market, as valued by the gross profit method, which approximated
the retail inventory method.
5. As of August 28, 1998, the Company had a deferred tax
liability of $3.9 million and a current deferred tax asset of
$19.1 million. As of May 30, 1998, the Company had a deferred
tax liability of $3.8 million and a current deferred tax asset of
$11.2 million. Valuation allowances were not required. Deferred
tax assets consisted primarily of certain operating costs,
provisions for uncollectible receivables, and certain inventory
related costs, not currently deductible for tax purposes and tax
loss carryforwards. Deferred tax liabilities primarily reflected
the excess of tax depreciation over book depreciation.
6. Licensee department sales, included in net sales, amounted
Page 6 of 20
<PAGE>
to $10.1 million for the three month period ended August 29,
1998, compared with $8.3 million for the similar period of a year
ago.
7. Other current liabilities primarily consisted of sales tax
payable, accrued operating expenses, payroll taxes payable and
other miscellaneous items.
8. On September 10, 1998, the Board of Directors of the Company
declared a cash dividend in the amount of two cents ($.02) per
share. The cash dividend is payable on October 26, 1998 to
stockholders of record on September 30, 1998.
9. The Company's net advertising costs consist primarily of
newspaper and television costs. The production costs of net
advertising are charged to expenses as incurred. Net advertising
expenses for the three month period ended August 29, 1998 were
$8.1 million. For the three month period ended August 30, 1997,
net advertising costs amounted to $8.3 million.
10. Basic and diluted net loss per share is based on the
weighted average number of shares outstanding during each period.
The amounts used in calculation of basic and dilutive net loss
per share are as follows:
<TABLE>
<CAPTION>
Three Three
Months Months
Ended Ended
August 29, August 30,
1998 1997
---------- ----------
(all amounts in thousands except per share data)
----------------------------------------------
<S> <C> <C>
Net Loss ($11,477) ($11,558)
- -----------------------------------------------------------------------------
Weighted Average
Shares Outstanding 47,362 47,554
- -----------------------------------------------------------------------------
Effect of Dilutive Stock Options 119 75
- -----------------------------------------------------------------------------
Weighted Average
Shares Outstanding
Assuming Dilution 47,481 47,629
- -----------------------------------------------------------------------------
Basic and Diluted
Net Loss Per Share ($.24) ($.24)
- -----------------------------------------------------------------------------
</TABLE>
Page 7 of 20
<PAGE>
11. a. In June 1997, the Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting Standards
("SFAS") No. 130, Reporting Comprehensive Income. This
statement, which establishes standards for reporting and
disclosure of comprehensive income and its components (revenues,
expenses, gains and losses) in a full set of general-purpose
financial statements, is effective for fiscal years beginning
after December 15, 1997. The Company adopted this statement in
the first quarter of fiscal 1999. It's adoption did not have any
impact on the Company's condensed consolidated financial
statements.
b. In June 1997, the FASB issued SFAS No. 131, Disclosures
about Segments of an Enterprise and Related Information. This
statement, which establishes standards for the reporting of
information on operating segments and requires the reporting of
selected information about operating segments in interim
Financial statements, is effective for fiscal years beginning
after December 15, 1997. However, this statement is not required
for interim statements in the initial year of adoption. The
Company does not expect adoption of this statement to result in
significant changes to its presentation of financial data.
c. In June 1998, the FASB issued Statement of Financial
Accounting Standards. No. 133, Accounting for Derivative
Instruments and Hedging Activities. This statement establishes
accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other
contracts (collectively referred to as derivatives), and for
hedging activities. It requires that an entity recognize all
derivatives as either assets or liabilities in the statement of
Financial position and measure those instruments at fair value.
This statement is effective for all fiscal quarters of fiscal
years beginning after June 15, 1999. Adoption of SFAS No. 133 is
not anticipated to have a material impact on the Company's
Financial statement.
d. In March 1998, the AICPA issued Statement of Position
("SOP") 98-1, Accounting For the Costs of Computer Software
Developed For or Obtained for Internal-Use. The SOP is effective
for the Company in fiscal 2000. The SOP will require the
capitalization of certain costs incurred after the date of
adoption in connection with developing or obtaining software for
internal use. The Company has not yet assessed what the impact
Page 8 of 20
<PAGE>
of the SOP will be on the Company's future earnings or Financial
position.
12. 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 was effected in the form of a 20% stock dividend by
the distribution of one additional share for every five shares of
stock already issued. The par value of the Common Stock remained
at $1.00 per share. As a result, $8.3 million, representing the
total par value of the new shares issued, were transferred from
the capital in excess of par value account to common stock.
Prior years' weighted average shares outstanding and net loss per
share amounts have been restated to reflect the six or five
stock split.
