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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended February 27, 1999
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)
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 7, 1999, 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 $4,690,866,574*
The number of shares outstanding of the issuer's common stock (par value $0.01
per share) at May 7, 1999: 139,649,339
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's definitive proxy statement filed on May 17, 1999
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 February 27, 1999 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 13,720,035 shares
beneficially owned by directors and executive officers, including in the
case of the Co-Chief Executive Officers trusts 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.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
FORM 10-K
ITEM NO. NAME OF ITEM PAGE
PART I
<S> <C>
Item 1. Business.............................................................................................3
Item 2. Properties..........................................................................................11
Item 3. Legal Proceedings...................................................................................12
Item 4. Submission of Matters to a Vote of
Security Holders................................................................................12
PART II
Item 5. Market for the Registrant's Common Equity
And Related Shareholder Matters.................................................................12
Item 6. Selected Financial Data.............................................................................13
Item 7. Management's Discussion and Analysis
of Financial Condition and Results of
Operations......................................................................................13
Item 7A. Quantitative and Qualitative Disclosures About
Market Risk.....................................................................................13
Item 8. Financial Statements and Supplementary
Data............................................................................................13
Item 9. Changes in and Disagreements with
Accountants on Accounting and Financial
Disclosure......................................................................................13
PART III
Item 10. Directors and Executive Officers of
the Registrant..................................................................................13
Item 11. Executive Compensation..............................................................................13
Item 12. Security Ownership of Certain Beneficial
Owners and Management...........................................................................13
Item 13. Certain Relationships and Related
Transactions....................................................................................13
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K.............................................................................14
</TABLE>
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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 in
fiscal 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, fiscal 1998 represented
52 weeks and ended on February 27, 1999; fiscal 1997 represented 52 weeks and
ended on February 28, 1998; and fiscal 1996 represented 52 weeks and 6 days and
ended on March 1, 1997. 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 7, 1999, the Company operated 189 stores in 35 states:
Alabama (3), Arizona (4), California (22), Colorado (5), Connecticut (4),
Delaware (1), Florida (20), Georgia (7), Illinois (11), Indiana (3), Kansas (2),
Kentucky (1), Maryland (8), Massachusetts (5), Michigan (7), Minnesota (1),
Missouri (5), Nebraska (1), Nevada (1), New Jersey (10), New Mexico (1), New
York (13), North Carolina (2), Ohio (6), Oklahoma (2), Oregon (1), Pennsylvania
(6), South Carolina (1), Tennessee (3), Texas (16), Utah (1), Vermont (1),
Virginia (10), Washington (4) and Wisconsin (1). 185 of these stores use the
superstore format that was pioneered by the Company in 1985. These stores are on
average approximately 42,000 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 40 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 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 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.
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The Company has been engaged in an ongoing expansion program involving
the opening of new superstores (including 45 in 1998, 33 in 1997, and 28 in
1996) and the expansion of existing stores (including three in 1998, three in
1997 and two in 1996). As a result of its expansion program, the Company's store
space has increased from approximately 1,512,000 square feet at the beginning of
1994 to approximately 7,688,000 square feet at the end of 1998. The Company's
expansion program is continuing, and the Company currently anticipates that in
1999 it will open approximately 50 new superstores, which includes the three new
superstores opened through May 7, 1999.
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 superstores offer both domestics merchandise and home
furnishings, including:
Domestics Merchandise
- bed linens and related items: sheets, comforters, duvet
covers, bedspreads, quilts, window treatments (such as
curtains and valances), decorative pillows, blankets, dust
ruffles, bed pillows and mattress pads.
- bath items: towels, shower curtains, waste baskets, mirrors,
hampers, robes, scales, bathroom rugs, wall hardware and bath
accessories.
- kitchen textiles: tablecloths, placemats, cloth napkins, dish
towels and chair pads.
Home Furnishings
- kitchen and tabletop items: cookware, cutlery, kitchen
gadgets, dinnerware, bakeware, flatware, drinkware, serveware,
glassware, food storage containers, tea kettles, trash cans
and cleaning supplies.
- 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, furniture covers, accent rugs, wicker and clocks)
and small electric appliances (such as blenders, food
processors, coffee makers, vacuums, irons, toaster ovens and
hair dryers).
- general home furnishings: giftwrap, candles, personal care
products (such as soaps, fragrances and massage 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).
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.
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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, Black & Decker, Rubbermaid, Springs, Braun, Kitchenaid, Cuisinart,
Hoover, Brita, Pillowtex, Pacific Coast Feather Co., Conair 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 most of its superstores carry in excess of 30,000 active
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 full-color circulars and mailing pieces include 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, typically
uses simple modular fixturing throughout the store. This fixturing is designed
so that it can be easily reconfigured to adapt to changes in the store'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.
CUSTOMER SERVICE
The Company places great emphasis on customer service and satisfaction
and, over the past 28 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".
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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
full-color circulars and mailing pieces distributed during key selling periods
of the year as its primary vehicles of paid advertising. In certain instances,
paid radio and television advertising may be used. Also, to support the opening
of new stores, the Company uses "grand opening" full-color circulars and
newspaper advertising. 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 45 at the beginning of fiscal 1994
to 186 at the end of fiscal 1998, and the total square footage of store space
has increased from approximately 1,512,000 square feet at the beginning of
fiscal 1994 to approximately 7,688,000 square feet at the end of fiscal 1998.
During 1998, the Company opened 45 new superstores and expanded three stores,
which resulted in the addition of approximately 1,921,000 square feet of store
space.
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 BEGINNING END BEGINNING END
YEAR STORES (1) STORES (2) OF YEAR OF YEAR OF YEAR OF YEAR
---- ---------- ---------- -------- ------- ------- -------
(IN SQUARE FEET)
<S> <C> <C> <C> <C> <C> <C> <C>
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
1997 3 33 4,347,000 5,767,000 108 141
1998 3 45 5,767,000 7,688,000 141 186
</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 one or two
stores. The Company will consider opening additional stores in that market, once
the stores have been proven successful.
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From the end of fiscal 1998 through May 7, 1999, the Company has opened
3 stores which are located in: Dublin, California; Fort Collins, Colorado; and
Reno, Nevada. During the balance of 1999, the Company currently anticipates that
it will open approximately 47 additional stores and relocate or expand 4 stores.
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.
STORE OPERATIONS
MERCHANDISING
The Company maintains its own central buying staff, comprised of two
general merchandise managers, four divisional merchandise managers, twenty-five
buyers and ten assistant buyers. Senior members of this buying staff report to
the Senior Vice President of Merchandising. The merchandise mix for each store
is selected by the central buying staff, in consultation with store managers and
other local store personnel. The central buying staff is responsible for
selecting the merchandise and for ordering the initial inventory required upon
the opening of each store, for ordering the first shipment of any new product
line that may be subsequently added to a store's merchandise mix and for
ordering seasonal merchandise.
After a store is opened, local store personnel are primarily
responsible for monitoring inventory levels and reordering 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 the 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 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 Company purchases its merchandise from approximately 3,000
suppliers. In 1998, the Company's largest supplier accounted for approximately
6% of the Company's merchandise purchases and the Company's 10 largest suppliers
accounted for approximately 26% 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. The Company purchases a
small amount of its merchandise directly 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 a few 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 90% 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 reordering conducted 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 or directly to one of five regional Vice
Presidents of Stores, who in turn report to the Senior Vice President of Stores.
Decisions relating to pricing and advertising for all stores are made centrally
in the Company's Buying Office, and certain store support functions (such as
finance and information technology) 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, all associates receive formalized training,
including sales techniques and product knowledge, through the Bed Bath & Beyond
University program.
The Company's policy is to generally 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 February 27, 1999, the Company employed approximately 9,400
persons, of whom approximately 6,100 were full-time employees and 3,300 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.
TRADE NAMES AND SERVICE MARKS
The Company uses its nationally recognized "Bed Bath & Beyond" name and
logo and its "Beyond any store of its kind" tag line as service marks in
connection with retail services. The Company has registered these marks and
others with the United States Patent and Trademark Office. The Company also has
registered or has applications pending with the trademark registries of several
foreign countries. Management believes that its nationally recognized name and
its service marks are an important element of the Company's merchandising
strategy.
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 68 Chairman, Co-Chief Executive Officer
and Director
Leonard Feinstein 62 President, Co-Chief Executive Officer
and Director
Steven H. Temares 40 Executive Vice President - Chief Operating
Officer
Ronald Curwin 69 Chief Financial Officer and Treasurer
Arthur Stark 44 Senior Vice President - Merchandising
Matthew Fiorilli 42 Senior Vice President - Stores
</TABLE>
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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 1992, thereafter as Chairman
and Co-Chief Executive Officer).
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 1992, thereafter as
President and Co-Chief Executive Officer).
Mr. Temares was promoted to Executive Vice President - Chief Operating
Officer of the Company in 1997. Prior to 1997, Mr. Temares served as Director of
Real Estate and General Counsel. Prior to joining the Company in 1992, Mr.
