THE BOMBAY COMPANY, INC. AND SUBSIDIARIES
Form 10-Q
Quarter Ended August 3, 1996
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 August 3, 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
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 organization) Identification No.)
550 Bailey Avenue, Suite 700, 76107
Fort Worth, Texas
- ------------------------------------ ----------------
Address of principal executive offices) (Zip code)
(817) 347-8200
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(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 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
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Indicate the number of shares outstanding of each of the issuer's classes
of common stock as of the latest practicable date.
Class Number of shares outstanding at
August 3, 1996
- --------------------------------------------------------------------------
Common stock, $1 par 37,609,003
value
TABLE OF CONTENTS
PART I -- FINANCIAL INFORMATION
Item
- ----
1. Financial Statements
2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II -- OTHER INFORMATION
4. Submission of Matters to a Vote of Security Holders
6. 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 Six Months Ended
August 3, July 29, August 3, July 29,
1996 1995 1996 1995
--------- ------ -------- -------
<S> <C> <C> <C> <C>
Net sales $71,203 $69,669 $139,285 $147,612
Costs and expenses:
Cost of sales, buying and store 51,863 49,311 100,190 103,940
occupancy
Selling, general and 23,178 21,689 47,055 46,789
administrative
Interest, net (19) (252) (122) (570)
Store closing costs adjustment -- (1,600) -- (6,000)
Total costs and expenses 75,022 69,148 147,123 144,159
Income (loss) before income taxes (3,819) 521 (7,838) 3,453
Provision (benefit) for income (1,511) 205 (3,091) 1,357
taxes
Net income (loss) ($2,308) $316 ($4,747) $2,096
Net income (loss) per average
common share
and common equivalent share ($0.06) $0.01 ($0.13) $0.06
Average common shares and common
equivalent shares outstanding 37,572 37,613 37,885 37,527
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>
August February July
3, 3, 29,
1996 1996 1995
---------- -------- ----------
ASSETS (Unaudited) (Unaudited)
- ------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $1,755 $24,079 $22,242
Inventories 103,321 88,341 66,586
Income taxes receivable 6,828 7,249 --
Deferred taxes 2,120 3,252 3,342
Other current assets 8,635 10,214 12,791
Total current assets 122,659 133,135 104,961
Property and equipment, net 43,884 46,265 49,470
Goodwill, less amortization 582 596 611
Other assets 9,737 10,700 10,021
Total assets $176,862 $190,696 $165,063
<CAPTION>
LIABILITIES AND STOCKHOLDERS'EQUITY
- -----------------------------------
<S> <C> <C> <C>
Current liabilities:
Accounts payable and accrued $17,682 $28,275 $14,892
expenses
Accrued payroll and bonuses 2,986 3,394 3,059
Total current liabilities 20,668 31,669 17,951
Accrued rent and other liabilities 6,958 6,559 6,205
Stockholders' equity:
Preferred stock, $1 par value,
1,000,000 shares authorized -- -- --
Common stock, $1 par value,
50,000,000
shares authorized, 37,609,003,
37,362,027
and 37,153,856 shares issued, 37,609 37,362 37,154
respectively
Additional paid-in capital 74,039 72,781 71,621
Retained earnings 38,231 42,978 32,681
Cumulative effect of foreign (643) (653) (549)
currency translation
Total stockholders' equity 149,236 152,468 140,907
Total liabilities and stockholders' $176,862 $190,696 $165,063
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>
Six Months Ended
-----------------------
August 3, July 29,
1996 1995
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<S> <C> <C>
Cash flows from operating activities:
Net income (loss) ($4,747) $2,096
Adjustments to reconcile net income (loss)
to net cash from operations:
Depreciation and amortization 5,756 6,107
Deferred income taxes and other 1,708 8,019
Noncash contributions to employee 848 835
benefit plans
Store closing reserve adjustment -- (6,000)
Change in assets and liabilities:
(Increase) decrease in inventories (14,964) 5,705
(Increase) decrease in other current 3,019 (647)
assets
Decrease in current liabilities (12,607) (24,877)
Increase in noncurrent assets (318) (214)
Increase in noncurrent liabilities 517 1,397
Net cash used by operations (20,788) (7,579)
Cash flows from investing activities:
Purchases of property and equipment (2,330) (3,541)
Sales of property and equipment 163 258
Net cash used by investing activities (2,167) (3,283)
Cash flows from financing activities:
Sale of stock to employee benefit plans 407 406
Proceeds from the exercise of employee 228 2,110
stock options
Net cash provided by financing activities 635 2,516
Effect of exchange rate change on cash (4) (82)
Net decrease in cash (22,324) (8,428)
Cash at beginning of period 24,079 30,670
Cash at end of period $1,755 $22,242
<CAPTION>
Supplemental disclosures of cash flow information:
<S> <C> <C>
Cash paid during the period for income taxes $735 $698
<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 August 3,
1996 and July 29, 1995, and the results of operations and cash
flows for the six months then ended. The results of operations for
the six month and three month periods ended August 3, 1996 and July
29, 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) Subsequent Event - Management Change
------------------------------------
On September 5, 1996, the Board of Directors announced that Mr.
