<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark one)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 1, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-20214
BED BATH & BEYOND INC.
(Exact name of registrant as specified in its charter)
NEW YORK 11-2250488
(State of incorporation) (IRS Employer Identification No.)
650 LIBERTY AVENUE, UNION, NEW JERSEY 07083
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 908/688-0888
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF
THE ACT:
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
None None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF
THE ACT:
COMMON STOCK (PAR VALUE $ 0.01 PER SHARE)
(Title of class)
PAGE 1 OF 2 PAGE COVER PAGE.
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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
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
As of May 9, 1997, the aggregate market value of the common stock held by
non-affiliates (which was computed by reference to the closing price on such
date of such stock on the NASDAQ National Market) was $1,364,329,887.*
Number of shares outstanding of the issuer's common stock (par value $0.01 per
share) at May 9, 1997: 68,646,640.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's definitive proxy statement filed on May 16, 1997
pursuant to Regulation 14A are incorporated by reference in Part III hereof.
Portions of the Registrant's Annual Report to Shareholders for the fiscal
year-ended March 1, 1997 are incorporated by reference in Part II hereof.
* For purposes of this calculation, all outstanding shares of common
stock have been considered held by non-affiliates other than the
18,348,764 shares beneficially owned by directors and executive
officers, including in the case of the Co-Chief Executive Officers,
partnerships in which they are general partners, and trusts and
foundations affiliated with them. In making such calculation, the
Registrant does not determine the affiliate or non-affiliate status of
any shares for any other purpose.
PAGE 2 OF 2 PAGE COVER PAGE.
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PART I
Unless otherwise indicated, the terms "Company" and "Bed Bath & Beyond"
refer collectively to Bed Bath & Beyond Inc. and its subsidiaries. Effective
February 26, 1996, the Company changed its fiscal year from the 52 or 53 week
period ending on the Sunday nearest February 28 to the 52 or 53 week period
ending on the Saturday nearest February 28. Accordingly, fiscal 1996 consisted
of 52 weeks and 6 days and ended on March 1, 1997; fiscal 1995 consisted of 52
weeks and ended on February 25, 1996; and fiscal 1994 consisted of 52 weeks and
ended on February 26, 1995. Unless otherwise indicated, all references herein to
periods of time (e.g., quarters and years) are to fiscal periods.
ITEM 1 - BUSINESS
INTRODUCTION
Bed Bath & Beyond believes that it is the nation's largest operator of
"superstores" selling predominantly better quality domestics merchandise and
home furnishings typically found in better department stores. The term
"superstore" as used herein means a store, other than a department store, that
is larger in size than the typical stores in its market selling similar product
categories and offers a breadth and depth of selection in most of its product
categories that far exceeds what is available in such stores. The Company offers
a wide assortment of merchandise at everyday low prices that are substantially
below regular department store prices and generally comparable to or below
department store sale prices. The Company's domestics merchandise line includes
items such as bed linens, bath accessories and kitchen textiles, and the
Company's home furnishings line includes items such as cookware, dinnerware,
glassware and basic housewares. The Company believes that it offers a breadth
and depth of selection in most of its product categories that far exceeds what
is generally available in department stores or other specialty retail stores and
that this enables it to offer customers the convenience of one-stop shopping for
most household items.
As of May 9, 1997, the Company operated 114 stores in 26 states:
Alabama (1), Arizona (2), California (14), Colorado (2), Connecticut (3),
Florida (11), Georgia (5), Illinois (8), Indiana (2), Kansas (1), Maryland (4),
Massachusetts (4), Michigan (4), Missouri (1), New Jersey (7), New Mexico (1),
New York (11), North Carolina (2), Ohio (4), Oklahoma (1), Pennsylvania (2),
Tennessee (2), Texas (13), Virginia (7), Washington (1) and Wisconsin (1). 110
of these stores use the superstore format that was pioneered by the Company in
1985. These stores are on average approximately 41,000 square feet in size and
carry the Company's full line of both domestics merchandise and home
furnishings. The other four stores, all established prior to 1986, are smaller
stores that primarily carry domestics merchandise.
HISTORY
The Company was founded in 1971. Leonard Feinstein and Warren
Eisenberg, the Co-Chief Executive Officers and founders of the Company, each has
more than 35 years of experience in the retail industry.
The Company commenced operations in 1971 with the opening of two
stores, one in New York and one in New Jersey. These stores operated under the
name "bed n bath" and sold primarily bed linens and bath accessories. The
Company continued to open bed n bath stores and by 1985 had opened stores in New
York, New Jersey, Connecticut and California. In 1985, the Company introduced
its superstore format with the opening of its first store carrying a full line
of both domestics merchandise and home furnishings. All stores opened by the
Company after 1985 use this format and carry the Company's full line of
domestics merchandise and home furnishings. The Company began using the name
"Bed Bath & Beyond" in 1987 in order to reflect
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the expanded product line offered by its superstores and to distinguish its
superstores from conventional specialty retail stores offering only domestics
merchandise or only home furnishings.
The Company has been engaged in an ongoing expansion program involving
the opening of new superstores (including 28 in 1996, 19 in 1995 and 16 in 1994)
and the expansion of existing stores (including two in 1996, two in 1995 and
four in 1994). As a result of its expansion program, the Company's store space
has increased from approximately 917,000 square feet at the beginning of 1992 to
approximately 4,347,000 square feet at the end of 1996. The Company's expansion
program is continuing, and the Company currently anticipates that in 1997 it
will open approximately 30 new superstores, which includes the six new
superstores opened through May 9, 1997.
MERCHANDISING AND MARKETING
The Company's strategy for merchandising and marketing is to offer
better quality merchandise at everyday low prices; to maintain a breadth and
depth of selection in most of its product categories that far exceeds what is
generally available in department stores or other specialty retail stores; to
present merchandise in a distinctive manner designed to maximize customer
convenience and reinforce customer perception of wide selection; and to
emphasize dedication to customer service and satisfaction.
MERCHANDISE SELECTION
The Company's 110 superstores offer both domestics merchandise and home
furnishings, while the Company's four smaller stores offer primarily domestics
merchandise. The Company's merchandise lines include:
Domestics Merchandise
o bed linens and related items: sheets, comforters, comforter
covers, bedspreads, quilts, window treatments, decorative
pillows, blankets, dust ruffles, bed pillows and mattress
pads.
o bath accessories: towels, shower curtains, waste baskets,
hampers, bathroom rugs and wall hardware.
o kitchen textiles: tablecloths, placemats, cloth napkins, dish
towels and chair pads.
Home Furnishings
o kitchen and tabletop items: cookware, cutlery, kitchen
gadgets, dinnerware, bakeware, flatware, drinkware, serveware
and glassware.
o basic housewares: storage items, closet-related items (such as
hangers, organizers and shoe racks), general housewares (such
as brooms, garbage pails and ironing boards), lifestyle
accessories (such as lamps, chairs, ready to assemble
furniture, wicker and clocks) and small electric appliances
(such as blenders, coffee makers, vacuums, irons, toaster
ovens and hair dryers).
o general home furnishings: giftwrap, candles, personal care
products, picture frames, wall art, juvenile items (such as
toys and children's books), artificial plants and flowers and
seasonal merchandise (such as summer and holiday related
items).
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The Company, on an ongoing basis, tests new merchandise categories and
adjusts the categories of merchandise carried in its stores and may add new
departments or adjust the size of existing departments as required. The Company
believes that the process of adding new departments and expanding or reducing
the size of various departments in response to changing conditions is an
important part of its merchandising strategy.
The Company's merchandise consists primarily of better quality
merchandise typically found at better department stores. For those product lines
that have brand names associated with them, the Company generally offers leading
brand name merchandise (including Wamsutta, Martex, Fieldcrest Cannon, Croscill,
Laura Ashley, Calphalon, Mikasa, Krups, J.A. Henckels, All-Clad, Portmeirion,
Rowenta, Black & Decker, Rubbermaid, Springs, Braun, Pillowtex and Waverly). The
Company estimates that brand name merchandise accounts for a significant portion
of its net sales.
The Company offers a breadth and depth of product selection that
enables customers to select among a wide assortment of styles, brands, colors
and designs within each of the Company's major product lines. The Company also
generally maintains consistent in-stock availability of merchandise in order to
reinforce customer perception of wide selection and build customer loyalty. The
Company estimates that many of its 110 superstores carry in excess of 30,000
stock-keeping units.
PRICING POLICY
The Company's pricing policy is to maintain everyday low prices that
are substantially below regular department store prices and generally comparable
to or below department store sale prices. The Company regularly monitors price
levels at its competitors in order to ensure that the Company's prices are being
maintained in accordance with its pricing policy. The Company believes that the
application of its everyday low price policy is essential to maintaining the
integrity of this policy and is an important factor in establishing its
reputation among customers.
Because the Company has an everyday low price policy, the Company does
not run sales. However, the Company uses periodic markdowns and semi-annual
clearances for merchandise that it has determined to discontinue carrying. In
addition, the Company's direct mail and newspaper insert advertising includes a
coupon, which is redeemed at the point-of-sale. The Company also honors
competitor coupons.
MERCHANDISE PRESENTATION
The Company has developed a distinctive style of merchandise
presentation. In each superstore, groups of related product lines are presented
together in separate areas of the store, creating the appearance that a Bed Bath
& Beyond superstore is comprised of several individual specialty stores for
different product lines. A "racetrack layout" that runs throughout the store
facilitates moving between areas and encourages customers to shop the entire
store. The Company believes that its format of merchandise presentation makes it
easy for customers to locate products, reinforces customer perception of wide
selection and communicates to customers that Bed Bath & Beyond superstores offer
a level of customer service generally associated with smaller specialty stores.
Merchandise is displayed in each of these separate areas from floor to
ceiling (generally 10 to 14 feet high) and, in addition, seasonal merchandise
and impulse items are prominently displayed in the front of the store. The
Company believes that its extensive merchandise selection, rather than
fixturing, should be the focus of customer attention and, accordingly, uses
simple modular fixturing throughout the store. This fixturing is designed so
that it can be easily reconfigured to adapt to changes in the Company's
merchandise mix and presentation. The Company believes that its floor to ceiling
displays create an exciting and attractive shopping environment that encourages
impulse purchases of additional items.
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CUSTOMER SERVICE
The Company places great emphasis on customer service and satisfaction
and, over the past 26 years, has sought to make this a defining feature of its
corporate culture. All managers provide leadership by example in this area by
regularly spending time assisting customers on the selling floor. The Company
believes that its success in the area of customer service is evidenced by its
ability to rely primarily on "word of mouth advertising".
The Company seeks to make shopping at its stores as pleasant and
convenient as possible. Each area within a store is staffed with knowledgeable
sales personnel who are available to assist customers in choosing merchandise,
to answer questions and to resolve any problems that may arise. In order to make
checking out convenient, check-out lines are continually monitored and
additional cashiers are added as necessary in order to minimize waiting time.
Returning merchandise is simplified through a return policy that permits
customers to return most items without presenting a sales receipt. Most Bed Bath
& Beyond stores are open seven days (and six evenings) a week in order to enable
customers to shop at times that are convenient for them.
ADVERTISING
In general, the Company relies on "word of mouth advertising" and on
its reputation for offering a wide assortment of quality merchandise at everyday
low prices, supplemented by the use of paid advertising. The Company uses direct
mail and newspaper inserts as its primary vehicles of paid advertising. In
certain instances, paid radio and television advertising may be used. Also, in
connection with the opening of new stores, the Company uses direct mail and
newspaper inserts. The Company believes that its ability to rely primarily on
"word of mouth advertising" will continue and that its limited use of paid
advertising permits it to spend less on advertising than a number of its
competitors.
EXPANSION
The Company is engaged in an ongoing expansion program involving the
opening of new stores in both existing and new markets and the expansion or
replacement of existing stores with larger stores. As a result of this program,
the total number of stores has increased from 34 at the beginning of 1992 to 108
at the end of 1996, and the total square footage of store space has increased
from approximately 917,000 square feet at the beginning of 1992 to approximately
4,347,000 square feet at the end of 1996.
