Bed, Bath and Beyond 2008 Annual Report Download

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Notice of 2009 Annual Meeting of Shareholders
Proxy Statement
2008 Annual Report
BED BATH & BEYOND INC.
To Our Fellow Shareholders:
The challenges our Company has faced in the past year have been many.Economic uncertainty, rising unemploy-
ment, falling consumer confidence and a marked slowdown in housing activity have had, and will continue to have,
an adverse effect on the general business climate and on our business. Despite these conditions, our Company
continues to grow and to widen the gap between us and our competitors. This past and continued success is a tribute
to the talented and dedicated associates who find additional ways to improve and enhance the customer shopping
experience in our stores each day. The sense of ownership and entrepreneurship they possess and exhibit daily lies at
the heartof our Company culture. Their goal and the goal of our Company has been and remains the same at all
times: to be the customer’s first choice for the merchandise categories we offer, domestically, interactively and in the
longer terminternationally.
Continued on page 1

Table of contents

  • Page 1
    BED BATH & BEYOND INC. Notice of 2009 Annual Meeting of Shareholders Proxy Statement 2008 Annual Report To Our Fellow Shareholders: The challenges our Company has faced in the past year have been many. Economic uncertainty, rising unemployment, falling consumer confidence and a marked slowdown...

  • Page 2
    ... In fiscal 2008, 2007, 2006, 2005 and 2004, the Company repurchased approximately $48 million, $734 million, $301 million, $598 million and $350 million of its common stock, respectively. (7) In fiscal 2006, the Company adopted Staff Accounting Bulletin 108, "Considering the Effects of Prior Year...

  • Page 3
    ... to test new merchandise initiatives throughout our stores, expand our bridal, baby and gift registry businesses and enhance our online shopping capabilities, as well as expand, relocate, renovate or remodel existing stores, and we remain committed to making the required investments in our Company...

  • Page 4
    ..., 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 Stock Market under the symbol BBBY and are included in the Standard...

  • Page 5
    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW Bed Bath & Beyond Inc. and subsidiaries (the "Company") is a chain of retail stores, operating under the names Bed Bath & Beyond ("BBB"), Christmas Tree Shops ("CTS"), Harmon and Harmon Face Values ("...

  • Page 6
    ...scal 2008, comparable store sales for 874 stores represented $6.746 billion of net sales; for fiscal 2007, comparable store sales for 792 stores represented $6.457 billion of net sales; and for fiscal 2006, comparable store sales for 683 stores represented BED BATH & BEYOND 2008 ANNUAL REPORT 4

  • Page 7
    ... from year to year because the Company is required each year to determine whether new information changes the assessment of both the probability that a tax position will effectively be sustained and the appropriateness of the amount of recognized benefit. BED BATH & BEYOND 2008 ANNUAL REPORT 5

  • Page 8
    ... income taxes payable and merchandise inventories offset by merchandise credit and gift card liabilities and accrued expenses and other current liabilities). Inventory per square foot was $51.24 as of February 28, 2009, a decrease of approximately 4.4% from $53.58 as of March 1, 2008. The Company...

  • Page 9
    ... authorized share repurchases as of February 28, 2009. The execution of the Company's current share repurchase program will consider current business and market conditions, including but not limited to, the liquidity of its auction rate security investments. BED BATH & BEYOND 2008 ANNUAL REPORT 7

  • Page 10
    ... and income taxes payable in the Consolidated Balance Sheet as of February 28, 2009 have been reï¬,ected only in the Total column in the table above as the timing and/or amount of any cash payment is uncertain. Deferred rent and other liabilities are primarily comprised of deferred rent, workers...

  • Page 11
    ... through the Company's stock option review. As a result of this program, the Company made cash payments totaling approximately $30.0 million to over 1,600 employees in the fourth quarter of fiscal 2006, which resulted in a non-recurring, pre-tax stock-based BED BATH & BEYOND 2008 ANNUAL REPORT 9

  • Page 12
    ... the Company's business and financial condition, including any tax implications relating to the Company's stock option grants. CRITICAL ACCOUNTING POLICIES The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires the Company to...

