FORM 10-Q
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 the quarterly period ended November 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 December 31, 1998
- -------------------------- ---------------------------------
Common stock, par value $1 49,604,649
Page 1 of 22<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 - November 28, 1998 3
(unaudited) and May 30, 1998
Condensed consolidated statements of operations - Six 4
and three months ended November 28, 1998 and November 29,
1997 (unaudited)
Condensed consolidated statements of cash flows - Six 5
months ended November 28, 1998 and November 29, 1997
(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
Part II - Other Information:
Item 1. Legal Proceedings 18
Item 4. Submission of Matters to a Vote 19
of Security Holders
Item 6. Exhibits and reports on Form 8-K 20
SIGNATURES 21
* * * * * * * * * * * *
Page 2 of 22<PAGE>
BURLINGTON COAT FACTORY WAREHOUSE CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(All amounts in thousands)
<TABLE>
<CAPTION>
November 28, May 30,
1998 1998
(Unaudited) (Note A)
----------- --------
<S> <C> <C>
ASSETS
- ------
Current Assets:
Cash and Cash Equivalents $104,400 $153,964
Accounts Receivable 23,564 17,578
Merchandise Inventories 639,588 474,817
Deferred Tax Asset 11,712 11,207
Prepaid Income Taxes 3,775 -
Prepaid and Other Current Asset 16,421 22,993
--------- --------
Total Current Assets 799,460 680,559
Property and Equipment (Net of Accumulated
Depreciation and Amortization) 230,063 222,813
Other Assets 10,964 6,435
--------- -------
Total Assets $1,040,487 $909,807
========= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current Liabilities:
Accounts Payable $325,205 $198,597
Income Taxes Payable - 10,372
Other Current Liabilities 108,811 94,339
Current Maturities of Long Term Debt 8,805 8,792
--------- -------
Total Current Liabilities 442,821 312,100
Long Term Debt 53,047 60,890
Other Liabilities 16,852 16,977
Deferred Tax Liability 3,934 3,771
Stockholders' Equity:
Unearned Compensation (16) (29)
Preferred Stock - -
Common Stock 49,610 49,594
Capital in Excess of Par Value 18,898 18,710
Retained Earnings 486,754 468,958
Less Treasury Stock at Cost (31,413) (21,164)
--------- -------
Total Stockholders' Equity 523,833 516,069
--------- -------
Total Liabilities and Stockholders' Equity $1,040,487 $909,807
--------- -------
See notes to the condensed consolidated financial statements.
NOTE A: The balance sheet at May 30, 1998 has been derived from the audited
financial statements at that date.
</TABLE>
Page 3 of 22<PAGE>
BURLINGTON COAT FACTORY WAREHOUSE CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited)
(All amounts in thousands except share data)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
November 28, November 29, November 28, November 29
1998 1997 1998 1997
------------------------- ------------------------
<S> <C> <C> <C> <C>
REVENUES:
Net Sales $ 946,014 $ 911,810 $ 598,827 $ 606,444
Other Income 7,902 8,554 4,391 4,307
---------- ---------- ---------- ----------
953,916 920,364 603,218 610,751
---------- ---------- ---------- ----------
COSTS AND EXPENSES:
Cost of Sales (Exclusive of
Depreciation and Amortization) 600,669 570,800 373,504 373,609
Selling and Administrative
Expenses 301,991 281,603 168,889 159,873
Depreciation and Amortization 16,631 16,192 8,811 7,826
Interest Expenses 3,475 3,681 1,745 1,811
--------- --------- ---------- ----------
922,766 872,276 552,949 543,119
--------- --------- ---------- ----------
Income Before Provision for
Income Taxes 31,150 48,088 50,269 67,632
Provision for Income Taxes 12,424 19,572 20,066 27,558
--------- --------- ---------- ----------
Net Income $ 18,726 $ 28,516 $ 30,203 $ 40,074
========== ========== ========== ==========
Earnings Per Share:
Basic and Diluted Net
Income Per Share $ .40 $ .60 $ .64 $ .84
========== ========== ========== ==========
Weighted Average Shares
Outstanding 47,205,445 47,534,356 47,044,613 47,408,430
========== ========== ========== ==========
Dividends Per Share $ .02 $ .02 $ .02 $ .02
========== ========== ========== ==========
See notes to the condensed consolidated financial statements.