Carson R. Thompson replaced Mr. Robert E. M. Nourse as President
and Chief Executive Officer. Mr. Thompson had been Chairman of the
Board since 1982 and Chief Executive Officer from 1982 until his
retirement from that position in 1991. With this management
change, Mr. Clayton E. Niles, a director of the Company since 1982,
was elected to the position of Chairman of the Board. In
connection with the change, Mr. Nourse also resigned as a director
of the Company. The Board further announced the departure of Ms.
Aagje M. T. Nourse, Executive Vice President of Merchandising and
Marketing.
Mr. and Ms. Nourse are each covered by Executive Severance and
Non Competition Agreements entered into on December 8, 1992. A
charge associated with the terminations will be recorded in the
third quarter. The total costs have not been finalized but are
presently anticipated to be no less than $3 million.
THE BOMBAY COMPANY, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition
-------------------------------------------------------------------
and Results of Operations
-------------------------
General
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The Bombay Company, Inc. ("Company'") is a specialty retailer
which markets lifestyle furniture, prints and accessories through
its 431 locations of The Bombay Company ("Bombay") retail stores
in 42 states in the United States and nine Canadian provinces. At
August 3, 1996, Bombay operated 221 stores which are in its large
format of approximately 4,000 square feet. Over the long term, 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 August 3, 1996 and July 29, 1995
-----------------------------------------------
Net sales were $71,203,000 for the quarter ended August 3, 1996
compared to $69,669,000 for the same period last year which
included sales relating to the closed Alex & Ivy division.
Excluding Alex & Ivy, net sales were $69,164,000 for the quarter
ended July 29, 1995. 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
$51,863,000 for the fiscal quarter compared to $49,311,000 for the
same period last year. As a percentage of sales, cost of sales
increased to 72.8% for the quarter compared to 70.8% for the prior
year. Excluding Alex & Ivy, the percentage was 70.7% for the
quarter ended July 29, 1995. The 2.1% increase for Bombay,
excluding Alex & Ivy, is due to lower product margin (2.3%)
partially offset by lower buying and occupancy costs (.2%). The
lower product margin is a result of a continuing shift in the sales
mix as consumers purchase a greater portion of sale or special
purchase merchandise compared to full price merchandise as well as
slightly higher freight and handling costs. The percentage
decrease in buying and occupancy costs reflects their relative
fixed nature measured against sales gains.
Selling, general and administrative expenses were $23,178,000 or
32.6% of sales for the quarter compared to $21,689,000 or 31.1% for
the comparable prior year period. The percentage for Bombay,
excluding Alex & Ivy, was 31.2% for the quarter ended July 29,
1995. The 1.4% increase for Bombay is principally associated with
payroll costs partially offset by lower advertising, relative to
sales.
Six Months Ended August 3, 1996 and July 29, 1995
-------------------------------------------------
Net sales were $139,285,000 for the six months ended August 3,
1996, compared to $147,612,000 for the same period last year.