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The table below sets forth information concerning the Company's
expansion program for the periods indicated:
<TABLE>
<CAPTION>
STORE SPACE NUMBER OF STORES
REPLACED NEW CLOSED BEGINNING END BEGINNING END
YEAR STORES (1) STORES (2) STORES OF YEAR OF YEAR OF YEAR OF YEAR
---- ---------- ---------- ------ -------- ------- ------- -------
(IN SQUARE FEET)
<S> <C> <C> <C> <C> <C> <C> <C>
1992 5 4 -- 917,000 1,128,000 34 38
1993 4 9 2 1,128,000 1,512,000 38 45
1994 4 16 -- 1,512,000 2,339,000 45 61
1995 2 19 -- 2,339,000 3,214,000 61 80
1996 2 28 -- 3,214,000 4,347,000 80 108
</TABLE>
(1) A replaced store is an existing store that was either expanded or replaced
by a new store in the same area.
(2) Excludes any new store that replaced an existing store in the same area.
The Company intends to continue its expansion program and believes that
the continued growth of the Company is dependent, in large part, on the success
of this program. As part of its expansion program, the Company expects to open
new superstores and, in addition, expects to expand existing stores as
opportunities arise.
The Company expects to open new superstores in existing markets and new
markets. In determining where to open new superstores, the Company evaluates a
number of factors, including the availability of prime real estate and
demographic information (such as data relating to income and education levels,
age and occupation). The Company believes that because it does not use central
distribution centers and since it relies on paid advertising to only a limited
extent, it has the flexibility to enter a new market with only a single store.
From the end of fiscal 1996 through May 9, 1997, the Company has opened
six stores which are located in: Naperville, Illinois; Northville, Michigan;
Buffalo, New York; Charlotte, North Carolina; San Antonio, Texas; and Madison,
Wisconsin. During the balance of 1997, the Company currently anticipates that it
will open approximately 24 additional stores. The Company has already leased
sites for 22 additional stores to be located in: Birmingham, Alabama; Mesa,
Arizona; Oceanside and Thousand Oaks, California; Golden, Colorado;
Jacksonville, Florida; Augusta, Georgia; Braintree, Massachusetts; Ballwin,
Kansas City and St. Peters, Missouri; East Hanover and Woodbridge, New Jersey;
New York City (Queens), New York; Tigard, Oregon; Pittsburgh (2) and Wynnewood,
Pennsylvania; Grapevine, Humble and San Antonio, Texas; and Richmond, Virginia;
and is in lease negotiations for several additional sites.
The Company has built its management structure with a view towards its
expansion and believes that as a result the Company has the management depth
necessary to support its anticipated expansion program. Each of the Company's
area managers typically supervise from three to five stores. Each of the
Company's district managers typically supervise four to eight stores, even
though the Company believes that each district manager has the capacity to
supervise up to ten stores.
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STORE OPERATIONS
MERCHANDISING
The Company maintains its own central buying staff, comprised of two
general merchandise managers and 11 senior buyers. The merchandise mix for each
store is selected by the central buying staff, in consultation with store
managers and other local store personnel. The factors taken into account in
selecting the merchandise mix for a particular store include store size and
configuration and local market conditions such as climate and demographics.
The central buying staff is responsible for ordering the initial
inventory required upon the opening of each store and for ordering the first
shipment of any new product line that may subsequently be added to a store's
merchandise mix. Local store personnel are thereafter primarily responsible for
monitoring inventory levels and re-ordering merchandise as required. In
addition, local store personnel are encouraged to monitor local sales trends and
market conditions and tailor the merchandise mix as appropriate to respond to
changing trends and conditions. The Company believes that its policy of having
reordering performed at the local store level, rather than centrally, and having
local store personnel determine the appropriate quantity to reorder encourages
entrepreneurship at the store level and better ensures that in-stock
availability will be maintained in accordance with the specific requirements of
each store.
The Company's central buying staff also services two smaller stores
operated by a third party under a franchise arrangement.
The Company purchases its merchandise from approximately 2,200
suppliers. In 1996, the Company's largest supplier accounted for approximately
7% of the Company's merchandise purchases and the Company's 10 largest suppliers
accounted for approximately 25% of such purchases. The Company purchases
substantially all of its merchandise in the United States, the majority from
domestic manufacturers and the balance from importers. On a limited basis, the
Company makes direct purchases from overseas sources. The Company has no
long-term contracts for the purchase of merchandise. The Company believes that
most merchandise, other than brand name goods, is available from a variety of
sources and that most brand name goods can be replaced with comparable
merchandise.
WAREHOUSING
Merchandise is shipped to each store from the Company's vendors, making
it unnecessary for the Company to maintain any central distribution centers. As
a result of the floor to ceiling displays used by the Company, a substantial
amount of merchandise is displayed on the sales floor of each store at all
times. Additional merchandise not displayed on the sales floor is stored in
separate warehouse space that is included in each store (with an estimated 10%
to 15% of the space of each store being dedicated to warehouse and receiving
space). In the case of several stores, merchandise is also stored at nearby
supplemental storage space leased by the Company. At present, the warehouse
space included in the Company's stores provides approximately 85% of the
Company's warehouse space requirements and such nearby supplemental storage
space provides the balance.
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MANAGEMENT
The Company seeks to encourage responsiveness and entrepreneurship at
the store level by providing its managers with a relatively high degree of
autonomy relating to operations and merchandising. This is reflected in the
Company's policy of having all reordering done at the store level, as well as in
the Company's policy of encouraging managers to tailor the merchandise mix of
each store in response to local sales trends and market conditions.
In general, stores are staffed with one to three assistant managers and
three to six department managers who report to a store manager, who in turn is
supervised by an area or district manager. Area and district managers report to
one of several regional managers who in turn report to one of two directors of
store operations. Decisions relating to pricing, advertising and markdowns for
all stores are made centrally in the Company's Buying Office, and certain store
support functions (such as finance and management information systems) are
performed centrally in the Company's Corporate Office.
TRAINING
The Company places great emphasis on the training of store level
management. All entry management personnel are generally required to work in
different departments of the store in order to acquire an overall understanding
of store operations. In addition, entry management personnel are trained in a
number of areas, including sales techniques, management techniques and product
knowledge.
The Company's policy is to build its management organization from
within. Each of the Company's area, district and regional managers was recruited
from the ranks of the Company's store managers and each of the Company's store
managers joined the Company in an entry level position. The Company believes
that its policy of promoting from within, as well as the opportunities for
advancement generated by its ongoing expansion program, serve as an incentive to
persons to seek and retain employment with the Company and results in low
turnover among its managers.
EMPLOYEES
As of March 1, 1997, the Company employed approximately 7,000 persons,
of whom approximately 4,500 were full-time employees and 2,500 were part-time
employees. None of the Company's employees are covered by collective bargaining
agreements. The Company believes that its relations with its employees are
excellent and that the labor turnover rate among its management employees is
lower than that experienced in the industry.
SEASONALITY
The Company's business exhibits less seasonality than many other retail
businesses, although sales levels are generally higher in August, November and
December, and generally lower in February and March.
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COMPETITION
The market for domestics merchandise and home furnishings is fragmented
and highly competitive. While the Company believes it is the preeminent marketer
in the superstore segment of the home goods industry, it competes directly with
a number of chains of superstores selling domestics merchandise and home
furnishings. In addition, the Company competes with many different types of
retail stores that sell many or most of the products sold by the Company. Such
competitors include: (i) better department stores, which often carry many of the
same product lines as the Company but do not typically have the same depth or
breadth of product selection, (ii) specialty stores (such as specialty linens or
housewares retailers), which often have a depth of product selection but
typically carry only a limited portion of the product lines carried by the
Company, and (iii) discount and mass merchandise stores. In addition, the
Company competes to a more limited extent with factory outlet stores that
typically offer limited quantities or limited lines of better quality
merchandise at discount prices. Some of the Company's competitors operate
substantially more stores and have substantially greater financial and other
resources than the Company, including, in a few cases, better name recognition.
The Company believes that it is the largest operator of superstores
selling predominantly better quality domestics merchandise and home furnishings
typically found in better department stores, and that it is well positioned to
compete successfully in its markets as measured by several factors, including
pricing, breadth and quality of product selection, in-stock availability of
merchandise, effective merchandise presentation, customer service and store
locations.
The visibility of the Company has encouraged superstore competitors to
imitate the Company's format and methods. Other retail chains continue to
introduce new store concepts which include many of the product lines carried by
the Company. There can be no assurance that the operation of competitors,
including those companies operating stores similar to those of Bed Bath &
Beyond, will not have a material effect on the Company.
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TRADE NAMES AND SERVICE MARKS
The Company uses the "Bed Bath & Beyond" name as a trade name and as a
service mark in connection with retail services. The Company has registered the
"Bed Bath & Beyond" name and logo as service marks with the United States Patent
and Trademark Office. Management believes that the name is an important element
of the Company's merchandising strategy. The Company currently operates several
stores under other names. The Company has entered into agreements pursuant to
which it believes it will be able to operate anywhere in the United States under
the Bed Bath & Beyond name.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth the name, age and business experience of
the executive officers of the Registrant:
<TABLE>
<CAPTION>
NAME AGE POSITIONS
- ---- --- ---------
<S> <C> <C>
Warren Eisenberg 66 Chairman, Co-Chief Executive Officer
and Director
Leonard Feinstein 60 President, Co-Chief Executive Officer
and Director
Steven H. Temares 38 Executive Vice President - Chief Operating
Officer
Ronald Curwin 67 Chief Financial Officer and Treasurer
</TABLE>
Mr. Eisenberg, a co-founder of the Company, has been a director and
officer of the Company since the Company commenced operations in 1971 (serving
as President and Co-Chief Executive Officer until April 9, 1992, and Chairman
and Co-Chief Executive Officer since that date).
Mr. Feinstein, a co-founder of the Company, has been a director and
officer of the Company since the Company commenced operations in 1971 (serving
as Co-Chief Executive Officer, Treasurer and Secretary until April 9, 1992, and
as President and Co-Chief Executive Officer since that date).
Mr. Temares was promoted to Executive Vice President - Chief Operating
Officer of the Company in January 1997. He joined the Company in June 1992
serving as Director of Real Estate and General Counsel. Prior to June 1992, Mr.
Temares engaged in the private practice of law.
Mr. Curwin, a certified public accountant, joined the Company in
September 1994 as Chief Financial Officer and Treasurer. Prior to joining the
Company, Mr. Curwin was engaged as a registered representative in the financial
services industry. Prior to 1992, Mr. Curwin was Chief Financial Officer of
Channel Home Centers, Inc., a retailer of home improvement products.
The Company's officers are elected by the Board of Directors for
one-year terms and serve at the discretion of the Board of Directors. No family
relationships exist between any of the executive officers or directors of the
Company.
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ITEM 2 - PROPERTIES
The Company's 114 stores are located in 26 states, principally in
suburban areas of medium and large sized cities. These stores are situated in
strip and power strip shopping centers, as well as in major off-price and
conventional malls, and free standing buildings. The Company's superstores range
in size from 13,000 to 85,000 square feet, but are predominantly between 30,000
and 50,000 square feet in major markets. The Company's four smaller stores range
in size from 7,000 to 11,000 square feet. In both superstores and smaller
stores, approximately 80% to 85% of store space is used for selling areas and
the balance for warehouse, receiving and office space.
The table below sets forth the number of stores located in each state
as of May 9, 1997:
<TABLE>
<CAPTION>
Number Number
State of Stores State of Stores
----- --------- ----- ---------
<S> <C> <C> <C>
Alabama 1 Missouri 1
Arizona 2 New Jersey 7
California 14 New Mexico 1
Colorado 2 New York 11
Connecticut 3 North Carolina 2
Florida 11 Ohio 4
Georgia 5 Oklahoma 1
Illinois 8 Pennsylvania 2
Indiana 2 Tennessee 2
Kansas 1 Texas 13
Maryland 4 Virginia 7
Massachusetts 4 Washington 1
Michigan 4 Wisconsin 1
</TABLE>
The Company currently leases all of its existing stores. The leases
provide for original lease terms that generally range from five to fifteen years
and certain leases provide for renewal options, that range from five to fifteen
years, often at increased rents. Certain leases provide for scheduled rent
increases (which, in the case of fixed increases, the Company accounts for on a
straight line basis over the noncancelable lease term) and/or for contingent
rent (based upon store sales exceeding stipulated amounts).
The Company also leases merchandise storage space in five locations
amounting to approximately 96,000 square feet. This space is used to supplement
the warehouse facilities in the Company's stores in proximity to these
locations. See Item 1 "Business--Store Operations--Warehousing."
The Company's Corporate Office is located in 63,500 square feet of
office space that the Company leases in Union, New Jersey. The Company's Buying
Office is located in 26,400 square feet of office space that the Company leases
in Farmingdale, New York.
