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 January 31, 1998
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 incorporatio (I.R.S. Employer Identification
or organization) 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 15, 1998 was
approximately $142,263,937.
Shares outstanding at April 15,1998: Common Stock, $1 Par Value: 38,120,579
DOCUMENTS INCORPORATED BY REFERENCE:
(a) Portions of the Annual Report to Shareholders for the Fiscal Year Ended
January 31, 1998 (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 21, 1998 (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 415 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 1997 Annual Report to Shareholders, filed
as Exhibit 13 to this Form 10-K Annual Report. Such Exhibit is incorporated
herein by reference.
<F7>
Merchandise Sales, Purchasing and Distribution
The Fiscal 1997 sales mix consisted of: 49% furniture, 26% accessories, 17%
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 1997, the Company's merchandise
assortment consisted of approximately 3,000 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. Offering
better selections by developing complete collections was a priority during
Fiscal 1997. During the year, approximately 1,200 new SKU's were introduced as
compared to approximately 1,000 in Fiscal 1996. The focus on product assortment
continues into Fiscal 1998, with an emphasis on enhancing our non-furniture
items as the Company attempts to attract more impulse buying.
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, Indonesia and China and agents in
various countries locate prospective vendors, coordinate production requirements
with manufacturers, provide technical expertise and quality control.
Approximately 75% of the Company's merchandise requirements are supplied by
35 contract manufacturers in eight 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
locatedoandsprovide thehcapabilityetoireplenishhthermajorityrofestore
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 January 31, 1998, 228 large
format Bombay stores were in operation, including 139 stores that have been
converted from regular stores since fiscal 1992. Over 90% of all stores are
located in major shopping malls. At January 31, 1998, 364 stores were operating
in 42 states in the United States and 51 stores were operating in nine 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:
AL - 5 LA - 7 NY - 23
AR - 1 KS - 4 OK - 4
AZ - 5 MA - 9 OH - 18
CA - 49 MD - 11 OR - 3
CO - 4 MI - 10 PA - 19
CT - 6 MN - 6 RI - 2
DC - 1 MO - 7 SC - 4
DE - 3 MS - 1 TN - 12
FL - 31 NC - 9 TX - 23
GA - 13 NE - 1 UT - 3
IA - 1 NH - 3 VA - 14
IL - 17 NJ - 15 WA - 8
IN - 4 NM - 1 WI - 1
KY - 2 NV - 3 WV - 1
Canada:
AB - 4 NB - 2 ON - 25
BC - 7 NF - 1 PQ - 8
MB - 1 NS - 2 SK - 1}
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 "safe 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. At January 31,
1998, owned office space was approximately 121,000 square feet of which the
Company occupies approximately 79,000 square feet. Leased office and retail
space was approximately 1,252,000 square feet. Office facilities are located in
the Fort Worth and Toronto areas. Leased distribution and storage facilities
are summarized following:
Location Square Feet
McDonnaugh, GA 250,000
Gilbertsville, PA 200,000
Fort Worth, TX 272,000
Mississauga, ON, CAN 105,000
827,000
Leases generally have 10 year terms, expiring between 1998 and 2011.
Adequate insurance coverage is maintained on all properties.
For additional lease information, see Note 4 of Notes to Consolidated
Financial Statements, located on page 21 of the 1997 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 1997 Annual Report
to Shareholders, filed as Exhibit 13 to this Form 10-K Annual Report. Such
Exhibit is incorporated herein by reference.
<F4>
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 1997 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 1997 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,
1998 was 2,500.
(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
1997 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 1997
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 1997 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>
Page Number(s) in
Annual Report*
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<S> <C>
Consolidated Statements of Operations for the Years Ended January 31, 1998,
February 1, 1997 and February 3, 1996.................................................16
Consolidated Balance Sheets at January 31, 1998 and February 1, 1997....................17
Consolidated Statements of Cash Flows for the Years Ended January 31, 1998,
February 1, 1997 and February 3, 1996..................................................18
Consolidated Statements of Stockholders' Equity for the Years Ended January 31, 1998,
February 1, 1997 and February 3, 1996................................................. 19
Notes to Consolidated Financial Statements...........................................20-24
Report of Independent Accountants.......................................................25
Unaudited Quarterly Financial Data......................................................26
</TABLE>
*The indicated pages of The Bombay Company, Inc. 1997 Annual Report to
Shareholders are filed as Exhibit 13 to this Annual Report on Form 10-K. Such
Exhibit is incorporated herein by reference.
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" and 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 Annual 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, 1998, appearing in the accompanying 1997
Annual Report to Shareholders are incorporated by reference in this
Form 10-K Annual Report. With the exception of the aforementioned
information and information incorporated in Items 1, 2, 3, 5, 6 and 7,
the 1997 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 1997 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 9
Schedule II-Valuation and Qualifying Accounts and Reserves for the
Years Ended January 31, 1998, February 1, 1997 and
February 3, 1996 11
(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 January 31,
1998.
<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, 1998, appearing on page 25 of the 1997 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, 1998
</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 29, 1998
/s/ ROBERT S. JACKSON
Robert S. Jackson
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 April 24, 1998
/s/ CLAYTON E. NILES
Clayton E. Niles
Director April 27, 1998
/s/ BARBARA BASS
Barbara Bass
Director April 23, 1998
/s/ EDMUND H. DAMON
Edmund H. Damon
Director April 25, 1998
/s/ GLENN E. HEMMERLE
Glenn E. Hemmerle
Director April 28, 1998
/s/ A. ROY MEGARRY
A. Roy Megarry
President, Chief Operating
Officer and Director
Carmie Mehrlander
Director April 21, 1998
/s/ ROBERT E. RUNICE
Robert E. Runice
Director April 29, 1998
/s/ CARSON R. THOMPSON
Carson R. Thompson
April 29, 1998
/s/ ELAINE D. CROWLEY Vice President, Finance and
Treasurer
Elaine D. Crowley
<TABLE>
THE BOMBAY COMPANY, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(Dollars in Thousands)
<CAPTION>
Additions
Charged Charged
to 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>
Year 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) $ --
Year Ended February 1, 1997
Store Conversions Reserve-
Asset Writedown $5,323 -- -- 1,683(1) $3,640
Year Ended January 31, 1998
Store Conversions Reserve-
Asset Writedown $3,640 -- -- 1,401(1) $2,239
<FN>
(1)Primarily remaining book value of leasehold improvements and lease obligations of Bombay
stores written off in connection with the store conversion program.