</TABLE>
Page 4 of 22<PAGE>
BURLINGTON COAT FACTORY WAREHOUSE CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
(All amounts in thousands)
<TABLE>
<CAPTION>
Six Months Ended
November 28, November 29,
1998 1997
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net Income $18,726 $28,516
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation and Amortization 16,631 16,192
Provision for Losses on Accounts Receivable 3,503 4,253
Provision for Deferred Income Taxes (342) (459)
Gain on Disposition of Fixed Assets (84) 65
Non-Cash Rent Expense and Other 339 472
Changes in Operating Assets and Liabilities:
Accounts Receivable (11,984) (15,828)
Merchandise Inventories (164,771) (232,566)
Prepaids and Other Current Assets 2,799 (8,300)
Accounts Payable 126,608 180,983
Other Current Liabilities 4,442 9,994
------- -------
Net Cash Used in Operating Activities (4,133) (16,678)
------- -------
INVESTING ACTIVITIES
Acquisition of Property and Equipment (24,253) (26,508)
Proceeds From Sale of Fixed Assets 153 7
Acquisition of Leaseholds (5,408) -
Receipts Against Long Term Notes Receivable 2,813 471
Minority Interest 70 67
Other (14) -
------- -------
Net Cash Used in Investing Activities (26,639) (25,963)
FINANCING ACTIVITIES
Principal Payments on Long Term Debt (7,830) (7,789)
Issuance of Common Stock Upon Exercise
of Stock Options 217 555
Purchase of Treasury Stock (10,249) (9,292)
Payment of Dividends (930) (804)
------- -------
Net Cash Used in Financing Activities (18,792) (17,330)
------- -------
Decrease in Cash and Cash Equivalents (49,564) (59,971)
Cash and Cash Equivalents at Beginning of Period 153,964 197,069
------- -------
Cash and Cash Equivalents at End of Period $104,400 $137,098
======= =======
Interest Paid: $ 3,430 $ 3,991
======= =======
Income Taxes Paid: $ 23,138 $ 20,139
======= =======
See notes to the condensed consolidated financial statements.
</TABLE>
Page 5 of 22<PAGE>
BURLINGTON COAT FACTORY WAREHOUSE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SIX AND THREE MONTHS ENDED NOVEMBER 28, 1998 AND NOVEMBER 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 six and three months ended November 28,
1998 and the corresponding periods ended November 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 August 27, 1998.
3. During fiscal 1998, the Company changed its fiscal year end
from a 52-53 week fiscal year ending on the Saturday closest to
June 30 of each year to a 52-53 week fiscal year ending on the
Saturday closest to May 31 of each year. For comparability
purposes, the information presented within the accompanying
unaudited condensed consolidated statement of operations for the
six and three months ended November 29, 1997 has been recast to
conform with the new fiscal year end.
4. Merchandise inventories as of November 28, 1998 and May 30,
1998 are valued at the lower of cost, on a First In First Out
("FIFO") basis, or market, as determined by the retail inventory
method. Prior to the first quarter of fiscal 1999, on an interim
basis, the Company stated inventory at the lower of FIFO cost or
market, as valued by the gross profit method, which approximated
the retail inventory method.
5. As of November 28, 1998, the Company had a deferred tax
liability of $3.9 million and a current deferred tax asset of
$11.7 million. As of May 30, 1998, the Company had a deferred
tax liability of $3.8 million and a current deferred tax asset of
$11.2 million. Valuation allowances were not required. Deferred
Page 6 of 22<PAGE>
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.
