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1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED, EFFECTIVE OCTOBER 7, 1996]
For the fiscal year ended February 3, 2001
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _______________ to ___________________
Commission file number 1-7288
THE BOMBAY COMPANY, INC.
(Exact name of registrant as specified in its charter)
A Delaware Corporation 75-1475223
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
550 Bailey Avenue
Fort Worth, Texas 76107
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code)
(817) 347-8200
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which Registered
------------------- -----------------------------------------
Common Stock, Par Value, $1 Per Share New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
NONE
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.____
The aggregate market value of the voting stock held by nonaffiliates of the
registrant based on the closing price of the stock on March 30, 2001 was
approximately $83,072,736.
Shares outstanding at March 30, 2001: Common Stock, $1 Par Value: 32,695,137
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the Definitive Proxy Statement for the Annual Meeting to be held May
17, 2001 (as expressly incorporated by reference in Part III).
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FORM 10-K
PART I
ITEM 1. BUSINESS.
(a) General Development of Business
The Bombay Company, Inc. and its wholly-owned subsidiaries (the "Company" or
"Bombay") is a specialty retailer marketing timeless and classic furniture, wall
decor and accessories through a network of retail locations throughout the
United States and Canada, through mail order and over the internet at
www.bombaycompany.com.
Bombay's unique position in the market place is a result of its core
competencies in design and sourcing. Over 80% of its product is sourced from
over 20 foreign countries. Over 95% of the product has been designed or styled
to Bombay's specifications.
To capitalize on its strengths, the Company has announced its intention to
develop other business opportunities outside of its core retail operations.
Bailey Street Trading Company represents the Company's wholesale operations,
introduced in Fiscal 2000. To date, the operations and financial results of the
wholesale operations have been immaterial to the Company as a whole. In
addition, the Company plans to expand the Bombay brand abroad through licensing
and distribution agreements with local partners in various markets. Finally, the
Company has recently announced the launch of Bombay Kids, its new line of
children's room furnishings, to be offered in Fall 2001 through catalog and
internet only.
(b) Financial Information About Segments
The Company operates primarily in one business segment consisting of the retail
sale of decorative home furnishings and related items.
(c) Narrative Description of Business
Merchandise Sales, Purchasing and Distribution
Bombay operates a chain of stores, located primarily in regional shopping malls,
certain secondary malls and selected urban and suburban locations. As of
February 3, 2001, there were 356 Bombay stores in 42 states in the United States
and 52 stores in nine Canadian provinces. Bombay also markets its products
through its mail order operations in the United States and Canada and through
e-commerce over the internet at www.bombaycompany.com. Bailey Street Trading
Company, the Company's wholesale operations, were introduced in Fiscal 2000 and,
to date, are immaterial to the operations and financial results of the Company.
Unless specified otherwise, the discussions in this Annual Report on Form 10-K
relate to the Bombay retail operations.
The Company offers a diverse selection of products consisting of approximately
5,000 SKUs of which over 95% of the product has been designed or styled to
Bombay's specifications. Bombay's proprietary product offers unique design,
quality and exceptional value to a wide audience of consumers. While furniture
is the Company's core competency and will remain as such, more focus has
recently and will continue to be given to the smaller "take with" items such as
wood and decorative accessories, crystal, candles and a wide assortment of gift
items.
The Company regularly updates its merchandise assortment by introducing new
products and discontinuing others as they approach the end of their life cycles.
During Fiscal 2000, approximately 2,600 SKUs were introduced as compared to
2,700 SKUs in Fiscal 1999. Typically, new product introductions are concentrated
during the Company's spring, fall and Christmas marketing periods. The principal
categories of merchandise include the following:
Furniture - This category includes both wood and metal ready-to-assemble
furniture focusing on the bedroom, living room, dining room and home office as
well as occasional pieces. Furniture represented 45%, 45% and 50% of total sales
in Fiscal 2000, 1999 and 1998, respectively. Bombay's furniture is manufactured
by contract manufacturers located principally in China, Taiwan, Malaysia,
Mexico, the Philippines, Indonesia, India and the United States.
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Accessories - This is the broadest category and represented 41%, 40% and 35% of
total sales in Fiscal 2000, 1999 and 1998, respectively. This category includes
both functional and decorative accessories including lamps, jewelry and
memorabilia boxes, baskets, candles and scents, crystal, ceramics, frames and
desktop, textiles, floral and holiday. The items are imported from over 15
countries in Asia, North America and Europe.
Wall Decor - This category includes prints, mirrors and sconces which
represented 14%, 15% and 15% of total sales in Fiscal 2000, 1999 and 1998,
respectively. This merchandise is sourced primarily from the United States,
various countries in Asia, Canada, Italy and Korea.
Merchandise is manufactured to Company specifications through a network of
contract manufacturers located principally in Asia and North America. Over 80%
of production needs are provided from foreign countries. Branch offices located
in Taiwan, Malaysia, Indonesia and China and agents in various countries locate
prospective vendors, coordinate production requirements with manufacturers and
provide technical expertise and quality control.
Bombay is not dependent on any particular supplier and has had long standing
relationships with many of its vendors. Approximately 70% of the Company's
merchandise requirements are supplied by 35 contract manufacturers in seven
countries. No long-term production agreements are in place; however, agreements
are in place with major manufacturers that prohibit the production of
proprietary product for other parties. Additional manufacturing capacity and
alternative sources, both domestic and international, continue to be added
through new vendors and plant expansions by existing vendors. The Company does
business with its vendors principally in United States currency and has not
historically experienced any material difficulties as a result of any foreign
political, economic or social instabilities.
Usually it takes several months from the time a merchandise order is placed with
a manufacturer until the goods are received at centralized distribution centers
in the United States and Canada. Depending on the category, the source country
and whether an item is new or a reordered product, lead times can vary from as
little as two months to as much as twelve months from order placement until
arrival at the stores. Order times are slightly less for North American
manufacturers principally due to shorter shipping times. Lead times may also be
impacted by seasonality factors especially in months when manufacturers are
producing at or near peak capacity to meet seasonal demands. As a result, Bombay
maintains an adequate inventory position in its distribution centers to ensure a
sufficient supply of products to its customers.
Store inventories are replenished from regional distribution centers located in
Fort Worth, Texas; Atlanta, Georgia; Gilbertsville, Pennsylvania; Miraloma,
California and Mississaugua, Ontario. The distribution centers are strategically
located and provide the capability to replenish the majority of store
inventories within 48 hours of when the order is processed. The Company uses
dedicated trucks and less-than-truckload carriers to transport its product from
its distribution centers to the stores.
Channels of Distribution
Stores and Real Estate
The Company bases its stores primarily in regional shopping malls, certain
secondary malls and selected urban and suburban locations that satisfy its
demographic and financial return criteria. Significant attention is given to
visual merchandising opportunities to maximize the ability to display product in
the most attractive setting.
In selecting store locations, the Company's real estate department conducts
extensive analyses of potential store sites and bases its selection on the
performance of other specialty retail tenants, the size of the market and the
demographics of the surrounding area. In evaluating a store location, placement
of the store relative to retail traffic patterns and customer base of other
retailers in the nearby vicinity are important considerations.
During Fiscal 2000, the Company, working closely with Thompson Associates, the
largest, independent full-service retail-consulting firm in the United States,
specializing in store location and market research, developed a comprehensive
real estate strategy. Based upon the analysis, the Company believes that it has
the opportunity to increase its total square footage though both an increase in
store counts and through larger stores. The strategy incorporates an off-mall
opportunity that will complement the current real estate portfolio. Currently
90% of the stores are mall based; however the Company has opened stores in, and
will continue to seek alternative locations including, street and upscale, open
air strip locations. The Company will seek out the most potentially profitable
locations for the opening of new stores regardless of the venue.
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4
The Company is currently targeting store sizes in the 4,000 to 5,000 square foot
range. In addition to building new stores, the Company will continue to convert
its existing regular stores which average approximately 1,800 square feet to the
larger format. As of February 3, 2001, there were 93 regular stores left in the
chain. Through new store growth and the continued conversion of regular stores,
the Company expects to expand the retail square footage by 30% over the next
three years.
During Fiscal 2000, 1999 and 1998, the Company opened 10 new stores, 19 new
stores and 15 new stores, respectively. An additional 20 stores were converted
to the larger format in Fiscal 2000, 11 in Fiscal 1999 and 16 in Fiscal 1998.
The store expansion plan includes approximately 30-35 new store openings and
15-20 conversions in Fiscal 2001.
During Fiscal 2000, 1999 and 1998, the Company's store openings included four,
eight and five outlet stores, respectively, which were typically located in
traditional outlet malls. At February 3, 2001, the store chain included a total
of 24 outlet stores. The Company views the use of outlets as an opportunity to
increase sales to a different customer base, to assist in the orderly clearance
of merchandise and to further capitalize on its strength in designing and
sourcing proprietary product. Of the 30-35 stores planned for Fiscal 2001,
Bombay expects to open approximately eight outlet locations.
The Company's average cost of leasehold improvements, furniture, fixtures and
machinery for stores (excluding outlets) opened or converted in Fiscal 2000, net
of landlord allowances, was approximately $284,000 per store or $86 per square
foot. In addition, other investments which consist primarily of inventory in the
store location, averaged approximately $98,000 per large format store. The
average cost of leasehold improvements, furniture, fixtures and machinery for
outlet stores opened in Fiscal 2000, net of landlord allowances, was
approximately $95,000 per store while the inventory investment averaged
approximately $63,000 per store. Bombay stores typically achieve store operating
level profitability during their first year of operations.
As of February 3, 2001, 356 stores were operating in 42 states in the United
States and 52 stores were operating in nine provinces in Canada as illustrated
in the map below.
