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 28, 1999
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 September 27, 1999
- -------------------------- ---------------------------------
Common stock, par value $1 46,406,199
Page 1 of 25
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 28, 1999 3
(unaudited) and May 29, 1999
Condensed Consolidated Statements of Operations - 4
Three Months Ended August 28, 1999 and August 29, 1998
(unaudited)
Condensed Consolidated Statements of Cash Flows - Three 5
Months Ended August 28, 1999 and August 29, 1998
(unaudited)
Notes to Condensed Consolidated Financial Statements 6 - 9
Item 2. Management's Discussion and Analysis of 10 - 17
Results of Operations and Financial Condition
Item 3. Quantitative and Qualitative Disclosures 17
About Market Risk
Part II - Other Information:
Item 6. Exhibits and Reports on Form 8-K 18
SIGNATURES 19
* * * * * * * * * * * *
Page 2 of 25
BURLINGTON COAT FACTORY WAREHOUSE CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(All amounts in thousands)
<TABLE>
<CAPTION>
August 28, May 29,
1999 1999
(Unaudited) (Note A)
------------ ------------
ASSETS
- ------
<S> <C> <C>
Current Assets:
Cash and Cash Equivalents $ 22,118 $106,952
Accounts Receivable 18,334 14,227
Merchandise Inventories 568,669 501,040
Deferred Tax Asset 14,413 10,231
Prepaid and Other Current Asset 16,975 18,247
Prepaid Income Tax 799 973
------- -------
Total Current Assets 641,308 651,670
Property and Equipment (Net of Accumulated
Depreciation and Amortization) 270,019 252,221
Long Term Investments 23,835 24,175
Other Assets 13,794 13,569
------- -------
Total Assets $948,956 $941,635
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current Liabilities:
Accounts Payable $249,186 $222,766
Other Current Liabilities 83,561 88,226
Current Maturities of Long Term Debt 44,921 7,919
------- -------
Total Current Liabilities 377,668 318,911
Long Term Debt 8,544 52,970
Other Liabilities 15,686 15,689
Deferred Tax Liability 5,406 5,909
Stockholders' Equity:
Preferred Stock - -
Common Stock 49,618 49,612
Capital in Excess of Par Value 19,177 19,157
Retained Earnings 509,469 515,814
Unearned Compensation - (2)
Accumulated Other Comprehensive
Income (Loss) (216) (29)
Treasury Stock at Cost (36,396) (36,396)
------- -------
Total Stockholders' Equity 541,652 548,156
------- -------
Total Liabilities and Stockholders' Equity $948,956 $941,635
======= =======
See notes to the condensed consolidated financial statements.
NOTE A: The balance sheet at May 29, 1999 has been derived from the audited
financial statements at that date.
</TABLE>
Page 3 of 25
<PAGE>
BURLINGTON COAT FACTORY WAREHOUSE CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(All amounts in thousands except share data)
<TABLE>
Three Months Ended
August 28, August 29,
1999 1998
---------- ----------
<S> <C> <C>
REVENUES:
Net Sales $391,680 $347,187
Other Income 2,978 3,240
---------- ----------
394,658 350,427
---------- ----------
COSTS AND EXPENSES:
Cost of Sales
(Exclusive of Depreciation and Amortization) 254,626 227,165
Selling and Administrative Expenses 139,862 132,833
Depreciation and Amortization 9,095 7,820
Interest Expenses 1,359 1,728
---------- ----------
404,942 369,546
---------- ----------
Loss Before Income Tax Benefit (10,284) (19,119)
Income Tax Benefit (3,939) (7,642)
---------- ----------
Net Loss ($6,345) ($11,477)
========== ==========
Earnings Per Share:
Basic and Diluted Net Loss Per Share ($.14) ($.24)
========== ==========
Weighted Average Shares Outstanding 46,403,509 47,362,196
========== ==========
See notes to the condensed consolidated financial statements.