Temares engaged in the private practice of law.
Mr. Curwin, a certified public accountant, joined the Company in 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.
Mr. Stark joined the Company in 1977. Mr. Stark was promoted to Senior
Vice President - Merchandising in January 1999. Prior to 1999, Mr. Stark was
Vice President - Merchandising from 1998 until 1999, Director of Store
Operations - Western Region from 1994 until 1998 and previously was Regional
Manager - Western Region.
Mr. Fiorilli joined the Company in 1973. Mr. Fiorilli was promoted to
Senior Vice President - Stores in January 1999. Prior to 1999, Mr. Fiorilli was
Vice President - Stores from 1998 until 1999, Director of Store Operations -
Eastern Region from 1994 until 1998 and previously was Regional Manager -
Eastern Region.
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 189 stores are located in 35 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 7, 1999:
<TABLE>
<CAPTION>
Number Number
State of Stores State of Stores
----- --------- ----- ---------
<S> <C> <C> <C>
Alabama 3 Nebraska 1
Arizona 4 Nevada 1
California 22 New Jersey 10
Colorado 5 New Mexico 1
Connecticut 4 New York 13
Delaware 1 North Carolina 2
Florida 20 Ohio 6
Georgia 7 Oklahoma 2
Illinois 11 Oregon 1
Indiana 3 Pennsylvania 6
Kansas 2 South Carolina 1
Kentucky 1 Tennessee 3
Maryland 8 Texas 16
Massachusetts 5 Utah 1
Michigan 7 Vermont 1
Minnesota 1 Virginia 10
Missouri 5 Washington 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 eight locations
amounting to approximately 103,000 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."
During 1998, the Company's Corporate Office, located in Union, New
Jersey, and the Company's Buying Office, located in Farmingdale, New York,
increased to 87,100 and 56,400 square feet, respectively. The Company plans to
lease additional office space at both of these locations.
11
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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.
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 February 27, 1999.
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
---- ---
Fiscal 1997 :
<S> <C> <C>
1st Quarter $ 14 3/4 $ 11 7/16
2nd Quarter 18 1/16 13 7/8
3rd Quarter 18 1/8 14 13/32
4th Quarter 22 7/16 16
Fiscal 1998 :
1st Quarter $ 27 3/4 $ 20
2nd Quarter 28 31/32 18 1/4
3rd Quarter 32 3/16 17 1/8
4th Quarter 35 3/16 27 1/2
Fiscal 1999 :
1st Quarter (through May 7, 1999) $ 39 3/8 $ 29 1/8
</TABLE>
The common stock is quoted through the NASDAQ National Market System
under the symbol BBBY. On May 7, 1999, there were approximately 580 shareholders
of record of the common stock (without including individual participants in
nominee security position listings). On May 7, 1999, the last reported sale
price of the common stock was $37 1/4.
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 8 -
Financial Statements and Supplementary Data.
12
<PAGE> 13
ITEM 6 - SELECTED FINANCIAL DATA
The information required by this item is included in the registrant's
Annual Report to Shareholders for the fiscal year ended February 27, 1999 on the
inside front cover 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 fiscal year ended February 27, 1999 on
pages 10 through 13 and is incorporated herein by reference.
ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
None.
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 fiscal year ended February
27, 1999 on pages 14 through 24 and are incorporated herein by reference. These
financial statements are indexed under Item 14(a)(1).
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
The Executive Officers of the Registrant information required by Part
III, Item 10 - Directors and Executive Officers of the Registrant is included in
this document; all other information required by Part III (Item 10 - Directors
and Executive Officers of the Registrant, Item 11 - Executive Compensation, Item
12 - Security Ownership of Certain Beneficial Owners and Management, and Item 13
- - Certain Relationships and Related Transactions) is incorporated herein by
reference from the Registrant's definitive Proxy Statement for the Annual
Meeting of Shareholders to be held June 25, 1999 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.
13
<PAGE> 14
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 February 27, 1999:
Consolidated Balance Sheets as of February 27, 1999 and February 28,
1998
Consolidated Statements of Earnings for the fiscal years ended February
27, 1999, February 28, 1998 and March 1, 1997
Consolidated Statements of Shareholders' Equity for the fiscal years
ended February 27, 1999, February 28, 1998 and March 1, 1997
Consolidated Statements of Cash Flows for the fiscal years ended
February 27, 1999, February 28, 1998 and March 1, 1997
Notes to Consolidated Financial Statements
Independent Auditors' Report
(a) (2) FINANCIAL STATEMENT SCHEDULES
The Supplementary Income Statement Schedule is included in this Report
(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.
14
<PAGE> 15
Schedule 1
Bed Bath & Beyond Inc. and Subsidiaries
Supplementary Income Statement Schedule
(in thousands)
<TABLE>
<CAPTION>
Year Ended
------------------------------------------------
February 27, February 28, March 1,
1999 1998 1997
Item ---- ---- ----
----
<S> <C> <C> <C>
Advertising Costs $20,800 $15,701 $12,282
======= ======= =======
</TABLE>
15
<PAGE> 16
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
Executive Officer and Director
/s/ Warren Eisenberg (Principal Executive Officer) May 28, 1999
WARREN EISENBERG
President, Co-Chief
/s/ Leonard Feinstein Executive Officer and Director
LEONARD FEINSTEIN May 28, 1999
Chief Financial Officer
and Treasurer
/s/ Ronald Curwin (Principal Financial Officer)
RONALD CURWIN May 28, 1999
Vice President - Finance
/s/ G. William Waltzinger, Jr. (Principal Accounting Officer)
G. WILLIAM WALTZINGER, JR. May 28, 1999
/s/ Klaus Eppler Director
KLAUS EPPLER May 28, 1999
/s/ Robert S. Kaplan Director
ROBERT S. KAPLAN May 28, 1999
/s/ Robert J. Swartz Director
ROBERT J. SWARTZ May 28, 1999
</TABLE>
16
<PAGE> 17
ANNUAL REPORT ON FORM 10-K
ITEM 14 (a)(3)
EXHIBITS
BED BATH & BEYOND INC.
FISCAL YEAR ENDED FEBRUARY 27, 1999
<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)
EXHIBIT
NO. EXHIBIT
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 Certificate of Amendment to the Company's Certificate of
Incorporation (incorporated by reference to Exhibit 3.1 to the
Company's Quarterly Report on Form 10-Q for the quarter ended
August 30, 1997)
3.4 Certificate of Change of Bed Bath & Beyond Inc. Under Section
805-A of the Business Corporation Law (incorporated by reference
to Exhibit 3.2 to the Company's Quarterly Report on Form 10-Q
for the quarter ended August 30, 1997)
3.5 Amended and Restated By-laws, as amended through June 26, 1997
(incorporated by reference to Exhibit 3.3 to the Company's
Quarterly Report on Form 10-Q for the quarter ended August 30,
1997)
3.6 Certificate of Amendment of Certificate of Incorporation
(incorporated by reference to Exhibit 3 to the Company's
Quarterly Report on Form 10-Q for the quarter ended May 30,
1998)
3.7 Amended By-Laws of Bed Bath & Beyond Inc. (As amended through
December 17, 1998) (incorporated by reference to Exhibit 3.1 to
the Company's Quarterly Report on Form 10-Q for the quarter
ended November 28, 1998)
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* 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)
10.3* 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)
18
<PAGE> 19
10.4* 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
10.5* 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
10.6 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 (incorporated
by reference to Exhibit 10.9 to the Company's Form 10-K for the
year ended March 1, 1997)
10.7 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 (incorporated
by reference to Exhibit 10.11 to the Company's Form 10-K for the
year ended March 1, 1997)
10.8 Third Amendment to the Credit Agreement among the Company, bed
'n bath Stores, Inc., BBBL, Inc., BBBY Management Corporation,
and The Chase Manhattan Bank, dated September 11, 1997
(incorporated by reference to Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended November 29,
1997)
10.9 Fourth Amendment to the Credit Agreement among the Company, bed
'n bath Stores, Inc., BBBL, Inc., BBBY Management Corporation,
and The Chase Manhattan Bank, dated September 19, 1997
(incorporated by reference to Exhibit 10.2 to the Company's
Quarterly Report on Form 10-Q for the quarter ended November 29,
1997)
10.10* Employment Agreement between the Company and Warren Eisenberg,
dated as of June 30, 1997 (incorporated by reference to Exhibit
10.1 to the Company's Quarterly Report on Form 10-Q for the
quarter ended August 30, 1997)
10.11* Employment Agreement between the Company and Leonard Feinstein,
dated as of June 30, 1997 (incorporated by reference to Exhibit
10.2 to the Company's Quarterly Report on Form 10-Q for the
quarter ended August 30, 1997)
10.12* Stock Option Agreement between the Company and Warren Eisenberg,
dated as of August 26, 1997 (incorporated by reference to
Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for
the quarter ended August 30, 1997)
10.13* Stock Option Agreement between the Company and Leonard
Feinstein, dated as of August 26, 1997 (incorporated by
reference to Exhibit 10.4 to the Company's Quarterly Report on
Form 10-Q for the quarter ended August 30, 1997)
19
<PAGE> 20
10.14* Company's 1992 Stock Option Plan, as amended through August 26,
1997 (incorporated by reference to Exhibit 10.5 to the Company's
Quarterly Report on Form 10-Q for the quarter ended August 30,
1997)
10.15* Company's 1996 Stock Option Plan, as amended through August 26,
1997 (incorporated by reference to Exhibit 10.6 to the Company's
Quarterly Report on Form 10-Q for the quarter ended August 30,
1997)
10.16* Employment Agreement between the Company and Steven H. Temares
(dated as of December 1, 1994) (incorporated by reference to
Exhibit 10.16 to the Company's Form 10-K for the year ended
February 28, 1998)
10.17* Form of Employment Agreement between the Company and certain
executives (including all of the executive officers of the
Company other than the Co-Chief Executive Officers, the Chief
Operating Officer and the Chief Financial Officer) (dated as of
December 1, 1994) (incorporated by reference to Exhibit 10.17 to
the Company's Form 10-K for the year ended February 28, 1998)
10.18 * Bed Bath & Beyond Inc. 1998 Stock Option Plan (incorporated by
reference to Exhibit 10 to the to the Company's Quarterly Report
on Form 10-Q for the quarter ended May 30, 1998)
10.19 Fifth Amendment to the Credit Agreement among the Company, bed
'n bath Stores, Inc., BBBL, Inc., Bed Bath & Beyond of
California Limited Liability Company, BBBY Management
Corporation and The Chase Manhattan Bank, dated October 26, 1998
(incorporated by reference to Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended November 29,
1998)
10.20 Second Amended and Restated Revolving Credit Note among the
Company, bed 'n bath Stores, Inc., BBBL, Inc., Bed Bath & Beyond
of California Limited Liability Company, BBBY Management
Corporation and The Chase Manhattan Bank, dated October 26, 1998
(incorporated by reference to Exhibit 10.2 to the Company's
Quarterly Report on Form 10-Q for the quarter ended November 29,
1998)
13** Company's 1998 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)
* This is a management contract or compensatory plan or arrangement.
