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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 28, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from............ to ...........
Commission File No.: 1-8739
BURLINGTON COAT FACTORY WAREHOUSE CORPORATION
---------------------------------------------
(Exact Name of Registrant as specified in its charter)
State or other jurisdiction: Delaware
I.R.S. Employer incorporation or
organization Identification No.: 22-1970303
1830 Route 130, Burlington, New Jersey 08016
-----------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code: (609) 387-7800
Securities registered pursuant to Section 12(b) of the Act:
Title of each class: Common Stock, $1.00 par value per share
Name of each exchange
on which registered: New York Stock Exchange, Inc.
Securities Registered pursuant to Section 12(g) of the Act:
Title of Class: None
Page 1 of 118
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 registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES X NO___.
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ ]
The aggregate market value of the Common Stock, $1.00 par value
("Common Stock"), of the registrant held by non-affiliates of the
registrant, as determined by reference to the closing price of
the Common Stock on the New York Stock Exchange as of August 29,
1997, was $349,910,822.
As of August 29, 1997, the number of shares of Common Stock,
$1.00 par value, outstanding was 41,257,921.
The documents incorporated by reference into this Form 10K:
Registrant's Proxy Statement to be filed pursuant to Regulation 14A
The Part of the Form 10-K into which the document is incorporated
Part III
Page 2 of 118
PART I
Item 1. Business
--------
Burlington Coat Factory Warehouse Corporation and its
subsidiaries (the "Company" or "Burlington Coat") operate a
chain of "off-price" apparel stores which offer a broad range of
moderate to higher priced, current brand name merchandise for
men, women and children at prices substantially below traditional
full retail prices generally charged by department and specialty
stores. In addition, Burlington Coat offers customers a complete
line of men's, women's and children's wear as well as a linens,
bath shop items, gifts and accessories department in 191 of its
stores and a children's furniture department in approximately 166
of its stores. The Company's policy of buying significant
quantities of merchandise throughout the year, maintaining
inventory control and using a "no-frills" merchandising approach,
allows it to offer merchandise at prices below traditional full
retail prices. The sale of irregular or discontinued merchandise
represents only a small portion of the Company's business.
Merchandise is displayed on easy access racks, and sales assistance
generally is available. Clothing alteration services are available
on a limited basis in many stores for an additional charge.
Burlington Coat's practice of purchasing outerwear early in
each fashion season and of reordering in rapid response to sales
has enabled it to maintain a large, current and varied selection
of outerwear throughout each year. Although the Company believes
that this practice helps attract customers to its stores, to the
extent the Company maintains a relatively large volume of merchandise,
particularly outerwear, the risks related to style changes, weather
and other seasonal factors, and economic conditions are necessarily
greater than if the Company maintained smaller inventories.
An important factor in Burlington Coat's operations has been
its continued ability to purchase desirable, first-quality
current brand labeled merchandise directly from manufacturers on
terms at least as favorable as those offered large retail department
and specialty stores. The Company estimates that over 1,000
manufacturers of apparel, including over 300 manufacturers of
outerwear, are represented at the Company's stores, and that no
Page 3 of 118
manufacturer accounted for more than 5% of the Company's purchases
during the last full fiscal year. The Company does not maintain
any long term or exclusive commitments or arrangements
to purchase from any manufacturer. No assurance can be given
that the Company will be able to continue to purchase such
merchandise directly from manufacturers or to continue its
current selling price structure. See "Competition."
The Company sells its merchandise to retail customers for
cash and accepts checks and most major credit cards. The Company's
"Cohoes" division also offers its own credit card. In addition, the
Company sells on a layaway plan and offers special orders on selected
merchandise. It does not offer refunds, except on furs, defective
merchandise and certain sales from specialty retail operations,
but will exchange or give store credit slips for merchandise returned
within a prescribed period of time.
The Company advertises primarily on television and, to a
lesser extent, in regional and local newspapers and radio.
During the past three fiscal years, advertising expenditures have
averaged approximately 2.7% of total revenues.
The Stores
- ----------
As of August 31, 1997, the Company operated 250 stores, all
but 19 of which are located in leased facilities ranging in size
(including storage space) from approximately 16,000 to approximately
163,000 square feet, with an average area of approximately 66,000
square feet. Selling space accounts for over four-fifths of the
total area in most stores.
All of the Company's stores are either free-standing or are
located in shopping malls or strip shopping centers. The Company
believes that its customers are attracted to its stores principally
by the availability of a large assortment of first-quality current
brand name merchandise at attractive prices.
The Company also operates stores under the names "Cohoes
Fashions," "Decelle," "Luxury Linens," "Totally 4 Kids," and
"Baby Depot". Cohoes Fashions offers merchandise in the middle
to higher price range. Decelle offers merchandise in the moder-
Page 4 of 118
ate price range for the entire family with an emphasis on children's
and youth wear. Luxury Linens is a specialty store for linens,
bath shop items, gifts and accessories and offers merchandise in
the middle to higher range. Totally 4 Kids is a moderate to upscale
concept store offering maternity wear, baby furniture, children's
wear from toddlers up to teens, children's books, toys, computer
software for kids, and educational tapes, all in a family
environment. Baby Depot is a concept store specializing in infant
to toddler apparel, baby and juvenile furniture and furnishings
and accessories.
In general, Burlington Coat generally has selected sites for
its stores where there are suitable existing structures which can
be refurbished, and, if necessary, enlarged, in a manner consistent
with the Company's merchandising concepts. In some cases, space has
been substantially renovated or built to specifications given by
Burlington Coat to the lessor. Such properties have been available
to the Company on lease terms which it believes have been favorable.
See "Growth and Expansion."
The stores generally are located in close proximity to
population centers, department stores and other retail operations
and are usually established near a major highway or thoroughfare,
making them easily accessible by automobile. Since the Company's
stores are generally located outside of urban centers and the
Company believes that some of its customers drive long distances
to visit store locations, it is likely that the Company would be
adversely affected by any conditions which were to result in the
reduction of automobile use.
The Company owns substantially all the equipment used in its
stores and believes that its selling space is well utilized and
that its equipment is well maintained and suitable for its
requirements.
At August 31, 1997, a majority of the Company's stores
contained one or more departments leased by unaffiliated parties
for the sale of jewelry and fragrance. During the fiscal year
ended June 28, 1997, the Company's rental income from all of its
leased departments aggregated less than 1% of the Company's total
revenues.
Page 5 of 118
Central Distribution
- --------------------
Central distribution, warehousing, ticketing and marking
services are extended to approximately fifty percent of the
dollar volume of the Company's merchandise through its office and
warehouse/distribution facility in Burlington, New Jersey. This
facility services the Company's present stores. The Company is
leasing approximately 85,000 square feet of warehouse space nearby
to its existing warehouse distribution center for the purpose of
warehousing and distributing its juvenile furniture inventory.
Growth and Expansion
- --------------------
Since 1972 when its first store was opened in Burlington,
New Jersey, the Company has expanded to two hundred twenty-four
Burlington Coat stores, four Cohoes Fashions stores, nine Decelle
stores, six stand-alone Luxury Linens stores, five Totally 4 Kids
store, and two stand alone Baby Depot stores as of August 31,
1997.
At August 31, 1997 the Company operated stores in 42 states
and is exploring expansion opportunities both within its current
market areas and in other regions. For fiscal 1998, the Company
has opened or plans to open approximately twelve to twenty
additional Burlington Coat Factory stores. The Company continues
to monitor store profitability and should economic factors
change, some store closings could be possible.
The Company believes that its ability to find satisfactory
locations for its stores is essential for the continued growth of
its business. The opening of stores generally is contingent upon
a number of factors, including the availability of desirable
locations with suitable structures and the negotiation of acceptable
lease terms. There can be no assurance, however, that the
Company will be able to find suitable locations for new stores or
that even if such locations are found and acceptable lease terms
are obtained, the Company will be able to open the number of new
stores presently planned.
Page 6 of 118
The Company operates its own jewelry department in sixteen
stores as of August 31, 1997. The jewelry program consists of
karat gold and precious and semi-precious stone jewelry, and in
some stores may include brand-name watches.
In May of 1994, the Company opened its first "Totally 4
Kids" store in Sterling, Virginia. The store caters to the
moderate to upscale market and offers maternity wear, baby
furniture, children's wear up to teens, children's books,
educational tapes, computer software for kids, and toys in a family
environment. As of August 31, 1997, the Company operated five
Totally 4 Kids stores in four states, one each in Virginia, New
Jersey, Tennessee, and two in California.
In September, 1994, the Company entered into a license
arrangement with a vendor to supply department store brand or
better fragrance and cosmetics to 127 stores on a test basis.
The program was expanded to 220 stores and the arrangement has
been extended through January 31, 1998.
In fiscal 1997 the Company began to operate its own shoe
department. At August 31, 1997 the Company operated this department
in approximately forty-five Burlington Coat Factory stores with
plans to expand to approximately 100 stores by the end of fiscal
1998. The shoe department offers a full line of mens and womens
shoes in many brands and styles.
Also in fiscal 1997, the Company began offering merchandise
for sale through its internet web site (http://www.coat.com).
Currently, ladies coats, kids clothing and baby and infant
products are available for purchase via this medium. If this
experiment is successful, the Company plans to expand the merchandise
mix offered through its web site; however, no assurance
can be given that this venture will be successful. To date,
sales generated from its internet web site have been negligible.
The Company seeks to maintain its competitive position and
improve its prospects by periodically reevaluating its methods of
operation, including its pricing and inventory policies, the
format of its stores and its ownership or leasing of stores.
Page 7 of 118
Seasonality
- -----------
The Company's business is seasonal, with its highest sales
occurring in the second fiscal quarter of each year. For the
past six fiscal years, approximately 57% of the Company's net
sales have occurred during the period from September through
January. Weather, however, continues to be an important contributing
factor to the sale of clothing in the fall, winter and spring seasons.
Generally, the Company's sales are higher if the weather is cold
during the fall and warm during the early spring. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
Operations
- ----------
Each store has a manager and one or more assistant managers,
as well as department managers. The Company also employs regional
and district managers to supervise overall store operating and
merchandising policies. Major merchandising decisions are made,
overall policies are set, and accounting and general financial
functions for the Company's stores are conducted, at corporate
headquarters. In addition, the Company employs directors of
administration, store operations, loss prevention and merchandise
presentation who are in charge of those functions on a Company-
wide basis.
Merchandise purchased by the Company is either shipped
directly from manufacturers to store locations or distributed
through the Company's warehousing and distribution facility. See
"Central Distribution." A computerized merchandise information
system provides regular detailed reports of sales and inventory
levels for each store and assists the merchandise managers and
buyers in monitoring and adjusting inventory levels.
