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 March 28, 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 April 27, 1998
- -------------------------- -----------------------------
Common stock, par value $1 47,358,294
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 - March 28, 1998 3
(unaudited), June 27, 1997 and March 29, 1997 (unaudited)
Condensed consolidated statements of operations - Nine and 4
three months ended March 28, 1998 and March 29, 1997
(unaudited)
Condensed consolidated statements of cash flows - Nine 5
months ended March 28, 1998 and March 29, 1997
(unaudited)
Notes to condensed consolidated financial statements 6 - 8
Item 2. Management's discussion and analysis of results 9 - 17
of operations and financial condition
Part II - Other Information:
Item 1. Legal Proceedings 18
Item 6. Exhibits and reports on Form 8-K 19
SIGNATURES 19
* * * * * * * * * * * *
Page 2 of 20
<PAGE>
BURLINGTON COAT FACTORY WAREHOUSE CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(All amounts in thousands)
<TABLE>
<CAPTION>
March 28, June 28, March 29,
1998 1997 1997
(Unaudited) (Note A) (Unaudited)
----------- --------- -----------
ASSETS
<S> <C> <C> <C>
Current Assets:
Cash and Cash Equivalents $176,059 $157,394 $231,170
Accounts Receivable 15,531 17,160 19,767
Merchandise Inventories 509,436 366,233 401,528
Deferred Tax Asset 9,382 9,201 10,906
Prepaid and Other Current Assets 16,416 7,150 11,856
-------- -------- --------
Total Current Assets 726,824 557,138 675,227
Property and Equipment Net of Accumulated
Depreciation and Amortization 220,824 209,864 209,551
Other Assets 7,085 8,075 8,457
-------- -------- --------
Total Assets $954,733 $775,077 $893,235
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current Liabilities:
Accounts Payable $250,180 $143,840 $225,369
Income Taxes Payable 8,558 10,657 22,123
Other Current Liabilities 91,472 75,074 87,343
Current Maturities of Long Term
Debt 7,873 7,831 7,826
-------- -------- --------
Total Current Liabilities 358,083 237,402 342,661
Long Term Debt 61,822 62,274 69,698
Other Liabilities 16,112 8,763 8,734
Deferred Tax Liability 6,408 6,423 7,636
Stockholders' Equity:
Unearned Compensation (34) (54) (61)
Common Stock - - -
Preferred Stock 49,579 49,511 49,475
Capital in Excess of Par Value 18,115 17,745 17,516
Retained Earnings 465,928 406,123 408,635
Less Treasury Stock at Cost (21,280) (13,110) (11,059)
-------- -------- ---------
Total Stockholders' Equity 512,308 460,215 464,506
-------- -------- --------
Total Liabilities and
Stockholders' Equity $954,733 $775,077 $893,235
======== ======== ========
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 20
<PAGE>
BURLINGTON COAT FACTORY WAREHOUSE CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited)
(All amounts in thousands except per share data)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
March 28, March 29, March 28, March 29,
1998 1997 1998 1997
----------- ----------- ---------- ---------
REVENUES:
<S> <C> <C> <C> <C>
Net Sales $ 1,510,610 $ 1,429,618 $ 397,110 $ 382,420
Other Income 14,599 13,243 6,253 5,650
----------- ----------- --------- ----------
1,525,209 1,442,861 403,363 388,070
----------- ----------- --------- ----------
COSTS AND EXPENSES:
Cost of Sales (Exclusive
of Depreciation and
Amortization) 963,999 922,983 258,089 248,249
Selling and Administrative
Expenses 431,215 391,255 134,631 123,704
Depreciation and
Amortization 23,863 22,525 8,186 7,433
Interest Expense 5,433 6,097 1,746 1,947
---------- ---------- --------- -----------
1,424,510 1,342,860 402,652 381,333
---------- ---------- --------- -----------
Income Before Provision
for Income Taxes 100,699 100,001 711 6,737
Provision For Income Taxes 40,090 40,974 268 2,885
---------- ---------- ----------- -----------
Net Income $ 60,609 $ 59,027 $ 443 $ 3,852
=========== =========== =========== ===========
Earnings Per Share:
Basic and Diluted Net
Income Per Share $ 1.28 $ 1.22 $ 0.01 $ 0.08
=========== ============ =========== ===========
Weighted Average Shares
Outstanding 47,431,485 48,377,640 47,390,371 47,908,757
=========== =========== =========== ===========
Dividends Per Share $ 0.02 - - -
=========== =========== ============ ===========
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>
Nine Months Ended
March 28, March 29,
---------- ----------
<S> <C> <C>
OPERATING ACTIVITIES
Net Income $ 60,609 $ 59,027
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation and Amortization 23,863 22,525