Page 9 of 20
<PAGE>
BURLINGTON COAT FACTORY WAREHOUSE CORPORATION
AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Results of
Operations.
Results of Operations
- ---------------------
The following table sets forth certain items in the condensed
consolidated statements of operations as a percentage of net
sales for three month period ended August 29, 1998 and August 30,
1997.
<TABLE>
<CAPTION>
Percentage of Net Sales
-----------------------
Three Months Ended
------------------
August 29, August 30,
1998 1997
---------- ----------
<S> <C> <C>
Net sales 100.0% 100.0%
Costs and expenses:
Cost of sales 65.4 64.6
Selling & adminis-
trative expenses 38.3 39.9
Depreciation &
amortization 2.3 2.7
Interest expense .5 .6
----- -----
106.5 107.8
Other income 1.0 1.4
----- -----
Loss before income
tax benefit (5.5) (6.4)
Income tax benefit 2.2 2.6
----- -----
Net loss (3.3)% (3.8)%
===== =====
</TABLE>
Page 10 of 20
<PAGE>
Three Months Ended August 29, 1998 and August 30, 1997
- ------------------------------------------------------
Net sales increased $41.8 million (13.7%) for the three month
period ended August 29, 1998 compared with the similar period a
year ago. Comparative stores sales increased 10.4%. Sales from
stores opened subsequent to August 30, 1997, including, nine
Burlington Coat Factory stores and one Decelle store, amounted to
$14.9 million for the three months ended August 29, 1998. The
Company closed eight stores subsequent to August 30, 1997. These
stores contributed $5.1 million to last year's three month sales.
Sales from leased departments, included in the three month net
sales figure, were $10.1 million, compared with $8.3 million
for the similar period of a year ago.
Other income (consisting of investment income, rental income from
leased departments, and miscellaneous items) was $3.5 million for
the three months ended August 29, 1998 and $4.2 million for the
three months ended August 30, 1997. Investment income decreases,
resulting from a decrease in investable funds during the
comparative periods, accounted for this $.7 million decrease in
other income.
Cost of sales increased $30.0 million (15.2%) for the three month
period ended August 29, 1998 compared with the similar period a
year ago. For the comparative three month period, cost of sales,
as a percentage of sales, increased from 64.6% to 65.4%. This
percentage increase was primarily the result of higher markdowns
during the current three month period compared with the similar
period of a year ago.
Selling and administrative expenses increased by $11.4 million
(9.3%) for the three month period ended August 29, 1998 compared
with the similar period a year ago. The dollar increase in
selling and administrative expenses was primarily due to an
increase in payroll expenditures. Payroll costs increased due to
annual pay increases granted subsequent to last year's first
quarter, payroll expenditures for stores opened subsequent to
last year's three month period and to increased staffing levels
at the stores and the home office. As a percentage of sales,
selling and administrative expenses decreased to 38.3% from 39.9%
in the comparative three month period. This decrease is
primarily the result of the relatively fixed costs of occupancy
expenses being measured against an increase in same store sales.
Interest expense decreased $.1 million for the three months ended
August 29, 1998 compared with the similar period of a year ago.
Page 11 of 20
<PAGE>
The three month decrease in interest expense is the result of
amortization of the Company's long term debt.
Income tax benefit decreased to $7.6 million for the
three months ended August 29, 1998 from $8.0 million for the
similar period of a year ago. The effective tax rates were 40.0%
and 40.9% for the three month periods ended August 29, 1998 and
August 30, 1997, respectively.
Net loss decreased $.1 million to $11.5 million for the three
months ended August 29, 1998 from $11.6 million for the
comparative period of a year ago. Loss per share was $.24 per
share for both the current year's three month period and the
comparative three month period of a year ago.
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
past, substantially all of the Company's profits have been
derived from operations during the months of September, October,
November, December and January.
Year 2000
- ---------
The inability of computer, software, or any equipment utilizing
microprocessors to properly recognize and process data
information at the turn of the century is commonly referred to as
the Year 2000 (Y2K) compliance issue.
The Company continues its assessment of how Year 2000 will impact
operations. Considerable progress has been achieved in the areas
of identifying, remediating, testing, and implementing Y2K
products and services which are critical to the business
computing systems infrastructure. Inventory of all in-house
software is being conducted in order to determine the impact of
external data feeds into the corporate information process. The
Company is in the process of attempting to identify critical
third party vendors whose inability to reach Y2K compliance may
impact business connectivity and viability. Hardware systems
have been examined and appropriate paths charted to ensure
complete Y2K compatibility. The goal for completing Year 2000
compliance for all critical computing system environments is
early to mid calendar 1999.
