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 August 1, 1998
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 August 1, 1998
Common stock, $1 par value 37,857,402
THE BOMBAY COMPANY, INC. AND SUBSIDIARIES
Form 10-Q
Quarter Ended August 1, 1998
TABLE OF CONTENTS
PART I -- FINANCIAL INFORMATION
Item Page No.
1. Financial Statements.............................................. 3-6
2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................... 7-9
PART II -- OTHER INFORMATION
4. Submission of Matters to a Vote of Security Holders................ 10
6. Exhibits and Reports on Form 8-K................................... 10
Signatures......................................................... 11
<TABLE>
THE BOMBAY COMPANY, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
August 1, August 2, August 1, August 2,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Net sales $82,011 $68,743 $150,354 $135,974
Costs and expenses:
Cost of sales, buying and store
occupancy costs 60,326 49,095 112,960 101,494
Selling, general and 22,978 21,965 45,716 45,179
administrative expenses
Interest (income), net (503) (644) (1,120) (1,381)
Total costs and expenses 82,801 70,416 157,556 145,292
Loss before income taxes (790) (1,673) (7,202) (9,318)
Benefit for income taxes (314) (678) (2,845) (3,698)
Net loss ($476) ($995) ($4,357) ($5,620)
Basic earnings per share ($0.01) ($0.03) ($0.11) ($0.15)
Diluted earnings per share ($0.01) ($0.03) ($0.11) ($0.15)
Average common shares outstanding
and dilutive potential common 38,057 38,049 38,089 38,036
shares
Cash dividends per common share -- -- -- --
<FN>
The accompanying notes are an integral part of these financial
statements.
</TABLE>
<TABLE>
THE BOMBAY COMPANY, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Dollars in thousands)
<CAPTION>
August 1, January 31, August 2,
1998 1998 1997
ASSETS (Unaudited) (Unaudited)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $37,010 $56,110 $52,664
Inventories 84,314 85,861 72,248
Other current assets 15,913 7,142 14,657
Total current assets 137,237 149,113 139,569
Property and equipment, net 40,477 36,753 37,775
Goodwill, less amortization 526 540 554
Other assets 9,994 9,056 8,750
Total assets $188,234 $195,462 $186,648
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C> <C>
Current liabilities:
Accounts payable and accrued $23,140 $23,019 $26,467
expenses
Accrued payroll and bonuses 3,215 4,390 3,313
Gift certificates redeemable 2,718 3,008 2,088
Total current liabilities 29,073 30,417 31,868
Accrued rent and other liabilities 6,755 6,807 6,432
Stockholders' equity:
Preferred stock, $1 par value,
1,000,000 shares authorized -- -- --
Common stock, $1 par value,
50,000,000 shares authorized 38,139,002;
38,114,187
and 38,052,870 shares issued, 38,139 38,114 38,053
respectively
Additional paid-in capital 76,011 75,904 75,657
Retained earnings 41,066 45,423 35,353
Cumulative effect of foreign (1,424) (1,203) (715)
currency translation
Common shares in treasury at
cost, 281,600; 0 and 0 shares, (1,386) -- --
respectively
Total stockholders' equity 152,406 158,238 148,348
Total liabilities and stockholders' $188,234 $195,462 $186,648
equity
<FN>
The accompanying notes are an integral part of these financial
statements.
</TABLE>
<TABLE>
THE BOMBAY COMPANY, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Dollars in thousands)
(Unaudited)
<CAPTION>
Six Months Ended
August 1, August 2,
1998 1997
<S> <C> <C>
Cash flows from operating activities:
Net loss ($4,357) ($5,620)
Adjustments to reconcile net loss
to net cash from operations:
Depreciation and amortization 4,836 5,068
Deferred taxes and other (3) 1,892
Noncash contributions to employee benefit plans - 18
Change in assets and liabilities:
(Increase) decrease in inventories 1,277 (2,655)
Increase in other current assets (8,309) (4,223)
Decrease in current liabilities (1,830) (3,698)
Increase in noncurrent assets (1,498) (329)
Increase (decrease) in noncurrent liabilities (31) 80
Net cash used by operations (9,915) (9,467)
Cash flows from investing activities:
Purchases of property and equipment (8,419) (1,453)
Sales of property and equipment 332 129
Net cash used by investing activities (8,087) (1,324)
Cash flows from financing activities:
Purchase of treasury stock (1,386) --
Sale of stock to employee benefit plans 79 233
Proceeds from the exercise of employee stock 53 22
options
Net cash provided by financing activities (1,254) 255
Effect of exchange rate change on cash 156 70
Net decrease in cash and cash equivalents (19,100) (10,466)
Cash and cash equivalents at beginning of 56,110 63,130
period
Cash and cash equivalents at end of period $37,010 $52,664
<CAPTION>
Supplemental disclosure of cash flow
information:
<S> <C> <C>
Income taxes paid (refunded) $1,914 ($561)
<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 August 1,
1998 and August 2, 1997, and the results of operations and cash flows for the
six months then ended. The results of operations for the six month and three
month periods ended August 1, 1998 and August 2, 1997 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 1997 Annual Report to
Shareholders.
