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 27, 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 December 31, 1999
- -------------------------- ---------------------------------
Common stock, par value $1 46,388,330
Page 1 of 22
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 27, 3
1999 (unaudited) and May 29, 1999
Condensed consolidated statements of operations - Six 4
and three months ended November 27, 1999 and
November 28, 1998 (unaudited)
Condensed consolidated statements of cash flows - Six 5
months ended November 27, 1999 and November 28, 1998
(unaudited)
Notes to condensed consolidated financial statements 6 - 10
Item 2. Management's discussion and analysis of 11 - 17
results of operations and financial condition
Item 3. Quantitative and Qualitative Disclosures 18
About Market Risk
Part II - Other Information:
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
BURLINGTON COAT FACTORY WAREHOUSE CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(All amounts in thousands)
<TABLE>
<CAPTION>
November 27, May 29,
1999 1999
(Unaudited) (Note A)
------------- ------------
ASSETS
- ------
<S> <C> <C>
Current Assets:
Cash and Cash Equivalents $ 81,069 $106,952
Accounts Receivable 34,154 14,227
Merchandise Inventories 674,149 501,040
Deferred Tax Asset 10,718 10,231
Prepaid and Other Current Assets 14,602 18,247
Prepaid Income Tax - 973
------- -------
Total Current Assets 814,692 651,670
Property and Equipment (Net of Accumulated
Depreciation and Amortization) 292,742 252,221
Long Term Investments 23,844 24,175
Other Assets 12,923 13,569
------- -------
Total Assets $1,144,201 $941,635
========= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current Liabilities:
Accounts Payable $ 392,400 $222,766
Income Taxes Payable 7,574 -
Other Current Liabilities 105,334 88,226
Current Maturities of Long Term Debt 44,916 7,919
------- -------
Total Current Liabilities 550,224 318,911
Long Term Debt 8,105 52,970
Other Liabilities 15,744 15,689
Deferred Tax Liability 5,035 5,909
Stockholders' Equity:
Preferred Stock - -
Common Stock 49,698 49,612
Capital in Excess of Par Value 19,483 19,157
Retained Earnings 538,472 515,814
Unearned Compensation - (2)
Accumulated Other Comprehensive
Income (Loss) (205) (29)
Treasury Stock at Cost (42,355) (36,396)
------- -------
Total Stockholders' Equity 565,093 548,156
------- -------
Total Liabilities and Stockholders' Equity $1,144,201 $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 22
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 27, November 28, November 27, November 28,
1999 1998 1999 1998
-------------------------- --------------------------
<S> <C> <C> <C> <C>
REVENUES:
Net Sales $ 1,014,214 $ 946,014 $ 622,534 $ 598,827
Other Income 6,876 7,304 3,898 4,064
---------- --------- --------- ---------
1,021,090 953,318 626,432 602,891
---------- --------- --------- ---------
COSTS AND EXPENSES:
Cost of Sales (Exclusive of
Depreciation and Amortization) 640,947 600,669 386,321 373,504
Selling and Administrative Expenses 320,224 301,393 180,362 168,562
Depreciation and Amortization 19,052 16,631 9,957 8,811
Interest Expense 2,643 3,475 1,284 1,745
---------- --------- --------- ---------
982,866 922,168 577,924 552,622
---------- --------- --------- ---------
Income Before Provision for Income Taxes 38,224 31,150 48,508 50,269
Provision for Income Taxes 14,625 12,424 18,564 20,066
---------- --------- --------- ---------
Net Income $ 23,599 $ 18,726 $ 29,944 $ 30,203
========== ========= ========= =========
Earnings Per Share:
Basic and Diluted Net Income Per Share $ .51 $ .40 $ .65 $ .64
========== ========= ========= =========
Weighted Average Shares Outstanding 46,382,893 47,205,445 46,362,277 47,044,613
========== ========== ========== ==========
Dividends Per Share $ .02 $ .02 $ .02 $ .02
========== ========= ========= =========
</TABLE>
See notes to the condensed consolidated financial statements.
