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, 2004
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 75-147522
(State or other jurisdiction of (I.R. S. Employer)
incorporation or organization) Identification Number)
550 Bailey Avenue
Fort Worth, Texas 76107
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code)
(817) 347-8200
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which Registered
Common Stock, Par Value, $1 Per Share New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No __
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K.____
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). Yes X No __
The aggregate market value of the voting stock held by nonaffiliates of the
registrant based on the closing price of the stock on August 1, 2003 was
approximately $337,760,038.
Shares outstanding at April 3, 2004: Common Stock, $1 Par Value: 35,533,305
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the Definitive Proxy Statement for the Annual Meeting to be held
May 26, 2004 (as expressly incorporated by reference in Part III).
Page 1 of 43
2
FORM 10-K
PART I
ITEM 1. BUSINESS.
(a) General Development of Business
The Bombay Company, Inc. and its wholly-owned subsidiaries design, source and
market a unique line of fashionable home accessories, wall decor and furniture
through a network of retail locations throughout the United States and Canada,
through specialty catalogs, the Internet and international licensing
arrangements. We also have a small wholesale operation that distributes a
separate line of occasional furniture. Throughout this report, the terms
"our," "we," "us" and "Bombay" refer to The Bombay Company, Inc., including
its subsidiaries.
Bombay's unique position in the market place is a result of our core
competencies in design, sourcing and importing. Over 90% of our product is
sourced from over 20 foreign countries. Over 90% of the product has been
designed or styled to Bombay's specifications.
During Fiscal 2001, we expanded our product offering to include a line of
children's furniture, textiles and accessories via catalog and Internet. As of
January 31, 2004, BombayKIDS has expanded to 35 stores of which thirty-one are
combination locations, with a BombayKIDS store adjacent to a core Bombay store.
We intend to open approximately 15 additional BombayKIDS stores in Fiscal 2004
and approximately 30 in Fiscal 2005.
In addition to our primary retail operations, Bombay has other operating
enterprises which contributed incrementally to profitability but which were not
significant to our operations in Fiscal 2003. Unless specified otherwise, the
discussions in this Annual Report on Form 10-K relate to the Bombay retail
operations, including BombayKIDS, outlets, Internet and catalog.
(b) Financial Information About Segments
Bombay operates primarily in one business segment as a multi-channel retailer
selling decorative home furnishings, furniture and related items.
(c) Narrative Description of Business
Merchandise Sales, Purchasing and Distribution
Bombay operates stores, primarily located in regional shopping malls, certain
secondary malls and selected urban and suburban locations. As of January 31,
2004, there were 415 stores in 42 states in the United States and 56 stores in
nine Canadian provinces. We also market our products through our mail order
operations in the United States and Canada and over the Internet at
www.bombaycompany.com and www.bombay.ca.
We offer a diverse selection of products consisting of approximately 4,800
stock keeping units ("SKUs") of which over 90% of the product has been designed
or styled to our specifications. Bombay's proprietary product offers unique
design, quality and exceptional value to a wide audience of consumers. We
regularly update our merchandise assortment by introducing new products while
discontinuing others. We have a fashion component to our product offerings,
primarily in the accessory and wall decor areas, which is introduced
seasonally. Other products with longer lives are discontinued as they approach
the end of their life cycles. Approximately 2,600 and 2,300 new SKUs were
introduced in Fiscal 2003 and Fiscal 2002, respectively. Typically, new
product introductions have been concentrated during our spring, fall and
Christmas selling periods. Going forward, we intend to introduce product more
frequently to increase newness in the store and to level spikes in inventory as
new product is introduced. The principal categories of merchandise include the
following:
Furniture - We sell two broad categories of furniture as described
below. Our furniture is manufactured by third party vendors located
principally in China, Malaysia, Taiwan, Vietnam, Indonesia and India.
Large Furniture - This category includes both wood and metal
furniture focusing on the bedroom, living room, dining room and home
office. Many of the larger items are displayed in store and stocked in
our distribution centers and are available for store delivery typically
within ten days. Large furniture represented 31%, 32% and 31% of total
sales in Fiscal 2003, 2002 and 2001, respectively.
Occasional Furniture - This category includes wood and metal hall
tables, end and coffee tables, plant stands and other small accent tables,
stands and curios that are ready-to-assemble, take home products.
Occasional furniture represented 14%, 12% and 12% of total sales in Fiscal
2003, 2002 and 2001, respectively.
2
Accessories - This is the broadest category and represented 43% of
total sales in Fiscal 2003, 2002 and 2001. This category includes both
functional and decorative accessories including lamps, jewelry and
memorabilia boxes, crystal, ceramics, frames and desktop items, textiles,
floral, candles and holiday. The items are imported from over 20
countries in Asia, North America and Europe.
Wall Decor - This category includes prints, mirrors and wall
accessories that represented 12%, 13% and 14% of total sales in Fiscal
2003, 2002 and 2001, respectively. This merchandise is sourced primarily
from the United States and various countries in Asia.
Merchandise is manufactured to Bombay's specifications through a network of
third party vendors principally located in Asia and North America. Over 90% of
production needs are sourced from foreign countries. We have branch offices in
Taiwan, Malaysia, China, Vietnam and India, and utilize agents in various
countries to locate prospective vendors, coordinate production requirements
with manufacturers and provide technical expertise and quality control.
We are not dependent on any particular supplier and have had long standing
relationships with many of our vendors. Thirty manufacturers in eight countries
supply almost 65% of our merchandise requirements. Bombay has no long-term
production agreements; however, we generally have agreements with major
manufacturers that prohibit the production of proprietary product for other
parties. Additional manufacturing capacity and alternative sources, both
domestic and international, continue to be added through new vendors and plant
expansions by existing vendors. We do business with our vendors principally in
United States currency and historically have not experienced any material
disruptions as a result of any foreign political, economic or social
instabilities.
The product development process takes between three months and twelve months,
beginning with the original idea and concluding with the final product received
at regional distribution centers in the United States and Canada. Depending on
the category, the source country and whether an item is new or reordered, lead
times generally vary from two to six months from order placement until arrival
at the stores. Order times are slightly less for North American manufacturers
principally due to shorter shipping times. Lead times may also be impacted by
seasonality factors especially in months when manufacturers are producing at,
or near, peak capacity to meet seasonal demands. As a result, we strive to
maintain an adequate inventory position in our distribution centers to ensure a
sufficient supply of products to our customers.
We have regional distribution centers in Fort Worth, Texas; McDonough, Georgia;
Gilbertsville, Pennsylvania; Mira Loma, California; Plainfield, Indiana and
Mississauga, Ontario. The distribution centers are strategically located and
provide the capability to replenish the majority of store inventories within 48
hours of when the order is processed. We use dedicated trucks and less-than-
truckload carriers to transport product from our distribution centers to the
stores.
Channels of Distribution
RETAIL
Stores and Real Estate
Historically, we have located our stores primarily in regional shopping malls,
certain secondary malls and selected urban and suburban locations that
satisfied our demographic and financial return criteria. Approximately one
hundred of our store leases expired in Fiscal 2003, and approximately 80 are
scheduled to expire in Fiscal 2004. We are currently pursuing an off-mall
strategy for new and relocated stores focusing on open-air lifestyle centers
and high-end strip centers (especially those with a concentration of home
furnishings retailers). Such locations offer us the opportunity to lower
occupancy costs, improve operating efficiencies and provide a more convenient
shopping experience for our customer. Our preference is to identify locations
where we can operate a combined Bombay and BombayKIDS store, thereby realizing
economies that come with a larger location while attracting a new and younger
customer to Bombay. As of January 31, 2004, approximately 26% of our stores,
excluding outlets, were in off-mall locations.
In selecting store locations, our real estate department conducts extensive
analyses of potential store sites. We base our selection on the existing or
planned co-tenancy of the center, the size of the market and the demographics
of the surrounding area. In evaluating a store location, placement of the
store relative to retail traffic patterns and customer base of other retailers
in the nearby vicinity are important considerations. Significant attention is
given to visual merchandising opportunities to maximize the ability to display
product in the most attractive setting. We seek out the most potentially
profitable locations for the opening of new stores regardless of the venue. We
are currently targeting 8,500 to 9,000 square foot locations where we can
construct a Bombay store of approximately 4,500 square feet and a BombayKIDS
store of approximately 4,000 square feet. Bombay mall stores are slightly
smaller in size, currently averaging approximately 3,600 square feet. New
Bombay off-mall locations are expected to be in the 4,000 to 5,000 square foot
range. In addition to building new stores, we continue to selectively convert
our
4
existing regular stores, which average approximately 1,800 square feet to the
larger format. As of January 31, 2004, there were 25 regular stores left in
the chain.
At January 31, 2004, the store chain included a total of 46 outlet stores. We
view the use of outlets as an opportunity to increase sales to a different
customer base, to assist in the orderly clearance of merchandise and to further
capitalize on our strength in designing and sourcing proprietary product.
Following is a table summarizing our store activity and composition:
January 31 February 1 February 2
2004 2003 2002
Number of stores:
Beginning of year............................ 422 419 408
Opened....................................... 84 28 32
Closed....................................... 35 25 21
End of year.................................. 471 422 419
Store composition:
Large format................................ 365 334 324
Regular..................................... 25 37 59
Outlet...................................... 46 46 36
BombayKIDS.................................. 35 5 -
Retail square footage (in thousands):
Large format................................. 1,459 1,297 1,244
Regular...................................... 46 68 107
Outlet....................................... 198 193 151
BombayKIDS................................... 144 20 -
Total........................................ 1,847 1,578 1,502
During Fiscal 2004, we plan to open approximately 75 to 80 new stores,
including approximately 15 BombayKIDS stores. We plan to close 35 to 40
stores, ending the year with approximately 510 stores. For store count
purposes, a combined Bombay and BombayKIDS location represents two stores.
Our average cost of leasehold improvements, furniture, fixtures and machinery
for Bombay stores opened in Fiscal 2003, net of landlord construction
allowances, was approximately $205,000 per store, or $44 per square foot. In
addition, other investments, which consist primarily of inventory in the store
location, averaged approximately $100,000 per large format store. The average
net cost of a BombayKIDS store is approximately $195,000 but, at $47, is
slightly higher than a Bombay large format store on a per square foot basis due
to higher fixturing costs. During Fiscal 2003, inventory investment averaged
$100,000 for a BombayKIDS store. During Fiscal 2003, average inventory
physically in store was approximately 40% of the total inventory investment.
Our mall-based stores typically achieve store level operating profitability
during their first full year of operations and reach maturity in three years.
Off-mall stores are typically profitable during their first year of operation.
However, based upon our limited experience, it appears that it may take
slightly longer for these stores to mature. Further, whether a store was
relocated from a local mall or is a new store in a market may also be an
influencing factor as to profitability and maturity.
5
As of January 31, 2004, 415 stores were operating in 42 states in the United
States and 56 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 - 6 KY - 3 NY - 18
AR - 1 LA - 8 OH - 14
AZ - 6 MA - 9 OK - 4
CA - 58 MD - 11 OR - 3
CO - 6 MI - 9 PA - 16
CT - 7 MN - 4 RI - 1
DE - 2 MO - 5 SC - 6
FL - 39 MS - 2 TN - 10
GA - 20 NC - 13 TX - 46
IA - 1 NE - 1 UT - 3
ID - 1 NH - 4 VA - 19
IL - 21 NJ - 18 WA - 4
IN - 6 NM - 1 WI - 3
KS - 2 NV - 3 WV - 1
CANADA:
AB - 4 NB - 1 ON - 30
BC - 7 NF - 1 PQ - 8
MB - 2 NS - 2 SK - 1}
6
Direct
We offer virtually all our retail SKUs for electronic commerce through our U.S.
websites at http://www.bombaycompany.com for Bombay, http://www.bombaykids.com
for BombayKIDS and http://www.bombayoutlet.com for Bombay Outlets. During
Fiscal 2003, we launched our Bombay Canada website at http://www.bombay.ca
which currently sells core product and a limited selection of outlet product,
with plans to add a BombayKIDS site in the future. We continue to pursue
online marketing partnerships to broaden our reach to additional customers.
