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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 26, 2000
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) (I.R.S. 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
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
NUMBER OF SHARES OUTSTANDING OF THE ISSUER'S COMMON STOCK:
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CLASS OUTSTANDING AT AUGUST 26, 2000
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Common Stock - $0.01 par value 283,038,968
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BED BATH & BEYOND INC. AND SUBSIDIARIES
INDEX
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PAGE NO.
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PART I - FINANCIAL INFORMATION
Consolidated Balance Sheets
August 26, 2000 and February 26, 2000 3
Consolidated Statements of Earnings
Three Months and Six Months Ended
August 26, 2000 and August 28, 1999 4
Consolidated Statements of Cash Flows
Six Months Ended August 26, 2000 and August 28, 1999 5
Notes to Consolidated Financial Statements 6
Management's Discussion and Analysis of Financial Condition
and Results of Operations 7-8
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 9
Exhibit Index 10
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BED BATH & BEYOND INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except per share data)
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August 26, February 26,
2000 2000
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(unaudited)
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Assets
Current assets:
Cash and cash equivalents $ 147,700 $ 144,031
Merchandise inventories 594,602 470,433
Prepaid expenses and other current
assets 38,635 32,904
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Total current assets 780,937 647,368
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Property and equipment, net 245,686 208,911
Other assets 10,904 9,521
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$1,037,527 $ 865,800
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Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 214,250 $ 145,114
Accrued expenses and other current
liabilities 120,974 108,079
Income taxes payable 32,074 33,590
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Total current liabilities 367,298 286,783
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Deferred rent 21,616 19,972
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Total liabilities 388,914 306,755
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Shareholders' equity:
Preferred stock - $0.01 par value;
authorized - 1,000 shares; no shares
issued or outstanding -- --
Common stock - $0.01 par value;
authorized - 350,000 shares; issued
and outstanding - August 26, 2000,
283,039 shares and February 26, 2000,
280,812 shares 2,830 2,808
Additional paid-in capital 117,598 94,994
Retained earnings 528,185 461,243
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Total shareholders' equity 648,613 559,045
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$1,037,527 $ 865,800
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See accompanying Notes to Consolidated Financial Statements.
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BED BATH & BEYOND INC. AND SUBSIDIARIES
Consolidated Statements of Earnings
(in thousands, except per share data)
(unaudited)
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Three Months Ended Six Months Ended
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August 26, August 28, August 26, August 28,
2000 1999 2000 1999
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Net sales $ 597,001 $ 457,586 $1,059,736 $ 816,958
Cost of sales, including buying,
occupancy and indirect costs 355,502 272,016 630,891 485,174
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Gross profit 241,499 185,570 428,845 331,784
Selling, general and administrative expenses 171,490 131,990 322,497 250,189
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Operating profit 70,009 53,580 106,348 81,595
Interest income 1,431 923 3,393 2,225
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Earnings before provision for income taxes 71,440 54,503 109,741 83,820
Provision for income taxes 27,862 21,256 42,799 32,690
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Net earnings $ 43,578 $ 33,247 $ 66,942 $ 51,130
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Net earnings per share - Basic $ 0.15 $ 0.12 $ 0.24 $ 0.18
Net earnings per share - Diluted $ 0.15 $ 0.12 $ 0.23 $ 0.18
Weighted average shares outstanding - Basic 282,872 279,556 282,298 279,305
Weighted average shares outstanding - Diluted 291,363 288,334 290,661 288,204
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See accompanying Notes to Consolidated Financial Statements.
