<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended April 26, 1997
Commission file number 1-10259
WABAN INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 33-0109661
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Mercer Road
Natick, Massachusetts 01760
(Address of principal executive offices) (Zip Code)
(508) 651-6500
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed 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 .
--- ---
The number of shares of the Registrant's common stock outstanding as of May 24,
1997: 32,894,749
<PAGE>
<TABLE>
PART I FINANCIAL INFORMATION
WABAN INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<CAPTION>
Thirteen Weeks Ended
-----------------------
April 26, April 27,
1997 1996
----------- -----------
(In Thousands Except
Per Share Amounts)
<S> <C> <C>
Net sales $1,039,151 $974,630
--------- -------
Cost of sales, including buying and occupancy costs 894,458 834,793
Selling, general and administrative expenses 121,692 119,423
Interest on debt and capital leases (net) 5,291 4,815
--------- -------
Total expenses 1,021,441 959,031
--------- -------
Income before income taxes 17,710 15,599
Provision for income taxes 6,907 6,084
--------- -------
Net income $ 10,803 $ 9,515
========= =======
Net income per common share (see Exhibit 11 for
detailed computations):
Primary and fully diluted $ 0.32 $ 0.28
========= =======
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
<TABLE>
WABAN INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<CAPTION>
April 26, January 25, April 27,
1997 1997 1996
----------- ----------- -----------
(Dollars In Thousands)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 33,461 $ 14,593 $ 8,744
Marketable securities - - 22,704
Accounts receivable 49,809 59,267 52,696
Merchandise inventories 653,490 611,754 637,083
Current deferred income taxes 16,939 16,425 21,320
Prepaid expenses 11,371 11,066 11,870
--------- --------- ---------
Total current assets 765,070 713,105 754,417
--------- --------- ---------
Property at cost:
Land and buildings 427,092 422,833 391,042
Leasehold costs and improvements 94,103 93,526 85,661
Furniture, fixtures and equipment 322,265 319,105 294,628
--------- --------- ---------
843,460 835,464 771,331
Less accumulated depreciation
and amortization 219,559 205,819 179,994
--------- --------- ---------
623,901 629,645 591,337
--------- --------- ---------
Property under capital leases 16,432 16,432 15,139
Less accumulated amortization 5,907 5,741 6,672
--------- --------- ---------
10,525 10,691 8,467
--------- --------- ---------
Property held for sale (net) - - 56
Deferred income taxes 7,526 7,755 11,481
Other assets 14,771 14,770 12,667
--------- --------- ---------
Total assets $1,421,793 $1,375,966 $1,378,425
========= ========= =========
LIABILITIES
Current liabilities:
Current installments of long-
term debt 12,067 12,474 12,861
Accounts payable 316,764 284,927 323,134
Restructuring reserve 2,840 2,799 5,629
Accrued expenses and other
current liabilities 128,912 133,057 130,926
Accrued federal and state
income taxes 9,278 3,663 5,882
Obligations under capital leases
due within one year 342 343 537
--------- --------- ---------
Total current liabilities 470,203 437,263 478,969
--------- --------- ---------
Real estate debt 433 450 500
General corporate debt 12,000 12,000 24,000
Senior subordinated debt 100,000 100,000 100,000
Convertible subordinated debt 106,949 108,568 108,600
Obligations under capital leases,
less portion due within one year 11,383 11,468 11,703
Noncurrent restructuring reserve 9,964 10,738 20,503
Other noncurrent liabilities 65,140 63,554 64,958
STOCKHOLDERS' EQUITY
Common stock, par value $.01,
authorized 190,000,000 shares,
issued 33,269,537, 33,269,537
and 33,296,935 shares 333 333 333
Additional paid-in capital 330,227 329,719 329,734
Unrealized holding gains (losses) - - 8
Retained earnings 322,676 311,873 244,728
Treasury stock, at cost, 397,293,
528,596 and 275,148 shares (7,515) (10,000) (5,611)
--------- --------- ---------
Total stockholders' equity 645,721 631,925 569,192
--------- --------- ---------
Total liabilities and
stockholders' equity $1,421,793 $1,375,966 $1,378,425
========= ========= =========
