<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): June 16, 1997
WABAN INC.
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Delaware
- --------------------------------------------------------------------------------
(State or Other Jurisdiction of Incorporation)
1-10259 33-0109661
------------------------- --------------------------------
(Commission File Number) (IRS Employer 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
Not Applicable
- --------------------------------------------------------------------------------
(Former Name or Address, if Changed Since Last Report)
<PAGE>
ITEM 5. OTHER EVENTS
On June 6, 1997, Waban Inc. ("Waban") filed with the Commission a Proxy
Statement/Prospectus relating to the proposed tax-free distribution (the
"Distribution"), in the form of a special dividend to stockholders, on a one-
for-one basis, of all outstanding shares of the common stock held by Waban of
BJ's Wholesale Club, Inc. ("BJI"), a newly formed, wholly owned subsidiary of
Waban and certain related transactions. Such Proxy Statement/Prospectus
contains, among other things, (i) pro forma financial data for the fiscal years
ended January 25, 1997, January 27, 1996 and January 28, 1995 illustrating the
estimated effects on Waban of the Distribution and certain related transactions
and (ii) pro forma financial data for the fiscal year ended January 25, 1997
illustrating the estimated effects on BJI of the Distribution and certain
related transactions. On June 10, 1997, Waban filed a Quarterly Report on Form
10-Q reporting financial information for the quarter ended April 26, 1997. The
purpose of this Current Report on Form 8-K is to present updated pro forma
financial data for each of Waban and BJI for the quarter ended April 26, 1997,
illustrating the estimated effects of the Distribution and certain related
transactions. All capitalized terms used herein which are not specifically
defined herein shall have the respective meanings assigned to such terms in the
Proxy Statement/Prospectus.
-2-
<PAGE>
PRO FORMA FINANCIAL DATA OF WABAN
The following unaudited pro forma financial data for the period ended
April 26, 1997 and as of April 26, 1997 illustrates the estimated effects
on Waban of the proposed Distribution and (i) the repayment by BJI to Waban of
intercompany indebtedness and current taxes payable, (ii) the prepayment of
Waban's Senior Notes and Senior Subordinated Notes, (iii) borrowings under
a new credit agreement that Waban expects to enter into with a group of banks,
effective with the Distribution and (iv) the full or partial conversion of
Waban's Convertible Debentures (the "Related Waban Transactions"). The Company
has called the Convertible Debentures for redemption and, in connection
therewith, has entered into the Standby Purchase Agreement. See "Standby
Agreement" and "Risk Factors--Conversion or Redemption of Convertible
Debentures" in the Proxy Statement/Prospectus filed with the Commission on June
6, 1997. The pro forma financial data has been prepared to present two
alternative scenarios. Scenario A gives pro forma effect to the conversion of
all of the Convertible Debentures into Waban Common Stock. Scenario B gives pro
forma effect to the redemption of $53,474,000 of the Convertible Debentures for
cash and the conversion of the remaining Convertible Debentures.
The unaudited pro forma financial data of Waban does not purport to
represent what the financial position or results of operations of Waban would
have been if the Distribution and Related Waban Transactions had in fact been
consummated on the dates indicated or at any future date. The pro forma
adjustments are based upon available information and upon certain assumptions
that Waban's management believes are reasonable in the circumstances.
-3-
<PAGE>
WABAN INC.