** Filed herewith.
20
<PAGE> 1
BED BATH &
BEYOND(R)
1998 ANNUAL REPORT
[GRAPHIC OMITTED]
-----------------------------------------------
Beyond any store of its kind(R).
<PAGE> 2
BED BATH & BEYOND ANNUAL REPORT 1998
- --------------------------------------------------------------------------------
Selected Financial Data
<TABLE>
<CAPTION>
FISCAL YEAR ENDED(1)
====================================================================================================================================
(in thousands, except per share and February 27, February 28, March 1, February 25, February 26, February 27, February 28,
selected operating data) 1999 1998 1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF EARNINGS DATA:
Net sales $1,397,197 $1,066,612 $ 823,178 $ 601,252 $ 440,261 $ 305,767 $ 216,712
Gross profit 576,125 441,016 341,168 250,036 183,819 127,972 90,528
Operating profit 158,052 118,914 90,607 67,585 51,685 36,906 26,660
Net earnings 97,346 73,142 55,015 39,459 30,013 21,887 15,960
Net earnings per share - Diluted(2) $ .68 $ .51 $ .39 $ .28 $ .22 $ .16 $ .12
SELECTED OPERATING DATA:
Number of stores open
(at period end) 186 141 108 80 61 45 38
Total square feet of store space
(at period end) 7,688,000 5,767,000 4,347,000 3,214,000 2,339,000 1,512,000 1,128,000
Percentage increase in comparable
store net sales 7.6% 6.4% 6.1% 3.8% 12.0% 10.6% 7.2%
BALANCE SHEET DATA (AT PERIOD END):
Working capital $ 249,574 $ 175,617 $ 121,679 $ 87,727 $ 71,902 $ 54,432 $ 34,501
Total assets 633,148 458,330 329,925 235,810 176,678 121,468 76,654
Long-term debt -- -- -- 5,000 16,800 13,300 --
Shareholders' equity $ 411,087 $ 295,397 $ 214,361 $ 151,446 $ 108,939 $ 77,305 $ 54,643
</TABLE>
(1) Each fiscal year represents 52 weeks, except for fiscal 1996 which
represents 52 weeks and 6 days.
(2) 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 in fiscal 1998,
1996 and 1993. The Company has not declared any cash dividends in any of
the fiscal years noted above.
- --------------------------------------------------------------------------------
STORE LOCATIONS (as of May 7, 1999)
- --------------------------------------------------------------------------------
Alabama 3 Indiana 3 Nevada 1 South Carolina 1
Arizona 4 Kansas 2 New Jersey 10 Tennessee 3
California 22 Kentucky 1 New Mexico 1 Texas 16
Colorado 5 Maryland 8 New York 13 Utah 1
Connecticut 4 Massachusetts 5 North Carolina 2 Vermont 1
Delaware 1 Michigan 7 Ohio 6 Virginia 10
Florida 20 Minnesota 1 Oklahoma 2 Washington 4
Georgia 7 Missouri 5 Oregon 1 Wisconsin 1
Illinois 11 Nebraska 1 Pennsylvania 6
- --------------------------------------------------------------------------------
TOTAL 189
Call 1-800-GO BEYOND(R) for exact locations.
- --------------------------------------------------------------------------------
CONTENTS
- --------------------------------------------------------------------------------
Letter to Shareholders 2
- --------------------------------------------------------------------------------
Management's Discussion
and Analysis of Financial
Condition and Results of Operations 10-13
- --------------------------------------------------------------------------------
Consolidated Financial Statements 14-24
- --------------------------------------------------------------------------------
Corporate Data 25
- --------------------------------------------------------------------------------
<PAGE> 3
BED BATH & BEYOND ANNUAL REPORT 1998
- --------------------------------------------------------------------------------
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 189 stores principally range in size 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 (a few of which are pictured in this
report) 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 stock is traded on the NASDAQ National Market under the symbol BBBY and
is included in the Standard & Poor's MidCap 400 Index and the NASDAQ-100 Index.
- ------------------------------------------------------------------------------
[GRAPHIC OMITTED]
[The following table was depicted as a bar chart in the printed material.]
NET EARNINGS PER SHARE
(in dollars)
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
.22 .28 .39 .51 .68
</TABLE>
[GRAPHIC OMITTED]
[The following table was depicted as a bar chart in the printed material.]
NET EARNINGS
(in millions)
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
30.0 39.5 55.0 73.1 97.3
</TABLE>
[GRAPHIC OMITTED]
[The following table was depicted as a bar chart in the printed material.]
NET SALES
(in millions)
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
440.3 601.3 823.2 1,066.6 1,397.2
</TABLE>
<PAGE> 4
BED BATH & BEYOND ANNUAL REPORT 1998 [GRAPHIC OMITTED] 2
- --------------------------------------------------------------------------------
TO OUR FELLOW SHAREHOLDERS
Two years ago, we reviewed the significant accomplishments of Bed Bath &
Beyond's Silver Anniversary Year, which included the opening of our 100th store.
Of fiscal 1997's notable accomplishments, surpassing $1 billion in net sales for
the first time certainly stands out. We're now very pleased to report to you
that our Company's performance in fiscal 1998 exceeded that of any prior year,
and we believe, has set the stage for even more impressive results in the years
ahead.
1998 AT A GLANCE: Net sales for the year ended February 27, 1999 were $1.397
billion, an increase of 31.0% from the prior year. Comparable store sales
advanced by 7.6%;
Net earnings of $97.3 million ($.68 per share), improved by 33.1% from $73.1
million ($.51 per share), representing the seventh consecutive year of earnings
increases over 30%;
[PHOTOS OMITTED]
Leonard Feinstein and
Warren Eisenberg
Co-Chief Executive Officers
Our debt-free balance sheet has strengthened, with working capital increasing by
42.1%; average returns on shareholders' equity and total assets were 27.6%, and
17.8%, respectively, among the highest in all of retailing;
Standard & Poor's recently assigned an investment grade credit rating to Bed
Bath & Beyond based on our "leadership position in the highly competitive home
furnishings industry, successful merchandising strategy, strong financial
profile and stable outlook";
<PAGE> 5
BED BATH & BEYOND ANNUAL REPORT 1998 [GRAPHIC OMITTED] 3
- --------------------------------------------------------------------------------
Forty-five new superstores were opened in fiscal 1998, more than in any other
year. At year-end, we operated 186 stores in 34 states;
In support of our ambitious growth program, we continue to make sizable
investments in our infrastructure, and are expanding the ranks of the seasoned
executives who will provide leadership well into the 21st century.
[GRAPHIC OMITTED]
[The following table was depicted as a bar chart in the printed material.]