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
<TABLE>
WABAN INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Thirteen Weeks Ended
--------------------
April 26, April 27,
1997 1996
--------- ---------
(In Thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 10,803 $ 9,515
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization of property 15,115 13,497
Loss on property disposals 23 374
Amortization of premium on marketable securities - 47
Other noncash items (net) 259 244
Deferred income taxes (285) 211
Increase (decrease) in cash
due to changes in:
Accounts receivable 9,458 6,525
Merchandise inventories (41,736) (66,847)
Prepaid expenses (305) (1,115)
Other assets (184) 372
Accounts payable 31,837 47,171
Restructuring reserves (748) (1,666)
Accrued expenses 15 (241)
Accrued income taxes 5,615 (2,889)
Other noncurrent liabilities 1,586 2,264
------- -------
Net cash provided by operating activities 31,453 7,462
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of marketable securities - (6,048)
Sale of marketable securities - 3,610
Maturity of marketable securities - -
Property additions (13,688) (36,756)
Property disposals 315 4,415
------- -------
Net cash used in investing activities (13,373) (34,779)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt (424) (391)
Repayment of capital lease obligations (86) (197)
Purchase of treasury stock - (3,453)
Proceeds from sale and issuance of
common stock 1,298 7,947
------- -------
Net cash provided by financing
activities 788 3,906
------- -------
Net increase (decrease) in cash and
cash equivalents 18,868 (23,411)
Cash and cash equivalents at
beginning of year 14,593 32,155
------- -------
Cash and cash equivalents at
end of period $ 33,461 $ 8,744
======= ======
Supplemental cash flow information:
Interest paid $ 380 $ (157)
Income taxes paid 1,577 8,762
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
<TABLE>
WABAN INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
<CAPTION>
(In Thousands Except Per Share Amounts)
-------------------------------------------------------------
Common Unrealized Total
Stock Additional Holding Stock-
Par Value Paid-In Gains Retained Treasury holders'
$.01 Capital (Losses) Earnings Stock Equity
--------- ---------- ---------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 27,
1996 $ 333 $328,619 $ 22 $235,213 $ (9,067) $555,120
Net income - - - 9,515 - 9,515
Unrealized
holding losses - - (14) - - (14)
Purchase of treasury
stock - - - - (3,453) (3,453)
Sale and issuance
of common stock - 1,115 - - 6,909 8,024
----- -------- ----- -------- ------- --------
Balance, April 27,
1996 $ 333 $329,734 $ 8 $244,728 $ (5,611) $569,192
===== ======== ===== ======== ======= ========
Balance, January 25,
1997 $ 333 $329,719 $ - $311,873 $(10,000) $631,925
Net income - - - 10,803 - 10,803
Sale and issuance
of common stock - 147 - - 1,247 1,394
Conversion of 6.5%
debentures - 361 - - 1,238 1,599
----- -------- ----- -------- ------- --------
Balance, April 26,
1997 $ 333 $330,227 $ - $322,676 $ (7,515) $645,721
===== ======== ===== ======== ======= ========
The accompanying notes are an integral part of the financial statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The results for the first three months are not necessarily indicative of
results for the full fiscal year because the Company's business, in common with
the business of retailers generally, is subject to seasonal influences. BJ's
Wholesale Club's sales and profits have typically been strongest in the
Christmas holiday season and lowest in the first quarter of each fiscal year.
HomeBase's sales and profits have typically been lower in the first and fourth
quarters of the fiscal year and higher in the second and third quarters, which
include the most active season for home construction.
2. The financial statements are unaudited and reflect all normal recurring
adjustments considered necessary by the Company for a fair presentation of its
financial statements in accordance with generally accepted accounting
principles.
3. These interim financial statements should be read in conjunction with the
consolidated financial statements and related notes contained in the Annual
Report on Form 10-K for the fiscal year ended January 25, 1997.
