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 December 27, 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)
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 February 4, 1998
- -------------------------- --------------------------------
Common stock, par value $1 49,563,536
Page 1 of 23<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 - December 27, 1997 3
(unaudited), June 27, 1997 and December 28, 1996 (unaudited)
Condensed consolidated statements of operations - Six and 4
three months ended December 27, 1997 and December 28, 1996
(unaudited)
Condensed consolidated statements of cash flows - Six and 5
three months ended December 27, 1997 and December 28, 1996
(unaudited)
Notes to condensed consolidated financial statements 6 - 8
Item 2. Management's discussion and analysis of results 9 - 15
of operations and financial condition
Part II - Other Information:
Item 1. Legal Proceedings 16
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 6. Exhibits and reports on Form 8-K 17
SIGNATURES 18
* * * * * * * * * * * *
Page 2 of 23<PAGE>
BURLINGTON COAT FACTORY WAREHOUSE CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(All amounts in thousands)
<TABLE>
<CAPTION>
December 27, June 28, December 28,
1997 1997 1996
(Unaudited) (Note A) (Unaudited)
ASSETS
<S> <C> <C> <C>
Current Assets:
Cash and Cash Equivalents $ 286,357 $157,394 $ 288,464
Accounts Receivable 22,783 17,160 22,073
Merchandise Inventories 485,859 366,233 414,607
Deferred Tax Asset 9,321 9,201 10,415
Prepaid and Other Current Assets 17,985 7,150 14,875
--------- ------- ---------
Total Current Assets 822,305 557,138 750,434
Property and Equipment Net of Accumulated
Depreciation and Amortization 218,534 209,864 208,172
Other Assets 7,443 8,075 9,052
Total Assets $1,048,282 $775,077 $ 967,658
========== ======== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable $ 310,417 $143,840 $ 279,706
Income Taxes Payable 29,617 10,657 30,481
Other Current Liabilities 108,866 75,074 102,611
Current Maturities of Long Term Debt 7,871 7,831 7,827
---------- -------- ---------
Total Current Liabilities 456,771 237,402 420,625
Long Term Debt 61,845 62,274 69,716
Other Liabilities 11,093 8,763 8,682
Deferred Tax Liability 6,034 6,423 7,546
Stockholders' Equity:
Unearned Compensation (41) (54) (68)
Preferred Stock -- -- --
Common Stock 49,565 41,259 41,187
Capital in Excess of Par Value 18,053 25,997 25,486
Retained Earnings 465,485 406,123 404,783
Less Treasury Stock at Cost (20,523) (13,110) (10,299)
---------- --------- ---------
Total Stockholders' Equity 512,539 460,215 461,089
Total Liabilities and Stockholders' Equity $1,048,282 $775,077 $ 967,658
========== ======== =========
See notes to the condensed consolidated financial statements.
NOTE A: The balance sheet at June 28, 1997 has been derived from the audited
financial statements at that date.
</TABLE>
Page 3 of 23<PAGE>
BURLINGTON COAT FACTORY WAREHOUSE CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited)
(All amounts in thousands except per share data)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
December 27, December 28, December 27, December 28,
1997 1996 1997 1996
-------------------------- --------------------------
REVENUES:
<S> <C> <C> <C> <C>
Net Sales $1,113,500 $1,047,198 $778,230 $739,958
Other Income 8,346 7,593 5,007 4,515
---------- ---------- -------- --------
1,121,846 1,054,791 783,237 744,473
---------- ---------- -------- --------
COSTS AND EXPENSES:
Cost of Sales (Exclusive
of Depreciation and
Amortization) 705,910 674,734 489,475 471,424
Selling and Administrative
Expenses 296,584 267,551 166,823 152,090
Depreciation and Amortization 15,677 15,092 7,862 7,468
Interest Expenses 3,687 4,150 1,828 1,923
---------- --------- -------- --------
1,021,858 961,527 665,988 632,905
---------- --------- -------- --------
Income Before Provision
for Income Taxes 99,988 93,264 117,249 111,568
Provision For Income Taxes 39,822 38,089 46,876 45,519
---------- --------- -------- -------
Net Income $ 60,166 $ 55,175 $ 70,373 $ 66,049
========== ========== ======== =========
Earnings Per Share:
Basic and Diluted Net
Income Per Share $ 1.27 $ 1.13 $ 1.48 $ 1.36
========== ========== ======== =========
Weighted Average Shares
Outstanding 47,452,084 48,660,200 47,409,278 48,452,839
========== ========== ========== ==========
Dividends Per Share $ .02 - $ .02 -
========== ========== ========== ==========
See notes to the condensed consolidated financial statements.