(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 January 31,
1998.
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.
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) - The Bombay Company, Inc. 1993 Stock Deferral Plan for Non-Employee
Directors. (7)
10(i) - Form of Executive Severance and Non-Competition Agreement dated
December 8, 1992. (1)
10(j) - Executive Long Term Disability Plan. (8)
10(k) - The Bombay Company, Inc. 1996 Long-Term Incentive Stock Plan. (9)
10(l) - Form of Award Agreement under the 1996 Long-Term Incentive Stock
Plan. (10)
13 - The Bombay Company, Inc. 1997 Annual Report to Shareholders is filed
as exhibit hereto solely to the extent portions thereof are
expressly incorporated herein by reference.
22 - Subsidiaries of the Registrant. (8)
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 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 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.
(10) Filed with the Commission as an Exhibit to the Company's Annual Report on
Form 10-K for the year ended February 1, 1997.
(11) Filed with the Commission on April 10, 1998.
<F3>
<TABLE>
SELECTED FINANCIAL DATA
The Bombay Company, Inc. and Subsidiaries
<CAPTION>
Seven Months
Year Ended Ended Year Ended
January 31 February 1 February 3 January 28 July 3 July 4
1998 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
Financial Data:
Net sales(1)....................... $332,577 $336,303 $345,399 $241,465 $317,452 $231,737
Net sales increase (decrease)...... (1)% 2%(6) _%(6) 23% 37% 32%
Same store sales increase (decrease) _ 2%(6) (9)%(6) (1)% 11% 11%
Income (loss) from continuing operations:(1)
Before accounting change.......... $4,450 $(2,840) $12,393(2) $(14,714)(2) $22,895 $8,190(3)
Cumulative effect of accounting change _ 835 _ _ _ _
Net income (loss)................. 4,450 (2,005) 12,393(2) (14,714)(2) 22,895 8,190(3)
Basic earnings per share:(4)
Income (loss) before accounting change .12 (.07) .33(2) (.39)(2) .63 .25(3)
Cumulative effect of accounting change _ .02 _ _ _ _
Net income (loss)................. .12 (.05) .33(2) (.39)(2) .63 .25(3)
Diluted earnings per share:(4)
Income (loss) before accounting change .12 (.07) .33(2) (.39)(2) .60 .23(3)
Cumulative effect of accounting change _ .02 _ _ _ _
Net income (loss)................. .12 (.05) .33(2) (.39)(2) .60 .23(3)
Total assets(1)...................... 195,462 195,363 190,696 189,747 180,548 143,436
Stockholders' equity(1).............. 158,238 153,933 152,468 134,810 147,006 115,818
Return on assets..................... 2.3% (1.0)% 6.5% N/C(5) 14.4% 8.3%
Return on equity..................... 2.9% (1.3)% 8.6% N/C(5) 17.4% 10.7%
Operating Data:
Average sales per store open for full
fiscal period(1)................... $796 $784 $765(6) $773(6) $699 $604
Average sales per square foot...... $263 $262 $263(6) $304(6) $323 $340
Number of stores:
Beginning of year................. 427 434 486 447 383 342
Opened............................ 2 9 11 40 71 44
Closed............................ 14 16 63 1 7 3
End of year....................... 415 427 434 486 447 383
Store composition:
Bombay - Regular.................. 187 203 216 230 268 328
Bombay - Large format............. 228 224 218 198 141 46
Alex & Ivy........................ _ _ _ 58 38 9
Retail square footage:(1)
Bombay - Regular.................. 333 358 371 396 457 553
Bombay - Large format............. 910 902 885 810 565 180
Alex & Ivy........................ _ _ _ 202 126 20
Total............................. 1,243 1,260 1,256 1,408 1,148 753
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
The Bombay Company, Inc. ("Company") is a specialty retailer which markets
traditional and classic furniture, prints and accessories through its 415
locations of The Bombay Company ("Bombay") retail stores in 42 states in the
United States and nine Canadian provinces. 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 three years of
comparable data for the total Company and also presents results excluding the
closed Alex & Ivy division.
The largest percentage of the Company's sales and operating income is realized
in the fiscal quarter that includes December (Christmas season). Merchandise is
manufactured to Company specification through a network of contract
manufacturers located principally in Asia and North America. Because the
majority of the Company's products are proprietary, the impact of inflation on
operating results is typically not significant. The Company attempts to
alleviate inflationary pressures by increasing selling prices (subject to
competitive conditions), improving designs and finding alternative production
sources in lower cost countries.
See Note 1 of Notes to Consolidated Financial Statements for fiscal reporting
periods.
<F1>
Special Note Regarding Forward-Looking Statements
Certain statements in this Annual Report to Shareholders under "Management's
Discussion and Analysis" 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
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 and regional weather conditions.
Net Sales
Net sales declined 1% to $332.6 million for Fiscal 1997. The most significant
contributor to the sales decline was the closure of 14 underperforming stores.
Same store sales (stores in existence for one year or more) were flat for the
year while new stores accounted for a 1% increase in sales over Fiscal 1996. The
Fiscal 1997 sales mix consisted of: 49% furniture, 26% accessories, 17% wall
decor (principally prints, mirrors and sconces) and 8% lamps and other
categories, essentially the same as Fiscal 1996. The focus of the Company was,
and continues to be, to offer more complete, cohesive collections with a broader
market appeal. This translated into a 7% increase in the average ticket;
however, the number of transactions also declined by 7%. On a regional basis,
Canada and the Northeastern United States reported the strongest results
although the results across all regions were within a very small range.
Net sales, excluding Alex & Ivy, increased 2% to $336.3 million in Fiscal 1996
from $330.7 million in Fiscal 1995 due primarily to a 2% increase in same store
sales. During the period, the number of transactions decreased 2% while the
average sale per transaction increased 4% to $85. Furniture sales were the
predominant component in the sales mix representing 49% of the business as
compared to 47% in Fiscal 1995. 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.