All costs associated with the Year 2000 project to date have been
expensed as incurred. The Company's total estimated cost of the
Page 12 of 20
<PAGE>
Year 2000 compliance program is approximately $2 million to $3
million, of which approximately $.2 million had been incurred
prior to this fiscal year. For the three months ended August 28,
1998 the Company incurred approximately $.1 million in costs
related to the Y2K project. The remaining expenses are expected
to be incurred primarily in the remainder of fiscal 1999. A
significant portion of these costs are not likely to be
incremental costs to the Company, but rather will represent the
redeployment of existing information technology resources. Based
upon current benchmarks, the Company believes that it has the
necessary resources in-house to complete all required Year 2000
remediation. In the event that internal resources are
insufficient to complete the project in a timely manner, out-
sourcing the Y2K project, either in part or whole, to a Year 2000
Service Provider may be necessary.
Until all inventory and analysis phases are completed the Company
will not know with absolute certainty how the transition from
1999 to 2000 will affect its operations. Moreover, there is no
guarantee that computing systems and associated applications of
other companies with which the Company conducts business will be
converted on a timely basis or that a failure by said companies
to address their Year 2000 compliance would have a material
adverse impact on the Company.
To date, the Company has not established a formal contingency
plan for dealing with a failure by either the Company or its
third party vendors to achieve Year 2000 compliance.
Liquidity and Capital Resources
- -------------------------------
The Company estimates spending approximately $50 million in
capital expenditures during fiscal 1999 including $14 million for
new store openings, $19 million for store relocations and
expansions, $6 million for upgrades and expansion of warehouse
facilities, and $11 million for computer and other equipment
expenditures. For the first three months of fiscal 1999 capital
expenditures amounted to approximately $14 million.
The Company repurchased 26,800 shares of its stock costing
approximately $.5 million during the first three months of the
current fiscal year. These purchases are reflected as treasury
stock in the equity section of the balance sheet. As of August
29, 1998, the Company had authorization to purchase an additional
$7.2 million of its stock. In addition, on September 10, 1998
the Board of Directors of the Company authorized the Company to
purchase an additional $5.1 million of its stock. Subsequent to
Page 13 of 20
<PAGE>
August 29, 1998, the Company repurchased an additional 452,300
shares costing approximately $7.5 million.
Working capital was $340.9 million at August 29, 1998 compared
with $368.5 million at May 30, 1998. This decrease was due
primarily to purchases of property and equipment and scheduled
payments of long term debt.
Net cash used in operating activities was $90.9 million for the
three months ended August 29, 1998. The primary use of cash
during the current three month period was for the purchase of
additional inventory. Inventory increases resulted from the
stocking of new stores, purchases for the Company's new shoe
departments and for the normal seasonal buildup of inventory
throughout the chain.
On September 10, 1998, the Board of Directors of the Company
declared the Company's annual cash dividend in the amount of two
cents ($.02) per share. The cash dividend is payable on October
26, 1998, to stockholders of record on September 30, 1998.
The Company's long-term borrowings at August 29, 1998 include
$51.8 million of long term subordinated notes issued by the
Company to institutional investors in June 1990 (the "Notes") and
an industrial development bond of $8.9 million issued by the New
Jersey Economic Development Authority (the "Refunding Bonds").
The Notes mature on June 27, 2005 and bear interest at the rate
of 10.6% per annum. The Notes have an average remaining maturity
of four years and are subject to mandatory payment in
installments of $7.4 million each without premium on June 27 of
each year. The Notes are subordinated to senior debt, including,
among others, bank debt and indebtedness for borrowed money.
During the current year's first fiscal quarter, the Company
repaid $7.4 million of the Notes. The Company has no current
plan to repurchase or repay any additional amounts earlier than
scheduled due to prohibitive prepayment penalties, but may
consider doing so in the future should conditions favorable to
the Company present themselves.
The Refunding Bonds consist of serial and term bonds. The serial
bonds aggregate $3.6 million and mature in series annually on
September 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.
Page 14 of 20
<PAGE>
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 7.3 years, respectively. During the current year's first
fiscal quarter, the Company expended approximately $.4 million
for the repayment of the Refunding Bonds.
The Company has in place a committed line of credit agreement in
the amount of $50.0 million and $100.0 million in uncommitted
lines of credit. The Company had no borrowings under these
credit lines during the first three months of fiscal 1999. The
Company had letter of credit commitments outstanding against
these lines of credit of $27.5 million as of the end of the first
quarter of fiscal 1999 and $33.8 million at May 30, 1998.
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.