ITEM 3 - LEGAL PROCEEDINGS
There are no material pending legal proceedings, other than ordinary
routine litigation incidental to the business, to which the Company is a party.
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ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders through
solicitation of proxies or otherwise during the fourth quarter of the fiscal
year ended March 1, 1997.
PART II
ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS
The following table sets forth the high and low reported sales prices
of the Company's common stock on the NASDAQ National Market System for the
periods indicated. These quotations reflect inter-dealer prices, without retail
markups, markdowns or commissions.
<TABLE>
<CAPTION>
HIGH LOW
<S> <C> <C>
Fiscal 1995:
1st Quarter $ 13 1/4 $ 9
2nd Quarter 16 1/2 10 5/16
3rd Quarter 18 7/16 12 1/2
4th Quarter 22 7/16 15
Fiscal 1996:
1st Quarter $ 31 1/2 $ 19 11/16
2nd Quarter 31 18 1/4
3rd Quarter 29 3/4 20 3/8
4th Quarter 31 3/4 24 1/8
Fiscal 1997:
1st Quarter (through May 9, 1997) 29 1/4 22 7/8
</TABLE>
The common stock is quoted through the NASDAQ National Market System
under the symbol "BBBY". On May 9, 1997, there were approximately 500
shareholders of record of the common stock (without including individual
participants in nominee security position listings). On May 9, 1997, the last
reported sale price of the common stock was $27 1/8.
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For the foreseeable future, the Company intends to retain all
earnings for use in the operation and expansion of its business and,
accordingly, the Company currently has no plans to pay dividends on its common
stock. The payment of any future dividends will be determined by the Board of
Directors in light of conditions then existing, including the Company's
earnings, financial condition and requirements, restrictions in financing
agreements, business conditions and other factors. At present, the Company's
ability to pay dividends is limited under its Credit Agreement. See Item 7
"Management's Discussion and Analysis of Financial Condition and Results of
Operations".
Bed Bath & Beyond Inc. was treated as an S corporation for Federal
and certain state income tax purposes during the period September 1, 1986
through June 9, 1992. As a result, earnings of Bed Bath & Beyond Inc. during
such period were taxed for Federal and certain state income tax purposes
directly to its shareholders rather than to the Company. In the years preceding
the Company's initial public offering (the "IPO"), the Company paid annual
distributions to its shareholders to provide them with funds to pay income taxes
on such earnings and as a return on their investment. In addition, prior to
completion of the IPO, the Company declared the following distributions payable
to the persons and entities that were shareholders of the Company immediately
preceding the IPO (such persons and entities being Warren Eisenberg, Leonard
Feinstein and certain members of their respective families and certain
affiliated trusts): (i) a $28.0 million distribution, representing a portion of
the previously earned and undistributed S corporation earnings of the Company
through March 1, 1992, which was paid upon completion of the IPO from the net
proceeds to the Company from the IPO, and (ii) a distribution in an amount equal
to the taxes payable on the earnings of the Company during the period from March
2, 1992 to completion of the IPO, which distribution amounted to $1,517,000 and
was paid from such earnings to such shareholders in September 1992. Subsequent
to the IPO, the Company has not been treated as an S corporation and,
accordingly, is subject to Federal and state income taxes.
ITEM 6 - SELECTED FINANCIAL DATA
The information required by this item is included in the registrant's
Annual Report to Shareholders for the year ended March 1, 1997 on page 1 and is
incorporated herein by reference.
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The information required by this item is included in the registrant's
Annual Report to Shareholders for the year ended March 1, 1997 on pages 10
through 13 and is incorporated herein by reference.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements required by this item are included in the
registrant's Annual Report to Shareholders for the year ended March 1, 1997 on
pages 14 through 24 and are incorporated herein by reference. These financial
statements are indexed under Item 14(a)(1).
14
<PAGE> 15
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None
PART III
The information required by this Part III (Items 10, 11, 12 and 13) is
incorporated herein by reference from the Registrant's definitive Proxy
Statement for the Annual Meeting of Shareholders to be held June 26, 1997 filed
with the Commission pursuant to Regulation 14A. The Compensation Report of the
Board of Directors and the performance graph included in such Proxy Statement
shall not be deemed incorporated herein by reference.
15
<PAGE> 16
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K
(a) (1) FINANCIAL STATEMENTS
The following financial statements and reports are incorporated by
reference to pages 14 through 24 of the Company's Annual Report to
Shareholders for the fiscal year ended March 1, 1997:
Consolidated Balance Sheets as of March 1, 1997 and February 25, 1996
Consolidated Statements of Earnings for the fiscal years ended March 1,
1997, February 25, 1996 and February 26, 1995
Consolidated Statements of Changes in Shareholders' Equity for the
fiscal years ended March 1, 1997, February 25, 1996 and February 26,
1995
Consolidated Statements of Cash Flows for the fiscal years ended March
1, 1997, February 25, 1996 and February 26, 1995
Notes to Consolidated Financial Statements
Independent Auditors' Report
(a) (2) FINANCIAL STATEMENT SCHEDULES
All schedules are omitted because they are not required, not applicable
or the information is included in the financial statements or notes
thereto.
(a) (3) EXHIBITS
The exhibits to this Report are listed in the Exhibit Index included
elsewhere herein.
(b) No reports on Form 8-K were filed by the Company during the fourth
quarter of the fiscal year covered by this report.
16
<PAGE> 17
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
BED BATH & BEYOND INC.
BY: /s/ WARREN EISENBERG
----------------------------
WARREN EISENBERG
CHAIRMAN, CO-CHIEF EXECUTIVE
OFFICER AND DIRECTOR
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the registrant
and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
- --------- -------- ----
<S> <C> <C>
Chairman, Co-Chief
/s/ WARREN EISENBERG Executive Officer and Director
- ----------------------------------- (principal executive officer) May 28, 1997
WARREN EISENBERG
President, Co-Chief
/s/ LEONARD FEINSTEIN Executive Officer and Director May 28, 1997
- -----------------------------------
LEONARD FEINSTEIN
Chief Financial Officer
and Treasurer (principal financial
/s/ RONALD CURWIN and accounting officer) May 28, 1997
- -----------------------------------
RONALD CURWIN
/s/ KLAUS EPPLER
- ----------------------------------- Director May 28, 1997
KLAUS EPPLER
/s/ ROBERT S. KAPLAN
- ----------------------------------- Director May 28, 1997
ROBERT S. KAPLAN
/s/ ROBERT J. SWARTZ
- ----------------------------------- Director May 28, 1997
ROBERT J. SWARTZ
</TABLE>
17
<PAGE> 18
EXHIBIT INDEX
Unless otherwise indicated, exhibits are incorporated by reference to the
correspondingly numbered exhibits to the Company's Registration Statement on
Form S-1 (Commission File No. 33-47250)
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT PAGE
- ------- ------- ----
<S> <C> <C>
3.1 Restated Certificate of Incorporation --
3.2 Certificate of Amendment to the Company's Certificate of Incorporation (incorporated by reference --
to Exhibit 3 to the Company's Quarterly Report on Form 10-Q/A for the quarter ended August 25, 1996)
3.3 Amended and Restated By-laws --
10.1 Credit Agreement among the company, bed 'n bath Stores, Inc., BBBL, Inc., BBBY --
Management Corporation, Chemical Bank New Jersey, N.A., Chemical Bank and Chemical
Bank New Jersey, N.A. as Agent (incorporated by reference to Exhibit 28 to the Company's
Form 8-K dated November 14, 1994)
10.2* Employment Agreement between the Company and Warren Eisenberg, as amended --
(incorporated by reference to Exhibit 10.3 to the Company's Registration Statement on
Form S-1 Commission File No. 33-47250 and Exhibit 99.1 to the Company's Registration
Statement on Form S-3 Commission File No. 33-66860)
10.3* Employment Agreement between the Company and Leonard Feinstein, as amended --
(incorporated by reference to Exhibit 10.4 to the Company's Registration Statement
on Form S-1 Commission File No. 33-47250 and Exhibit 99.2 to the Company's Registration Statement
on Form S-3 Commission File No. 33-66860)
10.4* Company's 1992 Stock Option Plan, as amended (incorporated by reference to Exhibit 28 to
the Company's Form S-8 dated October 14, 1994)
10.5* Agreement Concerning "Split Dollar" Life Insurance Plan, dated May 9, 1994, among --
the Company, Jay D. Waxenberg, as trustee of the Warren Eisenberg Life Insurance Trust,
Warren Eisenberg and Maxine Eisenberg (incorporated by reference to Exhibit 10.12 to
the Company's Form 10-K for the year ended February 27, 1994)
10.6* Agreement Concerning "Split Dollar" Life Insurance Plan, dated May 9, 1994, among --
the Company, Jay D. Waxenberg, as trustee of the Leonard Joseph Feinstein Life Insurance
Trust, Leonard Joseph Feinstein and Susan Feinstein (incorporated by reference to
Exhibit 10.13 to the Company's Form 10-K for the year ended February 27, 1994)
10.7* Agreement Concerning "Split Dollar" Life Insurance Plan, dated June 16, 1995, among the --
Company, Jay D. Waxenberg, as trustee of the Warren Eisenberg Life Insurance Trust,
Warren Eisenberg and Maxine Eisenberg
10.8* Agreement Concerning "Split Dollar" Life Insurance Plan, dated June 16, 1995, among the
Company, Jay D. Waxenberg, as trustee of the Leonard Joseph Feinstein Life Insurance Trust,
Leonard Joseph Feinstein and Susan Feinstein
</TABLE>
18
<PAGE> 19
<TABLE>
EXHIBIT
NO. EXHIBIT Page
- ------ ------- ----
<S> <C> <C>
10.9 First Amendment to the Credit Agreement among the Company, bed 'n bath Stores, Inc., --
BBBL, Inc., BBBY Management Corporation, Chemical Bank New Jersey, N.A.,
Chemical Bank and Chemical Bank New Jersey, N.A. as Agent, dated October 1, 1995
10.10 Company's 1996 Stock Option Plan (incorporated by reference to the Company's --
Form S-8 dated December 16, 1996, Commission File No. 333-18011)
10.11** Second Amendment to the Credit Agreement among the Company, bed 'n bath Stores, Inc.,
BBBL, Inc., BBBY Management Corporation, Chemical Bank New Jersey, N.A.,
Chemical Bank and Chemical Bank New Jersey, N.A. as Agent, dated February 24, 1997
11** Computation of per share earnings
13** Company's 1996 Annual Report, certain portions of which have been incorporated by reference herein
21** Subsidiaries of the Company
Commission File No. 33-1
23** Independent Auditors' Consent
27 Financial Data Schedule (Filed electronically with SEC only.)
</TABLE>
* This is a management contract or compensatory plan or arrangement.
** Filed herewith.
19
<PAGE> 1
Exhibit 10.11
SECOND AMENDMENT (the "Second Amendment"), dated as of February 24,
1997, of a certain Credit Agreement dated as of October 26, 1994 (the
"Agreement"), as amended by a First Amendment dated October 1, 1995, among BED
BATH & BEYOND, INC. (the "Company"), BED-N-BATH STORES, INC. ("BNBS"), BBBL,
INC. ("BBBL") AND BBBY MANAGEMENT CORPORATION ("BBBY"; BNBS, BBBL AND BBBY being
together the "Guarantors" and individually each a "Guarantor", and the
Guarantors together with the Company being the "Credit Parties") and CHEMICAL
BANK NEW JERSEY, NATIONAL ASSOCIATION ("Chemical NJ") and CHEMICAL BANK
("Chemical NY"; Chemical NJ and Chemical NY are together referred to as the
"Banks" and individually as a "Bank") and Chemical NJ, as agent for the Banks
(in such capacity, the "Agent").
WITNESSETH:
WHEREAS, the Credit Parties, the Banks and the Agent are parties to the
Agreement; and
WHEREAS, Chemical NJ has assigned all of its right, title and interest
in, to and under the Agreement, and all of its obligations and liabilities
thereunder, as a Bank to Chemical NY and Chemical NY has accepted such
assignment and has assumed all of the obligations and liabilities of Chemical NJ
as a Bank thereunder; and
WHEREAS, the Agent has assigned all of its responsibilities as Agent
under the Agreement to Chemical NY and Chemical NY has accepted such assignment;
and
WHEREAS, Chemical NY has changed its name to "The Chase Manhattan Bank"
("Chase"); and
WHEREAS, the Credit Parties have requested certain modifications to the
Agreement, and Chase is agreeable to such request;
NOW, THEREFORE, in consideration of the premises and mutual agreements
herein contained, the parties hereto hereby agree as follows:
1. Definitions. Except as otherwise stated, capitalized terms defined
in the Agreement and used herein without definition shall have the respective
meanings assigned to them in the Agreement.
