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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark one)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (Fee Required)
For the fiscal year ended February 25, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (Fee Required)
Commission File Number 0-20214
BED BATH & BEYOND INC.
(Exact name of registrant as specified in its charter)
NEW YORK 11-2250488
(State of incorporation) (IRS Employer Identification No.)
715 MORRIS AVENUE, SPRINGFIELD, NEW JERSEY 07081
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (201) 379-1520
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
None None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK (PAR VALUE $ 0.01 PER SHARE)
(Title of class)
PAGE 1 OF 2 PAGE COVER PAGE.
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
As of May 13, 1996, the aggregate market value of the common stock held by
non-affiliates (which was computed by reference to the closing price on such
date of such stock on the NASDAQ National Market) was $1,349,751,476.*
Number of shares outstanding of the issuer's common stock (par value $0.01 per
share) at May 13, 1996: 68,339,778.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's definitive proxy statement filed pursuant to
Regulation 14A not later than 120 days after the end of the fiscal year
(February 25, 1996) are incorporated by reference in Part III hereof.
Portions of the Registrant's Annual Report to Shareholders for the fiscal year
ended February 25, 1996 are incorporated by reference in Part II hereof.
* For purposes of this calculation, all outstanding shares of common
stock have been considered held by non-affiliates other than the
21,186,888 shares beneficially owned by directors and executive
officers, including in the case of the Co-Chief Executive Officers,
members of their immediate families, partnerships in which they are
general partners, and trusts and foundations affiliated with them. In
making such calculation, the Registrant does not determine the
affiliate or non-affiliate status of any shares for any other purpose.
PAGE 2 OF 2 PAGE COVER PAGE.
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PART I
Unless otherwise indicated, the terms "Company" and "Bed Bath & Beyond"
refer collectively to Bed Bath & Beyond Inc. and its subsidiaries. The Company's
fiscal year is the 52 or 53 week period ending on the Sunday nearest February
28. Fiscal years 1995, 1994 and 1993 (all 52 week periods) ended on February 25,
1996, February 26, 1995 and February 27, 1994, respectively. Unless otherwise
indicated, all references herein to periods of time (e.g., quarters and years)
are to fiscal periods.
ITEM 1 - BUSINESS
INTRODUCTION
Bed Bath & Beyond believes that it is the nation's largest operator of
"superstores" selling predominantly better quality domestics merchandise and
home furnishings typically found in better department stores. The term
"superstore" as used herein means a store, other than a department store, that
is larger in size than the typical stores in its market selling similar product
categories and offers a breadth and depth of selection in most of its product
categories that far exceeds what is available in such stores. The Company offers
a wide assortment of merchandise at everyday low prices that are substantially
below regular department store prices and generally comparable to or below
department store sale prices. The Company's domestics merchandise line includes
items such as bed linens, bath accessories and kitchen textiles, and the
Company's home furnishings line includes items such as cookware, dinnerware,
glassware and basic housewares. The Company believes that it offers a breadth
and depth of selection in most of its product categories that far exceeds what
is generally available in department stores or other specialty retail stores and
that this enables it to offer customers the convenience of one-stop shopping for
most household items (other than furniture, major appliances and carpeting).
As of May 13, 1996, the Company operated 86 stores in 22 states:
Alabama (1), Arizona (2), California (11), Colorado (1), Connecticut (3),
Florida (10), Georgia (4), Illinois (6), Indiana (2), Kansas (1), Maryland (4),
Massachusetts (2), Michigan (3), Missouri (1), New Jersey (6), New York (8),
Ohio (3), Oklahoma (1), Pennsylvania (2), Texas (10), Virginia (4) and
Washington (1). Eighty-two of these stores use the superstore format that was
pioneered by the Company in 1985. These stores are on average approximately
42,000 square feet in size and carry the Company's full line of both domestics
merchandise and home furnishings. The other four stores, all established prior
to 1986, are smaller stores that primarily carry domestics merchandise.
HISTORY
The Company was founded in 1971. Leonard Feinstein and Warren
Eisenberg, the Co-Chief Executive Officers and founders of the Company, each has
more than 35 years of experience in the retail industry.
The Company commenced operations in 1971 with the opening of two
stores, one in New York and one in New Jersey. These stores operated under the
name "bed n bath" and sold primarily bed linens and bath accessories. The
Company continued to open bed n bath stores and by 1985 had opened stores in New
York, New Jersey, Connecticut and California. In 1985, the Company introduced
its superstore format with the opening of its first store carrying a full line
of both domestics merchandise and home furnishings. All stores opened by the
Company after 1985 use this format and carry the Company's full line of
domestics merchandise and home furnishings. The Company began using the name
"Bed Bath & Beyond" in 1987 in order to reflect the expanded product line
offered by its superstores and to distinguish its superstores from conventional
specialty retail stores offering only domestics merchandise or only home
furnishings.
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The Company has been engaged in an ongoing expansion program involving
the opening of new superstores (including nineteen in 1995, sixteen in 1994 and
nine in 1993) and the expansion of existing stores (including two in 1995, four
in 1994 and four in 1993). As a result of its expansion program, the Company's
store space has increased from approximately 625,000 square feet at the
beginning of 1991 to approximately 3,214,000 square feet at the end of 1995. The
Company's expansion program is continuing, and the Company currently anticipates
that in 1996 it will open approximately 24 to 26 new superstores.
MERCHANDISING AND MARKETING
The Company's strategy for merchandising and marketing is to offer
better quality merchandise at everyday low prices; to maintain a breadth and
depth of selection in most of its product categories that far exceeds what is
generally available in department stores or other specialty retail stores; to
present merchandise in a distinctive manner designed to maximize customer
convenience and reinforce customer perception of wide selection; and to
emphasize dedication to customer service and satisfaction.