</TABLE>
Page 4 of 23<PAGE>
BURLINGTON COAT FACTORY WAREHOUSE CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
(All amounts in thousands)
<TABLE>
<CAPTION>
Six Months Ended
December 27, December 28,
1997 1996
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net Income $ 60,166 $ 55,175
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation and Amortization 15,677 15,092
Provision for Losses on Accounts Receivable 4,272 3,462
Provision for Deferred Income Taxes (509) (486)
Loss on Disposition of Fixed Assets 112 1,132
Rent Expense and Other 618 786
Changes in Operating Assets and Liabilities:
Accounts Receivable (10,101) (11,070)
Merchandise Inventories (119,626) (44,170)
Prepaids and Other Current Assets (10,835) 4,927
Accounts Payable 166,577 160,806
Other Current Liabilities 52,752 59,348
-------- --------
Net Cash Provided by Operating Activities 159,103 245,002
-------- --------
INVESTING ACTIVITIES
Acquisition of Property and Equipment (24,418) (17,248)
Proceeds From Sale of Fixed Assets -- 4
Receipts Against Long Term Notes Receivable 442 651
Minority Interest 67 43
Other 2,000 38
-------- -------
Net Cash Used by Investing Activities (21,909) (16,512)
--------- --------
FINANCING ACTIVITIES
Principal Payments on Long Term Debt (389) (5,755)
Issuance of Common Stock Upon Exercise of
Stock Options 375 143
Payment of Dividends (804) --
Purchase of Treasury Stock (7,413) (7,974)
--------- -------
Net Cash Used in Financing Activities (8,231) (13,586)
--------- --------
Increase in Cash and Cash Equivalents 128,963 214,904
Cash and Cash Equivalents at
Beginning of Period 157,394 73,560
--------- -------
Cash and Cash Equivalents at
End of Period $286,357 $288,464
======== ========
Interest Paid: $ 3,688 $ 4,182
Income Taxes Paid: $ 21,371 $ 13,321
======== ========
See notes to the condensed consolidated financial statements.
</TABLE>
Page 5 of 23<PAGE>
BURLINGTON COAT FACTORY WAREHOUSE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SIX AND THREE MONTHS ENDED DECEMBER 27, 1997 AND DECEMBER 28, 1996
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 six
and three months ended December 27, 1997 and the corresponding
periods ended December 28, 1996 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 September 26, 1997.
3. Inventories as of December 27, 1997 and December 28, 1996 are
stated at the lower of FIFO cost or market, as valued by the gross
profit method. Inventories as of June 27, 1997 were valued by the
retail inventory method.
4. As of December 27, 1997, the Company had a deferred tax
liability of $6.0 million and a current deferred tax asset of $9.3
million. As of December 28, 1996, the Company had a deferred tax
liability of $7.5 million and a current deferred tax asset of $10.4
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. Deferred tax
liabilities primarily reflected the excess of tax depreciation over
book depreciation.
5. Licensee department sales, included in net sales, amounted to
$24.1 million and $15.1 million for the six and three month periods
ended December 27, 1997, compared with $19.2 million and $12.4
million for the similar periods of fiscal 1997.
6. Other current liabilities primarily consisted of sales tax
payable, accrued operating expenses, payroll taxes payable and
other miscellaneous items.
Page 6 of 23<PAGE>
7. On September 8, 1997, the Board of Directors of the Company
declared the Company's first cash dividend in the amount of two
cents ($.02) per share, payable annually. The cash dividend was
paid on October 16, 1997 to stockholders of record on September 19,
1997 and amounted to $.8 million.