2. Amendments of the Agreement.
(a) All references in the Agreement to Chemical NJ, Chemical
NY, the Banks, any Bank and the Agent shall be amended to refer to
"Chase".
20
<PAGE> 2
(b) Subsection 9.16 of the Agreement is hereby amended by
deleting "Sunday" therefrom and by inserting "Saturday" in its place
and stead.
(c) Subsection 9.10 of the Agreement is hereby amended by
deleting "February 23, 1997" therefrom and by inserting "March 1, 1997"
in its place and stead.
(d) Subsection 1.1 of the Agreement is hereby amended by
deleting the definitions of "L/C Commitment", "Chemical NY Rate" and
"Chemical NY Rate Loans" and substituting the following:
" 'Chase' shall mean The Chase Manhattan Bank, a New York
banking corporation, which was formerly known as Chemical Bank.
" 'Chase Rate': the rate of interest publicly announced by
Chase from time to time in New York, New York as its prime rate."
" 'Chase Rate Loans': Loans, the rate of interest
applicable to which, is based upon the Chase rate."
" 'L/C Commitment': $15,000,000"
(e) Section 9.4 (c) is hereby amended in its entirety so that
such Section, as so amended, shall read as follows: "(c) Indebtedness
of the Credit Parties and any of their respective Subsidiaries in an
aggregate principal amount not exceeding $2,000,000 at any time
outstanding;"
(f) Section 14.2 of the Agreement is hereby amended by
deleting the notice provision for the Banks and the Agent and
substituting the following:
"Chase: The Chase Manhattan Bank
4 Campus Drive
Parsippany, New Jersey 07054
Attention: Valerie Schanzer, V.P.
Telecopy: (201) 734-1123
3. Representations and Warranties. To induce Chase to enter into this
Second Amendment, each of the Credit Parties hereby represents and warrants
that:
(a) Such Credit Party has the power, authority and legal right
to make and deliver this Second Amendment and to perform its
obligations under the Agreement, as amended by this Second Amendment,
without any notice, consent, approval or authorization not already
obtained, and such Credit Party has taken all necessary action to
authorize the same.
21
<PAGE> 3
(b) The making and delivery of this Second Amendment and the
performance of the Agreement, as amended by this Second Amendment, do
not violate any provision of law or any regulation or of the charter or
by-laws of such Credit Party or result in the breach of or constitute a
default under or require any consent under any indenture or other
agreement or instrument to which such Credit Party is a party or by
which such Credit Party or any of its property may be bound or
affected. The Agreement, as amended by this Second Amendment,
constitute a legal, valid and binding obligation of such Credit Party,
enforceable against it in accordance with its terms, except as the
enforceability thereof may be limited by any applicable bankruptcy,
reorganization, insolvency, moratorium or other laws affecting
creditors' rights generally.
(c) The representations and warranties contained in Section 6
of the Agreement are true and correct on and as of the date of this
Second Amendment and after giving effect thereto.
(d) No Default or Event of Default has occurred and is
continuing under the Agreement as of the date of this Second Amendment
and after giving effect thereto.
4. Effective Date. This Second Amendment shall become effective as of
February 24, 1997 when Chase shall have received counterparts of this Second
Amendment, duly executed by the respective parties thereto.
5. Counterparts. This Second Amendment may be signed in any number of
counterparts, each of which shall be an original and all of which taken together
shall constitute a single instrument with the same effect as if the signatures
thereto and hereto were upon the same instrument.
6. Full Force and Effect. Except as expressly modified by this Second
Amendment, all of the terms and provisions of the Agreement shall continue in
full force and effect, and all parties hereto shall be entitled to the benefits
thereof.
7. Governing Law. This Second Amendment shall be governed by and
construed in accordance with the internal laws (and not the law of conflicts) of
the State of New Jersey.
22
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have caused this Second
Amendment to be duly executed and delivered by their proper and duly authorized
officers as of the date set forth above.
BED BATH & BEYOND, INC.
By: /s/ Warren Eisenberg
--------------------------------------
Title: Co-Chief Executive Officer
BED-N-BATH STORES, INC.
By: /s/ Warren Eisenberg
--------------------------------------
Title: President
BBBL, INC.
By: /s/ Arthur Stark
--------------------------------------
Title: President
BBBY MANAGEMENT CORPORATION
By: /s/ Warren Eisenberg
--------------------------------------
Title: President
THE CHASE MANHATTAN BANK
By: /s/ Valerie Schanzer
--------------------------------------
Title: Vice-President
<PAGE> 1
Exhibit 11
BED BATH & BEYOND INC. AND SUBSIDIARIES
COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-----------------
MARCH 1, 1997 FEBRUARY 25, 1996
------------- -----------------
<S> <C> <C>
Weighted average number of shares outstanding 68,408,706 67,879,779
Dilutive effect of common equivalent shares
(stock options) outstanding 2,146,538 1,532,391
----------- -----------
Weighted average number of shares and dilutive common
equivalent shares (stock options) outstanding 70,555,244 69,412,170
=========== ===========
Net earnings $55,015,000 $39,459,000
=========== ===========
Net earnings per share $ .78 $ .57
=========== ===========
</TABLE>
<PAGE> 1
Exhibit 13
1996
----------------
25th Anniversary
BED BATH & BEYOND
-----------------
ANNUAL REPORT
--------------------------------
Beyond any store of its kind.(R)
<PAGE> 2
Founded in 1971, Bed Bath & Beyond Inc. is a nationwide chain of
"superstores" selling predominantly better quality domestics merchandise and
home furnishings. The Company's 114 stores principally range from 30,000 to
50,000 square feet, with some stores exceeding 80,000 square feet. They combine
superior service and a huge selection of items at everyday low prices within a
constantly evolving shopping environment that has proven to be both fun and
exciting for customers. Bed Bath & Beyond Inc.'s shares are traded on the
NASDAQ National Market System under the symbol "BBBY".
Store Locations
1 Alabama 7 New Jersey
2 Arizona 1 New Mexico
14 California 11 New York
2 Colorado 2 North Carolina
3 Connecticut 4 Ohio
11 Florida 1 Oklahoma
5 Georgia 2 Pennsylvania
8 Illinois 2 Tennessee
2 Indiana 13 Texas
1 Kansas 7 Virginia
4 Maryland 1 Washington
4 Massachusetts 1 Wisconsin
4 Michigan
1 Missouri 114 Total
Contents
Selected Financial Data 1
Letter to Shareholders 2 - 9
Management's Discussion and
Analysis of Financial Condition
and Results of Operations 10-13
Consolidated Financial Statements 14-24
Corporate Data INSIDE BACK COVER
<PAGE> 3
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
FISCAL YEAR ENDED(1)
-----------------------------------------------------------------------------------
(in thousands, except per share MARCH 1, FEBRUARY 25, FEBRUARY 26, FEBRUARY 27, FEBRUARY 28,
and selected operating data) 1997 1996 1995 1994 1993
================================================================================================================================
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales $ 823,178 $ 601,252 $ 440,261 $ 305,767 $ 216,712
Gross profit 341,168 250,036 183,819 127,972 90,528
Operating profit 90,607 67,585 51,685 36,906 26,660
Net earnings(2) 55,015 39,459 30,013 21,887 15,960
Net earnings per share(2)(3) $ .78 $ .57 $ .43 $ .32 $ .24
SELECTED OPERATING DATA:
Number of stores open
(at period end) 108 80 61 45 38
Total square feet of store space
(at period end) 4,347,000 3,214,000 2,339,000 1,512,000 1,128,000
Net sales per average square foot of
total store space $ 218 $ 217 $ 229 $ 232 $ 212
Percentage increase in comparable store
net sales 6.1% 3.8% 12.0% 10.6% 7.2%
BALANCE SHEET DATA (AT PERIOD END):
Working capital $ 121,679 $ 87,727 $ 71,902 $ 54,432 $ 34,501
Total assets 329,925 235,810 176,678 121,468 76,654
Long-term debt -- 5,000 16,800 13,300 --
Shareholders' equity $ 214,361 $ 151,446 $ 108,939 $ 77,305 $ 54,643
</TABLE>
(1) Each fiscal year is 52 weeks, except for March 1, 1997 which represents 52
weeks and 6 days.
(2) Bed Bath & Beyond Inc. was an S corporation for Federal and certain state
income tax purposes until June 9, 1992. Provision for income taxes and net
earnings in fiscal 1992 reflect a provision for pro forma income taxes as
if the Company and its subsidiaries had been liable for Federal, state and
local income taxes as taxable corporate entities.
(3) Net earnings per share amounts have been adjusted for two-for-one stock
splits of the Company's common stock (each of which was effected in the
form of a 100% stock dividend), which were distributed on June 21, 1993
and April 30, 1996.
<TABLE>
<CAPTION>
NET SALES NET EARNINGS PER SHARE NET EARNINGS
($ in millions) (in dollars) ($ in millions)
<S> <C> <C> <C>
92 216.7 0.24 16
93 305.8 0.32 21.9
94 440.3 0.43 30
95 601.3 0.57 39.5
96 823.2 0.78 55
</TABLE>
1
25th Anniversary
<PAGE> 4
TO OUR FELLOW SHAREHOLDERS:
Bed Bath & Beyond's Silver Anniversary Year was memorable in many ways.
In addition to recording the strongest financial results in our 25 year history,
our Company also achieved several significant milestones.
Among these were:
- - the debut of our 100th unit (located in Irvine, California), one of
twenty-eight new superstores opening during fiscal 1996;
- - the second two-for-one stock split since "going public" in 1992;
- - the addition of our stock to both the Standard & Poor's Mid-Cap 400 and
Nasdaq-100 indices;
- - the appointment of Steven H. Temares to the newly-established position of
Executive Vice President-Chief Operating Officer; and
- - the elimination of the balance of our long-term debt.
<TABLE>
<CAPTION>
TOTAL ASSETS
($ in millions)
<S> <C>
92 76.7
93 121.5
94 176.7
95 235.8
96 329.9
</TABLE>
[CAPTION]
OUR COMPANY
HAS NEVER
ENJOYED A
STRONGER FINANCIAL
POSITION.
OUR FIRST QUARTER CENTURY - A RETROSPECTIVE:
Bed Bath & Beyond began operations in 1971 with the opening of two small "bed
n bath" stores, one in New York and one in New Jersey. In the intervening two
and one-half decades, our Company has evolved into the preeminent nationwide
chain of domestics merchandise and home furnishings "superstores". Significant
milestones occurred in 1985, when our superstore format was introduced, and in
1987, when the "Bed Bath & Beyond" name, which recognized our expanded
merchandising offerings, was adopted.
Since our modest beginning on the East Coast, we have now grown to a chain of
114 stores in 26 states. In every market we have entered over the years,
consumer acceptance of our stores has been outstanding.
[PHOTO OF LEONARD FEINSTEIN AND WARREN EISENBERG, CO-CHIEF EXECUTIVE OFFICERS]
<PAGE> 5
From inception, we've believed very strongly in running a highly
decentralized company. This is one of our major strengths, one which
differentiates us from most other retailers. It has taken 25 years of developing
the people who have made possible our continued growth in a decentralized
manner, a distinct advantage that we enjoy. While a decentralized company can
become centralized, it is nearly impossible for a centralized company to become
decentralized. We operate in an environment in which all of our store managers,
area managers, district managers and regional directors, regardless of any prior
experience in retailing, begin their careers as associates or department
managers, and are trained to be Bed Bath & Beyond entrepreneurs and merchants.
Upon promotion to store manager, they are empowered to make merchandising and
operational decisions not customary in a centralized operation. The importance
of this distinction, and the philosophy upon which it is based, cannot be
overemphasized. Some might say that this is a difficult and expensive way to
operate, and we agree, but we also say it's well worth it! It is our operating
philosophy, or culture, if you will, that sets us apart from others in our
industry. It's what gives us the significant advantage we enjoy over our
competition, who simply cannot copy what we do and achieve the results we do.
Our stores, our "bottom line" and our balance sheet have proven, time and time
again, that this is so.
[CAPTION]
OUR ABILITY TO IDENTIFY AND CREATE GOOD MARKUP
ITEMS AND "MERCHANDISE
THE MIX"
HAS BEEN A
STRONG KEY TO OUR SUCCESS.