Page 4 of 22
BURLINGTON COAT FACTORY WAREHOUSE CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
(All amounts in thousands)
<TABLE>
<CAPTION>
Six Months Ended
November 27, November 28,
1999 1998
------------ ------------
<S>
<C> <C>
OPERATING ACTIVITIES
Net Income $ 23,599 $ 18,726
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation and Amortization 19,052 16,631
Provision for Losses on Accounts Receivable 3,862 3,503
Provision for Deferred Income Taxes (1,361) (342)
Loss (Gain) on Disposition of Fixed Assets 100 (84)
Non-Cash Rent Expense and Other 1,492 339
Changes in Operating Assets and Liabilities:
Accounts Receivable (23,795) (11,984)
Merchandise Inventories (173,109) (164,771)
Prepaids and Other Current Assets 4,618 2,799
Accounts Payable 169,634 126,608
Other Current Liabilities 24,682 4,442
-------- --------
Net Cash Provided (Used) in Operating Activities 48,774 (4,133)
-------- --------
INVESTING ACTIVITIES
Acquisition of Property and Equipment (59,638) (24,253)
Proceeds From Sale of Fixed Assets 3 153
Acquisition of Leaseholds (873) (5,408)
Receipts Against Long Term Notes Receivable 92 2,813
Minority Interest 81 70
Other 15 (14)
-------- --------
Net Cash Used in Investing Activities (60,320) (26,639)
-------- --------
FINANCING ACTIVITIES
Principal Payments on Long Term Debt (7,868) (7,830)
Issuance of Common Stock Upon Exercise of Stock Options 414 217
Purchase of Treasury Stock (5,959) (10,249)
Payment of Dividends (924) (930)
-------- --------
Net Cash Used in Financing Activities (14,337) (18,792)
-------- --------
Decrease in Cash and Cash Equivalents (25,883) (49,564)
Cash and Cash Equivalents at Beginning of Period 106,952 153,964
-------- --------
Cash and Cash Equivalents at End of Period $ 81,069 $ 104,400
======== ========
Interest Paid: $ 3,012 $ 3,430
======== ========
Income Taxes Paid: $ 8,412 $ 23,138
======== ========
</TABLE>
See notes to the condensed consolidated financial statements.
Page 5 of 22
BURLINGTON COAT FACTORY WAREHOUSE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SIX AND
THREE MONTHS ENDED NOVEMBER 27, 1999 AND NOVEMBER 28, 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 six and three months ended November 27,
1999 and the corresponding periods ended November 28, 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 November 27, 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 November 27, 1999, the Company had a deferred tax
liability of $5.0 million and a current deferred tax asset of
$10.7 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. Deferred
tax liabilities primarily reflected the excess of tax depreciation
over book depreciation.
5. Licensed department sales, included in net sales, amounted
to $19.8 million and $10.6 million, respectively for the six and
three month periods ended November 27, 1999, compared with $21.5
million and $11.4 million for the similar periods of a year ago.
Page 6 of 22
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>
November 27, 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 2000 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,
2000 to September 1, 2010 8,525 8,945
Promissory note, due at various dates
through 2000 (interest rate
imputed at 10.6%), 96 144
------ ------
Subtotal 53,021 60,889
Less current portion (44,916) (7,919)
------ ------
Long-Term Debt $ 8,105 $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 assumptions. The Company anticipates prepayment
penalties to amount to approximately $1.0 million. As a result
of this expected prepayment, the Company has classified the
entire balance of the Subordinated Notes as a current maturity of
debt on the Company's Condensed Consolidated Balance Sheet as of
November 27, 1999.
8. On September 17, 1999, the Board of Directors of the Company
declared a cash dividend in the amount of two cents ($.02) per
share. The cash dividend was paid on November 2, 1999 to
stockholders of record on October 7, 1999 and amounted to $0.9
million.
9. The Company's net advertising costs consist primarily of
newspaper and television costs. The production costs of net
advertising are charged to expenses as incurred. Net advertising
expenses for the six and three month periods ended November 27,
Page 7 of 22
1999 were $28.6 million and $22.1 million, respectively. For the
six and three month periods ended November 28, 1998, net
advertising costs amounted to $28.8 million and $20.7 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:
<TABLE>
<CAPTION>
Six Six Three Three
Months Months Months Months
Ended Ended Ended Ended
November 27, November 28, November 27, November 28,
1999 1998 1999 1998
------------ ------------ ------------ ------------
(all amounts in thousands except per share data)
<S> <C> <C> <C> <C>
Net Income $23,599 $18,726 $29,944 $30,203
- --------------------------------------------------------------------------------
Weighted Average
Shares Outstanding 46,383 47,205 46,362 47,045
- --------------------------------------------------------------------------------
Effect of Dilutive Stock 56 99 24 78
Options
- --------------------------------------------------------------------------------
Weighted Average
Shares Outstanding
Assuming Dilution 46,439 47,304 46,386 47,123
- --------------------------------------------------------------------------------
Basic and Diluted
Net Income Per Share $.51 $.40 $.65 $.64
- --------------------------------------------------------------------------------