At June 28, 1997, the Company had approximately 17,600
employees, including a large number of part-time and seasonal
employees which varies throughout the year. Of the Company's
employees, only those employed at one of its stores and at its
warehousing facility (aggregating up to 500 persons at its peak
and approximately 400 persons at June 28, 1997) are covered by
collective bargaining agreements. The Company cannot predict
Page 8 of 118
whether any future attempts to unionize its employees will be
successful. The Company believes that its relationship with its
employees has been and remains satisfactory.
Competition
- -----------
General. The retail apparel business is highly competitive.
Competitors include other individual, regional and national "off-
price" retailers offering similar merchandise at comparable
prices as well as individual and chain stores, some of which are
regional and national department and discount store chains. At
various times throughout the year department store chains and
specialty shops offer brand name merchandise at substantial
markdowns, which can result in prices approximating those offered
by the Company. Some of the Company's competitors are considerably
larger than the Company and have substantially greater financial
and other resources.
Resale Price Maintenance. Since it is the general policy of
the Company to sell at lower than the traditional full retail
price, its business may be adversely affected by manufacturers
who attempt to maintain the resale price of their merchandise by
refusing to sell, or to grant advertising allowances, to purchasers
who do not adhere to their suggested retail prices. Federal
legislation and regulations have been proposed from time to time
which, if enacted, would be helpful to manufacturers attempting
to establish minimum prices or withhold allowances. In addition,
the rules against resale price maintenance have been subject to
challenge in the courts from time to time.
The Company has, on several occasions in the past, brought
lawsuits against certain manufacturers and department store
chains and complained to the Federal Trade Commission seeking
more vigorous enforcement of existing Federal laws, as well as
testified before Congress in connection with proposed legislation
concerning the Federal antitrust laws.
Item 2. Properties
----------
The Company owns the land and building for nineteen of its
stores and is a 50% partner in a partnership which owns the
Page 9 of 118
building in which one store is located. Generally, however, the
Company's policy has been to lease its stores. Store leases
generally provide for fixed monthly rental payments, plus the
payment, in most cases, of real estate taxes and other charges
with escalation clauses. In certain locations, the Company's
store leases contain formulas providing for the payment of
additional rent based on sales.
The following table shows the years in which store leases
existing at August 31, 1997 expire:
Fiscal Years Number of Leases Expiring with
Ending June 30 Expiring Renewal Options
- -------------- ---------------- ---------------
1998-1999 49 43
2000-2001 33 27
2002-2003 19 11
2004-2005 36 22
2006-2007 25 16
Thereafter 77 32
--- ---
Total 239 151
=== ===
The Company owns five buildings in Burlington, New Jersey.
Of these buildings, two are used by the Company as retail space.
In addition, the Company owns approximately 97 acres of land in
the Townships of Burlington and Florence, New Jersey on which the
Company has constructed its office and warehouse/distribution
facility. The Company leases approximately 85,000 square feet of
space nearby to the warehouse/distribution facility to store its
juvenile furniture inventory. The Company leases approximately
20,000 square feet of office space in New York City with a right
of occupancy that expires in January, 2001.
Item 3. Legal Proceedings
-----------------
In late September 1994, three putative class action lawsuits,
P. Gregory Buchanan v. Monroe G. Milstein, et al., No. 94-
Page 10 of 118
CV-4663, Jacob Turner v. Monroe G. Milstein, et al., No. 94-CV-4737,
and Ronald Abramoff v. Monroe G. Milstein, et al., No. 94-CV-4751
(collectively, the "Class Actions"), were filed against
the Company, Monroe G. Milstein, Stephen E. Milstein and Robert
L. LaPenta, Jr. in the United States District Court for the
District of New Jersey. By Order entered November 15, 1994, the
Court consolidated the Class Actions under the caption In re
Burlington Coat Factory Securities Litigation. On January 17,
1995, plaintiffs filed their Consolidated Amended and Supplemental
Class Action Complaint (the "Amended Complaint"), naming as
defendants, in addition to those originally named in September
1994, Andrew R. Milstein and Mark A. Nesci. The Amended Complaint
sought unspecified damages in connection with alleged violations
of Sections 10(b) (and Rule 10b-5 promulgated thereunder) and 20(a)
of the Securities Exchange Act of 1934, as amended. The Amended
Complaint alleged material misstatements and omissions by the Company
and certain of its officers and directors that plaintiffs alleged
caused the Company's common stock to be artificially inflated during
the proposed Class Period, which was defined in the Amended Complaint
as the period from October 4, 1993 through September 23, 1994.
On March 3, 1995, the Company and the individual defendants served
a motion to dismiss plaintiffs' Amended Complaint. On February 20, 1996,
the District Court granted the Company's motion and dismissed the
plaintiffs' Amended Complaint in its entirety. In March, 1996,
the plaintiffs filed an appeal from the District Court's decision
in the United States Court of Appeals for the Third Circuit (the
"Appeal"). The Appeal was orally argued before a panel of three
judges on December 12, 1996. On June 10, 1997 the panel rendered
an unanimous decision affirming the District Court's dismissal of
the action but ruled that the District Court should allow the
plaintiffs to attempt to replead two of the six claims. The
matter has since been remanded to the District Court.
In the past, the Company has initiated several lawsuits in
its effort to stop what it believes to be unlawful practices on
the part of certain manufacturers and large retailers to control
the prices at which certain items of merchandise may be sold at
the Company's stores.
Page 11 of 118
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
The Company did not submit any matter to a vote of its
security holders during the fourth quarter of fiscal 1997.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
---------------------------------------------------------------------
The Company's Common Stock is traded on the New York Stock
Exchange, Inc. and its trading symbol is "BCF."
The following table provides the high and low closing prices
on the New York Stock Exchange for each fiscal quarter for the
period from July 2, 1995 to June 28, 1997 and for the two months
ended August 31, 1997.
Period Low Price High Price
------ --------- ----------
July 2, 1995 to
September 30, 1995 10 14 1/8
October 1, 1995 to
December 30, 1995 10 1/4 13 1/4
December 31, 1995 to
March 30, 1996 9 3/8 12 1/4
March 31, 1996 to
June 29, 1996 10 1/8 12 1/8
June 30, 1996 to
September 28, 1996 10 11 1/8
September 29, 1996 to
December 28, 1996 10 7/8 13 1/4
December 29, 1996 to
March 29, 1997 12 3/8 17 3/4
Page 12 of 118
March 30, 1997 to
June 28, 1997 17 1/2 20
June 29, 1997 to
August 31, 1997 15 3/16 23
At August 31, 1997 there were 405 record holders of the
Company's Common Stock. The number of record holders does not
reflect the number of beneficial owners of the Company's Common
Stock for whom shares are held by Cede & Co., certain brokerage
firms and others.
Dividend Policy
- ---------------
On September 8, 1997 the Board of Directors of the Company
declared the Company's first cash dividend in the amount of two
cents ($.02) per share payable annually. Maintenance of the cash
dividend policy or any change thereto in the future will be at the
discretion of the Company's Board of Directors and will depend
upon the financial condition, capital requirements and earnings
of the Company as well as other factors which the Board of
Directors may deem relevant. At present, the policy of the Board
of Directors of the Company is to retain the majority of earnings
to finance the growth and development of the Company's business.
Item 6. Selected Financial Data
-----------------------
The following table sets forth certain selected financial data:
7/3/93 7/2/94 7/1/95 6/29/96 6/28/97
(In thousands of dollars, except per share data)
Statement of Operations:
Revenues $1,214,783 $1,480,676 $1,597,028 $1,610,892 $1,776,823
Net Income 42,903(1) 45,383 14,866 29,013 56,515
Net Income per Share 1.06(1)(3) 1.12 .37 .71 1.41
Pro Forma Net Income .88(2) .93(2) .30(2) .59(2) 1.17(2)
per Share
Balance Sheet Data:
Total Assets $ 585,481 $ 725,439 $ 735,269 $ 704,731 $ 775,077
Working Capital 275,113 278,590 245,468 288,107 319,736
Long-Term Debt 91,428 91,369 83,298 74,907 62,274
Stockholders' Equity 323,111 369,857 385,019 413,745 460,215
Page 13 of 118
__________________
[FN]
(1) Effective June 28, 1992, the Company adopted Statement
of Financial Accounting Standards No. 109, "Accounting
for Income Taxes." The Company reflected the cumulative
effect of change in accounting for income taxes by
recording a benefit of $.6 million ($.02 per share)
during fiscal 1993.
(2) Adjusted to give retroactive effect to six for five stock
split effective in October, 1997.
(3) Adjusted to give retroactive effect to three for two stock
split effective September, 1993.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
-------------------------------------------------
The Company maintains its records on the basis of a 52-53
week fiscal year ending on the Saturday closest to June 30.
Fiscal 1997 ended on June 28, 1997, fiscal 1996 ended on June 29,
1996 and fiscal 1995 ended on July 1, 1995 and comprised 52 weeks
each.
Results of Operations
- ---------------------
Fiscal Years Ended July 1, 1995,
June 29, 1996, and June 28, 1997
--------------------------------
The following table sets forth certain items in the
consolidated statements of operations as a percentage of net
sales for the fiscal years ended July 1, 1995, June 29, 1996 and
June 28, 1997.
Page 14 of 118
Percentage of Net Sales
-----------------------
Fiscal Year Ended
- -----------------------------------------------------------------------------
7/01/95 6/29/96 6/28/97
Net Sales 100.0% 100.0% 100.0%
Costs and expenses:
Cost of sales 66.9 65.4 64.1
Selling and administrative 29.7 30.1 29.3
expenses
Depreciation and amortization 1.7 1.9 1.8
Interest expense 0.9 0.7 0.4
------ ------ ------
99.2 98.1 95.6
------ ------ ------
Other income 0.7 1.2 1.0
------ ------ ------
Income before income taxes 1.5 3.1 5.4
Provision for income taxes 0.6 1.3 2.2
------ ------ ------
Net income 0.9% 1.8% 3.2%
====== ====== ======
Results of Operations
- ---------------------
Performance in 1997 compared with 1996
- --------------------------------------
Net sales increased $166.4 million (10.5%) for fiscal 1997
compared with fiscal 1996. Comparative store sales increased
7.4%. The Company believes the increase in comparative sales in
fiscal 1997 was due mainly to an improved retail environment
relative to fiscal 1996. Eight new Burlington Coat Factory
Warehouse stores opened during fiscal 1997 contributed $42.8
million to this year's sales. Stores which were in operation a
year ago, but which were closed prior to this year, contributed
$10.2 million to last year's sales.