6. Licensee department sales, included in net sales, amounted
to $21.5 million and $11.4 million, respectively, for the six and
three month periods ended November 28, 1998, compared with $19.3
million and $11.0 million for the similar periods of a year ago.
7. Other current liabilities primarily consisted of sales tax
payable, accrued operating expenses, payroll taxes payable and
other miscellaneous items.
8. On September 10, 1998, the Board of Directors of the Company
declared a cash dividend in the amount of two cents ($0.02) per
share. The cash dividend was paid on October 26, 1998 to
stockholders of record on September 30, 1998 and amounted to $0.9
million.
9. The Company's net advertising costs consist primarily of
television and newspaper costs. The production costs of net
advertising are charged to expenses as incurred. Net advertising
expenses for the six and three month periods ended November 28,
1998 were $28.8 million and $20.7 million, respectively. For the
six and three month periods ended November 29, 1997, net
advertising costs amounted to $27.9 million and $19.6 million,
respectively.
10. Basic and diluted net income 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 income
per share are as follows:
Page 7 of 22<PAGE>
<TABLE>
<CAPTION>
Six Six Three Three
Months Months Months Months
Ended Ended Ended Ended
November 28, November 29, November 28, November 29,
1998 1997 1998 1997
------------ ------------ ------------ ------------
(all amounts in thousands except per share data)
<S> <C> <C> <C> <C>
Net Income $18,726 $28,516 $30,203 $40,074
- --------------------------------------------------------------------------------
Weighted Average
Shares Outstanding 47,205 47,534 47,045 47,408
- --------------------------------------------------------------------------------
Effect of Dilutive Stock 99 115 78 107
Options
- --------------------------------------------------------------------------------
Weighted Average
Shares Outstanding
Assuming Dilution 47,304 47,649 47,123 47,515
- --------------------------------------------------------------------------------
Basic and Diluted
Net Income Per Share $.40 $.60 $.64 $.84
- --------------------------------------------------------------------------------
</TABLE>
11. a. In June 1997, the Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting Standards
("SFAS") No. 130, Reporting Comprehensive Income. This
statement, which establishes standards for reporting and
disclosure of comprehensive income and its components (revenues,
expenses, gains and losses) in a full set of general-purpose
financial statements, is effective for fiscal years beginning
after December 15, 1997. The Company adopted this statement in
the first quarter of fiscal 1999. Its adoption did not have any
impact on the Company's condensed consolidated financial
statements.
b. In June 1997, the FASB issued SFAS No. 131, Disclosures
about Segments of an Enterprise and Related Information. This
statement, which establishes standards for the reporting of
information on operating segments and requires the reporting of
selected information about operating segments in interim
financial statements, is effective for fiscal years beginning
after December 15, 1997. However, this statement is not required
for interim statements in the initial year of adoption. The
Company does not expect adoption of this statement to result in
significant changes to its presentation of financial data.
Page 8 of 22<PAGE>
c. In June 1998, the FASB issued SFAS 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 condensed consolidated balance sheets and measure those
instruments at fair value. This statement is effective for all
fiscal quarters of fiscal years beginning after June 15, 1999.
The Company has not yet assessed what the impact of SFAS No. 133
will be on the Company's future earnings or financial position.
d. In March 1998, the AICPA issued Statement of Position
("SOP") 98-1, Accounting For the Costs of Computer Software
Developed For or Obtained for Internal-Use. The SOP is effective
for the Company in fiscal 2000. The SOP will require the
capitalization of certain costs incurred after the date of
adoption in connection with developing or obtaining software for
internal use. The Company has not yet assessed what the impact
of the SOP will be on the Company's future earnings or financial
position.
12. On September 8, 1997, the Board of Directors declared a six-
for-five split of the Company's common stock effective October
16, 1997, to stockholders of record on October 1, 1997. This
stock split was effected in the form of a 20% stock dividend by
the distribution of one additional share for every five shares of
stock already issued. The par value of the Common Stock remained
at $1.00 per share. As a result, $8.3 million, representing the
total par value of the new shares issued, were transferred from
the capital in excess of par value account to common stock.