Provision for Losses on Accounts Receivable 6,322 4,751
Provision for Deferred Income Taxes (196) (887)
Loss on Disposition of Fixed Assets 468 905
Rent Expense and Other 856 1,190
Changes in Operating Assets and Liabilities:
Accounts Receivable (5,012) (9,934)
Merchandise Inventories (143,203) (31,091)
Prepaids and Other Current Assets (9,266) 7,946
Accounts Payable 106,340 106,469
Other Current Liabilities 14,299 36,294
Other Liabilities 6,972 -
---------- ----------
Net Cash Provided by Operating Activities 62,052 197,195
---------- ----------
INVESTING ACTIVITIES
Acquisition of Property and Equipment (35,229) (26,714)
Proceeds From Sale of Fixed Assets - 381
Receipts Against Long Term Notes Receivable 713 897
Minority Interest 55 (111)
Other - 2
---------- ----------
Net Cash Used by Investing Activities (34,461) (25,545)
---------- ----------
FINANCING ACTIVITIES
Principal Payments on Long Term Debt (410) (5,774)
Issuance of Common Stock Upon Exercise of
Stock Options 458 468
Payment of Dividends (804) -
Purchase of Treasury Stock (8,170) (8,734)
---------- ----------
Net Cash Used in Financing Activities (8,926) (14,040)
---------- ----------
Increase in Cash and Cash Equivalents 18,665 157,610
Cash and Cash Equivalents at Beginning
of Period 157,394 73,560
---------- ----------
Cash and Cash Equivalents at End of Period $ 176,059 $ 231,170
========== ==========
Interest Paid: $ 3,976 $ 4,500
Income Taxes Paid: $ 34,285 $ 24,965
========= =========
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
NINE AND THREE MONTHS ENDED MARCH 28, 1998 AND MARCH 29, 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 nine and three months ended March 28,
1998 and the corresponding periods ended March 29, 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 September 26, 1997.
3. Inventories as of March 28, 1998 and March 29, 1997 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 March 28, 1998, the Company had a deferred tax
liability of $6.4 million and a current deferred tax asset of
$9.4 million. As of March 29, 1997, the Company had a deferred
tax liability of $7.6 million and a current deferred tax asset of
$10.9 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 $32.1 million and $8.0 million for the nine and three month
periods ended March 28, 1998, compared with $26.9 million and
$7.7 million for the similar periods of fiscal 1997.
Page 6 of 20
<PAGE>
6. Other current liabilities primarily consisted of sales tax
payable, accrued operating expenses, payroll taxes payable and
other miscellaneous items.
7. On September 8, 1997, the Board of Directors of the Company
declared the Company's first cash dividend in the amount of two
cents ($.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 March 28, 1998 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 nine month and three month periods ended March
28, 1998 were $36.7 million and $6.8 million, respectively. For
the nine month and three month periods ended March 29, 1997, net
advertising costs amounted to $35.3 million and $8.3 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 nine and three month periods ended March
28, 1998.
Page 7 of 20
<PAGE>
<TABLE>
<CAPTION>
Nine Months Ended March 28, 1998 Nine Months Ended March 29, 1997
(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 $60,609 47,431,485 $1.28 $59,027 48,377,640 $1.22
Effect of Dilutive Securities:
Assumed Conversion of
Stock Options 100,196 91,009
----------------------------------- ---------------------------------------
Dilutive Earnings Per Share:
Net Income and Assumed
Conversion $60,609 47,531,681 $1.28 $59,027 48,468,649 $1.22
=================================== ======================================
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended March 28, 1998 Three Months Ended March 29, 1997
(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 $ 443 47,390,371 $0.01 $3,852 47,908,757 $0.08
Effect of Dilutive Securities:
Assumed Conversion of
Stock Options 96,038 99,212
--------------------------------- --------------------------------------
Dilutive Earnings Per Share:
Net Income and Assumed
Conversion $ 443 47,486,409 $0.01 $ 3,852 48,007,969 $0.08
================================== =======================================
</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 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 the nine and three month periods ended March 28, 1998
and March 29, 1997.
