UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [NO FEE REQUIRED, EFFECTIVE OCTOBER 7, 1996]
For the fiscal year ended February 1, 1997
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
--------------- ---------------
Commission file number 1-7288
THE BOMBAY COMPANY, INC.
(Exact name of registrant as specified in its charter)
A Delaware Corporation 75-1475223
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
550 Bailey Avenue
Fort Worth, Texas 76107
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code)
(817) 347-8200
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which Registered
Common Stock, Par Value, $1 Per Share New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
NONE
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.
The aggregate market value of the voting stock held by nonaffiliates of the
registrant based on the closing price of the stock on April 21, 1997 was
approximately $111,965,242.
Shares outstanding at April 21,1997: Common Stock, $1 Par Value: 38,028,371
DOCUMENTS INCORPORATED BY REFERENCE:
(a) Portions of the Annual Report to Shareholders for the Fiscal Year Ended
February 1, 1997 (as expressly incorporated by reference in Parts I, II, and
IV).
(b) Portions of the Definitive Proxy Statement for the Annual Meeting to be
held May 22, 1997 (as expressly incorporated by reference in Part III).
FORM 10-K
PART I
ITEM 1. BUSINESS.
General
The Bombay Company, Inc. (the "Company") is a specialty retailer which
markets classic and traditional furniture, prints and accessories through a
network of 427 retail stores in the United States and Canada. For financial
information by geographic areas, see Note 7 of Notes to Consolidated Financial
Statements, located on page 23 of the 1996 Annual Report to Shareholders, filed
as Exhibit 13 to this Form 10-K Annual Report. Such Exhibit is incorporated
herein by reference.
<F7>
The Company has experienced declining profitability over the past several
years which it believes is the result of its previous rapid expansion with
increased expense structure and failure to introduce the appropriate quantity of
new successful products at a sufficient rate to improve the productivity of the
larger stores. Management is addressing these issues and believes that its
current focus on introducing classic and traditional furnishings to offer more
complete, cohesive collections with a broader market appeal will help improve
the profitability of the Company.
Merchandise Sales, Purchasing and Distribution
The fiscal 1996 sales mix consisted of: 49% furniture, 27% accessories, 16%
wall decor (principally prints, mirrors and sconces) and 8% lamps and other
categories. Bombay products internally designed or styled represent
approximately 95% of total sales. During fiscal year 1996, the Company's
merchandise assortment consisted of approximately 2,600 SKU's. The Company
regularly updates its merchandise assortment through introducing new products
and discontinuing others as they approach the end of their life cycles. During
the year, approximately 1,000 new SKU's were introduced as compared to
approximately 1,500 in fiscal year 1995. While new product is critical to the
Company's success, management also has recognized the need to present a more
cohesive collection for the customer. The Company has made some strides in this
direction during fiscal 1996 and stronger efforts are continuing toward the
development of more appropriate mixes of furniture and accessory offerings.
Merchandise is manufactured to Company specifications through a network of
contract manufacturers located principally in Asia and North America.
Approximately 60% of production needs are provided from overseas sources.
Branch offices located in Taiwan, Malaysia and Indonesia and agents in various
countries locate prospective vendors, coordinate production requirements with
manufacturers, provide technical expertise and quality control.
Approximately 70% of the Company's merchandise requirements are supplied by
35 contract manufacturers in seven countries. Although no long-term production
agreements exist with manufacturers, there are long standing relationships with
many of the major vendors. Formal agreements with major manufacturers are in
place which prohibit production of proprietary products for any other party.
Additional manufacturing capacity and alternative sources, both domestic and
international, continue to be added through new vendors and plant expansions by
existing vendors.
Usually, it takes several months from the time a merchandise order is placed
with an overseas manufacturer until the goods are received at centralized
distribution centers. Order lead times are slightly less for domestic
manufacturers principally due to shorter shipping time. Lead times can vary
depending on seasonality factors especially in months when factories are
producing at or near peak capacity to meet seasonal demands. While overseas
purchases are principally denominated in U.S. dollars, significant foreign
currency fluctuations could adversely affect the Company's ability to source
product in any one country.
Store inventories are replenished from three distribution centers in the
United States and one in Canada. The distribution centers are strategically
located and provide the capability to replenish the majority of store
inventories within 48 hours of the time when the order is processed.
Stores and Real Estate
The stores offer a wide variety of attractively styled, ready-to-assemble
furniture, prints and accessories, with a strong emphasis on value and quality.
Significant attention is given to visual merchandising in order to display
products in the most attractive setting.
To accommodate the increasing number of products, the Company introduced a
large format Bombay store in late fiscal 1992. The large format stores
average 4,000 square feet, while the regular stores average 1,700 square feet.
Presently, the Company's store opening program calls for large format stores
ranging in size from 2,500 to 3,500 square feet. At February 1, 1997, 224 large
format Bombay stores were in operation, including 134 stores that have been
converted from regular stores since fiscal 1992. Over 90% of all stores are
located in major shopping malls. At February 1, 1997, stores were operating in
42 states in the United States and nine of ten provinces in Canada, as
illustrated in the map below.
{The paper version of the Annual Report on Form 10-K contains herein a map
of the United States and Canada with states and provinces outlined, labeled
with the appropriate number of Bombay stores located in each, as follows:
United States:
WA - 8 OR - 4 CA - 49
NV - 3 UT - 3 AZ - 5
NM - 1 CO - 4 NE - 1
KS - 4 OK - 4 TX - 23
MN - 6 IA - 1 MO - 7
AR - 1 LA - 7 WI - 3
IL - 18 MS - 1 MI - 11
IN - 4 KY - 2 TN - 12
AL - 5 OH - 20 NH - 3
MA - 10 RI - 2 CT - 6
NY - 24 PA - 20 NJ - 15
DE - 3 MD - 11 DC - 1
WV - 1 VA - 14 NC - 9
SC - 4 GA - 12 FL - 31
Canada:
BC - 7 AB - 4 SK - 1
MB - 2 ON - 25 PQ - 9
NB - 3 NF - 1 NS - 2}
Bombay store locations by geographic
region are as follows:
South 102
Northeast 93
Midwest 88
West 90
Canada 54
---
Total 427
---
---
Competition
The home furnishings and decorative accessories market is highly fragmented.
The Company faces competition from furniture stores, department stores and other
specialty retailers. The Company believes that it competes primarily on the
basis of selection, quality and value of merchandise.
Employees
The Company has approximately 5,000 employees, which include approximately
3,000 part-time employees and is not a party to any union contract. Employee
relations are considered to be good.
Seasonality
Operating results are subject to seasonal variation. Historically, the
largest proportion of sales and substantially all of the income occurs in the
fiscal quarter that includes December (the Christmas season). Cash balances
increase significantly in December due to the Christmas business.
Intangibles
The Company owns a number of copyright, trademark and tradename
registrations. Management considers these intangibles to be valuable assets and
defends them as necessary.
Risks and Uncertainties
All statements in this Annual Report on Form 10-K, including those
incorporated herein by reference, that do not reflect historical information are
forward-looking statements made in reliance upon the ``afe harbor'' provisions
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 Company
to be materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such factors include,
but are not limited to, the following: competition; seasonality; success of
operating initiatives; new product development and introduction schedules;
acceptance of new product offerings; advertising and promotional efforts;
adverse publicity; 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 and regional weather conditions.
ITEM 2. PROPERTIES.
The Company owns its United States headquarters office complex, and leases
stores and distribution centers under numerous operating leases, generally with
10 year terms. At February 1, 1997, owned office space was approximately
121,000 square feet of which the Company occupies approximately 71,000 square
feet. Leased distribution/office and retail space was approximately 807,000 and
1,260,000 square feet, respectively, with leases expiring between 1997 and 2011.
Distribution facilities are located in the Atlanta, Fort Worth, Philadelphia and
Toronto areas. Office facilities are located in the Fort Worth and Toronto
areas. Adequate insurance coverage is carried on all leased properties.
For additional lease information, see Note 4 of Notes to Consolidated
Financial Statements, located on page 21 of the 1996 Annual Report to
Shareholders, filed as Exhibit 13 to this Form 10-K Annual Report. Such Exhibit
is incorporated herein by reference.
<F4>
ITEM 3. LEGAL PROCEEDINGS.
The information in response to Item 3 is contained in Note 4 of Notes to
Consolidated Financial Statements, located on page 21 of the 1996 Annual Report
to Shareholders, filed as Exhibit 13 to this Form 10-K Annual Report. Such
Exhibit is incorporated herein by reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no matters submitted to a vote of security holders during the
fourth quarter of the 1996 fiscal year.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
(a) The principal market for the registrant's common stock is the New York
Stock Exchange. The high and low trading prices are contained in the section
entitled `Price Range of Common Stock,' located on page 26 of the 1996 Annual
Report to Shareholders, filed as Exhibit 13 to this Form 10-K Annual Report.
Such Exhibit is incorporated herein by reference.
<F2>
(b) The approximate number of record holders of common stock on April 15,
1997 was 2,700.
(c) The Company has bank credit agreements with restrictions related to
payment of dividends. The Company has not paid dividends the past two years and
will continue to utilize available funds primarily for the expansion of its
retail stores and operating purposes.
ITEM 6. SELECTED FINANCIAL DATA.
The selected financial and operating data in response to Item 6 is contained
in the section entitled "Selected Financial Data," located on page 12 of the
1996 Annual Report to Shareholders, filed as Exhibit 13 to this Form 10-K
Annual Report. Such Exhibit is incorporated herein by reference.
<F3>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The information in response to Item 7 is contained in the section entitled
"Management's Discussion and Analysis," located on pages 13 to 15 of the 1996
Annual Report to Shareholders, filed as Exhibit 13 to this Form 10-K Annual
Report. Such Exhibit is incorporated herein by reference.
<F5>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information in response to Item 8 is contained in the 1996 Annual Report
to Shareholders, filed as Exhibit 13 to this Form 10-K Annual Report. Such
Exhibit is incorporated herein by reference. A cross-reference for location of
the requested information is below.
<TABLE>
<CAPTION>
Page Number(s) in
Annual Report*
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<S> <C>
Consolidated Statements of Operations for the Years Ended February 1, 1997,
February 3, 1996 and July 3, 1994 and
the Seven Months Ended January 28, 1995 16
Consolidated Balance Sheets at February 1, 1997 and February 3, 1996 17
Consolidated Statements of Cash Flows for the Years Ended February 1, 1997,
February 3, 1996 and July 3, 1994 and the Seven Months Ended
January 28, 1995 18
Consolidated Statements of Stockholders' Equity for the Years Ended
February 1, 1997, February 3, 1996 and July 3, 1994 and
Seven Months Ended January 28, 1995 19
Notes to Consolidated Financial Statements 20-24
Report of Independent Accountants 25
Unaudited Quarterly Financial Data 26
<FN>
*The indicated pages of The Bombay Company, Inc. 1996 Annual Report to
Shareholders are filed as Exhibit 13 to this Annual Report on Form 10-K. Such
Exhibit is incorporated herein by reference.
