FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended November 2, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 1-7288
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THE BOMBAY COMPANY, INC.
(Exact name of registrant as specified in its charter)
Delaware 75-1475223
(State or other jurisdiction of (I.R.S. Employer
incorporation or Identification
organization) No.)
550 Bailey Avenue, Fort Worth, Texas 76107
(Address of principal executive offices) (Zip Code)
(817) 347-8200
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the registrant (1) has filed by Section
13 or 155(d) of the Securities Exchange Act pf 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
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Indicate the number of shares outstanding of each of the issuer's classes
of common stock as of the latest praticable date.
Class Number of shares outstanding at
November 2, 1996
----------------------------------------------------------------------
Common stock, $1 par 37,908,147
value
TABLE OF CONTENTS
PART I -- FINANCIAL INFORMATION
1. Financial Statements ...............................
2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ................
PART II -- OTHER INFORMATION
Exhibits and Reports on Form 8-K .......................
Signatures .............................................
<TABLE>
THE BOMBAY COMPANY, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
November October November October
2, 1996 28, 1995 2, 1996 28, 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales $72,816 $70,424 $212,101 $218,036
Costs and expenses:
Cost of sales, buying and store 53,481 49,052 153,671 152,993
occupancy
Selling, general and 29,492 24,082 76,547 70,872
administrative
Interest, net (30) (101) (152) (672)
Store closing costs adjustment -- -- -- (6,000)
Total costs and expenses 82,943 73,033 230,066 217,193
Income (loss) before income taxes (10,127) (2,609) (17,965) 843
Provision (benefit) for income (3,980) (1,026) (7,071) 331
taxes
Net income (loss) ($6,147) ($1,583) ($10,894) $512
Net income (loss) per average
common share
and common equivalent share ($0.16) ($0.04) ($0.29) $0.01
Average common shares and common
equivalent shares outstanding 37,765 37,592 37,845 37,549
Cash dividends per common share -- -- -- --
<FN>
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<TABLE>
THE BOMBAY COMPANY, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Dollars in thousands)
<CAPTION>
November February October
2, 1996 3, 1996 28, 1995
--------- -------- ---------
ASSETS (Unaudited) (Unaudited)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $2,018 $24,079 $798
Inventories 102,645 88,341 85,928
Income taxes receivable 6,758 7,249 10,138
Deferred taxes 2,123 3,252 2,830
Other current assets 9,201 10,214 6,244
Total current assets 122,745 133,135 105,938
Property and equipment, net 42,862 46,265 48,252
Goodwill, less amortization 575 596 603
Other assets 9,796 10,700 9,909
Total assets $175,978 $190,696 $164,702
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C> <C>
Current liabilities:
Accounts payable and accrued $20,903 $28,275 $15,847
expenses
Accrued payroll and bonuses 3,110 3,394 2,620
Total current liabilities 24,013 31,669 18,467
Accrued rent and other liabilities 7,228 6,559 6,113
Stockholders' equity:
Preferred stock, $1 par value,
1,000,000 shares authorized -- -- --
Common stock, $1 par value,
50,000,000
shares authorized, 37,908,147;
37,362,027
and 37,270,445 shares issued, 37,908 37,362 37,270
respectively
Additional paid-in capital 75,196 72,781 72,344
Retained earnings 32,084 42,978 31,098
Cumulative effect of foreign (451) (653) (590)
currency translation
Total stockholders' equity 144,737 152,468 140,122
Total liabilities and $175,978 $190,696 $164,702
stockholders' equity
<FN>
The accompanying notes are an integral part
of these consolidated financial statements.
</TABLE>
<TABLE>
THE BOMBAY COMPANY, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Dollars in thousands)
(Unaudited)
<CAPTION>
Nine Months Ended
November October
2, 1996 28, 1995
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) ($10,894) $512
Adjustments to reconcile net income (loss)
to net cash from operations:
Depreciation and amortization 8,547 9,103
Deferred income taxes and other 1,699 7,558
Management change cost 3,672 --
Noncash contributions to employee 1,249 1,244
benefit plans
Store closing reserve adjustment -- (6,000)
Change in assets and liabilities:
Increase in inventories (14,042) (12,519)
(Increase) decrease in other current 2,620 (3,264)
assets
Decrease in current liabilities (12,864) (25,598)
Increase in noncurrent assets (690) (481)
Increase in noncurrent liabilities 797 1,359
Net cash used by operations (19,906) (28,086)
Cash flows from investing activities:
Purchases of property and equipment (3,746) (5,049)
Sales of property and equipment 231 358
Net cash used by investing activities (3,515) (4,691)
Cash flows from financing activities:
Sale of stock to employee benefit plans 590 624
Proceeds from the exercise of employee 936 2,333
stock options
Net cash provided by financing activities 1,526 2,957
Effect of exchange rate change on cash (166) (52)
Net decrease in cash (22,061) (29,872)
Cash at beginning of period 24,079 30,670
Cash at end of period $2,018 $798
<CAPTION>
Supplemental disclosures of cash flow
information:
<S> <C> <C>
Cash paid during the period for income taxes $753 $1,122
<FN>
The accompanying notes are an integral part of
these consolidated financial statements.