Cost of Sales, Buying and Store Occupancy Costs
Cost of sales, including buying and store occupancy costs, for Fiscal 1997 was
$229.9 million, or 69.1% of sales. As a percentage of sales, these costs
improved from 69.6% in Fiscal 1996. Product margins improved 60 basis points
compared to the prior year as inventory overstock was sold and the new products
were introduced. The increase in product margin was somewhat offset by a 10
basis point increase in buying and occupancy costs due to the relative fixed
nature of costs measured against sales declines.
Excluding Alex & Ivy, cost of sales, including buying and occupancy costs, for
Fiscal 1996 was $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 higher product costs 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.
Selling, General and Administrative Expenses
For Fiscal 1997, selling, general and administrative costs were reduced $9.7
million to $97.7 million. Expenses declined to 29.4% of sales in Fiscal 1997
from 31.9% of sales in Fiscal 1996. Excluding charges related to management
changes of $.8 million in Fiscal 1997 and $4.2 million in Fiscal 1996 (see Note
8 of Notes to Consolidated Financial Statements), selling, general and
administrative expenses were $96.9 million, or 29.1% of sales, in Fiscal 1997
compared to $103.2 million, or 30.7% of sales, in Fiscal 1996. The decrease is
primarily due to lower payroll and payroll related costs (110 basis points) and
lower supplies costs (20 basis points) as a result of more stringent cost
control initiatives.
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% of sales in
Fiscal 1995. The Fiscal 1996 amount included a $4.2 million charge (1.2% of
sales) recorded in connection with the management change which took place
September 1996. The remaining increase relates to higher payroll costs (120
basis points), costs incurred in connection with the closing of unprofitable
Bombay stores (20 basis points), higher insurance costs (20 basis points) and
higher recruiting and training costs (20 basis points) partially offset by lower
advertising expenses (90 basis points).
<TABLE>
Table (Dollars in millions)
______________________________________________________
<CAPTION>
Cost of Sales, Buying &
Sales Increase (Decrease) Store Occupancy Costs Selling, General & Administrative
_________________________ ____________________-- __________________---------------_
FiscalTotal All New Same Total % ofIncrease Total % of Increase
Year Sales StoresStoresStores* Costs Sales(Decrease) ExpensesSales (Decrease)
____________ ___________________ _____________________ ________________________
Excluding Alex & Ivy
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997 $332.6 (1)% 1% _ % $229.9 69.1% (.5)% $ 97.7 29.4% (2.5)%
1996 336.3 2 2 2233.9 69.6 3.5 107.4 31.9 2.1
1995 330.7 _ 5 (9) 218.7 66.1 3.6 98.4 29.8 1.0
<CAPTION>
Total Company
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997 $332.6 (1)% 1% _ % $229.9 69.1% (.5)% $ 97.7 29.4% (2.5)%
1996 336.3 (3) 2 2 233.9 69.6 3.1 107.4 31.9 2.3
1995 345.4 (5) 4 (8) 229.6 66.5 2.9 102.3 29.6 .2
<FN>
*Does not include converted stores until they have been operated a full twelve
months after conversion.
</TABLE>
Interest
Interest income in Fiscal 1997 was $2.3 million while there was no interest
expense for the year. In Fiscal 1996, interest income was $.7 million with
interest expense less than $.1 million, and in Fiscal 1995, interest income was
$.8 million while interest expense was less than $.1 million. Interest expense
during these periods reflects low levels of seasonal borrowing to fund inventory
purchases. The Company had no borrowings during Fiscal 1997. The increase in
interest income relates to higher average balances in short - term investments.
The most significant increase occurred in Fiscal 1997 as the average cash
balances remained higher throughout the year as inventory levels were controlled
to lower average levels and capital expenditures were less than $4 million.
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 costs 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).
There were no sales from Alex & Ivy stores during Fiscal 1997 and Fiscal 1996.
Alex & Ivy sales were $14.7 million during Fiscal 1995. Excluding costs or
credits relating to the closure, operating results for Fiscal 1995 were break-
even. 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
The Company provided $2.9 million for income taxes in Fiscal 1997 and $8.0
million in Fiscal 1995 while reflecting a benefit of $1.6 million for Fiscal
1996. The effective tax rate was 39.3%, (35.6)% and 39.3% in Fiscal 1997, Fiscal
1996 and Fiscal 1995, respectively. The lower rate in Fiscal 1996 was primarily
attributable to realizing an operating loss without reflecting a corresponding
state tax benefit.
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 available 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 April
14, 1998. These lines are expected to be renewed with existing banks.
Fiscal 1997
At January 31, 1998, cash and short - term investments were $56.1 million, a
decrease of $7.0 million from February 1, 1997. Net cash used by operations was
$4.1 million. Cash was used primarily for the increase in inventories of $16.8
million and decreases in accounts payable and accrued expenses of $5.5 million.
These were partially offset by net income of $4.5 million which included non-
cash depreciation and amortization totaling $9.9 million. The increase in
inventory is the result of a decision to change the timing of the Fiscal 1998
Spring I marketing period and to add a Spring gift catalogue which resulted in
product arriving earlier than last year as well as not meeting sales plans
during Fiscal 1997. While the dollar value of the inventory is somewhat above
ideal, the mix of the inventory is good. The Company expects to gradually reduce
current inventories through reduced ordering and does not expect any significant
adverse impact on future operations.
Capital expenditures totaled $3.9 million and included the costs of two new
stores, five store conversions and routine purchases of machinery and equipment.
The capital expenditure program for Fiscal 1998 is planned at approximately $20
million and includes 15 to 20 store openings and 20 conversions. The new stores
and conversions will be 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. 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 expenditure
program.
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 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 was 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.
Fiscal 1995
Cash and short-term investments were $24.1 million 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
million relating to the noncash adjustment to the Alex & Ivy closing reserve.
Other components of cash used by operations included a $15 million increase in
inventory levels offset by other net sources of cash totaling $4.5 million. The
increase in inventory levels was 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.