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES.
There have been no changes in or disagreements with accountants on accounting
or financial disclosures.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information required by this item appears under the captions "Election
of Directors", "Executive Officers of the Company" and "Section 16(a)
Beneficial Ownership Reporting Compliance" in the Definitive Proxy Statement
of The Bombay Company, Inc. relating to the Company's Annual Meeting of
Shareholders, which information is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this item appears under the captions "Executive
Compensation" and "Compensation of Directors" in the Definitive Proxy Statement
of The Bombay Company, Inc. relating to the Company's Annual Meeting of
Shareholders, which is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this item appears under the caption "Security
Ownership" in the Definitive Proxy Statement of The
Bombay Company, Inc. relating to the Company's Annual Meeting of Shareholders,
which information is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this item appears under the caption "Certain
Transactions" in the Definitive Proxy Statement of The Bombay Company, Inc.
relating to the Company's Annual Meeting of Shareholders, which information
is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a)The following documents are filed as a part of this Report for The Bombay
Company, Inc. and its subsidiaries:
(1)The financial statements as cross-referenced in Item 8 of this Form 10-
K Annual Report, together with the report thereon of Price Waterhouse
LLP dated March 11, 1997, appearing in the accompanying 1996 Annual
Report to Shareholders are incorporated by reference in this Form 10-K
Report. With the exception of the aforementioned information and
information incorporated in Items 1, 2, 3, 5, 6 and 7, the 1996 Annual
Report to Shareholders is not deemed filed as part of this Report. The
following financial statement schedule should be read in conjunction
with the financial statements in such 1996 Annual Report to
Shareholders. Financial statement schedules not included in this Form
10-K Annual Report have been omitted because they are not applicable or
the required information is shown in the financial statements or notes
thereto.
(2)Financial Statement Schedule:
Report of Independent Accountants on Financial Statement Schedule
Schedule II-Valuation and Qualifying Accounts and Reserves for the
Years Ended February 1, 1997, February 3, 1996 and July 3, 1994
and the Seven Months Ended January 28, 1995
(3)Exhibits:
A list of exhibits required to be filed as part of this report is set
forth in the Index to Exhibits, which immediately
precedes such exhibits, and is incorporated herein by reference.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter ended
February 1, 1997.
<AUDIT-REPORT>
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors
of The Bombay Company, Inc.
Our audits of the consolidated financial statements referred to in our report
dated March 11, 1997, appearing on page 25 of the 1996 Annual Report to
Shareholders of The Bombay Company, Inc. (which report and consolidated
financial statements are incorporated by reference in this Annual Report on Form
10-K) also included an audit of the Financial Statement Schedule listed in Item
14(a) of this Form 10-K. In our opinion, this Financial Statement Schedule
presents fairly, in all material respects, the information set forth therein
when read in conjunction with the related consolidated financial statements.
PRICE WATERHOUSE LLP
Fort Worth, Texas
March 11, 1997
</AUDIT-REPORT>
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.
THE BOMBAY COMPANY, INC.
(Registrant)
Date: April 23, 1997 /s/ROBERT S. JACKSON
-----------------------
Robert S. Jackson
Interim President and
Chief Executive Officer, Director
Pursuant to the requirements of the Securities and Exchange Act of 1934, this
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Name Position Date
---- -------- ----
Chairman of the Board
- ------------------
Clayton E. Niles
/s/ BARBARA BASS Director April 23, 1997
- ------------------
Barbara Bass
/s/ EDMUND H. DAMON Director April 29, 1997
- -------------------
Edmund H. Damon
Director
- ------------------
A. Roy Megarry
/s/ ROBERT E. RUNICE Director April 25, 1997
- --------------------
Robert E. Runice
/s/ CARSON R. THOMPSON Director April 30, 1997
- ----------------------
Carson R. Thompson
- ---------------------- Director
Shirley Young
Executive Vice President and
/s/ JAMES E. HERLIHY Chief Financial Officer
- ----------------------
James E. Herlihy May 1, 1997
/s/ ELAINE D. CROWLEY Vice President, Finance and Treasurer
- -----------------------
Elaine D. Crowley May 1, 1997
<TABLE>
THE BOMBAY COMPANY, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(Dollars in Thousands)
<CAPTION>
Additions
----------------------
Charged to Charged to
Balance at Costs Other Balance at
Beginning and Accounts - Deductions - End of
Description of Period Expenses Describe Describe Period
------------ --------- -------- -------- ------------ ---------
<S> <C> <C> <C> <C> <C>
Twelve Months Ended
July 3, 1994
- -------------------------
Store Conversion Reserve -
Asset Writedown $12,095 - - 3,669(1) $8,426
Seven Months Ended
January 28, 1995
- -------------------------
Store Conversion Reserve -
Asset Writedown $8,426 - - 1,473(1) $6,953
Store Closing Reserve:
Asset Writedown $ - 20,075 - 928(2) $19,147
Reserve:
Lease Obligations $ - 19,475 - - $19,475
Employee Separations $ - 1,450 - 101(3) $1,349
Twelve Months Ended
February 3, 1996
- -------------------------
Store Conversions Reserve:
Asset Writedowns $6,953 - - 1,630(1) $5,323
Store Closing Reserve:
Asset Writedown $19,147 - - 19,147(2,5) $ -
Reserve:
Lease Obligations $19,475 - - 19,475(4,5) $ -
Employee Separations $1,349 - - 1,349(3,5) $ -
Twelve Months Ended
February 1, 1997
- -------------------------
Store Conversions Reserve-
Asset Writedown $5,323 - - 1,683(1) $3,640
<FN>
(1) Primarily remaining book value of leasehold improvements of Bombay
stores, written off as they were converted to the large store format.
(2) Write-off of sold or disposed assets.
(3) Severance payments related to the closure of the Alex & Ivy division.
(4) Lease termination payments related to the closure of the Alex & Ivy
division.
(5) Includes reversals of $952,000, $4,626,000 and $422,000 related to
Asset Writedown, Lease Obligations and Employee Separations, respectively,
reflecting lower costs than originally projected.
</TABLE>
THE BOMBAY COMPANY, INC. AND SUBSIDIARIES
INDEX TO EXHIBITS
Filed with the Annual Report on Form 10-K for the fiscal year ended February 1,
1997.
Number Description
3(a) -Restated Certificate of Incorporation dated January 1,
1993 and Certificate of Amendment of the Restated
Certificate of Incorporation dated March 31, 1993 and
Bylaws, as amended and restated effective June 24,
1993. (1)
4 - Preferred Stock Purchase Rights Plan. (2)
10(a) -The Bombay Company, Inc. 1986 Stock Option Plan. (3)
10(b) -Form of Stock Option Agreement used to evidence stock
options granted under The Bombay Company, Inc. 1986
Stock Option Plan. (4)
10(c) -Executive Officers Incentive Compensation Plan. (8)
10(d) -Form of Indemnification Agreement. (3)
10(e) -The Bombay Company, Inc. 1991 Director Stock Option
Plan. (5)
10(f) -Form of Director Stock Option Agreement used to
evidence stock option grants under The Bombay Company,
Inc. 1991 Director Stock Option Plan. (6)
10(g) -The Bombay Company, Inc. Supplemental Stock Program. (6)
10(h) -Consulting Agreement dated April 1, 1991 between Carson
R. Thompson and the Registrant. (6)
10(i) -The Bombay Company, Inc. 1993 Stock Deferral Plan for
Non-Employee Directors. (7)
10(j) -Form of Executive Severance and Non-Competition
Agreement dated December 8, 1992. (1)
10(k) -Executive Long Term Disability Plan. (9)
10(l) -The Bombay Company, Inc. 1996 Long-Term Incentive Stock
Plan. (10)
10(m) -Form of Award Agreement under the 1996 Long-Term
Incentive Stock Plan.
13 -The Bombay Company, Inc. 1996 Annual Report to
Shareholders is filed as exhibit hereto solely to the
extent portions thereof are expressly incorporated
herein by reference.
18 -Letter re: change in accounting principles.
22 -Subsidiaries of the Registrant. (9)
23 -Definitive Proxy Statement of the Company relating to
Annual Meeting of Shareholders (certain portions of
such Proxy Statement are incorporated herein by
reference and are identified by reference to caption in
the text of this report). (11)
24 -Consent of Independent Accountants.
[FN]
(1)Filed with the Commission as an Exhibit to the Company's Annual Report on
Form 10-K for the year ended July 4, 1993. Such Exhibit is incorporated
herein by reference.
(2)Filed with the Commission as an Exhibit to the Company's Registration
Statement on Form 8A filed June 12, 1995. Such Exhibit is incorporated
herein by reference.
(3)Filed with the Commission as an Exhibit to the Company's Definitive Proxy
Statement dated October 10, 1986, which Proxy Statement was filed with the
Commission as an Exhibit to the Company's Annual Report on Form 10-K for the
year ended June 30, 1986. Such Exhibit is incorporated herein by reference.
(4)Filed with the Commission as an Exhibit to the Company's Registration
Statement on Form S-2, No. 33-26807, filed February 3, 1989. Such Exhibit is
incorporated herein by reference.
(5)Filed with the Commission as an Exhibit to the Company's Definitive Proxy
Statement dated October 8, 1991, which Proxy Statement was filed with the
Commission as an Exhibit to the Company's Annual Report on Form 10-K for the
year ended June 30, 1991. Such Exhibit is incorporated herein by reference.
(6)Filed with the Commission as an Exhibit to the Company's Annual Report on
Form 10-K for the year ended June 28, 1992. Such Exhibit is incorporated
herein by reference.
(7) Filed with the Commission as an Exhibit to the Company's Definitive Proxy
Statement dated September 7, 1993, which Proxy Statement was
filed with the Commission as an Exhibit to the Company's Annual Report on
Form 10-K for the year ended July 4, 1993. Such Exhibit is incorporated
herein by reference.
(8)Filed with the Commission as an Exhibit to the Company's Definitive Proxy
Statement dated September 2, 1994, which Proxy Statement was
filed with the Commission as an Exhibit to the Company's Annual Report on
Form 10-K for the year ended July 3, 1994. Such Exhibit is incorporated
herein by reference.
(9)Filed with the Commission as an Exhibit to the Company's Annual Report on
Form 10-K for the year ended July 3, 1994. Such Exhibit is incorporated
herein by reference.