Our Company has accomplished much over the past 25 years, but we are most
proud of the outstanding management team, second to none in our industry, that
has been assembled since 1971. On a day to day basis our Company is run by our
new Executive Vice President-Chief Operating Officer,
3
25th Anniversary
<PAGE> 6
Steven Temares, age 38, and five other key managers who have been with the
Company an average of 15 years, and whose average age is 40. Having worked
themselves, during their successful careers at Bed Bath & Beyond, in practically
every store operations or merchandising position, they continue to spend time
each week in our stores, working with their fellow employees, and greeting and
assisting customers. Exceptionally bright and hardworking, our key managers
operate as an incredibly effective team in directing the activities of the
approximately 7,000 associates who work in our stores and offices.
<TABLE>
<CAPTION>
SHAREHOLDERS' EQUITY
($ in millions)
<S> <C>
92 54.6
93 77.3
94 108.9
95 151.4
96 214.4
</TABLE>
[CAPTION]
OUR UNIQUE CORPORATE CULTURE
IS FOCUSED ON
"THE BOTTOM
LINE" AND ON BUILDING SHAREHOLDER VALUE.
Also, from the very beginning, our Company has operated on the premise
that the customer is the most important person in our business. The closer our
associates are to the customer, the more important that associate, and the
associate's ideas, are to Bed Bath & Beyond. Many creative ideas over the years
have come from store personnel, who conceived of many of these ideas through
their day to day contacts with customers.
Another guiding principle of our Company has been change. Only through
constant innovation and evolution have we been able to remain the industry
leader and continue to widen our lead. New customer service initiatives, new
merchandise items, new departments, new fixturing, combined with the
aforementioned new ideas, are truly our lifeblood. We have created, and will
continue to foster, a unique environment in which each individual is encouraged
to think of how to "do it better", and is rewarded by seeing his or her new idea
rolled out company-wide.
"Merchandising the mix" has been another key to our success. We have
proven over and over again our ability to not only identify and create good
markup items, but to drive the volume on such items. The result is not simply
higher sales volume, but higher gross margins as well. In our decentralized
environment, our personnel know very well that it is not just buying and pricing
the item that controls gross profit, but that by selling a better mix, and
driving the volume on higher margin merchandise, superior results are attained.
From inception in 1971, our stores have consistently featured top
national brands, literally the best in the industry. As an important element in
our merchandising philosophy, they reinforce our quality value pricing image to
the customer. We seek to avoid carrying merchandise where the vendor establishes
the retail selling price. This also distinguishes us from other retailers who,
in order to secure such products, may ask "department store prices" for them.
Thus, while we provide Bed Bath & Beyond shoppers with value-priced,
nationally-branded merchandise, through "merchandising the mix", we achieve
healthy gross margins.
In the twenty-five years we have been in business, we have always
believed that there are no shortcuts. We realize that you must invest the time,
the energy, the effort, and often the emotion, in order to produce outstanding
results. We have also found it
5
25th Anniversary
<PAGE> 7
essential to invest heavily in the infrastructure necessary to support a much
larger chain of retail stores. We continue to allocate significant resources to
the recruitment and training of personnel and to the accelerated development of
logistical support and computerized systems.
Successful retail businesses cannot be built, and mediocre businesses
cannot be transformed, literally overnight. Indeed, even a successful retailer
must constantly modify, innovate and improve every aspect of its business, if it
is to continue to achieve exceptional results. That is why we will strive, in
our next twenty-five years, to adhere to the business principles which have
served our Company so well during the past quarter century.
FINANCIAL REVIEW OF 1996:
Net sales for the fiscal year (fifty-two weeks, six days) ended March 1,
1997 were $823.2 million, compared with fiscal 1995 (fifty-two weeks) net sales
of $601.3 million, an increase of 36.9%. Comparable store sales for fiscal 1996
increased by 6.1% from last year.
Net earnings increased 39.4% to $55.0 million, or $.78 per share, from
$39.5 million, or $.57 per share. Internally-generated cash flow not only
completely funded our expansion program in 1996, but also enabled Bed Bath &
Beyond to achieve a strong, flexible, debt-free balance sheet on March 1, 1997.
With working capital at that date of $121.7 million, compared with $87.7 million
at the prior fiscal year-end, and a $45.0 million bank credit facility,
currently not being used, our Company has never enjoyed a stronger financial
position.
[CAPTION]
WE'VE ALWAYS
LIVED WITH
COMPETITORS,
AND HAVE FARED
QUITE WELL AGAINST
THEM.
STORE EXPANSION
<TABLE>
<CAPTION>
NUMBER OF STORES TOTAL SQUARE FOOTAGE
(IN THOUSANDS)
<S> <C> <C>
92 38 1,128
93 45 1,512
94 61 2,339
95 80 3,214
96 108 4,347
</TABLE>
EXPANSION PROGRAM:
Our new store expansion program accelerated during the fiscal year with
the opening of twenty-eight new superstores and the expansion of two additional
stores, bringing to 108 the number of stores operating at year-end. In fiscal
1996, we entered four new states (Missouri, New Mexico, North Carolina, and
Tennessee), and increased total store space by approximately 35%, from 3.2
million square feet to 4.3 million square feet. During fiscal 1997, we plan to
open approximately 30 additional new superstores, in both new and existing
markets, and to enter several states, including Oregon and Wisconsin, for the
first time.
The approximately $60 billion domestics and home furnishings industry
remains highly fragmented. Most sales of these products are still generated by
the department stores and the national chains. With all of our growth, Bed Bath
& Beyond enjoys less than a 2% market share. We presently operate in 28 of the
40 largest markets in the United States, and in those 28 markets there are
opportunities to open additional stores, and to upgrade existing units. We are
also pursuing growth opportunities in the remaining larger markets, as well as
in selected smaller markets. These factors, combined with strong demographics,
and the desire of many
6
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<PAGE> 8
consumers to upgrade their home environments, support the assumptions underlying
our long-term strategic goals.
COMPETITIVE ENVIRONMENT:
Bed Bath & Beyond has always faced numerous competitors, including
department stores, national chains and other superstore operators, and has fared
quite well against them. Since we became a public company in 1992, our
attractive financial results have tempted others to try to emulate our success.
We are frequently shopped by our competitors, including their top executives.
While they may copy our merchandise items, customer services, racetrack layout,
displays and fixtures, or even promotional ideas, there is simply no way they
can replicate our organization, develop our merchandising and operational
strengths, or generally clone our culture. While we know that past performance
does not assure future success, we are intent on exploiting the opportunity to
widen the gap in operating performance that clearly exists between Bed Bath &
Beyond and its competitors.
[CAPTION]
BED BATH & BEYOND
OFFERS AN
UNSURPASSED
BREADTH AND
DEPTH OF
MERCHANDISE AND
OUTSTANDING
CUSTOMER SERVICE.
AS WE LOOK TO THE FUTURE:
Bed Bath & Beyond, now a quarter-century old, is the leader in a young,
dynamic, fast-growing segment of the retail industry.
To summarize:
- - Our results, based upon well-tested operating and merchandising
philosophies, have been consistently strong;
- - Our Company has developed a proven, successful concept, which is rapidly
being rolled out across the country;
- - With only 114 stores in 26 states, expansion opportunities are plentiful;
- - We are solidifying our infrastructure to support planned growth;
- - Our experienced, entrepreneurial managers and associates truly enjoy the
business they've developed and nurtured, and they're doing an outstanding
job;
- - A strong, unleveraged financial position, provides exceptional resources
and flexibility.
And yet, with all of this going for us, and in spite of our performance
to date, we are never fully satisfied. We have not come this far, only to relax
our collective efforts to constantly reinvent our Company, to make it better
tomorrow than it is today. As we move towards the 21st Century, we reaffirm our
deep-seated commitment to the Bed Bath & Beyond customer from coast-to-coast,
upon whose loyal patronage our continued success ultimately depends.
Sincerely,
/s/ Warren Eisenberg
Warren Eisenberg,
Chairman and Co-Chief
Executive Officer
/s/ Leonard Feinstein
Leonard Feinstein,
President and Co-Chief
Executive Officer
May 9, 1997
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<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated (i) selected income
statement data of the Company expressed as a percentage of net sales and (ii)
the percentage change from the prior year in selected income statement data:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-----------------------------------------------------------------------------------------
PERCENTAGE OF NET SALES PERCENTAGE CHANGE FROM PRIOR YEAR
-----------------------------------------------------------------------------------------
MARCH 1, FEBRUARY 25, FEBRUARY 26, MARCH 1, FEBRUARY 25,
1997 1996 1995 1997 1996
=================================================================================================================================
<S> <C> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 36.9% 36.6%
Cost of sales, including buying,
occupancy and indirect costs 58.6 58.4 58.2 37.2 37.0
Gross profit 41.4 41.6 41.8 36.4 36.0
Selling, general and
administrative expenses 30.4 30.3 30.0 37.3 38.1
Operating profit 11.0 11.2 11.7 34.1 30.8
Earnings before provision
for income taxes 11.1 11.1 11.6 36.5 31.5
Net earnings 6.7 6.6 6.8 39.4 31.5
</TABLE>
FISCAL 1996 COMPARED WITH FISCAL 1995
In fiscal 1996, the Company expanded store space by 35.3%, from 3,214,000
square feet at fiscal year-end 1995 to 4,347,000 square feet at fiscal year-end
1996. The 1,133,000 square feet increase was the result of opening twenty-eight
new superstores and expanding two existing stores.
Net sales in fiscal 1996 increased $221.9 million to $823.2 million,
representing an increase of 36.9% over the $601.3 million net sales of fiscal
1995. Approximately 84% of the increase is attributable to new store net sales
and the balance to an increase in comparable store net sales. Net sales per
average square foot of store space increased in fiscal 1996 to $218 from $217 in
fiscal 1995.
Approximately 55% and 45% of net sales for fiscal 1996 were attributable to
sales of domestics merchandise and home furnishings, respectively. The Company
estimates that bed linens accounted for approximately 21% of net sales during
fiscal 1996 and fiscal 1995. No other individual product category accounted for
10% or more of net sales during either fiscal year.
Gross profit for fiscal 1996 was $341.2 million or 41.4% of net sales
compared with $250.0 million or 41.6% of net sales, a year ago. The decrease in
gross profit as a percentage of net sales was attributable to a number of
factors, including a different mix of sales during fiscal 1996 compared to the
mix of sales during the prior year, and an increase in coupons redeemed
associated with the circular marketing program.
The percentage increase in comparable store net sales was 6.1% in fiscal 1996
compared with 3.8% in fiscal 1995. The increase in comparable net sales relative
to the prior year primarily reflects a number of factors, including but not
limited to, the continued consumer acceptance of the Company's merchandise
offerings and customer service and the generally favorable retailing
environment.
Selling, general and administrative expenses ("SG&A"), were $250.6 million or
30.4% of net sales in fiscal 1996 compared to $182.5 million or 30.3% of net
sales in fiscal 1995. The increase in SG&A as a percentage of net sales
primarily reflects an increase in occupancy costs, which was partially offset by
a decrease in payroll and payroll related items. Expenses associated with new,
relocated or expanded stores are charged to earnings as incurred.
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<PAGE> 10
The costs associated with the Company's computer systems, including personnel
costs, hardware leasing costs and software costs, were approximately $9.8
million in fiscal 1996, $6.9 million in fiscal 1995 and $4.8 million in fiscal
1994, and the Company estimates will be approximately $12.5 million in fiscal
1997.
Operating profit was $90.6 million in fiscal 1996, an increase of $23.0
million or 34.1% from fiscal 1995, reflecting primarily the increase in net
sales which was partially offset by increases in cost of sales and SG&A.
The change in the effective tax rate reflects a decrease in the amount
provided for state and local taxes due primarily to the composition of states in
which the Company currently conducts business.
FISCAL 1995 COMPARED WITH FISCAL 1994
In fiscal 1995, the Company expanded store space by 37.4%, from 2,339,000
square feet at fiscal year-end 1994 to 3,214,000 square feet at fiscal year-end
1995. The 875,000 square feet increase was the result of opening nineteen new
superstores and expanding two existing stores.
Net sales in fiscal 1995 increased $161.0 million to $601.3 million,
representing an increase of 36.6% over the $440.3 million net sales volume of
fiscal 1994. Approximately 91% of the increase is attributable to new store net
sales and the balance to an increase in comparable store net sales.
The Company estimates that bed linens accounted for approximately 21% and 20%
of net sales during fiscal 1995 and fiscal 1994, respectively. No other
individual product category accounted for 10% or more of net sales during either
fiscal year.