{The paper version of the Annual Report on Form 10-K contains herein a map of
the United States and Canada with states and provinces outlined, labeled with
the appropriate number of Bombay stores located in each, as follows:
UNITED STATES:
AL - 5 KY - 2 NY - 19
AR - 1 LA - 7 OH -14
AZ - 5 MA - 8 OK - 4
CA -50 MD - 12 OR - 3
CO - 5 MI - 9 PA - 15
CT - 7 MN - 5 RI - 1
DC - 1 MO - 4 SC - 4
DE - 2 MS - 2 TN - 11
FL - 32 NC - 11 TX - 28
GA - 15 NE - 1 UT - 3
IA - 1 NH - 3 VA - 14
IL - 16 NJ - 16 WA - 6
IN - 4 NM - 1 WI - 1
KS - 4 NV - 3 WV - 1
CANADA:
AB - 4 NB - 2 ON - 26
BC - 7 NF - 1 PQ - 8
MB - 1 NS - 2 SK - 1}
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Internet
The Company has maintained a conservative posture on its investment in the
internet. The current site utilizes IBM's net.commerce software running on an
AS400 platform and is designed to be scalable in order to respond to the growing
e-commerce demand. Typically, the Company offers up to 800 SKUs for sale on its
website each season. Business to consumer sales over the internet are expected
to grow to approximately $3 million in Fiscal 2001. The Company also intends to
utilize its internet site to facilitate the growth of its international
licensing and distribution operations going forward.
Wholesale
During Fiscal 2000, the Company created a new wholesale division, Bailey Street
Trading Company. The brand is separate from Bombay and will allow the Company to
capitalize on its strengths in product design and sourcing. The initial product
offerings are focused on furniture but may be expanded to include wall decor and
accessories in the future. Bailey Street Trading Company will distribute its
merchandise to home furnishings retailers, specialty retailers, department
stores and mass merchants through a network of regional sales representatives.
Bailey Street has also targeted the hospitality industry which it plans to reach
through strategic partnerships with existing distributors who operate in that
industry. The Company believes that there may also be international
opportunities to distribute Bailey Street product abroad. To date, the
operations and financial results of Bailey Street Trading Company have been
immaterial to the Company as a whole.
International
The Company has recently announced its intention to develop and roll out an
international expansion strategy. The international business will be developed
through licensing and distribution agreements with local partners in various
markets. The Company intends to limit risk by initially entering into smaller
opportunistic markets with growth potential.
Intangibles
The Company owns a number of the trademarks and service marks used in its
business, including federal registrations for the marks "The Bombay Company" and
"Bombay", and the palm tree logo. The Company's trademarks are also registered
or are the subject of pending applications in a number of foreign countries.
Each registration is renewable indefinitely if the mark is still in use at the
time of renewal. Appropriate applications are on file for the new wholesale
business.
The Company believes that its trademarks have significant value and that these
marks enhance the Bombay(R) brand and are instrumental in the Company's ability
to create, sustain demand for and market its product. From time to time, the
Company discovers products in the marketplace that are counterfeit reproductions
of the Company's product or that otherwise infringe upon trademark or tradedress
rights held by the Company. The Company has and will continue to vigorously
defend it rights under the marks as necessary.
Seasonality
Operating results are subject to seasonal variation. Historically, the largest
proportion of sales and substantially all of the income occurs in the fiscal
quarter that includes the Christmas season. Inventory balances are generally
built to their highest levels prior to the Christmas selling season. Inventories
decline and cash balances increase significantly in December due to the
Christmas business.
Competition
The home furnishings and decorative accessories market is highly fragmented. The
Company faces competition from furniture stores, department stores and other
specialty retailers. The Company believes that it competes primarily on the
basis of selection, quality and value of merchandise.
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Employees
The Company has approximately 5,000 employees, which include approximately 3,000
part-time employees, and is not a party to any union contract. Employee
relations are considered to be good.
Risks and Uncertainties
All statements in this Annual Report on Form 10-K, including those incorporated
herein by reference, that do not reflect historical information are
forward-looking statements made in reliance upon the "safe harbor" provisions of
the Private Securities Litigation Reform Act of 1995. Such forward-looking
statements involve known and unknown risks, uncertainties and other factors
which may cause the actual results, performance or achievements of the Company
to be materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such factors include,
but are not limited to, the following: competition; seasonality; success of
operating initiatives; new product development and introduction schedules;
acceptance of new product offerings; advertising and promotional efforts;
adverse publicity; expansion of the store chain; availability, locations and
terms of sites for store development; changes in business strategy or
development plans; availability and terms of capital; labor and employee benefit
costs; changes in government regulations; risks associated with international
business and regional weather conditions.
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(d) Financial Information About Geographic Areas
The Company operates primarily in one industry segment, specialty retailing.
Substantially all revenues result from the sale of home furnishings and
accessories through retail stores in the United States and Canada. The Company's
wholesale operations, introduced in Fiscal 2000, have been immaterial to the
operations and financial results of the Company to date. Operating profit by
geographic area is total revenue less operating expenses. Area operating
expenses exclude interest income, net of interest expense, and income taxes.
Identifiable assets by area are those assets used in the area's operations,
including intangibles.
The following table shows net sales, operating profit and other financial
information by geographic area (in thousands):
Year Ended
------------------------------------------------
February 3 January 29 January 30
2001 2000 1999
------------ ------------ ------------
Net sales:
United States ............ $ 373,463 $ 349,632 $ 318,657
Canada ................... 48,051 41,249 38,058
------------ ------------ ------------
Total .................... $ 421,514 $ 390,881 $ 356,715
============ ============ ============
Operating profit:
United States ............ $ 9,628 $ 8,998 $ 3,505
Canada ................... 4,229 2,126 1,403
Interest income, net ..... 543 1,029 1,885
------------ ------------ ------------
Income before
income taxes ........ $ 14,400 $ 12,153 $ 6,793
============ ============ ============
Identifiable assets:
United States ............ $ 188,152 $ 186,325 $ 180,741
Canada ................... 18,499 15,547 12,778
------------ ------------ ------------
Total .................... $ 206,651 $ 201,872 $ 193,519
============ ============ ============
Depreciation and amortization:
United States ............ $ 13,794 $ 11,840 $ 9,592
Canada ................... 957 821 751
------------ ------------ ------------
Total .................... $ 14,751 $ 12,661 $ 10,343
============ ============ ============
Capital expenditures:
United States ............ $ 15,610 $ 16,307 $ 19,699
Canada ................... 1,111 1,704 777
------------ ------------ ------------
Total .................... $ 16,721 $ 18,011 $ 20,476
============ ============ ============
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ITEM 2. PROPERTIES.
The Company owns its United States headquarters office complex of which it
occupies approximately 85,000 square feet. The Company leases stores,
distribution centers, regional and Canadian offices under numerous operating
leases. Owned and leased facilities are summarized following:
Square Feet
-----------
Description Owned Leased
----------- ----- ------
Stores:
Outlet ................. -- 92,000
Regular ................ -- 163,000
Large format ........... -- 1,116,000
Distribution centers:
Miraloma, CA ........... -- 156,000
McDonnaugh, GA ......... -- 254,000
Gilbertsville, PA ...... -- 264,000
Fort Worth, TX ......... -- 250,000
Mississauga, ON, CAN ... -- 114,000
Offices and storage:
Mississauga, ON, CAN ... -- 9,000
Regional sites ......... -- 3,000
Fort Worth, TX ......... 121,000 35,000
--------- ---------
121,000 2,456,000
========= =========
Leases generally have 10 year terms, expiring between 2000 and 2013. The store
leases are generally based upon a minimum rental plus a percentage of the store
sales in excess of specified levels. Store lease terms generally require
additional payments covering taxes, common area charges and certain other costs.
Rental expense for Fiscal 2000, Fiscal 1999 and Fiscal 1998 totaled $45,137,000,
$42,991,000 and $40,244,000, respectively.
The minimum rental commitments for future fiscal years are as follows (in
thousands):
Fiscal
- ------
2001................................. $ 41,019
2002................................. 39,375
2003................................. 33,466
2004................................. 21,594
2005................................. 13,599
Thereafter........................... 44,310
--------
$193,363
========
The Bombay believes that the insurance coverage maintained on all properties is
adequate.
ITEM 3. LEGAL PROCEEDINGS.
The Company has certain contingent liabilities resulting from litigation and
claims incident to the ordinary course of business. Management believes that the
probable resolution of such contingencies will not materially affect the
financial position or results of operations of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no matters submitted to a vote of security holders during the fourth
quarter of the 2000 fiscal year.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
(a) The principal market for the registrant's common stock is the New
York Stock Exchange. The high and low trading prices, quoted by
fiscal quarter, follow:
Year ended February 3, 2001 High Low Year ended January 29, 2000 High Low
- --------------------------- ----- ----- --------------------------- ----- -----
First quarter........................ $4.44 $2.63 First quarter...................... $6.94 $3.56
Second quarter....................... 4.13 2.56 Second quarter..................... 8.13 5.56
Third quarter........................ 3.06 2.25 Third quarter...................... 6.81 3.50
Fourth quarter....................... 3.06 1.50 Fourth quarter..................... 5.88 3.75
(b) The approximate number of record holders of common stock on March 31,
2000 was 2,500.
(c) The Company has bank credit agreements with restrictions related to
payment of dividends. The Company has not paid dividends the past two years and
will continue to utilize available funds primarily for the expansion of its
retail stores and operating purposes.
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ITEM 6. SELECTED FINANCIAL DATA.
The following selected financial data has been derived from the consolidated
financial statements of The Bombay Company, Inc. The data set forth below should
be read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Company's consolidated financial
statements and notes thereto.