(10)Filed with the Commission as an Exhibit to the Company's Definitive Proxy
Statement dated April 3, 1996, which Proxy Statement was filed with the
Commission as an Exhibit to the Company's Annual Report on Form 10-K for the
year ended February 3, 1996. Such Exhibit is incorporated herein by
reference.
(11) Filed with the Commission on April 9, 1997.
<TABLE>
<F3>
Selected Financial Data
The Bombay Company, Inc. and Subsidiaries
<CAPTION>
Year Ended Seven Year Ended
Months
------------------ Ended ---------------------------
February 1 February 3 January 28 July 3 July 4 June 28
1997 1996 1995 1994 1993 1992
---------- ---------- ---------- ------ ------ -------
Financial Data:
<S> <C> <C> <C> <C> <C> <C>
Net sales(1) $336,303 $345,399 $241,465 $317,452 $231,737 $176,023
Net sales increase 2% - %(6) 23 % 37% 32% 26%
Same store sales increase (decrease) 2% (9)%(6) (1)% 11% 11% 13%
Income (loss) from continuing
operations:(1)
Before accounting change $(2,840) $12,393(2) $(14,714)(2) $22,895 $8,190(3) $9,602
Cumulative effect of accounting change 835 - - - - -
Net income (loss) (2,005) 12,393(2) (14,714)(2) 22,895 8,190(3) 9,602
Per common share and common equivalent
share:(4)
Income (loss) before accounting change (.07) .33(2) (.39)(2) .60 .23(3) .29
Cumulative effect of accounting change .02 - - - - -
Net income (loss) (.05) .33(2) (.39)(2) .60 .23(3) .29
Total assets(1) 195,363 190,696 189,747 180,548 143,436 79,178
Stockholders' equity(1) 153,933 152,468 134,810 147,006 115,818 59,114
Return on assets (1.0)% 6.5% N/C(5) 14.4% 8.3% 13.2%
Return on equity (1.3)% 8.6% N/C(5) 17.4% 10.7% 18.1%
Operating Data:
Average sales per store
open for full fiscal period(1) $784 $765(6) $773(6) $699 $604 $518
Average sales per square foot $262 $263(6) $304(6) $323 $340 $320
Number of stores:
Beginning of year 434 486 447 383 342 312
Opened 9 11 40 71 44 33
Closed 16 63 1 7 3 3
End of year 427 434 486 447 383 342
Store composition:
Bombay - Regular 203 216 230 268 328 336
Bombay - Large format 224 218 198 141 46 3
Alex & Ivy - - 58 38 9 3
Retail square footage:(1)
Bombay - Regular 358 371 396 457 553 547
Bombay - Large format 902 885 810 565 180 11
Alex & Ivy - - 202 126 20 6
Total 1,260 1,256 1,408 1,148 753 564
The Company has paid no cash dividends during the periods presented.
<FN>
(1)In thousands.
(2)Includes pre-tax operations realignment costs of $50,000,000, equivalent
to $.80 per share in the Seven Month Period, and credit of $6,000,000,
equivalent to $.10 per share in Fiscal 1995.
(3)Includes pre-tax store conversion costs of $13,000,000, equivalent to
$.22 per share.
(4)Adjusted to reflect all stock splits paid through December 31, 1993.
(5)Not comparable due to Seven Month Period.
(6)Excludes the closed Alex & Ivy division; comparatives are based on
twelve month periods.
</TABLE>
<F5>
Management's Discussion and Analysis
General
See Note 1 of Notes To Consolidated Financial Statements for fiscal
reporting periods.
<F1>
The Company operates a chain of Bombay Company retail stores in the
United States and Canada. Prior to Fiscal 1995, the Company also
operated the Alex & Ivy retail chain whose closure was announced on
January 13, 1995 and completed on May 10, 1995. As such, the discussion
following relates primarily to the ongoing operations of Bombay. The
discussion should be read in conjunction with the Table below which
summarizes four year comparable data for the total Company and also
presents results excluding the closed Alex & Ivy division.
The greater percentage of sales and operating income is realized in
the quarter that includes December (Christmas season). Even though the
precise effect of inflation on operations cannot be accurately
determined, management does not believe inflation has a material impact
on sales or results of operations.
Net Sales
Net sales, excluding Alex & Ivy, increased 2% to $336.3 in Fiscal
1996 from $330.7 million due primarily to a 2% increase in same store
sales (stores in existence for one year or more). During the period,
the number of transactions decreased 2% while the average sale per
transaction increased 4% to $85. Furniture sales continue to be the
predominant component in the sales mix representing 49% of the business
as compared to 47% last year. All regions of the Company contributed to
the sales gain except the Midwest which showed slight declines. The
Company's sales performance was driven in part by the promotions needed
to reduce its over inventory position.
Net sales, excluding Alex & Ivy, were $330.7 million in Fiscal 1995
compared to $331.4 million during the comparable twelve months. The
sales decline for Bombay was the result of a 9% decrease in same store
sales, which was offset by sales increases from new stores equal to 5%.
The period showed a 1% decrease in the number of customer transactions,
while the average sale per transaction increased approximately 1%.
For the Seven Month Period, new stores were the most significant
component of the 16% sales increase for Bombay with same store sales
declining 1%. The Seven Month Period showed a 16% increase in the
number of customer transactions but the average sale per transaction
was the same from period to period. Furniture sales increased
approximately 3% of the sales mix for the Seven Month Period.
The Bombay sales increase in Fiscal 1994 was attributable to new
stores and increased same store sales of 11%. Same store sales
increased 15% in the first six months and 6% in the last six months of
Fiscal 1994. The sales increase in Fiscal 1994 resulted from a 39%
increase in customer transactions while the average sale per
transaction decreased 5%. The lower average sale per transaction
reflects a change in sales mix. Accessories, which are generally lower
priced items, accounted for a 2% increase in the sales mix whereas
furniture declined approximately 1%. Geographically, all regions
contributed substantially to the positive sales increases in 1994 with
the Southern Region being the strongest performer.
<TABLE>
Table
----------------------------------------------------------------------------------------------------------------------
<CAPTION>
Cost of Sales, Buying &
Sales Increase (Decrease) Store Occupancy Costs Selling, General & Administrative
------------------------------- --------------------------- ---------------------------------
Total All New Same Total % of Increase Total % of Increase
Period Sales Stores Stores Stores** Costs Sales (Decrease) Expenses Sales (Decrease)
------ ----- ------ ------ -------- ----- ----- ---------- -------- ----- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Excluding Alex & Ivy
Twelve Months Ended January:
1997 $336.3 2% 2% 2% $233.9 69.6% 3.5% $107.4 31.9% 2.1%
1996 330.7 - 5 (9) 218.7 66.1 3.6 98.4 29.8 1.0
1995 331.4 * * * 207.1 62.5 * 95.5 28.8 *
Seven Months Ended January:
1995 217.3 16 11 (1) 136.0 62.5 6.7 62.9 28.9 .2
1994 186.7 38 15 14 104.2 55.8 * 53.6 28.7 *
Fiscal Year Ended June:
1994 300.7 32 14 11 175.2 58.3 .6 85.9 28.6 (1.6)
Total Company
Twelve Months Ended January:
1997 $336.3 2% 2% 2% $233.9 69.6% 3.1% $107.4 31.9% 2.3%
1996 345.4 (5) 4 (8) 229.6 66.5 2.9 102.3 29.6 .2
1995 362.9 * * * 230.8 63.6 * 106.7 29.4 *
Seven Months Ended January:
1995 241.5 23 16 (1) 153.7 63.6 7.2 70.9 29.4 .3
1994 196.0 43 20 11 110.6 56.4 * 57.1 29.1 *
Fiscal Year Ended June:
1994 317.5 37 17 11 187.8 59.1 1.2 92.9 29.3 (1.6)
<FN>
* Not meaningful or not available.
**Does not include converted stores until they have been operated a
full twelve months after conversion.
</TABLE>
Excluding Alex & Ivy, new store openings for Fiscal 1996, Fiscal 1995,
the Seven Month Period and Fiscal 1994 were 9, 11, 20 and 39. Also
during these periods, 3, 10, 38 and 56 small format Bombay stores were
converted to larger format stores while 16, 5, 1 and 4 stores
(predominately smaller format stores) were closed. Most new stores were
opened in existing market areas for Bombay.
Cost Of Sales, Buying And Store Occupancy Costs
Excluding Alex & Ivy, cost of sales, including buying and occupancy
costs, for Fiscal 1996 were $233.9 million or 7% higher than Fiscal
1995. As a percentage of sales, these costs increased to 69.6% in
Fiscal 1996 compared to 66.1% in Fiscal 1995. The increase was
primarily the result of a higher cost of sales as the Company disposed
of excess inventory through a series of aggressive promotions
especially during the second half of the year. The excessive inventory
levels also contributed to higher warehouse and freight costs which
adversely impacted margins. Occupancy costs as a percentage of sales
and total retail square footage were relatively flat compared to Fiscal
1995.
Excluding Alex & Ivy, costs of sales, including buying and store
occupancy costs for Fiscal 1995 were $218.7 million, or 6% higher than
the comparable twelve month period. As a percentage of sales, these
costs increased to 66.1% in Fiscal 1995 from 62.5% in the comparable
period of the prior year. The increase in costs for Bombay is due to
higher occupancy costs (2.7%) and higher product costs (.9%). The
occupancy costs percentage increase is the result of the retail square
footage added during the previous two years and the effect of declining
same store sales relative to the fixed nature of occupancy costs.
During Fiscal 1995, retail square footage for Bombay stores increased
only 4% to 1,256,000 square feet. The lower product margin is primarily
due to the effect of lowering selected retail prices, increasing
warehouse and freight costs, and a shift in the sales mix as consumers
tended to purchase a greater portion of merchandise on sale compared to
full price merchandise.
Bombay costs were $31.8 million, or 31%, higher during the Seven
Month Period than the comparable prior seven month period. The
percentage of sales increase of 6.7% compared to the same period in the
prior year reflects lower product margin of 4.6% and higher buying and
store occupancy costs of 2.1%. The lower product margin was primarily
due to: (1) $5 million Bombay inventory writedown, principally
nonfurniture products (see Note 9 of Notes To Consolidated Financial
Statements); (2) costs associated with a new distribution center opened
September 1994, as well as inefficiencies related to excess inventory
levels and (3) the acceleration of programs to discontinue selected
furniture products from normal sale period in January 1995 to begin
October 1994. The higher occupancy costs reflect increased square
footage.
<F9>
For Fiscal 1994, Bombay's costs increased 33% over the prior year
while sales increased 32%. As a percentage of sales, costs were 58.3%
or .6% higher than Fiscal 1993 reflecting higher buying and occupancy
costs related to the store expansion programs undertaken. During Fiscal
1994, retail square footage increased approximately 40% to 1,028,000
square feet. The slightly lower product margin reflects the mix between
promotional and nonpromotional periods.