Prior years' weighted average shares outstanding and net income
per share amounts have been restated to reflect the six for five
stock split.
Page 9 of 22<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 six and three month periods ended November 28, 1998
and November 29, 1997.
<TABLE>
<CAPTION>
Percentage of Net Sales
-----------------------
Six Months Ended Three Months Ended
---------------- ------------------
November 28, November 29, November 28, November 29,
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Costs and expenses:
Cost of sales 63.5 62.6 62.4 61.6
Selling & adminis-
trative expenses 31.9 30.9 28.2 26.4
Depreciation &
amortization 1.7 1.8 1.4 1.3
Interest expense .4 .4 .3 .3
---- ---- ---- ----
97.5 95.7 92.3 89.6
---- ---- ---- ----
Other income .8 .9 .7 .7
Income before income 3.3 5.2 8.4 11.1
taxes ---- ---- ---- ----
Provision for income
taxes 1.3 2.1 3.4 4.5
---- ---- ---- ----
Net Income 2.0% 3.1% 5.0% 6.6%
==== ==== ==== ====
</TABLE>
Page 10 of 22<PAGE>
Net sales increased $34.2 million (3.8%) for the six month period
ended November 28, 1998 compared with the similar period of a
year ago. Comparative stores sales increased 1.7% for the
period. Sales from stores operating in the current year, but not
open during the comparative period last year, contributed $33.6
million to this year's sales. Stores which were in operation a
year ago, but which were closed prior to November 28, 1998,
contributed $15.6 million to last year's net sales. Sales from
leased departments, included in the six month sales figure
amounted to $21.5 million compared with $19.3 million for the
similar period of a year ago.
Net sales decreased $7.6 million (1.3%) for the three month
period ended November 28, 1998, compared with the similar period
a year ago. Comparative stores sales decreased 2.8%. The
Company believes this decrease was the result of milder than
usual weather which directly impacted the sale of outerwear.
During the second fiscal quarter, comparative store sales of
coats decreased approximately 22%. Sales from stores operating
during the current year's second quarter, but not open in the
comparative period a year ago, amounted to $18.7 million. Stores
closed prior to this year's second quarter contributed $8.7
million to last year's sales. Sales from leased departments,
included in the three month net sales figure, were $11.4 million,
compared with $11.0 million for the similar period of a year ago.
Other income (consisting of investment income, rental income from
leased departments and miscellaneous items) was $7.9 million for
the six months ended November 28, 1998 and $8.6 million for the
corresponding period of fiscal 1998. Investment income decreases
of $1.1 million, resulting from a decrease in investable funds,
and a decrease in interest rates, during the comparative periods,
was offset in part by increases in other miscellaneous income
items of approximately $0.4 million. For the three month periods
ended November 28, 1998 and November 29, 1997, other income
amounted to $4.4 million and $4.3 million, respectively. For the
comparative second quarters of fiscal 1999 and fiscal 1998,
investment income decreased $0.3 million while other
miscellaneous income items increased approximately $0.4 million.
Cost of sales increased by $29.9 million (5.2%) for the six month
period ended November 28, 1998 compared with the similar period
of a year ago. For the three months ended November 28, 1998,
compared with the three months ended November 29, 1997, cost of
sales decreased from $373.6 million to $373.5 million. The
dollar changes in cost of sales primarily reflect the change in
sales for the comparative periods. As a percentage of sales,
Page 11 of 22<PAGE>
cost of sales increased to 63.5% from 62.6% for the comparative
six month period and increased to 62.4% from 61.6% for the
comparative three month period. These percentage increases are
primarily the result of increases in markdowns taken during the
current six and three month periods compared with the similar
periods of a year ago.