  • Page 13
    .... Self Insurance: The Company utilizes a combination of insurance and self insurance for a number of risks including workers' compensation, general liability, automobile liability and employee related health care benefits (a portion of which is paid by its employees). Liabilities associated with...

  • Page 14
    ... inquiry with respect to matters arising out of and related to the Company's historical stock option grants and procedures and related matters and has advised the Company that the Division is recommending no enforcement action be taken related to this matter. BED BATH & BEYOND 2008 ANNUAL REPORT 12

  • Page 15
    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 Other current assets Total current assets Long term investment securities Property and ...

  • Page 16
    CONSOLIDATED STATEMENTS OF EARNINGS Bed Bath & Beyond Inc. and Subsidiaries (in thousands, except per share data) Net sales Cost of sales Gross profit Selling, general and administrative expenses Operating profit Interest income Earnings before provision for income taxes Provision for income ...

  • Page 17
    ... Income Shares sold under employee stock option plans, including tax benefit 1,218 Issuance of restricted shares, net 1,224 Stock-based compensation expense, net Director fees paid in stock 7 Repurchase of common stock, including fees SFAS No. 158 change in measurement date effect Balance...

  • Page 18
    CONSOLIDATED STATEMENTS OF CASH FLOWS Bed Bath & Beyond Inc. and Subsidiaries (in thousands) Cash Flows from Operating Activities: Net earnings Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation Amortization of bond premium Stock-based compensation Tax ...

  • Page 19
    ... for self insurance, litigation, store opening, expansion, relocation and closing costs, the provision for sales returns, vendor allowances, stock-based compensation and income taxes. Actual results could differ from these estimates. E. Cash and Cash Equivalents The Company considers all highly...

  • Page 20
    ... ratio includes: merchandise purchases, net of returns to vendors, discounts and volume and incentive rebates; inbound freight expenses; duty, insurance and commissions. At any one time, inventories include items that have been written down to the Company's best estimate of their realizable value...

  • Page 21
    ... of unused card balances over defined time periods and have no expiration dates, but are subject to state escheat regulations; as such, the Company does not record income associated with unredeemed gift cards. Sales returns are provided for in the period that the related sales are recorded based...

  • Page 22
    ...date of adoption. Currently, the Company's stock-based compensation relates to restricted stock awards and stock options. The Company's restricted stock awards are considered nonvested share awards as defined under SFAS No. 123R. U. Income Taxes The Company files a consolidated Federal income tax...

  • Page 23
    ...of a defined benefit pension or other post retirement plan. FSP No. 132(R)-1 is effective for fiscal years ending after December 15, 2009. The Company does not believe FSP No. 132(R)-1 will have a material impact on its consolidated financial statements. BED BATH & BEYOND 2008 ANNUAL REPORT 21

  • Page 24
    ...time of acquisition, 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...

  • Page 25
    ... fiscal 2006 beginning balances are presented below: Review of Stock Option Grant Practices, Including Related Tax Items $ 11,273) (34,747) -) (38,288) 61,762) $ -) Rent & Lease Accounting $ 4,738) -) (15,588) -) 10,850) $ -) (in thousands) Other Assets Income Taxes Payable Deferred Rent and Other...

  • Page 26
    ... participants would use in pricing the asset or liability developed based on market data obtained from independent sources. Unobservable inputs are inputs that reï¬,ect a company's judgment concerning the assumptions that market participants BED BATH & BEYOND 2008 ANNUAL REPORT 24

  • Page 27
    ... of auction rate securities are based on the income approach, specifically, discounted cash ï¬,ow analyses which utilize significant inputs based on the Company's estimates and assumptions. Inputs include current coupon rates and expected maturity dates. BED BATH & BEYOND 2008 ANNUAL REPORT 25

  • Page 28
    ... a related tax benefit of approximately $1.0 million, and did not affect the Company's earnings in fiscal 2008. These securities at par are invested in preferred shares of closed end municipal bond funds, which are required, pursuant to the Investment Company BED BATH & BEYOND 2008 ANNUAL REPORT...