MERCHANDISE SELECTION
The Company's eighty-two superstores offer both domestics merchandise
and home furnishings, while the Company's four smaller stores offer primarily
domestics merchandise. The Company's merchandise lines include:
Domestics Merchandise
- bed linens and related items: sheets, comforters, comforter
covers, bedspreads, quilts, window treatments, decorative
pillows, blankets, dust ruffles, bed pillows and mattress
pads.
- bath accessories: towels, shower curtains, waste baskets,
hampers, bathroom rugs and wall hardware.
- kitchen textiles: tablecloths, placemats, cloth napkins, dish
towels and chair pads.
Home Furnishings
- kitchen and tabletop items: cookware, cutlery, kitchen
gadgets, dinnerware, bakeware, flatware,
drinkware, serveware and glassware.
- basic housewares: storage items, closet-related items (such as
hangers, organizers and shoe racks), general housewares (such
as brooms, garbage pails and ironing boards), lifestyle
accessories (such as lamps, chairs, wicker and clocks) and
small electric appliances (such as blenders, coffee makers,
vacuums, irons, toaster ovens and hair dryers).
- miscellaneous: gifts, giftwrap, picture frames, wall art,
luggage, juvenile items (such as small toys and children's
books) and seasonal merchandise (such as summer and holiday
related items).
The Company, on an ongoing basis, tests new merchandise categories and
adjusts the categories of merchandise carried in its stores and may add new
departments or adjust the size of existing departments as required. The Company
believes that the process of adding new departments and expanding or reducing
the size of various departments in response to changing conditions is an
important part of its merchandising strategy.
The Company's merchandise consists primarily of better quality
merchandise typically found at better department stores. For those product lines
that have brand names associated with them, the Company generally offers leading
brand name merchandise (including Wamsutta, Martex, Fieldcrest Cannon, Croscill,
Laura Ashley, Mikasa, Krups, J.A. Henckels, Farberware, All-Clad, Portmeirion,
Rowenta, Black & Decker, Rubbermaid,
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Springs, Braun, Pillowtex and Waverly). The Company estimates that brand name
merchandise accounts for a significant portion of its net sales.
The Company offers a breadth and depth of product selection that
enables customers to select among a wide assortment of styles, brands, colors
and designs within each of the Company's major product lines. The Company also
generally maintains consistent in-stock availability of merchandise in order to
reinforce customer perception of wide selection and build customer loyalty. The
Company estimates that many of its 82 superstores carry in excess of 30,000
stock-keeping units.
The Company estimates that bed linens accounted for approximately 21%,
20% and 20% of net sales during 1995, 1994 and 1993, respectively. No other
individual product category accounted for 10% or more of net sales during 1995,
1994 and 1993, except for towels, which accounted for 10% of net sales during
1993.
PRICING POLICY
The Company's pricing policy is to maintain everyday low prices that
are substantially below regular department store prices and generally comparable
to or below department store sale prices. The Company regularly monitors price
levels at its competitors in order to ensure that the Company's prices are being
maintained in accordance with its pricing policy.
The Company believes that the uniform application of its everyday low
price policy is essential to maintaining the integrity of this policy and is an
important factor in establishing its reputation among customers. Accordingly, in
the few instances where the Company is unable to offer a brand name product at
price levels that are consistent with this policy, it will instead offer
comparable quality merchandise without that brand name rather than compromise
its everyday low price policy.
Because the Company has an everyday low price policy, the Company does
not run sales. However, the Company uses periodic markdowns and semi-annual
clearances for merchandise that it has determined to discontinue carrying. In
addition, the Company's advertising circulars include a coupon, which is
redeemed at the point-of-sale.
MERCHANDISE PRESENTATION
The Company has developed a distinctive style of merchandise
presentation. In each superstore, groups of related product lines are presented
together in separate areas of the store, creating the appearance that a Bed Bath
& Beyond superstore is comprised of several individual specialty stores for
different product lines. A "racetrack layout" that runs throughout the store
facilitates moving between areas and encourages customers to shop the entire
store. The Company believes that its format of merchandise presentation makes it
easy for customers to locate products, reinforces customer perception of wide
selection and communicates to customers that Bed Bath & Beyond superstores offer
a level of customer service generally associated with smaller specialty stores.
Merchandise is displayed in each of these separate areas from floor to
ceiling (generally 10 to 14 feet high) and, in addition, seasonal merchandise
and impulse items are prominently displayed in the front of the store. The
Company believes that its extensive merchandise selection, rather than
fixturing, should be the focus of customer attention and, accordingly, uses
simple modular fixturing throughout the store. This fixturing is designed so
that it can be easily reconfigured to adapt to changes in the Company's
merchandise mix and presentation. The Company believes that its floor to ceiling
displays create an exciting and attractive shopping environment that encourages
impulse purchases of additional items.
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CUSTOMER SERVICE
The Company places great emphasis on customer service and satisfaction
and, over the past 25 years, has sought to make this a defining feature of its
corporate culture. All managers provide leadership by example in this area by
regularly spending time assisting customers on the selling floor. The Company
believes that its success in the area of customer service is evidenced by its
ability to rely primarily on "word of mouth advertising".
The Company seeks to make shopping at its stores as pleasant and
convenient as possible. Each area within a store is staffed with knowledgeable
sales personnel who are available to assist customers in choosing merchandise,
to answer questions and to resolve any problems that may arise. In order to make
checking out convenient, check-out lines are continually monitored and
additional cashiers are added as necessary in order to minimize waiting time.