8. On September 8, 1997, the Board of Directors of the Company
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. Common Stock and paid-in capital in excess of par
value accounts as of December 27, 1997 were adjusted to give effect
to the stock split.
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 six month and three month periods ended December
27, 1997 were $30.0 million and $18.7 million, respectively. For
the six month and three month periods ended December 28, 1996, net
advertising costs amounted to $27.0 million and $18.4 million,
respectively.
10. a. In February 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 128,
Earnings Per Share. This new standard requires dual presentation
of basic and diluted earnings per share and requires reconciliation
of the numerators and denominators of the basic and diluted
earnings per share calculation. This Statement is effective for
financial reporting purposes, for both interim and year-end
financial statements ending after December 15, 1997. The Company
has adopted this Statement for its interim statement of operations
for the six and three month periods ended December 27, 1997.
Page 7 of 23<PAGE>
<TABLE>
<CAPTION>
Six Months Ended December 27, 1997 Six Months Ended December 28, 1996
(all amounts in thousands except share data)
Income Shares Per Share Income Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
Basic Earnings Per Share:
<S> <C> <C> <C> <C> <C> <C>
Net Income $60,166 47,452,084 $1.27 $55,175 48,660,200 $1.13
Effect of Dilutive Securities:
Assumed Conversion of
Stock Options 105,872 83,326
__________________________________ _________________________________
Dilutive Earnings Per Share:
Net Income and Assumed
Conversion $60,166 47,557,956 $1.27 $55,175 48,743,526 $1.13
================================== ================================
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended December 27, 1997 Three Months Ended December 28, 1996
(all amounts in thousands except share data)
Income Shares Per Share Income Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
Basic Earnings Per Share:
<S> <C> <C> <C> <C> <C> <C>
Net Income $70,373 47,409,278 $1.48 $66,049 48,452,839 $1.36
Effect of Dilutive Securities:
Assumed Conversion of
Stock Options 108,511 74,603
____________________________________ ________________________________
Dilutive Earnings Per Share:
Net Income and Assumed
Conversion $70,373 47,517,789 $1.48 $66,049 48,527,442 $1.36
=================================== ================================
</TABLE>
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 year 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
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 fiscal 1999. At this time, the
Company has not determined the impact this standard will have on
the Company's financial statements.
Page 8 of 23<PAGE>
BURLINGTON COAT FACTORY WAREHOUSE CORPORATION
AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition.
Results of Operations
- ---------------------
The following table sets forth certain items in the condensed
consolidated statements of operations as a percentage of net sales for
the six and three month periods ended December 27, 1997 and December 28,
1996.
<TABLE>
<CAPTION>
Percentage of Net Sales
-----------------------
Six Months Ended Three Months Ended
<S> <C> <C> <C> <C>
December 27, December 28, December 27, December 28,
1997 1996 1997 1996
----------- ------------ ----------- ------------
Net sales 100.0% 100.0% 100.0% 100.0%
Costs and expenses:
Cost of sales 63.4 64.4 62.9 63.7
Selling & adminis-
trative expenses 26.7 25.6 21.5 20.6
Depreciation &
amortization 1.4 1.4 1.0 1.0
Interest expense .3 .4 .2 .2
------ ------ ------ ------
91.8 91.8 85.6 85.5
------ ------ ------ ------
Other income .8 .7 .6 .6
------ ------ ------ ------
Income before income
taxes 9.0 8.9 15.0 15.1
Provision for income
taxes 3.6 3.6 6.0 6.2
------ ------ ------ ------
Net income 5.4% 5.3% 9.0% 8.9%
====== ====== ====== ======
</TABLE>
Page 9 of 23<PAGE>
Six and Three Months Ended December 27, 1997 and December 28, 1996
___________________________________________________________________
Net sales increased $66.3 million (6.3%) for the six month period
ended December 27, 1997 compared with the similar period a year ago.