Selling, General And Administrative Expenses
For Fiscal 1996, Bombay's selling, general and administrative
expenses were $107.4 million or 31.9% of sales compared to $98.4
million or 29.8% last year. The Fiscal 1996 amount includes a $4.2
million charge (1.2% of sales) recorded in connection with the
management change which took place in September 1996. (See Note 8 of
Notes To Consolidated Financial Statements.) The remaining increase
relates to the higher payroll costs (1.2%), costs incurred in
connection with the closing of unprofitable Bombay stores (.2%), higher
insurance costs (.2%) and higher recruiting and training costs (.2%)
which were offset by lower advertising expenses (.9%).
<F8>
Excluding the cost associated with Alex & Ivy, Bombay costs increased
to $98.4 million or 29.8% of sales during Fiscal 1995 from $95.5
million or 28.8% of sales in the comparable prior year period. The
increase is due primarily to higher advertising (1.3%), payroll (.6%)
and insurance costs (.2%). Fixed payroll costs increased relative to
sales but were significantly offset by declines in performance based
pay. Costs for the prior year include a $4 million charge (1.2% of
sales) for restructuring the Company's operations for which there was
no corresponding expense in Fiscal 1995.
Expenses for the Seven Month Period increased $9.3 million or 17%
compared to the same prior year period. The .2% percentage of sales
increase can be attributed to the $4 million recorded for consolidation
of divisional and corporate overheads (see Note 9 of Notes To
Consolidated Financial Statements) which equals 1.8%, offset by lower
payroll and advertising costs.
<F9>
Fiscal 1994 expenses increased $17.0 million but decreased 1.6% as a
percentage of sales compared to Fiscal 1993. Payroll costs resulted in
the most significant decrease (.7%) from prior year; the remaining .9%
decrease resulted from lower insurance, advertising and other expenses,
as a percentage of sales.
Interest
Interest expense for Fiscal 1996, Fiscal 1995, for the Seven Month
Period and for Fiscal 1994 was less than $.1 million, $.1 million, $.4
million and $.1 million, respectively. The decreases in interest
expense during Fiscal 1996 and Fiscal 1995 reflect the lower seasonal
borrowings during the periods. The interest expense increase for the
Seven Month Period reflects the seasonal borrowing activity compared to
Fiscal 1994 which had no seasonal borrowing.
Interest income for Fiscal 1996, Fiscal 1995, for the Seven Month
Period and for Fiscal 1994 was $.7 million, $.8 million, $.2 million
and $.9 million, respectively. The decrease in interest during Fiscal
1996 is the result of excess inventory levels during the early portion
of the year which resulted in lower levels of cash available for short-
term investments. The increase in interest income during Fiscal 1995 is
the result of higher levels of short-term investments due to funds
generated by the liquidation of Alex & Ivy as well as a decrease in
store expansion activity. The decrease in interest income for the Seven
Month Period resulted from lower short-term investment levels.
Store Closing Costs
The January 1995 announcement to close the Alex & Ivy retail chain
resulted in a $41 million expense charge. The $41 million covered the
estimated cost to buyout lease obligations, property and equipment
write-offs, inventory writedowns and severance costs. During Fiscal
1995, the estimated costs of Alex & Ivy store closings were reduced by
$6 million based primarily on favorable results of negotiated lease
terminations (see Note 9 of Notes To Consolidated Financial
Statements).
<F9>
There were no sales from Alex & Ivy stores during Fiscal 1996 while
sales during Fiscal 1995, the Seven Month Period and Fiscal 1994 were
$14.7 million, $24.1 million and $16.7 million, respectively. Excluding
costs or credits relating to the closure, operating results for Fiscal
1995, the Seven Month Period and Fiscal 1994 were breakeven, and
operating losses of $1.5 million and $2.9 million, respectively. The
Company opened 20 Alex & Ivy stores during the Seven Month Period and
32 stores during Fiscal 1994. All 58 of the chain's existing stores
were closed during Fiscal 1995. The Company does not expect to incur
any additional costs in connection with this operation.
Income Taxes
For Fiscal 1996 and the Seven Month Period, income tax benefit was
$1.6 million, excluding the effect of the accounting change, and $9.6
million, respectively. Income tax expense for Fiscal 1995 and 1994 was
$8.0 million and $14.7 million, respectively. The effective tax rate
in each fiscal period was (35.6%), 39.3%, (39.5%) and 39.2%,
respectively.
The effective income tax rate decreased 3.7% for Fiscal 1996 and .2%
for Fiscal 1995 and increased .3% for the Seven Month Period primarily
due to the effect of state income taxes. The effective tax rate
increased .2% in Fiscal 1994 due to the Federal income tax rate
increase, partially offset by tax exempt short-term investments.
Liquidity and Capital Resources
The primary sources of liquidity and capital resources are cash flows
from operations and bank borrowings. Bank borrowings are utilized to
fund seasonal inventory purchases. In addition, the bank credit lines
are used for overseas merchandise purchases. Unsecured bank lines
aggregate $40 million, of which $30 million are committed under
revolving credit agreements expiring on July 15, 1997. These lines are
expected to be renewed with existing banks.
Fiscal 1996
Cash and short-term investments were $63.1 million at February 1,
1997, an increase of $39.1 million over the prior year. Net cash
provided by operations was $41.2 million. The net loss from the year
was $2.0 million which included $11.2 million of depreciation and
amortization. The remainder of the increase related primarily to the
$18.7 million reduction in inventory levels as well as the receipt of
income tax refunds and deposits totaling $10.5 million during the
period. The decrease in inventory levels is the result of the Company's
achieving its foremost objective of correcting its inventory position
during the year.
Capital expenditures were $4.4 million for the year due primarily to
opening nine new Bombay stores and converting three stores to the large
format. Next year's capital expenditure program at approximately $8 to
$10 million will be slightly higher than the Fiscal 1996 program and
includes up to 10 new stores and 9 large store conversions.
Generally, a new or converted store is profitable in its first full
year of operations. The Company believes that its current cash
position, cash flows from operations and borrowings available under
bank credit lines will be sufficient to fund current operations and its
capital expenditures.
Fiscal 1995
Cash and short-term investments were $24.1 milion at February 3,
1996, a decrease of $6.6 million over the prior comparable period. Net
cash used by operations was $4.1 million. Net income was $12.4 million
which included $6.0 million relating to the noncash adjustment to the
Alex & Ivy closing reserve. Other components of cash used by operations
included a $15.0 million increase in inventory levels offset by other
net sources of cash totaling $4.5 million. The increase in inventory
levels is the result of timing of shipments as well as lower than
expected sales volumes during the year.
Capital expenditures were $5.9 million during Fiscal 1995 due
primarily to opening 11 new Bombay stores and the conversion of 10
existing stores to the large format.
Seven Months Ended January 28, 1995
Cash increased $10.2 million for the seven months ended January 28,
1995 to $30.7 million. Net cash provided by operations was $31.0
million. The components of cash provided by operations were: net loss
of $14.7 million; noncash cost of $50 million relating to operations
realignments; and other net outflows of $4.3 million.
Capital expenditures were $22.1 million for the seven months ended
January 28, 1995. The capital expenditures program included investments
in: (1) 40 new stores; (2) 38 stores converted to large format; (3)
purchase of home office headquarters office complex; (4) new
distribution center and (5) information systems.
Fiscal 1994
Cash flows from operations were $10 million. Net income before
noncash expenses generated $34.3 million of operating cash flow and
other net changes added $3.9 million. These were offset by the
increased inventory investment of $28.2 million, required to support
the increased number of new stores and large store conversions.
Significant capital expenditures were made in Fiscal 1994 for store
growth programs, distribution center expansion and information systems.
In Fiscal 1994, $35.3 million was invested primarily in the building of
127 stores, including 71 new stores and 56 large store conversions.