TOTAL ASSETS
(in millions)
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
176.7 235.8 329.9 458.3 633.1
</TABLE>
COMPANY OPERATING PRINCIPLES: Over the years we've developed a unique corporate
culture based on four operating principles which are consistently applied,
providing our valued customers with truly unparalleled shopping experiences:
Focus on Customer Satisfaction and Loyalty: From the beginning, our major focus
has been on customer satisfaction. Vast merchandise assortments presented in a
customer friendly manner, extremely high in-stock positions, maximum assistance
from sales associates with knowledge of the products, minimum waiting at
checkouts, informative signing, and a liberal return policy are all components
of customer service in our stores. So is our Everyday Low Pricing policy, which
assures the customer our best price everyday, without promotional gimmicks or
"midnight madness" events.
The bright, talented managers and associates who run our stores are trained to
never say "no" to a customer. If necessary, they defer to someone who can say
"yes", someone who can somehow please the customer.
Simply put, our stores are fun places to shop. Our racetrack layout, high impact
displays, and constantly changing merchandise mix, all contribute to item sales
greater than anyone else in our industry segment selling the same item. By
focusing on
<PAGE> 6
BED BATH & BEYOND ANNUAL REPORT 1998 [GRAPHIC OMITTED] 4
- --------------------------------------------------------------------------------
customer satisfaction, and offering customers new and exciting products, we
continue to achieve outstanding sales results.
Maintain Entrepreneurial Culture with Decentralized Management: A major portion
of everyday decision-making is vested in the personnel who run our stores. They
are home grown to be entrepreneurs and merchants. They reorder most of the
merchandise, understand the profitability and productivity of each item, and the
relationship between volumes and margins. Our store merchants consistently
identify high markup items and drive the volume on these products. They decide
what items to feature, and reorder the merchandise that will produce optimal
results in their particular store. We give employees at all levels the power and
responsibility to take whatever action is necessary to consistently deliver
excellent customer service. Our superior financial results, which are in sharp
contrast to those of most of our competitors, reflect the successful application
of these principles.
[PHOTO OMITTED]
Steven H. Temares
Executive Vice President --
Chief Operating Officer
The entrepreneurial people who run our business make a tremendous difference,
and we remain committed to filling store operations positions from within.
Indeed, every one of our Regional Vice Presidents of Stores, Regional, District,
Area, and Store Managers has come up through our store ranks.
The outstanding opportunities for professional and personal growth that we
offer, and the recognition and rewards that come with them, have resulted in an
extraordinarily high employee retention rate.
<PAGE> 7
BED BATH & BEYOND ANNUAL REPORT 1998 [GRAPHIC OMITTED] 5
- --------------------------------------------------------------------------------
Develop a Committed, Knowledgeable Team: The Regional, District and Area
Managers previously referred to have been with Bed Bath & Beyond, on average,
for almost 10 years. Turnover at the store manager level and higher since 1992
has been under 5%. Similarly, employee turnover in our merchandising
organization has been exceptionally low. Everyone enjoys being on a winning
team.
[The following table was depicted as a bar chart in the printed material.]
SHAREHOLDERS' EQUITY
(in millions)
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
108.9 151.4 214.4 295.4 411.1
</TABLE>
While we are committed to "promoting from within" with respect to all store
operations personnel, we recognize that it is occasionally necessary to attract
outstanding individuals from outside the Company for other specialized areas of
our business. In real estate, construction, information technology, human
resources, advertising and marketing, legal, finance, loss prevention, planning,
purchasing and logistics, to name several, we have successfully recruited dozens
of individuals who are adding their collective talents to the accomplishment of
our long-term goals and objectives.
Constantly Change and Innovate: It's often been said that change is inevitable,
that the only thing you can count on in life is change. Not only do we believe
it, we virtually live by it! With respect to merchandising, we are constantly
innovating, offering our customers the very latest products, at everyday low
prices, with customer service levels second to none.
Because of our decentralized culture, we customize many of our own information
technology solutions. We devote considerable resources to these activities, and
our progress to date has been significant.
Consistent with our philosophy of change, all but ten stores that were open at
the time of our 1992 initial public offering have been expanded and/or
relocated, and we have plans to remodel or relocate three of those ten locations
this year.
<PAGE> 8
BED BATH & BEYOND ANNUAL REPORT 1998 [GRAPHIC OMITTED] 6
- --------------------------------------------------------------------------------
Similar changes and innovation may be found throughout the Company. We assume
that almost everything we do can, and should, be done better. Importantly,
our customers understand and appreciate the changes.
[PHOTO OMITTED]
Ronald Curwin
Chief Financial Officer and Treasurer
GROWING NATIONALLY: While opening 45 new superstores in 1998, compared with 33
opened last year, we entered for the first time, the states of Delaware,
Nebraska, South Carolina, Utah and Vermont. At year-end, we operated 186 stores
in 34 states. Total store space increased to 7.7 million square feet, an
increase of approximately 33.3% over the prior year.
Our plans for fiscal 1999 include opening approximately 50 new superstores,
several expansions, and our initial entry into several states.
We believe that there is an opportunity for Bed Bath & Beyond to expand, over
the next few years, to as many as 600 stores within the United States. We expect
our profitable growth to continue well into the new century.
INDUSTRY OVERVIEW: Bed Bath & Beyond operates in a highly-fragmented sector of
the retail industry. Whereas other sectors are dominated by 2 or 3 operators
with market shares from twenty to as high as thirty-five percent, the largest
home goods superstore operators have relatively minor market shares.
<PAGE> 9
BED BATH & BEYOND ANNUAL REPORT 1998 [GRAPHIC OMITTED] 7
- --------------------------------------------------------------------------------
Our Company's share is estimated to be approximately 2%, another indication that
we have substantial room for growth.
[The following table was depicted as a bar chart in the printed material.]
STORE EXPANSION
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
61 80 108 141 186
TOTAL SQUARE FOOTAGE
(in thousands) 2,339 3,214 4,347 5,767 7,688
</TABLE>
Favorable demographic and societal trends also support our belief in Bed Bath &
Beyond's continuing growth. The home has increasingly become a focal point in
people's lives. Whereas total consumer expenditures grew by about 28% during a
recent six year period, increases in expenditures for home goods exceeded 35%
during that same period. The 35 to 54 age group, which has the highest home
ownership levels, and spends the most per year on home-related merchandise,
represents another strong positive for the future.
Despite this generally favorable background, few operators in our retail sector
have been successful. In fact, most have done poorly, or failed. The few which
are profitable achieve operating margins considerably lower than those of Bed
Bath & Beyond.
We strongly believe that our approach to customer service, unique corporate
culture, and highly motivated associates, have made, and will continue to make,
the difference. In fact, we expect that our corporate culture and organization
will enable us to widen the lead between ourselves and our competitors in the
years ahead.
MANAGEMENT DEVELOPMENT: We continue to strengthen our senior management ranks in
order to support our rapidly expanding business. We have done so by recognizing
the contributions of exceptional, seasoned executives who have been instrumental
in Bed Bath & Beyond's consistent growth.
<PAGE> 10
BED BATH & BEYOND ANNUAL REPORT 1998 [GRAPHIC OMITTED] 8
- --------------------------------------------------------------------------------
In January, together with Chief Operating Officer Steven Temares, we proudly
announced the officer-level promotions of eleven executives who, on average,
have served the Company for over fourteen years. Arthur Stark and Matthew
Fiorilli were named Senior Vice Presidents. Joining Jonathan Rothstein as Vice
Presidents were: Michael Honeyman; Phillip Kornbluh; Allan Rauch; William
Waltzinger; Timothy Brewster; Martin Eisenberg; Edward Kopil; Martin Lynch and
William Onksen.
[PHOTO OMITTED]
Matthew Fiorilli
Senior Vice President -
Stores
As we continue to grow, we look forward to broadening the leadership ranks in
our Company.
WHAT'S AHEAD? It promises to be exciting. When we next address you in a Bed Bath
& Beyond annual report we will have ushered in a new decade and a new century.
There will be many celebrations, and much talk, about the bright future that
lies ahead. Certainly, technological developments that no one could have
envisioned three decades ago, when our Company began operations with two small
stores, present a myriad of exciting new opportunities.
<PAGE> 11
BED BATH & BEYOND ANNUAL REPORT 1998 [GRAPHIC OMITTED] 9
- --------------------------------------------------------------------------------
Success in the future will be achieved by those who can best adapt to change,
while continuing to stress customer satisfaction. Fortunately, constant change
and customer service have always been primary elements of the Bed Bath & Beyond
corporate culture. Enhanced shareholder value has been a notable result.
[PHOTO OMITTED]
Arthur Stark
Senior Vice President -
Merchandising
Our constant discovery of new, creative ways to further build upon our industry
leading position, including the development of exciting new products found
exclusively at Bed Bath & Beyond, encourages us to look toward the new
millennium with confidence. So do the contributions of our over 10,000
employees, who every day provide our customers with many reasons to frequently
shop in our stores, and of our many vendor partners and landlords with whom we
share our success.