(2) Financing Arrangements
The Company has renewed its unsecured revolving credit agreements with banks,
aggregating $45,000,000, of which $30,000,000 is committed. These credit
facilities, which expire April 13, 1999, 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) Comprehensive Income
Effective February 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" ("FAS 130").
Comprehensive income is defined as the change in equity (net assets) of a
business enterprise during a period from transactions and other events and
circumstances from non-owner sources. It includes all changes in equity during
a period except those resulting from investments by owners and distributions to
owners. Comprehensive loss for the three months ended August 1, 1998 and August
2, 1997 was $898,000 and $959,000, respectively, and for the six months ended
August 1, 1998 and August 2, 1997 was $4,578,000 and $5,832,000, respectively.
(4) Stock Buy Back Program
On June 17, 1998, the Company announced that its Board of Directors had
approved a stock buy back program with initial authorization to purchase up to
$10 million of the Company's stock. The shares may be purchased from time to
time, through open market purchases and privately negotiated transactions. As
of August 1, 1998, 281,600 shares had been purchased at a cost aggregating
$1,386,000.
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 reference in the Company's 1997 Form 10-K Annual
Report.
General
The Bombay Company, Inc. is a specialty retailer which markets traditional and
classic furniture, prints and accessories through its 408 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 1,800 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 August 1, 1998, 236 large format Bombay stores were in
operation, including 147 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 August 1, 1998 and August 2, 1997
Net sales were $82,011,000 for the quarter ended August 1, 1998 compared to
$68,743,000 for the same period last year, an increase of 19.3%. Same store
sales increased 20% for the comparative periods. Sales increases were primarily
attributable to an aggressive sales posture taken by new management particularly
with regard to purging seasonal and discontinued inventories.
Cost of sales, including buying and store occupancy costs, was $60,326,000 for
the second fiscal quarter compared to $49,095,000 for the same period last year.
As a percentage of sales, cost of sales increased to 73.6% for the quarter
compared to 71.4% for the prior year period. The 220 basis point decline in
margin is due to lower product margin (620 basis points) partially offset by
lower buying occupancy costs relative to sales (400 basis points). The lower
product margins are a result of the aggressive sales in purging seasonal and
discontinued merchandise. The percentage decrease in buying and store occupancy
costs reflects their relatively fixed nature measured against sales increases.
Selling, general and administrative expenses were $22,978,000 or 28.0% of sales
for the quarter compared to $21,965,000 or 32.0% of sales for the comparable
prior year period. The 400 basis point improvement is due to strong controls
over these expenses as well as economies of scale realized on the higher sales
volumes. The actual dollar increase in the expense is related to higher payroll
costs and other selling expense directly related to the higher sales volumes.
Six Months Ended August 1, 1998 and August 2, 1997
Net sales were $150,354,000 for the six months ended August 1, 1998 compared to
$135,974,000 for the same period last year. Same store sales increased 11% for
the year to date. Sales increases reflect the aggressive promotional activity
of the second fiscal quarter this year.
Cost of sales, including buying and store occupancy costs, was $112,960,000 or
75.1% of sales for the six months compared to $101,494,000 or 74.6% of sales for
the prior year to date. The 50 basis point increase is due to lower product
margin (290 basis points) partially offset by lower buying and occupancy costs
relative to sales (240 basis points). The lower product margin is a reflection
of the more aggressive promotional sales activity during the second fiscal
quarter relative to last year. The percentage decrease in buying and store
occupancy costs is due to their relatively fixed nature measured against sales
increases.
Selling, general and administrative expenses were $45,716.000 or 30.4% of sales
for the year to date compared to $45,179,000 or 33.2% of sales for the same
period last year. While costs remained virtually unchanged from the prior year
through on-going expense control efforts, as a percentage of sales they improved
by 280 basis points as a result of growth in sales.