The Cohoes stores showed a comparative stores sales increase
of 6.1%, while contributing $42.2 million to consolidated sales
for the fiscal year. During fiscal 1997, one Cohoes store was
closed. This store contributed $5.9 million to net sales in
fiscal 1997 compared with $6.6 million in fiscal 1996.
Page 15 of 118
Sales in fiscal 1997 for the Decelle stores were $37.5
million compared with $34.6 million in fiscal 1996. Fiscal 1997
comparative store sales were flat for the Decelle division.
During fiscal 1997, there was one new store opening within the
Decelle division. This store contributed $1.2 million to net
sales.
In addition, fiscal 1997 saw the opening of a new Totally 4
Kids store in Ontario, California and a Baby Depot store in
Arlington Heights, Illinois. In addition to the store closings
in the Burlington Coat Factory Warehouse, Cohoes, and Decelle
divisions, one Luxury Linens store, one Totally 4 Kids store, and
the Fit for Men store were closed during fiscal 1997.
Other income (consisting of rental income from leased
departments, investment income and miscellaneous items) decreased
to $18.5 million for the year ended June 28, 1997 compared with
$18.9 million for the year ended June 29, 1996. An increase in
investable funds in fiscal 1997 generated an increase of approx-
imately $4.5 million in investment income over fiscal 1996.
Offsetting this increase was a decrease of approximately $1.7
million in rental income during fiscal 1997 compared with fiscal
1996. The Company recorded a net loss on the disposition of
property of $1.1 million during fiscal 1997. During fiscal 1996
the Company recorded a net loss in the disposition of property
from closed stores of $1.8 million. Offsetting this loss in
fiscal 1996 was a $1.8 million gain on the sale of the Company's
Secaucus, New Jersey facility. In addition, the Company recorded
miscellaneous non-recurring income items of approximately $1.1
million during fiscal 1997 compared with $4.0 million during
fiscal 1996.
Cost of sales increased $86.6 million (8.3%) for fiscal 1997
compared with fiscal 1996. The dollar increase in cost of sales
was due to the increase in net sales during the current fiscal
year compared with the prior year. Cost of sales, as a per-
centage of net sales, decreased from 65.4% in fiscal 1996 to
64.1% in fiscal 1997. This decrease is due mainly to higher
initial markons maintained throughout fiscal 1997 compared with
the prior year. In addition, markdowns, as a percentage of
sales, were down slightly in fiscal 1997 compared with fiscal
1996 due to lower comparative inventory levels.
Page 16 of 118
Selling and administrative expenses increased $35.1 million
(7.3%) from fiscal 1996 to fiscal 1997. This increase in expense
was due mainly to an increase in payroll and payroll related
expenses. Comparative store payroll costs increased 5.0% in
fiscal 1997 compared with fiscal 1996. Annual pay increases and
increased staffing levels at the stores contributed to this
change. In addition, the Company incurred increased staffing
levels at both the home office and the distribution center during
fiscal 1997. As a percentage of net sales, selling and admini-
strative expenses were 29.3% in the 1997 fiscal year compared
with 30.1% for the prior fiscal year, a decrease of .8%. This
improvement is primarily the result of the increase in comparative
store sales realized by the Company in fiscal 1997.
Depreciation and amortization expense amounted to $31.0
million in fiscal 1997 compared with $29.9 million in fiscal
1996. This increase of $1.1 million in the fiscal 1997 period
compared with fiscal 1996 is attributable to new stores opened
during the year as well as remodeling and fixturing of existing
stores.
Interest expense decreased $3.7 million for the fiscal year
ended June 28, 1997 compared with the fiscal year ended June 29,
1996. The decrease in interest expense is the result of decreases
in borrowing levels associated with the Company's revolving
credit and term loan agreements, the refinancing of its industrial
development bonds, and the repayment of $13.4 million of its
subordinated bonds.
The provision for income taxes increased to $39.2 million
for the fiscal year ended June 28, 1997 from $20.0 million for
the fiscal year ended June 29, 1996. The effective tax rate was
41.0% for the year ended June 28, 1997 compared with 40.8% for
fiscal 1996.
Net income increased $27.5 million to $56.5 million for
fiscal 1997 from $29.0 million for fiscal 1996. Income per share
was $1.41 per share for fiscal 1997 compared with $.71 for fiscal
1996.
The Company's business is seasonal, with its highest sales
occurring in the months of September, October, November, December,
and January of each year. The Company's net income generally
reflects the same seasonal pattern as its net sales. In the
Page 17 of 118
past, substantially all of the Company's profits have been
derived from operations during the months of September,
October, November, December, and January.
Performance in 1996 compared with 1995
- --------------------------------------
Net sales increased $7.0 million (.4%) for fiscal 1996
compared with fiscal 1995. Comparative store sales decreased
7.2%. The Company believes the decrease in comparative store
sales in fiscal 1996 from fiscal 1995 was due mainly to a weak
apparel retail environment. Burlington Coat Factory Warehouse
stores opened during fiscal 1996 contributed $100.2 million to
fiscal 1996's sales. Stores which were in operation in fiscal
1995, but which were closed prior to fiscal 1996, contributed
$15.9 million to fiscal 1995's sales. The Cohoes stores showed a
comparative stores sales decrease of 11.3%, while contributing
$40.8 million to consolidated sales for the fiscal year. Sales
in fiscal 1996 for the Decelle stores were $34.6 million compared
with $33.1 million in fiscal 1995. Two Totally 4 Kids stores and
one Luxury Linens store opened during fiscal 1996 contributed
sales of $6.0 million to net sales. Sales from leased departments,
included in the twelve month net sales figure, were $34.9
million compared with $27.4 million fiscal 1995.
The Company closed nine stores during fiscal 1996. These
stores contributed $15.5 million to net sales for fiscal 1996
compared with $23.3 million in fiscal 1995.
Other income (consisting primarily of rental income from
leased departments, investment income and miscellaneous items)
increased to $18.9 million for the year ended June 29, 1996
compared with $12.1 million for the year ended July 1, 1995. The
increase for the fiscal year was due in part to a gain of approximately
$1.8 million on the sale of the Company's Secaucus, New Jersey
facility, a portion of which the Company had been leasing
to third parties and a portion of which it uses as a store. In
addition, increases in interest income of $4.2 million were the
result of increases in investable funds generated by the Company
through its continued plan of maintaining lower inventory levels
compared with inventory levels of a year ago. Furthermore,
during the third quarter of fiscal 1996, the Company recorded
non-recurring miscellaneous income of $4.0 million. Partially
Page 18 of 118
offsetting these increases was a loss of $1.8 million for the
twelve month period ended June 29, 1996 recorded for the writeoff
of leasehold improvements of stores closed during this fiscal
year.
Cost of sales decreased $19.8 million (1.9%) for fiscal 1996
compared with fiscal 1995. The dollar decrease in cost of sales
was due in part to a 7.2% decline in comparative store sales.
This was partially offset by cost of sales from new stores opened
during the year. Cost of sales as a percentage of net sales
decreased from 66.9% in fiscal 1995 to 65.4% in fiscal 1996. Cost
of sales declined in fiscal 1996 as a percentage of net sales due
to higher initial markups as a result of better opportunistic
buys. In addition, markdowns as a percentage of sales were down
due to the significantly lower inventory levels carried at the
stores. Freight as a percentage of purchases was down approximately
0.3% percent in fiscal 1996 over fiscal 1995.
Selling and administrative expenses increased by $7.9
million (1.7%) from fiscal 1995 to fiscal 1996. This increase in
expense was due primarily to costs associated with new store
operations. As a percentage of net sales, selling and adminis-
trative expenses were 30.1% in the 1996 fiscal year compared with
29.7% for the prior fiscal year, an increase of 0.4%.
Depreciation and amortization expense amounted to $29.9
million in fiscal 1996 compared with $26.3 million in fiscal
1995. This increase of $3.6 million in the fiscal 1996 period
compared with fiscal 1995 is attributable to new stores opened
during the year as well as remodeling and fixturing of existing
stores.
Interest expense decreased $1.9 million for the fiscal year
ended June 29, 1996 compared with the fiscal year ended July 1,
1995. The decrease in interest expense is the result of decreases
in borrowing levels associated with the Company's revolving
credit and term loan agreements and the refinancing of its
industrial development bonds.
The provision for income taxes increased to $20.0 million
for the fiscal year ended June 29, 1996 from $10.1 million for
the fiscal year ended July 1, 1995. The effective tax rate was
Page 19 of 118
40.8% for the year ended June 29, 1996 compared with 40.4% for
fiscal 1995.
Net income increased $14.1 million to $29.0 million for
fiscal 1996 from $14.9 million for fiscal 1995. Income per share
was $.71 per share for fiscal 1996 compared with $.37 for fiscal
1995.
Liquidity and Capital Resources
- -------------------------------
During the year ended June 28, 1997, the Company opened
eleven stores, including eight Burlington Coat Factory Warehouse
stores, one "Baby Depot" store, one "Totally 4 Kids" store and
one Decelle store. The Company closed six stores during the
fiscal year ended June 28, 1997. Expenditures incurred to acquire,
set up and fixture new stores opened during fiscal 1997
were approximately $7.7 million. In addition, the Company
expended approximately $13.9 million for capital improvements and
refurbishing of existing stores. During fiscal 1997, the Company
purchased the land and building associated with one of its stores
for $2.5 million. The Company estimates that it will spend
approximately $27.0 million for capital expenditures (i.e.,
fixtures, equipment and leasehold improvements) in connection
with the opening of from twelve to twenty new stores and remodeling
of existing stores during fiscal 1998.
The Company repurchased 857,900 shares of its stock, costing
approximately $10.8 million in the current fiscal year. These
purchases are reflected as treasury stock in the equity section
of the balance sheet. As of June 28, 1997 the Company had
authority to purchase an additional $6.0 million of its stock.
In July 1997, the Company's Board of Directors authorized the
Company to purchase an additional $10.0 million of treasury
stock. In July 1997, the Company repurchased 447,800 shares of
its stock costing $6.8 million.
Working capital increased to $319.7 million at June 28, 1997
from $288.1 million at June 29, 1996. At July 1, 1995, working
capital was $245.5 million.
Total funds provided from operations for the fiscal years
ended July 1, 1995, June 29, 1996, and June 28, 1997 were $45.5
Page 20 of 118
million, $66.9 million, and $97.1 million, respectively. Total
funds from operations are calculated by adding back to net income
non-cash expenditures such as depreciation and deferred taxes.