Selling and administrative expenses were $302.0 million and
$168.9 million for the six and three months ended November 28,
1998, respectively, compared with $281.6 million and $159.9
million for the comparative periods of a year ago. As a
percentage of sales, selling and administrative expenses were
31.9% and 28.2% for the six and three months ended November 28,
1998, respectively. For the comparative six and three month
periods of fiscal 1998, selling and administrative expenses were
30.9% and 26.4% of sales, respectively. The percentage and
dollar increases are primarily the result of increases in payroll
expenditures relating to new store openings, new shoe
departments, annual pay increases, and increased staffing levels
at the stores and home office.
Interest expense decreased $0.2 million for the six months ended
November 28, 1998 compared with the six months ended November 29,
1997. For the three months ended November 28, 1998, interest
expense was $1.7 million, a decrease of $0.1 million compared
with the three months ended November 29, 1997. The six and three
month decreases in interest expense are the result of the
Company's scheduled reductions of long term debt.
The provision for income taxes decreased to $12.4 million for the
six months ended November 28, 1998 from $19.6 million for the
similar period of a year ago. For the three months ended
November 28, 1998, the provision for income taxes decreased to
$20.1 million from $27.6 million for the comparative quarter of
last fiscal year. The effective tax rates for the six and three
months ended November 28, 1998 were each 39.9% compared with
40.7% for each of the six and three months ended November 29,
1997.
Net income decreased $9.8 million to $18.7 million for the six
months ended November 28, 1998, from $28.5 million for the
comparative period of fiscal 1998. Income per share was $0.40
per share for the current year's six month period compared with
$0.60 per share for the similar period of a year ago. Net income
was $30.2 million for the three month period ended November 28,
1998 compared with $40.1 million for the three months ended
November 29, 1997. Net income per share decreased to $0.64 per
Page 12 of 22<PAGE>
share for the three months ended November 28, 1998 from $0.84 per
share for the similar 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. For the past five fiscal years,
approximately 57% of the Company's net sales have occurred during
the period from September through January. Weather, however,
continues to be an important contributing factor to the sale of
clothing in the fall, winter and spring seasons. Generally, the
Company's sales are higher if the weather is cold during the fall
and warm during the early spring.
Year 2000
- ---------
The inability of computers, software, and any 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.
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. Inventory of all in-house software has been
completed and such software is being remediated, where
applicable, for compliance. A survey of third party software and
equipment is being conducted in order to determine critical
business systems requiring Y2K compliance verification. Hardware
systems are actively being examined and appropriate paths charted
to ensure complete Y2K compatibility. The goal for completing
Y2K compliance for all critical computing system environments is
mid calendar year 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 $0.2 million was incurred as of May 30,
1998 and $0.5 million in the first half of fiscal 1999. The
remaining expenditures are expected to occur primarily in fiscal
1999. A significant portion of these costs are not likely to be
incremental costs to the Company, but rather will represent the
redeployment of existing information technology resources. Based
upon current benchmarks, the Company believes that it has the
necessary resources in-house to complete all required Y2K
remediation. In the event that internal resources are
Page 13 of 22<PAGE>
insufficient to complete the project in a timely manner, out-
sourcing the Y2K project, either in part or whole, to a Y2K
Service Provider may be necessary.
The Company will not know with absolute certainty how the
transition from 1999 to 2000 will affect its operations until all
inventory and analysis phases have been completed. Moreover,
there is no guarantee that computing systems and associated
applications of other companies with which the Company conducts
business will be converted on a timely basis or that a failure by
said companies to address their Y2K compliance would not have an
adverse material impact on the Company.
To date, the Company has not established a formal contingency
plan for dealing with a failure by either the Company or its
third party vendors to achieve Y2K compliance.
Liquidity and Capital Resources
- -------------------------------
The Company estimates spending approximately $50 million in
capital expenditures during fiscal 1999 including $14 million for
new store openings, $19 million for store relocations and
expansions, $6 million for upgrades and expansion of warehouse
facilities, and $11 million for computer and other equipment
expenditures. During the first six months of fiscal 1999 capital
expenditures amounted to approximately $24.3 million.