Business-to-consumer revenues over the Internet were approximately $17 million
in Fiscal 2003. We also maintain websites supporting our wholesale activities.
Bombay has a catalog business which primarily serves as a marketing vehicle to
drive customers into stores and to the Internet. Direct catalog sales
represent less than 2.5% of revenues.
WHOLESALE
Bailey Street Trading Company - During Fiscal 2000, we created a wholesale
subsidiary, Bailey Street Trading Company ("Bailey Street"). The brand is
separate from Bombay and allows us to capitalize on our strengths in product
design, sourcing and importing. Current product offerings are focused on
furniture but may be expanded to include wall decor and accessories in the
future. We distribute our Bailey Street merchandise to a variety of customers
including independent gift stores, catalogers, department stores, furniture
stores and mass merchants through a network of independent regional sales
representatives. During Fiscal 2003, Bailey Street revenues increased to $15.8
million compared to $8.4 million in Fiscal 2002.
International - Bombay International, Inc. ("International") is our
international licensing and distribution channel. International operations
have extended to 14 licensed stores as of the end of Fiscal 2003, operating in
the Middle East and the Caribbean. International revenues totaled $3.7 million
compared to $3.5 million in Fiscal 2002. In the short-term, we plan to
continue expansion abroad through licensing and distribution agreements in
existing markets or with current partners. During Fiscal 2004, approximately
five to six additional International stores are planned to be opened by our
licensees.
Intangibles
We own a number of the trademarks and service marks used in our business,
including federal registrations for the marks The Bombay
Company{reg-trade-mark}, Bombay{reg-trade-mark}, the palm tree logo,
BombayKIDS{reg-trade-mark} and Bailey Street Trading Company{reg-trade-mark}.
Our trademarks are also registered or are the subject of pending applications
in a number of foreign countries. Each registration is renewable indefinitely
if the mark is still in use at the time of renewal.
We believe that our trademarks have significant value and that these marks
enhance the Bombay{reg-trade-mark} brand and are instrumental in our ability to
create, sustain demand for and market our product. From time to time, we
discover products in the marketplace that are counterfeit reproductions of our
product or that otherwise infringe upon our trademark or tradedress rights. We
have and will continue to vigorously defend our rights under the marks as
necessary.
Seasonality
Operating results are subject to seasonal variation. Historically, the largest
proportion of sales and substantially all of the income occur in the fourth
fiscal quarter, which includes the Christmas season. Inventory balances are
generally built to their highest levels prior to the Christmas selling season.
Inventories decline, short-term borrowings are repaid and cash balances
increase significantly in December due to the Christmas business.
Competition
The home furnishings and decorative accessories market is highly fragmented and
very competitive. We face competition from furniture stores, department stores
and other specialty retailers, including national chains and independent
retailers. We believe that we compete primarily on the basis of style,
selection, quality and value of merchandise.
Employees
We have approximately 5,500 employees, which include approximately 3,000 part-
time employees, and are not a party to any union contract. Employee relations
are considered to be good.
7
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 actual results, performance or achievements 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: general economic and financial market conditions which
affect consumer confidence in the spending environment for home-related
purchases; competition; seasonality; success of operating initiatives; new
product development and introduction schedules; uninterrupted flow of product
from overseas sources; acceptance of new product offerings including children's
merchandise; inherent safety of product offerings; advertising and promotional
efforts; adverse publicity; expansion of the store chain; availability,
locations and terms for retail and distribution real estate sites; ability to
renew leases on an economic basis; changes in business strategy or development
plans; availability and terms of borrowings or capital for operating purposes;
labor and employee benefit costs; ability to obtain insurance at a reasonable
cost; reliance on technology; security of the technological infrastructure;
changes in government or trade regulations including proposed duties on bedroom
furniture imports from China; risks associated with international business;
fluctuations in foreign currency exchange rates; potential travel or
import/export restrictions due to communicable diseases; terrorism; war or
threat of war; regional weather conditions; and hiring and retention of key
management personnel.
(d) Financial Information About Geographic Areas
Bombay operates in one industry segment, specialty retailing. Substantially
all revenues result from the sale of home furnishings and accessories through
retail stores, mail order and Internet in the United States and Canada. Our
wholesale operations have been immaterial to our operations and financial
results to-date. Long-lived assets include all non-current assets except
deferred taxes.
The following table shows net revenues and long-lived assets by geographic area
(in thousands):
Year Ended
January 31 February 1 February 2
2004 2003 2002
Net revenues:
United States.............. $526,219 $442,339 $388,789
Canada..................... 70,216 51,661 48,668
Total.................. $596,435 $494,000 $437,457
Long-lived assets:
United States.............. $68,031 $46,201 $51,367
Canada.................. 5,992 4,040 4,226
Total..................... $74,023 $50,241 $55,593
(e) Available Information
We make available free of charge through our website,
http://www.bombaycompany.com, all materials that we file electronically with
the SEC, including our annual report on Form 10-K, quarterly reports on Form
10-Q, current reports on Form 8-K, amendments to those reports filed or
furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of
1934, and Section 16 filings as soon as reasonably practicable after
electronically filing such materials with, or furnishing them to, the SEC.
During the period covered by this Form 10-K, we made all such materials
available through our website as soon as reasonably practicable after filing or
furnishing such materials with the SEC.
Any materials filed by the Company with the SEC may also be read and copied at
the SEC's Public Reference Room at 450 Fifth Street, NW, Washington, DC 20549.
Information on the operation of the Public Reference Room may be obtained by
calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains a website,
http://www.sec.gov, that contains reports, proxy and information statements and
other information which we file electronically with the SEC.
8
ITEM 2. PROPERTIES.
We own our United States headquarters office complex of which we occupy
approximately 87,000 square feet. We lease stores, distribution centers,
regional and Canadian offices under numerous operating leases. Owned and
leased facilities are summarized following:
Square Feet
Description Owned Leased
Stores:
Large format...................... - 1,459,000
Regular........................... - 46,000
Outlet............................ - 198,000
BombayKIDS........................ - 144,000
Distribution centers:
Mira Loma, CA..................... - 156,000
Gilbertsville, PA................. - 200,000
Fort Worth, TX.................... - 250,000
McDonough, GA..................... - 254,000
Plainfield, IN. .................. - 300,000
Mississauga, ON, CAN.............. - 114,000
Offices and storage:
Mississauga, ON, CAN.............. - 9,000
Regional sites.................... - 2,000
Fort Worth, TX.................... 121,000 35,000
121,000 3,167,000
Leases generally have 10-year terms, expiring between 2004 and 2015. Rents
under 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 2003, Fiscal 2002 and Fiscal
2001 totaled $58,712,000, $50,669,000 and $47,366,000, respectively.
The minimum rental commitments for future fiscal years related to real estate
properties are as follows (in thousands):
Fiscal
2004........................ $ 44,056
2005........................ 37,091
2006........................ 35,303
2007........................ 34,180
2008........................ 31,599
There....................... 101,482
$283,711
We believe that the insurance coverage maintained on all properties is
adequate.
ITEM 3. LEGAL PROCEEDINGS.
We have 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 our
financial position or results of operations.
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 Fiscal 2003.
9
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
(a) The principal market for Bombay's common stock is the New York Stock
Exchange. The high and low trading prices, quoted by fiscal quarter,
follow:
Year ended January 31, 2004 High Low Year ended February 1, 2003 High Low
First quarter.................... $ 8.69 $4.34 First quarter................... $4.45 $2.14
Second quarter................... 12.65 7.80 Second quarter.................. 5.25 2.61
Third quarter.................... 14.11 9.20 Third quarter................... 3.10 2.15
Fourth quarter................... 13.80 6.30 Fourth quarter.................. 5.95 2.96
(b) The approximate number of record holders of common stock on March 12,
2004 was 1,800.
(c) We have bank credit agreements with restrictions related to payment of
dividends. We have not paid dividends the past two years and will continue
to utilize available funds primarily for the expansion of our retail stores
and operating purposes.
(d) The information required by this item appears under the caption "Equity
Compensation Plan Information" 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.
10
ITEM 6. SELECTED FINANCIAL DATA.
The following selected financial data has been derived from our consolidated
financial statements. The data set forth below should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and our consolidated financial statements and notes thereto.
Year Ended
January 31 February 1 February 2 February 3 January 29
Financial Data: 2004 2003 2002 2001 2000
Net revenues*......................... $596,435 $494,000 $437,457 $423,459 $392,578
Net revenues increase................. 21% 13% 3% 8% 9%
Same store sales increase (decrease).. 13% 5% (2)% 5% 5%
Net income*........................... $9,951 $7,217 $3,724 $8,645 $7,342
Basic earnings per share.............. $.29 $.22 $.11 $.26 $.20
Diluted earnings per shares........... $.28 $.22 $.11 $.26 $.20
Total assets*......................... $264,933 $236,189 $206,889 $206,651 $201,872
Stockholders' equity*................. $191,387 $169,408 $158,707 $154,727 $156,248
Return on average assets.............. 4.0% 3.3% 1.8% 4.2% 3.7%
Return on average equity.............. 5.5% 4.4% 2.4% 5.6% 4.7%
Operating Data:
Average sales per store open
for full fiscal year* $1,249 $1,098 $1,012 $1,012 $926
Average sales per square foot........ $322 $296 $288 $306 $288
Number of stores:
Beginning of year................ 422 419 408 415 412
Opened........................... 84 28 32 10 19
Closed........................... 35 25 21 17 16
End of year...................... 471 422 419 408 415
Store composition:
Large format.................... 365 334 324 291 270
Regular......................... 25 37 59 93 125
Outlet.......................... 46 46 36 24 20
BombayKIDS...................... 35 5 - - -
Retail square footage:*
Large format.................... 1,459 1,297 1,244 1,116 1,049
Regular......................... 46 68 107 163 216
Outlet.......................... 198 193 151 92 72
BombayKIDS...................... 144 20 - - -
Total........................... 1,847 1,578 1,502 1,371 1,337
Bombay has paid no cash dividends during the periods presented.
* In thousands.
11
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
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 our actual results, performance or achievements 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: general economic and financial market conditions
which affect consumer confidence in the spending environment for home-related
purchases; competition; seasonality; success of operating initiatives; new
product development and introduction schedules; uninterrupted flow of product
from overseas sources; acceptance of new product offerings including children's
merchandise; inherent safety of product offerings; advertising and promotional
efforts; adverse publicity; expansion of the store chain; availability,
locations and terms of sites for store development; ability to renew leases on
an economic basis; changes in business strategy or development plans;
availability and terms of borrowings or capital for operating purposes; labor
and employee benefit costs; ability to obtain insurance at a reasonable cost;
reliance on technology; security of the technological infrastructure; changes
in government or trade regulations including proposed duties on bedroom
furniture imports from China; risks associated with international business;
fluctuations in foreign currency exchange rates; potential travel or
import/export restrictions due to communicable diseases; terrorism; war or
threat of war; regional weather conditions and hiring and retention of key
management personnel.
Executive Overview
Bombay markets a line of proprietary home furnishings that includes large
furniture, occasional furniture, wall decor and decorative accessories that is
timeless and classic in its styling. Over 90% of the items are imported, with
more than half of the product coming from China. We are a multi-channel
retailer with store locations, Internet and mail order operations, so that the
customer can shop at her convenience. We have a small wholesale operation that
is immaterial to overall revenue but contributes incrementally to
profitability.
We focus on several key metrics in managing and evaluating our operating
performance and financial condition including the following: same store sales,
sales and gross margins by merchandise categories, operating margins as a
percentage of revenues, earnings per share, cash flow, return on assets and
inventory turn.