Liquidity and Capital Resources
The primary sources of liquidity and capital resources are cash flows from
operations and bank lines of credit. Bank lines total $45,000,000, of which
$30,000,000 is committed, under revolving credit agreements expiring April 13,
1999. The bank credit lines are being utilized to support inventory purchases
under letters of credit and may be utilized to fund seasonal inventory
purchases. Letters of credit totaling $21,385,000 were outstanding at August 1,
1998. Based upon available cash balances at August 1, 1998 of over $37,000,000
and cash forecasts for the year, the Company does not presently expect to be in
a borrowing position at any time during fiscal 1998.
The store expansion program for the remainder of the fiscal year anticipates
approximately 13 new stores and nine conversions. New stores and conversions in
fiscal 1998 are in a new design which includes customer-friendly merchandise
displays and updated styling. The Company also intends to retrofit a number of
its existing larger format stores with certain of the more successful elements
of the new design. Capital expenditures for the year to date, totaling
$8,419,000, included eight store conversions and eight retrofit projects as well
as routine purchases of machinery and equipment. The total estimated capital
expenditures for fiscal 1998 are approximately $20,000,000. 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.
Year 2000 Conversion
The Company recognizes the need to ensure that it will be prepared for Year 2000
issues. It has evaluated internal systems and programs and has identified those
which it believes are not currently compliant. With respect to mission critical
systems, the Company has approached the problem in a variety of ways.
During the second quarter, the Company implemented a new payroll system and has
recently gone live on a new human resources system, both of which are Year 2000
compliant and
which replace a non-compliant system. The existing financial software has
recently been upgraded to a Year 2000 compliant version. The Company is in the
process of developing a new point of sale system which contemplates both
hardware and software replacements which will be compliant. This system is
currently in the process of being tested as development continues and a chain
wide rollout is planned for the summer of 1999. The Company's merchandising
system was implemented in 1994 and was designed to be Year 2000 compliant;
however, testing was not performed at that time to determine its readiness. The
merchandising system as well as other ancillary systems are currently being
reviewed and programs modified where necessary.
Incremental costs of ensuring the systems' readiness are not expected to be
significant as most of the work will be performed through redirecting existing
internal programming resources. Purchased software packages and hardware are
capitalized and amortized over their useful lives while other costs
associated with the Year 2000 conversion are being expensed as incurred. The
major components of the conversion are expected to be completed by the middle of
1999; however, there will be additional refinements that will continue for the
remainder of the year.
The Company is also communicating with vendors, financial institutions and
others with which it does business to coordinate Year 2000 conversion issues.
There can be no assurance that the systems of other companies and agencies on
which the Company relies will be timely converted or that such failure to
convert by another entity would not have an adverse impact on the Company's
operations.
THE BOMBAY COMPANY, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Annual Meeting of Shareholders of the Company was held on May 21, 1998.
(b) Directors elected to hold office are listed in the attached Proxy Statement
which is incorporated herein by reference. Directors elected:
Barbara Bass, Robert S. Jackson and A. Roy Megarry. Directors continuing:
Edmund H. Damon, Robert E. Runice, Glenn E. Hemmerle, Carmie Mehrlander,
Clayton E. Niles and Carson R. Thompson.
Election of Directors:
Barbara Bass - For: 33,624,989 Withheld: 1,503,932
Robert S. Jackson - For: 33,512,373 Withheld: 1,616,549
A. Roy Megarry - For 33,544,165 Withheld: 1,584,756
(c) Other matters voted upon: Approval of amendment to 1991 Director Stock
Option Plan to
increase available shares by 90,000 shares.
For: 27,383,931
Against: 7,348,915
Withheld: 396,076
Item 6. Exhibits and Reports on Form 8-K
(a) The Exhibits filed as a part of this report are listed below.
Exhibit No. Description
20 Notice of Annual Meeting of
Shareholders and Proxy Statement,
filed with the Commission on
April 10, 1998. Such Exhibit is
incorporated herein by reference.
(b) No reports on Form 8-K were filed during the quarter ended August 1, 1998.
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
Chief Executive Officer
/s/ Elaine D. Crowley
Elaine D. Crowley
Vice President, Finance
and Treasurer
Date: September 15, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from The
Bombay Company, Inc. quarterly report on Form 10-Q for the six months
ended August 1, 1998 and is qualified in its entirety by reference to
such 10-Q.
</LEGEND>
<CIK> 0000096287
<NAME> THE BOMBAY COMPANY, INC.
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<S> <C>
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</TABLE>