<TABLE>
<CAPTION>
Percentage of Net Sales
-----------------------
Nine Months Ended Three Months Ended
<S> <C> <C> <C> <C>
March 28, March 29, March 28, March 29,
1998 1997 1998 1997
--------- --------- --------- ---------
Net sales 100.0% 100.0% 100.0% 100.0%
Costs and expenses:
Cost of sales 63.8 64.6 65.0 64.9
Selling & adminis-
trative expenses 28.5 27.4 33.9 32.4
Depreciation &
amortization 1.6 1.5 2.1 1.9
Interest expense .4 .4 .4 .5
----- ----- ----- -----
94.3 93.9 101.4 99.7
----- ----- ----- -----
Other income 1.0 .9 1.6 1.5
----- ----- ----- -----
Income before income
taxes 6.7 7.0 .2 1.8
Provision for income
taxes 2.7 2.9 .1 .8
----- ----- ----- -----
Net income 4.0% 4.1% .1% 1.0%
===== ===== ===== =====
</TABLE>
Page 9 of 20
<PAGE>
Nine and Three Months Ended March 28, 1998 and March 29, 1997
- -------------------------------------------------------------
Net sales increased $81.0 million (5.7%) for the nine month
period ended March 28, 1998 compared with the similar period a
year ago. Comparative stores sales for Burlington Coat Factory
stores increased 1.4%. The Cohoes stores contributed $27.5
million to consolidated sales for the period. Cohoes comparative
store sales increased 3.0% for the nine month period. Sales in
the nine month period for the Decelle stores were $29.6 million.
Comparative store sales for the Decelle chain were down 6.0%.
Comparative store sales, in all chains, were negatively impacted
by the unseasonably warm weather during the winter months this
year and by a later Easter selling season this year, compared
with last fiscal year. Sales from stores opened subsequent to
March 29, 1997, including eleven Burlington Coat Factory stores
and one Decelle store, amounted to $49.4 million for the nine
months ended March 28, 1998. The Company closed six stores
during fiscal 1998. These stores contributed $21.3 million to
last year's nine month sales. Sales from leased departments,
included in the nine month net sales figure, were $32.1 million,
compared with $26.9 million for the similar period of a year ago.
For the three month period ended March 28, 1998, net sales
increased 3.8% to $397.1 million compared with the similar period
of a year ago. Comparative store sales for Burlington Coat
Factory stores increased .9% during the period. Cohoes
comparative store sales increased 2.4% while Decelle comparative
store sales fell 12.2% during the current three month period
compared with the similar period of a year ago. As in the nine
month comparative period, comparative store sales were negatively
impacted by an unusually warm winter this fiscal year and by the
later Easter selling season, compared with last fiscal year.
Sales for the Cohoes stores and Decelle stores were $8.5 million
and $6.6 million, respectively, for the three months ended March
28, 1998. Sales from stores opened subsequent to March 29, 1997,
were $16.5 million during fiscal 1998's third quarter. Sales
from stores which were in operation a year ago, but which were
closed prior to this year's third quarter, contributed $6.7
million to last year's third quarter sales. Leased department
sales, included in net sales, were $8.0 million for the third
quarter this year compared with $7.7 million in last year's
similar period.
Other income (consisting of investment income, rental income from
leased departments, and miscellaneous items) was $14.6 million
for the nine months ended March 28, 1998 and $13.2 million for
the nine months ended March 29, 1997. For the nine month
Page 10 of 20
<PAGE>
comparative period, investment income increases and decreased
losses from write-off of leasehold improvements from closed
stores, were offset by reductions in rental income, resulting
from the conversion of lessee shoe departments to Company
operated shoe departments. In addition, the Company had
non-recurring miscellaneous income items of approximately $1.4
million during the third quarter of fiscal 1998 compared with $.7
million during fiscal 1997.