Year 2000 Conversion
The Company recognizes the need to ensure that it will be prepared for Year
2000 software issues. It has evaluated internal systems and programs and has
identified those which it believes are not currently compliant. Certain
solutions are being developed through programming while other systems will be
upgraded or replaced. Incremental costs are not expected to be significant as
most of the work will be performed through the redirection of existing internal
programming resources. Purchased software packages are capitalized and amortized
over their useful lives while programming and 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.
<TABLE>
Consolidated Statements of Operations
The Bombay Company, Inc. and Subsidiaries
(In thousands, except per share amounts)
<CAPTION>
Year Ended
January 31 February 1 February 3
1998 1997 1996
______ _______ _______
<S> <C> <C> <C>
Net sales.................................................. $ 332,577 $ 336,303 $ 345,399
____________________________________
Costs and expenses:
Cost of sales, buying and store occupancy costs ......... 229,927 233,903 229,562
Selling, general and administrative expenses (Note 8).... 97,663 107,420 102,259
Interest income, net..................................... (2,349) (607) (828)
Operations realignment credit (Note 9)................... _ _ (6,000)
____________________________________
325,241 340,716 324,993
<F8>
<F9>
____________________________________
Income (loss) before income taxes and accounting change.... 7,336 (4,413) 20,406
Provision (benefit) for income taxes....................... 2,886 (1,573) 8,013
____________________________________
Income (loss) before accounting change..................... 4,450 (2,840) 12,393
Cumulative effect of accounting change, net of tax (Note 1) _ 835 _
<F1>
__________________________________
Net income (loss)........................................ $ 4,450 $(2,005) 12,393
____________________________________
____________________________________
Basic earnings per share:
Income (loss) before accounting change................... $.12 $(.07) $.33
Cumulative effect of accounting change, net of tax (Note 1) _ .02 _
<F1>
________ _________ _________
Net income (loss)........................................ $.12 $(.05) $.33
________ _________ _________
________ _________ _________
Diluted earnings per share:
Income (loss) before accounting change................... $.12 $(.07) $.33
Cumulative effect of accounting change, net of tax (Note 1) _ .02 _
<F1>
________ _________ _________
Net income (loss)........................................ $.12 $(.05) $.33
________ _________ _________
________ _________ _________
Average common shares outstanding.......................... 38,066 37,680 37,115
________________________________
________________________________
Average common shares outstanding and dilutive potential
common shares.............................................. 38,095 37,883 37,545
________________________________
________________________________
<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>
January 31 February 1
1998 1997
___________ ___________
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents (short - term investments
of $50,538 and $57,810, respectively)........................... $56,110 $63,130
Inventories, at lower of cost or market......................... 85,861 69,816
Deferred taxes.................................................. 3,400 3,429
Other current assets............................................ 3,742 8,325
___________ ____________
Total current assets........................................... 149,113 144,700
___________ ____________
Property and equipment, at cost:
Land............................................................ 993 993
Building........................................................ 5,198 5,196
Leasehold improvements.......................................... 62,122 62,442
Furniture and equipment......................................... 20,811 20,536
___________ ____________
89,124 89,167
Accumulated depreciation........................................ (52,371) (47,956)
___________ ____________
36,753 41,211
___________ ____________
Deferred taxes and other assets................................... 9,056 8,883
Goodwill, less amortization of $494 and $465, respectively........ 540 569
___________ ____________
$195,462 $195,363
___________ ____________
___________ ____________
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses........................... $23,019 $27,675
Accrued payroll and bonuses..................................... 4,390 5,008
Gift certificates redeemable.................................... 3,008 2,377
___________ ____________
Total current liabilities...................................... 30,417 35,060
___________ ____________
Accrued rent and other liabilities................................ 6,807 6,370
___________ ____________
Stockholders' equity:
Preferred stock, $1 par value, 1,000,000 shares authorized...... __ __
Common stock, $1 par value, 50,000,000 shares
authorized, 38,114,187 and 37,997,676 shares issued, respectively 38,114 37,998
Additional paid-in capital...................................... 75,904 75,465
Retained earnings............................................... 45,423 40,973
Cumulative effect of foreign currency translation............... (1,203) (503)
___________ ____________
Total stockholders' equity..................................... 158,238 153,933
___________ ____________
Commitments and Contingencies (Note 4)
<F4>
$195,462 $195,363
<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
____________________________________________
January 31 February 1 February 3
1998 1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 4,450 $ (2,005) $12,393
Adjustments to reconcile net income (loss) to net
cash from operations:
Depreciation and amortization 9,859 11,203 11,878
Operations realignment and management
severance costs (credit) (Notes 8 and 9) 800 4,200 (6,000)
Deferred taxes and other (104) (394) 7,636
Noncash contributions to employee benefit plans 18 1,667 1,671
Change in assets and liabilities:
(Increase) decrease in inventories (16,818) 18,714 (14,958)
(Increase) decrease in other current assets 4,412 9,268 (5,958)
Decrease in accounts payable and accrued expenses (5,626) (3,919) (11,272)
Increase (decrease) in accrued payroll and bonuses (567) 1,925 (891)
(Increase) decrease in noncurrent assets (1,001) 548 (215)
Increase (decrease) in noncurrent liabilities 496 (56) 1,605
______________________________________________
<F8>
<F9>
Net cash provided (used) by operations (4,081) 41,151 (4,111)
______________________________________________
Cash flows from investing activities:
Purchases of property, equipment and other (3,945) (4,432) (5,898)
Proceeds from sale of property and equipment 234 519 374
______________________________________________
Net cash used by investing activities (3,711) (3,913) (5,524)
______________________________________________
Cash flows from financing activities:
Sale of stock to employee benefit plans 273 696 823