</TABLE>
11. Statement of Financial Accounting Standards ("SFAS") No.
130, Reporting Comprehensive Income, 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):
Page 8 of 22
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
November 27, November 28, November 27, November 28,
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Apparel $ 782,138 $ 741,035 $ 499,853 $ 489,110
Non-Apparel 232,076 204,979 122,681 109,717
--------- -------- -------- --------
$1,014,214 $ 946,014 $ 622,534 $ 598,827
========= ======== ======== ========
</TABLE>
Apparel includes all clothing items for men, women and children.
Non-apparel includes linens, home furnishings, gifts, baby
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 $0.4 million and $0.2 million relating to these costs
during the six and three months ended November 27, 1999,
respectively.
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 Financial Accounting Standards Board
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 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.
Page 9 of 22
16. In December, 1999 the Securities and Exchange Commission
issued Staff Accounting Bulletin ("SAB") No. 101, Revenue
Recognition in Financial Statements. SAB No. 101 provides the
staff's view in applying generally accepted accounting principles
to revenue recognition in financial statements. SAB No. 101 is
required to be applied no later than the first fiscal quarter of
the fiscal year beginning after December 15, 1999. The Company
has not yet determined the impact the adoption of SAB No. 101
will have on the Company's consolidated financial statements.
17. Certain reclassifications have been made to the prior year's
financial statements to conform to the current year presentation.
Page 10 of 22
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 27, 1999
and November 28, 1998.
<TABLE>
<CAPTION>
Percentage of Net Sales
-----------------------
Six Months Ended Three Months Ended
---------------- ------------------
November 27, November 28, November 27, November 28,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Costs and expenses:
Cost of sales 63.2 63.5 62.1 62.4
Selling & adminis-
trative expenses 31.6 31.9 28.9 28.2
Depreciation &
amortization 1.9 1.7 1.6 1.4
Interest expense .2 .4 .2 .3
----- ----- ----- -----
96.9 97.5 92.8 92.3
----- ----- ----- -----
Other income .7 .8 .6 .7
----- ----- ----- -----
Income before income 3.8 3.3 7.8 8.4
taxes ----- ----- ----- -----
Provision for income
taxes 1.5 1.3 3.0 3.4
----- ----- ----- -----
Net Income 2.3% 2.0% 4.8% 5.0%
===== ===== ===== =====
</TABLE>
Page 11 of 22
Net sales increased $68.2 million (7.2%) for the six month period
ended November 27, 1999 compared with the similar period of a
year ago. Comparative stores sales increased 0.3% for the
period. Sales from stores operating in the current year, but not
open during the comparative period last year (including eighteen
stores opened during this year and nine stores opened in fiscal
1999's fourth quarter), contributed $70.8 million to this year's
sales. Stores which were in operation a year ago, but which were
closed prior to November 27, 1999, contributed $5.1 million to
last year's net sales. Sales from licensed departments included
in the six month sales figure amounted to $19.8 million, compared
with $21.5 million for the similar period of a year ago.
Net sales increased $23.7 million (4.0%) for the three month
period ended November 27, 1999, compared with the similar period
a year ago. Comparative stores sales decreased 3.9%. 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 16%. Sales from stores operating
during the current year's second quarter, but not open in the
comparative period a year ago, amounted to $49.1 million. Stores
closed prior to this year's second quarter contributed $3.0
million to last year's sales. Sales from licensed departments
included in the three month net sales figure were $10.6 million,
compared with $11.4 million for the similar period of a year ago.
The Cohoes stores contributed $18.6 million and $10.1 million to
consolidated net sales for the six and three months ended
November 27, 1999, respectively, compared with $18.1 million and
$9.9 million for the six and three months ended November 28,
1998. Cohoes comparative store sales decreased 1.6% and 5.9% for
the six and three month periods, respectively. One new Cohoes
store opened during the current year's second quarter contributed
$0.8 million to this year's sales.
Net sales in the first six months of fiscal 2000 for the Decelle
stores were $16.4 million compared with $17.2 million for six
months ended November 28, 1998. Net sales in the three months
ended November 27, 1999 were $9.2 million compared with $9.3
million during the similar period of a year ago. Decelle
comparative store sales for the six and three month periods
decreased 1.9% and 1.0%, respectively.