The Company repurchased 629,100 shares of its stock costing
approximately $10.2 million during the first six months of the
current fiscal year. These purchases are reflected as treasury
stock in the equity section of the balance sheet. As of November
28, 1998, the Company had authorization to purchase an additional
$3.0 million of its stock. Subsequent to November 28, 1998, the
Company repurchased an additional 97,500 shares costing
approximately $1.4 million and received authority to repurchase
an additional $10.0 million.
Working capital was $356.6 million at November 28, 1998 compared
with $368.5 million at May 30, 1998. This decrease was due
primarily to purchases of property and equipment, scheduled
payments of long term debt, repurchases of Company stock and the
payment of cash dividends.
Net cash used in operating activities was $4.1 million for the
six months ended November 28, 1998. The primary use of cash
during the current six month period was for the purchase of
additional inventory. Inventory increases resulted from the
Page 14 of 22<PAGE>
stocking of new stores, purchases for the Company's new shoe
departments and for the normal seasonal buildup of inventory
throughout the chain.
On September 10, 1998, the Board of Directors of the Company
declared the Company's annual cash dividend in the amount of two
cents ($0.02) per share. The cash dividend was paid on October
26, 1998, to stockholders of record on September 30, 1998. The
paid dividend amounted to $0.9 million.
The Company's long-term borrowings at November 28, 1998 include
$51.8 million of long term subordinated notes issued by the
Company to institutional investors in June 1990 (the "Notes") and
an industrial development bond of $8.9 million issued by the New
Jersey Economic Development Authority (the "Refunding Bonds").
The Notes mature on June 27, 2005 and bear interest at the rate
of 10.6% per annum. The Notes have an average remaining maturity
of four years and are subject to mandatory payment in
installments of $7.4 million, each without premium, on June 27 of
each year. The Notes are subordinated to senior debt, including,
among others, bank debt and indebtedness for borrowed money.
During the current year's first fiscal quarter, the Company
repaid $7.4 million of the Notes. The Company has no current
plan to repurchase or repay any additional amounts earlier than
scheduled due to prohibitive prepayment penalties, but may
consider doing so in the future should conditions favorable to
the Company present themselves.
The Refunding Bonds consist of serial and term bonds. The serial
bonds aggregate $3.6 million and mature in series annually on
September 1, beginning in 1996 and continuing to and including
2003. The term bonds consist of two portions, $1.4 million
maturing on September 1, 2005 and $5.0 million maturing on
September 1, 2010.
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% per
annum for the portion maturing on September 1, 2005 and 6.125%
per annum for the portion maturing on September 1, 2010. The
average interest rate and average maturity of the Refunding Bonds
are 5.6% and 7.0 years, respectively. During the current year's
first fiscal quarter, the Company expended approximately $0.4
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 $50.0 million in uncommitted
Page 15 of 22<PAGE>
lines of credit. The Company had no borrowings under these
credit lines during the first six months of fiscal 1999. The
Company had letter of credit commitments outstanding against
these lines of credit of $24.2 million as of the end of the
second quarter of fiscal 1999 and $33.8 million at May 30, 1998.
The Company believes that its current capital expenditures and
operating requirements can be satisfied from internally generated
funds, from short term borrowings under its revolving credit and
term loan agreement as well as from uncommitted lines of credit.
Furthermore, to the extent that the Company decides to purchase
additional store locations, it may be necessary to finance such
acquisitions with additional long term borrowings.