Comparative store sales increased 1.5%. New Burlington Coat Factory
Warehouse stores opened subsequent to December 28, 1996 contributed
$53.2 million to this year's sales. Stores which were in operation
a year ago, but which were closed prior to this year, contributed
$7.1 million to last year's sales. The Cohoes stores showed a
comparative stores sales increase of 1.6%, while contributing $19.0
million to consolidated sales for the period. During the prior
fiscal year one Cohoes Store was closed. This store contributed $3.6
million to last year's sales. Sales in the six month period for the
Decelle stores were $22.5 million compared with $20.9 million in the
similar period of a year ago. Comparative store sales for the
Decelle stores fell 3.8% for the six months ended December 27, 1997
compared with the similar period of a year ago. Two new Decelle
stores opened subsequent to December 28, 1996 contributed $2.4
million to this year's sales. The Company closed, prior to this
fiscal year, its Fit For Men Store and one Luxury Linens store.
These stores contributed $.5 million and $.7 million, respectively,
to last year's first six month sales. Sales from leased departments
included in the six month net sales figure were $24.1 million,
compared with $19.2 million for the similar period of a year ago.
For the three month period ended December 27, 1997, net sales
increased 5.2% to $778.2 million compared with the similar period of
a year ago. Comparative store sales increased .3%. New Burlington
Coat Factory Warehouse stores opened subsequent to December 28, 1996
contributed $43.7 million to the second quarter's net sales. Cohoes
comparative store sales were flat for the second quarter of fiscal 1998
compared with the similar period of fiscal 1997. Sales for the Cohoes
stores for the quarter were $10.1 million compared with $12.1 million
in the comparable quarter of a year ago. The Cohoes store closed prior
to this fiscal year, contributed $2.0 million to last year's sales in
the second fiscal quarter. Sales for the Decelle chain were $12.6 million
for the three months ended December 27, 1997 compared with $12.4 million
in the similar period of fiscal 1997. Comparative store sales fell 4.7%
during the second fiscal quarter in the Decelle stores. Leased department
sales, included in net sales, were $15.1 million for the second fiscal
quarter this year compared with $12.4 million in last year's similar
period.
Page 10 of 23<PAGE>
Other income (consisting primarily of rental income from leased
departments, investment income and miscellaneous items) was $8.3
million for the six months ended December 27, 1997 and $7.6 million
for the six months ended December 28, 1996. For the three months
ended December 27, 1997, other income was $5.0 million compared with
$4.5 million for the similar period of fiscal 1997. For both the six
and three month comparative periods, slight increases in investment
income and decreases in writeoffs of leasehold improvements of closed
stores were partially offset by decreases in rental income.
Cost of sales increased by $31.2 million (4.6%) for the six month
period ended December 27, 1997 compared with the similar period a
year ago and by $18.1 million (3.8%) for the quarter ended December
27, 1997 compared with the similar period a year ago. Cost of sales
as a percentage of net sales decreased from 64.4% to 63.4% for the
six months and decreased from 63.7% to 62.9% for the quarter ended
December 27, 1997 compared with similar periods a year ago. These
decreases in cost of sales, as a percentage of sales for both the six
months and three months ended December 27, 1997, are due primarily to
decreases in markdowns taken during those periods.
Selling and administrative expenses increased by $29.0 million
(10.9%) for the six month period ended December 27, 1997 compared
with the similar period a year ago. As a percentage of sales,
selling and administrative expenses increased to 26.6% from 25.6% in
the comparable six month period. For the three months ended December
27, 1997, selling and administrative expenses increased $14.7 million
to $161.8 million (9.7%). As a percentage of sales, selling and
administrative expenses were 21.4% compared with 20.6% for the
similar period of a year ago. For both the six and three month
periods ended December 27, 1997, compared with the similar periods of
a year ago, the dollar increases in selling and administrative
expenses are primarily due to an increase in payroll expenditures.
Payroll costs increased due to annual pay increases granted
subsequent to last year's second quarter, payroll expenditures for
stores opened subsequent to last year's second quarter and to
increased staffing levels at the stores.
Interest expense decreased $.5 million for the six months ended
December 27, 1997 compared with the similar period of fiscal 1997.
For the three month period ended December 27, 1997, interest expense
was $1.8 million, a decrease of $.1 million compared with the three
months ended December 28, 1996. The six and three month decreases in
interest expense are the result of normal reductions in the Company's
long term debt.