</TABLE>
Page 4 of 25
<PAGE>
BURLINGTON COAT FACTORY WAREHOUSE CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(All amounts in thousands)
<TABLE>
<CAPTION>
Three Months Ended
August 28, August 29,
1999 1998
---------- ----------
<S> <C> <C>
OPERATING ACTIVITIES
Net Loss ($6,345) ($11,477)
Adjustments to Reconcile Net Loss to Net Cash
Provided (Used) by Operating Activities:
Depreciation and Amortization 9,095 7,820
Provision for Losses on Accounts Receivable 1,533 1,307
Provision for Deferred Income Taxes (4,685) (7,813)
Loss (Gain) on Disposition of Fixed Assets 100 (3)
Non-Cash Rent Expense and Other 903 80
Changes in Operating Assets and Liabilities:
Accounts Receivable (5,642) (5,195)
Merchandise Inventories (67,629) (111,352)
Prepaids and Other Current Assets 1,446 8,110
Accounts Payable 26,420 53,742
Other Current Liabilities (4,670) (16,261)
------- -------
Net Cash Used in Operating Activities (49,474) (81,042)
------- -------
INVESTING ACTIVITIES
Acquisition of Property and Equipment (26,975) (13,816)
Proceeds From Sale of Fixed Assets 1 3
Acquisition of Leaseholds (1,064) (2,221)
Receipts Against Long Term Notes Receivable 51 154
Minority Interest 25 52
Other - (1)
------- -------
Net Cash Used in Investing Activities (27,962) (15,829)
------ ------
FINANCING ACTIVITIES
Principal Payments on Long Term Debt (7,424) (7,807)
Issuance of Common Stock Upon Exercise
of Stock Options 26 67
Purchase of Treasury Stock - (496)
------- -------
Net Cash Used in Financing Activities (7,398) (8,236)
Decrease in Cash and Cash Equivalents (84,834) (105,107)
Cash and Cash Equivalents at Beginning of Period 106,952 153,964
------- -------
Cash and Cash Equivalents at End of Period $22,118 $48,857
======= =======
Interest Paid: $2,785 $3,407
======= =======
Income Taxes Paid: $572 $7,606
======= =======
See notes to the condensed consolidated financial statements.
</TABLE>
Page 5 of 25
<PAGE>
BURLINGTON COAT FACTORY WAREHOUSE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED AUGUST 28, 1999 AND AUGUST 29, 1998
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 28, 1999 and
the corresponding period ended August 29, 1998 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, 1999.
3. Merchandise inventories as of August 28, 1999 and May 29,
1999 are valued at the lower of cost, on a First In First Out
(FIFO) basis, or market, as determined by the retail inventory
method.
4. As of August 28, 1999, the Company had a deferred tax
liability of $5.4 million and a current deferred tax asset of
$14.4 million. As of May 29, 1999, the Company had a deferred
tax liability of $5.9 million and a current deferred tax asset of
$10.2 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.
5. Licensee department sales, included in net sales, amounted
to $9.2 million for the three month period ended August 28, 1999,
compared with $10.1 million for the similar period of a year ago.
Page 6 of 25
6. Other current liabilities primarily consisted of sales tax
payable, accrued insurance costs, accrued operating expenses, payroll
taxes payable and other miscellaneous items.
7. Long-term debt consists of:
<TABLE>
<CAPTION>
August 28, May 29,
1999 1999
(unaudited)
(in thousands)
-------------------------
<S> <C> <C>
Subordinated Notes, 10.6%, due in
annual principal payments of $7.4
million from June 1999 to June 2005
with interest due semi-annually $44,400 $51,800
Industrial Revenue Bonds, 5.75%,
due in semi-annual payments of
various amounts from September 1,
1999 to September 1, 2010 8,945 8,945
Promissory Note, due at various dates
through 2000 (interest rate
imputed at 10.6%) 120 144
-------- --------
Subtotal 53,465 60,889
Less current portion (44,921) (7,919)
-------- --------
Long-term Debt $ 8,544 $52,970
======== ========
</TABLE>
With respect to the Subordinated Notes, in addition to the $7.4
million principal payment scheduled for June 27, 2000, the
Company plans to prepay the remaining balance of $37.0 million on
or after that time, assuming no material change in conditions or
current assunmptions. The Company anticipates prepayment penalties
to amount to approximately $1.0 million. As a result of this
expected prepayment, the Company has classified the entire
balance of the Subordinated Notes as a current maturity of debt
on the Company's Condensed Consolidated Balance Sheet as of
August 28, 1999.