We are currently executing a multi-phase turnaround intended to improve
Bombay's profitability and generate competitive operating results in-line with
current market leaders in the sector. For the year, our operating margin was
2.7% of revenues compared to industry leaders in the 8% to 12% range. We do
not believe that, long-term, there is anything structurally that would prevent
us from improving our operating results to approach those of industry leaders.
Phase I of the turnaround commenced during the third quarter of Fiscal 2002 and
continued into Fiscal 2003. Our goal was to reclaim market share, generating
above average same store sales and validating our positioning within the market
place. We reported 13 consecutive months of double-digit same store sales
increases beginning in September 2002 and continuing through September 2003.
As a result of the strength of these sales, we were able to leverage many of
our fixed costs including our buying and occupancy costs, which declined to
16.8% of revenues during Fiscal 2003 from 19.1% of revenues during Fiscal 2002.
Phase I was also characterized by the aggressive repositioning of our real
estate portfolio. During the 1980s and 1990s, our focus was on opening stores
in "A" malls throughout North America. As shopping habits have evolved, with
alternative venues such as lifestyle centers and big box strip centers gaining
popularity, we have begun to migrate our stores to off-mall locations. In
addition to being more convenient for customers and suitable for the sale of
large items, such locations typically have lower cost structures, both from a
fixed rent perspective and for other common area expenses billed by landlords.
Management believes that the movement to the off-mall locations will ultimately
result in lower fixed costs for Bombay and will help improve profitability.
During Fiscal 2003, approximately 100 leases expired, and we took advantage of
that opportunity to close some of our mall stores and move to nearby off-mall
locations. We are currently focusing on our top 25 markets to obtain market
density and leverage fixed logistics and advertising costs in those areas.
Additionally, we have restarted net store growth, which has been relatively
flat in number since 1996. A total of 88 real estate projects, including new
stores and relocations, were completed during the year resulting in opening 75
new off-mall locations. The total number of stores grew to 471, a net increase
of 49 stores.
12
The following table reflects the real estate portfolio at each fiscal year end:
January 31 February 1 February 2
2004 2003 2002
Units % of total Units % of total Units % of total
Mall......... 302 64% 328 78% 348 83%
Off-mall..... 123 26 48 11 35 8
Outlet....... 46 10 46 11 36 9
Total..... 471 100% 422 100% 419 100%
Another key aspect of Phase I included aggressively investing in marketing to
attract new customers to Bombay and support the move from mall to off-mall.
During the late 1990s and early 2000s, we had become increasingly reliant on
periodic catalogs to drive customers into the store and did not have marketing
vehicles with a broader reach. In Fiscal 2001, the marketing expenditures
reached their historical low of 3.4% of revenues. During Fiscal 2002 and
Fiscal 2003, we increased our marketing to 4.1% and 4.6% of revenues,
respectively, with much of the incremental spending going to support a program
for monthly inserts in Sunday newspapers in our top 21 markets.
In addition to investing in new stores, we began making some key investments in
our infrastructure that will serve as the foundation upon which we plan to grow
to become a billion dollar company with competitive operating margins. During
Fiscal 2003, we rolled out a new point-of-sale system and a broadband
communication network to our U.S. stores, completed the implementation of the
first phase of a new planning and allocation system, opened a new 300,000
square foot distribution center in the Midwest and made key investments in
leadership positions, including the appointment of a new Chief Executive
Officer and a new Chief Information Officer.
Investments in product margin, inventory, infrastructure and advertising led to
a 21% increase in revenues, improvement in operating margins from 2.5% to 2.7%
of revenue, and improvement in return on assets from 3.3% to 4.0%.
As we enter Fiscal 2004 and the second phase of the turnaround, we are focused
on six critical success factors .
DRIVE SAME STORE SALES AT A COMPETITIVE RATE - Average store level
productivity was increased as a result of last year's 13% same store sales
performance. Longer-term, we need to continue to defend our market share
and ultimately grow sales at a rate at, or above, the competition.
SUCCESSFULLY CONTINUE THE MIGRATION OF OUR STORES FROM MALL TO OFF-
MALL LOCATIONS - We expect to improve operating margins 200 to 500 basis
points over time as stores are relocated to lower-cost, off-mall
locations. During Fiscal 2004, approximately 80 additional leases will
expire and the migration will continue at an accelerated pace with plans
to end the year with over 40% of our stores being off-mall.
GROW STORE COUNT - Our goal is to increase the number of core Bombay
stores 5% annually and continue to open new concepts such as BombayKIDS.
The focus will be on our top 25 markets where we believe we can add almost
100 Bombay stores without exceeding current penetration limits. Market
density is expected to result in leveraging fixed costs and improving
operating efficiencies.
DEVELOP BOMBAYKIDS - By the end of Fiscal 2004, we expect to have 50
BombayKIDS stores, providing the critical mass to yield better returns for
the business. Success in the BombayKIDS business will enable us to
demonstrate our ability to organically develop other concepts that
leverage our core competencies and provide new growth vehicles.
BUILD THE PROPER INFRASTRUCTURE TO SUPPORT FUTURE GROWTH - It is
essential that we invest in systems, our logistics network and corporate
competencies in order to avoid the pitfalls that scale and complexity can
create. While it is tempting to forego such investments in favor of
short-term profits, we believe that they are critical for long-term growth
and will be accretive to future earnings. Planned infrastructure
investments will include supply chain improvements, further enhancements
to the U.S. point-of-sale system and its rollout to the Canadian
subsidiary, SKU level planning and plannogramming, expansion of
distribution facilities in the Northeast, and the addition of a new
general merchandise manager and a new vice president of financial planning
and analysis.
GENERATE PROFIT MARGIN EXPANSION - This, in many ways, will be the
result of executing the first five critical success factors well. The key
to profit margin expansion will be the focus on and delivery of profit
flow-through and return on new stores. Half of the opportunity lies in
migrating to off-mall as we reduce fixed occupancy costs and lower our
overall cost structure. Approximately 25%-30% of our future improvement
lies in leveraging our top line growth in the areas of selling, general
and administrative expenses and logistics. The remainder will come from
13
improving product margins as we reap the benefits of new systems designed
to help ensure better flow of product from source to store, improve
inventory turn and manage promotional activities.
The infrastructure that we develop and the investments that we make will be
critical to the third phase of our turnaround strategy. Our plan is to
organically develop other retail concepts and areas of operations that would
leverage our core competencies and become new growth vehicles for Bombay.
This longer term strategy is several years in the future and is dependent on
successfully accomplishing earlier phases, which will be the focus for Fiscal
2004 and beyond.
Fiscal 2004 will result in the second consecutive year of accelerated
investment in Bombay with capital expenditures planned to be in the $30 to $35
million range. Our strategy from a balance sheet perspective is to utilize our
credit facilities with banks to finance our seasonal working capital needs, and
to fund our capital growth from working capital from operations and from our
balance sheet.
Other Disclosures
The largest percentage of our sales and operating income is realized in the
fourth fiscal quarter, which includes December (Christmas season).
The impact of inflation on operating results is typically not significant
because the majority of our products are proprietary. We attempt to alleviate
inflationary pressures by improving designs, finding alternative production
sources in lower cost countries and increasing selling prices (subject to
competitive conditions).
One of the risks we are currently facing relates to the recent anti-dumping
petition against Chinese furniture makers for alleged dumping of wooden bedroom
furniture. The petition is currently working its way through the United States
International Trade Commission and the United States Department of Commerce.
The final determinations of the Commission will not be made until 2005 but
imposition of preliminary duties will begin in Spring 2004. Slightly more than
10% of our assortment is classified as bedroom furniture, not all of which is
imported from China or may be subject to such duties. Our sourcing offices in
Asia have been identifying alternative vendors in other countries including
Vietnam, where some of our existing vendors have chosen to open manufacturing
facilities. We have already begun to move production of many of the bedroom
furniture items to these alternate factories. We cannot predict what amount,
if any, of disruption there might be as manufacturers shift their production to
other locales or what level of duties-related price increases we will be able
to pass on to our customers for those items that we choose to continue to
source from China. We believe that, with our established network of offices
throughout Asia and the strength of our relationships with our vendors, we will
be able to negotiate arrangements that will allow us to continue offering all
product categories on a competitive basis.
We have a retail (52-53 week) fiscal year that ends on the Saturday nearest
January 31. All periods presented reflect 52 weeks.
NET REVENUES
Net revenues consist of sales to retail customers, through store, mail order
and Internet, and wholesale sales, through Bailey Street and to our
international licensees, as well as shipping fees and other revenues. Shipping
fees reflect revenue from customers for delivery of merchandise. Other
includes royalties and territory fees from international licensees.
Fiscal Fiscal Fiscal
Net revenues (in millions) 2003 2002 2001
Retail....................... $571.8 $478.3 $431.2
Wholesale.................... 17.7 10.8 3.3
Shipping..................... 6.6 4.6 2.8
Other........................ .3 .3 .2
Total..................... $596.4 $494.0 $437.5
Fiscal Fiscal Fiscal
Merchandise Category 2003 2002 2001
Accessories.................. 43% 43% 43%
Large furniture.............. 31 32 31
Occasional furniture......... 14 12 12
Wall decor................... 12 13 14
Total..................... 100% 100% 100%
14
Fiscal 2003
Net revenues increased $102.4 million, or 21%, to $596.4 million, compared to
$494.0 million in Fiscal 2002. Revenues from retail operations increased $94.9
million, or 20%, from the prior year. Both new stores and same store sales
increases contributed to the growth. Same store sales increased 13% for the
year as we increased the number of stores by 49. During the year, we opened 53
large format stores, 30 BombayKIDS stores and one outlet. In addition, we
converted four regular stores to the large format. Increases from additional
stores were partially offset by the closing of 26 large format stores, eight
regular stores and one outlet. Direct-to-customer revenues increased 44% to
$29.8 million, from $20.6 million, due to strong Internet sales, partially
offset by a decrease of approximately 10% in mail order sales. The remainder
of the increase relates to growth in our wholesale operations, in particular,
Bailey Street, where revenues increased 88%, to $15.8 million from $8.4 million
in Fiscal 2002.
All regions of the U.S. and Canada reported positive same store sales, with all
but the Midwest reporting double-digit sales increases. At the end of Fiscal
2003, we had 365 large format stores, 25 regular stores, 46 outlets and 35
BombayKIDS stores. Total retail square footage increased 17% compared to year-
end Fiscal 2002, while the store count increased by a net 49 units. The number
of retail transactions for the year increased by almost 15% and the average
ticket increased to $86 from $82 in Fiscal 2002.
Fiscal 2002
Net revenues increased $56.5 million, or 13%, to $494.0 million, compared to
$437.5 million in Fiscal 2001. Revenues from retail operations increased $48.3
million, or 11%, from the prior year. Same store sales increased 5% for the
year. New stores also contributed to revenue growth, as we opened 14 large
format stores, 9 outlets and 5 BombayKIDS stores while expanding two stores
from the regular to the large format. Sales growth from new real estate
activity was partially offset by store closures. Internet and mail order
revenues grew 73% to $20.6 million from $11.9 million in the prior year, fueled
by sales of BombayKIDS product and improvement made to our website. The
remainder of the increase was the result of growth in our wholesale operations.
All regions of the U.S. and Canada reported mid single-digit same store sales
increases. At the end of Fiscal 2002, we had 334 large stores, 37 regular
stores, 46 outlets and five BombayKIDS stores. During the year, we closed 25
stores. Total retail square footage increased 5% compared to year-end Fiscal
2001, while the number of stores increased by a net 3 units. The number of
retail transactions for the year increased 7% and the average ticket increased
4% to $82 from $79 in the prior year.