Year Ended
-------------------------------------------------------------------
Financial Data: February 3 January 29 January 30 January 31 February 1
2001 2000 1999 1998 1997
--------- ---------- ---------- --------- ----------
Net sales(1) ........................................ $ 421,514 $ 390,881 $ 356,715 $ 332,577 $ 336,303
Net sales increase (decrease) ....................... 8% 10% 7% (1)% 2%((2))
Same store sales increase ........................... 5% 5% 6% -% 2%
Income (loss) from continuing operations: (1)
Before accounting change ....................... $ 8,645 $ 7,342 $ 4,010 $ 4,450 $ (2,840)
Cumulative effect of accounting change ......... -- -- -- -- 835
Net income (loss) .............................. 8,645 7,342 4,010 4,450 (2,005)
Basic earnings per share:
Income (loss) before accounting change ......... .26 .20 .11 .12 (.07)
Cumulative effect of accounting change ......... -- -- -- -- .02
Net income (loss) .............................. .26 .20 .11 .12 (.05)
Diluted earnings per share:
Income (loss) before accounting change ......... .26 .20 .11 .12 (.07)
Cumulative effect of accounting change ......... -- -- -- -- .02
Net income (loss) .............................. .26 .20 .11 .12 (.05)
Total assets(1) .................................... 206,651 201,872 193,519 195,462 195,363
Stockholders' equity(1) ............................ 154,727 156,248 156,143 158,238 153,933
Return on average assets ........................... 4.2% 3.7% 2.1% 2.3% (1.0)%
Return on average equity ........................... 5.6% 4.7% 2.6% 2.9% (1.3)%
Operating Data:
Average sales per store open for full fiscal
year(1) ........................................ $ 1,032 $ 942 $ 873 $ 796 $ 784
Average sales per square foot ...................... $ 306 $ 288 $ 278 $ 263 $ 262
Number of stores:
Beginning of year .............................. 415 412 415 427 434
Opened ......................................... 10 19 15 2 9
Closed ......................................... 17 16 18 14 16
End of year .................................... 408 415 412 415 427
Store composition:
Outlet ........................................ 24 20 13 8 8
Regular ....................................... 93 125 148 179 195
Large format .................................. 291 270 251 228 224
Retail square footage:(1)
Outlet ........................................ 92 72 50 30 30
Regular ....................................... 163 216 253 303 328
Large format .................................. 1,116 1,049 989 910 902
Total ......................................... 1,371 1,337 1,292 1,243 1,260
The Company has paid no cash dividends during the periods presented.
(1) In thousands.
(2) Excludes the closed Alex & Ivy division; comparatives are based on twelve
month periods.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
General
The Bombay Company, Inc. ("Company" or "Bombay") is a specialty retailer which
markets timeless and classic furniture, wall decor and accessories through 408
Bombay retail stores in 42 states in the United States and nine Canadian
provinces, through mail order and over the internet at www.bombaycompany.com.
The Company has announced its intention to develop other business opportunities
outside of its core operations. Bailey Street Trading Company represents the
Company's wholesale operations, introduced in Fiscal 2000. In addition, the
Company plans to expand the Bombay brand abroad through licensing and
distribution agreements with local partners in various markets. Finally, the
Company has recently announced the launch of Bombay Kids, its new line of
children's room furnishings, to be offered in Fall 2001 through catalog and
internet only.
The largest percentage of the Company's sales and operating income is realized
in the fiscal quarter that includes December (Christmas season). Merchandise is
manufactured to Company specification through a network of contract
manufacturers located principally in Asia and North America. Because the
majority of the Company's products are proprietary, the impact of inflation on
operating results is typically not significant. The Company attempts to
alleviate inflationary pressures by increasing selling prices (subject to
competitive conditions), improving designs and finding alternative production
sources in lower cost countries.
See Note 1 of Notes to Consolidated Financial Statements for fiscal reporting
periods.
Special Note Regarding Forward-Looking Statements
Certain statements in this Annual Report to Shareholders under "Management's
Discussion and Analysis" constitute "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or achievements of
the Company to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. Such
factors include, among others, the following: competition; seasonality; success
of operating initiatives; new product development and introduction schedules;
acceptance of new product offerings; advertising and promotional efforts;
adverse publicity; expansion of the store chain; availability, locations and
terms of sites for store development; changes in business strategy or
development plans; availability and terms of capital; labor and employee benefit
costs; changes in government regulations; risks associated with international
business and regional weather conditions.
Net Sales
Fiscal 2000
Net sales increased $30.6 million, or 8%, to $421.5 million, compared to $390.9
million in Fiscal 1999. Sales increases were attributable to a 5% increase in
same store sales (stores in existence for one year or more). A 53rd week in
Fiscal 2000 added less than 2% to the total sales increase. Sales increases were
also realized with the opening of 10 new stores during the year and the
conversion of another 20 regular stores to the larger store format. These
increases were partially offset by the closure of 17 stores which were either
underperforming or at the end of their lease lives. On a net basis, the number
of stores decreased from 415 at the end of Fiscal 1999 to 408 at the end of
Fiscal 2000, including 291 large stores, 93 regular stores and 24 outlet stores,
while total retail square footage increased approximately 2.5%.
Sales growth was fairly consistent across all categories with the product mix
remaining virtually unchanged. Sales in Fiscal 2000 consisted of 45% furniture,
41% accessories and 14% wall decor (principally prints, mirrors and sconces). In
Fiscal 1999 the product mix was 45% furniture, 40% accessories and 15% wall
decor. The number of transactions increased by 9% and the average ticket
remained virtually unchanged at $79.
Same store sales gains were strongest in the Company's Canadian subsidiary, with
other strong performances in the western and northeastern portions of the U.S.
All regions reported positive or flat same store sales. Outlets also performed
well driven by the continued infusion of outlet only merchandise.
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Fiscal 1999
The Company recorded net sales of $390.9 million, an increase of $34.2 million
or 10% over net sales of $356.7 million in Fiscal 1998. The increase is due to a
5% increase in same store sales as well as a slight increase in the number of
stores opened. During the year, the Company opened 19 new stores and converted
another 11 regular stores to the larger format store. These increases were
partially offset by the closure of 16 underperforming stores, most of which were
at the end of their lease lives. As a result, the number of stores increased
from 412 stores at the end of Fiscal 1998 to 415 stores at the end of Fiscal
1999, including 270 large stores, 125 regular stores and 20 outlet stores. In
addition, during Fiscal 1999, the Company remodeled and/or remerchandised
another 30 stores in a style similar to the new store design introduced late in
Fiscal 1997.
From a product mix standpoint, the sales increases were primarily related to the
increased focus on accessories and impulse items, designed to attract more
customers and grow the Company's customer base. While furniture remained the
core of the business, the emphasis on accessories somewhat shifted the sales mix
in Fiscal 1999 compared to Fiscal 1998. In Fiscal 1999, furniture represented
45% of the sales, accessories were 40% and wall decor was 15%. In Fiscal 1998,
furniture represented 50% of the sales, accessories were 35% and wall decor was
15%. Consistent with the emphasis on accessories, the number of transactions
increased 23% over the previous year and the average ticket decreased 10% to
$79.
On a regional basis, there was little variation in same store sales with the
exception of the northeastern part of the U.S., which experienced a slight
decline. The same store sales increase in outlets was above the Company average
as more outlet specific merchandise purchases were made. During this period, the
mix of product in the outlets was approximately 60% special purchase and 40%
clearance and overstock from the primary chain.
COST OF SALES, BUYING AND STORE OCCUPANCY COSTS
Fiscal 2000
Cost of sales, including buying and store occupancy costs, was $291.7 million or
69.2% of sales. As a percentage of sales, these costs decreased from 70.0% of
sales in Fiscal 1999. Product margins improved 20 basis points from the prior
year due to an improved product mix and good in-stock positions of key
merchandise, more than offsetting higher distribution center and domestic
freight costs. Buying and occupancy costs declined 60 basis points to 19.6% of
sales while increasing $3.4 million. The higher dollar costs were primarily
driven by investments in new stores and technology. The improvement in buying
and occupancy costs as a percentage of sales is due to the relatively fixed
nature of these costs measured against a higher sales base.
Fiscal 1999
Cost of sales, including buying and store occupancy costs, was $273.5 million or
70.0% of sales. As a percentage of sales, these costs decreased from 70.9% of
sales in Fiscal 1998. Product margins improved 70 basis points over the prior
year primarily due to higher margins in all categories except furniture, which
was down slightly. Improved merchandise selection and more selective promotions
were the key reasons for the improvement. Buying and occupancy costs declined to
20.2% of sales from 20.4% of sales while increasing $6.1 million. The higher
costs were primarily the results of higher rents and related costs on a 3%
increase in overall store square footage, and higher depreciation costs
associated with the new construction, additional store fixtures and the new
point of sale system. The decline in buying and occupancy as a percentage of
sales is due to the relatively fixed nature of the costs measured against a
higher sales base.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Fiscal 2000
Selling, general and administrative expenses were $116.0 million, an increase of
$9.7 million or 9%, compared to $106.3 million in Fiscal 1999. The largest
component of the dollar increase is higher payroll and related costs. However,
as a percentage of sales these costs remain relatively constant. The Company's
investments in infrastructure and technology have also contributed to higher
selling, general and administrative expenses with increased depreciation,
amortization and related costs. As a percentage of sales, selling, general and
administrative expenses increased slightly, from 27.2% in Fiscal 1999 to 27.5%
in Fiscal 2000.
Fiscal 1999
Selling, general and administrative expenses were $106.3 million, an increase of
$7.4 million or 8%, compared to $98.9 million in Fiscal 1998. The dollar
increase resulted primarily from higher payroll and payroll related costs. Store
payroll cost increases were driven by higher store pay rates in the tight labor
market while performance based compensation increased due to the Company's
improved operating results. Although expenses increased in dollars, as a
percentage of sales, selling, general and administrative expenses declined from
27.7% to 27.2% due largely to
12
13
economies of scale realized in advertising, leveraging other fixed costs against
the higher sales base and continued controls over expenses.