8. On September 17, 1999, the Board of Directors of the Company
declared a cash dividend in the amount of two cents ($.02) per
share. The cash dividend is payable on November 2, 1999 to
stockholders of record on October 7, 1999.
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 28, 1999 were
$6.4 million. For the three month period ended August 29, 1998,
net advertising costs amounted to $8.1 million.
Page 7 of 25
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 28, August 29,
1999 1998
(unaudited) (unaudited)
------------- -------------
(all amounts in thousands except per share data)
<S> <C> <C>
Net Loss ($6,345) ($11,477)
- -------------------------------------------------------------------------
Weighted Average
Shares Outstanding 46,404 47,362
- -------------------------------------------------------------------------
Effect of Dilutive Stock Options 88 119
- -------------------------------------------------------------------------
Weighted Average
Shares Outstanding
Assuming Dilution 46,492 47,481
- ------------------------------------------------------------------------
Basic and Diluted
Net Loss Per Share ($.14) ($.24)
- ------------------------------------------------------------------------
</TABLE>
11. In June 1997, the Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting Standards
("SFAS") No. 130, Reporting Comprehensive Income. This statement
establishes standards for reporting and disclosure of
comprehensive income and its components (revenues, expenses,
gains and losses). The Company presents comprehensive income as
a component of stockholders' equity.
12. The Company reports segment information in accordance with
SFAS No. 131, Disclosure about Segments of an Enterprise and
Related Information. The Company has one reportable segment,
operating within the United States. Sales by major product
categories are as follows (in thousands) (unaudited):
<TABLE>
<CAPTION>
Three Months Ended
August 28, 1999 August 29, 1998
----------------- -----------------
<S> <C> <C>
Apparel $ 282,285 $ 251,925
Non-Apparel 109,395 95,262
-------- --------
$ 391,680 $ 347,187
======== ========
</TABLE>
Apparel includes all clothing items for men, women and children.
Non-apparel includes linens, home furnishings, gifts, baby
Page 8 of 25
furniture and baby furnishings.
13. 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 requires the
capitalization of certain costs incurred in connection with
developing or obtaining software for internal use. The Company
capitalized $.2 million relating to these costs during the three
months ended August 28, 1999.
14. The Company classifies its investments in debt securities
into held-to-maturity, available-for-sale or trading categories
in accordance with the provisions of SFAS No. 115, Accounting For
Certain Investments in Debt and Equity Securities. Debt
securities are classified as held-to-maturity when the Company
has the positive intent and ability to hold the securities to
maturity. Held-to-maturity securities are stated at amortized
cost. The Company's debt securities not classified as held-to-
maturity are classified as available-for-sale and are carried at
fair market value, with unrealized gains and losses, net of tax,
reported as a separate component in stockholders' equity.
15. 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, 2000. The Company has not yet
assessed what the impact of SFAS No. 133 will be on the Company's
future earnings or financial position.
16. Certain reclassifications have been made to the prior year's
financial statements to conform to the current year presentation.
Page 9 of 25
<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 three month periods ended August 28, 1999 and
August 29, 1998.
<TABLE>
<CAPTION>
Percentage of Net Sales
-----------------------
Three Months Ended
------------------
August 28, August 29,
1999 1998
---------- ----------
<S> <C> <C>
Net sales 100.0% 100.0%
Costs and expenses:
Cost of sales 65.0 65.4
Selling & adminis-
trative expenses 35.7 38.3
Depreciation &
amortization 2.3 2.3
Interest expense .4 .5
----- -----
103.4 106.5
----- -----
Other income .8 1.0
----- -----
Loss before income
tax benefit (2.6) (5.5)
Income tax benefit 1.0 2.2
----- -----
Net loss (1.6%) (3.3%)
====== ======
</TABLE>
Page 10 of 25
<PAGE>
Three Months Ended August 28, 1999 and August 29, 1998
- -------------------------------------------------------
Net sales increased $44.5 million (12.8%) for the three month
period ended August 28, 1999 compared with the similar period a
year ago. Comparative stores sales increased 7.6%. Sales from
stores opened subsequent to August 29, 1998 amounted to $21.8
million for the three months ended August 28, 1999. Stores which
were in operation a year ago, but which were closed prior to this
year, contributed $1.8 million to last year's sales. Sales from
leased departments, included in the three month net sales figure,
were $9.2 million, compared with $10.1 million for the similar
period of a year ago.