<TABLE>
Consolidated Statements of Operations
The Bombay Company, Inc. and Subsidiaries
(In thousands, except per share amounts)
<CAPTION>
Seven
Year Ended Months Year
---------------------- Ended Ended
February 1 February 3 January 28 July 3
1997 1996 1995 1994
---------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales $336,303 $345,399 $241,465 $317,452
-------- -------- -------- --------
Costs and expenses:
Cost of sales, buying and store occupancy costs (Note 9) 233,903 229,562 153,655 187,766
Selling, general and administrative expenses(Notes 8 and 9) 107,420 102,259 70,923 92,886
Interest expense (income), net (607) (828) 194 (832)
Store closing cost(credit) (Note 9) - (6,000) 41,000 -
------- ------- ------- -------
<F8>
<F9>
340,716 324,993 265,772 279,820
------- ------- ------- -------
Income (loss) before income taxes and accounting change (4,413) 20,406 (24,307) 37,632
Provision (benefit) for income taxes (1,573) 8,013 (9,593) 14,737
----- ------ ------ ------
Income (loss) before accounting change (2,840) 12,393 (14,714) 22,895
Cumulative effect of accounting change, net of tax (Note 1) 835 - - -
<F1>
----- ------ ------ ------
Net income (loss) $(2,005) $12,393 $(14,714) $22,895
----- ------ ------ ------
----- ------ ------ ------
Per average common share and common equivalent share:
Income (loss) before accounting change $(.07) $.33 $(.39) $.60
Cumulative effect of accounting change, net of tax (Note 1) .02 - - -
----- ---- ---- ----
<F1>
Net income (loss) $(.05) $.33 $(.39) $.60
----- ---- ---- ----
----- ---- ---- ----
Average common shares and common equivalent shares outstanding 37,883 37,545 37,692 38,323
------ ------ ------ ------
------ ------ ------ ------
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<TABLE>
Consolidated Balance Sheets
The Bombay Company, Inc. and Subsidiaries
(In thousands, except shares)
<CAPTION>
February 1 February 3
1997 1996
---------- ----------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents (short-term investments
of $57,810 and $19,704, respectively) $63,130 $24,079
Inventories, at lower of cost or market 69,816 88,341
Income taxes receivable 102 7,249
Deferred taxes 3,429 3,252
Other current assets 8,223 10,214
------- -------
Total current assets 144,700 133,135
------- -------
Property and equipment, at cost:
Land 993 993
Building 5,196 5,217
Leasehold improvements 62,442 62,054
Furniture and equipment 20,536 21,039
------ ------
89,167 89,303
Accumulated depreciation (47,956) (43,038)
------ ------
41,211 46,265
------ ------
Deferred taxes and other assets 8,883 10,700
Goodwill, less amortization of $465 and $438, respectively 569 596
------ ------
$195,363 $190,696
-------- --------
-------- --------
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses $30,052 $28,275
Accrued payroll and bonuses 5,008 3,394
------- -------
Total current liabilities 35,060 31,669
------- -------
Accrued rent and other liabilities 6,370 6,559
------- ------
Stockholders' equity:
Preferred stock, $1 par value, 1,000,000 shares authorized - -
Common stock, $1 par value, 50,000,000 shares authorized,
37,997,676 and 37,362,027 shares issued, respectively 37,998 37,362
Additional paid-in capital 75,465 72,781
Retained earnings 40,973 42,978
Cumulative effect of foreign currency translation (503) (653)
------ ------
Total stockholders' equity 153,933 152,468
------- -------
Commitments and Contingencies (Note 4)
<F4>
$195,363 $190,696
-------- --------
-------- --------
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<TABLE>
Consolidated Statements of Cash Flows
The Bombay Company, Inc. and Subsidiaries
(In thousands)
<CAPTION>
Year Ended Seven Months Year
----------------------- Ended Ended
February 1 February 3 January 28 July 3
1997 1996 1995 1994
---------- ---------- ------------ ------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $(2,005) $12,393 $(14,714) $22,895
Adjustments to reconcile net income (loss) to net
cash from operations:
Depreciation and amortization 11,203 11,878 6,782 8,947
Operations realignment and management 4,200 (6,000) 50,000 -
severance costs (credit) (Notes 8 and 9)
<F8>
<F9>
Deferred taxes and other (394) 7,636 (9,417) 601
Noncash contributions to employee benefit plans 1,667 1,671 1,006 1,857
Change in assets and liabilities:
(Increase) decrease in inventories 18,714 (14,958) (3,136) (28,247)
(Increase) decrease in other current assets 9,268 (5,958) 2,896 (2,727)
Increase (decrease) in accounts payable and
accrued expenses (3,919) (11,272) (1,710) 9,536
Increase (decrease) in accrued payroll and bonuses 1,925 (891) (3,301) 378
(Increase) decrease in noncurrent assets 548 (215) 1,715 (4,392)
Increase (decrease) in noncurrent liabilities (56) 1,605 921 1,187
------- ------- ------ ------
Net cash provided (used) by operations 41,151 (4,111) 31,042 10,035
---------- ------- ------ ------
Cash flows from investing activities:
Purchases of property, equipment and other (4,432) (5,898) (22,125) (35,290)
Proceeds from sale of property and equipment 519 374 246 411
--------- ------- ------ ------
Net cash used by investing activities (3,913) (5,524) (21,879) (34,879)
-------- ------- ------ ------
Cash flows from financing activities:
Sale of stock to employee benefit plans, net of
fractional shares 696 823 996 1,340
Exercise of stock options 1,138 2,287 27 1,019
------- ------ ------ ------
Net cash provided by financing activities 1,834 3,110 1,023 2,359
------- ------ ------ ------
Effect of exchange rate change on cash (21) (66) 43 103
------ ------ ------ ------
Net increase (decrease) in cash and cash equivalents 39,051 (6,591) 10,229 (22,382)
Cash and cash equivalents at beginning of year 24,079 30,670 20,441 42,823
------ ------- ------ -------
Cash and cash equivalents at end of year $63,130 $24,079 $30,670 $20,441
------- ------- ------- -------
------- ------- ------- -------
Supplemental disclosures of cash flow information:
Interest paid $46 $67 $377 $111
Income taxes paid (refunded) $(9,536) $7,458 $1,272 $7,597
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<TABLE>
Consolidated Statements of Stockholders' Equity
The Bombay Company, Inc. and Subsidiaries
(In thousands, except shares)
<CAPTION>
Foreign
Common Stock Additional Currency
---------------- Paid-In Retained Translation
Shares Amount Capital Earnings Effects
------ ------ ------- -------- -----------
<S> <C> <C> <C> <C> <C>
Balance, July 4, 1993 23,873,790 $23,874 $69,741 $22,404 $(201)
Shares contributed or sold to
employee benefit plans 106,559 106 3,404 - -
Exercise of stock options 343,753 344 4,906 - -
Three-for-two stock split 12,103,675 12,104 (12,121) - -
Foreign currency translation adjustments - - - - (450)
Net income - - - 22,895 -
---------- ------ ------ ------ -----
Balance, July 3, 1994 36,427,777 36,428 65,930 45,299 (651)
Shares contributed or sold to
employee benefit plans 218,140 218 2,473 - -
Exercise of stock options 4,049 4 30 - -
Foreign currency translation adjustments - - - - (207)
Net loss - - - (14,714) -
---------- ------- ------ ------ ----
Balance, January 28, 1995 36,649,966 36,650 68,433 30,585 (858)
Shares contributed or sold to
employee benefit plans 282,400 282 1,956 - -
Exercise of stock options 429,661 430 2,392 - -
Foreign currency translation adjustments - - - - 205
Net income - - - 12,393 -
---------- ------ ------ ------ ---
Balance, February 3, 1996 37,362,027 37,362 72,781 42,978 (653)
Shares contributed or sold to
employee benefit plans 275,865 276 1,531 - -
Exercise of stock options 359,784 360 1,153 - -
Foreign currency translation adjustments - - - - 150
Net loss - - - (2,005) -
------- ------- ------- ------- -----
Balance, February 1, 1997 37,997,676 $37,998 $75,465 $40,973 $(503)
---------- ------- ------- ------- -----
---------- ------- ------- ------- -----
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
Notes To Consolidated Financial Statements
<F1>
Note 1 - Statement Of Accounting Policies
Basis Of Presentation
The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries. All significant intercompany
transactions, balances and profits have been eliminated. The Company
has a retail (52-53 week) fiscal year which was changed to end on the
Saturday nearest January 31, beginning with the seven months (thirty
weeks) ended January 28, 1995 ("Seven Month Period"). For previous
periods, the fiscal year ended on the Sunday nearest June 30. The
period ended February 3, 1996 ("Fiscal 1995") represents 53 weeks.
The periods ended February 1, 1997 ("Fiscal 1996") and July 3, 1994
("Fiscal 1994") represent 52 weeks.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates.
Actual results could differ from those estimates.
Foreign Currency Translation
Fiscal year end exchange rates are used to translate assets and
liabilities to U.S. dollars. Monthly average exchange rates are used to
translate income and expenses. The cumulative effect of foreign
currency translation adjustments is reported in stockholders' equity.
Cash And Cash Equivalents
Cash in stores, deposits in banks and short-term investments with
original maturities of three months or less are considered as cash and
cash equivalents for the purposes of the financial statements. Short-
term investments are recorded at the lower of cost or fair market
value.
Inventories
Inventories are primarily finished merchandise and are valued at the
lower of average cost or market.
Accounting Change
During the quarter ended May 4, 1996, the Company changed the timing
of allocation of overhead costs to distribution center inventories. The
change more accurately reflects inventory costs and represents a
preferable method of accounting for distribution center inventories.
The cumulative effect of this change was $835,000, net of tax, or $.02
per share. This amount is presented in the consolidated statement of
operations as the cumulative effect of an accounting change. The impact
of this change on Fiscal 1996 results, excluding the cumulative effect,
was not significant. The pro forma effect of the change on prior years'
net income (loss) and net income (loss) per share is not significant.
Property And Equipment
Property and equipment are depreciated over the estimated useful
lives of the assets using the straight-line method over the lives
shown:
Building Forty years
Furniture and equipment Two to ten years
Leasehold improvements The lesser of the life
of the lease or asset
Maintenance and repairs are charged to expense as incurred. Renewals
and betterments which materially prolong the useful lives of the assets
are capitalized. The cost and related accumulated depreciation of
property retired or sold are removed from the accounts, and gains or
losses are recognized in the statement of operations.
Advertising Costs
Advertising costs are expensed the first time the advertising takes
place. During Fiscal 1996, Fiscal 1995, the Seven Month Period and
Fiscal 1994, advertising expense was $19,887,000, $22,859,000,
$15,733,000 and $21,422,000, respectively.
Goodwill
Goodwill recorded in association with acquisitions accounted for
using the purchase method is amortized using the straight-line method
over the estimated useful life of 40 years. The amortization policy is
reviewed annually and impairments, if any, would be recognized if the
expected future undiscounted operating cash flows derived from such
assets are less than their carrying value.
Income Taxes
The Company uses the liability method of computing deferred income
taxes on all material temporary differences. Temporary differences are
the differences between the reported amounts of assets and liabilities
and their tax bases. The Company assesses realizability of deferred tax
assets and, if necessary, a valuation allowance is provided.
Earnings Per Share
Net income (loss) per share is based upon the weighted average number
of shares outstanding plus the shares that would be outstanding
assuming exercise of dilutive stock options which are considered to be
common share equivalents.
Note 2 - Income Taxes
The components of the provision (benefit) for domestic and foreign
income taxes are shown below (in thousands):
<TABLE>
<CAPTION>
Year Ended Seven
Months Year
----------------------- Ended Ended
February 1 February 3 January 28 July 3
1997 1996 1995 1994
----------- ---------- ---------- ------
<S> <C> <C> <C> <C>
Income(loss)before
income taxes and
accounting change:
Domestic $(4,714) $18,923 $(26,928) $34,812
Foreign 301 1,483 2,621 2,820
------- ------- -------- -------
$(4,413) $20,406 $(24,307) $37,632
------- ------- -------- -------
------ ------- -------- -------
Provision (benefit)for
income taxes:
Current:
Federal $(1,479) $(6,929) $6,981 $10,891
Foreign 500 862 1,138 1,453
State and local - (2,200) 1,077 1,619
------- ------- ------ ------
(979) (8,267) 9,196 13,963
------- ------- ------ ------
Deferred (prepaid):
Federal (476) 13,516 (15,444) 656
Foreign (118) (139) (5) (63)
State and local - 2,903 (3,340) 181
------ ------- ------ ------
(594) 16,280 (18,789) 774
------ ------- ------ ------
Income tax provision
(benefit) before
accounting change (1,573) 8,013 (9,593) 14,737
Tax effect of
accounting change 449 - - -
------ ------ ----- -----
Total provision (benefit)
for income taxes $(1,124) $8,013 $(9,593) $14,737
------- ------ ------- -------
------- ------ ------- -------
</TABLE>
The effective tax rate differs from the federal statutory tax rate
for the following reasons:
<TABLE>
<CAPTION>
Year Ended Seven Months Year
---------------------- Ended Ended
February 1 February 3 January 28 July 3
1997 1996 1995 1994
---------- ---------- ---------- ------
<S> <C> <C> <C> <C>
Federal statutory tax rate (35.0)% 35.0% (35.0)% 35.0%
Increase in effective
tax rate due to:
Foreign income taxes (2.5) 1.0 .9 1.1
State and local taxes,
net of federal income
tax benefit - 2.2 (6.1) 3.1
Other, net 1.9 1.1 .7 -
---- ---- ---- ----
Effective tax rate (35.6)% 39.3% (39.5)% 39.2%
------ ----- ----- ----
------ ----- ----- ----
</TABLE>
Deferred taxes reflect the net tax impact of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and amounts used for income tax purposes. Deferred
tax assets (liabilities) are comprised of the following (in thousands):
<TABLE>
<CAPTION>
Year Ended
---------------------
February 1 February 3
1997 1996
---------- ----------
<S> <C> <C>
Deferred tax liabilities $(607) $(746)
------ ------
Deferred tax assets:
Depreciation 464 239
Accrued severance 877 -
Store conversion costs 1,300 1,975
Inventory valuation 2,296 2,784
Accrued rent 2,892 2,530
Other 1,554 1,558
----- -----
9,383 9,086
----- -----
Net deferred tax assets $8,776 $8,340
------ ------
------ ------
</TABLE>
Note 3 - Debt
The Company has unsecured revolving credit agreements with banks
aggregating $40,000,000 at February 1, 1997 of which $30,000,000 is
committed. These credit facilities are for working capital and letter
of credit purposes, primarily to fund seasonal merchandise purchases,
and bear interest at market rates based on prime. The credit agreements
restrict dividend payments, and require the maintenance of various
financial ratios and the payment of negotiated fees. The revolving
credit agreements expire July 15, 1997 and are expected to be renewed
under similar terms. At February 1, 1997, there were $7,904,000 in
letters of credit outstanding under all credit facilities, issued
principally in conjunction with overseas merchandise purchases.