Net cash provided by operating activities of $141.5 million
for the fiscal year ended June 28, 1997, decreased from $163.4
million in net cash provided from operating activities for fiscal
1996. This decrease in net cash from operations was due mainly
to a reduction in merchandise inventory in the current year of
$4.2 million versus an $81.6 million reduction in inventory
during fiscal 1996. This variance in inventory was offset in
part by the increases in earnings during fiscal 1997 versus
fiscal 1996 and to the early funding of insurance programs at the
end of fiscal 1996 compared with fiscal 1997.
The Company's long-term borrowings at June 28, 1997 include
$59.2 million of long term subordinated notes issued by the
Company to institutional investors in June, 1990 ("the Notes")
and an industrial development bond of $9.7 million issued by the
New Jersey Economic Development Authority.
The Notes mature on June 27, 2005 and bear interest at the
rate of 10.6% per annum. The Notes have a remaining average
maturity of 4.5 years and are subject to mandatory payment in
installments of $8.0 million each without premium on June 27 of
each year beginning in 1996. The Notes are subordinated to
senior debt, including, among others, bank debt and indebtedness
for borrowed money. In July 1996, the Company repurchased an
additional $5.4 million of the Notes, which reduced the Company's
mandatory prepayment to $7.4 million annually. The Company has
no current plans to repurchase or repay any additional amounts
earlier than scheduled but may consider doing so in the future
should conditions favorable to the Company present themselves.
The interest rate on the industrial development bond financ-
ing was originally fixed at 9.78% over the life of these serial
and term bonds (the "Bonds"). The Company refinanced its indus-
trial development bonds with the New Jersey Economic Development
Authority on September 1, 1995. The original bonds were called
at 103 and refinanced with credit enhanced bonds (the "Refunding
Bonds"). The Refunding Bonds consist of serial and term bonds
having the same maturity as the original issue. The serial bonds
aggregate $3.6 million and mature in series annually on September
Page 21 of 118
1, beginning in 1996 and continuing to and including 2003. The
term bonds consist of two portions, $1.4 million maturing on
September 1, 2005 and $5.0 million maturing on September 1, 2010.
The serial bonds bear interest ranging from 3.75% to 5.4% per
annum, and the term bonds bear interest at the rates of 5.60% for
the portion maturing on September 1, 2005 and 6.125% per annum
for the portion maturing on September 1, 2010. The average
interest rate and average maturity of the Refunding Bonds are
5.6% and 9 years, respectively. During the current year's first
fiscal quarter, the Company expended approximately $.3 million
for the repayment of the Refunding Bonds.
The Company has in place a committed line of credit agree-
ment in the amount of $50.0 million and $100.0 million in uncom-
mitted lines of credit. The Company had no borrowings under
these credit lines during fiscal 1997. During fiscal 1996, the
Company had available $50.0 million under a committed line of
credit and $150.0 million under uncommitted lines of credit. The
maximum borrowings outstanding under these lines were $120.4
million during the first quarter of fiscal 1996. The average
borrowings outstanding under the lines were $98.1 million during
the first quarter of fiscal 1996 at an average interest rate of
6.2%. During the second quarter of fiscal 1996, the Company had
a maximum borrowings under these agreements of $84.3 million.
The average borrowing during this period was $65.1 million with
an average borrowing interest rate of 6.2%. As of December 30,
1995, all borrowings under these agreements had been repaid.
There were no additional borrowings under these lines of credit
during the last two quarters of fiscal 1996.
The decrease in short term borrowings, during fiscal 1997,
over the similar period of a year ago is the direct result of
continued maintenance of lower inventory levels in the stores.
In addition, liquidity was enhanced by a significant increase in
profitability during fiscal 1996 and fiscal 1997. Also, reductions
in capital expenditures during fiscal 1996 and fiscal 1997
resulted in lower borrowing requirements.
The Company believes that its current capital expenditures
and operating requirements can be satisfied from internally
generated funds, from short term borrowings under its revolving
credit and term loan agreement as well as uncommitted lines of
credit and from its long term borrowings. The Company may
Page 22 of 118
consider replacing some of its short term borrowings with long
term financing. Furthermore, to the extent that the Company
decides to purchase additional store locations, it may be necessary
to finance such acquisitions with additional long term borrowings.
On or about September 23, 1994 three separate putative class
actions were filed against the Company. These three actions were
consolidated and an amended complaint was served on January 17,
1995. The Company filed a motion to dismiss on May 17, 1995 and a
hearing on the motion was held on July 20, 1995. On February 20,
1996, the District Court dismissed the plaintiff's amended
complaint in its entirety. In March, 1996, plaintiffs filed an
appeal from the District Court's decision. In June, 1997 the
U.S. Court of Appeals for the Third Circuit affirmed the District
Court's dismissal of the class action suits but held that plaintiffs
should be granted leave to attempt to replead two of the six claims
that were dismissed. (See part II - Other Information, Item 1 Legal
Proceedings.) The Company is unable to determine the probability of
any potential loss with respect to these class action suits or the
materiality thereof at this time and accordingly has not established
any reserve for this matter. However, the Company believes the actions
are without merit and intends to vigorously defend them.
Inflation
- ---------
Historically, the Company has been able to increase its
selling prices as the costs of merchandising and related operating
expenses have increased, and therefore, inflation has not had
a significant effect on operations.
Item 8. Financial Statements and Supplementary Data
-------------------------------------------
See Index to Financial Statements and following pages.
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure
---------------------------------------------
None
Page 23 of 118
PART III
Item 10. Directors and Executive Officers of the
Registrant
---------------------------------------
Item 11. Executive Compensation
----------------------
Item 12. Security Ownership of Certain Beneficial
Owners and Management
----------------------------------------
Item 13. Certain Relationships and Related Transactions
----------------------------------------------
In accordance with General Instruction G(3) of the General
Instructions to Form 10-K, the information called for by Items
10, 11, 12 and 13 is omitted from this Report and is incorporated
by reference to the definitive Proxy Statement to be filed by the
Company pursuant to Regulation l4A of the General Rules and
Regulations under the Securities Exchange Act of 1934, which the
Company will file not later than 120 days after June 28, 1997.
PART IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K
----------------------------------------
(a) The following documents are filed as part of this Report.
Page No.
1. Financial Statements
Index to Consolidated Financial 31
Statements
Independent Auditors' Report 32
Consolidated Balance Sheets 33
June 28, 1997 and June 29, 1996
Page 24 of 118
Page No.
Consolidated Statements of Operations 34
Fiscal Years Ended June 28, 1997,
June 29, 1996, and July 1, 1995
Consolidated Statements of 35
Stockholders' Equity for the
Fiscal Years Ended June 28, 1997,
June 29, 1996, and July 1, 1995
Consolidated Statements of Cash 36
Flows for the Fiscal Years
Ended June 28, 1997,
June 29, 1996 and July 1, 1995
Notes to Consolidated Financial 38
Statements
2. Financial Statement Schedules
Schedule II - Valuation and 56
Qualifying Accounts
Schedules I, III, IV and V are omitted
because they are not applicable or
not required or because the required
information is included in the consol-
idated financial statements or notes
thereto.
3. Exhibits
3.1 Articles of Incorporation,
as amended 1/
3.2 By-laws 1/
____________________
(1) Incorporated by reference to the Exhibits filed with the
Company's Annual Report on Form 10-K for the year ended July
3, 1993, File No. 1-8739.
Page 25 of 118
Page No.
*10.1 1993 Stock Incentive Plan 1/
--
10.2 Revolving Credit Agreement dated 2/
August 30, 1985 between the --
Company and BancOhio National
Bank, as amended through Amendment
No. 6.
10.3 Burlington Coat Factory Warehouse 62
Corporation 401(k) Profit-Sharing
Plan (as amended and restated
effective June 29, 1997.)
10.4 Loan Agreement dated as of August 1, 3/
1995 by and between New Jersey --
Economic Development Authority and
Burlington Coat Factory Warehouse
of New Jersey, Inc.
10.5 Assignment of Leases dated as of 3/
August 1, 1995 from Burlington --
Coat Factory Warehouse of New
Jersey, Inc. to First Fidelity
Bank, National Association
10.6 Mortgage and Security Agreement 3/
dated as of August 1, 1995 --
between Burlington Coat Factory
Warehouse of New Jersey, Inc. and
First Fidelity Bank, National
Association
____________________
(2) Incorporated by reference to the Exhibits filed with the
Company's Annual Report on Form 10-K for the year ended June
29, 1996, File No. 1-8739.
(3) Incorporated by reference to the Exhibits filed with the
Company's Annual Report on Form 10-K for the year ended July
1, 1995. File No. 1-8739.
Page 26 of 118
Page No.
10.7 Indenture of Trust dated as of 3/
August 1, 1995 by and between --
New Jersey Economic Development
Authority and Shawmut Bank
Connecticut, National Association
10.8 Guaranty and Suretyship dated as of 3/
August 1, 1995 from the Company to --
First Fidelity Bank, National
Association
10.9 Letter of Credit Reimbursement 3/
Agreement dated as of August 1, 1995 --
between Burlington Coat Factory
Warehouse of New Jersey,
Inc. and First Fidelity Bank,
National Association
10.10 Environmental Indemnity Agreement dated 3/
as of August 1, 1995 between Burlington --
Coat Factory Warehouse of New Jersey,
Inc. and First Fidelity Bank,
National Association
10.11 Note Agreement dated June 27, 1990 3/
--
21 Subsidiaries of Registrant 113
23 Consent of Deloitte & Touche LLP, 115
independent certified public
accountants, to the use of
their report on the financial
statements of the Company for
the fiscal year ended June 28,
1997 in the Registration Statements
of the Company on Form S-8,
Registration No. 2-96332,
No. 33-21569, No. 33-51965 and
No. 33-61351
27 Financial Data Schedule 117
*Executive Compensation Plan
Page 27 of 118
EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS
Description Location
----------- --------
1) 1993 Stock Incentive Plan Filed as Exhibit 10.1
to the Company's Annual
Report on Form 10-K for
the year ended July 3,
1993, Pages 103-130
(b) Reports on Form 8-K
During the period ended June 28, 1997 the Company did not
file any report on Form 8-K.
Page 28 of 118
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.