For the three months ended March 28, 1998, other income was $6.3
million compared with $5.7 million during the similar period of a
year ago. The $.6 million increase is primarily the result of
the miscellaneous non-recurring income items arising during this
year's third quarter, offset by increases in losses from
write-off of leasehold improvements from closed stores and by
lower investment income.
Cost of sales increased in dollar terms by $41.0 million (4.4%)
for the nine month period ended March 28, 1998 compared with the
similar period a year ago and by $9.8 million (4.0%) for the
quarter ended March 28, 1998 compared with the similar period a
year ago. For the comparative nine month period, cost of sales,
as a percentage of sales, decreased from 64.6% to 63.8%. This
improvement was primarily the result of improved initial margins
for the first nine months of fiscal 1998 compared with the
similar period of a year ago. For the three months ended March
29, 1997, cost of sales, as a percentage of sales, increased from
64.9% to 65.0%. For the comparative third quarters, improvements
in initial margins were offset by increases in markdowns as a
percentage of sales and a decrease in sales in the higher margin
outerwear departments.
Selling and administrative expenses increased by $40.0 million
(10.2%) for the nine month period ended March 28, 1998 compared
with the similar period a year ago. As a percentage of sales,
selling and administrative expenses increased to 28.5% from 27.4%
in the comparative nine month period. For the three months ended
March 28, 1998, selling and administrative expenses increased
$10.9 million to $134.6 million (8.8%). As a percentage of
sales, selling and administrative expenses were 33.9% compared
with 32.4% for the similar period of a year ago. For both the
nine and three month periods ended March 28, 1998, compared with
the similar periods of a year ago, the dollar increases in
selling and administrative expenses are primarily due to an
increase in payrol expenditures. Payroll costs increased due to
annual pay increases granted subsequent to last year's third
quarter, payroll expenditures for stores opened subsequent to
Page 11 of 20
<PAGE>
last year's third quarter and to increased staffing levels at the
stores and the home office. Partially offsetting the payroll
increases in the third quarter was a reduction in advertising
expense. Advertising expense decreased $1.6 million in this
year's third quarter compared with the similar period of a year
ago due to the later Easter season in fiscal 1998.
Interest expense decreased $.7 million for the nine months ended
March 28, 1998 compared with the similar period of fiscal 1997.
For the three month period ended March 28, 1998, interest expense
was $1.7 million, a decrease of $.2 million compared with the
three months ended March 29, 1997. The nine and three month
decreases in interest expense are the result of normal reductions
in the Company's long term debt.
The provision for income taxes decreased to $40.1 million for the
nine months ended March 28, 1998 from $41.0 million for the
similar period of fiscal 1997. For the three months ended March
28, 1998 the provision for income taxes decreased to $.3 million
from $2.9 million for the comparative period of a year ago. The
effective tax rates were 39.8% and 37.7% for the nine and three
month periods ended March 28, 1998 compared with 40.9% and 42.8%
for the comparative nine and three month periods of fiscal 1997.
Net income increased $1.6 million to $60.6 million for the nine
months ended March 28, 1998 from $59.0 million for the
comparative period of fiscal 1997. Income per share was $1.28
per share for the current year's nine month period compared with
$1.22 for the similar period of a year ago. Net income was $.4
million for the three month period ended March 28, 1998 compared
with $3.9 million for the three months ended March 29, 1997. Net
income per share decreased to $0.01 per share for the three
months ended March 28, 1998 compared with $0.08 for the similar
period of a year ago. The decrease in earnings during the third
quarter was primarily attributable to slower sales in the
outerwear departments during the beginning of the quarter, lower
sales in March due to a later Easter selling season during fiscal
1998 of approximately two weeks, and to the increase of payroll
related expenditures.
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.
Page 12 of 20
<PAGE>
Year 2000
- ---------
The inability of computers, software and other equipment
utilizing microprocessors to recognize and properly process data
fields containing a 2 digit year is commonly referred to as the
Year 2000 Compliance issue.