Interest expense and negotiated fees for Fiscal 1996, Fiscal 1995, the
Seven Month Period and Fiscal 1994 totaled $138,000, $67,000, $380,000
and $80,000, respectively.
<F4>
Note 4 - Commitments And Contingencies
Store, distribution and field office facilities are leased under
operating leases expiring through 2011. The store leases are generally
based upon a minimum rental plus a percentage of the store sales in
excess of specified levels. Store lease terms generally require
additional payments covering taxes, common area charges and certain
other costs. Rental expense for Fiscal 1996, Fiscal 1995, the Seven
Month Period and Fiscal 1994 totaled $39,502,000, $40,181,000,
$25,140,000 and $31,850,000, respectively.
The minimum rental commitments for future fiscal years are as follows
(in thousands):
Fiscal
------
1997.................. $38,118
1998.................. 37,578
1999.................. 36,295
2000.................. 33,989
2001.................. 31,530
Thereafter............ 70,334
-------
$247,844
--------
--------
The Company has certain contingent liabilities resulting from
litigation and claims incident to the ordinary course of business.
Management believes that the probable resolution of such contingencies
will not materially affect the financial position or results of
operations of the Company.
Note 5 - Employee Benefit Plans
The Bombay Company, Inc. Employee 401(k) Savings and Stock Ownership
Plan ("401(k) Plan") is open to substantially all employees who have
been employed for one year and who work at least 1,000 hours per year.
Under the 401(k) Plan, a participant may contribute up to 14% of
earnings with the Company matching the first 5% at a rate of 150%. The
employee contributions are paid to a corporate trustee and invested in
various funds. Company contributions are generally invested in its
common stock, and contributions made to participants' accounts become
fully vested upon completion of two years of service. Similar benefit
plans are in effect for eligible foreign employees.
To the extent employees are unable to contribute up to 5% of their
earnings to the 401(k) Plan because of limitations imposed by IRS
regulations, a Supplemental Stock Program was adopted. Under this
program, employee contributions in excess of IRS limitations, along
with Company matching contributions, are distributed annually in the
form of common stock.
The Bombay Company, Inc. Stock Purchase Program is open to all full-
time employees who have at least six months of service. Each
participant may contribute 5% or 10% of qualifying compensation. For
participants with at least two years of service, the Company matches
50% of the participant's contribution. Contributions are used to
purchase shares of Company common stock, which are distributed annually
to all participants. The participants' shares are fully vested upon
purchase.
Total Company contributions to these plans for Fiscal 1996, Fiscal
1995, the Seven Month Period and Fiscal 1994 were $1,667,000,
$1,665,000, $992,000 and $1,857,000, respectively. For Fiscal 1997, the
Company reduced its 401(k) and Supplemental Stock Program match from
150% to 75% and has temporarily suspended its match on the Stock
Purchase Program.
Note 6 - Common Stock And Stock Options
On December 1, 1993, the Board of Directors declared a three-for-two
common stock split. The split was payable on December 31, 1993 to
holders of record on December 14, 1993. Average common shares and
common equivalent shares outstanding, income per average common share
and common equivalent share, stock option shares and exercise prices
reflect all splits paid through December 31, 1993.
Non-employee directors are eligible to participate in the 1993 Stock
Deferral Plan for Non-Employee Directors, which allows such directors
the option to defer receipt of annual retainer payments which are
credited to an account for such director in units equivalent to Company
common stock.
Each share of Company common stock includes one Preferred Share
Purchase Right ("Right") entitling the holder to buy one one-
thousandth of a share of Series A Junior Participating Preferred Stock
of the Company at an exercise price of $50.00. The Rights, which have
ten year terms expiring in 2005, are exercisable if a person or group
acquires 15% or more of the common stock of the Company or announces a
tender offer for 15% or more of the common stock. If a person or group
acquires 15% or more of the outstanding common stock of the Company,
each Right will entitle the holder to purchase, at the Right's exercise
price, a number of shares of Company common stock having a market value
of twice the Right's exercise price. If the Company is acquired in a
merger or other business combination transaction after a person or
group acquires 15% or more of the Company's common stock, each Right
will entitle its holder to purchase, at the Right's exercise price, a
number of shares of the acquiring company's common stock having a
market value of twice the Right's exercise price. The Rights are
redeemable at one cent per Right at any time before they become
exercisable.
The Bombay Company, Inc. 1986 Stock Option Plan and 1996 Long Term
Incentive Stock Plan ("Employee Plans") provide for the granting of
options (and other types of stock-related awards under the 1996 plan)
to officers and key management employees. At February 1, 1997, the
option shares reserved for the Employee Plans were 3,663,066. The
option price is fixed at the market price or higher on the date of the
grant. Options are generally exercisable annually at a rate of 20% per
year beginning at least one year after the grant date. Shares available
for additional grants were 1,096,403; 388,387; 506,194 and 478,175 at
February 1, 1997, February 3, 1996, January 28, 1995 and July 3, 1994,
respectively.
The Bombay Company, Inc. 1991 Director Stock Option Plan ("Director
Plan") provides for the granting of options to members of the Board of
Directors who are neither employees nor officers of the Company. At
February 1, 1997, the option shares reserved for the Director Plan were
195,192. The option price is fixed at the market price on the date of
the grant. The maximum grant, initial and annual, is 4,000 shares. The
initial grant becomes exercisable at a rate of 20% per year beginning
one year after the grant date and includes past Board service toward
full vesting of the initial grant. Each additional annual grant becomes
fully exercisable six months after the grant date. Shares available for
additional grants were 18,633; 52,883; 73,133 and 93,383 at February 1,
1997, February 3, 1996, January 28, 1995 and July 3, 1994,
respectively.
The following table includes option information for the Employee
Plans and Director Plan:
<TABLE>
<CAPTION>
Number Option Price
Stock Option Activity of Shares Per Share
--------------------- --------- ------------
<S> <C> <C>
July 4, 1993 3,376,598 $ 1.93-21.00
Options granted 128,550 12.63-32.58
Options exercised (570,070) 1.93-25.75
Options canceled (91,510) 3.01-17.94
---------
July 3, 1994 2,843,568 2.72-32.58
Options granted 39,050 10.75-14.63
Options exercised (4,049) 6.74
Options canceled (46,819) 3.01-17.94
---------
January 28, 1995 2,831,750 2.72-32.58
Options granted 358,620 5.75-10.00
Options exercised (529,677) 3.01-7.75
Options canceled (220,563) 6.74-31.42
---------
February 3, 1996 2,440,130 2.72-32.58
Options granted 1,243,748 5.25-10.75
Options exercised (423,142) 2.72-7.98
Options canceled (1,048,065) 6.74-32.58
---------
February 1, 1997 2,212,671 3.01-25.75
---------
---------
Exercisable at:
July 3, 1994 970,455 2.72-25.75
---------
---------
January 28, 1995 1,448,366 2.72-32.58
---------
---------
February 3, 1996 1,265,455 2.72-32.58
---------
---------
February 1, 1997 623,256 3.01-25.75
---------
---------
</TABLE>
The following table summarizes stock options outstanding at
February 1, 1997:
<TABLE>
<CAPTION>
Outstanding Exercisable
------------------------------ ------------------
Weighted Weighted Weighted
Exercise Average Average Average
Price Remaining Exercise Exercise
Range Shares Life Price Shares Price
------------- --------- ---- ----- ------- -------
<S> <C> <C> <C> <C> <C>
$3.01 to 3.68 125,046 4.3 $3.39 125,046 $3.39
5.25 to 7.75 1,353,702 8.5 6.97 249,391 7.00
8.25 to 9.25 510,699 8.0 9.06 127,258 9.04
10.00 to 15.88 160,449 7.8 12.58 77,596 12.41
17.94 to 25.75 62,775 6.4 19.95 43,965 20.78
--------- -------
3.01 to 25.75 2,212,671 8.0 $8.02 623,256 $8.34
--------- -------
--------- -------
</TABLE>
The Company has adopted the disclosure-only provisions of Statement
of Financial Accounting Standards No. 123. "Accounting for Stock-Based
Compensation." Accordingly, no compensation cost has been recognized
for options granted. Had compensation cost for the Company's stock
option plans been determined based on the fair value at the grant date
for awards in Fiscal 1995 and Fiscal 1996 in accordance with the
provisions of SFAS No. 123, the Company's net income (loss) and net
income (loss) per share would have been reduced to the pro forma
amounts indicated below (in thousands, except per share amounts):
<TABLE>
<CAPTION>
Year Ended
---------------------
February 1 February 3
1997 1996
-------- -------
<S> <C> <C>
Net income (loss), as reported $(2,005) $12,393
Net income (loss), pro forma (3,443) 11,947
Net income (loss) per share, as reported (.05) .33
Net income (loss) per share, pro forma (.09) .32
</TABLE>
The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option-pricing model based upon the following
assumptions: expected volatility of 78.6%; risk-free interest rate
ranging from 5.44% to 7.12%; expected lives of 6 years and no expected
dividend payments. The weighted average fair value of options granted
during Fiscal 1996 and Fiscal 1995 was $4.96 and $6.66, respectively.