With all of us working together, while remaining focused on the Bed Bath &
Beyond customer, we hope to report to you, a year from now, that the financial
results of our fiscal 1999 operations were our best ever.
Sincerely,
/s/ Warren Eisenberg
Warren Eisenberg
Chairman and Co-Chief Executive Officer
/s/ Leonard Feinstein
Leonard Feinstein
President and Co-Chief Executive Officer
May 7, 1999
<PAGE> 12
BED BATH & BEYOND ANNUAL REPORT 1998 10
- --------------------------------------------------------------------------------
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 statement
of earnings data of the Company expressed as a percentage of net sales and (ii)
the percentage change from the prior year in selected statement of earnings
data:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
====================================================================
PERCENTAGE PERCENTAGE CHANGE
OF NET SALES FROM PRIOR YEAR
===================================================================================================================
February 27, February 28, March 1, February 27, February 28,
1999 1998 1997 1999 1998
===================================================================================================================
<S> <C> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 31.0% 29.6%
Cost of sales, including buying, occupancy
and indirect costs 58.8 58.7 58.6 31.2 29.8
Gross profit 41.2 41.3 41.4 30.6 29.3
Selling, general and administrative expenses 29.9 30.2 30.4 29.8 28.6
Operating profit 11.3 11.1 11.0 32.9 31.2
Earnings before provision for income taxes 11.6 11.4 11.1 33.1 33.0
Net earnings 7.0 6.9 6.7 33.1 32.9
</TABLE>
FISCAL 1998 COMPARED WITH FISCAL 1997
In fiscal 1998, the Company expanded store space by 33.3%, from 5,767,000 square
feet at fiscal year-end 1997 to 7,688,000 square feet at fiscal year-end 1998.
The 1,921,000 square feet increase was the result of opening forty-five new
superstores and expanding three existing stores.
Net sales in fiscal 1998 increased $330.6 million to $1.397 billion,
representing an increase of 31.0% over the $1.067 billion net sales in fiscal
1997. Approximately 77% of the increase was attributable to new store net sales
and the balance to an increase in comparable store net sales.
Approximately 55% and 45% of net sales in fiscal 1998 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 1998 and fiscal 1997. No other individual product category accounted for
10% or more of net sales during either fiscal year.
Gross profit in fiscal 1998 was $576.1 million or 41.2% of net sales, compared
with $441.0 million or 41.3% of net sales a year ago. The decrease in gross
profit as a percentage of net sales was primarily attributable to a different
mix of sales during fiscal 1998 compared to the mix of sales during the prior
year and an increase in coupons redeemed associated with the Company's marketing
program.
The percentage increase in comparable store net sales was 7.6% in fiscal 1998
compared with 6.4% in fiscal 1997. The increase in comparable store net sales
relative to the prior year reflects a number of factors, including the continued
consumer acceptance of the Company's merchandise offerings, a strong focus on
customer service and the generally favorable retailing environment.
Selling, general and administrative expenses ("SG&A") were $418.1 million or
29.9% of net sales in fiscal 1998 compared to $322.1 million or 30.2% of net
sales in fiscal 1997. The decrease in SG&A as a percentage of net sales
primarily reflects a relative decrease in payroll and payroll related items,
which were partially offset by an increase in occupancy costs. Expenses
associated with new, relocated or expanded stores are charged to earnings as
incurred.
<PAGE> 13
BED BATH & BEYOND ANNUAL REPORT 1998 11
- --------------------------------------------------------------------------------
Operating profit was $158.1 million in fiscal 1998, an increase of $39.1 million
or 32.9% from fiscal 1997, reflecting primarily the increase in net sales which
was partially offset by increases in cost of sales and SG&A.
The increase in earnings before provision for income taxes of 33.1% from fiscal
1997 to fiscal 1998 compared to the year to year increase in operating profit of
32.9% was attributable to interest income.
FISCAL 1997 COMPARED WITH FISCAL 1996
In fiscal 1997, the Company expanded store space by 32.7%, from 4,347,000 square
feet at fiscal year-end 1996 to 5,767,000 square feet at fiscal year-end 1997.
The 1,420,000 square feet increase was the result of opening thirty-three new
superstores and expanding three existing stores.
Net sales in fiscal 1997 increased $243.4 million to $1.067 billion,
representing an increase of 29.6% over the $823.2 million net sales in fiscal
1996. Approximately 81% of the increase was attributable to new store net sales
and the balance to an increase in comparable store net sales.
Approximately 55% and 45% of net sales in fiscal 1997 were attributable to sales
of domestics merchandise and home furnishings, respectively. The Company
estimated that bed linens accounted for approximately 21% of net sales during
fiscal 1997 and fiscal 1996. No other individual product category accounted for
10% or more of net sales during either fiscal year.
Gross profit in fiscal 1997 was $441.0 million or 41.3% of net sales compared
with $341.2 million or 41.4% of net sales, in fiscal 1996. The decrease in gross
profit as a percentage of net sales was primarily attributable to a different
mix of sales during fiscal 1997 compared to the mix of sales during fiscal 1996
and an increase in coupons redeemed associated with the Company's marketing
program.
The percentage increase in comparable store net sales was 6.4% in fiscal 1997
compared with 6.1% in fiscal 1996. The increase in comparable store net sales
relative to fiscal 1996 reflected a number of factors, including the continued
consumer acceptance of the Company's merchandise offerings, a strong focus on
customer service and the generally favorable retailing environment.
SG&A was $322.1 million or 30.2% of net sales in fiscal 1997 compared to $250.6
million or 30.4% of net sales in fiscal 1996. The decrease in SG&A as a
percentage of net sales primarily reflected a relative decrease in costs
associated with new store openings as well as a decrease in payroll and payroll
related items, which were partially offset by an increase in occupancy costs.
Expenses associated with new, relocated or expanded stores were charged to
earnings as incurred.
Operating profit was $118.9 million in fiscal 1997, an increase of $28.3 million
or 31.2% from fiscal 1996, reflecting primarily the increase in net sales which
was partially offset by increases in cost of sales and SG&A.
The increase in earnings before provision for income taxes of 33.0% from fiscal
1996 to fiscal 1997 compared to the year to year operating profit of 31.2% was
attributable to interest income.
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 1994 to the end of fiscal 1998, the chain has grown from 45 stores to
186 stores. Total square footage grew from 1,512,000 square feet at the
beginning of fiscal 1994 to 7,688,000 square feet at the end of fiscal 1998.
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 77%, 81%, 84%, 91% and 78% of the increase in net
sales in fiscal 1998, 1997, 1996, 1995 and 1994, respectively.
<PAGE> 14
BED BATH & BEYOND ANNUAL REPORT 1998 12
- --------------------------------------------------------------------------------
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 1999 it will open approximately 50 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 1999 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 $187.2 million at the end of
fiscal 1996, to $270.4 million at the end of fiscal 1997 and to $360.3 million
at the end of fiscal 1998. The increases in inventory between the fiscal years
were primarily attributable to the addition of new store space.
The Company's working capital increased from $121.7 million at the end of fiscal
1996, to $175.6 million at the end of fiscal 1997, and to $249.6 million at the
end of fiscal 1998. The increases between the fiscal years were primarily the
result of increases in merchandise inventories and cash and cash equivalents,
which were 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 $62.3 million, $41.3
million and $35.1 million during fiscal 1998, 1997 and 1996, respectively.
Under the Company's revolving Credit Agreement (the "Credit Agreement")
concluded in November 1994, and as subsequently amended, the Company may
borrow up to $45.0 million for loans and letters of credit. The Credit
Agreement matures 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 will materially affect its business or its expansion
program as currently planned.
The Company did not borrow under the Credit Agreement during fiscal 1998 or
fiscal 1997. The Company believes that during fiscal 1999, 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.
As of March 26, 1999, the Company has leased sites for thirty-seven new
superstores planned for opening in fiscal 1999, including three new stores
already opened in Dublin, California; Fort Collins, Colorado; and Reno, Nevada.
Approximate aggregate costs for the thirty-seven leased stores are estimated at
$68.5 million for merchandise inventories, $23.7 million for furniture and
fixtures and leasehold improvements and $11.9 million for preopening expenses
(which will be expensed as incurred). In addition to the thirty-seven locations
already leased, the Company expects to open approximately thirteen additional
locations during fiscal 1999. 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.
<PAGE> 15
BED BATH & BEYOND ANNUAL REPORT 1998 13
- --------------------------------------------------------------------------------
YEAR 2000
The Company has conducted an extensive review of its computer systems and
operations to identify the areas that could be affected by the Year 2000 issue.
A plan was developed which focuses on the Company's information systems and
third-party relationships.