COST OF SALES, BUYING AND STORE OCCUPANCY COSTS
(IN MILLIONS) Fiscal Fiscal Fiscal
2003 2002 2001
Cost of sales, buying
and occupancy costs...... $412.5 $344.0 $309.6
Shipping..................... 8.8 5.6 3.9
Total..................... $421.3 $349.6 $313.5
Fiscal 2003
Cost of sales, including buying and store occupancy costs, for Fiscal 2003 was
$421.3 million, or 70.6% of revenues. As a percentage of revenues, these costs
improved from 70.8% in Fiscal 2002. Product margins declined 210 basis points
as we focused on our value offerings at key price points designed to increase
market share and drive sales volumes. Buying and store occupancy costs
declined as a percentage of revenues to 16.8% from 19.1% in Fiscal 2002,
reflecting the significant leverage gained as a result of higher same store
sales. Buying and store occupancy costs included impairment charges totaling
$.2 million to write down the fixed assets related to eight unprofitable
stores.
Fiscal 2002
Cost of sales, including buying and store occupancy costs, for Fiscal 2002 was
$349.6 million, or 70.8% of revenues. As a percentage of revenues, these costs
declined from 71.7% in Fiscal 2001. Product margins declined 40 basis points
as we targeted key price points to drive volume. Buying and occupancy costs
were 19.1% of revenues, a 130 basis points decline, as a result of leveraging
costs against the stronger sales levels. Buying and occupancy costs included
impairment charges totaling $.7 million to write down the fixed assets related
to six unprofitable stores.
15
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Fiscal 2003
Selling, general and administrative expenses were $158.4 million compared to
$132.3 million in Fiscal 2002. As a percentage of revenues, expenses were
slightly lower at 26.6% in Fiscal 2003 compared to 26.8% in Fiscal 2002.
Excluding charges related to the departure of the Chief Executive Officer and
the settlement of a California wage and hour lawsuit in Fiscal 2002, selling,
general and administrative expenses in Fiscal 2002 were 26.3% of revenues. At
the store level, costs declined slightly as a percentage of sales. Store
payroll productivity gains were offset by higher costs associated with the new
broadband communication network and store opening and closing expenses.
Marketing costs increased over $7 million, or 50 basis points, as we increased
our distribution of monthly Sunday newspaper inserts from three markets in late
Fiscal 2002 to 21 markets in Fiscal 2003, in order to attract new customers and
drive traffic into the stores. Corporate office general and administrative
expenses declined approximately 40 basis points as we leveraged insurance and
payroll costs against the higher revenue base. Foreign exchange gains related
to the strengthening of the Canadian dollar also helped offset costs associated
with infrastructure investment in systems.
Fiscal 2002
Selling, general and administrative expenses were $132.3 million compared to
$117.6 million in Fiscal 2001. As a percentage of revenues, expenses were
slightly lower at 26.8% in Fiscal 2002 compared to 26.9% in Fiscal 2001.
Fiscal 2002 included a charge of $1.1 million relating to the departure of the
Chief Executive Officer and a $1.3 million charge related to the settlement of
a California wage and hour lawsuit. Excluding these charges, selling, general
and administrative costs were 26.3% of revenues, a 60 basis point decline. At
the store level, we were able to successfully leverage payroll costs against
the higher revenue base. Marketing costs increased by over $5 million or 70
basis points to 4.1% of revenues as we invested in advertising to drive sales
through increased direct marketing and testing broader reach vehicles including
a color newspaper insert. Corporate general and administrative costs declined
slightly as a percentage of revenue primarily due to leverage in payroll and
depreciation and amortization of systems partially offset by higher insurance
costs.
INTEREST
Fiscal 2003
During Fiscal 2003, we had interest income of $176,000 and interest expense of
$621,000, compared to interest income of $331,000 and interest expense of
$152,000 in Fiscal 2002. Decline in interest income and increase in expense
are the result of lower invested cash balances and greater utilization of the
credit facility in the current year. Funds were primarily used to finance our
capital expansion plan, with the addition of 49 locations, and higher inventory
levels to support both the higher store count and the increase in same store
sales.
Fiscal 2002
During Fiscal 2002, we had interest income of $331,000 and interest expense of
$152,000, compared to interest income of $248,000 and interest expense of
$566,000 in Fiscal 2001. Improvement resulted from higher average cash
balances generated through higher sales and profits, lower capital expenditures
and lower average inventory levels, resulting in lower utilization of the
credit facility. In addition, borrowings were at lower interest rates.
INCOME TAXES
We provided income taxes of $6.3 million, $5.1 million and $2.3 million in
Fiscal 2003, Fiscal 2002 and Fiscal 2001, respectively. The effective rates
were 38.7%, 41.2% and 38.6% in the respective periods. Fluctuations in the
effective rate were primarily related to foreign taxes that change in
accordance with earnings in the Canadian subsidiary and in state tax expenses
that have not changed proportionately to income before income taxes.
LIQUIDITY AND CAPITAL RESOURCES
The primary sources of liquidity and capital resources are cash flows from
operations and a line of credit with banks. We have an unsecured, revolving
credit agreement with a group of banks, with an aggregate commitment of up to
$75 million for working capital and letter of credit purposes. The bank
commitment is limited to 45% of saleable inventory. At January 31, 2004, the
bank commitment was $62.2 million, and $55.3 million was available for
borrowings or additional letters of credit. The credit facility expires July
5, 2005.
Fiscal 2003
During Fiscal 2003, we used $31.0 million of cash, ending the year with $25.6
million in cash and long-term investments. The decline in the level of cash
from Fiscal 2002, for both year-end comparisons and throughout the period, is
due to our higher capital expenditures and corresponding inventory levels in
Fiscal 2003 to support the additional stores and growth in same store sales.
The primary sources of cash were net income, including non-cash depreciation,
amortization expense and deferred tax expense, as well as the exercise of stock
options. Cash was primarily used for capital expansion, partially offset by
construction allowances granted by landlords, and to purchase additional
inventory to support the larger store base and increased same store sales.
16
Other significant uses of cash included the payment of federal income taxes and
a decrease in other current assets, primarily due to a decrease in prepaid rent
resulting from the timing of the end of the fiscal period.
Capital expenditures totaled $41.1 million and included the costs of opening 53
large format stores, 30 KIDS stores, one outlet, a distribution center in
Plainfield, Indiana, investments in new point-of-sale, planning and allocation
and other systems and routine purchases of equipment. These expenditures were
partially offset by construction allowances of $11.9 million granted by
landlords.
At January 31, 2004, inventory levels were $138.9 million or $36.2 million
higher than at February 1, 2003. This increase represents investments to
support the additional number of stores and higher sales levels. The year end
level was above desired levels as a result of aggressively buying to Christmas
sales that did not materialize. The investments were made primarily in core
merchandise which will continue to be offered as part of the product offering.
As a result, future orders will be adjusted to reflect the higher on hand
quantities. We do not expect the higher inventory levels to have a material
impact on gross margins. However, we will closely monitor inventory sell-
through and take appropriate actions, as necessary, to maximize inventory
productivity.
Long-term, our strategy is to utilize our credit facility to finance seasonal
borrowings and to utilize cash flow from operations and our balance sheet to
finance our capital programs. For Fiscal 2004, the capital expenditures plan
is estimated to be $30 to $35 million and includes the addition 64 large format
stores and 15 BombayKIDS stores. We expect to close 35 large format and 4
regular stores, and to end Fiscal 2004 with approximately 511 locations. Other
capital expenditure plans include further enhancements to the point-of-sale
system and its roll out to the Canadian subsidiary, expansion of distribution
facilities in the Northeast and routine purchases of equipment.
In connection with continuing operations, we have various contractual
obligations and commercial commitments requiring payment in future periods,
summarized in the table below.
Payments Due by Period
(In thousands) Total Less than 1 - 3 4 - 5 After 5
1 Year Years Years Years
CONTRACTUAL OBLIGATIONS
Real estate operating leases............ $283,711 $ 44,056 $106,574 $60,682 $72,399
Unconditional purchase orders........... 81,347 81,347 * * *
Equipment operating leases.............. 2,945 731 2,173 41 *
Employment contracts.................... 3,647 3,332 315 * *
Other contractual obligations........... 13,978 7,994 5,984 * *
Total contractual cash obligations.. $385,628 $137,460 $115,046 $60,723 $72,399
COMMERCIAL COMMITMENTS
Import letters of credit................ $3,898 $3,898 $ * $ * $ *
Standby letters of credit............... 2,942 2,942 * * *
Guarantees of travel cards.............. 135 135 * * *
Total commercial commitments........ $6,975 $6,975 $ * $ * $ *
With our current growth plans, we anticipate that we will need to increase our
borrowing capabilities to finance our pre-holiday build up of inventory in
Fiscal 2004. We currently intend to take advantage of the favorable credit
environment to increase our overall borrowing capabilities. We are exploring
various alternatives, including increasing our existing facility, and will
assess our options during the upcoming months.
Fiscal 2002
At February 1, 2003, cash and short-term investments were $56.6 million, $18.2
million higher than at February 2, 2002. The primary sources of cash were net
income including non-cash depreciation and amortization expense, increases in
payables including those related to higher inventory purchases, taxes, payroll
and insurance as well as proceeds from the exercise of stock options. These
sources were partially offset by higher inventory levels and capital
expenditures for store construction and routine equipment purchases.
At February 1, 2003, inventory levels were $13.0 million higher than at the
previous year end due to improved flow of product to support the strong sales
trend experienced during the second half of Fiscal 2002, and to support
continued growth into Fiscal 2003.
Capital expenditures totaled $10.2 million and included the costs of 28 new
stores and the conversion of two regular stores to the larger format, as well
as continued investments in software and equipment.
17
CRITICAL ACCOUNTING POLICIES
In the course of preparing the financial statements, management makes certain
judgments relative to accounting policies that are appropriate in the
circumstances and the application of those policies. The following policies
are those deemed to be most critical.
Inventory Valuation Policy
Inventories are valued at the lower of cost or market, cost being determined
based upon the weighted average inventory method. Cost is calculated based upon
the actual landed cost of an item at the time it is received in the warehouse
based upon actual vendor invoices or estimates of costs for which an invoice is
not present or for which an allocation of shared costs is required. In
addition, we include the cost of warehousing and transporting product to the
stores in our costs.
We regularly evaluate our compliance with the lower of cost or market
principle. Items are evaluated by SKU and to the extent that the cost of the
item exceeds the current selling price, provision is made to reduce the
carrying cost of the item. Additionally, we review the aging of our inventory
by SKU. The carrying cost of the item is reduced based upon certain age
criteria and product category. Since the determination of carrying value of
inventory involves both estimation and judgment of cost and market value,
differences in these estimates could result in valuations that vary from the
recorded asset.
Each month, we record an allowance for shrinkage to provide for the cost of
lost or stolen inventory. The amount of the allowance is determined based upon
the historical shrinkage results and is adjusted at least annually to reflect
current circumstances. Inventory is physically counted at all locations at
least once each year, at which time actual results are reflected in the
financial statements. Physical counts were taken at all stores and all the
distribution centers during January 2004.
Impairment of Long-Lived Assets
We review long-lived assets with definite lives at least annually and whenever
events or changes in circumstances indicate that the carrying value of the
asset may not be recoverable. This review includes the evaluation of
individual under-performing retail stores and assessing the recoverability of
the carrying value of the fixed assets related to the store. Future cash flows
are projected for the remaining lease life using a probability-weighted
approach to estimate the fair value of the store assets. These projections
consider such factors as future sales levels, gross margins, changes in rent
and other expenses as well as the overall operating environment specific to
that store. If the estimated future cash flows are less than the carrying
value of the assets, we record a charge equal to the difference between the
assets' fair value and carrying value as an impairment. Since the projection
of future cash flows involves judgment and estimates, differences in
circumstances or estimates could produce different results.