INTEREST
Fiscal 2000
The Company had interest income slightly less than $1.0 million and interest
expense of $.4 million, compared to interest income of $1.1 million and interest
expense of less than $.1 million in Fiscal 1999. The changes in these amounts
are due to lower average cash balances and greater utilization of seasonal
borrowings in the current year to support the Company's investments in store
expansion, infrastructure and technology, the stock repurchase program and
higher inventory levels.
Fiscal 1999
Interest income was $1.1 million compared to $1.9 million in Fiscal 1998. The
decline in interest income was due primarily to lower average cash balances
resulting primarily from higher average inventory levels than in Fiscal 1998. In
addition, $8.5 million of cash was used to repurchase Company stock during the
year. In Fiscal 1999, the Company had less than $.1 million interest expense
incurred on temporary seasonal borrowings used to support higher inventory
levels in preparation for the Christmas sales season.
INCOME TAXES
The Company provided income taxes of $5.8 million, $4.8 million and $2.8 million
in Fiscal 2000, Fiscal 1999 and Fiscal 1998, respectively. The effective rates
were 40.0%, 39.6% and 41.0% in the respective periods. Fluctuations in the
effective rate are primarily related to foreign taxes which change in accordance
with earnings in the Canadian subsidiary and in state tax expenses which have
not changed proportionately to income before income taxes.
LIQUIDITY AND CAPITAL RESOURCES
The primary sources of liquidity and capital resources are cash flows from
operations and bank lines of credit. Bank borrowings are available to fund
seasonal working capital requirements. In addition, the bank credit lines are
used for overseas merchandise purchases. Unsecured bank lines aggregate $45
million, of which $30 million are committed under revolving credit agreements
expiring May 12, 2001. Negotiations are currently underway to renew or replace
the credit lines. Management expects to complete these negotiations on
satisfactory terms before the current agreements expire.
Fiscal 2000
As of February 3, 2001, cash and short-term investments were $22.2 million, a
decrease of $17.0 million from January 29, 2000. The primary uses of cash were
inventory purchases, new store construction and information technology upgrades,
as well as purchases of treasury stock. These uses were partially offset by net
income, including non-cash depreciation and amortization expense, and by
increases in payables.
At February 3, 2001, inventory levels were $14.3 million higher than at January
29, 2000, an increase of 16% compared to an 8% growth in sales. Several factors
contributed to this increase. Spring product arrived earlier than last year in
order to ensure a good in-stock position for the introduction of the catalog in
early March. Additionally, the timing of Chinese New Year shifted from February
to January resulting in more of this season's inventory requirement being
shipped just prior to the Company's fiscal year end. Finally, the inventory mix
changed with a larger investment in bedroom furniture and a refined furniture
assortment, which resulted in higher average price per unit. The inventory
consists primarily of new merchandise, with less than 10% of the merchandise
being clearance product. Based upon the freshness of the inventory, management
does not expect to take unusual markdowns in order to sell through the product
and expects inventories to return to more normal levels by the end of the second
quarter.
Capital expenditures totaled $16.7 million and included the costs of 10 new
stores and the conversion of 20 regular stores to the larger format, as well as
continued investments in software and equipment. The capital expenditures
program for Fiscal 2001 is planned at approximately $19 million and includes 30
to 35 stores openings, including 8 to 10 outlets. Additionally, 15 to 20 stores
are expected to be converted to the larger format. Generally, a new or converted
store is profitable in its first full year of operations.
The Company has in place a stock repurchase program approved by the Board of
Directors of up to $30 million. During Fiscal 2000, the Company spent $10.3
million under the program to acquire approximately 3.0 million shares of the
Company's common stock. From the inception of the program through February 3,
2001, $25.0 million has been spent to repurchase approximately 6.0 million
shares. The Company does not currently have plans to purchase additional shares
during Fiscal 2001.
13
14
The Company's development of its wholesale business, international opportunities
and children's room furnishings line are expected to have modest capital
requirements during Fiscal 2001. The Company anticipates funding the growth of
these initiatives through working capital.
The Company believes that its current cash position, cash flows from operations
and credit line facilities will be sufficient to fund its current operations and
capital expenditures program.
Fiscal 1999
At January 29, 2000, cash and short-term investments were $39.2 million, a
decrease of $13.6 million from January 30, 1999. The primarily uses of cash were
inventory purchases, expansion of the store base and information technology
upgrades as well as purchases of treasury stock. These uses were partially
offset by net income including non-cash depreciation and amortization expense,
and by increases in payable.
At January 29, 2000, inventory levels were $16.2 million higher than at the same
time the prior year. During Fiscal 1999, the Company made the decision to bring
in approximately $5 million of inventory early as insurance against possible
supply chain disruptions related to Year 2000 issues. Much of this product was
included in inventory as of the end of the year. The increase was also
reflective of the higher sales level and the increase focus on accessories.
Capital expenditures totaled $18.0 million and included the costs of 19 new
stores and the conversion of 11 regular stores to the larger format. The 1999
capital expenditures also included approximately $6.6 million spent on the
replacement of store point of sale equipment, as well as purchases of additional
store fixtures and routine purchases of equipment.
During Fiscal 1999, the Company spent $8.5 million under its stock repurchase
program to acquire, through open market transactions, approximately 1.8 million
shares of the Company's common stock.
NEW ACCOUNTING PRONOUNCEMENT
Effective February 4, 2001, the Company will adopt the provisions of Statement
of Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities ("FAS 133"). FAS 133 establishes accounting and reporting
standards for derivative financial instruments including, among other things,
forward currency exchange contracts. However, due to the Company's limited use
of derivative financial instruments, adoption of FAS 133 will not have a
significant impact on the Company's consolidated financial position or results
of operations.
14
15
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
As of February 3, 2001, the Company had no market risk sensitive instruments.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The index to the consolidated financial statements is found on page 19. The
Company's consolidated financial statements and notes to the consolidate
financial statements follow the index.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES.
There have been no changes in or disagreements with accountants on accounting or
financial disclosures.
15
16
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information required by this item appears under the captions "Election of
Directors", "Executive Officers of the Company" and "Section 16(a) Beneficial
Ownership Reporting Compliance" in the Definitive Proxy Statement of The Bombay
Company, Inc. relating to the Company's Annual Meeting of Shareholders, which
information is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this item appears under the captions "Executive
Compensation" and "Compensation of Directors" in the Definitive Proxy Statement
of The Bombay Company, Inc. relating to the Company's Annual Meeting of
Shareholders, which is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this item appears under the caption "Security
Ownership" and in the Definitive Proxy Statement of The Bombay Company, Inc.
relating to the Company's Annual Meeting of Shareholders, which information is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this item appears under the caption "Certain
Transactions" in the Definitive Proxy Statement of The Bombay Company, Inc.
relating to the Company's Annual Meeting of Shareholders, which information is
incorporated herein by reference.
16
17
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) The following documents are filed as a part of this Annual Report for The
Bombay Company, Inc. and its subsidiaries:
(1) Financial Statements:
Report of Independent Accountants
Consolidated Statements of Income for the years ended February 3,
2001, January 29, 2000 and January 30, 1999
Consolidated Balance Sheets at February 3, 2001 and January 29, 2000
Consolidated Statements of Cash Flows for the years ended
February 3, 2001, January 29, 2000 and January 30, 1999
Consolidated Statements of Stockholders' Equity for the years
ended February 3, 2001, January 29, 2000 and January 29, 1999
Notes to Consolidated Financial Statements
(2) Financial statement schedules not included in this Form 10-K Annual
Report have been omitted because they are not applicable or the
required information is shown in the financial statements or notes
thereto.
(3) Exhibits:
A list of exhibits required to be filed as part of this report is
set forth in the Index to Exhibits, which immediately precedes such
exhibits, and is incorporated herein by reference.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter ended February
3, 2001.
17
18
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
THE BOMBAY COMPANY, INC.
(Registrant)
Date: April 30, 2001
/s/ CARMIE MEHRLANDER
--------------------------------
Carmie Mehrlander
Chairman of the Board, President
and Chief Executive Officer
Pursuant to the requirements of the Securities and Exchange Act of 1934,
this has been signed below by the following persons on behalf of the registrant
and in the capacities and on the dates indicated.
Name Position Date
---- -------- ----
Director
-------------------------------------
Barbara Bass
Director
-------------------------------------
John H. Costello
/s/ GLENN E. HEMMERLE Director April 30, 2001
-------------------------------------
Glenn E. Hemmerle
/s/ JAMES A. MARCUM Director April 30, 2001
-------------------------------------
James A. Marcum
/s/ CARMIE MEHRLANDER President, Chief Executive Officer April 30, 2001
------------------------------------- and Director
Carmie Mehrlander
/s/ JULIE L. REINGANUM Director April 27, 2001
-------------------------------------
Julie L. Reinganum
/s/ BRUCE R. SMITH Director April 27, 2001
-------------------------------------
Bruce R. Smith
/s/ NIGEL TRAVIS Director April 30, 2001
-------------------------------------
Nigel Travis
/s/ ELAINE D. CROWLEY Vice President, Chief Financial Officer April 30, 2001
------------------------------------- and Treasurer
Elaine D. Crowley
18
19
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Page No.
-------
Report of Independent Accountants................................................................... 20
Consolidated Statements of Income for the Years Ended February 3, 2001,
January 29, 2000 and January 30, 1999............................................................ 21
Consolidated Balance Sheets at February 3, 2001 and January 29, 2000................................ 22
Consolidated Statements of Cash Flows for the Years Ended February 3, 2001,
January 29, 2000 and January 30, 1999............................................................ 23
Consolidated Statements of Stockholders' Equity for the Years Ended February 3, 2001,
January 29, 2000, and January 30, 1999........................................................... 24
Notes to Consolidated Financial Statements.......................................................... 25-33
Unaudited Quarterly Financial Data.................................................................. 34
19
20
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
The Bombay Company, Inc.