Returning merchandise is simplified through a return policy that permits
customers to return most items without presenting a sales receipt. Most Bed Bath
& Beyond stores are open seven days (and six evenings) a week in order to enable
customers to shop at times that are convenient for them.
ADVERTISING
In general, the Company relies on "word of mouth advertising" and on
its reputation for offering a wide assortment of quality merchandise at everyday
low prices, supplemented by the use of paid advertising. The Company's primary
medium of paid advertising is the use of circulars which are distributed through
the mail and/or newspaper inserts. In certain instances, paid radio and
television advertising may be used. Also, in connection with the opening of new
stores, the Company uses paid newspaper and circular advertising until the store
is established in its market. The Company believes that its ability to rely
primarily on "word of mouth advertising" will continue and that its limited use
of paid advertising permits it to spend significantly less on advertising than
many of its competitors.
EXPANSION
The Company is engaged in an ongoing expansion program involving the
opening of new stores in both existing and new markets and the expansion or
replacement of existing stores with new, larger stores. As a result of this
program, the total number of stores has increased from 27 at the beginning of
1991 to 80 at the end of 1995, and the total square footage of store space has
increased from approximately 625,000 square feet at the beginning of 1991 to
approximately 3,214,000 square feet at the end of 1995.
The table below sets forth information concerning the Company's
expansion program for the fiscal periods indicated:
STORE SPACE NUMBER OF STORES
-------------------------------- -----------------------
REPLACED NEW CLOSED BEGINNING END BEGINNING END
YEAR STORES (1) STORES (2) STORES OF YEAR OF YEAR OF YEAR OF YEAR
---- ---------- ---------- ------ -------- ------- ------- -------
(IN SQUARE FEET)
1991 1 7 -- 625,000 917,000 27 34
1992 5 4 -- 917,000 1,128,000 34 38
1993 4 9 2 1,128,000 1,512,000 38 45
1994 4 16 -- 1,512,000 2,339,000 45 61
1995 2 19 -- 2,339,000 3,214,000 61 80
(1) A replaced store is an existing store that was either expanded or replaced
by a new store in the same area.
(2) Excludes any new store that replaced an existing store in the same area.
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The Company intends to continue its expansion program and believes that
the continued growth of the Company is dependent, in large part, on the success
of this program. As part of its expansion program, the Company expects to open
new superstores and, in addition, expects to expand existing stores as
opportunities arise.
The Company expects to open new superstores in existing markets,
contiguous markets and new markets. In determining where to open new
superstores, the Company evaluates a number of factors, including the
availability of prime real estate and demographic information (such as data
relating to income and education levels, age and occupation). The Company
believes that because it does not use central distribution centers and since it
relies on paid advertising to only a limited extent, it has the flexibility to
enter a new market with only a single store.
From the end of fiscal 1995 through May 13, 1996, the Company has
opened six stores which are located in: Northridge, California; Alpharetta,
Georgia; Burlington, Massachusetts; Independence, Missouri; Munsey Park, New
York; and Houston, Texas. During the balance of fiscal 1996, the Company
currently anticipates that it will open approximately 18 to 20 additional
stores. The Company has already leased sites for fifteen of these additional
stores, to be located in: Ontario, Santa Clara and Tustin, California; Denver,
Colorado; Atlanta, Georgia; Rockford, Illinois; Framingham, Massachusetts;
Edgewater, New Jersey; Rochester, New York; Canton, Ohio; Memphis, Tennessee
(two stores); Charlottesville, Chesapeake and Virginia Beach, Virginia; and is
in lease negotiations for several additional sites.
The Company has built its management structure with a view towards its
expansion and believes that as a result the Company has the management depth
necessary to support its anticipated expansion program. Each of the Company's
area and district managers typically supervise from three to six stores, even
though the Company believes that each district manager has the capacity to
supervise up to eight stores.
STORE OPERATIONS
MERCHANDISING
The Company maintains its own central buying staff, comprised of two
general merchandise managers and eleven buyers. The merchandise mix for each
store is selected by the central buying staff, in consultation with store
managers and other local store personnel. The factors taken into account in
selecting the merchandise mix for a particular store include store size and
configuration and local market conditions such as climate and demographics.
The central buying staff is responsible for ordering the initial
inventory required upon the opening of each store and for ordering the first
shipment of any new product line that may subsequently be added to a store's
merchandise mix. Local store personnel are thereafter responsible for monitoring
inventory levels and re-ordering such merchandise as required. In addition,
local store personnel are encouraged to monitor local sales trends and market
conditions and tailor the merchandise mix as appropriate to respond to changing
trends and conditions. The Company believes that its policy of having all
reordering done at the local store level, rather than centrally, and having
local store personnel determine the appropriate quantity to reorder encourages
entrepreneurship at the store level and better ensures that in-stock
availability will be maintained in accordance with the specific requirements of
each store.
The Company purchases its merchandise from approximately 1,900
suppliers. In 1995, the Company's largest supplier accounted for approximately
6% of the Company's merchandise purchases and the Company's ten largest
suppliers accounted for approximately 25% of such purchases. The Company
purchases substantially all of its merchandise in the United States, the
majority from domestic manufacturers and the balance from
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importers. On a limited basis, the Company has begun to make direct purchases
from overseas sources. The Company has no long-term contracts for the purchase
of merchandise. The Company believes that most merchandise, other than brand
name goods, is available from a variety of sources and that most brand name
goods can be replaced with comparable merchandise.
