FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark one)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 29, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission File Number 1-7288
THE BOMBAY COMPANY, INC.
(Exact name of registrant as specified in its charter)
Delaware 75-1475223
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
550 Bailey Avenue, Fort Worth, Texas 76107
(Address of principal executive offices) (Zip Code)
(817) 347-8200
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No ______
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
Class Number of shares outstanding at July 29, 2000
Common stock, $1 par value 32,609,267
THE BOMBAY COMPANY, INC. AND SUBSIDIARIES
Form 10-Q
Quarter Ended July 29, 2000
TABLE OF CONTENTS
PART I -- FINANCIAL INFORMATION
Item Page No.
1. Financial Statements 3-6
2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7-9
PART II -- OTHER INFORMATION
4. Submission of Matters to a Vote of Security Holders 10
6. Exhibits and Reports on Form 8-K 10
Signatures 11
<TABLE>
THE BOMBAY COMPANY, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
July 29, July 31, July 29, July 31,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Net sales $89,201 $90,762 $174,489 $166,048
Costs and expenses:
Cost of sales, buying and store 65,254 65,042 127,063 120,722
occupancy costs
Selling, general and administrative 25,969 25,344 52,614 49,343
expenses
Interest income, net (313) (329) (710) (703)
Total costs and expenses 90,910 90,057 178,967 169,362
Income (loss) before income taxes (1,709) 705 (4,478) (3,314)
Provison (benefit) for income taxes (675) 292 (1,769) (1,296)
Net income (loss) ($1,034) $413 ($2,709) ($2,018)
Basic earnings per share ($0.03) $0.01 ($0.08) ($0.06)
Diluted earnings per share ($0.03) $0.01 ($0.08) ($0.06)
Average common shares outstanding 32,921 36,494 33,900 36,616
Average common shares outstanding and
dilutive potential common shares 32,921 37,345 33,900 36,616
<FN>
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<TABLE>
THE BOMBAY COMPANY, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Dollars in thousands)
<CAPTION>
July 29, January 29, July 31,
2000 2000 1999
ASSETS (Unaudited) (Unaudited)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $16,759 $39,174 $26,884
Inventories 96,542 90,583 92,089
Other current assets 10,731 9,365 12,342
Total current assets 124,032 139,122 131,315
Property and equipment, net 47,538 47,544 46,499
Goodwill, less amortization 471 485 499
Other assets 15,754 14,721 13,190
Total assets $187,795 $201,872 $191,503
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C> <C>
Current liabilities:
Vendor payables and accrued expenses $27,212 $24,459 $27,430
Income taxes payable 3,405 5,192 --
Accrued payroll and bonuses 2,996 4,519 2,904
Gift certificates redeemable 3,867 4,184 3,339
Total current liabilities 37,480 38,354 33,673
Accrued rent and other liabilities 6,992 7,270 7,039
Stockholders' equity:
Preferred stock, $1 par value,
1,000,000 shares authorized -- -- --
Common stock, $1 par value, 50,000,000
shares authorized, 38,149,646 shares issued 38,150 38,150 38,150
Additional paid-in capital 75,917 76,082 76,095
Retained earnings 54,066 56,775 47,415
Accumulated other comprehensive income (1,236) (1,013) (1,410)
Common shares in treasury, at cost, 5,540,379;
2,677,236 and 1,817,283 shares, respectively (22,682) (13,129) (9,459)
Stock purchase loans (892) (617) --
Total stockholders' equity 143,323 156,248 150,791
Total liabilities and stockholders' equity $187,795 $201,872 $191,503
<FN>
The accompanying notes are an integral part of these consolidated
financial statements.