The exercise of non-qualified stock options in Fiscal 1996, Fiscal
1995, the Seven Month Period and Fiscal 1994 resulted in income tax
benefits of $558,000, $832,000, $7,000 and $6,114,000, respectively,
which were credited to additional paid-in capital. The income tax
benefits are the tax effect of the difference between the market price
on the date of exercise and the option price.
<F7>
Note 7 - Geographic Areas
The Company operates in one industry segment, specialty retailing.
Substantially all revenues result from the sale of home furnishings and
accessories through retail stores in the United States and Canada.
Operating profit by geographic area is total revenue less operating
expenses. Area operating expenses exclude interest expense, net of
interest income, and income taxes. Identifiable assets by area are
those assets used in the area's operations, including intangibles.
The following table shows net sales, operating profit (loss) and
other financial information by geographic area (in thousands):
<TABLE>
<CAPTION>
Year Ended Seven Months Year
--------------------- Ended Ended
February 1 February 3 January 28 July 3
1997 1996 1995 1994
----------- ---------- ----------- -------
<S> <C> <C> <C> <C>
Net sales:
United States $298,137 $309,433 $217,824 $285,802
Canada 38,166 35,966 23,641 31,650
-------- -------- -------- --------
Total $336,303 $345,399 $241,465 $317,452
-------- -------- -------- --------
-------- -------- -------- --------
Operating profit (loss):
United States:
Operations $(7,199) $ 9,409 $ 12,941 $32,328
Store closing costs - 6,000 (41,000) -
Canada 2,179 4,169 3,946 4,472
Interest, net 607 828 (194) 832
------- ------- ------- -------
Income (loss) before income $(4,413) $20,406 $(24,307) $37,632
taxes and accounting change ------- ------- -------- -------
------- ------- -------- -------
Identifiable assets:
United States $180,209 $173,803 $177,601 $166,868
Canada 15,154 16,893 12,146 13,680
-------- -------- -------- --------
Total $195,363 $190,696 $189,747 $180,548
-------- -------- -------- --------
-------- -------- -------- --------
Depreciation and amortization:
United States $10,362 $11,030 $6,330 $8,310
Canada 841 848 452 637
------- ------- ------ ------
Total $11,203 $11,878 $6,782 $8,947
------- ------- ------ ------
------- ------- ------ ------
Capital expenditures:
United States $3,820 $4,958 $21,209 $29,668
Canada 612 940 916 2,691
------ ------ ------- -------
Total $4,432 $5,898 $22,125 $32,359
------ ------ ------- -------
------ ------ ------- -------
</TABLE>
<F8>
Note 8 - Management Change
On September 5, 1996, the Company announced the termination of its
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 February 1, 1997, $1,970,000 of the $4.2
million had been paid.
<F9>
Note 9 - Operations Realignment Costs
On January 12, 1995, the Board of Directors approved the
establishment of $50 million in pre-tax reserves, equal to $.80 per
share after tax, for the closing of the Company's Alex & Ivy chain of
retail stores, inventory writedowns and streamlining divisional and
corporate structure. The components of the $50 million are $41 million
representing the estimated costs of closing the Alex & Ivy chain, $5
million for inventory writedowns to reposition Bombay merchandise lines
and sell off discontinued items, and $4 million representing estimated
costs, principally severance, to streamline operations, including the
consolidation of divisional and corporate overheads. During Fiscal
1995, $6 million of the original reserve was reversed based
primarily upon favorable results of negotiated lease terminations,
thereby reflecting lower costs than originally projected. All Alex &
Ivy stores were closed as of May 10, 1995 and all store lease
termination agreements were fully executed as of July 29, 1995.
Approximately 880 full and part-time employees were affected by the
closing of the Alex & Ivy chain. Alex & Ivy sales were $14,729,000,
$24,128,000 and $16,704,000 for Fiscal 1995, the Seven Month Period
and Fiscal 1994, respectively. Excluding costs or credits relating to
the closure of the division, operating results were breakeven in
Fiscal 1995 and losses before income taxes were $1,548,000 and
$2,863,000 for the Seven Month Period and Fiscal 1994, respectively.
The following table sets forth the components of the reserve to close
Alex & Ivy stores:
<TABLE>
<CAPTION>
Lease Asset Employee
Obligations Writedowns Separations Total
----------- ---------- ----------- -----
(In thousands)
<S> <C> <C> <C> <C>
Charge to expense $19,475 $20,075 $1,450 $41,000
Activity - (928) (101) (1,029)
------- ------- ------ -------
Balance
January 28, 1995 19,475 19,147 1,349 39,971
Activity (14,849) (18,195) (927) (33,971)
Reversal (4,626) (952) (422) (6,000)
------- ------- ----- -------
Balance
February 3, 1996 $ - $ - $ - $ -
------- ------- ----- -------
------- ------- ----- -------
</TABLE>
Note 10 - Change In Fiscal Year End
On January 12, 1995, the Board of Directors approved a change in the
Company's fiscal year end to the Saturday nearest the end of January.
Condensed pro forma statements of operations for the seven month
periods ended January 28, 1995 and unaudited January 30, 1994 follow
(in thousands, except per share amounts):
<TABLE>
<CAPTION>
Seven Months Ended
----------------------------
January 28 January 30
1995 1994
---------- ----------
(Unaudited)
<S> <C> <C>
Net sales $241,465 $195,990
Cost of sales, buying and 153,655 110,592
store occupancy costs
Selling, general and administrative 71,117 56,578
expenses and other
Store closing costs 41,000 -
-------- -------
Income (loss) before income taxes (24,307) 28,820
Provision (benefit)for income taxes (9,593) 11,297
------- ------
Net income (loss) $(14,714) $17,523
-------- -------
-------- -------
Net income (loss) per share $(.39) $.46
----- ----
----- ----
</TABLE>
Note 11 - Store Conversion Costs
On February 18, 1993, the Board of Directors approved a plan to
convert substantially all existing Bombay stores to a large format. In
the quarter ended March 28, 1993, a charge of $13,000,000 was recorded,
principally relating to the noncash cost of writing off the remaining
book value of leasehold improvements at the time Bombay stores are
converted. The reserve balance at February 1, 1997, February 3, 1996,
January 28, 1995 and July 3, 1994 totaled $3,640,000, $5,323,000,
$6,953,000 and $8,426,000, respectively.
Management's Report
The management of The Bombay Company, Inc. is responsible for the
preparation, integrity and fair presentation of its published financial
statements. The financial statements, presented on pages 16 to 24, have
been prepared in accordance with generally accepted accounting
principles and, as such, include amounts based on judgments and
estimates made by management. The Company also prepared the other
information included in the report to shareholders and is responsible
for its accuracy and consistency with the financial statements.
The Company maintains internal accounting control systems and related
policies and procedures designed to provide reasonable assurance that
assets are safeguarded, that transactions are executed in accordance
with management's authorization and are properly recorded, and that
accounting records may be relied upon for the preparation of financial
statements and other financial information. The design, monitoring and
revision of internal accounting control systems involve, among other
things, management's judgment with respect to the relative costs and
expected benefits of specific control measures. Also, an internal
auditing function which evaluates and formally reports on the adequacy
and effectiveness of internal accounting controls, policies and
procedures is maintained.
There are inherent limitations in the effectiveness of any system of
internal control, including the possibility of human error and the
circumvention or overriding of controls. Accordingly, even an effective
internal control system can provide only reasonable assurance with
respect to financial statement preparation. Furthermore, the
effectiveness of an internal control system can change with
circumstances.
The Audit and Finance Committee of the Board of Directors, which is
composed solely of directors who are not officers or employees of the
Company, meets regularly with corporate management, internal audit,
legal counsel and Price Waterhouse LLP to review the activities of each
and to satisfy itself that each is properly discharging its
responsibility. In addition, the Audit and Finance Committee meets
formally with Price Waterhouse LLP, without management present, to
discuss the audit of the financial statements as well as other auditing
and financial reporting matters.
The financial statements have been audited by Price Waterhouse LLP,
the independent accountants, whose report herein expresses their
opinion with respect to the fairness of the presentation of the
statements.
CARSON R. THOMPSON
President and
Chief Executive Officer
JAMES E. HERLIHY
Executive Vice President
and Chief Financial Officer
<AUDIT-REPORT>
Independent Accountants' Report
To the Board of Directors and Stockholders of
The Bombay Company, Inc.
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, of stockholders' equity
and of cash flows present fairly, in all material respects, the
financial position of The Bombay Company, Inc. and its subsidiaries at
February 1, 1997 and February 3, 1996, and the results of their
operations and their cash flows for each of the two years in the period
ended February 1, 1997, for the seven months ended January 28, 1995 and
for the year ended July 3, 1994, in conformity with generally accepted
accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits of these statements in accordance with
generally accepted auditing standards which 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, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for the opinion expressed
above.
As discussed in Note 1 to the financial statements, the Company
changed its method of accounting for inventory during the year ended
February 1, 1997.
PRICE WATERHOUSE LLP
March 11, 1997
Fort Worth, Texas
</AUDIT-REPORT>
<TABLE>
Unaudited Quarterly Financial Data
The Bombay Company, Inc. and Subsidiaries
(In thousands, except per share amounts)
Unaudited quarterly financial data for the quarters ended:
<CAPTION>
February 1 November 2 August 3 May 4
1997 1996 1996 1996
---------- ---------- -------- -----
<S> <C> <C> <C> <C>
Net sales $124,202 $72,816 $71,203 $68,082
Gross profit 45,253 19,335 19,340 18,472
Income (loss) before accounting change 8,890 (6,147)(1) (2,308) (3,275)
Cumulative effect of accounting change, net of tax - - - 835
Net income (loss) 8,890 (6,147)(1) (2,308) (2,440)
Per share:
Income (loss) before accounting change $.23 $(.16) $(.06) $(.08)
Cumulative effect of accounting change, net of tax - - - .02
Net income (loss) .23 (.16) (.06) (.06)
<CAPTION>
February 3 October 28 July 29 April 29
1996 1995 1995 1995
---------- ---------- ------- ---------
<S> <C> <C> <C> <C>
Net sales $127,363 $70,424 $69,669 $77,943
Gross profit 50,793 21,372 20,358 23,314
Net income (loss) 11,880 (1,583) 316(2) 1,780(2)
Net income (loss) per share $.32 $(.04) $.01(2) $.05(2)
<FN>
(1)Includes a pre-tax charge of $4,200,000, equivalent to $.07 per share,
relating to change in management.
(2) The quarters ended April 29, 1995 and July 29, 1995 include credits of
$4,400,000 and $1,600,000, respectively, relating to the closure of the
Alex & Ivy division.