WAREHOUSING
Merchandise is shipped directly to each store by the Company's vendors,
making it unnecessary for the Company to maintain any central distribution
centers. As a result of the floor to ceiling displays used by the Company, a
substantial amount of merchandise is displayed on the sales floor of each store
at all times. Additional merchandise not displayed on the sales floor is stored
in separate warehouse space that is included in each store (with an estimated
10% to 15% of the space of each store being dedicated to warehouse and receiving
space). In addition, in the case of several stores, merchandise is also stored
at nearby supplemental storage space leased by the Company. At present, the
warehouse space included in the Company's stores provides approximately 80% of
the Company's warehouse space requirements and such nearby supplemental storage
space provides the balance.
MANAGEMENT INFORMATION SYSTEMS
The Company completed the implementation of computerized perpetual
inventory systems in all of its stores during fiscal 1995. The Company expects
that over the long-term, the implementation of integrated computer systems will
enable the Company to improve operations, increase productivity, enhance
inventory management and expense controls, and generally facilitate the
Company's expansion plans. The costs associated with the Company's computer
systems, including personnel costs, hardware leasing costs and software costs,
were approximately $6.9 million in 1995, $4.8 million in 1994, and $2.9 million
in 1993, and the Company estimates will be approximately $9.6 million in 1996.
MANAGEMENT
The Company seeks to encourage responsiveness and entrepreneurship at
the store level by providing its managers with a relatively high degree of
autonomy relating to operations and merchandising. This is reflected in the
Company's policy of having all reordering done at the store level, as well as in
the Company's policy of encouraging managers to tailor the merchandise mix of
each store in response to local sales trends and market conditions.
In general, stores are staffed with one to three assistant managers and
three to six department managers who report to a store manager, who in turn is
supervised by an area or district manager. Area and district managers report to
one of several regional managers who in turn report to one of two directors of
store operations. Decisions relating to pricing, advertising and markdowns for
all stores are made centrally in the Company's Buying Office, and certain store
support functions (such as finance and management information systems) are
performed centrally in the Company's Administrative Office.
TRAINING
The Company places great emphasis on the training of store level
management. Management trainees are generally required to work in different
departments of the store in order to acquire an overall understanding of store
operations. In addition, management trainees are trained in a number of areas,
including sales techniques, management techniques and product knowledge.
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The Company's policy is to build its management organization from
within. Each of the Company's area, district and regional managers was recruited
from the ranks of the Company's store managers and each of the Company's store
managers joined the Company in an entry level or trainee position. The Company
believes that its policy of promoting from within, as well as the opportunities
for advancement generated by its ongoing expansion program, serve as an
incentive to persons to seek and retain employment with the Company and results
in low turnover among its managers.
EMPLOYEES
As of February 25, 1996, the Company employed approximately 5,400
persons, of whom approximately 3,400 were full-time employees and 2,000 were
part-time employees. None of the Company's employees are covered by collective
bargaining agreements. The Company believes that its relations with its
employees are excellent and that the labor turnover rate among its management
employees is lower than that experienced in the industry.
SEASONALITY
The Company's business exhibits less seasonality than many other retail
businesses, although sales levels are generally higher in August, November and
December and generally lower in February and March.
COMPETITION
The market for domestics merchandise and home furnishings is fragmented
and highly competitive. While the Company believes it is the preeminent marketer
in the superstore segment of the home goods industry, it competes directly with
a number of chains of superstores selling domestics merchandise and home
furnishings including: Linens 'n Things; HomePlace; Strouds; Home Goods
(division of TJX Companies); Three-D Bed & Bath; Home Express; and Pacific
Linen. In addition, the Company competes with many different types of retail
stores that sell many or most of the products sold by the Company. Such
competitors include: (i) better department stores, which often carry many of the
same product lines as the Company but do not typically have the same depth or
breadth of product selection, (ii) specialty stores (such as specialty linen or
housewares retailers), which often have a depth of product selection but
typically carry only a limited portion of the product lines carried by the
Company, and (iii) discount and mass merchandise stores. In addition, the
Company competes to a more limited extent with factory outlet stores that
typically offer limited quantities or limited lines of better quality
merchandise at discount prices. Many of the Company's competitors operate
substantially more stores and have substantially greater financial and other
resources than the Company, including, in some cases, better name recognition.
The Company believes that it is the largest operator of superstores
selling predominantly better quality domestics merchandise and home furnishings
typically found in better department stores, and that it is well positioned to
successfully compete in its markets as measured by several factors, including
pricing, breadth and quality of product selection, in-stock availability of
merchandise, effective merchandise presentation, customer service, and store
locations.
The visibility of the Company has encouraged superstore competitors to
imitate the Company's format and methods. Other retail chains, such as Home
Depot, are introducing new store concepts which include many of the product
lines carried by the Company. There can be no assurance that the operation of
competitors, including those companies operating stores similar to those of Bed
Bath & Beyond, will not have a material effect on the Company.
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TRADE NAMES, SERVICE MARKS AND FRANCHISE AGREEMENTS
The Company uses the "Bed Bath & Beyond" name as a trade name and as a
service mark in connection with retail services. The Company has registered the
"Bed Bath & Beyond" name and logo as service marks with the United States Patent
and Trademark Office. Management believes that the name Bed Bath & Beyond is an
important element of the Company's merchandising strategy. In certain situations
(as described below), the Company operates under other names.
The Company does not operate under the name "Bed Bath & Beyond" in the
Greater San Francisco area as a result of an agreement entered into by the
Company in connection with settling a litigation commenced against it claiming
that its use of the name "Bed Bath & Beyond" infringed upon the plaintiff's
prior use of the name "Bath & Beyond." Consequently, the Company's stores in San
Francisco and Oakland, California, operate under the name "Bed & Bath
Superstore"; the store in Santa Rosa, California operates under the name "Bed &
Bath." Also, the Company's stores in Massachusetts operate under the name
"BB&Beyond".
