FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark one)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended November 1, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission File Number 1-7288
THE BOMBAY COMPANY, INC.
(Exact name of registrant as specified in its charter)
Delaware 75-1475223
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.
550 Bailey Avenue, Fort Worth, Texas 76107
(Address of principal executive offices) (Zip Code)
(817) 347-8200
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed 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 the number of shares outstanding of each of the issuer's classes
of common stock as of the latest practicable date.
Class Number of shares outstanding at November 1, 1997
Common stock, $1 par value 38,104,118
THE BOMBAY COMPANY, INC. AND SUBSIDIARIES
Form 10-Q
Quarter Ended November 1, 1997
TABLE OF CONTENTS
PART I -- FINANCIAL INFORMATION
Item
1. Financial Statements
2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II -- OTHER INFORMATION
6. Exhibits and Reports on Form 8-K
Signatures
<TABLE>
THE BOMBAY COMPANY, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
---------------------- ---------------------
November 1, November 2, November 1, November 2
1997 1996 1997 1996
---------- ---------- ---------- --------
<S> <C> <C> <C> <C>
Net sales $71,329 $72,816 $207,303 $212,101
------- ------- -------- --------
Costs and expenses:
Cost of sales, buying and
store occupancy costs 50,363 53,481 151,857 154,955
Selling, general and
administrative expenses 24,538 29,492 69,717 76,547
Interest income, net (452) (30) (1,833) (152)
------ ------- ------- -------
Total costs and expenses 74,449 82,943 219,741 231,350
------ ------- ------- -------
Loss before income taxes and
accounting change (3,120) (10,127) (12,438) (19,249)
Benefit for income taxes (1,219) (3,980) (4,917) (7,520)
------ ------- ------ -------
Loss before accounting change (1,901) (6,147) (7,521) (11,729)
Cumulative effect of
accounting change, net of tax -- -- -- 835
------- ------- ------- --------
Net loss ($1,901) ($6,147) ($7,521) ($10,894)
======= ======= ======= ========
Per average common share and
common equivalent share:
Loss before accounting change ($0.05) ($0.16) ($0.20) ($0.31)
Cumulative effect of
accounting change, net of tax -- -- -- 0.02
------- ------- ------ -------
Net loss ($0.05) ($0.16) ($0.20) ($0.29)
======= ======= ====== =======
Average common shares and common
equivalent shares outstanding 38,078 37,765 38,050 37,845
======= ======= ====== ======
Cash dividends per common share -- -- -- --
======= ======= ====== ======
<FN>
The accompanying notes are an integral part of these consolidated
financial statements.
</TABLE>
<TABLE>
THE BOMBAY COMPANY, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Dollars in thousands, except share data)
<CAPTION>
November 1, February 1, November 2,
1997 1997 1996
----------- ----------- -----------
ASSETS (Unaudited) (Unaudited)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $27,618 $63,130 $2,018
Inventories 94,962 69,816 102,645
Income taxes receivable 6,792 102 6,758
Deferred taxes 3,038 3,429 2,123
Other current assets 9,461 8,223 9,201
------- ------- -------
Total current assets 141,871 144,700 122,745
Property and equipment, net 37,766 41,211 42,862
Goodwill, less amortization 547 569 575
Other assets 8,114 8,883 9,796
------- ------- -------
Total assets $188,298 $195,363 $175,978
======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $31,830 $30,052 $20,903
Accrued payroll and bonuses 3,225 5,008 3,110
------ ------ ------
Total current liabilities 35,055 35,060 24,013
------ ------ ------
Accrued rent and other liabilities 6,652 6,370 7,228
------ ------ ------
Stockholders' equity:
Preferred stock, $1 par value,
1,000,000 shares authorized -- -- --
Common stock, $1 par value, 50,000,000
shares authorized, 38,104,118,
37,997,676 and 37,908,147 shares
issued, respectively 38,104 37,998 37,908
Additional paid-in capital 75,894 75,465 75,196
Retained earnings 33,452 40,973 32,084
Cumulative effect of foreign currency
translation (859) (503) (451)
------- ------- -------
Total stockholders' equity 146,591 153,933 144,737
------- ------- -------
Total liabilities and stockholders'
equity $188,298 $195,363 $175,978
======= ======= =======
<FN>
The accompanying notes are an integral part of these consolidated
financial statements.