PRO FORMA CONDENSED BALANCE SHEET (UNAUDITED)
April 26, 1997
(Dollars in thousands)
Scenario A - Conversion of All Convertible Debentures into Common Stock
<TABLE>
<CAPTION>
Pro Forma
ASSETS Historical Adjustments Pro Forma
------ ---------- ----------- ---------
<S> <C> <C> <C>
Current Assets:
Cash and cash equivalents $33,461 (1,100) (1) $4,161
27,500 (2)
(138,200) (3)
82,500 (6)
Accounts receivable 49,809 (22,320) (7) 27,489
Merchandise inventories 653,490 (317,056) (7) 336,434
Current deferred income taxes 16,939 (6,186) (7) 10,753
Prepaid expenses 11,371 (5,312) (7) 6,059
---------- ----------
Total current assets 765,070 384,896
Property, net of depreciation 623,901 (378,517) (7) 245,384
Intercompany debt - 9,508 (4) -
(98,797) (5)
(82,500) (6)
171,789 (7)
Other assets 32,822 (1,307) (1) 17,962
(2,093) (3)
(11,460) (7)
---------- ----------
Total assets $1,421,793 $648,242
========== ==========
LIABILITIES
-----------
Current Liabilities:
Current installments of long-term debt $12,409 (12,000) (3) $235
(174) (7)
Accounts payable 316,764 (187,158) (7) 129,606
Accrued expenses and other current liabilities 131,752 (58,736) (7) 73,016
Accrued federal and state income taxes 9,278 (529) (1) 2,150
(5,751) (3)
(848) (3)
9,508 (4)
(9,508) (7)
---------- ----------
Total current liabilities 470,203 205,007
Noncurrent liabilities 75,104 (28,269) (7) 46,835
Long-term debt 230,765 (106,949) (1) 36,763
27,500 (2)
(112,000) (3)
(2,553) (7)
STOCKHOLDERS' EQUITY
--------------------
Common stock 333 43 (1) 376
Additional paid-in capital 330,227 98,613 (1) 359,261
(69,579) (7)
Treasury stock (7,515) 7,515 (1) -
Retained earnings 322,676 (1,100) (1) -
(8,449) (3)
(1,245) (3)
(98,797) (5)
(213,085) (7)
---------- ----------
Total stockholders' equity 645,721 359,637
---------- ----------
Total liabilities and stockholders' equity $1,421,793 $648,242
========== ==========
</TABLE>
-4-
<PAGE>
WABAN INC.
PRO FORMA CONDENSED STATEMENT OF INCOME (UNAUDITED)
Thirteen Weeks Ended April 26, 1997
(Dollars in thousands, except per share data)
Scenario A - Conversion of All Convertible Debentures into Common Stock
<TABLE>
<CAPTION>
Pro Forma
Historical Adjustments Pro Forma
---------- ----------- ---------
<S> <C> <C> <C>
Total revenues $1,039,151 (678,947) (1) $360,204
---------- --------
Cost of sales, including buying and occupancy costs 894,458 (612,199) (1) 282,259
Selling, general and administrative expenses 121,692 (50,248) (1) 71,444
Interest on debt and capital leases, net 5,291 (4,459) (2) 832
---------- --------
Total expenses 1,021,441 354,535
---------- --------
Income from continuing operations before taxes 17,710 5,669
Provision for income taxes 6,907 (4,696) (3) 2,211
---------- --------
Income from continuing operations $10,803 $3,458
========== ========
Pro forma earnings per share from continuing operations $0.09
========
</TABLE>
-5-
<PAGE>
WABAN INC.
NOTES TO PRO FORMA CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
SCENARIO A--CONVERSION OF ALL CONVERTIBLE DEBENTURES INTO COMMON STOCK
NOTES TO PRO FORMA CONDENSED BALANCE SHEET
(1) Adjustment to record conversion of the Convertible Debentures (net of
$1,307,000 unamortized debt expense and related tax benefit) into 4,321,171
shares of common stock and to record payment of $1,100,000 pursuant to the
Standby Purchase Agreement.
(2) Adjustment to record borrowings of $27,500,000 under a new credit
agreement that Waban expects to enter into with a group of banks, effective
with the Distribution. These borrowings, combined with the $82,500,000
received from BJI in repayment of intercompany indebtedness (see Note (6)
which follows) and $28,200,000 of Waban's available cash, will be used to
repay the Senior Notes ($24,000,000) and Senior Subordinated Notes
($100,000,000) plus $14,200,000 of prepayment penalties (see Note (3) which
follows).
(3) Adjustment to record repayment of the Senior Notes and Senior
Subordinated Notes and related prepayment penalties of approximately
$14,200,000, the write-off of unamortized debt expense of $2,093,000, and
related tax benefits as of April 26, 1997, the date of the pro forma
condensed balance sheet.