Gross profit for fiscal 1995 was $250.0 million or 41.6% of net sales
compared with $183.8 million or 41.8% of net sales, a year ago. The decrease in
gross profit as a percentage of net sales was attributable to a number of
factors, including a different mix of sales during fiscal 1995 compared to the
mix of sales during the prior year, and an increase in coupons redeemed
associated with the circular marketing program.
The percentage increase in comparable store net sales was 3.8% in fiscal 1995
compared with 12.0% in fiscal 1994. The slower rate of growth in comparable
store net sales relative to the prior year primarily reflects the general
slowdown in the retail sector.
Net sales per average square foot of store space declined to $217 from $229
in fiscal 1994, due principally to the timing of the significant new store space
added in fiscal 1995.
SG&A was $182.5 million or 30.3% of net sales in fiscal 1995 compared to
$132.1 million or 30.0% of net sales in fiscal 1994. The increase in SG&A as a
percentage of net sales primarily reflects an increase in occupancy costs, which
was partially offset by a decrease in payroll and payroll related items.
Expenses associated with new, relocated or expanded stores are charged to
earnings as incurred.
Operating profit was $67.6 million in fiscal 1995, an increase of $15.9
million or 30.8% from fiscal 1994, reflecting primarily the increase in net
sales which was partially offset by increases in cost of sales and SG&A.
EXPANSION PROGRAM
The Company is engaged in an ongoing expansion program involving the opening
of new stores in both new and existing markets and the expansion or replacement
of existing stores with larger stores. In the five-year period from the
beginning of fiscal 1992 to the end of fiscal 1996, the chain has grown from 34
stores to 108 stores. Total square footage grew from 917,000 square feet at the
beginning of fiscal 1992 to 4,347,000 square feet at the end of fiscal 1996.
A major portion of the increase in the Company's net sales during each of the
preceding five years was attributable to new store net sales as distinguished
from increases in comparable store net sales, with new store net sales
accounting for approximately 84%, 91%, 78%, 75% and 70% of the increase in net
sales in fiscal 1996, 1995, 1994, 1993 and 1992, respectively.
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<PAGE> 11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED
The Company intends to continue its expansion program and currently
anticipates that in fiscal 1997 it will open approximately 30 new stores (see
details under "Liquidity and Capital Resources" below). The Company believes
that a predominant portion of any increase in its net sales in fiscal 1997 will
continue to be attributable to new store net sales. Accordingly, the continued
growth of the Company is dependent, in large part, upon the Company's ability to
execute its expansion program successfully, of which there can be no assurance.
LIQUIDITY AND CAPITAL RESOURCES
The Company has been able to finance both its normal operations and its
expansion program principally through internally generated funds during the
preceding five years. For the foreseeable future, the Company intends to retain
all earnings for use in the operation and expansion of its business.
The Company's merchandise inventory has grown from $108.4 million at the end
of fiscal 1994 to $148.4 million at the end of fiscal 1995, and to $187.2
million at the end of fiscal 1996. The increase in inventory between the end of
fiscal 1995 and fiscal 1996 was attributable to the addition of new store space
during the period, which was partially offset by a decrease in inventory levels
at existing stores. This decrease in inventory levels at existing stores as of
the end of fiscal 1996 primarily reflected the timing of fiscal year-end
inventory receipts. The increase in merchandise inventory between the end of
fiscal 1994 and fiscal 1995 was primarily attributable to the addition of new
store space.
The Company's working capital increased from $71.9 million at the end of
fiscal 1994 to $87.7 million at the end of fiscal 1995, and to $121.7 million at
the end of fiscal 1996. The increase between the end of fiscal 1995 and the end
of fiscal 1996 was primarily reflected in an increase in merchandise inventories
and cash and cash equivalents, which was partially offset by increases in
accounts payable and accrued expenses and other current liabilities. The
increase between the end of fiscal 1994 and the end of fiscal 1995 was primarily
reflected in an increase in merchandise inventories, which was partially offset
by increases in accounts payable and accrued expenses and other current
liabilities.
The Company's expansion program requires the Company to make capital
expenditures for furniture and fixtures and leasehold improvements on an ongoing
basis. The Company's total capital expenditures were $35.1 million, $24.5
million and $24.5 million during fiscal 1996, 1995 and 1994, respectively.
Under a credit agreement (the "Credit Agreement") concluded in November 1994,
and subsequently amended in October 1995 and in February 1997, the Company may
borrow up to $45.0 million under a revolving credit commitment for loans and
letters of credit. The Credit Agreement matures in October 1998, at which time
any revolving credit loans outstanding may be converted to a term loan payable
in twelve quarterly installments maturing in October 2001.
The Credit Agreement contains certain covenants which, among other things,
place limitations on payment of dividends, capital expenditures and certain
expenses. Additionally, there are restrictions on additional borrowings and a
requirement that the Company maintain certain financial ratios. The Company does
not believe that any of these covenants have materially affected its business or
will affect its expansion program as currently planned.
The Company borrowed under the Credit Agreement primarily in order to meet
seasonal cash requirements as well as capital expenditures and inventory
requirements for new store space opened during the year. During fiscal 1996, the
outstanding amount of indebtedness did not exceed $6.0 million and there was no
amount of outstanding indebtedness at the end of the fiscal year. The
outstanding amounts of indebtedness under the Credit Agreement were $5.0 million
and $16.8 million at the end of fiscal 1995 and 1994, respectively. The
weighted-average interest rates on such indebtedness were 6.45%, 7.27% and 6.96%
at the end of fiscal 1996, 1995 and 1994, respectively.
The Company believes that during fiscal 1997, internally generated funds,
supplemented, if necessary, by borrowings under the Credit Agreement, will be
sufficient to fund both its normal operations and its expansion program.
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<PAGE> 12
As of March 28, 1997, the Company has leased sites for twenty-three new
superstores planned for opening in fiscal 1997, including four new stores
already opened in Northville, Michigan; Charlotte, North Carolina; San Antonio,
Texas; and Madison, Wisconsin (the Company's first store in that state).
Other new stores expected to open in fiscal 1997 will be located in
Birmingham, Alabama; Oceanside and Thousand Oaks, California; Golden, Colorado;
Augusta, Georgia; Naperville, Illinois; Ballwin, Kansas City and St. Peters,
Missouri; East Hanover and Woodbridge, New Jersey; Buffalo and New York City
(Queens), New York; Tigard, Oregon (the Company's first store in that state);
Pittsburgh (2), Pennsylvania; Grapevine and San Antonio, Texas; and Richmond,
Virginia.
Approximate aggregate costs for the twenty-three leased stores are estimated
at $45.5 million for merchandise inventories, $14.8 million for furniture and
fixtures and leasehold improvements, and $6.0 million for preopening expenses
(which will be expensed as incurred). In addition to the foregoing twenty-three
locations already leased, the Company expects to open approximately seven
additional locations. The costs that the Company is expected to incur in
connection with the anticipated opening of other superstores for which sites
have not yet been leased, cannot presently be determined.
RECENT ACCOUNTING PRONOUNCEMENT
In February 1997, Statement of Financial Accounting Standards No. 128,
"Earnings per Share" (SFAS No. 128), was issued. SFAS No. 128 simplifies the
standards for computing earnings per share and makes the United States standards
for computing earnings per share more comparable to international standards.
SFAS No. 128 requires presentation of "basic" earnings per share (which excludes
dilution) and "diluted" earnings per share. The Company does not believe the
adoption of SFAS No. 128 in fiscal 1997 will have a material impact on the
Company's reported earnings per share. SFAS No. 128 is effective for financial
statements issued for periods ending after December 15, 1997 and requires
restatement of all prior period earnings per share presented.
FORWARD LOOKING STATEMENTS
This Annual Report and, in particular, Management's Discussion and Analysis
of Financial Condition and Results of Operations contain forward looking
statements within the meaning of Section 21E of the Securities Exchange Act of
1934, as amended. The Company's actual results of operations and future
financial condition may differ materially from those expressed in any such
forward looking statements as a result of many factors that may be beyond the
Company's control. Such factors include, without limitation: general economic
conditions, changes in the retail environment and consumer spending habits,
demographics and other macroeconomic factors that may impact the level of
spending for the types of merchandise sold by the Company; unusual weather
patterns; competition from existing and potential competitors; pricing
pressures; the availability of trained qualified management personnel to support
the Company's expansion; and the cost of labor, merchandise and other costs and
expenses.
INFLATION AND SEASONALITY
The Company does not believe that its operating results have been materially
affected by inflation during the three preceding years. There can be no
assurance, however, that the Company's operating results will not be affected by
inflation in the future.
The Company's business exhibits less seasonality than many other retail
businesses, although sales levels are generally higher in August, November and
December, and generally lower in February and March.
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<PAGE> 13
CONSOLIDATED BALANCE SHEETS
BED BATH & BEYOND INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
MARCH 1, FEBRUARY 25,
(in thousands, except share and per share data) 1997 1996
========================================================================================
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 38,765 $ 10,267
Merchandise inventories 187,185 148,383
Prepaid expenses and other current assets 1,605 1,630
---------------------
Total current assets 227,555 160,280
---------------------
Property and equipment, net (note 2) 88,332 66,635
Other assets (notes 5 and 6) 14,038 8,895
---------------------
$329,925 $235,810
=====================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 47,821 $ 39,025
Accrued expenses and other current liabilities (note 3) 47,923 26,947
Income taxes payable 10,132 6,581
---------------------
Total current liabilities 105,876 72,553
---------------------
Long-term debt (note 4) -- 5,000
Deferred rent 9,688 6,811
---------------------
115,564 84,364
---------------------
Commitments and contingencies (notes 4, 7 and 9)
Shareholders' equity:
Preferred stock - $0.01 par value; authorized - 1,000,000
shares; no shares issued or outstanding -- --
Common stock - $0.01 par value; authorized -
March 1, 1997, 150,000,000 shares and
February 25, 1996, 100,000,000 shares;
issued and outstanding - March 1, 1997,
68,603,022 shares and February 25, 1996,
68,067,972 shares 686 681
Additional paid-in capital 54,149 46,254
Retained earnings 159,526 104,511
---------------------
Total shareholders' equity 214,361 151,446
---------------------
$329,925 $235,810
=====================
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
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<PAGE> 14
CONSOLIDATED STATEMENTS OF EARNINGS
BED BATH & BEYOND INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-----------------------------------------------
MARCH 1, FEBRUARY 25, FEBRUARY 26,
(in thousands, except share and per share data) 1997 1996 1995
===================================================================================================
<S> <C> <C> <C>
Net sales $ 823,178 $ 601,252 $ 440,261
Cost of sales, including buying, occupancy and
indirect costs 482,010 351,216 256,442
-----------------------------------------------
Gross profit 341,168 250,036 183,819
Selling, general and administrative expenses 250,561 182,451 132,134
-----------------------------------------------
Operating profit 90,607 67,585 51,685
Interest income (expense), net 704 (705) (816)
-----------------------------------------------
Earnings before provision for income taxes 91,311 66,880 50,869
Provision for income taxes (note 5 36,296 27,421 20,856
-----------------------------------------------
Net earnings $ 55,015 $ 39,459 $ 30,013
===============================================
Net earnings per share $ .78 $ .57 $ .43
===============================================
Weighted-average shares outstanding 70,555,244 69,412,170 69,138,766
===============================================
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
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CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
BED BATH & BEYOND INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
------------------- PAID-IN RETAINED
(in thousands) SHARES AMOUNT CAPITAL EARNINGS TOTAL
==============================================================================================================
<S> <C> <C> <C> <C> <C>
Balance at February 27, 1994 67,592 $ 338 $ 41,928 $ 35,039 $ 77,305
Net earnings 30,013 30,013
Shares sold under employee stock option
plan (note 11) 177 1 1,620 1,621
-----------------------------------------------------------
Balance at February 26, 1995 67,769 339 43,548 65,052 108,939
Net earnings 39,459 39,459
Shares sold under employee stock option
plan (note 11) 299 2 3,046 3,048
Reclassification of additional paid-in
capital to common stock in connection
with the 2 for 1 stock split (note 1(g)) 340 (340) --
-----------------------------------------------------------
Balance at February 25, 1996 68,068 681 46,254 104,511 151,446
Net earnings 55,015 55,015
Shares sold under employee stock option
plan (note 11) 535 5 7,895 7,900
-----------------------------------------------------------
BALANCE AT MARCH 1, 1997 68,603 $ 686 $ 54,149 $159,526 $214,361
===========================================================
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
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CONSOLIDATED STATEMENTS OF CASH FLOWS
BED BATH & BEYOND INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
--------------------------------------
MARCH 1, FEBRUARY 25, FEBRUARY 26,
(in thousands) 1997 1996 1995
=========================================================================================================
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net earnings $ 55,015 $ 39,459 $ 30,013
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 13,439 9,902 7,193
Loss from disposal of property and equipment -- 192 29
(Increase) decrease in assets:
Merchandise inventories (38,802) (39,995) (33,406)
Prepaid expenses and other current assets 25 1,530 1,163
Other assets (5,143) (2,429) (1,875)
Increase in liabilities:
Accounts payable 8,796 11,522 10,498
Accrued expenses and other current liabilities 20,976 12,123 5,673
Income taxes payable 3,551 2,799 2,393
Deferred rent 2,877 1,981 1,512
------------------------------------
Net cash provided by operating activities 60,734 37,084 23,193
------------------------------------
Cash Flows from Investing Activities:
Capital expenditures (35,136) (24,528) (24,523)
------------------------------------
Net cash used in investing activities (35,136) (24,528) (24,523)
------------------------------------
Cash Flows from Financing Activities:
Proceeds from long-term debt 17,000 55,060 64,500
Repayment of long-term debt (22,000) (66,860) (61,000)
Proceeds from exercise of stock options 7,900 3,048 1,621
------------------------------------
Net cash provided by (used in) financing activities 2,900 (8,752) 5,121
------------------------------------
Net increase in cash and cash equivalents 28,498 3,804 3,791
Cash and cash equivalents:
Beginning of period 10,267 6,463 2,672
------------------------------------
End of period $ 38,765 $ 10,267 $ 6,463
====================================
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RELATED MATTERS
a. Nature of Operations
Bed Bath & Beyond Inc. (the "Company") is a nationwide chain of
"superstores" selling predominantly better quality domestics merchandise and
home furnishings. As the Company operates in the retail industry, its results of
operations are affected by general economic conditions and consumer spending
habits.
b. Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
the Company and its subsidiaries, all of which are wholly owned.
All significant intercompany balances and transactions have been
eliminated in consolidation.
c. Fiscal Year
Effective February 26, 1996, the Company changed its fiscal year-end from
the 52 or 53 week period ending on the Sunday nearest February 28 to the 52 or
53 week period ending on the Saturday nearest February 28. Accordingly, the 1996
fiscal year consisted of 52 weeks and 6 days and ended on March 1, 1997; the
1995 fiscal year consisted of 52 weeks and ended on February 25, 1996; and the
1994 fiscal year consisted of 52 weeks and ended on February 26, 1995.
d. Cash and Cash Equivalents
The Company considers all highly liquid instruments purchased with
maturities of three months or less to be cash equivalents.
e. Merchandise Inventories
Merchandise inventories are stated at the lower of cost or market,
determined by means of the retail inventory method of accounting.
f. Property and Equipment
Property and equipment are stated at cost. Depreciation of furniture,
fixtures and equipment is computed primarily by the straight-line method over
the estimated useful lives of the assets, which is generally five to ten years.
Leasehold costs are amortized by the straight-line method over the life of the
lease and leasehold improvements are amortized by the straight-line method over
the lesser of their estimated useful life or the life of the lease.
The cost of maintenance and repairs is charged to earnings as incurred;
significant renewals and betterments are capitalized. Maintenance and repairs
amounted to $9.6 million, $6.9 million and $4.7 million for fiscal 1996, 1995
and 1994, respectively.
g. Shareholders' Equity
In March 1996, the Board of Directors of the Company approved a
two-for-one split of the Company's common stock in the form of a 100% stock
dividend. The stock split was distributed on April 30, 1996 to shareholders of
record on April 10, 1996. Accordingly, all share and per share data have been
adjusted to give effect to the stock split.
In July 1996, the Company's Certificate of Incorporation was amended to
increase the number of authorized shares of common stock (par value $.01 per
share) from 100,000,000 shares to 150,000,000 shares.
h. Preopening Expenses
Expenses associated with new, relocated or expanded stores are charged to
earnings as incurred.
i. Occupancy Costs
The Company accounts for scheduled rent increases contained in its leases
on a straight-line basis over the noncancelable lease term. At March 1, 1997 and
February 25, 1996, the accompanying consolidated balance sheets include deferred
rent liabilities of $9.7 million and $6.8 million, respectively, relating to
such scheduled rent increases.
j. Advertising Costs
Expenses associated with store advertising are charged to earnings as
incurred. For the 1996, 1995 and 1994 fiscal years, advertising expenses
amounted to $12.3 million, $9.3 million and $6.7 million, respectively.
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k. Income Taxes
The Company files a consolidated Federal income tax return. Separate state
income tax returns are filed with each state in which the Company conducts
business.
The Company accounts for its income taxes using the asset and liability
method. Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to the differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the year in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in earnings in the period that includes the
enactment date.
l. Earnings Per Share
Earnings per share is calculated using the weighted average shares and
dilutive common equivalent shares (stock options) outstanding during the period.
m. Fair Value of Financial Instruments
The Company's financial instruments include cash and cash equivalents,
accounts payable, accrued expenses and other current liabilities and long-term
debt. The book value of cash and cash equivalents, accounts payable and accrued
expenses and other current liabilities are representative of their fair values
due to the short-term maturity of these instruments. The book value of the
Company's long-term debt at February 25, 1996 is considered to approximate its
fair value, based on current market rates and conditions.
n. Accounting Standards
In fiscal 1996, the Company adopted Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" (SFAS No. 123). As
permitted under SFAS No. 123, the Company has elected not to adopt the fair
value based method of accounting for its stock-based compensation plans, but
will continue to apply the provisions of Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" (APB No. 25). The Company has
complied with the disclosure requirements of SFAS No. 123.
In fiscal 1996, the Company adopted Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of". There was no material impact on the
Company's financial condition or results of operations as a result of the
adoption.
o. Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities as of the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates.
2. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
MARCH 1, FEBRUARY 25,
(in thousands) 1997 1996
========================================================================
<S> <C> <C>
Furniture, fixtures and equipment $ 72,576 $ 47,495
Leasehold improvements 53,562 43,507
Leasehold purchases 4,331 4,331
-----------------------------
130,469 95,333
Less: Accumulated depreciation
and amortization (42,137) (28,698)
-----------------------------
$ 88,332 $ 66,635
=============================
</TABLE>
Depreciation and amortization expense was $13.4 million, $9.9 million and $7.2
million for fiscal 1996, 1995 and 1994, respectively.
19
25th Anniversary
<PAGE> 19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
3. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities consist of the following:
<TABLE>
<CAPTION>
MARCH 1, FEBRUARY 25,
(in thousands) 1997 1996
=====================================================
<S> <C> <C>
Sales taxes payable $ 5,079 $ 4,448
Other 42,844 22,499
------------------------
$47,923 $26,947
========================
</TABLE>
4. LONG-TERM DEBT
Under a credit agreement (the "Credit Agreement") concluded in November
1994, and subsequently amended in October 1995 and in February 1997, the Company
may borrow up to $45.0 million under a revolving credit commitment for loans and
letters of credit. The Credit Agreement matures in October 1998, at which time
any revolving credit loans outstanding may be converted to a term loan payable
in twelve quarterly installments maturing in October 2001. Interest on all
borrowing is determined based upon several alternative rates as stipulated in
the Credit Agreement. During fiscal 1996, 1995 and 1994, interest rates on
outstanding debt ranged from 5.70% to 7.25%, 5.92% to 9.00% and 5.00% to 9.00%,
respectively. As of March 1, 1997, there were no outstanding borrowings under
the Credit Agreement and approximately $1.0 million in outstanding letters of
credit.
The Credit Agreement contains certain covenants which, among other things,
place limitations on payment of dividends, capital expenditures and certain
expenses. Additionally, there are restrictions on additional borrowings and a
requirement that the Company maintain certain financial ratios. Under the terms
of these covenants, approximately $27.5 million was available for the payment of
dividends at March 1, 1997.
5. PROVISION FOR INCOME TAXES
The components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
FISCAL YEARS
----------------------------------------------
(in thousands) 1996 1995 1994
===========================================================================
<S> <C> <C> <C>
Current:
Federal $ 32,157 $ 22,383 $ 17,156
State and local 7,034 6,901 5,410
----------------------------------------------
39,191 29,284 22,566
----------------------------------------------
Deferred:
Federal (2,527) (1,635) (1,557)
State and local (368) (228) (153)
----------------------------------------------
(2,895) (1,863) (1,710)
----------------------------------------------
$ 36,296 $ 27,421 $ 20,856
==============================================
</TABLE>
Included in other assets are deferred income taxes which reflect the net
tax effects of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income tax
purposes. The significant components of the Company's deferred tax assets
consist of the following:
<TABLE>
<CAPTION>
MARCH 1, FEBRUARY 25,
(in thousands) 1997 1996
===============================================
<S> <C> <C>
Deferred rent $3,851 $2,816
Inventories 2,845 2,679
Other 2,894 1,200
---------------------
$9,590 $6,695
======================
</TABLE>
Reconciliations of the Federal statutory income tax rate to the effective
tax rates are as follows:
<TABLE>
<CAPTION>
FISCAL YEARS
-------------------------------------------
1996 1995 1994
===============================================================================
<S> <C> <C> <C>
Federal statutory
income tax rate 35.00% 35.00% 35.00%
State income taxes, net
of Federal tax benefit 4.75 6.48 6.72
Other -- (.48) (.72)
------------------------------------------
Effective tax rate 39.75% 41.00% 41.00%
==========================================
</TABLE>
20
25th Anniversary
<PAGE> 20
6. TRANSACTIONS AND BALANCES WITH RELATED PARTIES
a. The Company has an interest in certain life insurance policies on the
lives of its Chairman and President. The beneficiaries of these policies are
related to the aforementioned individuals. The Company's interest in these
policies is equivalent to the net premiums paid by the Company. At March 1, 1997
and February 25, 1996, other assets include $2.4 million and $1.8 million,
respectively, representing the Company's interest in the life insurance
policies.
b. The Company obtains certain payroll services from a related party. The
Company paid fees for such services of $213,000, $161,000 and $121,000 for
fiscal years 1996, 1995 and 1994, respectively.
c. The Company made charitable contributions to the Mitzi and Warren
Eisenberg Family Foundation, Inc. (the "Eisenberg Foundation") and the Feinstein
Family Foundation, Inc. (the "Feinstein Foundation") in the aggregate amounts of
$240,000, $190,000 and $179,000 for fiscal 1996, 1995 and 1994, respectively.
The Eisenberg Foundation and the Feinstein Foundation are each not-for-profit
corporations of which Messrs. Eisenberg and Feinstein and their family members
are the trustees and officers.
7. LEASES
The Company leases retail stores, as well as warehouses, office facilities
and equipment under agreements expiring at various dates through 2017. Certain
leases provide for contingent rents (based upon store sales exceeding stipulated
amounts), scheduled rent increases and renewal options generally ranging from
five to fifteen years. The Company is obligated under a majority of the leases
to pay for taxes, insurance and common area maintenance charges.
As of March 1, 1997, future minimum lease payments under noncancelable
operating leases are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR (in thousands) AMOUNTS
======================================================
<S> <C>
1997 $ 54,605
1998 54,007
1999 52,353
2000 50,880
2001 50,041
Thereafter 336,112
---------
Total minimum lease payments $ 597,998
=========
</TABLE>
As of March 28, 1997, the Company had executed leases for twenty-three
stores planned for opening in fiscal 1997.
Expenses for all operating leases were $52.0 million, $37.3 million and
$26.1 million for fiscal years 1996, 1995 and 1994, respectively.
8. EMPLOYEE BENEFIT PLAN
The Company has a defined contribution 401(k) savings plan (the "Plan")
covering all eligible employees. Participants may defer between 1% and 15% of
annual pre-tax compensation not to exceed $9,500, $9,500 and $9,240 for calendar
years 1997, 1996 and 1995, respectively; the Company has an option to contribute
an amount as determined by the Board of Directors. In addition, each participant
may elect to make voluntary, non-tax deductible contributions in excess of the
pre-tax compensation limit up to 15% of compensation. As of March 1, 1997, the
Company has made no contributions to the Plan.