BURLINGTON COAT FACTORY WAREHOUSE CORPORATION
(Registrant)
By: /s/Monroe G. Milstein
Monroe G. Milstein, President
Dated: September 26, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Name Title Date
- ---- ----- ----
/s/Monroe G. Milstin Chief Executive Officer September 26, 1997
Monroe G. Milstein and President (Principal
Executive Officer);
Director
/s/Robert L. LaPenta,Jr. Controller (Principal September 26, 1997
Robert L. LaPenta, Jr. Financial and
Accounting Officer)
/s/Henrietta Milstein Director September 26, 1997
Henrietta Milstein
/s/Harvey Morgan Director September 26, 1996
Harvey Morgan
/s/Andrew R. Milstein Director September 26, 1997
Andrew R. Milstein
/s/Stephen E. Milstein Director September 26, 1997
Stephen E. Milstein
/s/Mark A. Nesci Director September 26, 1997
Mark A. Nesci
/s/Irving Drillings Director September 26, 1997
Irving Drillings
Page 29 of 118
[THIS PAGE INTENTIONALLY LEFT BLANK]
Page 30 of 118
BURLINGTON COAT FACTORY WAREHOUSE CORPORATION
AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page No.
Independent auditors' report 32
Consolidated balance sheets 33
June 28, 1997 and June 29, 1996
Consolidated statements of operations for the 34
fiscal years ended June 28, 1997, June 29, 1996
and July 1, 1995
Consolidated statements of stockholders' 35
equity for the fiscal years ended July 1, 1995,
June 29, 1996 and June 28, 1997.
Consolidated statements of cash flows for 36
the fiscal years ended June 28, 1997,
June 29, 1996 and July 1, 1995.
Notes to consolidated financial statements 38
Financial Statement Schedules
Schedule II -- Valuation and Qualifying Accounts 56
Schedules I, III, IV and V are omitted because
they are not applicable or not required
because the required information is included
in the consolidated financial statements or
notes thereto.
Page 31 of 118
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
Burlington Coat Factory Warehouse Corporation
Burlington, New Jersey
We have audited the accompanying consolidated balance
sheets of Burlington Coat Factory Warehouse Corporation and its
subsidiaries as of June 28, 1997 and June 29, 1996, and the
related consolidated statements of operations, stockholders'
equity, and cash flows for each of the three fiscal years in the
period ended June 28, 1997. Our audits also included the finan-
cial statement schedule listed in the Index at Item 14(a)(2).
These financial statements and financial statement schedule are
the responsibility of the Company's management. Our responsibility
is to express an opinion on the financial statements and
financial statement schedule based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards 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. An
audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe our
audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements
present fairly, in all material respects, the financial position
of Burlington Coat Factory Warehouse Corporation and subsidiaries
at June 28, 1997 and June 29, 1996, and the results of their
operations and their cash flows for each of the three fiscal
years in the period ended June 28, 1997 in conformity with
generally accepted accounting principles. Also, in our opinion,
such financial statement schedule, when considered in relation to
the basic consolidated financial statements taken as a whole,
presents fairly in all material respects the information set
forth therein.
DELOITTE & TOUCHE LLP
Philadelphia, Pennsylvania
September 8, 1997
Page 32 of 118
BURLINGTON COAT FACTORY WAREHOUSE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(All amounts in thousands except share data)
June 28, June 29,
1997 1996
-------- --------
Current Assets:
Cash and Cash Equivalents $157,394 $ 73,560
Accounts Receivable (Net of Allowance for Doubtful
Accounts of 1997--$953 and 1996--$990) 17,160 15,003
Merchandise Inventories 366,233 370,437
Deferred Tax Asset 9,201 9,762
Prepaid and Other Current Assets 7,150 19,808
--------- ---------
Total Current Assets 557,138 488,570
Property and Equipment Net of Accumulated
Depreciation and Amortization 209,864 206,582
Other Assets 8,075 9,579
--------- ---------
Total Assets $775,077 $704,731
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable $143,840 $118,900
Income Taxes Payable 10,657 5,227
Accrued Insurance Costs 16,500 17,407
Other Current Liabilities 58,574 50,538
Current Maturities of Long-Term Debt 7,831 8,391
--------- ---------
Total Current Liabilities 237,402 200,463
Long-Term Debt 62,274 74,907
Other Liabilities 8,763 8,237
Deferred Tax Liability 6,423 7,379
Commitments and Contingencies
Stockholders' Equity:
Preferred Stock, Par Value $1; Authorized
5,000,000 shares; none issued and outstanding -- --
Common Stock, Par Value $1; Authorized 100,000,000 shares;
41,258,621 shares issued and outstanding at June 28, 1997
41,164,848 shares issued and outstanding at June 29, 1996 41,259 41,165
Capital in Excess of Par Value 25,997 25,384
Retained Earnings 406,123 349,608
Unearned Compensation (54) (87)
Treasury Stock at Cost; 1997-1,326,887 shares;
1996-468,987 shares (13,110) (2,325)
---------
Total Stockholders' Equity 460,215 413,745
---------
Total Liabilities and Stockholders' Equity $775,077 $704,731
=========
See notes to consolidated financial statements
Page 33 of 118
BURLINGTON COAT FACTORY WAREHOUSE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(All amounts in thousands except share data)
Year Ended
----------------------------------------
June 28, June 29, July 01,
1997 1996 1995
REVENUES: --------- -------- --------
Net Sales $1,758,368 $1,591,964 $1,584,942
Other Income 18,455 18,928 12,086
---------- ---------- ----------
1,776,823 1,610,892 1,597,028
---------- ---------- ----------
COSTS AND EXPENSES:
Cost of Sales (Exclusive of
Depreciation and Amortization) 1,126,975 1,040,388 1,060,212
Selling and Administrative Expenses 514,959 479,852 471,947
Depreciation and Amortization 31,047 29,913 26,327
Interest Expense 8,080 11,735 13,602
---------- ---------- ----------
1,681,061 1,561,888 1,572,088
---------- ---------- ----------
Income Before Provision for
Income Taxes 95,762 49,004 24,940
Provision for Income Taxes 39,247 19,991 10,074
---------- ---------- ----------
Net Income $56,515 $29,013 $ 14,866
========== ========== ==========
Net Income Per Share $ 1.41 $ 0.71 $ 0.37
========== ========== ==========
Weighted Average Shares Outstanding 40,211,663 40,730,516 40,710,683
========== ========== ==========
Dividends Per Share -- -- --
========== ========== ==========
Pro Forma Data (See Note B):
Pro Forma Net Income per Share $ 1.17 $ 0.59 $ 0.30
========== ========== ==========
Pro Forma Weighted Average 48,253,996 48,876,619 48,852,819
Shares Outstanding ========== ========== ==========
See notes to consolidated financial statements
Page 34 of 118
BURLINGTON COAT FACTORY WAREHOUSE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED JULY 1, 1995,JUNE 29, 1996 and JUNE 28, 1997
(All amounts in thousands)
Capital in
Common Excess of Retained Treasury Unearned Valuation
Stock Par Value Earnings Stock Compensation Allowance Total
- ----------------------------------------------------------------------------------------------------------------------------
Balance at July 02, 1994 $41,122 $24,592 $305,729 ($1,850) - $264 $369,857
Net Income 14,866 14,866
Stock Options Exercised 17 551 568
Net Unrealized Loss on Noncurrent
Marketable Securities 12 12
Equity Adjustment for Translation (284) (284)
----------------------------------------------------------------------------------------
Balance at July 01, 1995 41,139 25,143 320,595 ( 1,850) - (8) 385,019
Net Income 29,013 29,013
Stock Options Exercised 16 142 158
Net Unrealized Gain on Noncurrent
Marketable Securities 8 8
Unearned Compensation 10 99 (87) 22
Treasury Stock Transactions (475) (475)
----------------------------------------------------------------------------------------
Balance at June 29, 1996 41,165 25,384 349,608 ( 2,325) (87) - 413,745
Net Income 56,515 56,515
Stock Options Exercised 94 613 707
Unearned Compensation 33 - 33
Treasury Stock Transactions (10,785) (10,785)
----------------------------------------------------------------------------------------
Balance at June 28, 1997 $41,259 $25,997 $406,123 ($13,110) ($54) - $460,215
========================================================================================
See notes to consolidated financial statements
Page 35 of 118
BURLINGTON COAT FACTORY WAREHOUSE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(All amounts in thousands)
Year Ended
__________________________________________
June 28, June 29, July 01,
1997 1996 1995
------------------------------------------
OPERATING ACTIVITIES
Net Income $ 56,515 $ 29,013 $14,866
Adjustments to Reconcile Net Income to Net Cash
Provided by (Used in) Operating Activities:
Depreciation and Amortization 31,047 29,913 26,327
Provision for Losses on Accounts Receivable 7,203 6,068 5,162
Provision for Deferred Income Taxes (395) 489 (2,920)
(Gain) Loss on Disposition of Fixed Assets 1,165 (100) 536
Non-Cash Rent Expense and Other 1,521 1,438 1,521
Changes in Assets and Liabilities:
Accounts Receivable (9,865) (5,965) (3,032)
Merchandise Inventories 4,204 81,589 16,895
Prepaids and Other Current Assets 12,652 (13,876) 11,962
Accounts Payable 24,940 17,854 (32,660)
Accrued and Other Current Liabilities 12,559 16,931 4,389
--------- --------- ---------
Net Cash Provided by Operating Activities 141,546 163,354 43,046
--------- --------- ---------
INVESTING ACTIVITIES
Acquisition of Property and Equipment (35,797) (29,346) (66,900)
Proceeds From Sale of Fixed Assets 390 17,839 27
Issuance of Long-Term Notes Receivable - (516) (5,202)
Receipts Against Long-Term Notes Receivable 1,085 4,539 1,611
Acquisition of Leaseholds - - (2,652)
Minority Interest (110) (62) (66)
Other (42) (2,485) 2,031
--------- --------- ---------
Net Cash (Used in) Investing Activities (34,474) (10,031) (71,151)
--------- --------- ---------
FINANCING ACTIVITIES
Principal Payments on Long-Term Debt (13,193) (8,066) (59)
Issuance of Common Stock Upon Exercise of
Stock Options 740 158 568
Purchase of Treasury Stock (10,785) (475) -
Net (Payments)Borrowings Under Lines of Credit - (85,900) 20,880
--------- --------- ---------
Net Cash (Used in) Provided by Financing Activities (23,238) (94,283) 21,389
--------- --------- ---------
Increase (Decrease) in Cash and
Cash Equivalents 83,834 59,040 (6,716)
Cash and Cash Equivalents at
Beginning of Period 73,560 14,520 21,236
Cash and Cash Equivalents at -------- --------- ---------
End of Period $157,394 $ 73,560 $14,520
======== ========= =========
Interest Paid $ 8,092 $ 12,062 $13,490
======== ========= =========
Income Taxes Paid $ 34,212 $ 16,339 $10,900
======== ========= =========
See notes to consolidated financial statements
Page 36 of 118
BURLINGTON COAT FACTORY WAREHOUSE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Supplemental Schedule of Non-Cash Financing and Investing Activities:
During fiscal 1996, the Company granted a restricted stock
award of 10,000 shares of its common stock to an officer of the
Company with a fair market value of $108,800 as of the award's
measurement date. This award vests over a four year period from
the date of grant.