Deferred Taxes
We currently have recorded $8.1 million of deferred tax assets representing the
difference between the timing of deductions taken for financial statement
purposes and for tax purposes. In order to take the benefit of those assets,
we must have future taxable income. If future conditions indicate that the
benefit of the deferred tax assets will not be fully realized, we will record a
valuation allowance to reduce the assets to their estimated realizable value.
Insurance
We are self-insured with respect to medical and dental insurance coverage
offered to our eligible employees, up to a maximum of $125,000 per claim.
Above that amount, medical insurance coverage is in place. In connection with
the self-insured portion, we maintain a liability for claims that are in the
process of being paid and those that have been incurred but not yet reported to
our insurance carrier. We base the amount of the liability upon historical
claims experience and actuarial estimates regarding the exposure for claims
incurred but not yet reported. At January 31, 2004, the balance of the medical
and dental liability was $772,000.
Since Fiscal 2001, we have also maintained workers' compensation insurance
coverage with a deductible of up to $150,000 per claim. At January 31, 2004,
we had recorded a liability of $2.9 million representing the estimated amount
that will have to be paid in future periods related to the settlement of claims
under the insurance policies for Fiscal 2001 through Fiscal 2003. The amount
of the liability reflects expected remaining workers' compensation claims based
upon actuarial estimates, utilizing historical claims experience and other
relevant information and trends. Prior to Fiscal 2001, our workers'
compensation insurance was not subject to a deductible.
If circumstances change or if information becomes available that would indicate
that future payments with respect to insurance liabilities would be different
than what was previously estimated, we will adjust such liabilities
accordingly. Since the amounts recorded for insurance liabilities are based
upon various estimates, actual future requirements could vary from the recorded
liabilities.
18
New Accounting Pronouncements
During Fiscal 2003, we adopted Statement of Financial Accounting Standards
("SFAS") No. 143, Accounting for Asset Retirement Obligations. SFAS 143
requires that the fair value of a liability for an asset retirement obligation
be recognized in the period in which it is incurred if a reasonable estimate of
fair value can be made. The adoption of SFAS 143 did not have a material
impact on our consolidated financial position or results of operations.
We have also adopted the provisions of SFAS 146, Accounting for Costs
Associated with Exit or Disposal Activities, for exit or disposal activities
initiated after December 31, 2002. SFAS No. 146 requires that certain costs
associated with exit or disposal activities be recognized when they are
incurred rather than at the date of commitment to an exit or disposal plan.
The adoption of SFAS 146 did not have a material impact on our consolidated
financial position or results of operations.
In January 2003, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation Number ("FIN") 46, Consolidation of Variable Interest Entities -
An Interpretation of ARB No. 51. FIN 46 addresses consolidation by business
enterprises of variable interest entities that have certain characteristics.
In December 2003, the FASB amended and clarified FIN 46 by issuing FIN 46R.
The FASB has postponed the effective date of FIN 46R to the first quarter of
Fiscal 2004, at which time we will adopt the provisions of the standard. We do
not expect the adoption of the standard to have a material impact on our
consolidated financial position or results of operations.
19
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Market risk represents the potential loss arising from adverse changes in the
value of financial instruments. The risk of loss is assessed based upon the
likelihood of adverse changes in fair values, cash flows or future earnings.
We have exposure to interest rate risk, as borrowings under our credit facility
are based upon LIBOR, prime and other benchmark rates which may fluctuate with
market conditions. Based upon our seasonal borrowing levels, management does
not believe that a change in interest rates of 100 basis points would have a
significant impact on our consolidated financial position or results of
operations.
As of January 31, 2004 we had no debt or other market risk sensitive
instruments.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The index to the consolidated financial statements is found on page 26. Our
consolidated financial statements and notes to the consolidated financial
statements follow the index.
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.
ITEM 9A. CONTROLS AND PROCEDURES.
Within 90 days prior to the date of this filing, an evaluation was performed
under the supervision and with the participation of Bombay's management,
including the Chief Executive Officer and Chief Financial Officer, of the
effectiveness of the design and operation of our disclosure controls and
procedures pursuant to Rule 13a-14 under the Securities Exchange Act of 1934.
Based upon that evaluation, the Chief Executive Officer and Chief Financial
Officer concluded that our disclosure controls and procedures were effective in
timely alerting them to material information relating to Bombay that is
required to be included in periodic filings with the Securities and Exchange
Commission. There have been no significant changes in our internal controls or
in other factors that could significantly affect internal controls subsequent
to the date of the evaluation.
20
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
We have adopted a code of ethics that applies to all employees including our
principal executive officer and principal financial and accounting officer. A
copy of the Code of Business Conduct and Ethics is filed as an Exhibit to this
Annual Report on Form 10-K and is incorporated herein by reference. In
addition, the code is posted on our website at http://bombaycompany.com or can
be obtained, free of charge, upon request from the office of the Corporate
Secretary.
Other information required under Item 10 appears under the captions "Election
of Directors", "Executive Officers of the Company", "Meetings and Committees of
the Board" 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 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 AND
RELATED STOCKHOLDER MATTERS.
EQUITY COMPENSATION INCENTIVE PLAN INFORMATION
Bombay currently maintains The Bombay Company, Inc. Employee Stock Purchase
Plan (the "ESPP"), The Bombay Company, Inc. 1996 Long-Term Incentive Stock Plan
(the "1996 Plan"), and The Bombay Company, Inc. Supplemental Stock Program (the
"SSP"), all of which were originally approved by our shareholders. We also
maintain The Bombay Company, Inc. Amended and Restated 2001 Non-Employee
Directors' Equity Plan (the "Directors' Equity Plan"), which was not subject to
shareholder approval.
The following table gives information about equity awards under the above-
mentioned plans as of January 31, 2004.
Plan Category Number of securities Weighted-average Number of securities remaining
to be issued upon exercise price of available for future issuance
exercise of outstanding options, under equity compensation
outstanding options, warrants and rights plans (excluding securities
warrants and rights reflected in column (a))
(a) (b) (c)
Equity compensation 2,458,570 $5.09 2,272,009 (2) (3)
plans approved by
security holders (1)
Equity compensation 252,750 $4.61 116,469
plans not approved by
security holders (4)
Total 2,711,320 $5.03 2,388,478
(1) Consists of the ESPP, 1996 Plan and SSP.
(2) Of these shares, 234,274 remain available for purchase under the ESPP and
96,504 remain available for purchase under the SSP.
21
(3) The 1996 Plan includes an "evergreen" feature which replenishes the Plan
with newly available shares on an annual basis. The added shares equal
1.25% of the total number of issued shares of Bombay common stock as of the
last day of each fiscal year.
(4) Consists of the Directors' Equity Plan. The material features of the
Directors' Equity Plan are as follows:
Members of the Board receive stock options and may opt to receive fees in the
form of Bombay common stock or to defer those fees in the form of stock units
pursuant to the Directors' Equity Plan. The Directors' Equity Plan provides
for an initial grant of a nonqualified option to new directors and an automatic
annual grant of nonqualified options to continuing directors on the third
business day after Bombay issues its press release summarizing our operating
results for the prior fiscal year. The initial and automatic annual option
grants are 10,000 shares. Committee chairs are awarded an additional option
grant covering 2,500 shares on an annual basis beginning in Fiscal 2004. The
initial grant vests 20% per year over a five-year period and the annual grants
vest in full six months after the grant.
Non-employee directors may opt to be paid their fees in the form of Bombay
common stock distributed to such director on a quarterly basis. Alternatively,
non-employee directors may choose to defer the receipt of annual and committee
chair retainers and meeting fees, which are then credited in stock units
equivalent to Bombay common stock and held by Bombay in an account for the
benefit of each participating director. The stock units, which are fully
vested, become payable in the form of Bombay common stock upon retirement from
the Board or otherwise as specified in the director's election notice. The
stock units are adjusted for stock dividends, stock splits, combinations,
reclassifications, recapitalizations or other capital adjustments.
Other information required under Item 12 appears under the captions "Security
Ownership" 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 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
There were no relationships or related transactions during the reporting period
which require disclosure.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
The information required by this item appears under the captions "Independent
Auditors' Fees" and "Audit Committee's Pre-approval Policy and Procedures" 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.
22
PART IV
ITEM 15. 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) Financial Statements:
Report of Independent Auditors
Consolidated Statements of Income for the Years Ended January 31,
2004, February 1, 2003 and February 2, 2002
Consolidated Balance Sheets at January 31, 2004 and February 1, 2003
Consolidated Statements of Stockholders' Equity for the Years Ended
January 31, 2004, February 1, 2003 and February 2, 2002
Consolidated Statements of Cash Flows for the Years Ended January 31,
2004, February 1, 2003 and February 2, 2002
Notes to Consolidated Financial Statements
(2) 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.
(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.
The Securities and Exchange Commission requires the filing of a Form 8-K
for certain events specified under Sections 13 or 15(d) of the Securities
Exchange Act of 1934, for nonpublic information required to be disclosed
by Regulation FD, or for any other information which the Company deems of
importance to security holders. During the quarter ended January 31,
2004, the following Reports on Form 8-K were filed:
(1)On November 21, 2003, we filed a Form 8-K reporting the results of our
earnings for the fiscal quarter ended November 1, 2003.
(2)On November 21, 2003, we filed a Form 8-K issuing guidance regarding
our expected real estate strategy for the remainder of Fiscal 2003 and
Fiscal 2004.
23
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 9, 2004
/s/ JAMES D. CARREKER
James D. Carreker
Chairman of the Board and
Chief Executive Officer
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
/s/ JAMES D. CARREKER Chairman of the Board and April 9, 2004
James D. Carreker Chief Executive Office
/s/ NIGEL TRAVIS Lead Director April 7, 2004
Nigel Travis
Director
John H. Costello
/s/ SUE T. GROENTEMAN Director April 8, 2004
Sue T. Groenteman
Director
Paul J. Raffin
/s/ JULIE L. REINGANUM Director April 7, 2004
Julie L. Reinganum
/s/ LAURIE M. SHAHON Director April 7, 2004
Laurie M. Shahon
Director
Bruce R. Smith
/s/ ELAINE D. CROWLEY Senior Vice President, April 8, 2004
Elaine D. Crowley Chief Financial Officer
and Treasurer
24
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Page No.
Report of Independent Auditors.............................. 25
Consolidated Statements of Income for the Years Ended
January 31, 2004, February 1, 2003 and February 2, 2002 .. 26
Consolidated Balance Sheets at January 31, 2004 and
February 1, 2003.......................................... 27
Consolidated Statements of Stockholders' Equity for
the Years Ended January 31, 2004, February 1, 2003
and February 2, 2002...................................... 28-29
Consolidated Statements of Cash Flows for the Years
Ended January 31, 2004, February 1, 2003 and
February 2, 2002.......................................... 30
Notes to Consolidated Financial Statements.................. 31-39
Unaudited Quarterly Financial Data.......................... 40
25
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders of
The Bombay Company, Inc.
In our opinion, the consolidated financial statements listed in the
accompanying index on page 24 present fairly, in all material respects, the
financial position of The Bombay Company, Inc. and its subsidiaries at January
31, 2004 and February 1, 2003, and the results of their operations and their
cash flows for each of the three years in the period ended January 31, 2004, in
conformity with accounting principles generally accepted in the United States
of America. 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 auditing standards generally accepted in the United States of
America 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 our opinion.