Page 11 of 23<PAGE>
The provision for income taxes increased to $39.8 million for the six
months ended December 27, 1997 from $38.1 million for the similar
period of fiscal 1997. For the three months ended December 27, 1997
the provision for income taxes increased to $46.9 million from $45.5
million for the comparable period of a year ago. The effective tax
rates were 39.8% and 40.0% for the six and three month periods ended
December 27, 1997 compared with 40.8% for the comparable six and
three month periods of fiscal 1997.
Net income increased $5.0 million to $60.2 million for the six months
ended December 27, 1997 from $55.2 million for the comparative period
of fiscal 1997. Income per share was $1.27 per share for the current
year's six month period compared with $1.13 for the similar period of
a year ago. Net income was $70.4 million for the three month period
ended December 27, 1997 compared with $66.0 million for the three
months ended December 28, 1996. Net income per share increased to
$1.48 per share for the three months ended December 27, 1997 compared
with $1.36 for the similar period of a year ago.
The Company's business is seasonal, with its highest sales occurring
in the months of October, November, and December 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
October, November and December.
Year 2000
- ---------
The Company is in the midst of a project to determine the impact of
the Year 2000 issue on the Company's computer systems. The Company
is currently assembling a list of, and analyzing, its internally
developed software, purchased software, and external data feeds that
utilize embedded date codes which may experience operational problems
when the Year 2000 is reached. The Company currently plans to complete
its analysis by the end of 1998 and will continue to make required
modifications to the identified problems through the early part of 1999.
The total cost of making the Company "Year 2000 Compliant" cannot be
accurately determined at this time. In addition, the Company currently
cannot accurately assess the effect of incomplete or untimely resolution
of Year 2000 issues on its operations.
Liquidity and Capital Resources
- -------------------------------
The Company opened five Burlington Coat Factory stores during the
first quarter of fiscal 1998 and eight stores in the second fiscal
Page 12 of 23<PAGE>
quarter. The Company also opened one Decelle store in Wellesley,
Massachusetts during this year's second quarter. The Company plans
to open two stores during the remainder of fiscal 1998. The Company
estimates spending approximately $11.7 million for store openings
during this fiscal year, of which approximately $7.1 million have
been expended as of December 27, 1997. In addition, the Company
plans to spend approximately $16.5 million for the refurbishing and
refixturing of existing stores, of which $8.8 million have been
expended as of the end of this year's second fiscal quarter. During
fiscal 1998, the Company purchased the land and building associated
with two of its stores for approximately $5.3 million. Other capital
expenditures, consisting primarily of computer system enhancements
and distribution center improvements, are expected to be
approximately $14.2 million during fiscal 1998 of which through the
first six months of the current fiscal year, approximately $3.2
million have been made spent.
The Company repurchased 571,360 shares of its stock (after giving
effect to the six for five stock split effected on October 16, 1997),
costing approximately $7.4 million in the first half of the current
fiscal year. These purchases are reflected as treasury stock in the
equity section of the balance sheet. As of December 27, 1997, the
Company has authorization to purchase an additional $8.6 million of
its stock.
Working capital increased to $365.5 million at December 27, 1997
from $329.8 million at December 28, 1996.
Net cash provided by operating activities was $159.1 million for the
six months ended December 27, 1997, a decrease of $85.9 million from
$245.0 million in net cash provided by operating activities for the
comparable period of fiscal 1997. This decline is due primarily to an
increase in inventory. Inventory increased due to additional
inventory purchases for the Company's new shoe departments and for new
stores. Higher outerwear inventories throughout the Company were the
result of weaker than expected sales in the second quarter in the outerwear
division.
The Company's long-term borrowings at December 27, 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 $9.3 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 an average
remaining maturity of three years and are subject to mandatory
prepayment in installments of $8.0 million each without premium on
Page 13 of 23<PAGE>
June 27 of each year from and after June 27, 1996. The Notes are
subordinated to senior debt, including, among others, bank debt and
indebtedness for borrowed money. During the first quarter of fiscal
1997, 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 plan 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 financing was
originally fixed at 9.78% over the life of these serial and term
bonds (the "Bonds"). The Company refinanced its industrial
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 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 5.7% and 8.3 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 six months of fiscal 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 and from its
long term borrowings. The Company may 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.