Other income (consisting of investment income, rental income from
leased departments and miscellaneous items) was $6.9 million for
the six months ended November 27, 1999 and $7.3 million for the
Page 12 of 22
corresponding period of fiscal 1999. Lower investment income was
the primary cause of the decline in other income. For the three
month periods ended November 27, 1999 and November 28, 1998,
other income amounted to $3.9 million and $4.1 million,
respectively. For the comparative second quarters of fiscal 2000
and fiscal 1999, investment income decreased $0.2 million.
Cost of sales increased by $40.3 million (6.7%) for the six month
period ended November 27, 1999 compared with the similar period
of a year ago. For the three months ended November 27, 1999,
compared with the three months ended November 28, 1998, cost of
sales increased from $373.5 million to $386.3 million. The
dollar changes in cost of sales primarily reflect the change in
sales for the comparative periods. As a percentage of sales,
cost of sales decreased to 63.2% from 63.5% for the comparative
six month periods and decreased to 62.1% from 62.4% for the
comparative three month periods. These percentage decreases are
primarily the result of decreases in markdowns taken as a
percentage of sales during the current six and three month
periods compared with the similar periods of a year ago.
Selling and administrative expenses were $320.2 million and
$180.4 million for the six and three months ended November 27,
1999, respectively, compared with $301.4 million and $168.6
million for the comparative periods of a year ago. As a
percentage of sales, selling and administrative expenses were
31.6% and 28.9% for the six and three months ended November 27,
1999, respectively. For the comparative six and three month
periods of fiscal 1999, selling and administrative expenses were
31.9% and 28.2% of sales, respectively. The dollar increase in
selling and administrative expenses were primarily the result of
the increased number of stores operating during the six and three
month periods of this fiscal year compared with the similar
periods of a year ago. The increase in selling and
administrative expenses as a percentage of sales for the three
months ended November 27, 1999 primarily reflected the increased
cost of opening new stores this year over last. Eighteen new
stores have been opened this fiscal year compared with six
openings during the similar period a year ago. The twelve
additional stores added approximately $3.0 million to this year's
selling and administrative expenses. In addition, the decline in
comparative store sales during the second quarter contributed to
the increase in selling and administrative expenses as a
percentage of sales, for the second quarter of fiscal 2000 over
the second quarter of fiscal 1999.
Page 13 of 22
Interest expense decreased $0.8 million for the six months ended
November 27, 1999 compared with the six months ended November 28,
1998. For the three months ended November 27, 1999, interest
expense was $1.3 million, a decrease of $0.5 million compared
with the three months ended November 28, 1998. 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 increased to $14.6 million for the
six months ended November 27, 1999 from $12.4 million for the
similar period of a year ago. For the three months ended
November 27, 1999, the provision for income taxes decreased to
$18.6 million from $20.1 million for the comparative quarter of
last fiscal year. The effective tax rates for the six and three
months ended November 27, 1999 were each 38.3% compared with
39.9% for each of the six and three months ended November 28,
1998.
Net income increased $4.9 million to $23.6 million for the six
months ended November 27, 1999, from $18.7 million for the
comparative period of fiscal 1999. Income per share was $0.51
per share for the current year's six month period compared with
$0.40 per share for the similar period of a year ago. Net income
was $29.9 million for the three month period ended November 27,
1999 compared with $30.2 million for the three months ended
November 28, 1998. Net income per share increased to $0.65 per
share for the three months ended November 27, 1999 from $0.64 per
share for the similar period of a year ago. The number of
weighted average shares outstanding during the current year's
second quarter compared with the similar period of a year ago,
was smaller as the result of the Company's repurchase of shares
of its common stock during the intervening period.
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 conversion from calendar year 1999 to calendar year 2000
occurred without any significant disruption to the Company's
Page 14 of 22
mission critical business systems. All costs associated with the
Y2K project to date have been expensed as incurred. The Company
incurred Y2K compliance expenses of approximately $2.1 million
through November 27, 1999, of which $0.2 million was expensed
during the second quarter of fiscal year 2000. Subsequent to the
end of the second quarter of fiscal year 2000 and through
December 31, 1999, the Company incurred an additional $0.1
million of Y2K compliance expenses.
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 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 six months of fiscal 2000
capital expenditures amounted to approximately $60.7 million.
The Company repurchased 414,500 shares of its stock costing
approximately $6.0 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
27, 1999, the Company had authorization to purchase an additional
$1.3 million of its stock. Subsequent to November 27, 1999, the
Company repurchased an additional 70,000 shares costing
approximately $0.9 million and received authority to repurchase
an additional $10.0 million of the Company's stock.