(4) Adjustment to record transfer of BJI's current taxes payable to Waban
through the intercompany balance.
(5) Adjustment to record forgiveness of $98,797,000 of BJI's intercompany
indebtedness.
(6) Adjustment to record cash received of $82,500,000 from BJI in
repayment of intercompany indebtedness.
(7) Adjustment to reflect the distribution of the remainder of BJI's net
assets, which total $282,664,000 excluding Waban's forgiveness of BJI's
intercompany indebtedness (see Note (5) above). $213,085,000 of this amount
is charged to Waban's retained earnings, reducing that balance to zero; the
remaining $69,579,000 is charged to additional paid-in capital.
NOTES TO PRO FORMA CONDENSED STATEMENT OF INCOME
(1) Adjustment to separate the operating revenues and expenses of BJI's
discontinued operations.
(2) Adjustment to reflect interest expense on anticipated reduced
borrowings using an assumed interest rate of 7.50%. Each variance of 1/8 of
one percent from this assumed interest rate would change quarterly interest
expense by $8,594.
(3) Adjustment to income tax provision for the estimated income tax
effect of the pro forma adjustments.
Pro forma earnings per share from continuing operations is based on
37,193,415 shares of common stock outstanding (including 4,321,171 shares of
common stock issued upon conversion of the Convertible Debentures) plus
583,969 common equivalent shares, using the treasury stock method of
accounting for outstanding stock options.
-6-
<PAGE>
WABAN INC.
PRO FORMA CONDENSED BALANCE SHEET (UNAUDITED)
April 26, 1997
(Dollars in thousands)
Scenario B-Partial Conversion of Convertible Debentures into Common Stock
<TABLE>
<CAPTION>
Pro Forma
ASSETS Historical Adjustments Pro Forma
------ ------------- ------------- -----------
<S> <C> <C> <C>
Current Assets:
Cash and cash equivalents $33,461 (1,100) (1) $2,230
40,868 (2)
(193,605) (3)
122,606 (6)
Accounts receivable 49,809 (22,320) (7) 27,489
Merchandise inventories 653,490 (317,056) (7) 336,434
Current deferred income taxes 16,939 (6,186) (7) 10,753
Prepaid expenses 11,371 (5,312) (7) 6,059
------------- -----------
Total current assets 765,070 382,965
Property, net of depreciation 623,901 (378,517) (7) 245,384
Intercompany debt - 9,508 (4) -
(58,691) (5)
(122,606) (6)
171,789 (7)
Other assets 32,822 (654) (1) 17,962
(2,746) (3)
(11,460) (7)
------------- -----------
Total assets $1,421,793 $646,311
============= ===========
LIABILITIES
-----------
Current Liabilities:
Current installments of long-term debt $12,409 (174) (7) $235
(12,000) (3)
Accounts payable 316,764 (187,158) (7) 129,606
Accrued expenses and other current liabilities 131,752 (58,736) (7) 73,016
Accrued federal and state income taxes 9,278 (265) (1) 1,368
(6,533) (3)
(1,112) (3)
9,508 (4)
(9,508) (7)
------------- -----------
Total current liabilities 470,203 204,225
Noncurrent liabilities 75,104 (28,269) (7) 46,835
Long-term debt 230,765 (53,475) (1) 50,131
40,868 (2)
(165,474) (3)
(2,553) (7)
STOCKHOLDERS' EQUITY
--------------------
Common stock 333 22 (1) 355
Additional paid-in capital 330,227 45,549 (1) 344,765
(31,011) (7)
Treasury stock (7,515) 7,515 (1) -
Retained earnings 322,676 (1,100) (1) -
(9,598) (3)
(1,634) (3)
(58,691) (5)
(251,653) (7)
------------- -----------
Total stockholders' equity 645,721 345,120
------------- -----------
Total liabilities and stockholders' equity $1,421,793 $646,311
============= ===========
</TABLE>
-7-
<PAGE>
WABAN INC.