See notes to consolidated financial statements
Page 37 of 118
Notes to Consolidated Financial Statements
- -----------------------------------------------------------------------------
A. Summary of Significant Accounting Policies
1. Business
Burlington Coat Factory Warehouse Corporation operates
249 stores, in 42 states, which sell "off-price" apparel for
men, women and children. A majority of those stores offer a
home linens department and a baby room furniture department.
The Company operates stores under the names "Burlington Coat
Factory Warehouse"(two hundred twenty-three stores),
"Cohoes Fashions" (four stores), "Decelle" (nine stores),
"Luxury Linens" (six stores), "Totally 4 Kids" (five
stores), and "Baby Depot" (two stores). Cohoes Fashions
offers merchandise in the middle to higher price range.
Decelle offers merchandise in the moderate price range for
the entire family with an emphasis on children's and youth
wear. Luxury Linens is a specialty store for linens, bath
shop items, gifts and accessories and offers merchandise in
the middle to higher range. Totally 4 Kids is a moderate to
upscale concept store offering maternity wear, baby furniture,
children's wear from toddlers up to teens, children's
books, toys, computer software for kids and educational
tapes in a family environment. Baby Depot is a stand alone
infant and toddler store specializing in infant and toddler
apparel, furnishings and accessories.
2. Principles of Consolidation
The consolidated financial statements include the
accounts of Burlington Coat Factory Warehouse Corporation
and its subsidiaries (the "Company"). All intercompany
transactions and balances have been eliminated in consolidation.
3. Use of Estimates
The Company's consolidated financial statements have
been prepared in conformity with generally accepted account-
Page 38 of 118
ing principles. Certain amounts included in the consolidated
financial statements are estimated based on currently
available information and management's judgment as to the
outcome of future conditions and circumstances. While every
effort is made to ensure the integrity of such estimates,
including the use of third party specialists where appropriate,
actual results could differ from these estimates.
4. Inventories
Inventories are stated at the lower of the First In
First Out (FIFO) cost or market, as determined by the retail
inventory method.
5. Property and Equipment
Property and equipment are stated at cost and depreciation
is computed on the straight line method over the estimated
useful lives of the assets. The estimated useful
lives are between 20 and 40 years for buildings, depending
upon the expected useful life of the facility, and three to
ten years for store fixtures and equipment. Leasehold
improvements are amortized over a ten year period or lease
term, whichever is less. Repairs and maintenance expenditures
are charged to expense as incurred. Renewals and
betterments which significantly extend the useful lives of
existing property and equipment are capitalized.
6. Store Opening Expenses
Expenses related to new store openings are charged to
operations in the period incurred.
7. Income Taxes
The Company accounts for income taxes in accordance
with Statement of Financial Accounting Standards No. 109
"Accounting for Income Taxes." Deferred income taxes have
been recorded to recognize temporary differences which
Page 39 of 118
result from revenues and expenses being recognized in different
periods for financial reporting purposes than for income tax purposes.
8. Net Income per Share
Net Income per share is based on the weighted average
number of shares outstanding during each period. The
dilutive effect of stock options is not material.
9. Cash and Cash Equivalents
Cash and cash equivalents represent cash and short-term, highly
liquid investments with maturities of three months or less at
the time of purchase. Cash equivalent investments amounted to
$142.3 million at June 28, 1997 and $59.8 million at June 29, 1996.
10. Fiscal Year End Date
The Company's fiscal year is a 52-53 week year with its
year ending on the Saturday closest to June 30th of each
year. Fiscal 1997, Fiscal 1996, and Fiscal 1995 ended June
28, 1997, June 29, 1996 and July 1, 1995, respectively, and
comprised 52 weeks each.
11. Other Income
Other income is primarily rental income received from
leased departments and interest income. In addition, the
Company realized approximately $1.1 million and $4.0 million
in non-recurring income from settlement of contractual
obligations during fiscal 1997 and fiscal 1996, respectively.
Page 40 of 118
12. Reclassifications
Certain reclassifications have been made to the prior
year's financial statements to conform to the classification
used in the current year.
13. Impairment of Long Lived Assets
In March 1995, the Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting Standards
("SFAS") No. 121, Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to Be Disposed of.
The Company adopted this statement in the first fiscal
quarter of the current fiscal year as required by this
statement. This statement requires that long-lived assets
and certain identifiable intangibles to be held and used by
an entity be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount
of an asset may not be recoverable. Also, in general, long-
lived assets and certain intangibles to be disposed of
should be reported at the lower of carrying amount or fair
value less cost to sell. The Company considers historical
performance and future estimated results in its evaluation
of potential impairment and then compares the carrying
amount of the asset to the estimated future cash flows
expected to result from the use of the asset. If the
carrying amount of the asset exceeds estimated expected un-
discounted future cash flows, the Company measures the
amount of the impairment by comparing the carrying amount of
the asset to its fair value. The estimation of fair value
is generally measured by discounting expected future cash
flows at the rate the Company utilizes to evaluate potential
investments. The Company estimates fair value based on the
best information available making whatever estimates,
judgments and projections are considered necessary.
Adoption of this statement did not have a material impact on
the Company's financial statements for the fiscal year ended
June 28, 1997.
Page 41 of 118
14. Stock-Based Compensation
SFAS No. 123, Accounting for Stock Based Compensation,
encourages, but does not require companies to record
compensation cost for stock-based employee compensation
plans at fair value. The Company has chosen to continue to
account for stock-based compensation using the intrinsic
method prescribed in Accounting Principles Board Opinion No.
25, Accounting for Stock Issued to Employees, and related
Interpretations. Accordingly, compensation cost for stock
options is measured as the excess, if any, of the quoted
market price of the Company's stock at the date of the grant
over the amount an employee must pay to acquire the stock
(See Note L).
15. Recent Accounting Pronouncements
a. In February 1997, the Financial Accounting
Standards Board issued Statement of Financial Accounting
Standards No. 128, Earnings Per Share. This Statement will
be effective for financial reporting purposes, for both
interim and year-end financial statements ending after
December 15, 1997. The Company anticipates that this
Statement will not have a material effect on its financial
statements.
b. The Financial Accounting Standards Board has
issued SFAS No. 130. Reporting Comprehensive Income which
will result in disclosure of comprehensive income and its
components (revenues, expenses, gains and losses) in a full
set of general-purpose financial statements. The Company is
not required to adopt this standard until fiscal 1999. At
this time, the Company has not determined the impact this
standard will have on the Company's financial statements.
c. The Financial Accounting Standards Board has
issued SFAS No. 131. Disclosures about Segments of an
Enterprise and Related Information which establishes
standards for the way public business enterprises report
information about operating segments in annual financial
statements and requires that those enterprises report
selected information about operating segments in interim
Page 42 of 118
financial reports issued to shareholders. It also
establishes standards for related disclosures about products
and services, geographic areas, and major customers. The
Company is not required to adopt this standard until 1999.
At this time, the Company has not determined the impact this
standard will have on the Company's financial statements.
B. Stock Split
On September 8, 1997, the Board of Directors declared a
six-for-five split of the Company's common stock effective
October 16, 1997, to stockholders of record on October 1,
1997. This stock split is to be effected in the form of a
20% stock dividend by the distribution of one additional
share for every five shares of stock already issued. Pro
forma net income per share data presented for each of the
three fiscal years in the period ended June 28, 1997 represent
net income divided by the pro forma weighted average number
of shares of common stock outstanding during the periods
adjusted to give retroactive effect to the stock split.
C. Property and Equipment
Property and equipment consists of:
- ------------------------------------------------------------------
June 28, June 29,
1997 1996
(in thousands)
- ------------------------------------------------------------------
Land $ 19,044 $ 18,345
Buildings 71,409 66,926
Store Fixtures and Equipment 191,871 180,862
Leasehold Improvements 67,871 65,683
Construction in Progress 526 146
--------- ---------
350,721 331,962
Less Accumulated Depreciation --------- ---------
and Amortization (140,857) (125,380)
--------- ---------
$209,864 $206,582
========= =========
Page 43 of 118
D. Accounts Payable
Accounts payable consists of:
- -------------------------------------------------------------------
June 28, June 29,
1997 1996
(in thousands)
- -------------------------------------------------------------------
Accounts Payable-Trade $125 827 $ 98,441
Accounts Payable-Due Banks 7,657 10,247
Other 10,356 10,212
-------- --------
$143,840 $118,900
======== ========
E. Lines of Credit
The Company had a committed line of credit of $50.0 million
at both June 28, 1997 and June 29, 1996. The Company also had an
uncommitted line of credit of $150.0 million at both June 28,
1997 and June 29, 1996. As of August 31, 1997, the Company reduced
its uncommitted lines of credit to $100.0 million. Letters of
credit outstanding against these lines were $53.3 million and
$38.6 million at June 28, 1997 and June 29, 1996, respectively.
The Company had no borrowings under these credit lines
during fiscal 1997. For fiscal 1996, the maximum borrowings
outstanding under these lines were $120.4 million. During the
period of borrowing, in fiscal 1996, the average outstanding
balances under these lines were $38.7 million.
The weighted average interest rate on outstanding borrowings
during fiscal 1996 was 6.2%.
Short-term borrowings against these lines of credit bear
interest at or below the lending bank's prime rate. The $50
million committed line of credit requires a commitment fee on the
unused portion of 1/4 of 1 percent.
The Company's committed line of credit renews annually and
is available through 1998. The uncommitted lines of credit are
cancelable at any time.
Page 44 of 118
F. Long-Term Debt
Long-term debt consists of:
______________________________________________________________________
June 28, June 29,
1997 1996
(in thousands)
- ----------------------------------------------------------------------
Subordinated Notes, 10.6%,
due in annual $7.4 million
payments from June 1996
to June 2005 $ 59,200 $ 72,000
Industrial Revenue Bonds, 5.84%,
due in semi-annual payments of
various amounts from September 1,
1996 to September 1, 2010 9,680 10,000
Urban Development Action Grant, non-
interest bearing, due April 1999 917 917
Promissory note, due at various dates
through 2000 (interest rate
imputed at 10.6%) 308 381
--------- ---------
Subtotal 70,105 83,298
Less current portion (7,831) (8,391)
--------- ---------
Long-Term Debt $ 62,274 $ 74,907
========= =========
The Industrial Revenue Bonds and Urban Development Action
Grant were issued in connection with the construction of the
Company's distribution center. The Bonds are secured by a first
mortgage on the Company's distribution center. The Urban
Development Action Grant was secured by a second mortgage on the
facility.
