Bed, Bath and Beyond 2006 Annual Report Download

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2006
2006 Annual Report • Notice of Annual Meeting • Proxy Statement
To Our Fellow Shareholders:
We say it every year. We get to work each day with talented, dedicated people. We hear it from others, from
outside our Company, or who join us from other organizations. We hear it from those who provide merchandise and
services to our Company. Most importantly, we hear it from our customers. We have heard it described as “passion,”
or as a “can-do” attitude. Whatever it is, it has taken a thought in 1971 to a chain of 34 stores in 1992 and, today,
transformed it into a Company that at the end of fiscal 2006 comprised 888 Bed Bath & Beyond, Christmas Tree Shops
and Harmon stores in 48 states, the District of Columbia and Puerto Rico. Now that passion is extended to another
phase in our customers’ life-cycle with the addition of buybuy BABY this past March. We say this every year and never
get tired of it: we are excited about the prospects for our Company, not only for the benefits our continued profitable
growth will present to our customers, shareholders and vendor partners, but for the opportunities that growth will
provide our more than 35,000 associates who amaze us each day with their energy, talent, dedication and hard work.
Continued on page 1

Table of contents

  • Page 1
    ...is, it has taken a thought in 1971 to a chain of 34 stores in 1992 and, today, transformed it into a Company that at the end of fiscal 2006 comprised 888 Bed Bath & Beyond, Christmas Tree Shops and Harmon stores in 48 states, the District of Columbia and Puerto Rico. Now that passion is extended to...

  • Page 2
    ... any cash dividends in any of the fiscal years noted above. (4) In fiscal 2006, 2005 and 2004, the Company repurchased approximately $301 million, $598 million and $350 million of its common stock, respectively. (5) The Company adopted Staff Accounting Bulletin 108, "Considering the Effects of...

  • Page 3
    ... in fiscal 2005. All comparable store sales percentages are calculated based on an equivalent number of weeks for each annual period. • During fiscal 2006, we opened 74 new Bed Bath & Beyond stores. We ended the year with 815 Bed Bath & Beyond stores in 48 states, the District of Columbia and...

  • Page 4
    ... as well as food, giftware, health and beauty care items and infant and toddler merchandise. The Company's stores combine superior service and a broad selection of items at everyday low prices. Shares of Bed Bath & Beyond Inc. are traded on the NASDAQ National Market under the symbol BBBY and are...

  • Page 5
    ... of 8 stores in Maryland, New Jersey, New York and Virginia. The stores range in size from approximately 28,000 to 60,000 square feet and offer a broad assortment of premier infant and toddler merchandise in categories including furniture, car seats, strollers, feeding, bedding, bath, health and...

  • Page 6
    ... and $2.186 billion or 42.5% of net sales, respectively. The increase in gross profit between fiscal 2005 and 2004 as a percentage of net sales was primarily attributable to lower inventory acquisition costs of the Company's current merchandise offerings. BED BATH & BEYOND ANNUAL REPORT 2006 4

  • Page 7
    ...million in fiscal 2005. The decrease in net cash used in financing activities was primarily attributable to common stock repurchased of $301 million in the current year compared to $598 million in the prior year under the Company's stock repurchase program. BED BATH & BEYOND ANNUAL REPORT 2006 5

  • Page 8
    ... at the end of the fiscal 2006. In accordance with SAB 108, the Company has adjusted beginning retained earnings for fiscal 2006 in the accompanying consolidated financial statements for the items described under "Review of Equity Grants and Procedures and BED BATH & BEYOND ANNUAL REPORT 2006 6

  • Page 9
    ...lease term as the date the Company obtained possession of the leased premises and to correspondingly increase deferred tax assets. The Company does not believe that the net effect of this adjustment which includes fiscal years 1993 through 2003 was material. BED BATH & BEYOND ANNUAL REPORT 2006 7

  • Page 10
    ..., does not require any new fair value measurements. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007. The Company does not believe the adoption of SFAS No. 157 will have a material impact on its consolidated financial statements. BED BATH & BEYOND ANNUAL REPORT 2006 8

  • Page 11
    ... "Recent Accounting Pronouncements-Staff Accounting Bulletin No. 108"). For fiscal 2006, the Company recorded $8.2 million of expense related to the revised measurement dates. The Company's Board of Directors also approved a remediation program intended to protect over 1,600 employees from certain...