The Cohoes stores contributed $8.5 million to consolidated sales
for the three months ended August 28, 1999 compared with $8.2
million for the three months ended August 29, 1998. Cohoes
comparative store sales increased 3.6% for the three month
period.
Sales in the first quarter of fiscal 2000 for the Decelle stores
were $7.3 million compared with $7.9 million for three months
ended August 29, 1998. Decelle comparative store sales decreased
3.2% for the comparative three months.
Other income (consisting of investment income, rental income from
leased departments, and miscellaneous items) was $3.0 million for
the three months ended August 28, 1999 and $3.2 million for the
three months ended August 29, 1998. Lower investment income,
resulting from a decrease in investable funds and interest rates
during the comparative periods, accounted for the $.2 million
decrease in other income.
Cost of sales increased $27.5 million (12.1%) for the three month
period ended August 28, 1999 compared with the similar period a
year ago. For the comparative three month period, cost of sales,
as a percentage of sales, decreased to 65.0% from 65.4%. This
percentage decrease was primarily the result of lower markdowns
during the three month period compared with the similar period of
a year ago.
Selling and administrative expenses increased by $7.0 million
(5.3%) for the three month period ended August 28, 1999 compared
with the similar period a year ago. The dollar increase in
selling and administrative expenses was primarily a result of the
increased number of stores operating during the three month period
compared with the similar period a year ago. As a percentage of
sales, selling and administrative expenses
Page 11 of 25
<PAGE>
decreased to 35.7% for the three months ended August 28, 1999,
from 38.3% in the comparative three month period of a year
ago. This decrease is primarily due to the increase in
comparative store sales and to payroll cost controls instituted
by the Company.
Interest expense decreased $.4 million for the three months ended
August 28, 1999 compared with the similar period of a year ago.
The three month decrease in interest expense is the result of
amortization of the Company's long term debt.
Income tax benefit decreased to $3.9 million for the three months
ended August 28, 1999 from $7.6 million for the similar period of
a year ago. The effective tax rates were 38.3% and 40.0% for the
three month periods ended August 28, 1999 and August 29, 1998,
respectively.
Net loss decreased $5.2 million to $6.3 million for the three
months ended August 28, 1999 from $11.5 million for the
comparative period of a year ago. Loss per share was $.14 per
share for the current fiscal year's first quarter and $.24 for
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 computers, software, and equipment utilizing
microprocessors or embedded systems to properly recognize and
process date information prior to, during and after January 1,
2000 is commonly referred to as the Year 2000 ("Y2K") compliance
problem.
As of August 28, 1999, the Company continues assessment of how
Y2K will impact operations. Considerable progress has been
achieved in the areas of identifying, remediating, testing, and
implementing Y2K products which are critical to the business
computing systems infrastructure. An inventory of all in-house
software systems has been completed, and said systems have been
remediated, where applicable, for compliance. In addition, a
selected number of these systems are being audited for compliance
Page 12 of 25
<PAGE>
by two independent professional service providers as a means to
further verify compliance. A survey of third party software and
equipment has been conducted in order to determine critical
business systems requiring Y2K compliance verification. These
systems are being upgraded or replaced, as appropriate, to
guarantee compliance. Hardware systems have also been examined
and appropriate paths charted to achieve Y2K compatibility.
Critical vendors with which the Company conducts business have
been identified and contacted to assure their goods and/or
services are compliant with Company Y2K standards.
The goal for completing fiscal year 2000 compliance for all
business mission-critical computing system environments was
successfully reached on May 29, 1999. The transition of the
Company's accounting and record keeping system to fiscal 2000
from fiscal 1999 was accomplished without error.