PRO FORMA CONDENSED STATEMENT OF INCOME (UNAUDITED)
Thirteen Weeks Ended April 26, 1997
(Dollars in thousands, except per share data)
Scenario B - Partial Conversion of Convertible Debentures into Common Stock
<TABLE>
<CAPTION>
Pro Forma
Historical Adjustments Pro Forma
------------ ----------- -----------
<S> <C> <C> <C>
Total revenues $1,039,151 (678,947)(1) $360,204
------------ -----------
Cost of sales, including buying and occupancy costs 894,458 (612,199)(1) 282,259
Selling, general and administrative expenses 121,692 (50,248)(1) 71,444
Interest on debt and capital leases, net 5,291 (4,209)(2) 1,082
------------ -----------
Total expenses 1,021,441 354,785
------------ -----------
Income from continuing operations before taxes 17,710 5,419
Provision for income taxes 6,907 (4,793)(3) 2,114
------------ -----------
Income from continuing operations $10,803 $3,305
============ ===========
Pro forma earnings per share from continuing operations $0.09
===========
</TABLE>
-8-
<PAGE>
WABAN INC.
NOTES TO PRO FORMA CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
SCENARIO B--PARTIAL CONVERSION OF CONVERTIBLE DEBENTURES INTO COMMON STOCK
NOTES TO PRO FORMA CONDENSED BALANCE SHEET
(1) Adjustment to record conversion of $53,475,000 of the Convertible
Debentures (net of the payment of $1,100,000 pursuant to the Standby
Purchase Agreement and net of $654,000 unamortized debt expense and related
tax benefit) into 2,160,606 shares of common stock.
(2) Adjustment to record borrowings of $40,868,000 under a new credit
agreement that Waban expects to enter into with a group of banks, effective
with the Distribution. These borrowings, combined with the $122,606,000
received from BJI in repayment of intercompany indebtedness (see Note (6)
which follows) and $30,131,000 of Waban's available cash, will be used to
repay the Senior Notes ($24,000,000), Senior Subordinated Notes
($100,000,000), and $53,474,000 of the Convertible Debentures plus $16,131,000
of prepayment penalties (see Note (3)).
(3) Adjustment to record repayment of the Senior Notes, Senior
Subordinated Notes and $53,474,000 of the Convertible Debentures and
related prepayment penalties of approximately $16,131,000, the write-off of
unamortized debt expense of $2,746,000, and related tax benefits as of
April 26, 1997, the date of the pro forma condensed balance sheet.
(4) Adjustment to record transfer of BJI's current taxes payable to Waban
through the intercompany balance.
(5) Adjustment to record forgiveness of $58,691,000 of BJI's intercompany
indebtedness.
(6) Adjustment to record cash received of $122,606,000 from BJI in
repayment of intercompany indebtedness.
(7) Adjustment to reflect the distribution of the remainder of BJI's net
assets, which total $282,664,000, excluding Waban's forgiveness of BJI's
intercompany indebtedness (See Note (5) above). $251,653,000 of this amount is
charged to Waban's retained earnings; the remaining $31,011,000 is charged to
additional paid-in capital.
NOTES TO PRO FORMA CONDENSED STATEMENT OF INCOME
(1) Adjustment to separate the operating revenues and expenses of BJI's
discontinued operations.
(2) Adjustment to reflect interest expense on anticipated reduced
borrowings using an assumed interest rate of 7.50%. Each variance of 1/8 of
one percent from this assumed interest rate would change quarterly interest
expense by $12,771.
(3) Adjustment to income tax provision for the estimated income tax
effect of the pro forma adjustments.
Pro forma earnings per share from continuing operations is based on
35,032,850 shares of common stock outstanding (including 2,160,606 shares of
common stock issued upon conversion of the Convertible Debentures) plus
583,969 common equivalent shares, using the treasury stock method of
accounting for outstanding stock options.