  • Page 29
    ... Stock-based compensation Merchandise credits and gift card liabilities Accrued expenses Other Deferred Tax Liabilities: Depreciation Goodwill Other February 28, 2009 $ 23,904) 59,785) 40,198) 65,081) 33,539) 57,113) 17,637) (20,841) (20,502) (13,918) $ 241,996) BED BATH & BEYOND 2008 ANNUAL REPORT...

  • Page 30
    ... Company is currently under examination by the Internal Revenue Service for tax years 2001 through 2005. The Company is also open to examination for state and local jurisdictions with varying statutes of limitations, generally ranging from three to five years. BED BATH & BEYOND 2008 ANNUAL REPORT...

  • Page 31
    ... and renewal options. The Company is obligated under a majority of the leases to pay for taxes, insurance and common area maintenance charges. As of February 28, 2009, future minimum lease payments under non-cancelable operating leases are as follows: Fiscal Year 2009 2010 2011 2012 2013 Thereafter...

  • Page 32
    ... 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 33
    ... Plans The Company currently grants awards under the Bed Bath & Beyond 2004 Incentive Compensation Plan (the "2004 Plan"). The 2004 Plan is a ï¬,exible compensation plan that enables the Company to offer incentive compensation through stock options, restricted stock awards, stock appreciation rights...

  • Page 34
    ... of stock options for fiscal 2008 were $17.7 million and the associated income tax benefits were $2.5 million. Restricted Stock Restricted stock awards are issued and measured at fair market value on the date of grant and generally become exercisable in five equal annual installments beginning...

  • Page 35
    ... general, to the executive remaining in the Company's employ on specified 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...

  • Page 36
    ... 0.53 $ 0.55 $ 0.52 March 1, 2008 $ 1,933,186 799,098 259,442 265,077 92,156 $ 172,921 $ 0.67 $ 0.66 Net earnings per share ("EPS") amounts for each quarter are required to be computed independently and may not equal the amount computed for the total year. BED BATH & BEYOND 2008 ANNUAL REPORT 34

  • Page 37
    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 (the Company) as of February 28, 2009 and March 1, 2008, and the related ...

  • Page 38
    ... audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Bed Bath & Beyond Inc. and subsidiaries as of February 28, 2009 and March 1, 2008, and the related consolidated statements of earnings, shareholders' equity...

  • Page 39
    BED BATH & BEYOND INC. NOTICE OF ANNUAL MEETING OF SHAREHOLDERS JUNE 30, 2009 TIME PLACE 9:00 A.M. on Tuesday, June 30, 2009 Madison Hotel One Convent Road Morristown, New Jersey 07960 (1) To elect ten directors until the Annual Meeting in 2010 and until their respective successors have been elected...

  • Page 40
    ... Bath & Beyond Inc. 650 Liberty Avenue Union, New Jersey 07083 PROXY STATEMENT These proxy materials are delivered in connection with the solicitation by the Board of Directors of Bed Bath & Beyond Inc. (the "Company", "we", or "us"), a New York corporation, of proxies to be voted at our 2009 Annual...

  • Page 41
    ... mail Mark, sign and date your proxy card and return it in the postage-paid envelope we've provided, or return it to Bed Bath & Beyond Inc., c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. Voting by any of these methods will not affect your right to attend the Annual Meeting and vote in person...

  • Page 42
    ... 2010 Annual Meeting, which is described below. A "FOR" vote by a majority of the votes cast is required to ratify the selection of KPMG LLP as the Company's independent auditors for fiscal 2009, to re-approve the performance goals under the Bed Bath & Beyond Inc. 2004 Incentive Compensation Plan...

  • Page 43
    ... requirements under the New York Business Corporation Law, which are described below; (iv) adopted a policy as part of the Company's corporate governance guidelines on the recovery of incentive compensation, commonly referred to as a "clawback policy," applicable to the Company's named executive...

  • Page 44
    ... the right to elect to receive all or fifty percent of their fees in stock or cash. In addition to the fees above, each director received an automatic grant of restricted stock under the Company's 2004 Incentive Compensation Plan with a fair market value on the date of the Company's Annual Meeting...