On or about September 23, 1994 three separate putative class
actions were filed against the Company. These three actions were
consolidated and an amended complaint was served on January 17,
1995. The Company filed a motion to dismiss on May 17, 1995 and
a hearing on the motion was held on July 20, 1995. On February
20, 1996, the District Court dismissed the plaintiffs' amended
complaint in its entirety. In March, 1996, the plaintiffs filed
an appeal from the District Court's decision, and in December,
1996, the U.S. Court of Appeals for the Third Circuit heard oral
argument on the appeal. In June, 1997 the U.S. Court of Appeals
for the Third Circuit affirmed the District Court's dismissal of
the class action suit but held that plaintiffs should be granted
leave to attempt to replead two of the six claims that were
dismissed. After remand to the District Court, the plaintiffs
filed a further amended complaint in an effort to cure the legal
deficiencies of the two claims in question. Among other changes,
the amended complaint dropped all claims against Andrew Milstein,
Stephen Milstein and Mark Nesci. On July 1, 1998, the Company
filed a further motion to dismiss on the grounds that the amended
complaint failed to cure such deficiencies. The motion has been
fully briefed by both sides and the parties await word from the
District Court either scheduling oral argument or deciding the
motion without oral argument. (See Part II - Other Information,
Item 1 - Legal Proceedings.) The Company is unable to determine
the probability of any potential loss with respect to these class
action suits or the materiality thereof at this time and
accordingly has not established any reserve for this matter.
Safe Harbor Statement
- ---------------------
Statements made in this report that are forward-looking (within
the meaning of the Private Securities Litigation Reform Act of
1995) are not historical facts and involve a number of risks and
Page 16 of 22<PAGE>
uncertainties. Such statements include but are not limited to,
proposed store openings and closings, proposed capital
expenditures, projected financing requirements, proposed
developmental projects, projected sales and earnings, the
Company's ability to maintain selling margins, and the Company's
anticipated ability to resolve Year 2000 computer problems if
any. Among the factors that could cause actual results to differ
materially are the following: general economic conditions;
consumer demand; consumer preferences; weather patterns;
competitive factors, including pricing and promotional activities
of major competitors; the availability of desirable store
locations on suitable terms; the availability, selection and
purchasing of attractive merchandise on favorable terms; import
risks; the Company's ability to control costs and expenses;
unforeseen computer related problems; any unforeseen material
loss or casualty; the effect of inflation; and other factors that
may be described in the Company's filings with the Securities and
Exchange Commission. The Company does not undertake to publicly
update or revise its forward-looking statements even if
experience or future changes make it clear that any projected
results expressed or implied will not be realized.
Page 17 of 22<PAGE>
BURLINGTON COAT FACTORY WAREHOUSE CORPORATION
AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
In late September 1994, three putative class action
lawsuits, P. Gregory Buchanan v. Monroe G. Milstein, et al., No.
94-CV-4663, Jacob Turner v. Monroe G. Milstein, et al., No.
94-CV-4737, and Ronald Abramoff v. Monroe G. Milstein, et al.,
No. 94-CV-4751 (collectively, the "Class Actions"), were filed
against the Company, Monroe G. Milstein, Stephen E. Milstein and
Robert L. LaPenta, Jr. in the United States District Court for
the District of New Jersey. By Order entered November 15, 1994,
the Court consolidated the Class Actions under the caption In re
Burlington Coat Factory Securities Litigation. On January 17,
1995, plaintiffs filed their Consolidated Amended and
Supplemental Class Action Complaint (the "Amended Complaint"),
naming as defendants, in addition to those originally named in
September 1994, Andrew R. Milstein and Mark A. Nesci. The
Amended Complaint sought unspecified damages in connection with
alleged violations of Sections 10(b) (and Rule 10b-5 promulgated
thereunder) and 20(a) of the Securities Exchange Act of 1934, as
amended. The Amended Complaint alleged material misstatements
and omissions by the Company and certain of its officers and
directors that plaintiffs alleged caused the Company's common
stock to be artificially inflated during the proposed Class
Period, which was defined in the Amended Complaint as the period
from October 4, 1993 through September 23, 1994. On March 3,
1995, the Company and the individual defendants served a motion
to dismiss plaintiffs' Amended Complaint. On February 20, 1996,
the District Court granted the Company's motion to dismiss the
plaintiffs' Amended Complaint in its entirety. In March 1996,
the plaintiffs filed an appeal from the District Court's decision
in the United States Court of Appeals for the Third Circuit (the
"Appeal"). The Appeal was orally argued before a panel of three
judges on December 12, 1996. On June 10, 1997 the panel rendered
a unanimous decision affirming the District Court's dismissal of
the action but ruled that the District Court should allow the
plaintiffs to attempt to replead two of the six claims. After
remand to the District Court, the plaintiffs filed a further
amended complaint in an effort to cure the legal deficiencies of
the two claims in question. Among other changes, the amended
complaint dropped all claims against Andrew Milstein, Stephen
Milstein and Mark Nesci. On July 1, 1998, the Company filed a
further motion to dismiss on the grounds that the amended
Page 18 of 22<PAGE>
complaint failed to cure such deficiencies. The motion has been
fully briefed by both sides and the parties await word from the
District Court either scheduling oral argument or deciding the
motion without oral argument. The Company is unable at this time
to assess the probable outcome of the two remaining claims or the
materiality of the risk of loss in connection therewith.