In our opinion, the consolidated financial statements listed in the accompanying
index on page 19 present fairly, in all material respects, the financial
position of The Bombay Company, Inc. and its subsidiaries at February 3, 2001
and January 29, 2000, and the results of their operations and their cash flows
for each of the three years in the period ended February 3, 2001, in conformity
with accounting principles generally accepted in the United States of America.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States of America which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
PRICEWATERHOUSECOOPERS LLP
March 14, 2001
Fort Worth, Texas
20
21
CONSOLIDATED STATEMENTS OF INCOME
The Bombay Company, Inc. and Subsidiaries
(In thousands, except per share amounts)
Year Ended
----------------------------------------------
February 3 January 29 January 30
2001 2000 1999
------------ ------------ ------------
Net sales ............................................. $ 421,514 $ 390,881 $ 356,715
------------ ------------ ------------
Costs and expenses:
Cost of sales, buying and store occupancy costs .... 291,692 273,500 252,891
Selling, general and administrative expenses ....... 115,965 106,257 98,916
Interest income, net ............................... (543) (1,029) (1,885)
------------ ------------ ------------
407,114 378,728 349,922
------------ ------------ ------------
Income before income taxes ............................ 14,400 12,153 6,793
Provision for income taxes ............................ 5,755 4,811 2,783
------------ ------------ ------------
Net income ......................................... $ 8,645 $ 7,342 $ 4,010
============ ============ ============
Basic earnings per share .............................. $ .26 $ .20 $ .11
============ ============ ============
Diluted earnings per share ............................ $ .26 $ .20 $ .11
============ ============ ============
Average common shares outstanding ..................... 33,262 36,408 37,728
============ ============ ============
Average common shares outstanding and
dilutive potential common shares ................... 33,292 36,672 37,784
============ ============ ============
The accompanying notes are an integral part of these consolidated financial
statements.
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CONSOLIDATED BALANCE SHEETS
The Bombay Company, Inc. and Subsidiaries
(In thousands, except shares)
February 3 January 29
2001 2000
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents (short-term investments of $15,244 and $32,584, respectively) .. $ 22,157 $ 39,174
Inventories, at lower of cost or market .................................................. 104,914 90,583
Other current assets ..................................................................... 15,380 9,365
------------ ------------
Total current assets ................................................................ 142,451 139,122
------------ ------------
Property and equipment, at cost:
Land ..................................................................................... 990 993
Building ................................................................................. 5,198 5,198
Leasehold improvements ................................................................... 76,991 73,896
Furniture and equipment .................................................................. 28,844 28,674
------------ ------------
112,023 108,761
Accumulated depreciation ............................................................. (63,517) (61,217)
------------ ------------
Net property and equipment ........................................................... 48,506 47,544
------------ ------------
Deferred taxes and other assets ............................................................. 15,237 14,721
Goodwill, less amortization of $577 and $549, respectively .................................. 457 485
------------ ------------
Total assets ........................................................................ $ 206,651 $ 201,872
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses ............................................... $ 28,445 $ 24,459
Income taxes payable ................................................................ 5,969 5,192
Accrued payroll and bonuses ......................................................... 5,649 4,519
Gift certificates redeemable ........................................................ 4,765 4,184
------------ ------------
Total current liabilities .......................................................... 44,828 38,354
------------ ------------
Accrued rent and other liabilities .......................................................... 7,096 7,270
------------ ------------
STOCKHOLDERS' EQUITY:
Preferred stock, $1 par value, 1,000,000 shares authorized .......................... -- --
Common stock, $1 par value, 50,000,000 shares authorized,
38,149,646 shares issued ........................................................... 38,150 38,150
Additional paid-in capital .......................................................... 75,735 76,082
Retained earnings ................................................................... 65,420 56,775
Accumulated other comprehensive income (loss) ....................................... (1,267) (1,013)
Common shares in treasury, at cost, 5,455,919 and
2,677,236 shares, respectively ................................................ (22,320) (13,129)
Stock purchase loans and accrued interest ........................................... (991) (617)
------------ ------------
Total stockholders' equity ......................................................... 154,727 156,248
------------ ------------
Commitments and contingencies (Note 4)
Total liabilities and stockholders' equity ......................................... $ 206,651 $ 201,872
============ ============
The accompanying notes are an integral part of these consolidated financial
statements.
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CONSOLIDATED STATEMENTS OF CASH FLOWS
The Bombay Company, Inc. and Subsidiaries
(In thousands)
Year Ended
----------------------------------------------
February 3 January 29 January 30
2001 2000 1999
------------ ------------ ------------
Cash flows from operating activities:
Net income ..................................................... $ 8,645 $ 7,342 $ 4,010
Adjustments to reconcile net income to net cash from operations:
Depreciation and amortization .............................. 14,751 12,661 10,343
Deferred taxes and other ................................... 346 (317) 936
Change in assets and liabilities:
(Increase) decrease in inventories ......................... (14,692) (15,615) 8,769
(Increase) decrease in other current assets ................ (2,113) 38 (1,777)
Increase in accounts payable and accrued expenses .......... 256 3,081 1,593
Increase (decrease) in income taxes payable ................ 764 3,477 (399)
Increase (decrease) in accrued payroll and bonuses ......... 1,137 1,291 (1,163)
(Increase) decrease in noncurrent assets ................... 62 (84) (162)
Increase in noncurrent liabilities ......................... 9 462 398
------------ ------------ ------------
Net cash provided by operations .......................... 9,165 12,336 22,548
------------ ------------ ------------
Cash flows from investing activities:
Purchases of property, equipment and other .................... (16,721) (18,011) (20,476)
Proceeds from sale of property and equipment .................. 375 249 403
------------ ------------ ------------
Net cash used by investing activities ..................... (16,346) (17,762) (20,073)
------------ ------------ ------------
Cash flows from financing activities:
Purchases of treasury stock ................................... (10,303) (8,527) (6,170)
Sale of stock to employee benefit plans ....................... 291 269 161
Issuance of stock purchase loans .............................. -- (43) --
Exercise of stock options ..................................... -- 290 38
------------ ------------ ------------
Net cash used by financing activities ...................... (10,012) (8,011) (5,971)
------------ ------------ ------------
Effect of exchange rate change on cash ............................ 176 (198) 195
------------ ------------ ------------
Net decrease in cash and cash equivalents ......................... (17,017) (13,635) (3,301)
Cash and cash equivalents at beginning of year .................... 39,174 52,809 56,110
------------ ------------ ------------
Cash and cash equivalents at end of year .......................... $ 22,157 $ 39,174 $ 52,809
============ ============ ============
Supplemental disclosures of cash flow information:
Interest paid ................................................. $ 424 $ 48 $ --
Income taxes paid ............................................. 4,254 1,490 2,217
Non-cash financing activities:
Distributions of director fees .............................. 6 189 148
Issuance of restricted stock ................................ 154 73 --
Loans issued to purchase Company stock ...................... 314 574 --
The accompanying notes are an integral part of these consolidated financial
statements.
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24
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
The Bombay Company, Inc. and Subsidiaries
(In thousands)
Common Stock Treasury Stock Additional Stock
-------------------------- --------------------------- Paid-In Purchase
Shares Amount Shares Amount Capital Loans
----------- ----------- ----------- ----------- ----------- -----------
Total, January 31, 1998 ............ 38,114 $ 38,114 -- $ -- $ 75,904 $ --
Purchases of treasury shares ....... -- -- (1,207) (6,170) -- --
Shares contributed or sold to
employee benefit plans .......... 19 19 15 77 66 --
Exercise of stock options .......... 15 15 -- -- 38 --
Distributions of deferred
director fees ................... 2 2 21 110 36 --
Net income ......................... -- -- -- -- -- --
Foreign currency
translation adjustments ......... -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Total, January 30, 1999 ............ 38,150 38,150 (1,171) (5,983) 76,044 --
Purchases of treasury shares ....... -- -- (1,777) (8,527) -- --
Shares contributed or sold to
Employee benefit plans ......... -- -- 80 405 (43) (93)
Exercise of stock options .......... -- -- 66 336 (22) --
Distributions of deferred
director fees ................... -- -- 31 153 36 --
Distributions of restricted stock .. -- -- 13 65 8 --
Shares sold to officers with
stock purchase loans ............ -- -- 81 422 59 (481)
Loans to officers for purchases of
Company stock ................... -- -- -- -- -- (43)
Net income ......................... -- -- -- -- -- --
Foreign currency
translation adjustments ......... -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Total, January 29, 2000 ............ 38,150 38,150 (2,677) (13,129) 76,082 (617)
Purchases of treasury shares ....... -- -- (3,040) (10,303) -- --
Shares contributed or sold to
employee benefit plans .......... -- -- 130 541 (250) --
Distributions of director fees ..... -- -- 2 7 (1) --
Distributions of restricted stock... -- -- 28 130 24 --
Shares sold to officers with
stock purchase loans ............ -- -- 101 434 (120) (314)
Interest charged on stock
purchase loans .................. -- -- -- -- -- (60)
Net Income ......................... -- -- -- -- -- --
Foreign currency translation
Adjustments ..................... -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Total, February 3, 2001 ............ 38,150 $ 38,150 (5,456) $ (22,320) $ 75,735 $ (991)
=========== =========== =========== =========== =========== ===========
Accumulated Annual
Other Compre-
Retained Comprehensive hensive
Earnings Income (Loss) Income
----------- ----------- -----------
Total, January 31, 1998 ............ $ 45,423 $ (1,203)
Purchases of treasury shares ....... -- --
Shares contributed or sold to
employee benefit plans .......... -- --
Exercise of stock options .......... -- --
Distributions of deferred
director fees ................... -- --
Net income ......................... 4,010 -- $ 4,010
Foreign currency
translation adjustments ......... -- (298) (298)
----------- ----------- -----------
Total, January 30, 1999 ............ 49,433 (1,501) $ 3,712
===========
Purchases of treasury shares ....... -- --
Shares contributed or sold to
Employee benefit plans ......... -- --
Exercise of stock options .......... -- --
Distributions of deferred
director fees ................... -- --
Distributions of restricted stock .. -- --
Shares sold to officers with
stock purchase loans ............ -- --
Loans to officers for purchases of
Company stock ................... -- --
Net income ......................... 7,342 -- $ 7,342
Foreign currency
translation adjustments ......... -- 488 488
----------- ----------- -----------
Total, January 29, 2000 ............ 56,775 (1,013) $ 7,830
===========
Purchases of treasury shares ....... -- --
Shares contributed or sold to
employee benefit plans .......... -- --
Distributions of director fees ..... -- --
Distributions of restricted stock... -- --
Shares sold to officers with
stock purchase loans ............ -- --
Interest charged on stock
purchase loans .................. -- --
Net Income ......................... 8,645 -- $ 8,645
Foreign currency translation
Adjustments ..................... -- (254) (254)
----------- ----------- -----------
Total, February 3, 2001 ............ $ 65,420 $ (1,267) $ 8,391
=========== =========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
24
25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - STATEMENT OF ACCOUNTING POLICIES
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the Company and
its wholly - owned subsidiaries. All significant intercompany transactions,
balances and profits have been eliminated. The Company has a retail (52 - 53
week) fiscal year which ends on the Saturday nearest January 31. The period
ended February 3, 2001 ("Fiscal 2000") represents 53 weeks. The periods ended
January 29, 2000 ("Fiscal 1999") and January 30,1999 ("Fiscal 1998") represent
52 weeks.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates. Actual results
could differ from those estimates.