The Company is party to two agreements with a franchisee under which
the franchisee currently operates two stores in Ohio and has a right of first
refusal with respect to the opening of additional stores in certain areas of
Ohio and of neighboring states. The Company has no plans to enter into any
additional such franchisee relationships.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth the name, age and business experience of
the executive officers of the Registrant:
NAME AGE POSITIONS
- - - ---- --- ---------
Warren Eisenberg 65 Chairman, Co-Chief Executive Officer
and Director
Leonard Feinstein 59 President, Co-Chief Executive Officer
and Director
Ronald Curwin 66 Chief Financial Officer and Treasurer
- - - ---------------
Mr. Eisenberg, a co-founder of the Company, has been a director and
officer of the Company since the Company commenced operations in 1971 (serving
as President and Co-Chief Executive Officer until April 9, 1992, and Chairman
and Co-Chief Executive Officer since that date).
Mr. Feinstein, a co-founder of the Company, has been a director and
officer of the Company since the Company commenced operations in 1971 (serving
as Co-Chief Executive Officer, Treasurer and Secretary until April 9, 1992, and
as President and Co-Chief Executive Officer since that date).
Mr. Curwin, a certified public accountant, joined the Company in
September 1994 as Chief Financial Officer and Treasurer. Prior to joining the
Company, Mr. Curwin was engaged as a registered representative in the financial
services industry for three years. From 1977 to 1991, he was employed as Chief
Financial Officer of Channel Home Centers, Inc., a retailer of home improvement
products.
The Company's officers are elected by the Board of Directors for
one-year terms and serve at the discretion of the Board of Directors. No family
relationships exist between any of the executive officers or directors of the
Company.
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ITEM 2 - PROPERTIES
The Company's 86 stores are located in 22 states, principally in
suburban areas of medium and large sized cities. These stores are situated in
strip and power strip shopping centers, as well as in major off-price and
conventional malls, and free standing buildings. The Company's superstores range
in size from 13,000 to 85,000 square feet, but are predominantly between 30,000
and 50,000 square feet in major markets. The Company's four smaller stores range
in size from 7,000 to 11,000 square feet. In both superstores and smaller
stores, approximately 80% to 85% of store space is used for selling areas and
the balance for warehouse, receiving and office space.
The table below sets forth the number of stores located in each state
as of May 13, 1996:
Number Number
State of Stores State of Stores
----- --------- ----- ---------
Alabama 1 Massachusetts 2
Arizona 2 Michigan 3
California 11 Missouri 1
Colorado 1 New Jersey 6
Connecticut 3 New York 8
Florida 10 Ohio 3
Georgia 4 Oklahoma 1
Illinois 6 Pennsylvania 2
Indiana 2 Texas 10
Kansas 1 Virginia 4
Maryland 4 Washington 1
The Company currently leases all of its existing stores. The leases
provide for original lease terms that generally range from 5 to 15 years and
certain leases provide for renewal options, that range from 5 to 15 years, often
at increased rents. Certain leases provide for scheduled rent increases (which,
in the case of fixed increases, the Company accounts for on a straight line
basis over the noncancelable lease term) and certain of the leases provide for
contingent rent (based upon store sales exceeding stipulated amounts).
The earliest store lease expirations, which relate to two of the
Company's smaller stores, will occur in November 1996 and March 1998.
The Company also leases storage space in four locations amounting to
approximately 93,000 square feet. This space is used to supplement the warehouse
facilities in the Company's stores in proximity to these locations.
See Item 1 "Business--Store Operations--Warehousing."
The Company's Corporate Office is situated in 6,300 square feet of
office space that is part of the Company's store in Springfield, New Jersey and
an additional 26,300 square feet of rented office space in Union, New Jersey
houses the Company's Administrative Offices (including finance and management
information systems). The Company's Buying Office is located in 26,400 square
feet of rented office space that the Company leases in Farmingdale, New York.
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ITEM 3 - LEGAL PROCEEDINGS
There are no material pending legal proceedings, other than ordinary
routine litigation incidental to the business, to which the Company is a party.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders through
solicitation of proxies or otherwise during the fourth quarter of the fiscal
year ended February 25, 1996.
PART II
ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS
The following table sets forth the high and low reported sales prices
of the Company's common stock on the NASDAQ National Market System for the
periods indicated. These quotations reflect inter-dealer prices, without retail
markups, markdowns or commissions.
HIGH LOW
---- ---
Fiscal 1994:
------------
1st Quarter $ 16 3/8 $ 11 1/2
2nd Quarter 16 1/2 12 1/2
3rd Quarter 15 3/8 11 3/8
4th Quarter 15 3/4 12 7/8
Fiscal 1995 :
------------
1st Quarter 13 1/4 9
2nd Quarter 16 1/2 10 5/16
3rd Quarter 18 7/16 12 1/2
4th Quarter 22 7/16 15
Fiscal 1996:
------------
1st Quarter (through May 13, 1996) 29 11/16 19 11/16
The common stock is quoted through the NASDAQ National Market System
under the symbol "BBBY". On May 13, 1996, there were approximately 400 holders
of record of the common stock (without including individual participants in
nominee security position listings). On May 13, 1996, the last reported sale
price of the common stock was $28 5/8.