4. Presented below is information relative to the operating results of the
Company's business segments (dollars in thousands):
</TABLE>
<TABLE>
<CAPTION>
Thirteen Weeks Ended
--------------------
April 26, April 27,
1997 1996
----------- -----------
<S> <C> <C>
Net sales:
BJ's Wholesale Club $ 678,947 $ 622,388
HomeBase 360,204 352,242
--------- ---------
$1,039,151 $ 974,630
========= =========
Operating income:
BJ's Wholesale Club $ 16,571 $ 14,036
HomeBase 8,753 8,255
General corporate expense (2,323) (1,877)
--------- ---------
23,001 20,414
Interest on debt and capital
leases (net) (5,291) (4,815)
-------- ---------
Income before income taxes $ 17,710 $ 15,599
======== =========
</TABLE>
Warehouses in operation - end of period:
- ---------------------------------------
BJ's Wholesale Club 80 72
HomeBase 84 82
5. On June 6, 1997, the Company called for redemption on July 7, 1997 all of
its outstanding 6.5% Convertible Subordinated Debentures due July 1, 2002.
Convertible Debentures in an aggregate principal amount of $106,914,000 were
outstanding on June 6, 1997. The Company has entered into a standby purchase
agreement with Prudential Securities Incorporated pursuant to which Prudential
has agreed, subject to certain conditions, to purchase from the Company up to
2,160,606 shares of the Company's Common Stock; however, Prudential will
purchase shares from the Company if, and then only to the extent that, more
than $53,474,000 of Convertible Debentures are not duly surrendered for
conversion prior to 6:00 p.m., Eastern time, on June 26, 1997.
The Company's 1997 Annual Meeting of Stockholders, at which various proposals
relating to the Company's proposed spin-off (the "Distribution") of its BJ's
Wholesale Club division will be considered, will be held on July 10, 1997.
Assuming stockholder approval of such proposals and subject to certain
conditions, including declaration of the distribution of shares of BJ's
Wholesale Club, Inc. by the Company's Board of Directors, the Company expects
the Distribution would be effected by the end of July 1997. However, the
Company's Board of Directors has reserved discretion to abandon, defer or
modify the Distribution at any time prior to the date on which the Distribution
is made.
6. The Company's senior notes, senior subordinated notes and bank credit
agreement are fully and unconditionally guaranteed by Natick Realty, Inc.,
which was incorporated as a wholly-owned subsidiary of Waban Inc. in January
1997 for the purpose of acting as a holding company for various real estate
subsidiaries of the Company. Natick Realty, Inc. was capitalized with 1,000
shares of common stock with a par value of $.01 per share. In the quarter
ended April 26, 1997, Waban Inc. transferred to Natick Realty, Inc. all of the
outstanding capital stock of certain real estate subsidiaries with net assets
totalling $218.2 million and certain real estate assets of the Company with a
net book value of $27.1 million.
The following condensed consolidating financial statements present the results
of operations and financial position and cash flows of Waban Inc., Natick
Realty, Inc. and its subsidiaries (together, the "Guarantor Subsidiaries"), and
all other subsidiaries (the "Non-Guarantor Subsidiaries"), and the eliminations
necessary to arrive at the information for the Company on a consolidated basis.
Separate financial statements of Natick Realty, Inc. are not presented because
the Company believes that the condensed consolidating financial statements
presented are more meaningful in understanding the financial position of the
Guarantor Subsidiaries.
<TABLE>
WABAN INC.