The Company has commenced analysis of the Year 2000 issue with
the mission to ensure that all Company critical computng systems
will be Year 2000 compliant. The Company is currently focusing
on the creation of a controlled development environment,
including the establishment of standaridized strategies for
identification, recording, tracking, remediation, testing, and
implementation of all components of the Company computing systems
infrastructure. An inventory of all Company technology relative
to Year 2000 is scheduled to be completed by the end of May 1998.
As non-compliant Year 2000 issues are discovered, they are
inventoried and scheduled for correction and implementation.
This includes, but is not limited to, all internal software,
third-party software, external data feeds, and hardware systems.
Inventory data will be subsequently analyzed to calculate the
resources required to complete this project, at which time the
cost for Year 2000 compliance and implementation can be
determined. The goal for completing Year 2000 compliance for all
critical computing systems is early 1999.
All costs associated with the Year 2000 project to date have been
expensed as incurred and have not reached a material amount.
Presently, the Company believes that it has the necessary
resources in-house to complete all the necessary Year 2000
changes. In the event that internal resources are insufficient
to complete the project in a timely manner, out-sourcing the Year
2000 project, either in part or whole, to a Year 2000 Service
Provider may be necessary.
The Company currently is unable to assess how the transition from
1999 to 2000 will affect its operations. The many computer
systems and associated applications are of concern, as are the
functions of the physical plant (including corporate and
subsidiary headquarters, and associated retail stores) that
depend upon embedded time-controlled electronic circuitry such as
security and evironmental systems. Furthermore, there can be no
assurance that the computing systems 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 concern would not have an adverse material impact
on the Company.
Page 13 of 20
<PAGE>
Liquidity and Capital Resources
- -------------------------------
The Company opened three Burlington Coat Factory stores during
the first quarter of fiscal 1998, seven stores in the second
fiscal quarter and one store in the third fiscal quarter. The
Company also opened one Decelle store in Wellesley, Massachusetts
during this year's second quarter. The Company estimates
spending approximately $8.5 million for store openings during
this fiscal year, of which approximately $8.1 million have been
expended as of March 28, 1998. In addition, for the fiscal year
the Company has budgeted approximately $19.7 million for the
refurbishing and refixturing of existing stores, of which $17.1
million have been expended as of the end of this year's third
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 $6.0 million during fiscal 1998. Of this amount,
through the first nine months of the current fiscal year,
approximately $4.5 million have been spent.
The Company repurchased 622,360 shares of its stock (after giving
effect to the six for five stock split effected on October 16,
1997), costing approximately $8.2 million in the nine months of
the current fiscal year. These purchases are reflected as
treasury stock in the equity section of the balance sheet. As of
March 28, 1998, the Company has authorization to purchase an
additional $7.8 million of its stock.
Working capital increased to $368.7 million at March 28, 1998
from $332.6 million at March 29, 1997.
On September 8, 1997, the Board of Directors of the Company
declared the Company's first cash dividend in the amount of two
cents ($.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.
Net cash provided by operating activities was $62.1 million for
the nine months ended March 28, 1998, a decrease of $135.1
million from $197.2 million in net cash provided by operating
activities for the comparative period of fiscal 1997. This
decline is due primarily to the following:
1) increases in outerwear inventories, resulting from lower than
expected sales during the second and third quarters of fiscal
Page 14 of 20
<PAGE>
1998;
2) opportunistic purchases of additional basic coat inventory
from coat manufacturers' excess inventory, resulting from the
sluggish outerwear selling season;
3) inventory purchases for the Company's new shoe departments,
which have been opened in approximately 100 stores during the
current fiscal year; and
4) a later Easter selling season during fiscal 1998 compared with
the similar period of a year ago.
The Company's long-term borrowings at March 28, 1998 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 June 27 of each year. 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
Page 15 of 20
<PAGE>
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 nine months of fiscal 1998. The
Company had letter of credit commitments outstanding against
these lines of credit of $22.3 million and $23.6 million as of
the end of the third quarter of fiscal 1998 and fiscal 1997,
respectively.
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. 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, 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 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 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 17 of 20
<PAGE>
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 March 28, 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: May 5, 1998
Page 19 of 20
<PAGE>
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