For the foreseeable future, the Company intends to retain all
earnings for use in the operation and expansion of its business and,
accordingly, the Company currently has no plans to pay dividends on its common
stock. The payment of any future dividends will be determined by the Board of
Directors in light of conditions then existing, including the Company's
earnings, financial condition and requirements, restrictions in financing
agreements, business conditions and other factors. At present, the Company's
ability to pay dividends is limited under its Credit Agreement. See Item 7
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
12
13
Bed Bath & Beyond Inc. was treated as an S corporation for Federal
and certain state income tax purposes during the period September 1, 1986
through June 9, 1992. As a result, earnings of Bed Bath & Beyond Inc. during
such period were taxed for Federal and certain state income tax purposes
directly to its shareholders rather than to the Company. In the years preceding
the Company's initial public offering (the "IPO"), the Company paid annual
distributions to its shareholders to provide them with funds to pay income taxes
on such earnings and as a return on their investment. In addition, prior to
completion of the IPO, the Company declared the following distributions payable
to the persons and entities that were shareholders of the Company immediately
preceding the IPO (such persons and entities being Warren Eisenberg, Leonard
Feinstein and certain members of their respective families and certain
affiliated trusts): (i) a $28.0 million distribution, representing a portion of
the previously earned and undistributed S corporation earnings of the Company
through March 1, 1992, which was paid upon completion of the IPO from the net
proceeds to the Company from the IPO, and (ii) a distribution in an amount equal
to the taxes payable on the earnings of the Company during the period from March
2, 1992 to completion of the IPO, which distribution amounted to $1,517,000 and
was paid from such earnings to such shareholders in September 1992. Subsequent
to the IPO, the Company has not been treated as an S corporation and,
accordingly, is subject to Federal and state income taxes.
ITEM 6 - SELECTED FINANCIAL DATA
The information required by this item is included in the registrant's
Annual Report to Shareholders for the year ended February 25, 1996 on page 1 and
is incorporated herein by reference.
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The information required by this item is included in the registrant's
Annual Report to Shareholders for the year ended February 25, 1996 on pages 9
through 11 and is incorporated herein by reference.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements required by this item are included in the
registrant's Annual Report to Shareholders for the year ended February 25, 1996
on pages 12 through 20 and is incorporated herein by reference. These financial
statements are indexed under Item 14(a)(1). See also the financial statement
schedules that are included herein and are indexed under Item 14(a)(2).
13
14
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None
PART III
The information required by this Part III (Items 10, 11, 12 and 13) is
incorporated herein by reference from the Registrant's definitive Proxy
Statement for the Annual Meeting of Shareholders to be held June 27, 1996 filed
with the Commission pursuant to Regulation 14A. The Compensation Report of the
Board of Directors, the Compensation Report of a Special Committee of the Board
of Directors and the performance graph included in such Proxy Statement shall
not be deemed incorporated herein by reference.
14
15
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K
(A) (1) FINANCIAL STATEMENTS
The following financial statements and reports are incorporated by
reference to pages 12 through 20 of the Company's Annual Report to
Shareholders for the fiscal year ended February 25, 1996:
Consolidated Balance Sheets as of February 25, 1996 and February 26,
1995
Consolidated Statements of Earnings for the fiscal years ended February
25, 1996, February 26, 1995 and February 27, 1994
Consolidated Statements of Changes in Shareholders' Equity for the
fiscal years ended February 25, 1996, February 26, 1995 and February
27, 1994
Consolidated Statements of Cash Flows for the fiscal years ended
February 25, 1996, February 26, 1995 and February 27, 1994
Notes to Consolidated Financial Statements
Independent Auditors' Report
(A) (2) SCHEDULES
The following schedules are included in this Report:
II - Amounts Receivable from Related Parties, Underwriters, Promoters
and Employees other than Related Parties
V - Property and Equipment
VI - Accumulated Depreciation of Property and Equipment
X - Supplementary Income Statement
(A) (3) EXHIBITS
The exhibits to this Report are listed in the Exhibit Index included
elsewhere herein.
(B) No reports on Form 8-K were filed by the Company during the fourth
quarter of the fiscal year covered by this report.
15
16
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.
BED BATH & BEYOND INC.
BY: /s/ Warren Eisenberg
-----------------------------
WARREN EISENBERG
CHAIRMAN, CO-CHIEF EXECUTIVE
OFFICER AND DIRECTOR
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the registrant
and in the capacities and on the dates indicated.
SIGNATURE CAPACITY DATE
- - - --------- -------- ----
Chairman, Co-Chief
Executive Officer and Director
/s/ Warren Eisenberg (principal executive officer) May 23, 1996
- - - -------------------------------
WARREN EISENBERG
President, Co-Chief
/s/ Leonard Feinstein Executive Officer and Director May 23, 1996
- - - -------------------------------
LEONARD FEINSTEIN
/s/ Klaus Eppler Director May 23, 1996
- - - -------------------------------
KLAUS EPPLER
/s/ Robert S. Kaplan Director May 23, 1996
- - - -------------------------------
ROBERT S. KAPLAN
/s/ Robert J. Swartz Director May 23, 1996
- - - -------------------------------
ROBERT J. SWARTZ
Chief Financial Officer
and Treasurer (principal financial
/s/ Ronald Curwin and accounting officer) May 23, 1996
- - - -------------------------------
RONALD CURWIN
17
ANNUAL REPORT ON FORM 10-K
ITEM 14 (d)
FINANCIAL STATEMENT SCHEDULES
BED BATH & BEYOND INC.