CONDENSED CONSOLIDATING STATEMENT OF INCOME
FOR THE THIRTEEN WEEKS ENDED APRIL 26, 1997
(In Thousands)
(Unaudited)
<CAPTION>
Non-
Waban Inc. Guarantor Guarantor
(Parent Sub- Sub- Elimin- Consol-
Corporation) sidiaries sidiaries ations idated
------------ --------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
Net sales $1,022,801 $ 7,426 $ 32,725 $(23,801) $1,039,151
---------- ------- -------- -------- ----------
Cost of sales, including
buying and occupancy costs 891,321 1,441 13,266 (11,570) 894,458
Selling, general and
administrative expenses 130,478 29 3,416 (12,231) 121,692
Interest on debt and
capital leases (net) 7,532 - (2,241) - 5,291
---------- ------- -------- -------- ----------
Total expenses 1,029,331 1,470 14,441 (23,801) 1,021,441
---------- ------- -------- -------- ----------
Income before income taxes
and equity in income of
subsidiaries (6,530) 5,956 18,284 - 17,710
Provision for income taxes 74 - 6,833 - 6,907
Equity in income of
subsidiaries 17,407 - - (17,407) -
---------- ------- ------- ------- ---------
Net income $ 10,803 $ 5,956 $ 11,451 $(17,407) $ 10,803
========== ======= ======= ======= =========
</TABLE>
<PAGE>
<TABLE>
WABAN INC.
CONDENSED CONSOLIDATING BALANCE SHEET
APRIL 26, 1997
(In Thousands)
(Unaudited)
<CAPTION>
Non-
Waban Inc. Guarantor Guarantor
(Parent Sub- Sub- Elimin- Consol-
Corporation) sidiaries sidiaries ations idated
------------ ---------- --------- -------- -------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 31,443 $ - $ 2,018 $ - $ 33,461
Accounts receivable 47,846 - 1,963 - 49,809
Merchandise inventories 637,706 - 15,784 - 653,490
Current deferred income
taxes 16,939 - - - 16,939
Prepaid expenses 10,913 - 458 - 11,371
--------- -------- -------- -------- ---------
Total current assets 744,847 - 20,223 - 765,070
--------- -------- -------- -------- ---------
Investment in subsidiaries 460,207 - - (460,207) -
Intercompany indebtedness (73,073) 3,320 69,753 - -
Property at cost 406,762 258,544 178,154 - 843,460
Less: accumulated depreci-
ation and amortization 185,158 15,535 18,866 - 219,559
--------- -------- -------- -------- ---------
221,604 243,009 159,288 - 623,901
Deferred income taxes 7,863 3 (340) - 7,526
Other assets 20,285 4,924 87 - 25,296
--------- -------- -------- -------- ---------
Total assets $1,381,733 $251,256 $249,011 $(460,207)$1,421,793
========= ======== ======== ======== =========
LIABILITIES
Current liabilities:
Current installments of
long-term debt and
capital lease obligations $ 12,342 $ - $ 67 $ - $ 12,409
Accounts payable 310,135 - 6,629 - 316,764
Accrued expenses and other
current liabilities 108,425 - 32,605 - 141,030
--------- -------- -------- -------- --------
Total current
liabilities 430,902 - 39,301 - 470,203
--------- -------- -------- -------- --------
Long-term debt and capital
lease obligations 230,165 - 600 - 230,765
Other liabilities 74,945 - 159 - 75,104
STOCKHOLDERS' EQUITY
Common stock 333 - 949 (949) 333
Additional paid-in capital 330,227 245,300 74,842 (320,142) 330,227
Retained earnings 322,676 5,956 133,160 (139,116) 322,676
Treasury stock (7,515) - - - (7,515)
--------- -------- -------- -------- --------
Total stockholders'
equity 645,721 251,256 208,951 (460,207) 645,721
---------- -------- -------- --------- ----------
Total liabilities and
stockholders' equity $1,381,733 $251,256 $249,011 $(460,207)$1,421,793
========== ======== ======== ========= ===========
</TABLE>
<PAGE>
<TABLE>
WABAN INC.