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BED BATH & BEYOND INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(in thousands, unaudited)
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Six Months Ended
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August 26, August 28,
2000 1999
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Cash Flows from Operating Activities:
Net earnings $ 66,942 $ 51,130
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 20,691 14,198
Tax benefit from exercise of stock options 13,312 3,685
Deferred income taxes (3,865) (2,507)
Increase in assets:
Merchandise inventories (124,169) (79,198)
Prepaid expenses and other current
assets (2,360) (2,999)
Other assets (889) (1,765)
Increase (decrease) in liabilities:
Accounts payable 69,136 52,188
Accrued expenses and other current
liabilities 12,895 20,266
Income taxes payable (1,516) 4,514
Deferred rent 1,644 1,821
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Net cash provided by operating activities 51,821 61,333
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Cash Flows from Investing Activities:
Capital expenditures (57,466) (24,217)
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Net cash used in investing activities (57,466) (24,217)
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Cash Flows from Financing Activities:
Proceeds from exercise of stock options 9,314 3,333
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Net cash provided by financing activities 9,314 3,333
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Net increase in cash and cash equivalents 3,669 40,449
Cash and cash equivalents:
Beginning of period 144,031 90,396
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End of period $ 147,700 $ 130,845
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See accompanying Notes to Consolidated Financial Statements.
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BED BATH & BEYOND INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1) BASIS OF PRESENTATION
The accompanying consolidated financial statements, except for the
February 26, 2000 consolidated balance sheet, have been prepared without
audit. In the opinion of Management, the accompanying consolidated
financial statements contain all adjustments (consisting of only normal
recurring accruals) necessary to present fairly the financial position of
Bed Bath & Beyond Inc. and subsidiaries (the "Company") as of August 26,
2000 and February 26, 2000 and the results of their operations for the
three months and six months ended August 26, 2000 and August 28, 1999,
respectively, and their cash flows for the six months ended August 26,
2000 and August 28, 1999, respectively. Because of the seasonality of the
specialty retailing business, operating results of the Company on a
quarterly basis may not be indicative of operating results for the full
year.
The accompanying unaudited consolidated financial statements are presented
in accordance with the requirements for Form 10-Q and consequently do not
include all the disclosures normally required by generally accepted
accounting principles. Reference should be made to Bed Bath & Beyond
Inc.'s Annual Report for the fiscal year ended February 26, 2000 for
additional disclosures, including a summary of the Company's significant
accounting policies.
2) STOCK SPLIT
In July 2000, the Board of Directors 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 August 11, 2000 to shareholders of
record on July 28, 2000. Accordingly, all shareholders' equity, share and
per share amounts for all periods presented have been retroactively
adjusted to give effect to the stock split.
3) NEW ACCOUNTING PRONOUNCEMENTS
The FASB Emerging Issues Task Force ("EITF") reached a consensus with
respect to the issue of "Accounting for Certain Sales Incentives",
including point of sale coupons, rebates and free merchandise. They
concluded that the value of point of sale coupons and rebates, which
result in a reduction of the price paid by the customer, should be
recorded as a reduction of sales and that free merchandise incentives
should be recorded as cost of sales. The Company will adopt the EITF in
the fourth quarter of the current fiscal year, as required. The Company
currently records its point of sale coupons and rebates in cost of sales
and free merchandise incentives in sales. The reclassifications will not
have an impact on gross profit, operating profit or net earnings.
The Task Force also reached a consensus with respect to the issue of
"Accounting for Shipping and Handling Fees and Costs". They concluded
that amounts billed to a customer in a sale transaction related to
shipping and handling represent revenues and costs related to shipping
and handling represent cost of sales. The Company currently nets revenues
and costs in selling, general and administrative expenses ("SG&A") and,
upon adoption, will reclassify such shipping and handling revenues to
sales and shipping and handling costs to cost of sales. The Company will
adopt the EITF in the fourth quarter of the current fiscal year, as
required. The Company does not believe the amount of the
reclassifications related to shipping and handling fees and costs is
material. The reclassifications will not have an impact on operating
profit or net earnings.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Three Months August 26, 2000 vs. Three Months August 28, 1999
Net sales for the second quarter ended August 26, 2000 were $597.0 million, an
increase of $139.4 million or approximately 30.5% over net sales of $457.6
million for the corresponding quarter last year. Approximately 81.2% of the
increase was attributable to new store net sales. The increase in comparable
store net sales in the second quarter of 2000 was approximately 6.1%. The
increase in net sales reflects a number of factors, including but not limited
to, the continued consumer acceptance of the Company's merchandise offerings and
customer service and the generally favorable retailing environment.