</TABLE>
<TABLE>
THE BOMBAY COMPANY, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Dollars in thousands)
(Unaudited)
<CAPTION>
Six Months Ended
July 29, July 31,
2000 1999
<S> <C> <C>
Cash flows from operating activities:
Net loss ($2,709) ($2,018)
Adjustments to reconcile net loss
to net cash from operations:
Depreciation and amortization 6,921 5,913
Deferred taxes and other 3 453
Change in assets and liabilities:
Increase in inventories (6,260) (17,648)
Increase in other current assets (1,125) (2,419)
Increase (decrease) in current liabilities (1,047) 2,467
Decrease in noncurrent assets 57 14
Increase (decrease) in noncurrent liabilities (123) 214
Net cash used by operations (4,283) (13,024)
Cash flows from investing activities:
Purchases of property and equipment (8,300) (9,491)
Sales of property and equipment 137 186
Net cash used by investing activities (8,163) (9,305)
Cash flows from financing activities:
Purchases of treasury stock (10,281) (3,795)
Sale of stock to employee benefit plans 184 94
Proceeds from the exercise of employee stock options -- 72
Net cash used by financing activities (10,097) (3,629)
Effect of exchange rate change on cash 128 33
Net decrease in cash and cash equivalents (22,415) (25,925)
Cash and cash equivalents at beginning of period 39,174 52,809
Cash and cash equivalents at end of period $16,759 $26,884
<CAPTION>
Supplemental disclosure of cash flow information:
<S> <C> <C>
Income taxes paid $305 $1,727
Non-cash financing activities:
Distributions of deferred director fees -- 122
Issuance of restricted stock 136 64
Loans issued to purchase Company stock 243 --
<FN>
The accompanying notes are an integral part of these consolidated
financial statements.
</TABLE>
THE BOMBAY COMPANY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(1) Accounting Principles
In the opinion of the Company, the accompanying consolidated financial
statements contain all adjustments (consisting of only normal recurring
adjustments) necessary to present fairly the financial position as of July 29,
2000 and July 31,1999, the results of operations for the three and six months
then ended, and cash flows for the six months then ended. The results of
operations for the three and six month periods ended July 29, 2000 and July 31,
1999 are not necessarily indicative of the results to be expected for the full
fiscal year. The consolidated financial statements should be read in
conjunction with the financial statement disclosures contained in the Company's
1999 Annual Report to Shareholders.
(2) Financing Arrangements
The Company has renewed its unsecured revolving credit agreements with banks,
aggregating $45,000,000, of which $30,000,000 is committed. These credit
facilities, which expire May 12, 2001, are for working capital and letter of
credit purposes, primarily to fund seasonal merchandise purchases, and bear
interest at market rates based on prime. Letters of credit totaling $20,985,000
were outstanding under these facilities at July 29, 2000. There were no
borrowings under these revolving credit lines as of July 29, 2000.
(3) Comprehensive Income/Loss
Comprehensive loss for the three months ended July 29, 2000 was $1,026,000.
Comprehensive income for the three months ended July 31, 1999 was $198,000.
Comprehensive loss for the six months ended July 29, 2000 and July 31, 1999 was
$2,932,000 and $1,927,000, respectively. Other comprehensive income consists of
the cumulative effect of foreign currency translation adjustments.
(4) Stock Repurchase Program
On July 5, 2000, the Company announced that its Board of Directors had
approved an increase to the Company's stock repurchase program of $5,000,000,
bringing the aggregate authorized to $30,000,000. Under the program, the
Company is authorized to purchase shares of its common stock, from time to time,
through open market purchases and privately negotiated transactions. As of July
29, 2000, the Company had purchased 6,014,916 shares at a cost aggregating
$24,978,000 of which 474,537 shares had been utilized to fund stock transactions
persuant to employee and director stock programs.
THE BOMBAY COMPANY, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Special Note Regarding Forward-Looking Statements
Certain statements in this Form 10-Q under "Management's Discussion and
Analysis of Financial Condition and Results of Operations" constitute "forward-
looking statements" within the meaning of the Private Securities Litigation
Reform Act of 1995. Such forward-looking statements involve known and unknown
risks, uncertainties and other factors which may cause the actual results,
performance or achievements of The Bombay Company, Inc. ("Company") to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such factors include,
among others, the following: competition; seasonality; success of operating
initiatives; new product development and introduction schedules; acceptance of
new product offerings; advertising and promotional efforts; adverse publicity;
expansion of the store chain; availability, locations and terms of sites for
store development; changes in business strategy or development plans;
availability and terms of capital; labor and employee benefit costs; changes in
government regulations; risks associated with international business; regional
weather conditions; and other factors referenced in the Company's 1999 Form 10-K
Annual Report.