FISCAL YEAR ENDED FEBRUARY 25, 1996
18
INDEPENDENT AUDITORS' REPORT ON SCHEDULES
The Board of Directors and Shareholders
Bed Bath & Beyond Inc.:
Under date of March 22, 1996, we reported on the consolidated balance sheets of
Bed Bath & Beyond Inc. and subsidiaries as of February 25, 1996 and February 26,
1995, and the related consolidated statements of earnings, changes in
shareholders' equity and cash flows for each of the fiscal years in the
three-year period ended February 25, 1996, as contained in the 1995 Annual
Report to Shareholders. These consolidated financial statements and our report
thereon are incorporated by reference in the Annual Report on Form 10-K for the
fiscal year ended February 25, 1996. In connection with our audits of the
aforementioned consolidated financial statements, we also audited the related
financial statement schedules as listed in answer to Part IV, Item 14 (a)(2) of
Form 10-K. These financial statement schedules are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statement schedules based on our audits.
In our opinion, such financial statement schedules, when considered in relation
to the basic consolidated financial statements taken as a whole, present fairly,
in all material respects, the information set forth therein.
/S/ KPMG PEAT MARWICK LLP
New York, New York
March 22, 1996
19
Schedule II
BED BATH & BEYOND INC. AND SUBSIDIARIES
AMOUNTS RECEIVABLE FROM RELATED PARTIES, UNDERWRITERS, PROMOTERS AND
EMPLOYEES OTHER THAN RELATED PARTIES
BALANCE AT
BEGINNING BALANCE AT
NAME OF DEBTOR OF PERIOD ADDITIONS DEDUCTIONS END OF PERIOD
--------- --------- ---------- -------------
Fiscal year ended February 25, 1996
Loan Receivable $ 0 $ 0 $ 0 $ 0
============ ========== ========== ===========
Fiscal year ended February 26, 1995
Loan Receivable $ 0 $ 0 $ 0 $ 0
============ ========== ========== ===========
Fiscal year ended February 27, 1994
Loan Receivable
Warren Eisenberg (1) $ - $ 30,766 $ 30,766 $ -
Leonard Feinstein (1) - 30,766 30,766 -
Jonathan Rothstein (2) 33,200 - 33,200 -
------------ ---------- ---------- ------------
Total $ 33,200 $ 61,532 $ 94,732 $ 0
============ ========== ========== ============
(1) Expenses incurred in connection with the Company's initial public offering
and secondary offering that were allocated to the Chairman and President.
(2) The loan imputed interest based on the prime rate and was payable in equal
monthly installments commencing in February 1992 and subsequently paid in
full in January 1994.
20
Schedule V
BED BATH & BEYOND INC. AND SUBSIDIARIES
PROPERTY AND EQUIPMENT
(in thousands)
BALANCE AT BALANCE AT
BEGINNING ADDITIONS RETIREMENTS END OF
OF PERIOD AT COST OR SALES OTHER PERIOD
--------- ------- -------- ----- ------
Fiscal year ended February 25, 1996
Furniture, fixtures
and equipment $33,505 $14,502 $512 $ -- $47,495
Leasehold improvements 33,729 9,876 98 -- 43,507
Leasehold purchases 4,181 150 -- -- 4,331
------- ------- ---- ------- -------
$71,415 $24,528 $610 $ 0 $95,333
======= ======= ==== ======= =======
Fiscal year ended February 26, 1995
Furniture, fixtures
and equipment $20,266 $13,244 $ 5 $ -- $33,505
Leasehold improvements 22,528 11,279 78 -- 33,729
Leasehold purchases 4,181 -- -- -- 4,181
------- ------- ---- ------- -------
$46,975 $24,523 $ 83 $ 0 $71,415
======= ======= ==== ======= =======
Fiscal year ended February 27, 1994
Furniture, fixtures
and equipment $12,736 $ 7,530 $-- $ -- $20,266
Leasehold improvements 11,415 11,980 867 -- 22,528
Leasehold purchases 3,948 233 -- -- 4,181
------- ------- ---- ------- -------
$28,099 $19,743 $867 $ 0 $46,975
======= ======= ==== ======= =======
21
Schedule VI
BED BATH & BEYOND INC. AND SUBSIDIARIES
ACCUMULATED DEPRECIATION OF PROPERTY AND EQUIPMENT
(in thousands)
BALANCE AT BALANCE AT
BEGINNING ADDITIONS RETIREMENTS END OF
OF PERIOD AT COST OR SALES OTHER PERIOD
--------- ------- -------- ----- ------
Fiscal year ended February 25, 1996
Furniture, fixtures
and equipment $10,511 $5,482 $368 $ -- $15,625
Leasehold improvements 6,927 3,968 50 -- 10,845
Leasehold purchases 1,776 452 -- -- 2,228
------- ------ ---- ------- -------
$19,214 $9,902 $418 $ 0 $28,698
======= ====== ==== ======= =======
Fiscal year ended February 26, 1995
Furniture, fixtures
and equipment $ 6,895 $3,617 $ 1 $ -- $10,511
Leasehold improvements 3,826 3,154 53 -- 6,927
Leasehold purchases 1,354 422 -- -- 1,776
------- ------ ---- ------- -------
$12,075 $7,193 $ 54 $ 0 $19,214
======= ====== ==== ======= =======
Fiscal year ended February 27, 1994
Furniture, fixtures
and equipment $ 4,789 $2,106 $-- $ -- $ 6,895
Leasehold improvements 2,725 1,680 579 -- 3,826
Leasehold purchases 940 414 -- -- 1,354
------- ------ ---- ------- -------
$ 8,454 $4,200 $579 $ 0 $12,075
======= ====== ==== ======= =======
22
Schedule X
BED BATH & BEYOND INC. AND SUBSIDIARIES
SUPPLEMENTARY INCOME STATEMENT INFORMATION
(in thousands)
52 WEEKS ENDED 52 WEEKS ENDED 52 WEEKS ENDED
ITEM FEBRUARY 25, 1996 FEBRUARY 26 ,1995 FEBRUARY 27, 1994
- - - ----------------- ----------------- ----------------- -----------------
Advertising Costs $ 9,284 $ 6,734 $ 4,752
======= ======== ========
23
ANNUAL REPORT ON FORM 10-K
ITEM 14 (a)(3)
EXHIBITS
BED BATH & BEYOND INC.