Approximately 55% and 45% of net sales for the second quarter were attributable
to sales of domestics merchandise and home furnishings merchandise,
respectively.
Gross profit for the second quarter of 2000 was $241.5 million or 40.5% of net
sales compared with $185.6 million or 40.6% of net sales during the second
quarter of 1999.
SG&A was $171.5 million in the second quarter of 2000 compared with $132.0
million in the same quarter last year and as a percentage of net sales were
28.7% and 28.8%, respectively.
Six Months August 26, 2000 vs. Six Months August 28, 1999
Net sales for the six months ended August 26, 2000 were $1.1 billion, an
increase of $242.8 million or approximately 29.7% over net sales of $817.0
million for the corresponding period last year. Approximately 82.2% of the
increase was attributable to new store net sales. The increase in comparable
store net sales for the first six months of 2000 was approximately 5.6%.
Gross profit for the first six months of 2000 was $428.8 million or 40.5% of net
sales compared with $331.8 million or 40.6% of net sales during the same period
last year.
SG&A was $322.5 million in the first six months of 2000 compared with $250.2
million for the same period last year and as a percentage of net sales were
30.4% and 30.6%, respectively. The decrease in SG&A, as a percentage of net
sales, primarily reflects a relative decrease in occupancy costs.
EXPANSION PROGRAM
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 to 272 stores at the end of the second quarter of
2000 compared with 201 stores at the end of the corresponding quarter last year.
Total square footage grew to approximately 10.8 million square feet at the end
of the second quarter of 2000, from approximately 8.3
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million square feet at the end of the second quarter of last year. The total
number of stores and the total square footage does not include the Company's
electronic service site which was launched on November 28, 1999.
During the first six months of fiscal 2000, the Company opened 31 new
superstores resulting in an aggregate addition of 1.0 million square feet to
total store space. The Company anticipates opening approximately 33 additional
stores and expanding two existing stores by the end of the fiscal year,
aggregating approximately 1.1 million square feet of store space for the year.
FINANCIAL CONDITION
Total assets at August 26, 2000 were $1.0 billion compared with $865.8 million
at February 26, 2000, an increase of $171.7 million. Of the total increase,
$133.6 million represented an increase in current assets and $38.2 million
represented an increase in non-current assets. The increase in current assets
was primarily attributable to an increase in merchandise inventories, which
resulted from new store space and, to a lesser extent, changes in merchandising
mix.
Total liabilities at August 26, 2000 were $388.9 million compared with $306.8
million at February 26, 2000, an increase of $82.2 million. The increase was
primarily attributable to a $69.1 million increase in accounts payable
(resulting from an increase in inventories) and a $12.9 million increase in
accrued expenses and other current liabilities.
Shareholders' equity was $648.6 million at August 26, 2000 compared with $559.0
million at February 26, 2000. The increase reflects net earnings for the first
six months of fiscal 2000 and additional paid-in capital from the exercise of
stock options.
Capital expenditures for the first six months of fiscal 2000 were $57.5 million
compared with $24.2 million for the corresponding period last year. The increase
is primarily attributable to expenditures for furniture, fixtures and leasehold
improvements for the 31 new superstores opened during the first six months
compared to expenditures for furniture, fixtures and leasehold improvements for
the 15 new superstores opened and two stores expanded in the same period last
year, as well as the cost of store renovations and information technology
additions.
FORWARD LOOKING STATEMENTS
This Form 10-Q may contain forward looking statements. Important factors which
may affect these statements are contained in the Company's Annual Report to
shareholders for the fiscal year ended February 26, 2000.
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PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) The exhibits to this report are listed on the Exhibit Index included
elsewhere herein.
(b) No reports on Form 8-K were filed by the Company during the three month
period ended August 26, 2000.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BED BATH & BEYOND INC.
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(Registrant)
Date: October 10, 2000 By: /s/ Eugene A. Castagna
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Eugene A. Castagna
Vice President - Finance and Principal
Accounting Officer
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EXHIBIT INDEX
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Exhibit No. Exhibit Page No.
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10.1 Form of Standard Stock Option Agreement
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27 Financial Data Schedule 14
(Filed electronically with SEC only)
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