General
The Bombay Company, Inc. ("Company") is a specialty retailer which markets
timeless and classic furniture, prints and accessories through over 400
locations of The Bombay Company ("Bombay") retail stores in 42 states in the
United States and nine Canadian provinces, through mail order and over the
Internet at www.bombayco.com.
The largest percentage of the Company's sales and operating income is realized
in the fiscal quarter that includes December (Christmas season). Substantially
all 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 adjusting selling prices (subject to
competitive conditions), improving designs and finding alternative production
sources in lower cost countries.
Results of Operations
Quarters Ended July 29, 2000 and July 31, 1999
Net sales were $89,201,000 for the quarter ended July 29, 2000 compared to
$90,762,000 for the quarter ended July 31,1999, a decrease of 2%. Same store
sales decreased 2% from the prior year. For the quarter, furniture,
accessories and wall decor sales represented 51%, 34% and 15% of the business,
respectively, which is consistent with last year's second quarter product mix.
Sales declines were primarily attributable to the furniture category, wall decor
and baskets as well as disappointing results from the summer clearance event.
Within the furniture category, living room furniture was the most significantly
impacted area with declines resulting as sales of older products slowed while
new product introductions were not scheduled until the third quarter. Strong
wall decor sales during the first quarter resulted in comparatively less
clearance product to sell during the second quarter. While total sales of
accessories grew quarter over quarter due to successes in the garden and floral
and other key growth categories, the Company was unable to replicate the
previous year's strong basket sales. Thus, sales of accessories grew at a lower
rate than expected. Summer clearance event sales were adversely impacted by a
change in the promotional strategy that resulted in a reduced page
count and circulation of our catalogue as compared to last year
as dollars were shifted to fund a national magazine campaign. The Company
has modified its promotional strategy for the remainder of the year and does not
anticipate a similar situation going forward.
From a geographic standpoint, the Canadian operations reported double-digit
sales increases while the northeast and outlet operations reported positive same
store sales gains in the U.S. During the quarter ended July, 29, 2000, the
number of sales transactions increased by approximately 5% over the second
fiscal quarter of last year, while the average transaction declined to $91 from
$97. The decline in the average ticket is due to the continued emphasis on
accessories and take-with furniture as well as there being less large furniture
featured during this year's clearance event.
Cost of sales, including buying and occupancy costs, was $65,254,000 for the
second fiscal quarter compared to $65,042,000 for the same period last year. As
a percentage of sales, cost of sales increased to 73.2% for the quarter compared
to 71.7% for the prior year period. Product margins declined by 50 points due
primarily to higher domestic freight costs from the Company's distribution
centers to the stores and higher distribution center costs. Buying and
occupancy costs increased to 22.6% from 21.6% due to the relatively fixed nature
of these costs measured against a lower sales base.
Selling, general and administrative expenses were $25,969,000 or 29.1% of
sales for the quarter compared to $25,344,000 or 27.9% of sales for the
comparable prior year period. The largest component of the dollar increase
continues to be higher payroll costs driven by higher store pay rates in the
tight labor market. Amortization costs resulting from investments made in
technology also contributed to increased selling, general and administrative
expenses, while advertising decreased slightly. As a percentage of sales,
selling, general and administrative expenses increased primarily due to the
fixed nature of many of these costs measured against a lower sales base.