Exercise of stock options 266 1,138 2,287
______________________________________________
Net cash provided by financing activities 539 1,834 3,110
______________________________________________
Effect of exchange rate change on cash 233 (21) (66)
______________________________________________
Net increase (decrease) in cash and cash equivalents (7,020) 39,051 (6,591)
Cash and cash equivalents at beginning of year 63,130 24,079 30,670
______________________________________________
Cash and cash equivalents at end of year $56,110 $63,130 $24,079
______________________________________________
______________________________________________
Supplemental disclosures of cash flow information:
Interest paid $ _ $ 46 $ 67
Income taxes paid (refunded) $ 1,791 $ (9,536) $ 7,458
<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>
Additional Currency
Common Stock Paid-In Retained Translation
____________________
Shares Amount Capital Earnings Effects
__________ ____________________ _________ __________
<S> <C> <C> <C> <C> <C>
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)
Shares contributed or sold to
employee benefit plans....... 61,880 62 223 _ _
Exercise of stock options..... 54,631 54 216 _ _
Foreign currency translation
adjustments................... _ _ _ _ (700)
Net income.................... _ _ _ 4,450 _
__________ _______ _______ _______ _______
Balance, January 31, 1998.....38,114,187 $38,114 $75,904 $45,423 $(1,203)
__________ _______ _______ _______ _______
__________ _______ _______ _______ _______
<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 ends on the Saturday nearest January 31. The periods
ended January 31, 1998 ("Fiscal 1997") and February 1, 1997 ("Fiscal 1996")
represent 52 weeks. The period ended February 3, 1996 ("Fiscal 1995") represents
53 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 1997, Fiscal 1996 and Fiscal 1995, advertising expense was
$20,096,000, $19,887,000 and $22,859,000, 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
In March 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, Earnings per Share ("FAS 128"), which
superceded Accounting Principles Board Opinion No. 15. FAS 128 requires
presentation of basic and diluted earnings per share. Basic earnings per share
are based upon the weighted average number of shares outstanding. Diluted
earnings per share are based upon the weighted average number of shares
outstanding plus the shares that would be outstanding assuming exercise of
dilutive stock options and distribution of restricted stock and deferred
director compensation. The Company adopted FAS 128 in Fiscal 1997 on a
retrospective basis.
The computations for basic and diluted earnings from continuing operations per
share follow (in thousands, except per share amounts):
<TABLE>
<CAPTION>
Year Ended
January 31 February 1 February 3
1998 1997 1996
<S> <C> <C> <C>
Numerator:
Income (loss) before
accounting change $4,450 $(2,840) $12,393
Denominator for basic
earnings per share:
Average common
shares outstanding 38,066 37,680 37,115
Denominator for diluted
earnings per share:
Average common
shares outstanding 38,066 37,680 37,115
Stock options 11 203 430
Restricted stock 13 _ _
Deferred director
compensation 5 _ _
38,095 37,883 37,545
_______ _______ _______
_______ _______ _______
Basic earnings
per share $.12 $(.07) $.33
____ _____ _____
____ _____ _____
Diluted earnings
per share $.12 $(.07) $.33
_____ _____ _____
_____ _____ _____
</TABLE>
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
January 31 February 1 February 3
1998 1997 1996
<S> <C> <C> <C>
Income (loss) before
income taxes and
accounting change:
Domestic..... $ 6,706 $(4,714) $18,923
Foreign...... 630 301 1,483
$ 7,336 $(4,413) $20,406
Provision (benefit) for
income taxes:
Current:
Federal...... $ 2,255 $(1,479) $(6,929)
Foreign...... 306 500 862
State and local 109 _ (2,200)
2,670 (979) (8,267)
Deferred (prepaid):
Federal...... 175 (476) 13,516
Foreign...... 59 (118) (139)
State and local (18) _ 2,903
216 (594) 16,280
Income tax provision
(benefit) before
accounting change 2,886 (1,573) 8,013
Tax effect of
accounting change _ 449 _
_______ _______ ________
Total provision
(benefit)for income
taxes.......... $ 2,886 $(1,124) $ 8,013
_______ _______ ________
_______ _______ ________
</TABLE>
The effective tax rate differs from the federal statutory tax rate for the
following reasons:
<TABLE>
<CAPTION>
Year Ended
January 31 February 1 February 3
1998 1997 1996
<S> <C> <C> <C>
Federal statutory
tax rate 35.0% (35.0)% 35.0%
Increase in effective
tax rate due to:
Foreign income taxes 2.0 (2.5) 1.0
State and local taxes,
net of federal income
tax benefit..... 1.2 _ 2.2
Other, net........ 1.1 1.9 1.1
_____ _____ _____
Effective tax rate 39.3% (35.6)% 39.3%
</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
January 31 February 1
1998 1997
<S> <C> <C>
Deferred tax liabilities $(1,144) $ (607)
_________ _________
Deferred tax assets:
Depreciation 789 464
Accrued severance 740 877
Store conversion costs 764 1,300
Inventory valuation 2,323 2,296
Accrued rent 2,998 2,892
Other 2,247 1,554
________ ________
9,861 9,383
-_______ -_______
Net deferred tax assets $8,717 $8,776
________ ________
________ ________
</TABLE>
Note 3 - Debt
______________________________________________________________
The Company has an unsecured revolving credit agreement with a group of banks
aggregating $45 million at January 31, 1998 of which $30 million is committed.
The credit facility is for working capital and letter of credit purposes,
primarily to fund seasonal merchandise purchases, and bears interest at market
rates based on prime. The credit agreement restricts dividend payments, and
requires the maintenance of various financial ratios and the payment of
negotiated fees. The revolving credit agreement expires April 14, 1998 and is
expected to be renewed under similar terms. At January 31, 1998, there were
$13,290,000 in letters of credit outstanding under the credit facility, issued
principally in conjunction with overseas merchandise purchases. Interest expense
and negotiated fees for Fiscal 1997, Fiscal 1996 and Fiscal 1995 totaled
$182,000, $138,000 and $67,000, 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 1997,
Fiscal 1996 and Fiscal 1995 totaled $39,051,000, $39,502,000 and $40,181,000,
respectively.
The minimum rental commitments for future fiscal years are as follows (in
thousands):
<TABLE>
<CAPTION>
Fiscal
<S> <C>
1998.......................... $37,437
1999.......................... 36,179
2000.......................... 33,871
2001.......................... 31,615
2002.......................... 29,303
Thereafter.................... 44,372
___________
$212,777
___________
___________
</TABLE>
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 75%. Contributions are paid to a corporate trustee and
invested in various funds. 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. 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. The
Company has temporarily suspended its match on the Stock Purchase Program.