9. EMPLOYMENT AGREEMENTS
Under terms of employment agreements with its Chairman and President
extending through June 1997, the Company is required to pay each a base salary
(which may be increased by the Board of Directors) of $750,000 per annum. The
agreements also provide for other terms and conditions of employment, including
termination payments.
10. SUPPLEMENTAL CASH FLOW INFORMATION
The Company paid income taxes of $31.2 million, $25.2 million and $19.5
million in fiscal 1996, 1995 and 1994, respectively.
The Company also paid interest of $108,000, $991,000 and $823,000 in
fiscal 1996, 1995 and 1994, respectively.
11. STOCK COMPENSATION PLANS
Under its 1996 Stock Option Plan (the "1996 Plan"), the Company may grant
options to purchase not more than an aggregate of 2,000,000 shares of common
stock, subject to adjustment under certain circumstances. No options have been
granted under the 1996 Plan as of March 1, 1997. Under its Amended 1992 Stock
Option Plan (the "1992 Plan"), the Company may grant options to purchase not
more than an aggregate of 5,600,000 shares of common
21
25th Anniversary
<PAGE> 21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
11. STOCK COMPENSATION PLANS (CONTINUED)
stock, subject to adjustment under certain circumstances. Some or all of the
options under the stock option plans may be "incentive stock options" within the
meaning of the Internal Revenue Code of 1986. Options have been granted at
market value and are exercisable at a rate of 20% per year over a five-year
period commencing with the date of the grant, or one or two years thereafter and
expire ten years from the date of grant.
The following table summarizes stock option transactions:
<TABLE>
<CAPTION>
NUMBER WEIGHTED -
OF AVERAGE
SHARES EXERCISE PRICE
=====================================================================
<S> <C> <C>
Balance at February 27, 1994 2,642,510 $ 6.46
Options granted 848,800 12.87
Options exercised (177,080) 5.34
Options canceled (201,140) 8.87
----------
Balance at February 26, 1995 3,113,090 8.12
----------
Options granted 1,121,500 11.22
Options exercised (299,090) 5.87
Options canceled (279,640) 12.07
----------
Balance at February 25, 1996 3,655,860 8.96
----------
Options granted 819,200 21.43
Options exercised (535,050) 6.26
Options canceled (191,970) 13.00
----------
Balance at March 1, 1997 3,748,040 $11.86
==================================================================
Options exercisable:
At February 25, 1996 679,540 $ 6.46
At March 1, 1997 822,780 $ 8.05
==================================================================
</TABLE>
The stock option committees appointed pursuant to the stock option plans
determine the number of shares and the option price per share for all options
issued under the stock option plans.
The following tables summarize information pertaining to stock options
outstanding and exercisable at March 1, 1997:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
------------------------------------------------------
WEIGHTED-AVERAGE
RANGE OF NUMBER REMAINING WEIGHTED-AVERAGE
EXERCISE PRICES OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE
================ =========== ================ ================
<S> <C> <C> <C>
$ 4.25 to 7.38 718,380 5.34 $ 4.65
8.16 to 9.22 620,240 6.15 8.19
9.47 to 11.34 733,700 8.12 9.49
11.47 to 18.25 884,020 7.66 13.73
19.75 to 29.06 791,700 9.43 21.39
---------
$ 4.25 to 29.06 3,748,040 7.43 $ 11.86
=========
</TABLE>
<TABLE>
<CAPTION>
OPTIONS EXERCISABLE
-------------------------------------------
RANGE OF NUMBER WEIGHTED-AVERAGE
EXERCISE PRICES EXERCISABLE EXERCISE PRICE
=============== =========== ================
<S> <C> <C>
$ 4.25 to 7.38 428,100 $ 4.65
8.16 to 9.22 116,480 8.23
9.47 to 11.34 23,220 9.52
11.47 to 18.25 254,140 13.52
19.75 to 29.06 840 20.03
----------
$ 4.25 to 29.06 822,780 $ 8.05
==========
</TABLE>
The Company applies APB No. 25 and related interpretations in accounting
for its stock option plans. Accordingly, no compensation cost has been
recognized in connection with the plans. Had compensation costs for options
granted in fiscal 1996 and 1995 been determined based on the fair value at the
grant dates for awards under the plans consistent with the methodology of SFAS
No. 123, the Company's pro forma net income and earnings per share would have
been $53.9 million and $.76 in fiscal 1996, respectively, and $39.1 million and
$.56 in fiscal 1995, respectively.
The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option-pricing model with the following assumptions used
for grants for fiscal years 1996 and 1995, respectively: dividend yield of 0%
for both years; expected volatility of 42% for both years; risk-free interest
rates of 6.62% and 6.52%; and expected lives of six years for both years. The
weighted-average fair value of options granted during the year is $11.65 and
$5.89, for fiscal years 1996 and 1995, respectively.
22
25th Anniversary
<PAGE> 22
12. SUMMARY OF QUARTERLY RESULTS (UNAUDITED)
<TABLE>
<CAPTION>
FISCAL 1996 QUARTER ENDED
--------------------------------------------------------------
MAY 26, AUGUST 25, NOVEMBER 24, MARCH 1,
(in thousands, except per share data) 1996 1996 1996 1997
=============================================================================================================
<S> <C> <C> <C> <C>
Net sales $159,658 $203,503 $214,793 $245,224
Gross profit 65,788 83,937 88,664 102,779
Operating profit 12,661 25,034 22,812 30,100
Earnings before provision
for income taxes 12,803 25,071 23,037 30,400
Provision for income taxes 5,089 9,966 9,157 12,084
Net earnings $ 7,714 $ 15,105 $ 13,880 $ 18,316
Net earnings per share $ .11 $ .21 $ .20 $ .26
</TABLE>
<TABLE>
<CAPTION>
FISCAL 1995 QUARTER ENDED
--------------------------------------------------------------
MAY 28, AUGUST 27, NOVEMBER 26, FEBRUARY 25,
(in thousands, except per share data) 1995 1995 1995 1996
=============================================================================================================
<S> <C> <C> <C> <C>
Net sales $113,452 $150,110 $161,789 $175,901
Gross profit 46,864 62,224 66,944 74,004
Operating profit 9,787 18,936 17,101 21,761
Earnings before provision
for income taxes 9,594 18,602 16,959 21,725
Provision for income taxes 3,934 7,627 6,953 8,907
Net earnings $ 5,660 $ 10,975 $ 10,006 $ 12,818
Net earnings per share $ .08 $ .16 $ .14 $ .19
</TABLE>
23
25th Anniversary
<PAGE> 23
INDEPENDENT AUDITORS' REPORT
[LOGO] KPMG Peat Marwick LLP
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF BED BATH & BEYOND INC.:
We have audited the accompanying consolidated balance sheets of Bed Bath &
Beyond Inc. and subsidiaries as of March 1, 1997 and February 25, 1996, and the
related consolidated statements of earnings, changes in shareholders' equity and
cash flows for each of the fiscal years in the three-year period ended March 1,
1997. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Bed Bath &
Beyond Inc. and subsidiaries as of March 1, 1997 and February 25, 1996, and the
results of their operations and their cash flows for each of the fiscal years in
the three-year period ended March 1, 1997 in conformity with generally accepted
accounting principles.
/s/ KPMG Peat Marwick LLP
New York, New York
March 28, 1997
24
25th Anniversary
<PAGE> 24
CORPORATE DATA
EXECUTIVE OFFICERS & DIRECTORS
Warren Eisenberg
Chairman, Co-Chief Executive Officer and Director
Leonard Feinstein
President, Co-Chief Executive Officer and Director
Steven H. Temares
Executive Vice President - Chief Operating Officer
Ronald Curwin
Chief Financial Officer and Treasurer
Klaus Eppler
Director - Partner, Proskauer Rose Goetz & Mendelsohn LLP,
New York, New York
Robert S. Kaplan
Director - General Partner, Goldman, Sachs & Co.,
New York, New York
Robert J. Swartz
Director - Independent Consultant
KEY MANAGERS
Matthew Fiorilli
Director of Store Operations - Eastern Region
Harold Kislik
General Merchandise Manager - Domestics Merchandise
Phillip Kornbluh
Director of Store Planning
Jonathan Rothstein
General Merchandise Manager - Home Furnishings
Arthur Stark
Director of Store Operations - Western Region
CORPORATE OFFICE
Bed Bath & Beyond Inc.
650 Liberty Avenue
Union, New Jersey 07083
Telephone: 908/688-0888
SHAREHOLDER INFORMATION
The Company's 1996 Annual Report on Form 10-K (excluding exhibits) may be
obtained, at no cost, by writing to the Chief Financial Officer and Treasurer at
the Company's Corporate Office (Fax: 908/810-8813).
STOCK LISTING
The Common Stock of Bed Bath & Beyond Inc. is traded through the NASDAQ National
Market System under the symbol "BBBY".
STOCK ACTIVITY
The following table sets forth by fiscal quarter the high and low reported sales
prices of the Company's Common Stock on the NASDAQ National Market System during
fiscal 1995 and fiscal 1996:
<TABLE>
<CAPTION>
High Low
=========================================
<S> <C> <C>
Fiscal 1995
First Quarter $13 1/4 $ 9
Second Quarter 16 1/2 10 5/16
Third Quarter 18 7/16 12 1/2
Fourth Quarter 22 7/16 15
Fiscal 1996
First Quarter $31 1/2 $19 11/16
Second Quarter 31 18 1/4
Third Quarter 29 3/4 20 3/8
Fourth Quarter 31 3/4 24 1/8
</TABLE>
At March 28, 1997, there were approximately 500 shareholders of record. This
number excludes individual shareholders holding stock under nominee security
position listings.
TRANSFER AGENT
The Transfer Agent should be contacted on questions of change of address, name
or ownership, lost certificates and consolidation of accounts.
American Stock Transfer & Trust Company
40 Wall Street
46th Floor
New York, New York 10005
Telephone: 800/937-5449
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
345 Park Avenue
New York, New York 10154
ANNUAL MEETING
The Annual Meeting of Shareholders will be held at 9:00 A.M. Thursday, June 26,
1997, at the Headquarters Plaza Hotel, Three Headquarters Plaza, Morristown,
New Jersey.
<PAGE> 25
BED BATH & BEYOND
650 LIBERTY AVENUE
UNION, NJ 07083
908/688-0888
<PAGE> 1
Exhibit 21
SUBSIDIARIES OF BED BATH & BEYOND INC.
The following are all of the subsidiaries of Bed Bath & Beyond Inc. other than:
(i) 100% owned subsidiaries of Bed n Bath Stores, Inc. which subsidiaries hold
no assets other than a single store lease and, in some cases, fully depreciated
fixed assets; and (ii) subsidiaries which in the aggregate would not constitute
a significant subsidiary.
NAME STATE
BBBL, Inc. Delaware
BBBY Management Corp. New Jersey
Bed n Bath Stores, Inc. New Jersey
<PAGE> 1
Exhibit 23
INDEPENDENT AUDITORS' CONSENT
The Board of Directors and Shareholders
Bed Bath & Beyond Inc.:
We consent to incorporation by reference in the registration statements (No.
33-63902, 33-87602, and 333-18011) on Forms S-8 of Bed Bath & Beyond Inc. of our
report dated March 28, 1997, relating to the consolidated balance sheets of Bed
Bath & Beyond Inc. and subsidiaries as of March 1, 1997 and February 25, 1996,
and the related consolidated statements of earnings, changes in shareholders'
equity, and cash flows for each of the fiscal years in the three-year period
ended March 1, 1997, which report appears in the March 1, 1997 annual report on
Form 10-K of Bed Bath & Beyond Inc.
/s/ KPMG PEAT MARWICK LLP
New York, New York
May 28, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-01-1997
<PERIOD-START> FEB-26-1996
<PERIOD-END> MAR-01-1997
<CASH> 38,765
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 187,185
<CURRENT-ASSETS> 227,555
<PP&E> 130,469
<DEPRECIATION> 42,137
<TOTAL-ASSETS> 329,925
<CURRENT-LIABILITIES> 105,876
<BONDS> 0
0
0
<COMMON> 686
<OTHER-SE> 213,675
<TOTAL-LIABILITY-AND-EQUITY> 329,925
<SALES> 832,178
<TOTAL-REVENUES> 823,178
<CGS> 482,010
<TOTAL-COSTS> 482,010
<OTHER-EXPENSES> 250,561
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (704)
<INCOME-PRETAX> 91,311
<INCOME-TAX> 36,296
<INCOME-CONTINUING> 55,015
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 55,015
<EPS-PRIMARY> .78
<EPS-DILUTED> .78
</TABLE>