/s/ PRICEWATERHOUSECOOPERS LLP
PRICEWATERHOUSECOOPERS LLP
Fort Worth, Texas
April 9, 2004
26
CONSOLIDATED STATEMENTS OF INCOME
The Bombay Company, Inc. and Subsidiaries
(In thousands, except per share amounts)
Year Ended
January 31 February 1 February 2
2004 2003 2002
Net revenues................................................ $596,435 $494,000 $437,457
Costs and expenses:
Cost of sales, buying and store occupancy costs.......... 421,322 349,599 313,484
Selling, general and administrative expenses............. 158,446 132,305 117,589
Interest expense (income), net........................... 445 (179) 318
580,213 481,725 431,391
Income before income taxes.................................. 16,222 12,275 6,066
Provision for income taxes.................................. 6,271 5,058 2,342
Net income............................................... $ 9,951 $ 7,217 $ 3,724
Basic earnings per share.................................... $.29 $.22 $.11
Diluted earnings per share.................................. $.28 $.22 $.11
Average common shares outstanding........................... 34,649 33,048 32,967
Average common shares outstanding and
dilutive potential common shares......................... 34,966 33,298 32,992
The accompanying notes are an integral part of these consolidated financial
statements.
27
CONSOLIDATED BALANCE SHEETS
The Bombay Company, Inc. and Subsidiaries
(In thousands, except shares)
January 31 February 1
2004 2003
ASSETS
Current assets:
Cash and cash equivalents (short-term investments of $15,421 and $46,622 respectively)..... $ 25,619 $ 56,608
Inventories, at lower of cost or market.................................................... 138,908 102,768
Other current assets....................................................................... 26,012 21,123
Total current assets.................................................................. 190,539 180,499
Property and equipment, at cost:
Land....................................................................................... 892 892
Building................................................................................... 5,198 5,198
Leasehold improvements..................................................................... 103,295 81,827
Furniture and equipment.................................................................... 40,756 33,345
150,141 121,262
Accumulated depreciation............................................................... (82,034) (75,961)
Net property and equipment............................................................. 68,107 45,301
Deferred taxes and other assets............................................................... 5,864 9,966
Goodwill, less amortization of $611........................................................... 423 423
Total assets........................................................................ $264,933 $236,189
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses...................................................... $ 35,348 $ 37,202
Income taxes payable....................................................................... 1,103 6,673
Accrued payroll and bonuses................................................................ 8,019 7,192
Gift certificates redeemable............................................................... 7,129 5,923
Accrued insurance.......................................................................... 3,730 3,609
Total current liabilities.............................................................. 55,329 60,599
Accrued rent and other liabilities............................................................ 18,217 6,182
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
Additional paid-in capital................................................................. 79,210 75,446
Retained earnings.......................................................................... 86,312 76,361
Accumulated other comprehensive income (loss).............................................. 122 (1,394)
Common shares in treasury, at cost, 2,816,772 and
4,621,440 shares, respectively......................................................... (11,555) (18,918)
Deferred compensation...................................................................... (852) (237)
Total stockholders' equity............................................................. 191,387 169,408
Commitments and contingencies (Note 5)
Total liabilities and stockholders' equity.......................................... $264,933 $236,189
The accompanying notes are an integral part of these consolidated financial
statements.
28 & 29
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
The Bombay Company, Inc. and Subsidiaries
(In thousands)
Accumulated
Common Stock Treasury Stock Additional Stock Other Annual
Paid-In Purchase Deferred Retained Comprehensive Comprehensive
Shares Amount Shares Amount Capital Loans Comp. Earnings Income (Loss) Income
Total, February 3, 2001.... 38,150 $38,150 (5,456) $(22,320) $75,735 $(991) $ * $65,420 $(1,267)
Purchases of treasury
shares................... * * (39) (103) * * * * *
Shares contributed or
sold to employee benefit
plans.................... * * 102 418 (225) * * * *
Director fee distributions. * * 30 123 (48) * * * *
Restricted stock
distributions............ * * 250 1,021 (195) * (552) * *
Deferred compensation
expense.................. * * * * * * 285 * *
Collections of stock
purchase loans........... * * * * * 86 * * *
Interest (charges)
collections on stock
purchase loans, net...... * * * * * (45) * * *
Net income................. * * * * * * * 3,724 * $3,724
Foreign currency
translation adjustments.. * * * * * * * * (509) (509)
Total, February 2, 2002.... 38,150 38,150 (5,113) (20,861) 75,267 (950) (267) 69,144 (1,776) $3,215
Purchases of treasury
shares................... * * (202) (895) * 864 * * *
Shares contributed or
sold to employee
benefit plans............ * * 66 271 (89) * * * *
Exercise of stock options.. * * 596 2,438 45 * * * *
Director fee distributions. * * 77 313 3 * * * *
Restricted stock
distributions............ * * (45) (184) 220 * (44) * *
Deferred compensation
expense.................. * * * * * * 74 * *
Net repayments of stock
purchase loans........... * * * * * 103 * * *
Interest charges on stock
purchase loans, net...... * * * * * (17) * * *
Net income................. * * * * * * * 7,217 * $7,217
Foreign currency
translation adjustments.. * * * * * * * * 382 382
Total, February 1, 2003.... 38,150 38,150 (4,621) (18,918) 75,446 * (237) 76,361 (1,394) $7,599
Purchases of treasury
shares................... * * (9) (69) * * * * *
Shares contributed or
sold to employee benefit
plans.................... * * 64 262 113 * * * *
Exercise of stock options.. * * 1,613 6,610 3,007 * * * *
Director fee distributions. * * 55 227 33 * * * *
Restricted stock
distributions............ * * 81 333 611 * (974) * *
Deferred compensation
expense.................. * * * * * * 359 * *
Net income................. * * * * * * * 9,951 * $ 9,951
Foreign currency
translation adjustments.. * * * * * * * * 1,516 1,516
Total, January 31, 2004.... 38,510 $38,510 (2,817) $(11,555) $79,210 $ * $(852) $86,312 $ 122 $11,467
The accompanying notes are an integral part of these consolidated financial
statements.
30
CONSOLIDATED STATEMENTS OF CASH FLOWS
The Bombay Company, Inc. and Subsidiaries
(In thousands)
Year Ended
January 31 February 1 February 2
2004 2003 2002
Cash flows from operating activities:
Net income.............................................................. $ 9,951 $ 7,217 $ 3,724
Adjustments to reconcile net income to net cash from operations:
Depreciation......................................................... 13,217 12,740 13,000
Amortization........................................................ 4,248 2,743 3,472
Restricted stock compensation....................................... 328 66 298
Deferred taxes and other............................................ 5,108 (1,543) (707)
Change in assets and liabilities:
(Increase) decrease in inventories.................................. (34,833) (12,430) 14,090
Increase in other current assets.................................... (3,943) (2,033) (807)
Increase (decrease) in accounts payable and accrued expenses....... (1,843) 13,624 50
Increase (decrease) in income taxes payable........................ (2,276) 3,608 (2,700)
Increase (decrease) in accrued payroll and bonuses................. 725 2,156 (607)
Decrease in noncurrent assets...................................... 19 13 74
Increase (decrease) in noncurrent liabilities...................... 617 (535) (563)
Net cash provided (used) by operations.......................... (8,682) 25,626 29,324
Cash flows from investing activities:
Purchases of property, equipment and other............................. (41,062) (10,224) (14,127)
Landlord construction allowances....................................... 11,900 * *
Proceeds from sale of property and equipment........................... 172 289 614
Net cash used by investing activities.......................... (28,990) (9,935) (13,513)
Cash flows from financing activities:
Purchases of treasury stock............................................ (83) (31) (103)
Sale of stock to employee benefit plans................................ 387 182 193
Collection of stock purchase loans..................................... * 104 86
Exercise of stock options.............................................. 6,310 2,328 *
Net cash provided by financing activities...................... 6,614 2,583 176
Effect of exchange rate change on cash .................................... 69 (81) 271
Net increase (decrease) in cash and cash equivalents....................... (30,989) 18,193 16,258
Cash and cash equivalents at beginning of year............................. 56,608 38,415 22,157
Cash and cash equivalents at end of year................................... $ 25,619 $ 56,608 $ 38,415
Supplemental disclosures of cash flow information:
Interest paid.......................................................... $ 597 $ 152 $ 566
Income taxes paid...................................................... 4,191 2,298 5,687
Non-cash financing activities:
Distributions of director fees....................................... 260 316 75
Distributions of restricted stock.................................... 943 368 826
Repurchase of shares from stock purchase loans....................... * 864 *
The accompanying notes are an integral part of these consolidated financial
statements.
31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Bombay Company, Inc. and Subsidiaries
NOTE 1 - STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
The Bombay Company, Inc. and its wholly-owned subsidiaries design, source and
market a unique line of fashionable home accessories, wall decor and furniture
through a network of retail locations throughout the United States and Canada,
through specialty catalogs, over the Internet and internationally through
licensing arrangements. We also have a small wholesale operation that
distributes a separate line of occasional furniture. Throughout this report,
the terms "our," "we," "us" and "Bombay" refer to The Bombay Company, Inc.,
including its subsidiaries.
The consolidated financial statements include the accounts of Bombay and its
wholly-owned subsidiaries. All significant intercompany transactions, balances
and profits have been eliminated. Bombay has a retail (52-53 week) fiscal
year, which ends on the Saturday nearest January 31. All periods presented
reflect 52 weeks.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates. These estimates
affect reported amounts of assets, liabilities, revenues, expense and related
disclosures. Actual results could differ from those estimates.
FOREIGN CURRENCY TRANSLATION
The functional currency of our Canadian operations is the Canadian dollar.
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. We record the cumulative effect of foreign currency translation
adjustments in accumulated other comprehensive income (loss) within
stockholders' equity.
CASH AND CASH EQUIVALENTS
We consider cash in stores, deposits in banks and short-term investments with
original maturities of three months or less 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
cost or market, cost being determined based upon the weighted average inventory
method.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost and 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
Landlord construction allowances are recorded as other liabilities and are
amortized as a reduction of rent expense over the life of the related lease.
We charge maintenance and repairs to expense as they are incurred. We
capitalize renewals and betterments which materially prolong the useful lives
of the assets. As property is retired or sold, we remove the cost and related
accumulated depreciation from the accounts, and we recognize gains or losses in
the statements of income.
CAPITALIZED SOFTWARE COSTS
We capitalize certain external and internal costs associated with computer
software and significant enhancements to software features of existing
products. We amortize the costs utilizing the straight-line method over the
estimated economic lives of the software, which range from three to seven
years. Total costs capitalized were $15,128,000 and $19,500,000 at January 31,
2004 and February 1, 2003, respectively. Accumulated amortization related to
these assets was $10,016,000 and $15,236,000 in Fiscal 2003 and Fiscal 2002,
respectively.
IMPAIRMENT OF LONG-LIVED ASSETS
During Fiscal 2002, we adopted the provisions of Statement of Financial
Accounting Standards ("SFAS") No. 144, Accounting for Impairment or Disposal of
Long-Lived Assets. SFAS 144 requires that long-lived assets with definite
lives be evaluated for impairment whenever conditions indicate that the
carrying value of the assets may not be recoverable. In determining if an
impairment exists, assets must be grouped at the lowest level for which there
are identifiable cash flows that are largely independent of cash flows from
other groups of assets. In performing this impairment test, we group our
assets at the store level. If an impairment exists, the amount of the
impairment is measured as the difference between the carrying value and the
estimated fair value of the assets. The adoption of SFAS 144 did not have a
significant impact on our financial position or results of operations.
For periods prior to Fiscal 2002, we assessed impairment of long-lived assets
in accordance with the provisions of SFAS No. 121, which were similar to the
provisions of SFAS 144.
GOODWILL
During Fiscal 2002, we adopted the provisions of SFAS No. 142, Accounting for
Goodwill and Other Intangibles. SFAS 142 provides that goodwill should no
longer be amortized, but should be tested for impairment at least annually, and
whenever conditions indicate that such an impairment could exist. Goodwill is
tested for impairment by comparing the estimated fair value of our net assets
to their carrying value. If the carrying value exceeds the estimated fair
value, we calculate the implied value of goodwill and recognize an impairment
loss. No impairment was recorded in Fiscal 2003 or Fiscal 2002. The adoption
of SFAS 142 did not have a significant impact on our financial statements, nor
would it have had a significant impact on prior years if the provisions of SFAS
142 had been applied.