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE THIRTEEN WEEKS ENDED APRIL 26, 1997
(In Thousands)
(Unaudited)
<CAPTION>
Non-
Waban Inc. Guarantor Guarantor
(Parent Sub- Sub- Elimin- Consol-
Corporation) sidiaries sidiaries ations idated
------------ ---------- --------- -------- -------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES $ 3,984 $ 7,554 $ 19,915 $ - $ 31,453
-------- -------- -------- -------- --------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Property additions (9,123) (4,313) (252) - (13,688)
Property disposals 4 30 281 - 315
-------- -------- -------- -------- --------
Net cash provided by (used
in) investing activities (9,119) (4,283) 29 - (13,373)
-------- -------- -------- -------- --------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Repayment of long-term
debt and capital lease
obligations (86) - (424) - (510)
Net intercompany borrowings 41,186 (3,271) (37,915) - -
Proceeds from sale and
issuance of common stock 1,298 - - - 1,298
-------- -------- -------- -------- --------
Net cash provided by (used
in) financing activities 42,398 (3,271) (38,339) - 788
-------- -------- ------- -------- --------
Net increase (decrease) in
cash and cash equivalents 37,263 - (18,395) - 18,868
Cash and cash equivalents
at beginning of year (5,820) - 20,413 - 14,593
-------- -------- ------- -------- --------
Cash and cash equivalents
at end of period $ 31,443 $ - $ 2,018 $ - $ 33,461
======== ======== ======= ======== ========
</TABLE>
<PAGE>
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Thirteen Weeks (First Quarter) Ended April 26, 1997 versus Thirteen Weeks Ended
April 27, 1996.
Results of Operations
- ---------------------
Consolidated net sales for the quarter ended April 26, 1997 were $1.04 billion,
an increase of 6.6% over last year's first quarter. This increase was due to
the opening of new stores since the end of last year's first quarter and a
comparable store sales increase of 2.6% at BJ's Wholesale Club, offset in part
by a decrease in HomeBase's comparable store sales of 0.8% in the first
quarter.
Cost of sales (including buying and occupancy costs) as a percentage of sales
was 86.1% in this year's first quarter versus 85.7% in the comparable period
last year. The increase in the cost of sales ratio was attributable to the
increased proportion of consolidated sales contributed by BJ's, (which has
lower gross margins than HomeBase) and a decrease in HomeBase's first quarter
merchandise gross margin compared with last year's first quarter.
Selling, general and administrative ("SG&A") expenses as a percentage of
consolidated net sales were 11.7% in the first quarter this year
compared to 12.3% in last year's first quarter. This decrease was also due
in part to BJ's larger share of consolidated net sales. SG&A expenses as a
percentage of sales are lower at BJ's than at HomeBase, whose business offers a
higher level of customer service. SG&A expenses this year included
approximately $0.5 million incurred in discussions, now terminated, with
Leonard Green & Partners, L.P. about a proposal to combine the Company's
HomeBase division with Kmart's Builders Square unit.
BJ's operating income in this year's first quarter was $16.6 million, or 18.1%
higher than last year's $14.0 million. This increase was attributable mainly
to increased sales volumes and a favorable merchandise mix, which resulted in a
higher gross margin than last year. Total sales included membership fee income
of $13.0 million in the first quarter versus $12.1 million last year.
Operating income at HomeBase was $8.8 million in the first quarter, an increase
of 6.0% over last year's $8.3 million. This increase was due to an improvement
in HomeBase's SG&A expenses as a percentage of sales, which more than offset a
decrease in gross margin that reflected lower average selling margin and a
higher provision for inventory shrinkage.
The components of net interest expense were as follows (in thousands):
<TABLE>
<CAPTION>
Thirteen Weeks Ended
April 26, April 27,
1997 1996
--------- ---------
<S> <C> <C>
Interest expense on debt $5,199 $4,936
Interest and investment income (289) (519)
----- -----
Interest on debt (net) 4,910 4,417
Interest on capital leases 381 398
----- -----
Interest on debt and capital leases (net) $5,291 $4,815
===== =====
</TABLE>
Interest expense on debt was net of capitalized interest of $86,000 this year
and $694,000 last year.
The Company's provision for income taxes was 39% of pre-tax income in both this
year's and last year's first quarter.
Net income for the first quarter was $10.8 million, or $.32 per share, versus
$9.5 million, or $.28 per share, in last year's first quarter.