With respect to the Company's information systems, the Company has completed
remediation and testing of its mission critical systems and believes that its
information systems are Year 2000 compliant. The Company will test new
installations, versions or changes implemented during the remainder of fiscal
1999. The Company expects to complete its contingency plans to address the most
reasonably likely worst case Year 2000 scenarios by the third quarter of fiscal
1999.
With respect to its third-party relationships, the Company has contacted its
largest suppliers, vendors and service providers to assess their state of Year
2000 readiness. This process is effectively complete and the Company is in the
process of developing contingency plans, which are expected to be completed by
the third quarter of fiscal 1999 and which include developing alternate
third-party relationships, if necessary. Potential sources of risk include the
inability of principal vendors and suppliers to be Year 2000 compliant, which
could result in delays in product deliveries from vendors, and disruption of the
Company's distribution channel. The Company believes the geographically diverse
nature of its business and its large vendor and supplier base should minimize
such potential sources of risk.
Based on the efforts to date, the Company does not believe that the Year 2000
issue will have a material adverse effect on its consolidated financial
condition or results of operations. The Company's costs incurred to date
associated with the Year 2000 issue were not material. The Company estimates
that the costs associated with the completion of the Year 2000 project,
excluding any costs that may be incurred by the Company as a result of the
failure of any third-parties to become Year 2000 compliant, will also not be
material.
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 retailing 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; competition from
other channels of distribution; pricing pressures; the ability to find suitable
locations at reasonable occupancy costs to support the Company's expansion
program; the availability of trained qualified management personnel to support
the Company's growth; and the cost of labor, merchandise and other costs and
expenses.
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.
<PAGE> 16
BED BATH & BEYOND ANNUAL REPORT 1998 14
- --------------------------------------------------------------------------------
Consolidated Balance Sheets
Bed Bath & Beyond Inc. and Subsidiaries
<TABLE>
<CAPTION>
February 27, February 28,
(in thousands, except share and per share data) 1999 1998
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 90,396 $ 53,280
Merchandise inventories 360,337 270,357
Prepaid expenses and other current assets 4,546 2,323
- ----------------------------------------------------------------------------------------------
Total current assets 455,279 325,960
- ----------------------------------------------------------------------------------------------
Property and equipment, net (note 2) 150,438 111,381
Other assets (notes 4 and 5) 27,431 20,989
- ----------------------------------------------------------------------------------------------
$633,148 $458,330
==============================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 99,370 $ 64,718
Accrued expenses and other current liabilities 89,725 73,610
Income taxes payable 16,610 12,015
- ----------------------------------------------------------------------------------------------
Total current liabilities 205,705 150,343
- ----------------------------------------------------------------------------------------------
Deferred rent 16,356 12,590
- ----------------------------------------------------------------------------------------------
Total liabilities 222,061 162,933
- ----------------------------------------------------------------------------------------------
Commitments and contingencies (notes 3, 6 and 8)
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 -
February 27, 1999, 350,000,000 shares and
February 28, 1998, 150,000,000 shares;
issued and outstanding - February 27, 1999,
139,418,120 shares and February 28, 1998,
138,087,946 shares 1,394 1,381
Additional paid-in capital 79,679 61,348
Retained earnings 330,014 232,668
- ----------------------------------------------------------------------------------------------
Total shareholders' equity 411,087 295,397
- ----------------------------------------------------------------------------------------------
$633,148 $458,330
==============================================================================================
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
<PAGE> 17
BED BATH & BEYOND ANNUAL REPORT 1998 15
- --------------------------------------------------------------------------------
Consolidated Statements of Earnings
Bed Bath & Beyond Inc. and Subsidiaries
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
- -----------------------------------------------------------------------------------------------------------
February 27, February 28, March 1,
(in thousands, except share and per share data) 1999 1998 1997
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $ 1,397,197 $ 1,066,612 $ 823,178
Cost of sales, including buying, occupancy and indirect costs 821,072 625,596 482,010
- -----------------------------------------------------------------------------------------------------------
Gross profit 576,125 441,016 341,168
Selling, general and administrative expenses 418,073 322,102 250,561
- -----------------------------------------------------------------------------------------------------------
Operating profit 158,052 118,914 90,607
Interest income 3,517 2,484 704
- -----------------------------------------------------------------------------------------------------------
Earnings before provision for income taxes 161,569 121,398 91,311
Provision for income taxes (note 4) 64,223 48,256 36,296
- -----------------------------------------------------------------------------------------------------------
Net earnings $ 97,346 $ 73,142 $ 55,015
===========================================================================================================
Net earnings per share - Basic $ .70 $ .53 $ .40
Net earnings per share - Diluted $ .68 $ .51 $ .39
Weighted average shares outstanding - Basic 138,842,151 137,664,704 136,817,412
Weighted average shares outstanding - Diluted 143,235,599 142,362,018 141,129,962
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
<PAGE> 18
BED BATH & BEYOND ANNUAL REPORT 1998 16
- --------------------------------------------------------------------------------
Consolidated Statements of 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 25, 1996 136,136 $ 1,362 $ 45,573 $104,511 $151,446
Net earnings 55,015 55,015
Shares sold under employee stock option plans (note 10) 1,070 10 7,890 7,900
- -------------------------------------------------------------------------------------------------------------------
Balance at March 1, 1997 137,206 1,372 53,463 159,526 214,361
Net earnings 73,142 73,142
Shares sold under employee stock option plans (note 10) 882 9 7,885 7,894
- -------------------------------------------------------------------------------------------------------------------
Balance at February 28, 1998 138,088 1,381 61,348 232,668 295,397
Net earnings 97,346 97,346
Shares sold under employee stock option plans (note 10) 1,330 13 18,331 18,344
- -------------------------------------------------------------------------------------------------------------------
Balance at February 27, 1999 139,418 $ 1,394 $ 79,679 $330,014 $411,087
===================================================================================================================
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
<PAGE> 19
BED BATH & BEYOND ANNUAL REPORT 1998 17
- --------------------------------------------------------------------------------
Consolidated Statements of Cash Flows
Bed Bath & Beyond Inc. and Subsidiaries
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
- ----------------------------------------------------------------------------------------------------------------
February 27, February 28, March 1,
(in thousands) 1999 1998 1997
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net earnings $ 97,346 $ 73,142 $ 55,015
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Depreciation and amortization 23,217 18,238 13,439
Deferred income taxes (5,166) (6,345) (2,895)
(Increase) decrease in assets:
Merchandise inventories (89,980) (83,172) (38,802)
Prepaid expenses and other current assets (2,223) (718) 25
Other assets (1,276) (606) (2,248)
Increase in liabilities:
Accounts payable 34,652 16,897 8,796
Accrued expenses and other current liabilities 16,115 25,687 20,976
Income taxes payable 4,595 1,883 3,551
Deferred rent 3,766 2,902 2,877
- ----------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 81,046 47,908 60,734
- ----------------------------------------------------------------------------------------------------------------
Cash Flows from Investing Activities:
Capital expenditures (62,274) (41,287) (35,136)
- ----------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (62,274) (41,287) (35,136)
- ----------------------------------------------------------------------------------------------------------------
Cash Flows from Financing Activities:
Proceeds from long-term debt -- -- 17,000
Repayment of long-term debt -- -- (22,000)
Proceeds from exercise of stock options 18,344 7,894 7,900
- ----------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 18,344 7,894 2,900
- ----------------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents 37,116 14,515 28,498
Cash and cash equivalents:
Beginning of period 53,280 38,765 10,267
- ----------------------------------------------------------------------------------------------------------------
End of period $ 90,396 $ 53,280 $ 38,765
================================================================================================================
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
<PAGE> 20
BED BATH & BEYOND ANNUAL REPORT 1998 18
- --------------------------------------------------------------------------------
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 in fiscal 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, fiscal 1998
represented 52 weeks and ended on February 27, 1999; fiscal 1997 represented 52
weeks and ended on February 28, 1998; and fiscal 1996 represented 52 weeks and 6
days and ended on March 1, 1997.
D. ACCOUNTING STANDARDS
The Company has adopted Statement of Financial Accounting Standards ("SFAS") No.
128, "Earnings per Share", which requires a dual presentation of earnings per
share - basic and diluted. Basic earnings per share has been computed by
dividing net income by the weighted average number of shares outstanding.
Diluted earnings per share has been computed by dividing net income by the
weighted average number of shares outstanding including the dilutive effect of
stock options.
The Company has adopted SFAS No. 123, "Accounting for Stock-Based
Compensation". 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.
E. CASH AND CASH EQUIVALENTS
The Company considers all highly liquid instruments purchased with maturities of
three months or less to be cash equivalents.
F. MERCHANDISE INVENTORIES
Merchandise inventories are stated at the lower of cost or market, determined by
means of the retail inventory method of accounting.
G. PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation of furniture, fixtures
and equipment is computed primarily using the straight-line method over the
estimated useful lives of the assets, which is generally three to ten years.
Leasehold purchases are amortized using the straight-line method over the life
of the lease and leasehold improvements are amortized using 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 $17.3 million, $12.2 million and $9.6 million for fiscal 1998, 1997
and 1996, respectively.