FOREIGN CURRENCY TRANSLATION
Fiscal year end exchange rates are used to translate assets and liabilities to
U.S. dollars. Monthly average exchange rates are used to translate income and
expenses. The cumulative effect of foreign currency translation adjustments is
reported in accumulated other comprehensive income (loss) within stockholders'
equity.
CASH AND CASH EQUIVALENTS
Cash in stores, deposits in banks and short-term investments with original
maturities of three months or less are considered as cash and cash equivalents
for the purposes of the financial statements. Short - term investments are
recorded at the lower of cost or fair market value.
INVENTORIES
Inventories are primarily finished merchandise and are valued at the lower of
average cost or market, cost being determined based upon the weighted average
inventory method.
PROPERTY AND EQUIPMENT
Property and equipment are depreciated over the estimated useful lives of the
assets using the straight - line method over the lives shown:
Building................................ Forty years
Furniture and equipment................. Two to ten years
Leasehold improvements.................. The lesser of the life
of the lease or asset
Maintenance and repairs are charged to expense as incurred. Renewals and
betterments which materially prolong the useful lives of the assets are
capitalized. The cost and related accumulated depreciation of property retired
or sold are removed from the accounts, and gains or losses are recognized in the
statements of income.
GOODWILL
Goodwill recorded in association with acquisitions accounted for using the
purchase method is amortized using the straight - line method over the estimated
useful life of 40 years.
IMPAIRMENT OF LONG-LIVED ASSETS
Long-lived assets, including goodwill, are reviewed whenever events or changes
in circumstances indicate that the carrying value of the asset may not be
recoverable. This review is performed by comparing the expected future
undiscounted net cash flows to the net book value of the assets. The amount of
the impairment loss is measured as the difference between carrying value and the
estimated fair value of the asset. To date, no impairment has been recognized.
REVENUE RECOGNITION
Revenue is recognized when delivery has occurred, the sales price is fixed or
determinable, and collectibility is reasonably assured. Sales are net of returns
and exclude sales tax.
25
26
The Company adopted the provisions of SEC Staff Accounting Bulletin No. 101,
Revenue Recognition in Financial Statements ("SAB 101"), in the fourth quarter
of Fiscal 2000. The effect of the adoption of SAB 101 was not material to the
Company's net sales or results of operations.
SHIPPING AND HANDLING COSTS
The Company includes the net costs of shipping and handling orders to customers
within selling, general and administrative expenses. During Fiscal 2000, Fiscal
1999 and Fiscal 1998, shipping and handling costs, totaled $2,356,000,
$1,996,000 and $2,127,000, respectively. Amounts collected from customers in
Fiscal 2000, Fiscal 1999 and Fiscal 1998 totaled $1,945,000, $1,697,000 and
$1,850,000, respectively.
ADVERTISING COSTS
Advertising costs are expensed the first time the advertising takes place.
During Fiscal 2000, Fiscal 1999 and Fiscal 1998 advertising expense was
$14,701,000, $14,645,000 and $16,565,000, respectively.
INCOME TAXES
The Company uses the liability method of computing deferred income taxes on all
material temporary differences. Temporary differences are the differences
between the reported amounts of assets and liabilities and their tax bases. The
Company assesses realizability of deferred tax assets and, if necessary, a
valuation allowance is provided.
COMPREHENSIVE INCOME
Comprehensive income represents the change in equity (net assets) of a business
enterprise during a period from transactions and other events and circumstances
from non-owner sources. It includes all changes in equity during a period except
those resulting from investments by owners and distributions to owners. Such
amounts are included in accumulated other comprehensive income (loss) within
stockholders' equity and consist of the cumulative effect of foreign currency
translation adjustments.
DERIVATIVES AND HEDGING ACTIVITIES
Effective February 4, 2001, the Company will adopt the provisions of Statement
of Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities ("FAS 133"). FAS 133 establishes accounting and reporting
standards for derivative financial instruments including, among other things,
forward currency exchange contracts. However, due to the Company's limited use
of derivative financial instruments, adoption of FAS 133 will not have a
significant impact on the Company's consolidated financial position or results
of operations.
EARNINGS PER SHARE
Basic earnings per share are based upon the weighted average number of shares
outstanding. Diluted earnings per share are based upon the weighted average
number of shares outstanding plus the shares that would be outstanding assuming
exercise of dilutive stock options and distribution of restricted stock and
deferred director compensation.
The computations for basic and diluted earnings from continuing operations per
share are as follows (in thousands, except per share amounts):
Year Ended
--------------------------------------------
February 3 January 29 January 30
2001 2000 1999
------------ ------------ ------------
Numerator:
Net income ............................... $ 8,645 $ 7,342 $ 4,010
============ ============ ============
Denominator for basic earnings per share:
Average common shares outstanding ............ 33,262 36,408 37,728
============ ============ ============
Denominator for diluted earnings per share:
Average common shares outstanding ......... 33,262 36,408 37,728
Stock options ............................. -- 217 32
Restricted stock .......................... 11 23 8
Deferred director compensation ............ 19 24 16
------------ ------------ ------------
33,292 36,672 37,784
============ ============ ============
Basic earnings per share ..................... $ .26 $ .20 $ .11
============ ============ ============
Diluted earnings per share ................... $ .26 $ .20 $ .11
============ ============ ============
26
27
NOTE 2 - INCOME TAXES
The components of the provision for domestic and foreign income taxes are shown
below (in thousands):
Year Ended
----------------------------------------------
February 3 January 29 January 30
2001 2000 1999
------------ ------------ ------------
Income (loss) before income taxes:
Domestic ......................... $ 12,503 $ 12,049 $ 7,244
Foreign .......................... 1,897 104 (451)
------------ ------------ ------------
$ 14,400 $ 12,153 $ 6,793
============ ============ ============
Provision (benefit) for income taxes:
Current:
Federal ...................... $ 3,950 $ 4,895 $ 1,789
Foreign ...................... 919 (20) (75)
State and local .............. 387 527 299
------------ ------------ ------------
5,256 5,402 2,013
------------ ------------ ------------
Deferred (prepaid):
Federal ...................... 389 (692) 767
Foreign ...................... 44 149 (50)
State and local .............. 66 (48) 53
------------ ------------ ------------
499 (591) 770
------------ ------------ ------------
Total provision for income taxes .... $ 5,755 $ 4,811 $ 2,783
============ ============ ============
The effective tax rate differs from the federal statutory tax rate for the
following reasons:
Year Ended
----------------------------------------
February 3 January 29 January 30
2001 2000 1999
---------- ---------- ----------
Federal statutory tax rate ......... 35.0% 35.0% 35.0%
Increase in effective tax rate
due to:
Foreign income taxes ....... 2.1 .8 .5
State and local taxes,
net of federal income
tax benefit ............ 2.2 3.0
4.0
Other, net ................. .7 .8 1.5
---------- ---------- ----------
Effective tax rate .... 40.0% 39.6% 41.0%
========== ========== ==========
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Deferred taxes reflect the net tax impact of temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and
amounts used for income tax purposes. Deferred tax assets (liabilities) are
comprised of the following (in thousands):
February 3 January 29
2001 2000
------------ ------------
Deferred tax liabilities ..... $ (1,661) $ (1,185)
------------ ------------
Deferred tax assets:
Accrued rent ............. 2,900 3,042
Depreciation ............. 2,661 2,697
Inventory valuation ...... 1,727 1,725
Store conversion costs ... 391 482
Other .................... 1,930 1,686
------------ ------------
9,609 9,632
------------ ------------
Net deferred tax assets .. $ 7,948 $ 8,447
============ ============
NOTE 3 - DEBT
The Company has unsecured revolving credit agreements with a group of banks
aggregating $45 million at February 3, 2001 of which $30 million is committed.