Liquidity and Capital Resources
- -------------------------------
Cash provided by operating activities was $31.5 million in the first quarter
this year versus $7.5 million last year. This increase was due primarily to
this year's smaller increase in inventories net of accounts payable and to an
increase in current income taxes payable. Increases in inventories and
accounts payable since the end of the fiscal year were due primarily to normal
seasonal requirements.
Cash expended for property additions in the first quarter was $13.7 million
this year and $36.8 million in the first quarter of last year. No new stores
were opened in this year's first quarter, while one new BJ's and three new
HomeBase stores were opened in the comparable period last year.
The Company's capital expenditures are expected to total approximately $115
million in the current fiscal year, based on opening approximately ten new BJ's
clubs and two new HomeBase warehouses. BJ's closed a club in the Hartford,
Connecticut market in the first quarter and HomeBase expects to close one
California warehouse store in the current fiscal year. Eight existing HomeBase
warehouses stores are slated for renovation later this year. The timing of
actual store openings and renovations and the amount of related expenditures
could vary from these estimates due, among other things, to the complexity of
the real estate development process.
The Company recently announced BJ's plans to enter the Cleveland, Ohio market
with three or four new clubs in 1998.
The Company has a $150 million credit agreement with a group of banks which
includes a $20 million sub-facility for standby letters of credit. At April
26, 1997, $6.3 million of standby letters of credit were outstanding under the
sub-facility; the remainder of the line of credit was available for use.
Cash and cash equivalents totaled $33.5 million as of April 26, 1997. The
Company believes that, based on its current corporate structure, its existing
bank credit agreement, together with anticipated cash flow from operations,
would be sufficient to finance its operations into the fiscal year ending
January 30, 1999. However, see "Recent Developments" below for information
regarding the Company's financing plans in connection with the proposed spin-
off of its BJ's Wholesale Club division.
Seasonality
- -----------
BJ's sales and operating income have typically been strongest in the Christmas
holiday season and lowest in the first quarter of each fiscal year. HomeBase's
sales and earnings have typically been lower in the first and fourth quarters
of the fiscal year and higher in the second and third quarters, which
include the most active season for home construction.
Recent Developments
- -------------------
On June 6, 1997, the Company called for redemption on July 7, 1997 all of its
outstanding 6.5% Convertible Subordinated Debentures due July 1, 2002.
Convertible Debentures in an aggregate principal amount of $106,914,000 were
outstanding on June 6, 1997. The Company has entered into a standby purchase
agreement with Prudential Securities Incorporated pursuant to which Prudential
has agreed, subject to certain conditions, to purchase from the Company up to
2,160,606 shares of the Company's Common Stock; however, Prudential will
purchase shares from the Company if, and then only to the extent that, more
than $53,474,000 of Convertible Debentures are not duly surrendered for
conversion prior to 6:00 p.m., Eastern time, on June 26, 1997.
The Company's 1997 Annual Meeting of Stockholders, at which various proposals
relating to the Company's proposed spin-off (the "Distribution") of its BJ's
Wholesale Club division will be considered, will be held on July 10, 1997.
Assuming stockholder approval of such proposals and subject to certain
conditions, including declaration of the distribution of shares of BJ's
Wholesale Club, Inc. ("BJI") by the Company's Board of Directors, the Company
expects the Distribution would be effected by the end of July 1997.
Following the Distribution, the Company is expected to change its name to
"HomeBase, Inc."
The Distribution is conditioned upon a number of other factors, including: (i)
BJI and the Company having obtained separate bank credit facilities; (ii) the
conversion into common stock or the redemption for cash of the Convertible
Debentures and any shares required to be purchased from the Company pursuant to
the Standby Purchase Agreement having been issued; and (iii) the repayment by
the Company of its outstanding 9.58% senior notes due May 31, 1998 (whose
balance was $24 million as of April 26, 1997) and the retirement or defeaseance
of the Company's $100 million 11% senior subordinated notes due May 15, 2004.
Even if all conditions are satisfied, the Company's Board of Directors has
reserved discretion to abandon, defer or modify the Distribution at any time
prior to the date on which the Distribution is made. In order to effect the
redemption of the Convertible Debentures, the Company must obtain a waiver
under, or amend, its existing bank credit agreement.