Total Company contributions to these plans for Fiscal 1997, Fiscal 1996 and
Fiscal 1995 were $681,000, $1,667,000 and $1,665,000, respectively.
Note 6 - Common Stock and Stock Options
______________________________________________________________
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 retainer payments and meeting fees which are credited to an
account for such director in units equivalent to Company common stock.
The Company has a shareholders' rights plan under which 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. 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 January 31, 1998, the option shares reserved for the
Employee Plans were 3,593,470. 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 one year after the grant date. Shares available
for additional grants were 2,663,618, 1,096,403 and 388,387 at January 31, 1998,
February 1, 1997 and February 3, 1996, respectively.
On March 12, 1997, the Board of Directors granted 50,000 shares each of
restricted stock under the 1996 Long Term Incentive Stock Plan to two key
executives. The respective shares are issuable at March 12, 2001 contingent upon
the continued employment of each executive. Compensation expense of $105,000 was
recognized during Fiscal 1997 in connection with the restricted stock.
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 January 31, 1998, the
option shares reserved for the Director Plan were 189,005. The option price is
fixed at the market price on the date of the grant. The option grant, initial
and annual, is currently 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 6,946, 18,633 and 52,883 at January 31,
1998, February 1, 1997 and February 3, 1996, 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>
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
Options granted... 644,766 3.63 - 8.38
Options exercised. (75,783) 3.16 - 6.75
Options canceled.. (1,174,147) 3.63 - 17.94
____________
January 31, 1998.... 1,607,507 3.01 - 25.75
____________
____________
Exercisable at:
February 3, 1996.. 1,265,455 2.72 - 32.58
____________
____________
February 1, 1997.. 623,256 3.01 - 25.75
__________
__________
January 31, 1998.. 579,233 3.01 - 25.75
__________
__________
</TABLE>
The following table summarizes stock options outstanding at
January 31, 1998:
<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 4.50 193,562 7.0 $ 4.05 102,762 $ 3.73
4.59 to 5.50 493,291 9.3 4.78 30,156 4.70
6.06 to 7.94 433,830 7.7 7.00 132,490 6.88
8.25 to 9.25 319,808 7.2 9.10 178,758 9.19
10.00 to 15.88 116,571 6.3 12.85 91,507 12.48
17.94 to 25.75 50,445 5.3 20.44 43,560 20.82
_________ _______
1,607,507 7.8 $ 7.23 579,233 $ 8.85
__________ _______
__________ _______
</TABLE>
The Company has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123, Accounting for Stock - Based
Compensation ("FAS 123"). 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 through Fiscal 1997 in accordance with the provisions of FAS 123, the
Company's net income (loss) and earnings per share would have been reduced to
the pro forma amounts indicated below (in thousands, except per share amounts):
<TABLE>
<CAPTION>
Year Ended
January 31 February 1 February 3
1998 1997 1996
<S> <C> <C> <C>
Net income (loss), as reported $4,450 $(2,005) $12,393
Net income (loss), pro forma 4,057 (3,443) 11,947
Basic earnings (loss) per share,
as reported .12 (.05) .33
Diluted earnings (loss) per share,
as reported .12 (.05) .33
Basic earnings (loss) per share,
pro forma .11 (.09) .32
Diluted earnings (loss) per share,
pro forma .11 (.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:
<TABLE>
<CAPTION>
Year Ended
January 31 February 1 February 3
1998 1997 1996
<S> <C> <C> <C>
Expected volatility 75.0% 78.6% 78.6%
Expected life years 6 6 6
Expected dividends _ _ _
Risk-free interest rate 5.82 - 7.14% 5.85 - 6.78% 5.44 - 7.12%
</TABLE>
The weighted average fair value of options granted during Fiscal 1997, Fiscal
1996 and Fiscal 1995 was $3.37, $4.96 and $6.66, respectively.
The exercise of non - qualified stock options in Fiscal 1997, Fiscal 1996 and
Fiscal 1995 resulted in income tax benefits of $47,000, $558,000 and $832,000,
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 income, net of interest expense, 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
January 31 February 1 February 3
1998 1997 1996
<S> <C> <C> <C>
Net sales:
United States... $294,308 $298,137 $309,433
Canada ......... 38,269 38,166 35,966
Total $332,577 $336,303 $345,399
Operating profit (loss):
United States:
Operations $2,462 $(7,199) $9,409
Store closing costs _ _ 6,000
Canada.......... 2,525 2,179 4,169
Interest income, net 2,349 607 828
Income (loss) before
income taxes and
accounting change. $7,336 $(4,413) $20,406
Identifiable assets:
United States $180,127 $180,209 $173,803
Canada ......... 15,111 15,154 16,893
Total $195,238 $195,363 $190,696
Depreciation and amortization:
United States $9,078 $10,362 $11,030
Canada ......... 781 841 848
Total $9,859 $11,203 $11,878
Capital expenditures:
United States $3,591 $3,820 $4,958
Canada.......... 354 612 940
Total $3,945 $4,432 $5,898
</TABLE>
<F8>
Note 8 - Management Changes
______________________________________________________________
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. As
of January 31, 1998, $84,000 of the $800,000 had been paid.
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 January 31, 1998
and February 1, 1997, $3,406,000 and $1,970,000, respectively, 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 for Fiscal 1995.
Excluding costs or credits relating to the closure of the division, operating
results were breakeven in Fiscal 1995.
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 - 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 million 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
January 31, 1998 and February 1, 1997 totaled $2,239,000 and $3,640,000,
respectively.
<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 January 31, 1998 and February 1, 1997, and
the results of their operations and their cash flows for the three years ended
January 31, 1998, 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.