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 plaintiffs' amended
complaint in its entirety. In March, 1996, the plaintiffs filed
an appeal from the District Court's decision, and in December,
1996, the U.S. Court of Appeals for the Third Circuit heard oral
argument on the appeal. In June, 1997 the U.S. Court of Appeals
for the Third Circuit affirmed the District Court's dismissal of
the class action suit but held that plaintiffs should be granted
leave to attempt to replead two of the six claims that were
dismissed. After remand to the District Court, the plaintiffs
filed a further amended complaint in an effort to cure the legal
deficiencies of the two claims in question. Among other changes,
the amended complaint dropped all claims against Andrew Milstein,
Stephen Milstein and Mark Nesci. On July 1, 1998, the Company
filed a further motion to dismiss on the grounds that the amended
complaint failed to cure such deficiencies. The motion has been
fully briefed by both sides and the parties await word from the
District Court either scheduling oral argument or deciding the
Page 15 of 20
<PAGE>
motion without oral argument. (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.
Safe Harbor Statement
- ---------------------
Statements made in this report that are forward-looking (within
the meaning of the Private Securities Litigation Reform Act of
1995) are not historical facts and involve a number of risks and
uncertainties. Such statements include but are not limited to,
proposed store openings and closings, proposed capital
expenditures, projected financing requirements, proposed
developmental projects, projected sales and earnings, the
Company's ability to maintain selling margins, and the Company's
anticipated ability to resolve Year 2000 computer problems if
any. Among the factors that could cause actual results to differ
materially are the following: general economic conditions;
consumer demand; consumer preferences; weather patterns;
competitive factors, including pricing and promotional activities
of major competitors; the availability of desirable store
locations on suitable terms; the availability, selection and
purchasing of attractive merchandise on favorable terms; import
risks; the Company's ability to control costs and expenses;
unforeseen computer related problems; any unforeseen material
loss or casualty; the effect of inflation; and other factors that
may be described in the Company's filings with the Securities and
Exchange Commission. The Company does not undertake to publicly
update or revise its forward-looking statements even if
experience or future changes make it clear that any projected
results expressed or implied will not be realized.
Page 16 of 20
<PAGE>
BURLINGTON COAT FACTORY WAREHOUSE CORPORATION
AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 1 Legal Proceedings
In late September 1994, three putative class action
lawsuits, P. Gregory Buchanan v. Monroe G. Milstein, et al., No.
94-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 to dismiss
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 a 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. After remand to the District Court, the plaintiffs filed
a further amended complaint in an effort to cure the legal
deficiencies of the two claims in question. Among other changes,
the amended complaint dropped all claims against Andrew Milstein,
Page 17 of 20
<PAGE>
Stephen Milstein and Mark Nesci. On July 1, 1998, the Company
filed a further motion to dismiss on the grounds that the amended
complaint failed to cure such deficiencies. The motion has been
fully briefed by both sides and the parties await word from the
District Court either scheduling oral argument or deciding the
motion without oral argument. The Company is unable at this time
to assess the probable outcome of the two remaining claims or the
materiality of the risk of loss in connection therewith.
Item 6 Exhibits and Reports on Form 8-K
Page No.
--------
a. Exhibits
27. Financial Data Schedule 20
b. The Company filed no reports on Form 8-K during the
period ended August 29, 1998
Page 18 of 20
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
BURLINGTON COAT FACTORY WAREHOUSE CORPORATION
/s/ Monroe G. Milstein
------------------------
Monroe G. Milstein
President & Chief Executive Officer
/s/ Robert L. LaPenta, Jr.
----------------------------
Robert L. LaPenta, Jr.
Corporate Controller & Chief Accounting
Officer
Date: October 9, 1998
Page 19 of 20
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-29-1999
<PERIOD-END> AUG-29-1998
<CASH> 39,031,000
<SECURITIES> 0
<RECEIVABLES> 22,387,000
<ALLOWANCES> (929,000)
<INVENTORY> 586,169,000
<CURRENT-ASSETS> 680,642,000
<PP&E> 401,957,000
<DEPRECIATION> (173,129,000)
<TOTAL-ASSETS> 917,784,000
<CURRENT-LIABILITIES> 339,755,000
<BONDS> 53,083,000
0
0
<COMMON> 49,602,000
<OTHER-SE> 454,561,000
<TOTAL-LIABILITY-AND-EQUITY> 917,784,000
<SALES> 347,187,000
<TOTAL-REVENUES> 350,698,000
<CGS> 227,165,000
<TOTAL-COSTS> 227,165,000
<OTHER-EXPENSES> 139,617,000
<LOSS-PROVISION> 1,307,000
<INTEREST-EXPENSE> 1,728,000
<INCOME-PRETAX> (19,119,000)
<INCOME-TAX> (7,642,000)
<INCOME-CONTINUING> (11,477,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (11,477,000)
<EPS-PRIMARY> (.24)
<EPS-DILUTED> (.24)
</TABLE>