Forward-Looking Information
- ---------------------------
This quarterly report on Form 10-Q contains "forward-looking statements,"
including certain information with respect to the Company's plans and strategy.
For this purpose, any statements contained herein that are not statements of
historical fact may be deemed to be forward-looking statements. Without
limiting the foregoing, the words "believes," "anticipates," "plans," "expects"
and similar expressions are intended to identify forward-looking statements.
There are a number of important factors that could cause actual events or the
Company's actual results to differ materially from those indicated by such
forward-looking statements. These factors include, without limitation, the
outcome of the proposed Distribution and related transactions described under
"Recent Developments" above and the factors included in the Company's
Registration Statement on Form S-3, File No. 333-25511-01 and under the heading
"Risk Factors" included in the Company's Proxy Statement for the 1997 Annual
Meeting of Stockholders.
<PAGE>
PART II. Other Information
-----------------
Item 6 - Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
11.0 Statement regarding computation of per share
earnings.
27.0 Financial Data Schedule
(b) The Company did not file any reports on Form 8-K with
the Securities and Exchange Commission during the quarter
ended April 26, 1997.
<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.
WABAN INC.
----------
(Registrant)
Date: June 10, 1997 /S/ HERBERT J. ZARKIN
----------------------------- ------------------------------
Herbert J. Zarkin
President and
Chief Executive Officer
Date: June 10, 1997 /S/ EDWARD J. WEISBERGER
----------------------------- ------------------------------
Edward J. Weisberger
Senior Vice President and
Chief Financial Officer
<PAGE>
<TABLE>
Exhibit 11
WABAN INC. AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF NET INCOME PER COMMON SHARE
(Unaudited)
<CAPTION>
Thirteen Weeks Ended
--------------------
April 26, April 27,
1997 1996
----------- -----------
<S> <C> <C>
Net income as reported $10,803,000 $ 9,515,000
========== ==========
Net income used for primary computation $10,803,000 $ 9,515,000
Add (where dilutive):
Tax effected interest and amortization
of debt expense on convertible debt 1,071,000 1,085,000
---------- ----------
Net income used for fully diluted computation $11,874,000 $10,600,000
========== ==========
Weighted average number of
common shares outstanding 32,793,084 32,916,276
Add (where dilutive):
Assumed exercise of those options that
are common stock equivalents net of treasury
shares deemed to have been repurchased 493,003 676,031
---------- ----------
Weighted average number of common and common
equivalent shares outstanding, used for
primary computation 33,286,087 33,592,307
Add (where dilutive):
Shares applicable to stock options in
addition to those used in primary computation
due to the use of period-end market price
when higher than average price - 85,186
Assumed exercise of convertible securities 4,356,171 4,387,879
---------- ----------
Adjusted shares outstanding used for fully
diluted computation 37,642,258 38,065,372
========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the Waban
Inc. consolidated statements of income and consolidated balance sheets filed
with the Form 10-Q for the quarter ended April 26, 1997 and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-END> APR-26-1997
<CASH> 33,461
<SECURITIES> 0
<RECEIVABLES> 49,809
<ALLOWANCES> 0
<INVENTORY> 653,490
<CURRENT-ASSETS> 765,070
<PP&E> 859,892
<DEPRECIATION> 225,466
<TOTAL-ASSETS> 1,421,793
<CURRENT-LIABILITIES> 470,203
<BONDS> 230,765
<COMMON> 333
0
0
<OTHER-SE> 645,388
<TOTAL-LIABILITY-AND-EQUITY> 1,421,793
<SALES> 1,039,151
<TOTAL-REVENUES> 1,039,151
<CGS> 894,458
<TOTAL-COSTS> 894,458
<OTHER-EXPENSES> 121,692
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,291
<INCOME-PRETAX> 17,710
<INCOME-TAX> 6,907
<INCOME-CONTINUING> 10,803
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,803
<EPS-PRIMARY> 0.32
<EPS-DILUTED> 0.32
</TABLE>