</TABLE>
THE BOMBAY COMPANY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(1)Accounting Principles
In the opinion of the Company, the accompanying consolidated financial
statements contain all adjustments (consisting of only normal recurring
adjustments other than as described below) necessary to present fairly the
financial position as of November 2, 1996 and October 28, 1995, and the
results of operations and cash flows for the nine months then ended. The
results of operations for the nine month and three month periods ended
November 2, 1996 and October 28, 1995 are not necessarily indicative of
the results to be expected for the full fiscal year. The consolidated
financial statements should be read in conjunction with the financial
statement disclosures contained in the Company's 1995 Annual Report
to Shareholders.
(2) Inventory Capitalization
During the quarter ended May 4, 1996, the Company recorded a one time
credit to cost of goods sold relating to the refinement of its method of
allocating overhead to inventory. Such adjustment reduced cost of goods
sold for the first fiscal quarter by $1,284,000 and decreased the loss
per share by $.02.
(3) Financing Arrangements
In July 1996, the Company entered into revolving credit agreements with
banks aggregating $40,000,000 in unsecured lines of credit, of which
$30,000,000 is committed. The lines, which expire July 15, 1997, are
used for working capital and letter of credit purposes, and bear interest
at negotiated rates.
(4) Management Change
On September 5, 1996, the Company announced the termination of the Company's
President and Chief Executive Officer and its Executive Vice President of
Merchandising and Marketing. In accordance with severance and non competition
agreements, a one time pre-tax charge of $4.2 million, equivalent to $.07 per
share after tax, was recorded during the quarter ended November 2, 1996. As
of November 2, 1996, $528,000 of the $4.2 million had been paid.
THE BOMBAY COMPANY, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Special Note Regarding Forward-Looking Statements
Certain statements in this Form 10-Q under "Management's Discussion and
Analysis of Financial Condition and Results of Operations" constitute "forward-
looking statements" within the meaning of the Private Securities Litigation
Reform Act of 1995. Such forward-looking statements involve known and unknown
risks, uncertainties and other factors which may cause the actual results,
performance or achievements of The Bombay Company, Inc. ("Company") to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such factors
include, among others, the following: competition; seasonality; success of
operating initiatives; new product development and introduction schedules;
advertising and promotional efforts; adverse publicity; acceptance of new
product offerings; expansion of the store chain; availability, locations and
terms of sites for store development; changes in business strategy or
development plans; availability and terms of capital; labor and employee
benefit costs; changes in government regulations; risks associated with
international business; regional weather conditions; and other factors
referenced in the Company's 1995 Form 10-K Annual Report.
General
The Bombay Company, Inc. is a specialty retailer which markets traditionally
styled furniture, prints and accessories through its 432 locations of The
Bombay Company ("Bombay") retail stores in 42 states in the United States and
nine Canadian provinces. At November 2, 1996, Bombay operated 225 stores
which are in its large format of approximately 4,000 square feet. It is the
Company's intention to continue to open new large format stores and convert
the majority of the existing small stores to the large format, but not at the
same opening rates or necessarily as large as the stores opened in the prior
years. On January 13, 1995, the Company announced the closing of the
Alex & Ivy retail chain. The closure of these 59 stores was completed on
May 10, 1995.
The largest percentage of the Company's sales and operating income are
realized in the fiscal quarter that includes December (Christmas season.
Although the precise effect of inflation on operations cannot be accurately
determined, management does not believe inflation has a material effect
on sales or results of operations.
Results of Operations
Quarters ended November 2, 1996 and October 28, 1995
Net sales were $72,816,000 for the quarter ended November 2, 1996 compared to
$70,424,000 for the same period last year. Same store sales were flat when
compared to sales from the corresponding period of the prior year with new
store sales accounting for the majority of the increase.
Cost of sales, including buying and occupancy costs, was $53,481,000 for the
fiscal quarter compared to $49,052,000 for the same period last year. As a
percentage of sales, cost of sales increased to 73.4% for the quarter compared
to 69.7% for the prior year. The 3.7% increase is due to lower product margin
(4.4%) partially offset by lower buying and occupancy costs (.7%). The lower
product margin is primarily a result of increased promotional activity needed to
sell older product lines as well as the need to reduce excess inventory levels.
The percentage decrease in buying and occupancy costs reflects their relative
fixed nature measured against sales gains.
Selling, general and administrative expenses were $29,492,000 for the quarter
which included a one time pre-tax charge of $4.2 million associated with the
recent management change. Excluding this cost, selling, general and
administrative expenses were $25,292,000 or 34.7% of sales for the quarter
compared to $24,082,000 or 34.2% for the comparable prior year period. The
.5% increase is principally associated with payroll costs relative to sales.