Working capital was $264.5 million at November 27, 1999 compared
with $332.8 million at May 29, 1999. This decrease was due
primarily to purchases of property and equipment, purchases of
treasury stock, scheduled payments of long term debt, and the
classification of the Company's subordinated notes as a current
liability.
On September 17, 1999, the Board of Directors of the Company
declared a cash dividend in the amount of two cents ($.02) per
share. The cash dividend was paid on November 2, 1999, to
stockholders of record on October 7, 1999 and amounted to $0.9
million.
The Company's borrowings at November 27, 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 $8.5 million issued by the New
Page 15 of 22
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 November 27, 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.
The Refunding Bonds consist of serial and term bonds. The serial
bonds aggregate $2.1 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
5.8% and 6.9 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 six months of fiscal 2000 or
fiscal 1999. The Company had letter of credit commitments
outstanding against these lines of credit of $14.7 million as of
the end of the second quarter of fiscal 2000 and $20.9 million at
May 29, 1999.
Page 16 of 22
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. 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
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 November 27, 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 November 27, 1999
(in thousands):
Expected Maturity Date of Long-Term Debt (Including Current Portion)
and Long Term Investments at November 27, 1999 (unaudited)
<TABLE>
<CAPTION>
Fixed Rate Average Long-Term Average
Debt Interest Rate Investments Interest Rate
-------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C>
2000 (remaining) $ 51 10.6% - -
2001 44,905 10.5% - -
2002 505 5.1% $ 4,200 5.6%
2003 555 5.2% - -
2004 605 5.4% 20,000 6.5%
Thereafter 6,400 6.0% - -
------ -------
Total $53,021 $ 24,200
====== =======
Fair Value at
November 27, 1999 $56,308 $ 23,775
====== =======
</TABLE>
Page 18 of 22
BURLINGTON COAT FACTORY WAREHOUSE CORPORATION
AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
The Company's annual meeting of stockholders was held on October
21, 1999. At the meeting, the following actions were taken: 1)
stockholders elected directors to serve until the next annual
meeting of stockholders and until their successors are duly
elected and qualified and 2) stockholders ratified the
appointment of Deloitte & Touche LLP as independent certified
public accountants for the Company for the fiscal year ending
June 3, 2000. The following tables set forth the results of the
votes cast at the meeting for each matter submitted to
stockholders:
Votes Broker
1) Election of Directors Votes For Withheld Non-Votes
--------------------- --------- -------- ---------
Monroe G. Milstein 43,475,761 527,253 -0-
Henrietta Milstein 43,475,761 527,253 -0-
Andrew R. Milstein 43,475,761 527,253 -0-
Irving Drillings 43,475,761 527,253 -0-
Harvey Morgan 43,475,761 527,253 -0-
Stephen E. Milstein 43,479,361 527,653 -0-
Mark A. Nesci 43,475,641 527,353 -0-
2) Ratify appointment of Deloitte & Touche LLP as independent
Certified Public Accountants:
Votes For 43,994,236
Votes Against 3,797
Votes Abstained 4,981
Broker Non-Vote 0
Page 19 of 22
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 27, 1999.
Page 20 of 22
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, 2000
Page 21 of 22
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-03-2000
<PERIOD-END> NOV-27-1999
<CASH> 81,069,000
<SECURITIES> 0
<RECEIVABLES> 38,725,000
<ALLOWANCES> (4,571,000)
<INVENTORY> 674,149,000
<CURRENT-ASSETS> 814,692,000
<PP&E> 509,404,000
<DEPRECIATION> (216,662,000)
<TOTAL-ASSETS> 1,144,201,000
<CURRENT-LIABILITIES> 550,224,000
<BONDS> 8,105,000
0
0
<COMMON> 49,698,000
<OTHER-SE> 515,395,000
<TOTAL-LIABILITY-AND-EQUITY> 1,144,201,000
<SALES> 1,014,214,000
<TOTAL-REVENUES> 1,021,090,000
<CGS> 640,947,000
<TOTAL-COSTS> 640,947,000
<OTHER-EXPENSES> 335,414,000
<LOSS-PROVISION> 3,862,000
<INTEREST-EXPENSE> 2,643,000
<INCOME-PRETAX> 38,224,000
<INCOME-TAX> 14,625,000
<INCOME-CONTINUING> 23,599,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 23,599,000
<EPS-BASIC> .51
<EPS-DILUTED> .51
</TABLE>