-9-
<PAGE>
PRO FORMA FINANCIAL DATA OF BJI
The following unaudited pro forma financial data illustrates the estimated
effects on BJI of the proposed Distribution and (i) the repayment by BJI to
Waban of intercompany indebtedness and current taxes payable, (ii) borrowings
under a new credit agreement that BJI expects to enter into with a group of
banks, effective with the Distribution, and (iii) the impact of the full or
partial conversion of the Convertible Debentures (the "Related BJI
Transactions"). The Company has called the Convertible Debentures for redemption
and, in connection therewith, has entered into the Standby Purchase Agreement.
See "Standby Agreement" and "Risk Factors--Conversion or Redemption of
Convertible Debentures" in the Proxy Statement/Prospectus filed with the
Commission on June 6, 1997. The pro forma financial data has been prepared to
present two alternative scenarios. Scenario A gives pro forma effect to the
conversion of all of the Convertible Debentures into Waban Common Stock.
Scenario B gives pro forma effect to the redemption of $53,474,000 of the
Convertible Debentures for cash and the conversion of the remaining Convertible
Debentures into Waban Common Stock. The pro forma balance sheet data is based on
the April 26, 1997 balance sheet of BJI and assumes the Distribution and Related
BJI Transactions were consummated on that date. The pro forma income statement
data gives effect to the Distribution and Related BJI Transactions as if they
occurred at the beginning of the fiscal year ending January 25, 1997. The
unaudited pro forma financial data should be read in conjunction with the
historical financial statements of BJI included elsewhere in the Proxy
Statement/Prospectus.
The pro forma financial data of BJI does not purport to represent what the
financial position or results of operations of BJI would have been if the
Distribution and Related BJI Transactions had in fact been consummated on the
dates indicated or at any future date. The pro forma adjustments are based
upon available information and upon certain assumptions that BJI's management
believes are reasonable in these circumstances.
-10-
<PAGE>
BJ'S WHOLESALE CLUB, INC.
PRO FORMA CONDENSED BALANCE SHEET (UNAUDITED)
April 26, 1997
(Dollars in thousands)
Scenario A - Conversion of All Convertible Debentures into Common Stock
<TABLE>
<CAPTION>
Pro Forma
ASSETS Historical Adjustments Pro Forma
------ ------------ ----------- -----------
<S> <C> <C> <C>
Current Assets:
Cash $- $-
Accounts receivable 22,320 22,320
Merchandise inventories 317,056 317,056
Current deferred income taxes 6,186 6,186
Prepaid expenses 5,312 5,312
------------ -----------
Total current assets 350,874 350,874
Property, net of depreciation 378,517 378,517
Other assets 14,945 14,945
------------ -----------
Total assets $744,336 $744,336
============ ===========
<CAPTION>
LIABILITIES
-----------
<S> <C> <C> <C>
Current Liabilities:
Current installments of long-term debt $174 $174
Accounts payable 187,158 187,158
Accrued expenses and other current liabilities 58,736 58,736
Accrued federal and state income taxes 9,508 (9,508) (1) -
------------ -----------
Total current liabilities 255,576 246,068
Noncurrent liabilities 28,269 28,269
Deferred income taxes 3,485 3,485
Loans and advances from Waban Inc. 171,789 9,508 (1) -
(98,797) (4)
(82,500) (3)
Long-term debt 2,553 82,500 (3) 85,053
STOCKHOLDER'S EQUITY
--------------------
Common stock 329 43 (2) 372
Additional paid-in capital - 98,797 (4) 98,797
Retained earnings 282,335 (43) (2) 282,292
------------ -----------
Total stockholder's equity 282,664 381,461
------------ -----------
Total liabilities and stockholder's equity $744,336 $744,336
============ ===========
</TABLE>
-11-
<PAGE>
BJ'S WHOLESALE CLUB, INC.