FISCAL YEAR ENDED FEBRUARY 25, 1996
24
EXHIBIT INDEX
Unless otherwise indicated, exhibits are incorporated by reference to the
correspondingly numbered exhibits to the Company's Registration Statement on
Form S-1 (Commission File No. 33-47250)
EXHIBIT
NO. EXHIBIT PAGE
--- ------- ----
3.1 Restated Certificate of Incorporation --
3.2 Amended and Restated By-laws --
10.1 Credit Agreement among the Company, bed 'n bath Stores, Inc., BBBL, Inc., BBBY --
Management Corporation, Chemical Bank New Jersey, N.A., Chemical Bank and Chemical
Bank New Jersey, N.A. as Agent (incorporated by reference to Exhibit 28 to the Company's
Form 8-K dated November 14, 1994)
10.2* Employment Agreement between the Company and Warren Eisenberg, as amended --
(incorporated by reference to Exhibit 10.3 to the Company's Registration Statement on
Form S-1 Commission File No. 33-47250 and Exhibit 99.1 to the Company's Registration
Statement on Form S-3 Commission File No. 33-66860)
10.3* Employment Agreement between the Company and Leonard Feinstein, as amended --
(incorporated by reference to Exhibit 10.4 to the Company's Registration Statement on Form S-1
Commission File No. 33-47250 and Exhibit 99.2 to the Company's Registration Statement
on Form S-3 Commission File No. 33-66860)
10.4* Company's 1992 Stock Option Plan, as amended (incorporated by reference to Exhibit 28 to --
the Company's Form S-8 dated October 14, 1994)
10.5 Franchise Agreement among Linens, Etc., Inc. and Stuart Fredericks Corporation dated --
November 1, 1977 (incorporated by reference to Exhibit 10.6 to the Company's Registration
Statement on Form S-1 Commission File No. 33-47250)
10.6 Franchise Agreement among Linens, Etc., Inc. and Stuart Fredericks Corporation dated March --
1, 1982 (incorporated by reference to Exhibit 10.7 to the Company's Registration Statement
on Form S-1 Commission File No. 33-47250)
10.7 Franchise Modification Agreement among Linens Etc., Inc., Stuart Fredericks Corporation, --
the Company, Stuart Goldblatt and Warren Eisenberg dated as of May 30, 1992 (incorporated by
reference to Exhibit 10.8 to the Company's Registration Statement on Form S-1 Commission
File No. 33-47250)
10.8 Form of U.S. Underwriting Agreement dated June 4, 1992 between the Company and Goldman, --
Sachs & Co. and Shearson Lehman Brothers Inc. as representatives (incorporated by reference to
Exhibit 1.1 to the Company's Registration Statement on Form S-1 Commission File No. 33-47250)
24
25
10.9 Form of International Underwriting Agreement dated June 4, 1992 between the Company --
and Goldman Sachs International Limited and Lehman Brothers International Limited, as
representatives (incorporated by reference to Exhibit 1.2 to the Company's Registration
Statement on Form S-1 Commission File No. 33-47250)
10.10* Agreement Concerning "Split Dollar" Life Insurance Plan, dated May 9, 1994, among --
the Company, Jay D.Waxenberg, as trustee of the Warren Eisenberg Life Insurance Trust,
Warren Eisenberg and Maxine Eisenberg (incorporated by reference to Exhibit 10.12 to
the Company's Form 10-K for the year ended February 27, 1994)
10.11* Agreement Concerning "Split Dollar" Life Insurance Plan, dated May 9, 1994, among --
the Company, Jay D.Waxenberg, as trustee of the Leonard Joseph Feinstein Life Insurance
Trust, Leonard Joseph Feinstein and Susan Feinstein (incorporated by reference to
Exhibit 10.13 to the Company's Form 10-K for the year ended February 27, 1994)
10.12** Agreement Concerning "Split Dollar" Life Insurance Plan, dated June 16, 1995, among the
Company, Jay D.Waxenberg, as trustee of the Warren Eisenberg Life Insurance Trust,
Warren Eisenberg and Maxine Eisenberg
10.13** Agreement Concerning "Split Dollar" Life Insurance Plan, dated June 16, 1995, among the
Company, Jay D.Waxenberg, as trustee of the Leonard Joseph Feinstein Life Insurance Trust,
Leonard Joseph Feinstein and Susan Feinstein
10.14** First Amendment to the Credit Agreement among the Company, bed 'n bath Stores, Inc.,
BBBL, Inc., BBBY Management Corporation, Chemical Bank New Jersey, N.A.,
Chemical Bank and Chemical Bank New Jersey, N.A. as Agent, dated October 1, 1995
11** Computation of per share earnings
13** Company's 1995 Annual Report, certain portions of which have been
incorporated by reference herein
21** Subsidiaries of the Company
Commission File No. 33-1
23** Independent Auditors' Consent
27 Financial Data Schedule (Filed electronically with SEC only.)
* This is a management contract or compensatory plan or arrangement.
** Filed herewith.
25