Item 4. Submission of Matters to a Vote of Security Holders.
The Company's annual meeting of stockholders was held on October
15, 1998. 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; 2) stockholders approved the adoption of
the Company's 1998 Stock Incentive Plan; and 3) stockholders
ratified the appointment of Deloitte & Touche LLP as independent
certified public accountants for the Company for the fiscal year
ending May 29, 1999. The following tables set forth the results
of the votes cast at the meeting for each matter submitted to
stockholders:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Votes Broker
1) Election of Directors Votes For Withheld Non-Votes
--------------------- --------- -------- ---------
Monroe G. Milstein 41,470,803 751,655 -0-
Henrietta Milstein 41,161,563 1,060,895 -0-
Andrew R. Milstein 41,470,803 751,655 -0-
Irving Drillings 41,470,803 751,655 -0-
Harvey Morgan 41,470,803 751,655 -0-
Stephen E. Milstein 41,161,443 1,061,015 -0-
Mark A. Nesci 41,470,803 751,655 -0-
</TABLE>
2) Approve adoption of the Company's 1998 Stock Incentive Plan
<TABLE>
<CAPTION>
<S> <C> <C>
Votes For 36,171,086
Votes Against 6,021,532
Votes Abstained 29,839
Broker Non-Vote 1
</TABLE>
3) Ratify appointment of Deloitte & Touche LLP as independent
Certified Public Accountants:
<TABLE>
<CAPTION>
<S> <C> <C>
Votes For 42,208,958
Votes Against 6,037
Votes Abstained 7,463
Broker Non-Vote 0
</TABLE>
Page 19 of 22<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
Page No.
--------
a. Exhibits
27. Financial Data Schedule 22
b. The Company filed no report on Form 8-K
during the period ended November 28, 1998.
Page 20 of 22<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: January 8, 1999
Page 21 of 22<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-29-1999
<PERIOD-END> NOV-28-1998
<CASH> 104,400,000
<SECURITIES> 0
<RECEIVABLES> 25,268,000
<ALLOWANCES> (1,704,000)
<INVENTORY> 639,588,000
<CURRENT-ASSETS> 799,460,000
<PP&E> 396,407,000
<DEPRECIATION> (166,344,000)
<TOTAL-ASSETS> 1,040,487,000
<CURRENT-LIABILITIES> 442,821,000
<BONDS> 53,047,000
0
0
<COMMON> 49,610,000
<OTHER-SE> 474,223,000
<TOTAL-LIABILITY-AND-EQUITY> 1,040,487,000
<SALES> 946,014,000
<TOTAL-REVENUES> 953,916,000
<CGS> 600,669,000
<TOTAL-COSTS> 600,669,000
<OTHER-EXPENSES> 315,119,000
<LOSS-PROVISION> 3,503,000
<INTEREST-EXPENSE> 3,475,000
<INCOME-PRETAX> 31,150,000
<INCOME-TAX> 12,424,000
<INCOME-CONTINUING> 18,726,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,726,000
<EPS-PRIMARY> .40
<EPS-DILUTED> .40
</TABLE>