On September 1, 1995 the Company called the Industrial
Revenue Bonds at 103 and simultaneously refinanced these bonds
with fixed rate bonds with an average interest rate of 5.84%.
The new Industrial Revenue Bonds have the same maturity schedule
as the original bonds and are also secured by a first mortgage on
the Company's home office and distribution center. The average
interest rate before the refinancing was 9.78%. Indebtedness
totaling $10.6 million are secured by land and buildings with a
net book value of $18.9 million at June 28, 1997.
Page 45 of 118
On July 1, 1996 the Company paid $5.4 million of the
Subordinated Notes as an early retirement of debt. Associated
with the $5.4 million was a $.4 million charge for the early
retirement. As a result of this payment, the annual installments
due from June 1997 to June 2005 have decreased to $7.4 million
from $8.0 million.
Long-term debt maturing in each of the next five fiscal
years is as follows: million; 1998 - $7.8 million; 1999 - $8.8
million; 2000 - $7.9 million; 2001 - $7.9 million; and 2002 -
$7.9 million.
As of June 28, 1997, the Company was in compliance with all
covenants related to its loan agreements. Several loan
agreements of the Company contain restrictions which, among other
things, require maintenance of certain financial ratios, restrict
encumbrance of assets and creation of indebtedness, and limit the
payment of dividends. At June 28, 1997, $234.3 million of the
Company's retained earnings of $406.1 million were unrestricted
and available for the payment of dividends under the most
restrictive terms of the agreements.
G. Sales from Leased Departments
Retail sales from certain leased departments, included in
net sales, amounted to $34.8 million, $34.9 million, and $27.4
million in fiscal 1997, fiscal 1996 and fiscal 1995,
respectively.
H. Lease Commitments
The Company leases 231 stores and office spaces under
operating leases that will expire principally during the next
twenty years. The leases typically include renewal options and
escalation clauses and provide for contingent rentals based on a
percentage of gross sales.
The following is a schedule of future minimum lease payments
under the operating leases:
Page 46 of 118
- ---------------------------------------------------------------------------
Fiscal Year (in thousands)
- ---------------------------------------------------------------------------
1998 $ 64,288
1999 61,040
2000 55,512
2001 51,254
2002 47,178
Thereafter 306,833
--------
Total minimum lease payments $586,105
========
The above schedule of future minimum lease payments has not
been reduced by future minimum sublease rental income of $8.7
million under non-cancelable subleases and other contingent
rental agreements.
Total rental expenses under operating leases for the periods
ended June 28, 1997, June 29, 1996 and July 1, 1995 were $67.0
million, $62.7 million and $57.1 million, respectively, including
contingent rentals of $1.8 million, $1.8 million and $2.5
million, respectively. Rent expense for the above periods has
not been reduced by sublease rental income of $4.0 million, $5.7
million and $6.1 million which has been included in other income
for the periods ended June 28, 1997, June 29, 1996 and July 1,
1995, respectively.
The Company has irrevocable letters of credit in the amount
of $14.3 million to guarantee payment and performance under
certain leases, insurance contracts and utility agreements.
I. Employee Retirement Plans
The Company has a noncontributory profit-sharing plan
covering employees who meet age and service requirements.
Effective September 1, 1995, the Company amended and restated the
plan to provide additional retirement security to participants by
adding a cash or deferred (salary deferral) feature qualifying
under Section 401(k) of the Internal Revenue Code. Membership
in the salary deferment feature is voluntary. Employees may, up
to certain prescribed limits, contribute to the 401(k) plan and a
portion of these contributions are matched by the Company. In
Page 47 of 118
addition, under the profit sharing feature, the Company's
contribution to the plan is determined annually by the Board of
Directors. The provision for Company profit sharing and 401(k)
contributions was $5.4 million for fiscal 1997. The provision
for profit sharing contributions were $4.2 million and $5.0
million, respectively, for the periods ended June 29, 1996 and
July 1, 1995.
J. Income Taxes
The provision for income taxes is summarized as follows:
- ---------------------------------------------------------------
Year ended 1997 1996 1995
(in thousands)
- ---------------------------------------------------------------
Current:
Federal $32,504 $17,112 $10,737
State and Other 7,138 2,390 2,257
-------- ------- --------
Subtotal 39,642 19,502 12,994
Deferred (395) 489 (2,920)
-------- ------- --------
Total $39,247 $19,991 $10,074
======== ======= ========
A reconciliation of the Company's effective tax rate with
the statutory federal tax rate is as follows:
- ------------------------------------------------------------------
Year ended 1997 1996 1995
- ------------------------------------------------------------------
Tax at statutory rate 35.0% 35.0% 35.0%
State income taxes, net
of federal benefit 4.8 3.9 4.7
Other charges 1.2 1.9 .7
----- ----- -----
Effective tax rate 41.0% 40.8% 40.4%
===== ===== =====
Deferred income taxes for 1997, 1996 and 1995 reflect the
impact of "temporary differences" between amounts of assets and
liabilities for financial reporting purposes and such amounts as
Page 48 of 118
measured by tax laws. These temporary differences are determined
in accordance with SFAS No. 109.
Temporary differences which give rise to deferred tax assets
and liabilities at June 28, 1997 and June 29, 1996 are as
follows:
_________________________________________________________________________________________________
Year Ended 1997 1996
Deferred Tax Deferred Tax Deferred Tax Deferred Tax
Assets Liabilities Assets Liabilities
(in thousands)
- -------------------------------------------------------------------------------------------------
Current:
Allowance for doubtful
accounts $ 384 $ 399
Compensated absences 781 692
Inventory costs
capitalized for tax
purposes 2,548 2,805
Insurance reserves 6,459 6,630
Prepaid items deductible
for tax purposes $ 1,276 $ 1,413
Other 305 649
------ ------- ------ -------
10,477 1,276 11,175 1,413
------ ------- ------ -------
Non-Current:
Depreciation 10,287 11,111
Accounting for rent
expense 1,476 1,152
Pre-opening costs 2,410 2,615
Other 22 35
------ ------- ------ -------
$3,886 $10,309 $3,767 $11,146
------ ------- ------ -------
No valuation account is deemed necessary.
K. Supplementary Income Statement Information
___________________________________________________________________________
Year ended 1997 1996 1995
(in thousands)
- ---------------------------------------------------------------------------
Advertising $45,409 $44,172 $42,345
Repairs and Maintenance $19,913 $16,631 $15,533
All other required items are omitted since they are less
than 1% of total revenues.
L. Incentive Plans
In April 1983, the stockholders of the Company adopted a
Stock Option and Stock Appreciation Rights Plan (the "1983 Plan")
Page 49 of 118
which authorized the granting of options for the issuance of
1,125,000 shares of common stock. During 1988 the stockholders
authorized the issuance of an additional 675,000 shares of common
stock for a total of 1,800,000 shares under this Plan. The 1983
Plan provided for the issuance of incentive stock options,
nonqualified stock options and stock appreciation rights. This
plan expired in April, 1993. In November, 1993, the stockholders
of the Company approved a stock incentive plan (the "1993 Plan"),
authorizing the granting of incentive stock options, non-
qualified stock options, stock appreciation rights, restricted
stock, performance stock and other stock based compensation. A
total of 450,000 shares of common stock have been reserved for
issuance under the 1993 Plan. A summary of stock options
transactions in fiscal 1995, 1996 and 1997 is as follows:
___________________________________________________________
Number Option Price
of Shares Per Share
- -----------------------------------------------------------
Options outstanding
July 2, 1994 . . . . . . 318,045 $ 4.74 to $24.69
Options issued . . . . . . 38,200 $11.50
Options cancelled. . . . . (5,290) $ 4.74 to $ 7.37
Options exercised. . . . . (16,404) $ 4.74 to $ 7.37
-------- ----------------
Options outstanding
July 1, 1995 . . . . . . 334,551 $ 4.74 to $24.69
Options issued . . . . . . 38,900 $11.38
Options cancelled. . . . . (6,525) $ 4.74 to $ 7.37
Options exercised. . . . . (15,456) $ 4.74 to $ 7.37
Options outstanding -------- ----------------
June 29, 1996. . . . . . 351,470 $ 4.74 to $24.69
Options issued . . . . . . 17,400 $10.63 to $11.06
Options cancelled. . . . . (168) $ 5.48
Options exercised. . . . . (93,599) $ 4.74 to $11.50
-------- ----------------
Options outstanding
June 28, 1997. . . . . . 275,103 $ 4.74 to $24.69
Options exercisable. . . . 257,703 $ 4.74 to $24.69
------- ----------------
The Company adopted the disclosure requirements of Statement
of Financial Accounting Standards No. 123 ("SFAS 123"),
Accounting for Stock Based Compensation, effective with the 1997
financial statements, but elected to continue to measure compen-
sation expense in accordance with APB Opinion No. 25, Accounting
for Stock Issued to Employees. Accordingly, no compensation
Page 50 of 118
expense for stock options has been recognized. If compensation
expense had been determined based on the estimated fair value of
options granted in 1996 and 1997, consistent with the methodology
in SFAS 123, the pro forma effects on the Company's net income
per share would have been as follows (in thousands, except per
share amounts):
1997 1996
Net Income: ------- -------
As reported $56,515 $29,013
Pro forma $56,146 $28,971
Net Income per Share:
As reported $1.41 $0.71
Pro forma $1.40 $0.71
The fair value of each stock option granted is estimated on
the date of grant using the Black-Scholes option pricing model
with the following weighted average assumptions used for grants
in 1997 and 1996:
1997 1996
---- ----
Risk-free interest rate 6.5% 6.5%
Expected volatility 42.9% 42.9%
Expected life 10 years 10 years
Contractual life 10 years 10 years
Fair value of options granted $117,309 $303,385
During the fiscal year ended June 29, 1996, a restricted
stock award of 10,000 shares of the Company's common stock was
made to an officer of the Company. The fair market value on the
date of the award was $108,800. The shares become vested to the
officer over a four year period based on certain employment
criteria. The unearned compensation related to this award is
being amortized over the vesting period.