H. DEFERRED RENT
The Company accounts for scheduled rent increases contained in its leases on a
straight-line basis over the noncancelable lease term.
I. SHAREHOLDERS' EQUITY
In March 1996, the Board of Directors of the Company approved a two-for-one
split of the Company's common stock effected 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.
<PAGE> 21
BED BATH & BEYOND ANNUAL REPORT 1998 19
- --------------------------------------------------------------------------------
In June 1998, the Board of Directors of the Company approved a two-for-one split
of the Company's common stock effected in the form of a 100% stock dividend. The
stock dividend was distributed on July 31, 1998 to shareholders of record on
July 10, 1998.
Unless otherwise stated, all references to common shares outstanding and net
earnings per share in the consolidated financial statements are on a post-split
basis.
In June 1998, the Company's Certificate of Incorporation was amended to increase
the number of authorized shares of common stock (par value $.01 per share) from
150,000,000 shares to 350,000,000 shares.
J. PREOPENING EXPENSES
Expenses associated with new, relocated or expanded stores are charged to
earnings as incurred.
K. ADVERTISING COSTS
Expenses associated with store advertising are charged to earnings as incurred.
L. 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.
M. FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments include cash and cash equivalents, accounts
payable and accrued expenses and other current liabilities. 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.
N. IMPAIRMENT OF LONG-LIVED ASSETS
When changes in circumstances warrant measurement, impairment losses for store
fixed assets are calculated by comparing the present value of projected
individual store cash flows over the lease terms to the asset carrying values.
The Company does not believe that any material impairment currently exists
related to its long-lived assets.
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>
February 27, February 28,
(in thousands) 1999 1998
- --------------------------------------------------------------------------------
<S> <C> <C>
Furniture, fixtures and equipment $ 146,188 $ 102,633
Leasehold improvements 81,326 63,070
Leasehold purchases 3,141 3,141
- --------------------------------------------------------------------------------
230,655 168,844
Less: Accumulated depreciation
and amortization (80,217) (57,463)
- --------------------------------------------------------------------------------
$ 150,438 $ 111,381
================================================================================
</TABLE>
<PAGE> 22
BED BATH & BEYOND ANNUAL REPORT 1998 20
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements
(Continued)
3. CREDIT AGREEMENT
Under the Company's revolving Credit Agreement (the "Credit Agreement")
concluded in November 1994, and as subsequently amended, the Company may borrow
up to $45.0 million for loans and letters of credit. The Credit Agreement
matures in October 2001. Interest on all borrowing is determined based upon
several alternative rates as stipulated in the Credit Agreement.
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. Under the
terms of these covenants, approximately $48.7 million was available for the
payment of dividends at February 27, 1999.
The Company did not borrow under the Credit Agreement during fiscal 1998 or
fiscal 1997. As of February 27, 1999 and February 28, 1998, there were
approximately $1.7 million and $1.4 million in outstanding letters of credit,
respectively.
4. PROVISION FOR INCOME TAXES
The components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
FISCAL YEARS
- --------------------------------------------------------------------------------
(in thousands) 1998 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $ 61,098 $ 44,981 $ 32,157
State and local 8,291 9,620 7,034
- --------------------------------------------------------------------------------
69,389 54,601 39,191
- --------------------------------------------------------------------------------
Deferred:
Federal (4,549) (5,587) (2,527)
State and local (617) (758) (368)
- --------------------------------------------------------------------------------
(5,166) (6,345) (2,895)
- --------------------------------------------------------------------------------
$ 64,223 $ 48,256 $ 36,296
================================================================================
</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>
February 27, February 28,
(in thousands) 1999 1998
- --------------------------------------------------------------------------------
<S> <C> <C>
Deferred rent $ 6,502 $ 5,004
Inventories 7,489 4,599
Other 7,110 6,332
- --------------------------------------------------------------------------------
$21,101 $15,935
================================================================================
</TABLE>
For fiscal 1998, 1997 and 1996, the effective tax rate is comprised of the
Federal statutory income tax rate of 35.00% and the State income tax rate, net
of Federal benefit, of 4.75%.
5. 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 February 27, 1999 and
February 28, 1998, other assets include $3.4 million and $2.9 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 $424,000, $308,000 and $213,000 for
fiscal 1998, 1997 and 1996, 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
$390,000, $300,000 and $240,000 for fiscal 1998, 1997 and 1996, respectively.
The Eisenberg Foundation and the Feinstein Foundation are each not-for-profit
corporations of which Messrs. Eisenberg and Feinstein, the Chairman and
President of the Company, respectively, and their family members are the
trustees and officers.
<PAGE> 23
BED BATH & BEYOND ANNUAL REPORT 1998 21
- --------------------------------------------------------------------------------
6. LEASES
The Company leases retail stores, as well as warehouses, office facilities and
equipment, under agreements expiring at various dates through 2019. 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 February 27, 1999, future minimum lease payments under noncancelable
operating leases are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR (in thousands) AMOUNTS
================================================================================
<S> <C>
1999 $ 96,175
2000 94,801
2001 94,364
2002 93,338
2003 91,270
Thereafter 584,398
- --------------------------------------------------------------------------------
Total minimum lease payments $1,054,346
================================================================================
</TABLE>
As of March 26, 1999, the Company had executed leases for thirty-seven stores
planned for opening in fiscal 1999.
Expenses for all operating leases were $89.5 million, $70.2 million and $52.0
million for fiscal 1998, 1997 and 1996, respectively.
7. 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 subject to statutory limitations. 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
February 27, 1999, the Company has made no contributions to the Plan.
8. COMMITMENTS AND CONTINGENCIES
Under terms of employment agreements with its Chairman and President extending
through June 2002, 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.
The Company is involved in various claims and legal actions arising in the
ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse effect on the
Company's consolidated financial position, results of operations or liquidity.
9. SUPPLEMENTAL CASH FLOW INFORMATION
The Company paid income taxes of $53.5 million, $48.5 million and $31.2 million
in fiscal 1998, 1997 and 1996, respectively.
The Company also paid interest of $62,000, $54,000 and $108,000 in fiscal 1998,
1997 and 1996, respectively.
10. STOCK OPTION PLANS
Under its 1998 Stock Option Plan, its 1996 Stock Option Plan and its Amended
1992 Stock Option Plan (the "Stock Option Plans"), the Company may grant options
to purchase not more than an aggregate of 6.0 million, 4.0 million and 11.2
million shares of common stock, respectively, subject to adjustment under
certain circumstances. The options under the Stock Option Plans may be either
non-qualified or incentive stock options within the meaning of the Internal
Revenue Code of 1986. Options have been granted at market value and are
exercisable in five equal annual installments beginning one to three years after
the date of grant and expire ten years from the date of grant.
<PAGE> 24
BED BATH & BEYOND ANNUAL REPORT 1998 22
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements
(Continued)
The following table summarizes stock option transactions:
<TABLE>
<CAPTION>
WEIGHTED-
AVERAGE
NUMBER OF EXERCISE
SHARES PRICE
- --------------------------------------------------------------------------------
<S> <C> <C>
Outstanding at February 25, 1996 7,311,720 $ 4.48
Options granted 1,638,400 10.72
Options exercised (1,070,100) 3.13
Options canceled (383,940) 6.50
----------
Outstanding at March 1, 1997 7,496,080 5.93
==========
Options granted 4,349,800 14.71
Options exercised (881,902) 3.91
Options canceled (359,080) 8.73
----------
Outstanding at February 28, 1998 10,604,898 9.61
==========
Options granted 2,770,200 23.54
Options exercised (1,330,149) 5.10
Options canceled (308,680) 12.20
----------
Outstanding at February 27, 1999 11,736,269 $ 13.34
================================================================================
Options exercisable:
At March 1, 1997 1,645,560 $ 4.03
At February 28, 1998 2,211,538 $ 4.64
At February 27, 1999 2,538,809 $ 7.67
================================================================================
</TABLE>
The stock option committee 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 February 27, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
- --------------------------------------------------------------------------------
WEIGHTED-AVERAGE WEIGHTED-
RANGE OF NUMBER REMAINING AVERAGE
EXERCISE PRICES OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 2.13 to 4.73 2,430,050 5.05 $ 4.19
5.67 to 12.13 2,370,544 6.55 8.52
12.23 to 15.47 1,606,870 8.08 12.83
15.63 to 22.72 2,917,065 8.63 16.38
23.66 to 31.88 2,411,740 9.29 23.88
----------
$ 2.13 to 31.88 11,736,269 7.53 $ 13.34
==========
</TABLE>
<TABLE>
<CAPTION>
OPTIONS EXERCISABLE
- --------------------------------------------------------------------------------
WEIGHTED-
RANGE OF NUMBER AVERAGE
EXERCISE PRICES EXERCISABLE EXERCISE PRICE
- --------------------------------------------------------------------------------
<S> <C> <C>
$ 2.13 to 4.73 1,048,130 $ 3.77
5.67 to 12.13 878,584 7.03
12.23 to 15.47 128,010 13.12
15.63 to 22.72 484,085 15.84
23.66 to 31.88 -- --
---------
$ 2.13 to 31.88 2,538,809 $ 7.67
=========
</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 Stock Option Plans. Set forth below are the Company's net
earnings and net earnings per share presented "as reported", and as if
compensation cost had been recognized in accordance with the fair value
provisions of SFAS No. 123:
<TABLE>
<CAPTION>
FISCAL YEARS
- --------------------------------------------------------------------------------
(in thousands, except per share data) 1998 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
NET EARNINGS:
As reported $97,346 $73,142 $55,015
Pro forma $89,519 $69,257 $53,908
NET EARNINGS PER SHARE:
Basic:
As reported $ 0.70 $ 0.53 $ 0.40
Pro forma $ 0.64 $ 0.50 $ 0.39
Diluted:
As reported $ 0.68 $ 0.51 $ 0.39
Pro forma $ 0.62 $ 0.49 $ 0.38
</TABLE>
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 1998, 1997 and 1996, respectively: dividend yield of 0% for
all years; expected volatility of 42% for all years; risk free interest rates of
5.58%, 6.36% and 6.62%; and expected lives of six years for all years. The
weighted-average fair value of options granted during the year is $12.12, $7.58
and $5.83 for fiscal 1998, 1997 and 1996, respectively.