Testing of remediated computer code for calendar year 2000
compliance began in June 1999 in a separate, isolated computing
system designed and built specifically for Y2K testing, which
replicates the Company's live computing systems. During such
testing, controls are implemented to ensure that the code being
tested and any data produced do not enter into the Company's live
computing environment. With the exception of a small number of
personal computers (which will be replaced before calendar year-
end in accordance with the Company's normal asset retirement
schedule), the Company's electronic data interchange (EDI)
software (which is currently being upgraded in association with
the Company's EDI vendor), and the Company's merchandise
management system (MMS) (for which the Company is expecting to
receive a new version of the MMS software from its MMS vendor), the
Company has completed the remediation and implementation of
substantially all other business mission-critical computing
systems on a calendar year basis. The Company does not expect
any material business interruption in connection with the
replacement of personal computers, the upgrading of its EDI
software or the installation and implementation of newer MMS
software, all of which are scheduled to be completed prior to
December 31, 1999.
All costs associated with the Y2K project to date have been
expensed as incurred. The Company's total estimated cost of the
Y2K compliance program is approximately $2 million to $3 million,
of which approximately $1.7 million was incurred as of May 29,
1999 and $.2 million during the first quarter of fiscal 2000.
The remaining expenditures are expected to occur primarily in the
remainder of fiscal 2000. A significant portion of these costs
Page 13 of 25
<PAGE>
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 Y2K remediation. In the event that internal
resources are insufficient to complete the project in a timely
manner, outsourcing the Y2K project, either in part or whole, to
a Y2K Service Provider may be necessary.
The Company does not know with absolute certainty how the
transition from calendar year 1999 to calendar year 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 failure by those companies to address their
Y2K compliance would not have an adverse material impact on the
Company. Disruption of business functions due to events beyond
the Company's reasonable control, such as power grid or
telecommunications failures and disruption of product supply and
distribution channels, may result in temporary interruption of
operations localized within the region of failure.
Contingency plans are in progress to address the aforementioned
scenarios as well as those events associated with minor
disruptions within the Company business cycle in areas such as
store loss prevention, distribution center operations, physical
plant management, and human resource administration. These
contingency plans are being integrated with Company data
processing procedures to ensure that the Company will be able to
collect and store critical operational data as of December 31,
1999 so that such data can be reproduced, if necessary, on or
after January 1, 2000.
Liquidity and Capital Resources
- -------------------------------
The Company estimates spending approximately $90.0 million in
capital expenditures during fiscal 2000 including $11.8 million
for the purchase of store land and buildings, $35.3 million for
new store openings, $24.4 million for store relocations,
expansions and refurbishings, $6.0 million for upgrades and
expansion of warehouse facilities, and $12.5 million for computer
and other equipment expenditures. For the first three months of
fiscal 2000 capital expenditures amounted to approximately $27.0
million.
Working capital was $263.6 million at August 28, 1999 compared
with $332.8 million at May 29, 1999. This decrease was due
Page 14 of 25
<PAGE>
primarily to purchases of property and equipment, scheduled
payments of long term debt, and the classification of the
Company's subordinated notes as a current liability, reflecting
the Company's planned repayment of this debt in June 2000.
Net cash used in operating activities was $49.5 million for the
three months ended August 28, 1999. The primary use of cash for
operating activities during the current three month period was
for the purchase of additional inventory. Inventory increases
resulted from the stocking of new stores and from the normal
seasonal buildup of inventory throughout the chain.
On September 17, 1999, the Board of Directors of the Company
declared a cash dividend in the amount of two cents ($.02) per
share. The cash dividend is payable on November 2, 1999, to
stockholders of record on October 7, 1999.
The Company's borrowings at August 28, 1999 include $44.4 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 three 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. From time to time, the Company
reviews the desirability of prepaying the balance of the Notes,
which as of August 28, 1999 aggregates $44.4 million. If
interest rates remain at current levels, the Company, in addition
to making its scheduled $7.4 million payment, may prepay the
remaining $37.0 million on June 27, 2000 or sometime thereafter,
when the prepayment penalty associated with such prepayment would
fall to approximately $1.0 million. No assurance, however, can
be given that the Company will do so. Such a decision will
depend in part on the availability of cash and the Company's
borrowing requirements, prevailing interest rates, alternative
uses for cash and general economic conditions along with many
other factors. In expectation of prepaying the Notes on or after
June 27, 2000, the Company has reclassified the remaining balance
of the Notes to Current Maturities of Long Term Debt on the
Company's Condensed Consolidated Balance Sheet.