March 11, 1998
Fort Worth, Texas
</AUDIT-REPORT>
<F2>
<TABLE>
Unaudited Quarterly Financial Data
The Bombay Company, Inc. and Subsidiaries
(In thousands, except per share amounts)
<CAPTION>
Unaudited quarterly financial data for the quarters ended:
January 31 November 1 August 2 May 3
1998 1997 1997 1997
<S> <C> <C> <C> <C>
Net sales............................................ $125,274 $71,329 $68,743 $67,231
Gross profit......................................... 47,204 20,966 19,648 14,832
Net income (loss).................................... 11,971 (1,901)(1) (995) (4,625)
Basic earnings (loss) per share...................... .31 (.05)(1) (.03) (.12)
Diluted earnings (loss) per share.................... .31 (.05)(1) (.03) (.12)
<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)(2) (2,308) (3,275)
Cumulative effect of accounting change, net of tax... _ _ _ 835
Net income (loss).................................... 8,890 (6,147)(2) (2,308) (2,440)
Basic earnings per share:
Income (loss) before accounting change............. .23 (.16)(2) (.06) (.08)
Cumulative effect of accounting change, net of tax. _ _ _ .02
Net income (loss).................................. .23 (.16)(2) (.06) (.06)
Diluted earnings per share:
Income (loss) before accounting change............. .23 (.16)(2) (.06) (.08)
Cumulative effect of accounting change, net of tax. _ _ _ .02
Net income (loss).................................. .23 (.16)(2) (.06) (.06)
<FN>
(1)Includes a pre-tax charge of $800,000, equivalent to $.01 per share after tax, relating to change in management.
(2)Includes a pre-tax charge of $4,200,000, equivalent to $.07 per share after tax, relating to change in management.
</TABLE>
<TABLE>
Price Range of Common Stock
Quoted by quarter for the fiscal periods ended:
<CAPTION>
January 31, 1998 High Low February 1, 1997 High Low
__________________ ______ ______ __________________ ______ _______
<S> <C> <C> <C> <C> <C>
First........................ $5.38 $3.25 First.....................$11.88 $4.88
Second....................... 6.38 3.63 Second....................11.38 4.63
Third........................ 9.00 5.56 Third..................... 7.25 5.00
Fourth....................... 6.13 4.00 Fourth.................... 5.50 4.38
</TABLE>
THE BOMBAY COMPANY, INC.
EXECUTIVE MANAGEMENT INCENTIVE COMPENSATION PLAN
1. Purpose of the Plan
The purpose of the Executive Management Incentive Compensation Plan (the
"Plan") is to provide financial incentives for eligible Company officers to meet
and exceed pre-determined annual financial goals for Company, including those
related to profitability, return on assets and earnings per share.
2. Definitions
2.1 "Affiliated Company" means any company controlling, controlled by, or
under common control with the Company.
2.2 "Base Salary" means as to a Fiscal Year, a Participant's actual salary
rate in effect on the Determination Date. Such salary shall be before
(1) deductions for taxes and benefits, and (2) deferrals of
compensation pursuant to Company-sponsored plans.
2.3 "Bonus" means a cash or stock payment pursuant to the provisions of
the Plan.
2.4 "Code" means the Internal Revenue Code of 1986, as amended. Reference
to a specific section of the Code shall include such section, any
valid regulation promulgated thereunder, and any comparable provision
of any future legislation or regulation amending, supplementing or
superseding such section or regulation.
2.5. "Committee" means the Compensation and Human Resources Committee of
the Company's Board of Directors, or any other Committee appointed by
the Board.
2.6 "Company" means The Bombay Company, Inc., a Delaware corporation.
2.7. "Determination Date" means as to a fiscal year, the earlier of (1) the
first business day in such fiscal year, or (2) the latest date
possible which will not jeopardize the Plan's qualification as
"performance-based compensation" under Code Section 162(m).
2.8 "Earnings per Share" means net income, divided by outstanding common
stock shares, including common stock equivalents.
2.9 "Fiscal Year" means the 1995 fiscal year of the Company and each
succeeding fiscal year of the Company.
2.10 "Officer" means an officer (whether or not a member of the Company's
Board of Directors) employed by the Company or any Affiliated Company.
2.11 "Participant" means as to any Fiscal Year, an Officer who has been
selected by the Committee for participation in the Plan for such
Fiscal Year.
2.12 "Operating Profits" means the operating profits of the Company on a
consolidated basis before officer bonuses for a given Fiscal Year,
determined in accordance with generally accepted accounting
principles, provided that the Committee shall determine whether any
significant nonrecurring items should be excluded from the
calculation.
2.13 "Return on Assets" mean Operating Profits divided by average
consolidated assets, calculated by dividing the beginning Fiscal Year
assets, plus each month-end assets for a Fiscal Year, by 13.
2.14 "Termination of Employment" means the time when the employee-employer
relationship between the Participant and the Company and its
Affiliated Companies is terminated for any reason, including, but not
limited to, a termination by resignation, discharge, death, permanent
disability, retirement, or the disaffiliation of an Affiliated
Company, but excluding any such termination where there is a
simultaneous reemployment by either the Company or an Affiliated
Company.
3. Administration of the Plan
3.1 The Plan shall be administered by the Committee, which shall consist
of no fewer than two members of the Company's Board of Directors, who
shall be appointed and serve at the pleasure of the Company's Board of
Directors. No member of the Company's Board of Directors who is not
an "outside director" under Code Section 162(m) shall serve on the
Committee.
3.2 Subject to the provisions of the Plan, the Committee shall have
exclusive authority to select the Plan Participants, determine the
percentage of bonus based upon Company performance and individual
performance and determine the bonus levels and the performance
thresholds which must be achieved prior to payment of bonuses. For
each Fiscal Year, all actions shall be taken by the Determination
Date.
3.3 The Committee shall have all discretion and authority necessary or
appropriate to administer the Plan, including, but not limited to, the
power to interpret the Plan, to prescribe, amend and rescind rules and
regulations relating to it, and to make all other determinations
necessary or advisable in the administration of the Plan. Such
determination shall be final and binding upon all persons having an
interest in the Plan.
3.4 A majority of the Committee shall constitute a quorum, and the acts of
a majority of the members present at a meeting at which a quorum is
present, or any action taken without a meeting by a writing executed
by a majority of the Committee, shall constitute the act of the
Committee.