Excluding Alex & Ivy, sales for the six months ended July 29, 1995
were $132,883,000. Sales increases are the result of new store
openings and same store sales increases of 2% for the six months.
Cost of sales, including buying and store occupancy costs, was
$100,190,000 or 71.9% of sales for the six months compared to
$103,940,000 or 70.4% for the same period last year. Excluding
Alex & Ivy, the amounts for Bombay were $93,028,000 or 70.0% of
sales for the six months ended July 29, 1995. The 1.9% increase
for Bombay is due to lower product margin (3.3%) 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 (.9%). The lower product margin
is a result of a continuing shift in the sales mix as consumers
purchase a greater portion of sale or special purchase merchandise
compared to full price merchandise as well as slightly higher
freight and handling costs. The percentage decrease in buying and
occupancy costs reflects their relative fixed nature measured
against sales gains.
Selling, general and administrative expenses were $47,055,000 or
33.8% of sales for the six months ended August 3, 1996 compared to
$46,789,000 or 31.7% for the comparable prior year period. The
percentage for Bombay, excluding Alex & Ivy, was 32.4% for the six
months ended July 29, 1995. The 1.4% increase for Bombay is
primarily related to payroll costs.
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 $23,022,000 were outstanding
at August 3, 1996. Bank lines total $40,000,000 of which
$30,000,000 is committed under revolving credit agreements expiring
July 15, 1997.
At August 3, 1996, cash and short-term investments were $1,755,000,
a decrease of $22,324,000 since February 3, 1996. Uses of cash for
the six months ended August 3, 1996 were primarily due to increased
inventory levels of $14,964,000 and reductions in current
liabilities of $12,607,000. The primary sources of cash were
operating results, adjusted for noncash items, of $3,565,000 and
reductions of current assets of $3,019,000. Capital expenditures
for the six months, totaling $2,330,000, included three new store
openings and two conversions.
The store expansion program for the remainder of the fiscal year
anticipates approximately five new stores and two conversions. The
total estimated capital expenditures for fiscal 1996 are
$5,000,000. Inventory levels at $103,321,000 are $36,735,000 over
prior year levels and are between $20 million and $30 million over
desired levels. Through promotional selling, order cancellations
and seasonal increase in sales, the Company expects a significant
reduction in its over-inventory position by the end of its fiscal
year. 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 4. Submission of Matters to a Vote of Security Holders
------------------------------------------------------------
(a) The Annual Meeting of Shareholders of the Company was held on
May 16, 1996.
(b) Directors elected to hold office are listed in the attached
Proxy Statement which is incorporated herein by reference.
Directors elected: Clayton E. Niles, Carson R. Thompson and
Shirley Young. Directors continuing: Barbara Bass,
Edmund H. Damon, Robert S. Jackson, A.
Roy Megarry, Robert E. M. Nourse and Robert E. Runice.
(c) Other matters voted upon:
(1)Election of Directors:
Clayton E. Niles - For: 31,944,078 Against: 925,048
Carson R. Thompson - For: 31,952,275 Against: 916,851
Shirley Young - For 31,951,221 Against: 917,904
(2)To approve the adoption of the 1996 Long-Term Incentive Stock
Plan, as described in the attached Proxy Statement,
which plan description is incorporated herein by reference.
Voting results: For: 13,040,915
Against: 11,330,147
Abstain: 196,453
Non-votes: 8,301,610
Item 6. Exhibits and Reports on Form 8-K
(a) The Exhibits filed as a part of this report are listed below.
Exhibit No. Description
----------- -----------------------------
20 Notice of Annual Meeting of
Shareholders and Proxy
Statement, filed with the
Commission on April 3, 1996.
Such Exhibit is incorporated
herein by reference.
(b) No reports on Form 8-K were filed during the quarter ended
August 3, 1996.
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: September 17, 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 six months
ended August 3, 1996 and is qualified in its entirety by reference to such
10-Q.
</LEGEND>
<CIK> 0000096287
<NAME> THE BOMBAY COMPANY, INC.
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<S> <C>
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