Page 15 of 25
<PAGE>
The Refunding Bonds consist of serial and term bonds. The serial
bonds aggregate $2.5 million and mature in series annually on
September 1 through the year 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 6.7 years, respectively.
The Company has in place a committed line of credit agreement in
the amount of $50.0 million and an additional $50.0 million in
uncommitted lines of credit. The Company had no borrowings under
these credit lines during the first three months of fiscal 2000
or fiscal 1999. The Company had letter of credit commitments
outstanding against these lines of credit of $22.2 million as of
the end of the first quarter of fiscal 2000 and $20.9 million at
May 29, 1999.
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.
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, projected sources
and applications of funds, 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;
Page 16 of 25
<PAGE>
the availability, selection and purchasing of attractive merchandise
on favorable terms; import risks; the Company's ability to
control costs and expenses; unforseen computer related problems;
any unforseen 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.
Item 3. Quantitative and Qualitative Market Risk Disclosures.
The Company does not utilize financial instruments for trading
purposes and holds no derivative financial instruments which
could expose the Company to significant market risk. The
Company's primary market risk exposure with regard to financial
instruments is to changes in interest rates. Pursuant to the
terms of certain revolving credit arrangements, changes in the
lenders' prime rate, LIBOR or other stated interest rates could
affect the rates at which the Company could borrow funds
thereunder. At August 28, 1999, the Company had no outstanding
borrowings against the credit facilities. The table below
summarizes the fair value and contract terms of the Company's
fixed rate debt and long-term investments, at August 28, 1999 (in
thousands):
Expected Maturity Date of Long-Term Debt (Including Current
Portion) and Long Term Investments at August 28, 1999 (unaudited)
<TABLE>
<CAPTION>
Fixed Rate Average Long-Term Average
Debt Interest Rate Investments Interest Rate
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
2000 $ 495 8.3% - 6.3%
(remaining)
2001 44,905 10.5% - 6.3%
2002 505 5.1% $ 4,200 6.3%
2003 555 5.2% - 6.5%
2004 605 5.4% 20,000 6.5%
Thereafter 6,400 6.0% - -
------- -------
Total $53,465 $24,200
======= =======
Fair Value at
August 28, 1999 $54,326 $23,770
======= =======
</TABLE>
Page 17 of 25
BURLINGTON COAT FACTORY WAREHOUSE CORPORATION
AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
a. Exhibits Page No.
-------- --------
10.5 Amendment No. 8 to Revolving 20
Credit Agreement dated September 21,
1999 between the Company and National
City Bank
27 Financial Data Schedule 24
b. The Company filed no reports on Form 8-K during the
period ended August 28, 1999.
Page 18 of 25
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.
Vice President, Corporate Controller & Chief
Accounting Officer
Date: October 12, 1999
Page 19 of 25
EXHIBIT 10.5
------------
Page 20 of 25
<PAGE>
AMENDMENT NO. EIGHT TO REVOLVING CREDIT AGREEMENT
THIS AMENDMENT NO. EIGHT TO REVOLVING CREDIT AGREEMENT
("Amendment No. Eight") is made effective as of the 21st day of
September, 1999, to the Revolving Credit Agreement dated August
30, 1985, (the "Agreement") executed by and between BURLINGTON
COAT FACTORY WAREHOUSE CORPORATION, a corporation duly organized
under the laws of the State of Delaware and BURLINGTON COAT
FACTORY WAREHOUSE OF NEW JERSEY, INC., a corporation duly
organized under the laws of the State of New Jersey (herein
collectively referred to as the "Borrower"), and NATIONAL CITY
BANK, successor by merger to National City Bank of Columbus,
formerly known as National City Bank, Columbus, formerly known as
BancOhio National Bank, a national banking association with a
banking office at 155 East Broad Street, Columbus, Ohio 43251
(herein called "Bank").
WITNESSETH:
WHEREAS, Borrower and Bank entered into the Agreement pursuant to
which Bank extended a commitment to make revolving loans to
Borrower up to a maximum principal amount of Twenty-Five Million
and 00/100 Dollars ($25,000,000.00), said maximum principal
amount having previously been increased to Fifty Million and
00/100 Dollars ($50,000,000.00), and each loan having been made
pursuant to the terms of the Agreement; and
WHEREAS, Borrower and Bank have previously entered into
amendments of the Agreement, as evidenced by Amendment No. 1
dated January 7, 1987, by an Amendment No. 2 dated February 3,
1987, by an Amendment No. 3 dated June 1, 1989, by Amendment No.