Page 51 of 118
M. Interim Financial Information (Unaudited)
(All amounts in thousands except per share data.)
Provision Net Income Pro Forma
(Benefit) (Loss) Net Income
Gross for Income Net Income per Share (Loss) per
Net Sales Profit Taxes (Loss) (1) Share (2)
- ------------------------------------------------------------------------------------------
1997:
First $307,240 $103,930 ($ 7,430) ($10,874) ($0.27) ($0.22)
Second 739,958 268,534 45,519 66,049 1.64 1.36
Third 382,420 134,171 2,885 3,852 0.10 0.08
Fourth 328,750 124,758 ( 1,727) ( 2,512) ( 0.06) ( 0.05)
1996:
First $291,227 $ 97,086 ($ 7,761) ($11,161) ($0.27) ($0.23)
Second 658,631 233,760 33,769 48,784 1.20 1.00
Third 323,234 108,070 ( 3,089) ( 4,567) ( 0.11) ( 0.09)
Fourth 318,872 112,660 ( 2,928) ( 4,043) ( 0.10) ( 0.09)
____________________
(1) Net income per share is based on the weighted average number
of shares outstanding during each of the quarters. The sum
of the four quarters may not equal the full year computation
due to rounding.
(2) Adjusted to give retroactive effect to six for five stock
split effective October, 1997.
On an interim basis the Company values inventory using the
gross profit method and at year-end values inventory at the lower
of FIFO cost or market as determined by the retail inventory
method. The annual adjustment for the difference between actual
gross profit and interim estimated gross profit is recorded in
the fourth quarter of the fiscal year. Results of quarterly
operations are impacted by the highly seasonal nature of the
Company's business, timing of certain holiday selling seasons and
the comparability of calendar weeks within a quarter as a result
of the 52/53 week fiscal years.
Page 52 of 118
N. Fair Value of Financial Instruments
The carrying values of cash and cash equivalents, short-term
investments, accounts receivable and accounts payable approximate
fair value because of the short maturities of these items.
Interest rates that are currently available to the Company
for issuance of notes payable and long-term debt (including
current maturities) with similar terms and remaining maturities
are used to estimate fair value for debt issues. The estimated
fair value of notes payable and long-term debt (including current
maturities) are as follows:
________________________________________________________________________________
June 28, June 29,
1997 1996
Carrying Fair Carrying Fair
Amount Value Amount Value
(in thousands)
- --------------------------------------------------------------------------------
Long-Term Debt
(including current maturities) $70,105 $71,132 $83,298 $83,556
- --------------------------------------------------------------------------------
The fair values presented herein are based on pertinent
information available to management as of the respective year
ends. Although management is not aware of any factors that could
significantly affect the estimated fair value amounts, such
amounts have not been comprehensively revalued for purposes of
these financial statements since that date, and current estimates
of fair value may differ from amounts presented herein.
O. Legal Matters
In late September, 1994, the Company received summons and
complaint in three separate purported class action lawsuits.
Each of the complaints was consolidated into a single amended
complaint which sought unspecified damages and alleged a cause of
action arising under certain federal securities laws for alleged
material misstatements and omissions in public statements by the
Company and five executive officers purportedly causing the
market price of the Company's common stock to be artificially
inflated during the period October 4, 1993 through September 23,
1994, inclusive. On February 20, 1996, the District Court
dismissed the plaintiff's amended complaint in its entirety. In
March, 1996, plaintiffs filed an appeal from the District Court's
Page 53 of 118
decision in the United States Court of Appeals for the Third
Circuit. The appeal was orally argued before a panel of three
judges on December 12, 1996. On June 12, 1997 the panel rendered
an unanimous decision affirming the District Court's dismissal of
the action but ruled that the District Court should allow the
plaintiffs to attempt to replead two of the six claims. The matter
has been remanded to the District Court. The Company is unable to
determine the probability of any settlement loss with respect to
these class action suits or the materiality thereof at this time
and accordingly has not established any reserve for this matter
in the accompanying consolidated financial statements.
Dividend Policy
On September 8, 1997, the Board of Directors of the Company
declared the Company's first cash dividend in the amount of two
cents ($.02) per share payable annually. Maintenance of the cash
dividend policy or any change thereto in the future will be at
the discretion of the Company's Board of Directors and will
depend upon the financial condition, capital requirements and
earnings of the Company as well as other factors which the Board
of Directors may deem relevant. At present, the policy of the
Board of Directors is to retain the majority of earnings to
finance the growth and development of the Company's business. At
June 29, 1996, $234.3 million of the Company's retained earnings
were unrestricted and available for the payment of dividends
under the most restrictive terms of certain loan agreements.
Market for the Registrant's Common Equity and Related Stockholder
Matters
The Company's Common Stock is traded on the New York Stock
Exchange, Inc. and its trading symbol is "BCF." The following
table provides the high and low closing prices on the New York
Stock Exchange for each fiscal quarter for the period from July
2, 1995 to June 28, 1997 and for the two months ended August 31,
1997:
Page 54 of 118
- ----------------------------------------------------------------
Period Low Price High Price
- ----------------------------------------------------------------
July 2, 1995 to
September 30, 1995 10 14 1/8
- -----------------------------------------------------------------
October 1, 1995 to
December 30, 1995 10 1/4 13 1/4
- -----------------------------------------------------------------
December 31, 1995 to
March 30, 1996 9 3/8 12 1/4
- -----------------------------------------------------------------
March 31, 1996
June 29, 1996 10 1/8 12 1/8
- -----------------------------------------------------------------
June 30, 1996 to
September 28, 1996 10 11 1/8
- -----------------------------------------------------------------
September 29, 1996 to
December 28, 1996 10 7/8 13 1/4
- -----------------------------------------------------------------
December 29, 1996 to
March 29, 1997 12 3/8 17 3/4
- -----------------------------------------------------------------
March 30, 1997 to
June 28, 1997 17 1/2 20
- -----------------------------------------------------------------
June 29, 1997 to
August 31, 1997 15 3/16 23
- -----------------------------------------------------------------
As of August 31, 1997, there were 405 record holders of the
Company's Common Stock. The number of record holders does not
reflect that number of beneficial owners of the Company's Common
Stock for whom shares are held by Cede & Co., certain brokerage
firms and others.
Page 55 of 118
BURLINGTON COAT FACTORY WAREHOUSE CORPORATION
Schedule II - Valuation and Qualifying Accounts
(All amounts in thousands)
________________________________________________________________________________________
COL.A COL.B COL.C COL D COL.E
- ----------------------------------------------------------------------------------------
BALANCE AT CHARGED TO BALANCE
BEGINNING CHARGED TO OTHER ACCOUNTS AT END OF
DESCRIPTION OF PERIOD EXPENSE ACCOUNTS WRITTEN OFF PERIOD
- ----------------------------------------------------------------------------------------
Period ended 6/28/97
- ----------------------
ALLOWANCE FOR DOUBTFUL
ACCOUNTS-
ACCOUNTS RECEIVABLE $ 990 $7,203 $0 $(7,240) $ 953
Period ended 6/29/96
- ----------------------
ALLOWANCE FOR DOUBTFUL
ACCOUNTS-
ACCOUNTS RECEIVABLE $3,711 $6,068 $0 $(8,789) $ 990
Period ended 7/01/95
- ----------------------
ALLOWANCE FOR DOUBTFUL
ACCOUNTS-
ACCOUNTS RECEIVABLE $4,995 $5,162 $0 $(6,446) $3,711
Page 56 of 118
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File No. 1-8739
=============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
EXHIBITS FILED WITH
FORM 10-K
FOR FISCAL YEAR ENDED
JUNE 28, 1997
under
The Securities Exchange Act of 1934
BURLINGTON COAT FACTORY WAREHOUSE CORPORATION
(Exact Name of Registrant as specified in its Charter)
- ------------------------------------------------------------------------------
Page 59 of 118
INDEX TO EXHIBITS
Exhibits Page No.
- -------- --------
3.1 Articles of Incorporation, as Amended 1/
--
3.2 By-laws 1/
--
10.1 1993 Stock Incentive Plan 1/
--
10.2 Revolving Credit Agreement dated 1/
August 30, 1985 between the Company --
and BancOhio National Bank as amended
through Amendment No. 6
10.3 Burlington Coat Factory Warehouse 62
Corporation 401(k) Profit Sharing Plan
(as amended and restated effective
June 19, 1997)
10.4 Loan Agreement dated as of 3/
August 1, 1995 by and between --
New Jersey Economic Development
Authority and Burlington Coat Factory
Warehouse of New Jersey, Inc.
10.5 Assignment of Leases dated as of 3/
August 1, 1995 from Burlington --
Coat Factory Warehouse of New
Jersey, Inc. to First Fidelity Bank,
National Association
10.6 Mortgage and Security Agreement dated 3/
as of August 1, 1995 between Burlington --
Coat Factory Warehouse of New Jersey,
Inc. and First Fidelity Bank, National
Association
________________________
(1) Incorporated by reference to Exhibits filed with the Company's Annual
Report on Form 10-K for the year ended July 3, 1993, File No. 1-8739.
(2) Incorporated by reference to Exhibit filed with the Company's Annual
Report on Form 10-K for the year ended June 29, 1996, File No. 1-8739
(3) Incorporated by reference to Exhibit filed with the Company's Annual
Report on Form 10-K for the year ended July 1, 1995. File No. 1-8739.
Page 60 of 118
Exhibits Page No.
- -------- --------
10.7 Indenture of Trust dated as of 3/
August 1, 1995 by and between --
New Jersey Economic Development
Authority and Shawmut Bank
Connecticut, National Association
10.8 Guaranty and Suretyship Agreement dated 3/
as of August 1, 1995 from the Company --
to First Fidelity Bank, National
Association
10.9 Letter of Credit Reimbursement Agreement 3/
dated as of August 1, 1995 between --
Burlington Coat Factory Warehouse of
New Jersey, Inc. and First Fidelity
Bank, National Association
10.10 Environmental Indemnity Agreement dated 3/
as of August 1, 1995 between Burlington --
Coat Factory Warehouse of New Jersey,
Inc. and First Fidelity Bank, National
Association
10.11 Note Agreement dated June 27, 1990 3/
--
21 Subsidiaries of Registrant 113
23 Consent of Deloitte & Touche LLP 115
independent certified public accountants,
to the use of their report on the financial
statements of the Company for the fiscal
year ended June 28, 1997 in the Registration
Statements of the Company on Form S-8,
Registration No. 2-96332, No. 33-21569,
No. 33-51965 and No. 33-61351
27 Financial Data Schedule 117
Page 61 of 118