3.5 All expenses and liabilities incurred by the Committee in the
administration of the Plan shall be borne by the Company. The
Committee may employ attorneys, consultants, accountants, or other
persons, and the Committee, the Company and its officers and directors
shall be entitled to rely upon the advice, opinion, or valuations of
any such persons. No member of the Committee shall be personally
liable for, and all members of the Committee shall be fully protected
by the Company in respect of any action, determination, or
interpretation taken or made with respect to the Plan, unless such
action, determination, or interpretation constitutes criminal
misconduct, willful negligence or demonstrates bad faith.
4. Eligibility and Participation
The Plan is designed for Officers whose responsibilities significantly
influence Company results. Plan Participants shall be selected by the Committee
prior to or on the Determination Date. Participation in the Plan is on a Fiscal
Year basis and in the discretion of the Committee.
5. Determination of Bonuses: Bonus Pool Funding
5.1 Prior to or on the Determination Date, the Committee, in its sole
discretion, shall assign each Participant a planned bonus. Bonuses
may be expressed as a percentage of Base Salary or as a percentage of
the combined bonus pools at approved levels. The Committee shall also
determine the percentage of the planned bonus which shall be
determined based upon Company performance and based upon individual
performance.
5.2 Bonus Pool based on Operating Profits: Prior to or on the
Determination Date, the Committee, in its sole discretion, shall set a
consolidated corporate Operating Profit plan for bonus purposes and
determine the fixed percentages of Operating Profits that will be
accrued for a bonus pool at different levels of profit achievement for
the Fiscal Year. The Committee also will specify a minimum profit
threshold below which no bonus based on profits shall be paid.
5.3 Bonus Pool based on Return on Assets. Prior to or on the
Determination Date, the Committee, in its sold discretion, shall, if
it deems it appropriate, establish a Return of Assets threshold for
bonus purposes for the Fiscal Year. If utilized, the Committee shall
further establish a schedule for the accrual of bonus dollars for each
percentage improvement (or fraction thereof) over the Return on Assets
threshold. If the Return on Assets target is not achieved, no Return
on Assets bonus shall be accrued.
5.4 Actual corporate Operating Profit and Return on Asset performance
shall adjust the portion of planned bonus related to Company
performance for each individual Participant based on the extent to
which the pre-determined thresholds are achieved or exceeded by the
Company, except that for any Fiscal Year the maximum bonus payable to
any Participant under the Plan shall not exceed $3,000,000.
Discretion shall not be permitted to reduce the award for any
Participant below that which otherwise would be payable in accordance
with the Plan as it relates to the Company performance element of the
bonus. The Operating Profit and Return on Assets calculations shall
be determined in accordance with generally accepted accounting
practices and may exclude any significant non-recurring items that are
specified by the Committee.
5.5 Individual Performance bonuses: As set forth in 5.1, the Committee
shall determine the allocation of bonus between Company performance
and individual performance. Individual performance bonus will be
based upon satisfactory completion of individual goals or measurements
as judged by the Committee for the CEO, President and COO and by the
Committee, CEO, President & COO for all other officers who are
Participants in the plan.
5.6 Growth Factor: Upon completion of the Fiscal Year and after earned
bonuses based on Operating Profits and Return on Assets are calculated
pursuant to the pre-determined schedules established by the Committee,
a growth factor may be applied to adjust bonus payments up or down
based on a comparison of Earnings per Share for the Fiscal Year
compared to the prior fiscal year. If Earnings per Share growth is
less than -5%, bonuses otherwise earned based on Operating Profits and
Return on Assets may be reduced by up to 50%, and if Earnings per
Share increases by greater than 30%, bonuses otherwise earned may be
increased by up to 50%. The Committee, in its discretion, shall
determine the schedule of bonus adjustments between these maximum
levels.
6. Payment of Award
Prior to the payment of any bonuses, the Committee shall certify the level
of Operating Profit, Return on Assets and Earnings per Share achieved for the
Fiscal Year. Payment of bonuses will be made in cash, on or about 30 days
following the completion of each Fiscal Year, unless such payments exceed 150%
of planned levels. In such case, the Committee shall determine what percentage
of the excess over 150% that shall be paid in the form of Common Stock pursuant
to the Company's Supplemental Stock Program. Notwithstanding any contrary
provision of the Plan, (a) if a Participant incurs a Termination of Employment
prior to the end of a Fiscal Year, the Committee shall determine, in its sole
discretion, the extent to which a bonus shall be paid for such Fiscal Year, and
b) no provision of the Plan shall be construed to create a trust or to
establish or evidence any Participant's claim of any right other than as an
unsecured general creditor with respect to any payment to which he or she may be
entitled. The Company shall withhold all applicable taxes required by law from
any payment, including any federal, FICA, state and local taxes.
7. Employment Rights
Nothing in the Plan shall confer upon any Participant the right to continue
in the employ of the Company or its Affiliated Companies or shall interfere with
or restrict in any way the rights of the Participant's employer to discharge or
change the terms of employment of any Participant at any time for any reason
whatsoever, with or without cause.
8. Effect upon Other Plans
The adoption of the Plan shall not affect any other equity or other
compensation or incentive plan in effect for the Company or any Affiliated
Company, and the Plan shall not preclude the Company's Board of Directors from
establishing any other forms of incentive compensation for Officers.
9. Amendment, Suspension or Termination of the Plan
The Board of Directors, in its sole discretion, may alter, amend, or
terminate the Plan, or any part thereof, at any time and for any reason;
provided, however, that if and to the extent required to ensure the Plan's
qualification under Code Section 162(m) as "performance-based compensation," any
such amendment shall be subject to shareholder approval.
10. Effective Date
The effective date of this Plan, as amended, is May 21, 1997.
<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, 33-55306, 333-39057 and 333-
39059) of The Bombay Company, Inc. of our report dated March
11, 1998 appearing on page 25 of the 1997 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 29, 1998
</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
January 31, 1998 and is qualified in its entirety by reference to such
10-K.
</LEGEND>
<CIK> 0000096287
<NAME> THE BOMBAY COMPANY, INC.
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<S> <C>
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0
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