PRO FORMA CONDENSED STATEMENT OF INCOME (UNAUDITED)
Thirteen Weeks Ended April 26, 1997
(Dollars in thousands, except per share data)
Scenario A - Conversion of All Convertible Debentures into Common Stock
<TABLE>
<CAPTION>
Pro Forma
Historical Adjustments Pro Forma
------------ ----------- -----------
<S> <C> <C> <C>
Net sales $665,922 $665,922
Membership fee income 13,025 13,025
------------ -----------
Total revenues 678,947 678,947
------------ -----------
Cost of sales, including buying and occupancy costs 612,199 612,199
Selling, general and administrative expenses 51,374 51,374
Interest on debt and capital leases, net 3,882 (2,559)(1) 1,323
------------ -----------
Total expenses 667,455 664,896
------------ -----------
Income before income taxes 11,492 14,051
Provision for income taxes 4,435 1,036 (2) 5,471
------------ -----------
Net income $7,057 $8,580
============ ===========
Pro forma earnings per share $0.23
===========
</TABLE>
-12-
<PAGE>
BJ'S WHOLESALE CLUB, INC.
NOTES TO PRO FORMA CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
SCENARIO A--CONVERSION OF ALL CONVERTIBLE DEBENTURES INTO COMMON STOCK
NOTES TO PRO FORMA CONDENSED BALANCE SHEET
(1) Adjustment to record transfer to Waban of current taxes payable
through the intercompany balance.
(2) Adjustment to reflect additional shares outstanding as a result of
conversion of Waban's Convertible Debentures into 4,321,171 shares of
common stock.
(3) Adjustment to record borrowings under a new credit agreement that BJI
expects to enter into with a group of banks, effective with the Distribution
and repayment of outstanding intercompany indebtedness to Waban.
(4) Adjustment to record Waban's contribution of $98,797,000 to the
equity of BJI through the forgiveness of intercompany indebtedness.
NOTES TO PRO FORMA CONDENSED STATEMENT OF INCOME
(1) Adjustment to reflect interest expense in connection with the
$82,500,000 borrowing under a new credit agreement that BJI expects to enter
into with a group of banks, effective with the Distribution in lieu of
interest expense on intercompany borrowings from Waban. Interest on credit
agreement borrowings is assumed to be 6.50%. Each variance of 1/8 of one
percent from this assumed interest rate would change quarterly interest
expense by $25,781.
(2) Adjustment to income tax provision for the estimated income tax
effect of the pro forma adjustment at a marginal tax rate of 40.5%.
Pro forma earnings per share is based on 37,193,415 shares of common stock
outstanding (including 4,321,171 shares of common stock issued upon conversion
of Waban's Convertible Debentures) plus 439,166 common equivalent shares,
using the treasury stock method of accounting for outstanding stock options.
Management believes the historical financial statements reflect BJI's
historical costs of doing business. As a publicly owned company, BJI will
likely incur additional costs. Such additional costs, estimated to be
approximately $2,000,000 on an annual basis, or $500,000 on a quarterly basis,
are not reflected in the Pro Forma Condensed Statement of Income.
-13-
<PAGE>
BJ'S WHOLESALE CLUB, INC.
PRO FORMA CONDENSED BALANCE SHEET (UNAUDITED)
April 26, 1997
(Dollars in thousands)
Scenario B - Partial Conversion of Convertible Debentures into Common Stock
<TABLE>
<CAPTION>
Pro Forma
Historical Adjustments Pro Forma
---------- ----------- ---------
<S> <C> <C> <C>
ASSETS
------
Current Assets:
Cash $- $-
Accounts receivable 22,320 22,320
Merchandise inventories 317,056 317,056
Current deferred income taxes 6,186 6,186
Prepaid expenses 5,312 5,312
-------- --------
Total current assets 350,874 350,874
Property, net of depreciation 378,517 378,517
Other assets 14,945 14,945
-------- --------
Total assets $744,336 $744,336
======== ========
LIABILITIES
-----------
Current Liabilities:
Current installments of long-term debt $174 $174
Accounts payable 187,158 187,158
Accrued expenses and other current liabilities 58,736 58,736
Accrued federal and state income taxes 9,508 (9,508) (1) -
-------- --------
Total current liabilities 255,576 246,068
Noncurrent liabilities 28,269 28,269
Deferred income taxes 3,485 3,485
Loans and advances from Waban Inc. 171,789 9,508 (1) -
(58,691) (4)
(122,606) (3)
Long-term debt 2,553 122,606 (3) 125,159
STOCKHOLDER'S EQUITY
--------------------
Common stock 329 22 (2) 351
Additional paid-in capital - 58,691 (4) 58,691
Retained earnings 282,335 (22) (2) 282,313
-------- --------
Total stockholder's equity 282,664 341,355
-------- --------
Total liabilities and stockholder's equity $744,336 $744,336
======== ========
</TABLE>
-14-
<PAGE>
BJ'S WHOLESALE CLUB, INC.