Six Months Ended July 29, 2000 and July 31, 1999
Net sales were $174,489,000 for the six months ended July 29, 2000 compared
to $166,048,000 for the same period last year, an increase of 5%. Same store
sales increased 3% on a year to date basis. For the six month periods ended
July 29, 2000 and July 31, 1999, furniture, accessories and wall decor
represented 51%, 33% and 16% of the business, respectively. The sales increase
reflects the strong first quarter performance driven by new product
introductions which was partially offset by a weak summer clearance event and
declines in sales of older products from certain furniture, wall decor and
accessory categories. The transaction count increased by 11% over the
comparable period last year and the average ticket declined to $92 from $97.
Cost of sales, including buying and occupancy costs, was $127,063,000 or
72.8% of sales for the six months compared to $120,722,000 or 72.7% of sales for
the comparable prior year period. The 10 basis point change is due to a
decrease in product margin (50 basis points) partially offset by improvement in
buying and occupancy costs (40 basis points). Product margins declined due
primarily to higher domestic freight costs from the Company's distribution
centers to the stores and higher distribution center costs. Improvement in
buying and occupancy costs is attributable to the relatively fixed nature of
these costs leveraged against a higher sales base.
Selling, general and administrative expenses were $52,614,000 or 30.2% of
sales for the six months compared to $49,343,000 or 29.7% of sales for the prior
year comparable period. The largest component of the dollar increase continues
to be higher payroll costs driven by the higher sales volume and higher store
pay rates in the tight labor market. Amortization costs resulting from
investments made in technology also contributed to increased selling, general
and administrative expenses, while advertising decreased slightly.
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 under letters of credit. Unsecured bank lines
aggregate $45 million, of which $30 million are committed under revolving credit
agreements expiring May 12, 2001. Letters of credit totaling $20,985,000 were
outstanding at July 29, 2000. There were no borrowings under these revolving
credit lines as of July 29, 2000.
The store expansion plan for the remainder of the fiscal year anticipates
approximately 11 new stores and 11 conversions to the large format, primarily in
the third fiscal quarter. Capital expenditures for the year to date period
included one new store opening, one new outlet and ten conversions as well as
routine purchases of furniture, equipment and software. The total estimated
capital expenditures for Fiscal 2000 are approximately $20 million.
The Company also continues a stock repurchase program approved by the Board of
Directors of up to $30 million. During the six months ended July 29, 2000,
$10,281,000 was spent to acquire 3,030,300 shares of the Company's common stock.
Through July 29, 2000, $24,978,000 has been spent to repurchase 6,014,916
shares.
The Company believes that its current cash position, cash flows from
operations and credit lines will be sufficient to fund its current
operations, capital expenditure and stock repurchase programs.
THE BOMBAY COMPANY, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Annual Meeting of Shareholders of the Company was held on May 18, 2000.
(b) Directors elected to hold office are listed in the attached Proxy
Statement, which is incorporated herein by reference. Directors elected:
Edmund H. Damon, Glenn E. Hemmerle and Robert E. Runice. Directors continuing:
Barbara Bass, George B. Cobbe, Robert S. Jackson, James A. Marcum, Carmie
Mehrlander and Bruce R. Smith.
Election of Directors:
Edmund H. Damon - For: 25,312,297 Withheld: 2,532,276
Glenn E. Hemmerle - For: 25,238,916 Withheld: 2,605,657
Robert E. Runice - For: 25,292,407 Withheld: 2,552,166
(c) Other matters voted upon: None
Item 6. Exhibits and Reports on Form 8-K
(a) The Exhibits filed as a part of this report are listed below.
Exhibit No. Description
20 Notice of Annual Meeting of Shareholders and
Proxy Statement, filed with the Commission on
April 13, 2000. Such Exhibit is incorporated
herein by reference.
(b) No reports on Form 8-K have been filed during the quarter ended July 29,
2000.
THE BOMBAY COMPANY, INC. AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE BOMBAY COMPANY, INC.
(Registrant)
/s/ Carmie Mehrlander
Carmie Mehrlander
Chairman, President and
Chief Executive Officer
/s/ Elaine D. Crowley
Elaine D. Crowley
Vice President, Finance
and Treasurer
Date: September 6, 2000