</TABLE>
<TABLE>
THE BOMBAY COMPANY, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Dollars in thousands)
(Unaudited)
<CAPTION>
Nine Months Ended
---------------------
November 1, November 2,
1997 1996
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net loss ($7,521) ($10,894)
Adjustments to reconcile net loss
to net cash from operations:
Depreciation and amortization 7,499 8,547
Deferred taxes and other 1,085 1,699
Management change cost 800 3,672
Noncash contributions to employee
benefit plans 18 1,249
Change in assets and liabilities:
Increase in inventories (25,560) (14,042)
(Increase) decrease in other current
assets (7,299) 2,620
Decrease in current liabilities (2,443) (12,864)
Increase in noncurrent assets (577) (690)
Increase in noncurrent liabilities 314 797
------ ------
Net cash used by operations (33,684) (19,906)
------ ------
Cash flows from investing activities:
Purchases of property and equipment (2,696) (3,746)
Sales of property and equipment 163 231
----- -----
Net cash used by investing activities (2,533) (3,515)
----- -----
Cash flows from financing activities:
Sale of stock to employee benefit plans 273 590
Proceeds from the exercise of employee
stock options 266 936
----- -----
Net cash provided by financing
activities 539 1,526
----- -----
Effect of exchange rate change on cash 166 (166)
Net decrease in cash and cash equivalents (35,512) (22,061)
Cash and cash equivalents at beginning of
period 63,130 24,079
------ ------
Cash and cash equivalents at end of period $27,618 $2,018
====== ======
<CAPTION>
Supplemental disclosure of cash flow information:
<S> <C> <C>
Income taxes paid $1,656 $753
<FN>
The accompanying notes are an integral part of these consolidated
financial statements.
</TABLE>
THE BOMBAY COMPANY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(1) Accounting Principles
In the opinion of the Company, the accompanying consolidated financial
statements contain all adjustments (consisting of only normal recurring
adjustments) necessary to present fairly the financial position as of
November 1, 1997 and November 2, 1996, and the results of operations and
cash flows for the nine months then ended. The results of operations for
the nine month and three month periods ended November 1, 1997 and
November 2, 1996 are not necessarily indicative of the results to be
expected for the full fiscal year. The consolidated financial statements
should be read in conjunction with the financial statement disclosures
contained in the Company's 1996 Annual Report to Shareholders.
(2) Financing Arrangements
The Company has renewed its unsecured revolving credit agreements with
banks, aggregating 40,000,000, of which $30,000,000 is committed. These
credit facilities, which expire April 14, 1998, are for working capital
and letter of credit purposes, primarily to fund seasonal merchandise
purchases, and bear interest at market rates based on prime.
(3) Management Change
On October 3, 1997, the Company announced the departure of its Executive
Vice President and Chief Financial Officer. In accordance with a severance
and non competition agreement, a one time pre-tax charge of $800,000,
equivalent to $.01 per share after tax, was recorded during the quarter
ended November 1, 1997.
THE BOMBAY COMPANY, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Special Note Regarding Forward-Looking Statements
Certain statements in this Form 10-Q under "Management's Discussion and
Analysis of Financial Condition and Results of Operations" constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements involve
known and unknown risks, uncertainties and other factors which may cause
the actual results, performance or achievements of The Bombay Company, Inc.
("Company") to be materially different from any future results, performance
or achievements expressed or implied by such forward-looking statements.
Such factors include, among others, the following: competition;
seasonality; success of operating initiatives; new product development and
introduction schedules; 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; regional weather
conditions; and other factors referenced in the Company's 1996 Form 10-K
Annual Report.
General
The Company is a specialty retailer which markets traditional and classic
furniture, prints and accessories through its 420 locations of The Bombay
Company ("Bombay") retail stores in 42 states in the United States and nine
Canadian provinces. 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 November 1, 1997, 226 large format Bombay stores were in
operation, including 137 stores that have been converted from regular stores
since fiscal 1992.
The largest percentage of the Company's sales and operating income is
realized in the fiscal quarter that includes December (Christmas season).
Although the precise effect of inflation on operations
cannot be accurately determined, management does not believe inflation has
a material impact on sales or results of operations.
Results of Operations
Quarters Ended November 1, 1997 and November 2, 1996
Net sales were $71,329,000 for the quarter ended November 1, 1997 compared
to $72,816,000 for the same period last year, a decrease of 2%. The
decrease is due primarily to there being twelve fewer stores than at
November 2, 1996 while same store sales were flat for the quarter.