</TABLE>
<F2>
<TABLE>
Price Range of Common Stock
Quoted by quarter for the fiscal periods ended:
<CAPTION>
February 1, 1997 High Low February 3, 1996 High Low
---------------- ---- --- ---------------- ---- ---
<S> <C> <C> <C> <C> <C>
First.............. $11.88 $4.88 First............... $10.88 $7.38
Second............. 11.38 4.63 Second.............. 9.13 7.13
Third.............. 7.25 5.00 Third............... 8.88 4.75
Fourth............. 5.50 4.38 Fourth.............. 7.88 5.00
</TABLE>
EMPLOYEE AWARD AGREEMENT
pursuant to
THE BOMBAY COMPANY, INC. 1996 LONG-TERM INCENTIVE STOCK PLAN
(Stock Option Award)
Effective March 6, 1996
This Award Agreement (the "Agreement") is made this
day of , 19 , between THE BOMBAY COMPANY, INC., a
---- ------ --
Delaware Corporation (the "Company"), and
-------------
an employee of the Company or one of its subsidiaries (the
"Employee").
WHEREAS, the Company desires to carry out the purposes
of The Bombay Company, Inc. 1996 Long Term Incentive Stock
Plan (the "Plan") by affording Employee the opportunity to
purchase shares of the Company's $1.00 par value common
stock (the "Shares").
NOW THEREFORE, in consideration of the mutual covenants
hereinafter set forth for other good and valuable
consideration, the parties hereto agree as follows:
1. Grant of Award. The Company hereby grants to
Employee the right and option (the "Option") to purchase
an aggregate of shares of the Company's Shares,
------
such Shares being subject to adjustment as provided in
paragraph 8 hereof, and on the terms and conditions herein
set forth. The Shares granted pursuant to this Option (the
"Option Shares") are granted as a nonqualified option.
2. Purchase Price. The purchase price of the Option
Shares shall be $4.75 per Share, such purchase price being
100% of the fair market value of such Shares on the
date first appearing above (the "Date of the Grant").
3. Exercise of Award. Unless expired as provided in
paragraph 5 below, and subject to the special provisions of
paragraph 6 below, the Award for Option Shares may be
exercised from time to time in whole or in part for not more
than 20% of the entire number of Option Shares at any time
after the first annaiversary of the Date of Grant, and an
additional 20% of the total Option Shares on, or after the
first each of the four (4) succeeding anniversaries of the
Date of Grant.
4. Manner of Exercise; Payment of Purchase Price.
A. Subject to the terms and conditions of this
Agreement, the Award shall be exercised by written notice to
the Company at its principal office. Such notice shall
state the election to exercise the Award and shall specify
the number of Option Shares sought to be exercised pursuant
to the notice. Such notice of exercise shall be signed by
Employee and shall be irrevocable when given.
B. The notice of exercise shall be accompanied
by the full payment of the purchase price for the Option
Shares in cash by certified check or bank cashiers check or
through satisfactory arrangements for payment by a broker
representing the Employee in the sale of some or all of the
Option Shares. Subject to approval of an authorized
Committee of the Board of Directors (the "Committee"),
payment of the purchase price may be accomplished by the
surrender of stock certificates representing Shares having
an aggregate fair market value on the date of exercise equal
to the purchase price of the Option Shares, or by a
combination of cash and Shares.
C. Upon receipt of the purchase price, and
subject to the terms of paragraph 11, a certificate
representing the Option Shares exercised shall be registered
in the name of the person or persons so exercising the
Award. In the event the Award shall be exercised pursuant
to paragraph 7, by any person or persons other than the
Employee, such notice shall be accompanied by appropriate
proof satisfactory to the Company of the right of such
person or persons to exercise the Award. All Shares issued
as a result of an exercise of an Award as provided herein
shall be fully paid and non-assessable.
D. The payment of witholding tax liability by
Employee shall be a condition precedent to the Company's
obligation to issue any certificates for Shares resulting
from an exercise of an Award.
5. Exercise and Expiration of Award. This Award, if
not exercised, shall expire and become null and void upon
the expiration of three (3) months after Employee ceases to
be employed by the Company or any of its subsidiaries unless
such termination shall have been for cause, as determined by
the Committee, in which event the Award shall be null and
void as of the date of such termination. Notwithstanding
the above, if Employee retires from the Company or any of
its subsidiaries (as determined by the Committee in its sole
discretion), the Award may, at the Committee's discretion
remain exercisable for a period not to exceed 36 months
following such retirement. In the event of Employee's death
or permanent disability, the Award shall be exercisable for
a period of 12 months following such death or disability.
Notwithstanding the above, the Award shall, without
exception, become null and void once a period of 10 years
shall have lapsed since the Date of Grant. Except as
provided in paragraph 6 below, only those portions of this
Award vested as of the date of termination of Employee's
employment may be exercised.
6. Acceleration of Exercise Dates. Notwithstanding
the provisions of paragraph 3 above relating to the vesting
of this Award in installments, the Committee may, in its
discretion, permit this Award to be immediately exercisable,
until the expiration date provided in paragraph 5 above, for
the entire number of Option Shares covered hereby upon the
retirement of Employee or any Change in Control of the
Company (as defined in the Plan).
7. Award Nontransferable. Unless permitted by law
regulation and approved by the Committee, the Award and any
right related thereto shall not be transferable by Employee
otherwise than by will or by the laws of descent and
distribution and may be exercised during Employee's
lifetime, only by Employee. Upon the death of employee, the
award may be exercised by Employee's executor,
administrator, legatee or distributee, as the case may be.
8. Adjustments of Shares Subject to Award. If any
Shares shall at any time be changed or exchanged by reason
of reorganization, merger, consolidation, recapitalization,
reclassification, stock split, combination of shares or a
dividend payable in stock, then the aggregate number of
Option Shares subject to this Agreement and the purchase
price of such Option Shares shall be automatically adjusted
such that Employee's proportionate interest shall be
maintained as before the occurrence of such event. The
determination of any such adjustment by the Committee shall
be final, binding and conclusive.
9. No Contract. This Agreement does not constitute a
contract for employment and shall not affect the right of
the Company to terminate Employee's employment for any
reason whatsoever.
10. Rights as Shareholder. This Award shall not
entitle Employee or any permitted transferee to any rights
of a shareholder of the Company or to any notice of
proceedings of the Company with respect to any Option Shares
issuable upon exercise of this Award unless and until the
Award has been exercised for such Shares.
11. Restriction on Issuance of Shares. The
Company shall not be required to issue or deliver any
certificates for Shares purchased upon the exercise of an
Award prior to the obtaining of any approval from any
governmental agency which the Company shall, in its sole
discretion, determine to be necessary or advisable, and the
completion of any registration or other qualification of
such Shares under any state or federal law or ruling or
regulations of any governmental body which the Company
shall, in its sole discretion, determine to be necessary or
advisable. In addition, if shares reserved for issuance
upon exercise of Awards shall not then be registered under
the Securities Act of 1933 the Company may, upon Employee's
exercise of an Award, require Employee or his permitted
transferee to represent in writing that the Shares being
acquired are for investment and not with a view to
distribution, and may mark the certificate for the Shares
with a legend restricting transfer and may issue stop
transfer orders relating to such certificate to the transfer
agent.
12. Lapse of Award. The Agreement shall be null and
void in the event Employee shall fail to sign and return a
counterpart hereof to the Company within thirty (30) days of
its delivery to Employee.
13. Binding Effect. This Agreement shall be binding
upon this heirs, executors, administrators, and successors
of the parties hereto.
14. Governing Instrument and Law. This Award and any
Shares issued hereunder shall in all respects be governed by
the terms and provisions of the Plan, and by the laws of the
State of Texas, and in the event of a conflict between the
terms of this Agreement and the terms of the Plan, the terms
of the Plan shall control.
THE BOMBAY COMPANY, INC.
By:
----------------------------
Accepted and Agreed:
------------------------ Date: -------------------------
<AUDIT-REPORT>
Letter re: Change in Accounting Principles
Exhibit 18
March 11, 1997
To the Board of Directors of
The Bombay Company, Inc.
Dear Directors:
We have audited the consolidated financial statements incorporated by
reference in the Company's Annual Report on Form 10-K for the year
ended February 1, 1997 and issued our report thereon dated March 11,
1997. Note 1 to the consolidated financial statements describes a
change in the Company's method of allocating overhead costs to
inventory. The change was made to improve the accuracy of inventory
valuation by applying overhead costs to inventory as the costs are
incurred. It should be understood that the preferability of one
acceptable method of inventory accounting over another has not been
addressed in any authoritative accounting literature and in arriving at
our opinion expressed below, we have relied on management's business
planning and judgment. Based on our discussions with management and
the stated reasons for the change, we believe that such change
represents, in your circumstances, the adoption of a preferable
alternative accounting principle for inventories in conformity with
Accounting Principles Board Opinion No. 20.
Yours very truly,
Price Waterhouse LLP
Fort Worth, Texas
</AUDIT-REPORT>
<AUDIT-REPORT>
CONSENT OF INDEPENDENT ACCOUNTANTS
Exhibit 24
We hereby consent to the incorporation by reference in these
Registration Statements on Form S-8 (No. 33-02028, 33-32610, 33-
40736, 33-40743, 33-51076 and 33-55306) of The Bombay Company,
Inc. of our report dated March 6, 1996 appearing on page 23 of
the 1995 Annual Report To Shareholders, which is incorporated in
this Annual Report on Form 10-K. We also consent to the
incorporation by reference of our report on the Financial
Statement Schedule, which appears on page 9 of this Form 10-K.
PRICE WATERHOUSE LLP
Fort Worth, Texas
April 26, 1996
</AUDIT-REPORT>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from The
Bombay Company, Inc. Annual Report on Form 10-K for the fiscal year ended
February 1, 1997 and is qualified in its entirety by reference to such
10-K.
</LEGEND>
<CIK> 0000096287
<NAME> THE BOMBAY COMPANY, INC.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> FEB-01-1997
<PERIOD-START> FEB-04-1996
<PERIOD-END> FEB-01-1997
<CASH> 63130
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 69816
<CURRENT-ASSETS> 144700
<PP&E> 89167
<DEPRECIATION> 47956
<TOTAL-ASSETS> 195363
<CURRENT-LIABILITIES> 35060
<BONDS> 0
0
0
<COMMON> 37998
<OTHER-SE> 115935
<TOTAL-LIABILITY-AND-EQUITY> 195363
<SALES> 336303
<TOTAL-REVENUES> 336303
<CGS> 233903
<TOTAL-COSTS> 341323
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (607)
<INCOME-PRETAX> (4413)
<INCOME-TAX> (1573)
<INCOME-CONTINUING> (2840)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 835
<NET-INCOME> (2005)
<EPS-PRIMARY> (.05)
<EPS-DILUTED> (.05)
</TABLE>