The credit facilities are for working capital and letter of credit purposes,
primarily to fund seasonal merchandise purchases, and bear interest at market
rates based on prime. The credit agreements restrict dividend payments, and
require the maintenance of various financial ratios and the payment of
negotiated fees. The revolving credit agreements expire May 12, 2001 and
negotiations are currently underway for their renewal or replacement. Management
expects to complete these negotiations on satisfactory terms before the current
agreements expire. At February 3, 2001, there were $8,908,000 in letters of
credit outstanding under the credit facilities, issued principally in
conjunction with overseas merchandise purchases. Interest expense and negotiated
fees for Fiscal 2000, Fiscal 1999 and Fiscal 1998 totaled $610,000, $257,000 and
$247,000, respectively.
NOTE 4 - COMMITMENTS AND CONTINGENCIES
Store, distribution and field office facilities are leased under operating
leases expiring through 2013. The store leases are generally based upon a
minimum rental plus a percentage of the store sales in excess of specified
levels. Store lease terms generally require additional payments covering taxes,
common area charges and certain other costs. Rental expense for Fiscal 2000,
Fiscal 1999 and Fiscal 1998 totaled $45,137,000, $42,991,000 and $40,244,000,
respectively.
The minimum rental commitments for future fiscal years are as follows (in
thousands):
Fiscal
- ------
2001.................... $ 41,019
2002.................... 39,375
2003.................... 33,466
2004.................... 21,594
2005.................... 13,599
Thereafter.............. 44,310
---------
$ 193,363
=========
The Company has certain contingent liabilities resulting from litigation and
claims incident to the ordinary course of business. Management believes that the
probable resolution of such contingencies will not materially affect the
financial position or results of operations of the Company.
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29
NOTE 5 - EMPLOYEE BENEFIT PLANS
The Bombay Company, Inc. Employee 401(k) Savings and Stock Ownership Plan
("401(k) Plan") is open to substantially all employees who have been employed
for one year and who work at least 1,000 hours per year. Under the 401(k) Plan,
a participant may contribute up to 15% of earnings with the Company matching
100% of the initial 3% contribution, and 50% of the next 2% contributed by the
participant. Contributions are paid to a corporate trustee and invested in
various funds. Company matching contributions made to participants' accounts are
fully vested immediately. Similar benefit plans are in effect for eligible
foreign employees.
To the extent employees are unable to contribute up to 5% of their earnings to
the 401(k) Plan because of limitations imposed by IRS regulations, a
Supplemental Stock Program was adopted. Under this program, employee
contributions in excess of IRS limitations, along with Company matching
contributions, are distributed annually in the form of Company common stock.
The Bombay Company, Inc. Stock Purchase Program ("SPP") is open to all full-time
employees who have at least 90 days of service. Each participant may contribute
1% to 10% of qualifying compensation, to a maximum annual contribution of
$21,250. Contributions are used to purchase shares of Company common stock at a
discount of 15% from current market rates. The participants' shares are fully
vested upon purchase. Participants' shares are held by a third-party
administrator until the respective participant requests a distribution.
Total Company contributions to these plans for Fiscal 2000, Fiscal 1999 and
Fiscal 1998 were $738,000, $480,000 and $544,000 respectively.
During Fiscal 1998, the Company modified its vacation policy in order to be more
competitive with the retail industry. As a result of the change, the Company
recorded a one time pre - tax credit of $700,000, equivalent to $.01 per share
after tax, relating to expenses that had been accrued under the previous policy
but were no longer required under the revised policy.
NOTE 6 - COMMON STOCK AND STOCK OPTIONS
The Company's Board of Directors has authorized a stock repurchase program to
purchase up to an aggregate of $30 million of the Company's stock. The shares
may be purchased from time to time, through open market purchases and privately
negotiated transactions. During Fiscal 2000, Fiscal 1999 and Fiscal 1998,
3,039,550, 1,777,416 and 1,207,200 shares, respectively, were acquired at an
aggregate cost of $10,303,000, $8,527,000 and $6,170,000, respectively. Treasury
shares are used for various employee and director stock plans as the need
arises.
Non-employee directors are eligible to participate in the Non-Employee
Director Equity Plan, which allows such directors the option to defer receipt of
retainer payments and meeting fees which are credited to an account for such
director in units equivalent to Company common stock.
The Bombay Company, Inc. 1986 Stock Option Plan and 1996 Long Term Incentive
Stock Plan ("Employee Plans") provide for the granting of options (and other
types of stock-related awards under the 1996 plan) to officers and key
management employees. At February 3, 2001, the option shares reserved for the
Employee Plans were 5,406,225. The option price is fixed at the market price or
higher on the date of the grant. Options are generally exercisable annually at a
rate of 33% per year beginning one year after the grant date. Shares available
for additional grants were 1,732,538; 2,046,273 and 2,315,959 at February 3,
2001, January 29, 2000 and January 30,1999, respectively.
During Fiscal 1998, restricted stock aggregating 90,000 shares was granted under
the 1996 Long Term Incentive Stock Plan to three key executives. The respective
shares are issuable in designated increments contingent upon continued
employment of the respective executive after 12 months, 24 months and 36 months.
During Fiscal 2000 and Fiscal 1999, 27,500 and 13,000 shares, respectively,
became vested and were issued under these grants. If each of the executives
remains employed by the Company under the terms of the grant, 49,500 shares will
be issuable during Fiscal 2001. Compensation expense of $98,000, $174,000 and
$214,000 was recognized during Fiscal 2000, Fiscal 1999 and Fiscal 1998,
respectively, in connection with the restricted stock.
The Bombay Company, Inc. 1991 Director Stock Option Plan and Non-Employee
Director Equity Plan ("Director Plans") provide for the granting of options to
members of the Board of Directors who are neither employees nor
29
30
officers of the Company. At February 3, 2001, the option shares reserved for the
Director Plans were 761,005. The option price is fixed at the market price on
the date of the grant. The option grant, initial and annual, is currently the
lesser of 5,000 shares or $75,000 in face value. The initial grant becomes
exercisable at a rate of 20% per year beginning one year after the grant date.
Each additional annual grant becomes fully exercisable six months after the
grant date. Shares available for additional grants were 481,696, 10,946 and
56,946 at February 3, 2001, January 29, 2000 and January 30, 1999, respectively.
The following table includes option information for the Employee Plans and
Director Plan:
Weighted
Number Option Price Average
Stock Option Activity Of Shares Per Share Option Price
- ----------------------------------- ------------ ------------ ------------
January 31, 1998 ...................................................... 1,607,507 $3.01-25.75 $ 7.23
Options granted ................................................... 1,218,535 3.75-8.19 5.20
Options exercised ................................................. (25,569) 3.01-4.75 3.48
Options canceled .................................................. (691,329) 3.88-15.88 6.33
-----------
January 30, 1999 ...................................................... 2,109,144 3.33-25.75 6.28
Options granted ................................................... 1,151,610 3.81-8.00 4.73
Options exercised ................................................. (44,316) 4.00-7.25 4.84
Options canceled .................................................. (359,053) 3.33-17.94 6.36
-----------
January 29, 2000 ...................................................... 2,857,385 3.60-25.75 5.67
Options granted ................................................... 1,027,500 1.75-5.00 3.77
Options canceled .................................................. (207,644) 2.50-15.88 4.61
-----------
February 3, 2001 ...................................................... 3,677,241 1.75-25.75 5.20
===========
Exercisable at:
January 30,1999 ................................................... 640,609 3.33-25.75 8.35
===========
January 29, 2000 .................................................. 827,492 3.60-25.75 7.15
===========
February 3, 2001 .................................................. 2,100,473 3.60-25.75 5.60
===========
The following table summarizes stock options outstanding at February 3, 2001:
Outstanding Exercisable
- -------------------------------------------------------------------------- --------------------------------
Weighted Weighted Weighted
Exercise Average Average Average
Price Remaining Exercise Exercise
Range Shares Life Price Shares Price
- --------------------- ------------ -------------- --------------- ------------- ---------------
$1.75-3.75 237,787 8.11 $ 3.12 77,362 $ 3.65
3.81-3.94 1,344,951 8.56 3.88 558,927 3.87
4.00-4.38 394,984 7.12 4.28 389,651 4.28
4.50-4.94 367,341 6.48 4.75 285,994 4.74
5.00-5.95 410,218 7.40 5.52 233,238 5.48
6.00-6.44 405,400 8.49 6.42 151,887 6.42
6.53-9.25 386,244 5.41 7.46 273,098 7.50
10.00-25.75 130,316 2.93 15.21 130,316 15.21
--------- ---------
3,677,241 7.50 $ 5.20 2,100,473 $ 5.60
========= =========
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31
The exercise of non - qualified stock options in Fiscal 1999 and Fiscal 1998
resulted in income tax benefits of $25,000 and $17,000, respectively, which were
credited to additional paid - in capital. The income tax benefits are the tax
effect of the difference between the market price on the date of exercise and
the option price.
The Company has adopted the disclosure-only provisions of Statement of Financial
Accounting Standards No. 123, Accounting for Stock - Based Compensation ("FAS
123"). Accordingly, no compensation cost has been recognized for options
granted. Had compensation cost for the Company's stock option plans been
determined based on the fair value at the grant date for awards in Fiscal 1995
through Fiscal 2000 in accordance with the provisions of FAS 123, the Company's
net income and earnings per share would have been reduced to the pro forma
amounts indicated below (in thousands, except per share amounts):
Year Ended
--------------------------------------------
February 3 January 29 January 30
2001 2000 1999
------------ ------------ ------------
Net income, as reported ...... $ 8,645 $ 7,342 $ 4,010
Net income, pro forma ........ 7,521 5,876 2,868
Basic earnings per share,
as reported .............. .26 .20 .11
Diluted earnings per share,
as reported ............. .26 .20 .11
Basic earnings per share,
pro forma ............... .23 .16 .08
Diluted earnings per share,
pro forma ............... .23 .16 .08
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model based upon the following assumptions:
Year Ended
---------------------------------------
February 3 January 29 January 30
2001 2000 1999
---------- ---------- ----------
Expected volatility ........ 59.8% 59.4% 55.5%
Expected life years ........ 6 5 6
Expected dividends ......... -- -- --
Risk-free interest rate .... 5.2-6.8% 5.3-6.7% 5.0-6.1%
The weighted average fair value of options granted during Fiscal 2000, Fiscal
1999 and Fiscal 1998 was $2.34, $2.64 and $2.92, respectively.