Page 14 of 23<PAGE>
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, 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. The case has since been remanded to
the District Court but, as of yet, the order permitting the
plaintiffs to replead those two claims has not been signed by the
District Court. (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.
Page 15 of 23<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 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"). On
December 12, 1996, the Third Circuit entertained oral argument in connection
with the Appeal. In June, 1997 the U.S. Court of Appeals for the Third
Circuit affirmed the District Court's dismissal of the putative class action
suit but held that plaintiffs should be granted leave to attempt to replead two
of the six claims that were dismissed. The case has since been remanded to
the District Court but, as of yet, the order permitting the plaintiffs to
replead those two claims has not been signed by the District Court. 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.
Page 16 of 23<PAGE>
Item 4 Submission of Matters to a Vote of Security Holders
The Company's annual meeting of stockholders was held on November
6, 1997. At the meeting, the following actions were taken: 1)
stockholders elected directors to serve until the next annual
meeting of stockholders and until their successors are duly elected
and qualified; and 2) stockholders ratified the appointment of
Deloitte & Touche LLP as independent certified public accountants
for the Company for the fiscal year ending May 30, 1998. The
following tables set forth the results of the votes cast at the
meeting for each matter submitted to stockholders:
0<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Votes Broker
1) Election of Directors Votes For Withheld Non-Votes
--------------------- --------- -------- ---------
Monroe G. Milstein 38,608,195 130,028 - 0 -
Henrietta Milstein 38,292,328 445,895 - 0 -
Andrew R. Milstein 38,616,691 121,532 - 0 -
Irving Drillings 38,291,608 446,615 - 0 -
Harvey Morgan 38,616,891 121,332 - 0 -
Stephen E. Milstein 38,616,691 121,532 - 0 -
Mark A. Nesci 38,616,891 121,332 - 0 -
</TABLE>
2) Ratify appointment of Deloitte & Touche LLP as independent
Certified Public Accountants:
<TABLE>
<CAPTION>
<S> <C> <C>
Votes For 38,708,899
Votes Against 15,501
Votes Abstained 13,823
Broker Non-Vote 0
</TABLE>
Item 6 Exhibits and Reports on Form 8-K
Page No.
a. Exhibits
10.3 Burlington Coat Factory Warehouse 19
Corporation 401(k) Profit-Sharing
Plan (Instrument of Amendment)
27. Financial Data Schedule 23
b. The Company filed on November 12, 1997,
a report on Form 8-K reporting a change
in fiscal year
Page 17 of 23<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: February 10, 1998
Page 18 of 23<PAGE>
Exhibit 10.3
Page 19 of 23<PAGE>
EXHIBIT A
INSTRUMENT OF AMENDMENT TO
THE BURLINGTON COAT FACTORY WAREHOUSE CORPORATION
401(k) PROFIT SHARING PLAN
The Burlington Coat Factory Warehouse Corporation 401(k)
Profit Sharing Plan, as amended and restated effective June 29,
1997 (hereinafter referred to as the "Plan"), is hereby amended as
follows, effective as of the dates set forth herein:
1. Effective as of June 29, 1997, the definition of "Year of
Service" is hereby amended in its entirety to read as follows:
"Year of Service" means a Plan Year
during which a Participant completes at least
1,000 Hours of Service; provided, that (i) for
purposes of determining an Employee's
eligibility to participate in the Plan,
pursuant to ARTICLE 1, a Year of Service shall
mean any twelve (12) consecutive month period,
beginning on or after the date of the
Employee's employment with an Affiliate,
during which he completes at least 1,000 of
Service; and (ii) for purposes of determining
the vesting of a Participant's interest,
pursuant to ARTICLE VIII, (A) an Employee who
is credited with at least 1,000 Hours of
Service in both his first twelve (12)
consecutive months of employment and the Plan
Year which begins during such twelve (12)
month period shall be credited with two (2)
Years of Service at the end of such Plan Year
and (B) Years of Service completed by the
Participant prior to his attainment of age
eighteen (18) shall be disregarded."