  • Page 45
    ...to the Bed Bath & Beyond Plan to Pay Directors Fees in Stock and the number of shares was determined (in accordance with the terms of such plan) as described in footnote (1). (3) Represents the value of 1,753 restricted shares of common stock of the Company granted under the Company's 2004 Incentive...

  • Page 46
    ...Compensation Committee and the Nominating and Corporate Governance Committee, as well as the Company's policies on director attendance at the Annual Meeting and how shareholders can communicate with the Board of Directors, are available on the Company's website at www.bedbathandbeyond.com. BED BATH...

  • Page 47
    ... incurred by the Company for professional services rendered by KPMG LLP for fiscal 2008 and 2007 were as follows: Audit Fees Audit-Related Fees Tax Fees All Other Fees 2008 $ 1,229,000 19,400 114,039 - $ 1,362,439 2007 $ 1,510,060 105,000 521,982 - $ 2,137,042 BED BATH & BEYOND PROXY STATEMENT 45

  • Page 48
    ... 2007, "audit-related fees" included fees associated with respect to the setting of exercise prices for employee stock options and related matters. In fiscal 2008 and fiscal 2007, "tax fees" included fees associated with tax planning, tax compliance (including review of tax returns) and tax advice...

  • Page 49
    .... The Board believes that active shareholder participation in the election of directors is important to the Company and to effective corporate governance. In response to similar concerns, a number of public companies have recently approved charter amendments requiring a majority vote standard for...

  • Page 50
    ... Business Corporation Law voting standards and that the statutory voting requirements were amended after the Company was formed to permit a majority vote. Consistent with the elimination of the supermajority voting provisions discussed above, the Board of Directors recommends that a new article...

  • Page 51
    ... 2004 Plan is a ï¬,exible incentive compensation plan that enables the Company to offer employees and others incentive compensation through stock options, stock appreciation rights ("SARs"), restricted stock awards and performance awards, including cash awards. Administration The Board of Directors...

  • Page 52
    ...share of common stock on the date of exercise over the exercise price per share of the SAR. The Committee will determine the terms and conditions of SARs at the time of grant, but generally SARs will be subject to the same terms and conditions as options (as described above). BED BATH & BEYOND PROXY...

  • Page 53
    ..., discontinued operations, extraordinary items and other unusual or non-recurring charges; an event either not directly related to the operations of the Company or not within the reasonable control of the Company's management; or a change in accounting standards required by generally accepted...

  • Page 54
    ... of the Committee. Since all such future awards have not yet been determined, the benefits or amounts that will be received by or allocated to the Company's executive officers or other eligible employees or consultants cannot be determined at this time. BED BATH & BEYOND PROXY STATEMENT 52

  • Page 55
    ... GOALS UNDER THE 2004 PLAN AT THE ANNUAL MEETING IS REQUIRED TO RE-APPROVE SUCH GOALS. THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE RE-APPROVAL OF THE PERFORMANCE GOALS UNDER THE BED BATH & BEYOND INC. 2004 INCENTIVE COMPENSATION PLAN. SHAREHOLDER PROPOSAL (PROPOSAL 6) We...

  • Page 56
    ...nine big-box retailers in terms of climate change governance practices. It is vital that our company address and report on the impacts of its operations on the environment and on society. RESOLVED: Shareholders request that the Board of Directors prepare a sustainability report including strategies...

  • Page 57
    ...and retain highly qualified executives • Be competitive with other major U.S. retail peer companies • Reward corporate and individual performance • Align the interests of executives and shareholders • Promote the balance of annual and long-term results BED BATH & BEYOND PROXY STATEMENT 55

  • Page 58
    ... Investor Relations section. The Compensation Committee currently consists of three members of our Board of Directors, Mr. Adler and Mses. Morrison and Stoller, all of whom are "independent" as defined by the NASDAQ listing standards and the applicable tax and securities rules and regulations. The...

  • Page 59
    ... and Chief Executive Officer regarding the proposed salary and equity compensation awards for the other named executive officers and certain other executives for fiscal 2008 and 2009. In addition, JFR met with the Co-Chairmen to discuss compensation recommendations. BED BATH & BEYOND PROXY...