Nine Months Ended November 2, 1996 and October 28, 1995
Net sales were $212,101,000 for the nine months ended November 2, 1996 compared
to $218,036,000 for the same period last year which included sales relating to
the closed Alex & Ivy division. Excluding Alex & Ivy, net sales for the nine
months ended October 28, 1995 were $203,307,000. Sales increases are the result
of new store openings and same store sales increases of 2% for the nine months.
Cost of sales, including buying and store occupancy costs, was $153,671,000 or
72.5% of sales for the nine months compared to $152,993,000 or 70.2% for the
same period last year. Excluding Alex & Ivy, the amounts for Bombay were
$142,081,000 or 69.9% of sales for the nine months ended October 28, 1995. The
2.6% increase for Bombay is due to lower product margin (3.7%) partially offset
by slightly lower buying and occupancy costs in relation to sales (.5%) and a
one time credit of $1,284,000 in the first fiscal quarter relating to the
refinement of the Company's method of allocating overhead to inventory (.6%).
The lower product margin is primarily a result of the need to promote older
product lines and the efforts necessary to reduce excess inventory levels. The
percentage decrease in buying and occupancy costs reflects their relative fixed
nature measured against sales gains.
Selling, general and administrative expenses were $76,547,000 or 36.1% of
sales for the nine months ended November 2, 1996 which included a one time
pre-tax cost of $4.2 million associated with the recent management change.
Excluding this cost, selling, general and administrative expenses were
$72,347,000 or 34.1% of sales compared to $70,872,000 or 32.5% for the
comparable period last year. The prior year percentage for Bombay, excluding
Alex & Ivy, was 33.0%. The 1.1% increase for Bombay is primarily related
to payroll costs partially offset by lower advertising, relative to sales.
Liquidity and Capital Resources
The primary sources of liquidity and capital resources are cash flows from
operations and bank borrowings. Historically, for approximately six months of
the year, bank borrowings have been utilized to fund seasonal inventory
purchases. In addition, the bank credit lines are used throughout the year to
support letters of credit which are used extensively for overseas merchandise
purchases. Letters of credit totaling $6,990,000 were outstanding at November
2, 1996. Bank lines total $40,000,000 of which $30,000,000 is committed under
revolving credit agreements expiring July 15, 1997.
At November 2, 1996, cash and short-term investments were $2,018,000, a
decrease of $22,061,000 since February 3, 1996. Uses of cash for the nine
months ended November 2, 1996 were primarily due to increased inventory
levels of $14,042,000 and reductions in current liabilities of $12,864,000.
The primary sources of cash were operating results, adjusted for noncash
items, of $4,273,000 and reductions of current assets of $2,620,000. Capital
expenditures for the nine months, totaling $3,746,000, included nine new
store openings and three conversions.
No additional store expansion is anticipated for the remainder of the fiscal
year. The total estimated capital expenditures for fiscal 1996 are
$5,000,000. While the Company has been significantly over-inventoried for
much of the year, inventories decreased by $676,000 from the end of the
second fiscal quarter to the end of the third fiscal quarter, historically
when inventories are at their peak in anticipation of seasonal sales
increases. The stabilization of the inventory levels has been achieved
through promotional activity, order cancellations and seasonal increase in
sales. The Company expects a significant reduction in its excess inventory
position by the end of its fiscal year and projects inventory below $80
million as compared to $88 million at the prior year end. However, higher
levels of promotional activity may need to continue after year end depending
on the inventory mix achieved related to the inventory reduction program.
The Company believes that its current cash position, cash flow from
operations and borrowings available under credit lines will be sufficient
to fund current operations and its capital expenditures program.
THE BOMBAY COMPANY, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
No reports on Form 8-K have been filed during the quarter ended November 2,
1996. No exhibits have been filed as a part of this report.
THE BOMBAY COMPANY, INC. AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE BOMBAY COMPANY, INC.
(Registrant)
/s/ Carson R. Thompson
-------------------------
Carson R. Thompson
President and Chief Executive Officer
/s/ James E. Herlihy
------------------------
James E. Herlihy
Executive Vice President
and Chief Financial Officer
Date: December 16, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from The
Bombay Company, Inc. quarterly report on Form 10-Q for the nine months
ended November 2, 1996 and is qualified in its entirety by reference to
such 10-Q.
</LEGEND>
<CIK> 0000096287
<NAME> THE BOMBAY COMPANY, INC.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> FEB-01-1997
<PERIOD-START> FEB-04-1996
<PERIOD-END> NOV-02-1996
<CASH> 2018
<SECURITIES> 0
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<INVENTORY> 102645
<CURRENT-ASSETS> 122745
<PP&E> 89899
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<BONDS> 0
0
0
<COMMON> 37908
<OTHER-SE> 106829
<TOTAL-LIABILITY-AND-EQUITY> 175978
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<CGS> 153671
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<INTEREST-EXPENSE> (152)
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<NET-INCOME> (10894)
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</TABLE>