REVENUE RECOGNITION
We recognize revenue when delivery has occurred, the sales price is fixed or
determinable, and collectibility is reasonably assured. Revenues are net of
returns and exclude sales tax.
We include in revenues amounts collected from customers for shipping and
handling orders. In Fiscal 2003, Fiscal 2002 and Fiscal 2001, these revenues
totaled $6,566,000, $4,626,000 and $2,779,000, respectively. The associated
shipping and handling expenses are included in cost of sales.
GIFT CERTIFICATES
We record proceeds from the sale of gift cards and certificates as a liability
at the time we receive them. When the holder of the card or certificate
redeems it for merchandise, we relieve the liability and recognize revenue.
ADVERTISING COSTS
We expense advertising cost the first time the advertising takes place. During
Fiscal 2003, Fiscal 2002 and Fiscal 2001, advertising expense was $27,604,000,
$20,258,000 and $14,597,000, respectively.
INCOME TAXES
We use 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. We assess the
realizability of deferred tax assets and, if necessary, provide a valuation
allowance.
All unremitted earnings of the foreign subsidiary are considered to be
permanently reinvested. Accordingly, no U.S. deferred taxes have been provided
on such earnings.
COMPREHENSIVE INCOME
Comprehensive income represents the change in equity (net assets) of a business
enterprise during a period from transactions and other events and circumstances
from non-owner sources. It includes all changes in equity during a period
except those resulting from investments by owners and distributions to owners.
Such amounts are included in accumulated other comprehensive income (loss)
within stockholders' equity and consist of the cumulative effect of foreign
currency translation adjustments.
NEW ACCOUNTING PRONOUNCEMENTS
During Fiscal 2003, we adopted SFAS No. 143, Accounting for Asset Retirement
Obligations. SFAS 143 requires that the fair value of a liability for an asset
retirement obligation be recognized in the period in which it is incurred if a
reasonable estimate of fair value can be made. The adoption of SFAS 143 did
not have a material impact on our consolidated financial position or results of
operations.
We have also adopted the provisions of SFAS 146, Accounting for Costs
Associated with Exit or Disposal Activities, for exit or disposal activities
initiated after December 31, 2002. SFAS No. 146 requires that certain costs
associated with exit or disposal activities be recognized when they are
incurred rather than at the date of commitment to an exit or disposal plan.
The adoption of SFAS 146 did not have a material impact on our consolidated
financial position or results of operations.
In January 2003, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation Number ("FIN") 46, Consolidation of Variable Interest Entities -
An Interpretation of ARB No. 51. FIN 46 addresses consolidation by business
enterprises of variable interest entities that have certain characteristics.
In December 2003, the FASB amended and clarified FIN 46 by issuing FIN 46R.
The FASB has postponed the effective date of FIN 46R to the first quarter of
Fiscal 2004, at which time we will adopt the provisions of the standard. We do
not expect the adoption of the standard to have a material impact on our
consolidated financial position or results of operations.
33
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 deferred director
compensation.
The computation for basic and diluted earnings from continuing operations per
share are as follows (in thousands, except per share amounts):
Year Ended
January 31 February 1 February 2
2004 2003 2002
Numerator:
Net income..................................... $9,951 $7,217 $3,724
Denominator for basic earnings per share:
Average common shares outstanding.............. 34,649 33,048 32,967
Denominator for diluted earnings per share:
Average common shares outstanding.............. 34,649 33,048 32,967
Stock options.................................. 314 227 1
Deferred director compensation................. 3 23 24
34,966 33,298 32,992
Basic earnings per share........................... $.29 $.22 $.11
Diluted earnings per share......................... $.28 $.22 $.11
STOCK-BASED COMPENSATION
We apply the recognition and measurement principles of Accounting Principles
Board Opinion No. 25, Accounting for Stock Issued to Employees, and related
interpretations and the disclosure-only provisions of SFAS 123, Accounting for
Stock-Based Compensation, in accounting for our stock-based incentive plans.
No compensation expense related to grants of stock options has been reflected
in net income, as all options granted under the plans had an exercise price
equal to the market price of Bombay's common stock on the date of grant.
Compensation expense related to grants of restricted stock is measured as the
quoted market price of Bombay's common stock at the measurement date, amortized
to expense over the vesting period. The following table illustrates the effect
on net income and earnings per share if we had applied the fair value
recognition provisions of SFAS 123 to stock-based compensation (in thousands):
Year Ended
January 31 February 1 February 2
2004 2003 2002
Net income as reported...................... $ 9,951 $7,217 $3,724
Stock-based compensation expense
determined under FAS 123, net of tax...... (1,196) (925) (964)
Net income, pro forma....................... $ 8,755 $6,292 $2,760
Basic earnings per share, as reported....... .29 .22 .11
Diluted earnings per share, as reported..... .28 .22 .11
Basic earnings per share, pro forma......... .25 .19 .08
Diluted earnings per share, pro forma....... .25 .19 .08
34
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:
Year Ended
January 31 February 1 February 2
2004 2003 2002
Expected volatility........... 65.7% 63.9% 59.9%
Expected life years........... 5 6 6
Expected dividends............ * * *
Risk-free interest rate....... 3.3 - 4.5% 3.8 - 5.8% 5.0 - 5.5%
The weighted average fair value of options granted during Fiscal 2003, Fiscal
2002 and Fiscal 2001 was $3.95, $1.71 and $1.69, respectively.
NOTE 2 - STORE IMPAIRMENTS
Following the holiday selling season, we reviewed our real estate portfolio for
impairment, focusing on store locations with operating losses. Of the 471
company-owned stores open as of January 31, 2004, eight stores were identified
for which the carrying amounts of the store assets were not expected to be
recoverable. As a result of the review, we recorded an impairment charge to
buying and occupancy costs of $244,000. Similar reviews, performed in Fiscal
2002 and Fiscal 2001, resulted in charges to buying and occupancy costs of
$693,000 and $715,000, respectively.
NOTE 3 - DEBT
We have an unsecured, revolving credit agreement with a group of banks. On
July 10, 2003, the credit agreement was amended to increase the aggregate
commitment by $25,000,000 to $75,000,000 through the addition of one lending
party and an increased commitment on the part of two existing banks. We have
the option to request an increase in the aggregate commitment to $100,000,000,
subject to approval by the banks, through the addition of another lending bank
or increased commitment by the existing lending banks. The facility, which
expires July 5, 2005, is for working capital, inventory financing and letter of
credit purposes. Borrowings under the facility can be made, at our option and
subject to certain limitations, in the form of loans or by the issuance of
bankers' acceptances with respect to inventory purchases. Loans under the
facility bear interest, at our option, at either the lead bank's prime lending
rate plus a margin of .25% to 1.25% or the LIBOR rate plus a margin of 1.75% to
2.75%, with the margin depending on our leverage ratio. Under the terms of the
agreement, we are required to maintain certain financial ratios and other
financial conditions. The agreement prohibits us from making certain
investments, advances or loans, and limits the dollar amounts of capital
expenditures, purchases of treasury shares, cash dividends and asset sales. In
the event that we are in default of certain provisions of the agreement, the
lenders would be permitted to file liens against our inventory located in the
United States and perfect the pledge of 65% of the stock of our Canadian
subsidiary, thereby securing the indebtedness.
The bank commitment is limited to 45% of saleable inventory. At January 31,
2004, the bank commitment was $62,157,000. Letters of credit totaling
$6,840,000 were outstanding under the facility, and $55,317,000 was available
for borrowings or additional letters of credit. Interest expense and
negotiated fees for Fiscal 2003, Fiscal 2002 and Fiscal 2001, totaled
$1,086,000, $617,000 and $884,000, respectively.
35
NOTE 4 - INCOME TAXES
The components of the provision for domestic and foreign income taxes are shown
below (in thousands):
Year Ended
January 31 February 1 February 2
2004 2003 2002
Income before income taxes:
Domestic................................. $11,920 $11,146 $5,447
Foreign.................................. 4,302 1,129 619
$16,222 $12,275 $6,066
Provision (benefit) for income taxes:
Current:
Federal.............................. $(1,019) $ 5,065 $2,290
Foreign.............................. 1,729 884 339
State and local...................... (176) 498 147
534 6,447 2,776
Deferred (prepaid):
Federal.............................. 5,054 (1,303) (423)
Foreign.............................. 45 57 29
State and local...................... 638 (143) (40)
5,737 (1,389) (434)
Total provision for income taxes............ $ 6,271 $ 5,058 $2,342
The effective tax rate differs from the federal statutory tax rate for the
following reasons:
Year Ended
January 31 February 1 February 2
2004 2003 2002
Federal statutory tax rate............... 34.0% 34.0% 34.0%
Increase in effective tax rate
rate due to:
Foreign income taxes............. 1.7 4.5 2.6
State and local taxes,
net of federal income
tax benefit.................. 1.9 1.9 1.1
Other, net....................... 1.1 .8 .9
Effective tax rate.......... 38.7% 41.2% 38.6%
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):
January 31 February 1
2004 2003
Deferred tax liabilities:
Depreciation............................ $(2,709) $ *
Other................................... (1,357) (1,426)
(4,066) (1,426)
Deferred tax assets:
Inventory valuation..................... 2,505 1,625
Accrued rent............................ 2,343 2,374
Accrued insurance....................... 1,314 1,270
Depreciation............................ * 2,998
Other................................... 1,938 2,930
8,100 11,197
Net deferred tax assets.............. $ 4,034 $ 9,771
Deferred tax assets, net of liabilities:
Current................................. $4,188 $4,322
Non-current............................. (154) 5,449
Total.............................. $4,034 $9,771
NOTE 5 - COMMITMENTS AND CONTINGENCIES
We have store, distribution and field office facilities and equipment leased
under operating leases expiring through 2015. 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 2003, Fiscal 2002 and Fiscal 2001 totaled $58,712,000, $50,669,000
and $47,366,000, respectively.
The minimum rental commitments for future fiscal years are as follows (in
thousands):
Fiscal
2004.................... $ 44,787
2005.................... 37,817
2006.................... 36,026
2007.................... 34,903
2008.................... 31,640
Thereafter............. 101,483
$286,656
We have 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 our
financial position or results of operations.
We are party to employment agreements with certain executives which provide for
compensation and certain other benefits. The agreements also provide for
severance payments under certain circumstances.
NOTE 6 - 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 75% of earnings with Bombay matching
100% of the initial 3% contribution, and 50% of the next 2% contributed by the
participant. Participant contributions and Company match are paid to a
corporate trustee and invested in various funds or Bombay stock, as directed by
the participant. Company matching contributions made to participants' accounts
are fully vested immediately. 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 Bombay common stock.
The Bombay Company, Inc. Stock Purchase Program ("SPP") is open to all full-
time employees who have at least 90 days of service. Each participant may
contribute 1% to 10% of qualifying compensation, to a maximum annual
contribution of $21,250. Contributions are used to purchase shares of Bombay
common stock at a discount of 15% from current market rates. The participants'
shares are fully vested upon purchase. Participants' shares are held by a
third-party administrator until the respective participant requests a
distribution.
Total Bombay contributions to these plans for Fiscal 2003, Fiscal 2002 and
Fiscal 2001 were $714,000, $723,000 and $644,000, respectively.
NOTE 7 - COMMON STOCK AND STOCK OPTIONS
Our Board of Directors has authorized a stock repurchase program to purchase up
to an aggregate of $30 million of Bombay's stock. The shares may be purchased
from time to time, through open market purchases and privately negotiated
transactions. During Fiscal 2003, Fiscal 2002 and Fiscal 2001, 9,000, 13,000
and 39,000 shares, respectively, were acquired at an aggregate cost of $70,000,
$31,000 and $103,000, respectively. Treasury shares are used for various
employee and director stock plans as the need arises.