  • Page 12
    ...a material impact on its earnings. Store Opening, Expansion, Relocation and Closing Costs: Store opening, expansion, relocation and closing costs, including markdowns, asset residual values and projected occupancy costs, are charged to earnings as incurred. BED BATH & BEYOND ANNUAL REPORT 2006 10

  • Page 13
    ...the Company's stock option grants, the outcome of the shareholder derivative actions filed against certain of the Company's officers and its directors and the possibility of other private litigation relating to such stock option grants and related matters. BED BATH & BEYOND ANNUAL REPORT 2006 11

  • Page 14
    CONSOLIDATED BALANCE SHEETS Bed Bath & Beyond Inc. and Subsidiaries (in thousands, except per share data) ASSETS Current assets: Cash and cash equivalents Short term investment securities Merchandise inventories...632,224) (948,395) -) 2,262,450) $ 3,382,140) BED BATH & BEYOND ANNUAL REPORT 2006 12

  • Page 15
    ...stock, including fees Balance at February 26, 2005 302,825 Net earnings Shares sold under employee stock option plans, including tax benefit 2,300 Issuance of...612) $3,153,856) (32,676) $(1,249,397) See accompanying Notes to Consolidated Financial Statements. BED BATH & BEYOND ANNUAL REPORT 2006 13

  • Page 16
    ...cash and cash equivalents Cash and cash equivalents: Beginning of period End of period See accompanying Notes to Consolidated Financial Statements. March 3, 2007 $ 594,244) FISCAL YEAR ENDED February 25, 2006 $ 572,847) February 26, 2005...) $ 222,108) $ $ BED BATH & BEYOND ANNUAL REPORT 2006 14

  • Page 17
    ... early application encouraged. The Company adopted SAB 108 in its fiscal fourth quarter. (See "Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial Statements," Note 2). BED BATH & BEYOND ANNUAL REPORT 2006...

  • Page 18
    ... H. Cash and Cash Equivalents The Company considers all highly liquid instruments purchased with original maturities of three months or less to be cash equivalents. Included in cash and cash equivalents are credit and debit card receivables from banks, which typically settle within 5 business days...

  • Page 19
    ... the impairment occurs. Included within other assets in the accompanying consolidated balance sheets as of March 3, 2007 and February 25, 2006 is $147.6 million for goodwill and $19.9 million for the tradename of CTS, which are not subject to amortization. BED BATH & BEYOND ANNUAL REPORT 2006 17

  • Page 20
    ... will be adjusted accordingly. S. Cost of Sales Cost of sales includes the cost of merchandise, buying costs and costs of our distribution network including inbound freight charges, distribution facility costs, receiving costs and internal transfer costs. BED BATH & BEYOND ANNUAL REPORT 2006 18

  • Page 21
    ... 2006, 2005 and 2004, respectively. W. Stock-Based Compensation The FASB issued SFAS No. 123 (revised 2004), "Share-Based Payment" ("SFAS No. 123R") which requires companies to measure all employee stock-based compensation awards using a fair value method and record such expense in its consolidated...

  • Page 22
    ... through 2005) of $61.8 million, including related tax items. In accordance with the provisions of SAB 108, the Company decreased beginning retained earnings for fiscal year 2006 by $61.8 million within the accompanying Consolidated Financial Statements. BED BATH & BEYOND ANNUAL REPORT 2006 20

  • Page 23
    ... the Company's method of accounting defined the beginning of the lease term as the date the Company commenced lease payments. The Company has ...099) (720,592) $ 929,507) February 25, 2006 $ 49,900) 517,469) 528,109) 231,047) 1,326,525) (587,783) $ 738,742) BED BATH & BEYOND ANNUAL REPORT 2006 21