2. Effective as of June 29, 1997, the first sentence of Section
2.4(a) of the Plan is hereby amended by substituting the
phrase "dollar amount" for the word "percentage."
3. Effective as of June 29, 1997, the first sentence of Section
3.2(a) of the Plan is hereby amended by substituting the
phrase "dollar amounts of contributions" for the phrase
"contribution percentages."
Page 20 of 23<PAGE>
4. Effective as of June 29, 1997; the parenthetical statement in
the second sentence of Section 3.3 of the Plan is hereby
amended by substituting the phrase "dollar amount of
contribution" for the phrase "contribution percentage."
5. Effective as of December 1, 1997, Section 7.3 of the Plan is
hereby amended by redesignating the existing provision as
subsection 7.3(a), by adding the following sentence to the end
of such redesignated subsection 7.3(a):
"In the event that (i) a Participant fails to
make a designation, or (ii) the Committee does
not receive a Participant's written notice or
(iii) no record exists within the voice
response system utilized by the Plan of a
Participant's designation of Investment Funds,
the Trustee shall invest any amount it
receives with respect to such Participant in
the "Stable Value Fund" and the Committee
shall take reasonable steps to elicit an
Investment Fund designation from the
Participant."
and by adding the following new subsection 7.3(b) at the end
thereof:
"(b) Purchases of Stock made pursuant to a
Participant's designation will be made on the
open market or with Stock held in the
Company's Treasury ("Treasury Stock"), and the
Participant's Account will be credited with
the number of whole and fractional shares of
Stock so purchased (net of any brokerage
commissions and fees). Sales of Stock from the
Stock Fund will be made on the open market.
Purchases and sales of Stock on the open
market will be reflected at the Trustee's
cost, net of any brokerage commissions and
fees, of such purchases and sales. Purchases
made with Treasury Stock will be reflected at
the closing sales price for Stock on the day
on which a Participant directs the Trustee to
effect an investment in the Stock Fund on his
behalf (or if no Stock is traded on that day,
on the next day on which open market trades in
Stock occur)."
Page 21 of 23<PAGE>
6. Effective December 1, 1997, Section 7.4 of the Plan is amended
by adding the following after the fourth sentence therein:
"Any cash dividends and cash proceeds from any
other distributions received with respect to a
Participant's interest in the Stock Fund will
be reinvested in additional shares of Stock."
7. Effective as of June 29, 1997, Section 9.5 of the Plan is
hereby amended by adding the following proviso clause at the
end of the first sentence therein:
" ; and further provided, that, at the
election of the Participant (or, if
applicable, his beneficiary) and subject to
any restrictions contained in Section 7.7, the
portion of such single sum payment that is
attributable to the Participant's investment
in the Stock Fund may be paid in whole shares
of Stock equal in value to all or part of the
Participant's interest in the Stock Fund and
any remaining interest in the Stock Fund shall
be paid in cash."
Page 22 of 23<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-30-1998
<PERIOD-END> DEC-27-1997
<CASH> 286,357,000
<SECURITIES> 0
<RECEIVABLES> 25,241,000
<ALLOWANCES> (2,458,000)
<INVENTORY> 485,859,000
<CURRENT-ASSETS> 822,305,000
<PP&E> 374,714,000
<DEPRECIATION> (156,180,000)
<TOTAL-ASSETS> 1,048,282,000
<CURRENT-LIABILITIES> 456,771,000
<BONDS> 61,845,000
0
0
<COMMON> 49,565,000
<OTHER-SE> 462,974,000
<TOTAL-LIABILITY-AND-EQUITY> 1,048,282,000
<SALES> 1,113,500,000
<TOTAL-REVENUES> 1,121,846,000
<CGS> 705,910,000
<TOTAL-COSTS> 705,910,000
<OTHER-EXPENSES> 307,989,000
<LOSS-PROVISION> 4,272,000
<INTEREST-EXPENSE> 3,687,000
<INCOME-PRETAX> 99,988,000
<INCOME-TAX> 39,822,000
<INCOME-CONTINUING> 60,166,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 60,166,000
<EPS-PRIMARY> 1.27
<EPS-DILUTED> 1.27
</TABLE>