<PAGE> 25
BED BATH & BEYOND ANNUAL REPORT 1998 23
- --------------------------------------------------------------------------------
11. SUMMARY OF QUARTERLY RESULTS (UNAUDITED)
<TABLE>
<CAPTION>
FISCAL 1998 QUARTER ENDED
- ---------------------------------------------------------------------------------------------
May 30, August 29, November 28, February 27,
(in thousands, except per share data) 1998 1998 1998 1999
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $269,571 $344,946 $363,431 $419,249
Gross profit 110,179 141,943 148,473 175,530
Operating profit 20,744 41,760 40,154 55,394
Earnings before provision for income taxes 21,561 42,331 40,915 56,762
Provision for income taxes 8,570 16,827 16,264 22,562
Net earnings $ 12,991 $ 25,504 $ 24,651 $ 34,200
Net earnings per share - Basic(1) $ .09 $ .18 $ .18 $ .25
Net earnings per share - Diluted(1) $ .09 $ .18 $ .17 $ .24
</TABLE>
<TABLE>
<CAPTION>
FISCAL 1997 QUARTER ENDED
- ---------------------------------------------------------------------------------------------
May 31, August 30, November 29, February 28,
(in thousands, except per share data) 1997 1997 1997 1998
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $213,662 $266,895 $280,978 $305,077
Gross profit 87,358 109,500 115,422 128,736
Operating profit 15,810 31,770 30,726 40,608
Earnings before provision for income taxes 16,447 32,274 31,440 41,237
Provision for income taxes 6,540 12,827 12,497 16,392
Net earnings $ 9,907 $ 19,447 $ 18,943 $ 24,845
Net earnings per share - Basic (1) $ .07 $ .14 $ .14 $ .18
Net earnings per share - Diluted (1) $ .07 $ .14 $ .13 $ .17
</TABLE>
(1) Net earnings per share amounts for each quarter are required to be
computed independently and may not equal the amount computed for the total
year.
<PAGE> 26
BED BATH & BEYOND ANNUAL REPORT 1998 24
- --------------------------------------------------------------------------------
Independent Auditors' Report [LOGO] KPMG
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 February 27, 1999 and February 28, 1998, and
the related consolidated statements of earnings, shareholders' equity and cash
flows for each of the fiscal years in the three-year period ended February 27,
1999. 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 February 27, 1999 and February 28, 1998, and the
results of their operations and their cash flows for each of the fiscal years in
the three-year period ended February 27, 1999 in conformity with generally
accepted accounting principles.
/s/ KPMG LLP
New York, New York
March 26, 1999
<PAGE> 27
BED BATH & BEYOND ANNUAL REPORT 1998 25
- --------------------------------------------------------------------------------
Corporate Data
DIRECTORS
Warren Eisenberg
Chairman and Co-Chief Executive Officer
of Bed Bath & Beyond Inc.
Leonard Feinstein
President and Co-Chief Executive Officer
of Bed Bath & Beyond Inc.
Klaus Eppler
Partner, Proskauer Rose LLP,
New York, New York
Robert S. Kaplan
Managing Director, Goldman, Sachs & Co.,
New York, New York
Robert J. Swartz
Vice President, Alco Capital Group, Inc.,
New York, New York
OFFICERS
Warren Eisenberg
Chairman and Co-Chief Executive Officer
Leonard Feinstein
President and Co-Chief Executive Officer
Steven H. Temares
Executive Vice President - Chief Operating Officer
Ronald Curwin
Chief Financial Officer and Treasurer
Arthur Stark
Senior Vice President - Merchandising
Matthew Fiorilli
Senior Vice President - Stores
Michael Honeyman
Vice President - Administration and Corporate Operations
Phillip Kornbluh
Vice President - Visual Merchandising
Allan Rauch
Vice President - Legal and General Counsel
Jonathan Rothstein
Vice President - Product Development and Marketing
G. William Waltzinger, Jr.
Vice President - Finance
P. Timothy Brewster
Vice President of Stores - N.Y.C. and Long Island Region
Martin Eisenberg
Vice President of Stores - Northeast Region
Edward Kopil
Vice President of Stores - Southern Region
Martin Lynch
Vice President of Stores - Midwest and Western Region
William Onksen
Vice President of Stores - MidAtlantic Region
CORPORATE OFFICE
Bed Bath & Beyond Inc.
650 Liberty Avenue
Union, New Jersey 07083
Telephone: 908/688-0888
SHAREHOLDER INFORMATION
The Company's 1998 Annual Report on Form 10-K (excluding exhibits) may be
obtained, without charge, by writing to the Investor Relations Department at the
Corporate Office, or by fax (908/810-8813).
STOCK LISTING
The Common Stock of Bed Bath & Beyond Inc. trades on the NASDAQ National
Market 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 during fiscal
1997 and fiscal 1998 (adjusted for the Company's 2-for-1 stock split which
occurred in July 1998):
<TABLE>
<CAPTION>
QUARTER HIGH LOW
- --------------------------------------------------------------------------------
<S> <C> <C>
FISCAL 1997
First $14 3/4 $11 7/16
Second 18 1/16 13 7/8
Third 18 1/8 14 13/32
Fourth 22 7/16 16
FISCAL 1998
First $27 3/4 $20
Second 28 31/32 18 1/4
Third 32 3/16 17 1/8
Fourth 35 3/16 27 1/2
</TABLE>
At March 26, 1999, there were approximately 600 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 LLP
345 Park Avenue
New York, New York 10154
ANNUAL MEETING
The Annual Meeting of Shareholders will be held at 9:00 a.m. Friday, June 25,
1999, at the Headquarters Plaza Hotel, Three Headquarters Plaza, Morristown, New
Jersey.
(C) 1999 Bed Bath & Beyond Inc. and its subsidiaries.
[RECYCLE LOGO] Printed on recycled paper
<PAGE> 28
BED BATH &
BEYOND(R)
650 Liberty Avenue
Union, New Jersey 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
Bed Bath & Beyond of California Limited Liability Company Delaware
<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, 333-18011 and 333-75883) on Forms S-8 of Bed Bath & Beyond
Inc. of our report dated March 26, 1999, relating to the consolidated balance
sheets of Bed Bath & Beyond Inc. and subsidiaries as of February 27, 1999 and
February 28, 1998, and the related consolidated statements of earnings,
shareholders' equity, and cash flows for each of the fiscal years in the
three-year period ended February 27, 1999, which report appears in the February
27, 1999 annual report on Form 10-K of Bed Bath & Beyond Inc.
/S/ KPMG LLP
New York, New York
May 28, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> FEB-27-1999
<PERIOD-END> FEB-27-1999
<CASH> 90,396
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 360,377
<CURRENT-ASSETS> 455,279
<PP&E> 230,655
<DEPRECIATION> 80,217
<TOTAL-ASSETS> 633,148
<CURRENT-LIABILITIES> 205,705
<BONDS> 0
0
0
<COMMON> 1,394
<OTHER-SE> 409,693
<TOTAL-LIABILITY-AND-EQUITY> 633,148
<SALES> 1,397,197
<TOTAL-REVENUES> 1,397,197
<CGS> 821,072
<TOTAL-COSTS> 821,072
<OTHER-EXPENSES> 418,073
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (3,517)
<INCOME-PRETAX> 161,569
<INCOME-TAX> 64,223
<INCOME-CONTINUING> 97,346
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 97,346
<EPS-BASIC> 0.70
<EPS-DILUTED> 0.68
</TABLE>