Furniture sales typically represent the majority of revenues. With the
fall marketing period including a large number of furniture introductions
and a focus on home decorating, furniture represented approximately 55% of
sales for the quarter compared to 54% for the comparable prior year quarter.
Wall decor and lamp sales reflected modest improvement while accessories
performed at slightly lower levels than last year.
Cost of sales, including buying and occupancy costs, was $50,363,000 for
the quarter compared to $53,481,000 for the same period last year. As a
percentage of sales, cost of sales decreased to 70.6% for the quarter
compared to 73.4% for the comparable prior year period. The 280 basis point
improvement is due to higher product margin (300 basis points) partially
offset by higher buying and occupancy costs relative to sales (20 basis
points). The higher product margins reflect lower
levels of promotional activity compared to the prior year and selective
product cost reduction efforts. The percentage increase in buying and
occupancy costs reflects their relatively fixed nature measured against
sales declines.
Selling, general and administrative expenses were $24,538,000 or 34.4% of
sales for the quarter compared to $29,492,000 or 40.5% of sales for the
comparable prior year period. The current and prior year amounts include
charges of $800,000 and $4,200,000, respectively, resulting from separate
management changes. Excluding these charges, selling, general and
administrative expenses were $23,738,000 or 33.3% of sales for the current
quarter compared to $25,292,000 or 34.7% of sales for the comparable prior
year period. The decreases are the result of on-going expense control
efforts and are primarily related to reduced payroll expenses.
Nine Months Ended November 1, 1997 and November 2, 1996
Net sales were $207,303,000 for the nine months ended November 1, 1997
compared to $212,101,000 for the same period last year. Same store sales
declined 1% for the year to date.
Cost of sales, including buying and store occupancy costs, was $151,857,000
or 73.3% of sales for the nine months compared to $154,955,000 or 73.1%
for the same period last year. The gross margin decrease is due to
higher buying and occupancy costs relative to sales (60 basis points)
partially offset by higher product margin (40 basis points). The percentage
increase in buying and occupancy costs reflects their relative fixed nature
measured against sales declines.
Selling, general and administrative expenses were $69,717,000 or 33.6% of
sales for the nine months compared to $76,547,000 or 36.1% for the same
period last year. Excluding the effects of charges associated with changes
in management, selling, general and administrative expenses were
$68,917,000 or 33.2% or sales for the nine months compared to $72,347,000
or 34.1% or sales for the comparable prior year period. The decreases
are the result of on-going expense control efforts and are primarily
related to reduced payroll expenses partially offset by increased
advertising costs.
Liquidity and Capital Resources
The primary sources of liquidity and capital resources are cash flows from
operations and bank lines of credit. Bank borrowings are utilized to fund
seasonal inventory purchases. In addition, the bank credit lines are used
for overseas merchandise purchases. Letters of credit totaling $27,983,000
were outstanding at November 1, 1997. Bank lines total $40,000,000, of
which $30,000,000 is committed, under revolving credit agreements expiring
April 14, 1998. Based on available cash balances at November 1, 1997 of
over $27,000,000 and cash forecasts for the year, the Company does not
expect to be in a borrowing position at any time during fiscal 1997. The
bank credit lines are, however, being utilized to support inventory
purchases under letters of credit.
Capital expenditures through November 1, 1997 totaled $2,696,000 and
included expenditures relating to the construction of five new or converted
stores as well as routine purchases of machinery and equipment. The store
expansion program for the remainder of the fiscal year anticipates
approximately two store conversions. The total estimated capital
expenditures for fiscal 1997 are $4,000,000. The Company believes that
its current cash position, cash flow from operations and credit line
facilities will be sufficient to fund current operations and its capital
expenditure program.
THE BOMBAY COMPANY, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) No Exhibits have been filed as a part of this report.
(b) No reports on Form 8-K were filed during the quarter
ended November 1, 1997.
THE BOMBAY COMPANY, INC. AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
THE BOMBAY COMPANY, INC.
(Registrant)
/s/ Robert S. Jackson
Robert S. Jackson
Interim President and
Chief Executive Officer
/s/ Elaine D. Crowley
Elaine D. Crowley
Vice President of Finance
and Treasurer
Date: December 16, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from The
Bombay Company, Inc. quarterly report on Form 10-Q for the nine months
ended November 1, 1997 and is qualified in its entirety by reference to
such 10-Q.
</LEGEND>
<CIK> 0000096287
<NAME> THE BOMBAY COMPANY, INC.
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</TABLE>