PRO FORMA CONDENSED STATEMENT OF INCOME (UNAUDITED)
Thirteen Weeks Ended April 26, 1997
(Dollars in thousands, except per share data)
Scenario B - Partial Conversion of Convertible Debentures into Common Stock
<TABLE>
<CAPTION>
Pro Forma
Historical Adjustments Pro Forma
------------ ------------- -----------
<S> <C> <C> <C>
Net sales $665,922 $665,922
Membership fee income 13,025 13,025
------------ -----------
Total revenues 678,947 678,947
------------ -----------
Cost of sales, including buying and occupancy costs 612,199 612,199
Selling, general and administrative expenses 51,374 51,374
Interest on debt and capital leases, net 3,882 (1,908)(1) 1,974
------------ -----------
Total expenses 667,455 665,547
------------ -----------
Income before income taxes 11,492 13,400
Provision for income taxes 4,435 773 (2) 5,208
------------ -----------
Net income $7,057 $8,192
============ ===========
Pro forma earnings per share $0.23
===========
</TABLE>
-15-
<PAGE>
BJ'S WHOLESALE CLUB, INC.
NOTES TO PRO FORMA CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
SCENARIO B--PARTIAL CONVERSION OF CONVERTIBLE DEBENTURES INTO COMMON STOCK
NOTES TO PRO FORMA CONDENSED BALANCE SHEET
(1) Adjustment to record transfer to Waban of current taxes payable
through the intercompany balance.
(2) Adjustment to reflect additional shares outstanding as a result of
conversion of Waban's Convertible Debentures into 2,160,606 shares of
common stock.
(3) Adjustment to record borrowings under a new credit agreement that BJI
expects to enter into with a group of banks, effective with the Distribution
and repayment of outstanding intercompany indebtedness to Waban.
(4) Adjustment to record Waban's contribution of $58,691,000 to the
equity of BJI through the forgiveness of intercompany indebtedness.
NOTES TO PRO FORMA CONDENSED STATEMENT OF INCOME
(1) Adjustment to reflect interest expense in connection with the
$122,606,000 borrowing under a new credit agreement that BJI expects to enter
into with a group of banks, effective with the Distribution in lieu of
interest expense on intercompany borrowings from Waban. Interest on credit
agreement borrowings is assumed to be 6.50%. Each variance of 1/8 of one
percent from this assumed interest rate would change quarterly interest
expense by $38,314.
(2) Adjustment to income tax provision for the estimated income tax,
effect of the pro forma adjustment at a marginal tax rate of 40.5%.
Pro forma net income is based on 35,032,850 shares of common stock outstanding
(including 2,160,606 shares of common stock issued upon conversion of Waban's
Convertible Debentures) plus 439,166 common equivalent shares, using the
treasury stock method of accounting for outstanding stock options.
Management believes the historical financial statements reflect BJI's
historical costs of doing business. As a publicly owned company, BJI will likely
incur additional costs. Such additional costs, estimated to be approximately
$2,000,000 on an annual basis, or $500,000 on a quarterly basis, are not
reflected in the Pro Forma Condensed Statement of Income.
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<PAGE>
SIGNATURE
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 hereunto duly authorized.
Date: June 16, 1997 WABAN INC.
/s/ Edward J. Weisberger
------------------------------
By: Edward J. Weisberger
Title: Senior Vice President
and Chief Financial Officer
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