  • Page 24
    ... $0.6 million as of March 3, 2007 and were not material as of February 25, 2006. As of March 3, 2007 and February 25, 2006, the Company had no cumulative unrecognized holding gains or losses relating to its available-for-sale investment securities. BED BATH & BEYOND ANNUAL REPORT 2006 22

  • Page 25
    ...of 2.49% and other income tax benefits of 0.09%. For fiscal 2004, the effective tax rate is comprised of the Federal statutory income tax rate of 35.00% and the State income tax rate, net of Federal benefit, of 2.60% and other income tax effects of 0.15%. BED BATH & BEYOND ANNUAL REPORT 2006 23

  • Page 26
    ... a specified period of time. The Company contributed approximately $4.8 million and $0.5 million for fiscal 2006 and 2005, respectively. For fiscal 2004, the Company did not make a material contribution to the Plans, as the match was not yet effective. BED BATH & BEYOND ANNUAL REPORT 2006 24

  • Page 27
    ... provide for a base salary (which may be increased by the Board of Directors), termination payments, post-retirement benefits and other terms and conditions of employment. In addition, the Company maintains employment agreements with other executives which provide for severance pay and, in some...

  • Page 28
    ... non-cash equity-based compensation charges related to fiscal years prior to 2006. (See "Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial Statements," Note 2). BED BATH & BEYOND ANNUAL REPORT 2006 26

  • Page 29
    ...New Jersey in connection with its inquiry into such matters. Incentive Compensation Plans During fiscal 2004, in anticipation of adopting SFAS No. 123R, the Company revised its overall approach to compensation for its employees, including stock-based compensation, and adopted the Bed Bath & Beyond...

  • Page 30
    ...vesting dates. The Company recognizes compensation expense related to these awards based on the assumption that the performance-based test will be achieved. Vesting of restricted stock awarded to the Company's other employees is based solely on time vesting. BED BATH & BEYOND ANNUAL REPORT 2006 28

  • Page 31
    ... of 8 stores in Maryland, New Jersey, New York and Virginia. The stores range in size from approximately 28,000 to 60,000 square feet and offer a broad assortment of premier infant and toddler merchandise in categories including furniture, car seats, strollers, feeding, bedding, bath, health and...

  • Page 32
    REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board of Directors and Shareholders Bed Bath & Beyond Inc.: We have audited the accompanying consolidated balance sheets of Bed Bath & Beyond Inc. and subsidiaries as of March 3, 2007 and February 25, 2006, and the related consolidated ...

  • Page 33
    ...(CONTINUED) The Board of Directors and Shareholders Bed Bath & Beyond Inc.: We have audited management's assessment, included in the accompanying Management's Report on Internal Control Over Financial Reporting, that Bed Bath & Beyond Inc. and subsidiaries maintained effective internal control over...

  • Page 34
    ... Operations Allan N. Rauch Vice President - Legal and General Counsel G. William Waltzinger, Jr. Vice President - Bed Bath & Beyond Inc. Corporate Development President - Harmon Stores, Inc. Chuck Bilezikian Chief Executive Officer - Christmas Tree Shops, Inc. Richard S. Acciarito Vice President...

  • Page 35
    ...'s Policy of Ethical Standards for Business Conduct is also provided at this location. Stock Listing NASDAQ National Market Trading symbol BBBY. Annual Meeting The Annual Meeting of Shareholders will be held at 9 a.m. July 10, 2007, at the Madison Hotel, One Convent Road, Morristown, New Jersey...

  • Page 36
    STORE LOCATIONS (as of March 3, 2007) BED BATH & BEYOND STORES CHRISTMAS TREE SHOPS STORES HARMON STORES Alabama Alaska Arizona Arkansas California Colorado Connecticut Delaware Florida Georgia Idaho Illinois Indiana Iowa Kansas Kentucky Louisiana Maine Maryland Massachusetts Michigan Minnesota ...

  • Page 37
    650 Liberty Avenue Union, NJ 07083 908-688-0888