NOTE 7 - SHAREHOLDERS' RIGHTS PLAN
The Company has a shareholders' rights plan under which each share of Company
common stock includes one Preferred Share Purchase Right ("Right") entitling the
holder to buy one one-thousandth of a share of Series A Junior Participating
Preferred Stock of the Company at an exercise price of $50. The Rights, which
have ten year terms expiring in 2005, are exercisable if a person or group
acquires 15% or more of the common stock of the Company or announces a tender
offer for 15% or more of the common stock. If a person or group acquires 15% or
more of the outstanding common stock of the Company, each Right will entitle the
holder to purchase, at the Right's exercise price, a number of shares of Company
common stock having a market value of twice the Right's exercise price. If the
Company is acquired in a merger or other business combination transaction after
a person or group acquires 15% or more of the Company's common stock, each Right
will entitle its holder to purchase, at the Right's exercise price, a number of
shares of the acquiring company's common stock having a market value of twice
the Right's exercise price. The Rights are redeemable at one cent per Right at
any time before they become exercisable.
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32
NOTE 8 - STOCK PURCHASE LOANS
On August 26, 1999, the Board of Directors adopted an executive stock purchase
program as a vehicle to enable executive officers to increase their ownership in
the Company by purchasing Company stock, further aligning the interests of the
officers with those of the shareholders. Under the program, certain key
executive officers may be given the opportunity to purchase shares of the
Company's common stock at market prices from time to time over a specified
period of time, and the Company will finance 100% of the purchase price of such
stock. The unsecured, full recourse loans bear interest at Applicable Federal
Rates and have due rates ranging from August 31, 2002 to May 31, 2003. At
February 3, 2001 and January 29, 2000, $931,000 and $617,000, respectively, had
been borrowed under these terms, and the notes receivable are reflected as a
reduction in stockholders' equity. Of the total, $43,000 was used to purchase
shares through open market transactions while the remainder was purchased from
the Company's treasury at current market prices. The shares purchased from the
Company are unregistered and, therefore, are restricted when received by
participants. During Fiscal 2000, $60,000 in interest income was recognized
related to the loans.
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33
NOTE 9 - GEOGRAPHIC AREAS
The Company operates in one industry segment, specialty retailing. Substantially
all revenues result from the sale of home furnishings and accessories through
retail stores in the United States and Canada. Operating profit by geographic
area is total revenue less operating expenses. Area operating expenses exclude
interest income, net of interest expense, and income taxes. Identifiable assets
by area are those assets used in the area's operations, including intangibles.
The following table shows net sales, operating profit and other financial
information by geographic area (in thousands):
Year Ended
------------------------------------------------
February 3 January 29 January 30
2001 2000 1999
------------ ------------ ------------
Net Sales:
United States ............ $ 373,463 $ 349,632 $ 318,657
Canada ................... 48,051 41,249 38,058
------------ ------------ ------------
Total .................... $ 421,514 $ 390,881 $ 356,715
============ ============ ============
Operating profit:
United States ............ $ 9,628 $ 8,998 $ 3,505
Canada ................... 4,229 2,126 1,403
Interest income, net ..... 543 1,029 1,885
------------ ------------ ------------
Income before
income taxes ........ $ 14,400 $ 12,153 $ 6,793
============ ============ ============
Identifiable assets:
United States ............ $ 188,152 $ 186,325 $ 180,741
Canada ................... 18,499 15,547 12,778
------------ ------------ ------------
Total .................... $ 206,651 $ 201,872 $ 193,519
============ ============ ============
Depreciation and amortization:
United States ............ $ 13,794 $ 11,840 $ 9,592
Canada ................... 957 821 751
------------ ------------ ------------
Total .................... $ 14,751 $ 12,661 $ 10,343
============ ============ ============
Capital expenditures:
United States ............ $ 15,610 $ 16,307 $ 19,699
Canada ................... 1,111 1,704 777
------------ ------------ ------------
Total .................... $ 16,721 $ 18,011 $ 20,476
============ ============ ============
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34
UNAUDITED QUARTERLY FINANCIAL DATA
The Bombay Company, Inc. and Subsidiaries
(In thousands, except per share amounts)
Unaudited quarterly financial data for the quarters ended:
February 3 October 28 July 29 April 29
2001 2000 2000 2000
------------ ------------ ------------ ------------
Net sales ........................... $ 156,643 $ 90,382 $ 89,201 $ 85,288
Gross profit ........................ 56,516 25,880 23,947 23,479
Net income (loss) ................... 12,991 (1,637) (1,034) (1,675)
Basic earnings (loss) per share ..... .40 (.05) (.03) (.05)
Diluted earnings (loss) per share ... .40 (.05) (.03) (.05)
January 29 October 30 July 31 May 1
2000 1999 1999 1999
------------ ------------ ------------ ------------
Net sales ........................... $ 139,577 $ 85,256 $ 90,762 $ 75,286
Gross profit ........................ 49,936 22,119 25,720 19,606
Net income (loss) ................... 11,718 (2,358) 413 (2,431)
Basic earnings (loss) per share ..... .33 (.06) .01 (.07)
Diluted earnings (loss) per share ... .32 (.06) .01 (.07)
34
35
THE BOMBAY COMPANY, INC. AND SUBSIDIARIES
INDEX TO EXHIBITS
Filed with the Annual Report on Form 10-K for the fiscal year ended February 3,
2001.
EXHIBIT
NUMBER DESCRIPTION
------ -----------
3(a) - Restated Certificate of Incorporation dated January 1, 1993
and Certificate of Amendment of the Restated Certificate of
Incorporation dated March 31, 1993. (1)
3(b) - Bylaws, as amended and restated effective May 21, 1997. (9)
4 - Preferred Stock Purchase Rights Plan. (2)
10(a) - Form of Indemnification Agreement. (3)
10(b) - The Bombay Company, Inc. Supplemental Stock Program. (4)
10(c) - The Bombay Company, Inc. 1993 Stock Deferral Plan for
Non-Employee Directors. (5)
10(d) - Executive Long Term Disability Plan. (6)
10(e) - The Bombay Company, Inc. 1996 Long-Term Incentive Stock Plan.
(7)
10(f) - Form of Award Agreement under the 1996 Long-Term Incentive
Stock Plan. (9)
10(g) - Executive Officers Incentive Compensation Plan. (8)
10(h) - Employment Contract with Executive Officer. (9)
10(i) - The Bombay Company, Inc. Amended and Restated 1991 Director
Stock Option Plan. (10)
10(j) - Form of Agreement used to evidence stock option grants under
The Bombay Company, Inc. 1991 Director Stock Option Plan. (5)
10(k) - Employment Contracts with Executive Officers. (11)
10(l) - The Bombay Company, Inc. 2000 Non-Employee Director Equity
Plan. (11)
10(m) - Form of Agreement used to evidence stock option grants under
The Bombay Company, Inc. 2000 Non-Employee Director Equity
Plan. (11)
21 - Subsidiaries of the Registrant. (11)
22 - Definitive Proxy Statement of the Company relating to Annual
Meeting of Shareholders (certain portions of such Proxy
Statement are incorporated herein by reference and are
identified by reference to caption in the text of this
report). (12)
23 - Consent of Independent Accountants.
----------
35
36
(1) Filed with the Commission as an Exhibit to the Company's Annual Report on
Form 10-K for the year ended July 4, 1993. Such Exhibit is incorporated
herein by reference.
(2) Filed with the Commission as an Exhibit to the Company's Registration
Statement on Form 8A filed June 12, 1995. Such Exhibit is incorporated
herein by reference.
(3) Filed with the Commission as an Exhibit to the Company's Definitive Proxy
Statement dated October 10, 1986, which Proxy Statement was filed with the
Commission as an Exhibit to the Company's Annual Report on Form 10-K for
the year ended June 30, 1986. Such Exhibit is incorporated herein by
reference.
(4) Filed with the Commission as an Exhibit to the Company's Annual Report on
Form 10-K for the year ended June 28, 1992. Such Exhibit is incorporated
herein by reference.
(5) Filed with the Commission as an Exhibit to the Company's Definitive Proxy
Statement dated September 7, 1993, which Proxy Statement was filed with
the Commission as an Exhibit to the Company's Annual Report on Form 10-K
for the year ended July 4, 1993. Such Exhibit is incorporated herein by
reference.
(6) Filed with the Commission as an Exhibit to the Company's Annual Report on
Form 10-K for the year ended July 3, 1994. Such Exhibit is incorporated
herein by reference.
(7) Filed with the Commission as an Exhibit to the Company's Definitive Proxy
Statement dated April 3, 1996, which Proxy Statement was filed with the
Commission as an Exhibit to the Company's Annual Report on Form 10-K for
the year ended February 3, 1996. Such Exhibit is incorporated herein by
reference.
(8) Filed with the Commission as an Exhibit to the Company's Annual Report on
Form 10-K for the year ended January 31, 1998. Such Exhibit is
incorporated herein by reference.
(9) Filed with the Commission as an Exhibit to the Company's Annual Report on
Form 10-K for the year ended January 30, 1999. Such Exhibit is
incorporated herein by reference.
(10) Filed with the Commission as an Exhibit to the Company's Registration
Statement on Form S-8 filed February 8, 2000. Such Exhibit is incorporated
herein by reference.
(11) Filed with the Commission as an Exhibit to the Company's Annual Report on
Form 10-K for the year ended January 29, 2000. Such Exhibit is
incorporated herein by reference.
(12) Filed with the Commission on April 13, 2001.
36