4 dated August 18, 1993, by Amendment No. 5 dated September 28,
1995, by Amendment No. Six dated March 28, 1996, and by Amendment
No. Seven dated June 1, 1998, (collectively, the "Amendments")
(the Agreement together with the Amendments hereinafter
collectively referred to as the "Agreement"); and
WHEREAS, Borrower and Bank desire to amend the Agreement to
modify Subsection 7.05(G) of the Agreement, but to otherwise
preserve, ratify, and reaffirm the terms and conditions of the
Agreement.
Page 21 of 25
NOW THEREFORE, the parties hereto, in consideration of the mutual
promises and covenants herein contained, agree as follows:
1. Subsection 7.05(G) of the Agreement is hereby deleted in its
entirety and the following is hereby inserted in its place:
(G) other encumbrances on property owned by Borrower or any
Subsidiary made in connection with borrowings in an
aggregate amount equal to not more than Twenty-Five Million
and 00/100 Dollars ($25,000,000.00);
2. Borrower hereby expressly acknowledges and confirms that the
representations and warranties of Borrower set forth in Article
VI of the Agreement are true and accurate on this date with the
same effect as if made on and as of this date; that except as
previously disclosed to Bank, no financial condition or
circumstances exists as to Borrower which would inevitably result
in the occurrence of an Event of Default under Article VII of the
Agreement; and that except as previously disclosed to Bank, no
event has occurred or no condition exists which constitutes, or
with the running of time or the giving of notice would constitute
an Event of Default under Article VIII of the Agreement.
3. Except, as herein expressly modified, the parties hereto
ratify and confirm all of the terms, conditions, warranties and
covenants of the Agreement, including provisions for the payment
of the Note pursuant to the terms of the Agreement. This
Amendment does not constitute the extinguishment of any
obligation or indebtedness previously incurred.
4. This Amendment shall be binding upon Borrower, and Bank and
their respective successors and assigns, and shall inure to the
benefit of Bank and its respective successors and assigns.
Page 22 of 25
Executed by the parties hereto in manner and from sufficient to
bind them effective as of the date and year first above written.
BURLINGTON COAT FACTORY
WAREHOUSE CORPORATION
By: /s/ Robert LaPenta
------------------------
Its: Chief Accounting Officer
BURLINGTON COAT FACTORY
WAREHOUSE OF NEW JERSEY, INC.
By: /s/ Robert LaPenta
------------------------
Its: Chief Accounting Officer
NATIONAL CITY BANK
By: /s/ George M. Gevas
------------------------
George M. Gevas
Its: Senior Vice President
Page 23 of 25
EXHIBIT 27
----------
Page 24 of 25
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-03-2000
<PERIOD-END> AUG-28-2000
<CASH> 22,118,000
<SECURITIES> 0
<RECEIVABLES> 20,590,000
<ALLOWANCES> (2,256,000)
<INVENTORY> 568,669,000
<CURRENT-ASSETS> 641,308,000
<PP&E> 476,903,000
<DEPRECIATION> (206,884,000)
<TOTAL-ASSETS> 948,956,000
<CURRENT-LIABILITIES> 377,668,000
<BONDS> 8,544,000
0
0
<COMMON> 49,618,000
<OTHER-SE> 492,034,000
<TOTAL-LIABILITY-AND-EQUITY> 948,956,000
<SALES> 391,680,000
<TOTAL-REVENUES> 394,658,000
<CGS> 254,626,000
<TOTAL-COSTS> 254,626,000
<OTHER-EXPENSES> 147,424,000
<LOSS-PROVISION> 1,533,000
<INTEREST-EXPENSE> 1,359,000
<INCOME-PRETAX> (10,284,000)
<INCOME-TAX> (3,939,000)
<INCOME-CONTINUING> (6,345,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,345,000)
<EPS-BASIC> (.14)
<EPS-DILUTED> (.14)
</TABLE>