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, 2004, the option shares reserved for the
Employee Plans were 4,492,494. 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 33% per year beginning one year after the grant date. Shares
available for additional grants were 1,795,138; 2,432,019 and 1,459,552 at
January 31, 2004, February 1, 2003 and February 2, 2002, respectively.
During Fiscal 2001, restricted stock aggregating 200,000 shares was granted
under the 1996 Long Term Incentive Stock Plan to three key executives. The
respective shares were to become vested in designated increments contingent
upon continued employment of the respective executive after 12 months, 24
months and 36 months. During Fiscal 2002, 40,000 of the shares became vested
and were distributed. Also in Fiscal 2002, two of the executives left the
employment of Bombay and 120,000 restricted shares expired unvested. During
Fiscal 2003, 15,000 of the shares became vested and were distributed. The
remaining 25,000 shares have become vested and will be distributed in Fiscal
2004. Compensation expense of $23,000 and $285,000 was recognized during
Fiscal 2003 and Fiscal 2001, respectively, and in Fiscal 2002 net expenses of
$87,000 were reversed in connection with the restricted stock.
During Fiscal 2002, 75,000 shares of restricted stock were granted and issued
to the Chairman of the Board. One third of the shares vested upon his
acceptance of the position. Contingent upon continued Board service, one third
of the shares was to become vested after 12 months and 24 months, respectively.
During Fiscal 2003, the Chairman of the Board accepted the appointment to also
become our Chief Executive Officer. Under the terms of his employment, the
unvested shares under his initial restricted stock grant were canceled and a
new grant of 81,256 shares was issued. Contingent upon his continued
employment, the shares will become fully vested after 36 months. During Fiscal
2003 and Fiscal 2002, $136,000 and $153,000, respectively, was recognized as
compensation expense in conjunction with the restricted stock grants.
During Fiscal 2003, 50,000 shares of restricted stock were granted and issued
under the 1996 Long Term Incentive Stock Plan to a key executive. The
respective shares are to become vested in designated increments contingent upon
continued employment of the executive after 12 months, 24 months and 36 months.
Compensation expense of $170,000 was recognized during Fiscal 2003 in
connection with the restricted stock.
The Bombay Company, Inc. Non-Employee Director Equity Plan ("Director Plan")
provides for the granting of options to members of the Board of Directors who
are neither Bombay employees nor officers. At January 31, 2004, the option
shares reserved for the Director Plan were 464,978. The option price is fixed
at the market price on the date of the grant. For Fiscal 2003, the option
grant, initial and annual, was the lesser of 10,000 shares or $75,000 in face
value. The initial grant becomes exercisable at a rate of 20% per year
beginning one year after the grant date. Each additional annual grant becomes
fully exercisable six months after the grant date. Shares available for
additional grants were 116,469; 325,196 and 354,210 at January 31, 2004,
February 1, 2003 and February 2, 2002, respectively.
The Director Plan also allows directors the option to receive retainer and
meeting fees in the form of Bombay common stock or to defer receipt of such
fees. Deferred amounts are credited to an account for such director in units
equivalent to Bombay common stock.
The following table includes option information for the Employee Plans and
Director Plan:
Weighted
Number Option Price Average
Stock Option Activity Of Shares Per Share Option Price
February 3, 2001............... 3,677,241 $1.75 - 25.75 $5.20
Options granted............ 1,157,200 2.35 - 4.00 2.77
Options canceled........... (603,856) 2.31 - 25.75 4.83
February 2, 2002............... 4,230,585 1.75 - 25.75 4.59
Options granted............ 1,200,388 2.38 - 5.02 2.71
Options exercised.......... (595,703) 2.65 - 5.44 3.91
Options canceled........... (1,547,000) 2.38 - 25.75 4.55
February 1, 2003............... 3,288,270 1.75 - 25.75 4.05
Options granted............ 1,248,800 4.54 - 13.52 6.75
Options exercised.......... (1,603,784) 1.75 - 15.88 3.93
Options canceled........... (221,966) 1.75 - 25.75 8.53
January 31, 2004............... 2,711,320 2.06 - 15.88 5.03
Exercisable at:
February 2, 2002........... 2,502,548 1.75 - 25.75 5.27
February 1, 2003........... 1,821,900 1.75 - 25.75 4.96
January 31, 2004........... 786,709 2.06 - 15.88 4.43
The following table summarizes stock options outstanding at January 31, 2004:
Outstanding Exercisable
Weighted Weighted Weighted
Exercise Average Average Average
Price Remaining Exercise Exercise
Range Shares Life Price Shares Price
$2.06 - 2.48 457,980 8.0 $ 2.38 75,725 $ 2.37
2.55 - 2.94 383,548 7.4 2.75 163,890 2.75
3.00 - 3.94 270,246 7.1 3.55 172,581 3.55
4.00 - 4.97 601,988 7.9 4.56 208,955 4.56
5.00 - 5.63 357,308 8.8 5.39 25,308 5.39
6.00 - 7.89 117,800 5.6 6.54 93,300 6.54
9.13 - 15.88 522,450 8.7 11.57 46,950 11.57
2,711,320 7.9 $ 5.03 786,709 $ 4.43
The exercise of non-qualified stock options in Fiscal 2003 and Fiscal 2002
resulted in income tax benefits of $3,283,000 and $155,000, 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.
NOTE 8 - SHAREHOLDERS' RIGHTS PLAN
We have a shareholders' rights plan under which each share of Bombay 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 Bombay 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 Bombay, each Right will entitle the holder
to purchase, at the Right's exercise price, a number of shares of Bombay common
stock having a market value of twice the Right's exercise price. If Bombay is
acquired in a merger or other business combination transaction after a person
or group acquires 15% or more of our 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.
NOTE 9 - STOCK PURCHASE LOANS
On May 16, 2002, the Board of Directors elected to abolish our Executive Stock
Loan Program, which originated in August 1999. At that date, participants
owned 189,031 shares of Bombay common stock purchased under the program. We
reacquired, at then current market prices aggregating $864,000, the Bombay
common stock that was previously purchased by the executive officers under the
program, and the notes were extinguished. Amounts owed to Bombay or the
participants as a result of the difference between the market value of the
stock and the loan balance plus accrued interest were paid in full.
During Fiscal 2002 and Fiscal 2001, $17,000 and $53,000, respectively, in
interest income was recognized related to the loans.
39
NOTE 10 - GEOGRAPHIC AREAS
We operate primarily 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. Long-lived
assets include all non-current assets except deferred taxes.
The following table shows net revenues and long-lived assets by geographic area
(in thousands):
Year Ended
January 31 February 1 February 2
2004 2003 2002
Net revenues:
United States........... $526,219 $442,339 $388,789
Canada.................. 70,216 51,661 48,668
Total............... $596,435 $494,000 $437,457
Long-lived assets:
United States........... $68,031 $46,201 $51,367
Canada.................. 5,992 4,040 4,226
Total................ $74,023 $50,241 $55,593
40
UNAUDITED QUARTERLY FINANCIAL DATA
The Bombay Company, Inc. and Subsidiaries
(In thousands, except per share amounts)
Unaudited quarterly financial data for the quarters ended:
January 31 November 1 August 2 May 3
2004 2003 2003 2003
Net revenues.......................... $211,564 $135,361 $130,273 $119,237
Gross profit.......................... 67,150 39,215 35,410 33,338
Net income (loss)..................... 12,140 (148) (768) (1,273)
Basic earnings (loss) per share....... .34 - (.02) (.04)
Diluted earnings (loss) per share..... .33 - (.02) (.04)
February 1 November 2 August 3 May 4
2003 2002 2002 2002
Net revenues.......................... $189,264 $113,841 $100,040 $90,855
Gross profit.......................... 65,266 32,870 23,885 22,380
Net income (loss)..................... 13,841 84 (3,276) (3,432)
Basic earnings (loss) per share....... .41 - (.10) (.10)
Diluted earnings (loss) per share..... .41 - (.10) (.10)
41
INDEX TO EXHIBITS
The Bombay Company, Inc. and Subsidiaries
Filed with the Annual Report on Form 10-K for the fiscal year ended January 31,
2004.
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. (1)
3(b) - Bylaws, as amended and restated effective May 21, 1997. (6)
4(a) - Preferred Stock Purchase Rights Plan. (2)
4(b) - Amendment to Preferred Stock Purchase Rights Plan. (11)
10(a) - Form of Indemnification Agreement.
10(b) - The Bombay Company, Inc. Supplemental Stock Program. (3)
10(c) - Executive Long Term Disability Plan. (4)
10(d) - The Bombay Company, Inc. 1996 Long-Term Incentive Stock Plan. (5)
10(e) - Form of Award Agreement under the 1996 Long-Term Incentive Stock
Plan. (6)
10(f) - The Bombay Company, Inc. Amended and Restated 2001 Non-Employee
Directors' Equity Plan. (8)
10(g) - Form of Agreement used to evidence stock option grants under The
Bombay Company, Inc. Amended and Restated 2001 Non-
Employee Directors' Equity Plan. (8)
10(h) - Executive Management Incentive Compensation Plan. (10)
10(i) - Employment Letter with Donald V. Roach. (9)
10(j) - Employment Letter with Stephen Farley. (9)
10(k) - Employment Letter with Brian N. Priddy. (9)
10(l) - Employment Agreement with James D. Carreker. (13)
10(m) - Restricted Stock Agreement with James D. Carreker. (13)
10(n) - Stock Option Agreement with James D. Carreker. (13)
10(o) - Employment Letter with Lucretia D. Doblado.
10(p) - Amended and Restated Credit Agreement among The Bombay Company, Inc.,
as Borrower, Bank of America, N.A., as Administrative Agent, Swing
Line Lender, and L/C Issuer, and the Other Lenders Party Hereto,
dated July 5, 2002. (9)
10(q) - First Amendment to Amended and Restated Credit Agreement, dated
July 10, 2003. (12)
14 - Code of Business Conduct and Ethics.
42
INDEX TO EXHIBITS (CONT.)
The Bombay Company, Inc. and Subsidiaries
Number Description
21 - Subsidiaries of the Registrant. (7)
22 - 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). (14)
23 - Consent of Independent Auditors.
31(a) - Certification of the Chief Executive Officer Pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
31(b) - Certification of the Chief Financial Officer Pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
32 - Certifications Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.
43
________________
(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 Annual Report on
Form 10-K for the year ended June 28, 1992. Such Exhibit is incorporated
herein by reference.
(4)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.
(5)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.
(6)Filed with the Commission as an Exhibit to the Company's Annual Report on
Form 10-K for the year ended
January 30, 1999. Such Exhibit is incorporated herein by reference.
(7)Filed with the Commission as an Exhibit to the Company's Annual Report on
Form 10-K for the year ended January 29, 2000. 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 January 2, 2002. Such Exhibit is incorporated
herein by reference.
(9)Filed with the Commission as an Exhibit to the Company's Quarterly Report
on Form 10-Q for the quarterly period ended
August 3, 2002. Such Exhibit is incorporated herein by reference.
(10)Filed with the Commission as an Exhibit to the Company's Definitive Proxy
Statement dated April 10, 2003, 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 1, 2003. Such Exhibit is incorporated
herein by reference.
(11) Filed with the Commission as an Exhibit to the Company's Annual Report on
Form 10-K for the year ended February 1, 2003. Such Exhibit is incorporated
herein by reference.
(12) Filed with the Commission as an Exhibit to the Company's Form 8-K on July
14, 2003. Such Exhibit is incorporated herein by reference.
(13) Filed with the Commission as an Exhibit to the Company's Quarterly Report
on Form 10-Q for the quarterly period ended August 2, 2003. Such Exhibit
is incorporated herein by reference.
(14) Filed with the Commission on April 9, 2004.