  • Page 60
    ..., (ii) changes in accounting methods, and (iii) extraordinary items, as defined in APB 30, or stock repurchase or dividend activity. The Company believes that this performance-based test meets the standard for performance-based compensation under the Code so that the restricted stock awards will be...

  • Page 61
    ... grants consisting solely of restricted stock. Vesting of restricted stock awarded to these employees is based solely on time-vesting with no performancebased test. All awards of restricted stock and stock options are made under the Company's 2004 Incentive Compensation Plan, approved by the Company...

  • Page 62
    ... the stock options awarded to the Co-Chairmen vest in three equal annual installments, in each case commencing on the first anniversary of the grant date and based on continued service to the Company. The restricted stock awards to each such executive are conditioned on the performance-based test...

  • Page 63
    ... and change in control payments and benefits. Impact of Accounting and Tax Considerations The Compensation Committee considers the accounting cost associated with equity compensation and the impact of Section 162(m) of the Code, which generally prohibits any publicly-held corporation from...

  • Page 64
    ... of Operations" in the Company's Form 10-K for the Company's 2008 fiscal year. The amounts shown in the table reï¬,ect the Company's accounting expense and do not necessarily reï¬,ect the actual value, if any, that may be realized by the named executive officers. BED BATH & BEYOND PROXY STATEMENT...

  • Page 65
    ... Table below. Additionally, Mr. Temares contributed $11,700, $8,580 and $9,635 of his salary for fiscal 2008, 2007 and 2006, respectively, to the Bed Bath & Beyond Inc. 401(k) Savings Plan (the "Company 401(k)"). The actuarial present value of the benefits payable under the supplemental executive...

  • Page 66
    ...the end of the term of employment. Potential Payments Upon Termination or Change in Control The named executive officers' employment agreements and certain of the plans in which the executives participate require the Company to pay compensation to the executives if their employment terminates. The...

  • Page 67
    ...a retirement benefit payable over a ten-year period, any amount due prior to six months after the termination of employment will be paid in a lump sum on the date six months from the date of such termination of employment. Table and related footnotes follow on the next two pages. BED BATH & BEYOND...

  • Page 68
    ... have been made in connection with a change in control occurring on February 28, 2009. Cash severance represents three times current salary payable over a period of three years. Cash severance represents one times current salary payable over a period of one year. BED BATH & BEYOND PROXY STATEMENT...

  • Page 69
    ...ed Deferred Compensation Balance (5) Supplemental Pension (6) Split-Dollar Life Insurance Substitute Payment (7) Total $ $ ...,161 $ $ $ $ - - - - $ $ $ $ 124,524 124,524 - 124,524 $ $ $ $ - - - - $ $ $ $ - - - - $ $ $ $ 2,443,490 964,524 - 2,443,490 BED BATH & BEYOND PROXY STATEMENT 67

  • Page 70
    ..., subject in general to the executive remaining in the Company's employ on specific vesting dates. The performance-based test for fiscal 2008 was met. The performance test is designed to meet the standard for performance-based compensation under the Code, so that restricted stock awards will be...

  • Page 71
    ... OPTION AND RESTRICTED STOCK AWARDS AT FISCAL YEAR END The following table sets forth information for each of the named executive officers with respect to the value of all unexercised options and unvested restricted stock awards as of February 28, 2009, the end of fiscal 2008. Number of Securities...

  • Page 72
    ... 13, 2008, with an exercise price of $11.4688 and a market price of $21.05. These options were expiring on December 31, 2008 and, pursuant to the Company's insider trading policy, could not be exercised between November 21, 2008 and their expiration date. (2) (3) (4) (5) BED BATH & BEYOND PROXY...

  • Page 73
    ... bonus or incentive compensation, welfare benefits, fringe benefits, noncash remuneration, amounts realized from the sale of stock acquired under a stock option or grant, and moving expenses. When a participant elects to make a deferral under the plan, the Company credits the account of the...

  • Page 74
    ... business. The Schedule 13G also states that Davis Selected Advisers, L.P. has the sole power to dispose or to direct the disposition of 21,710,854 shares of common stock. The address of Davis Selected Advisers, L.P. is 2949 East Elvira Road, Suite 101, Tucson, AZ 85756. (2) (3) BED BATH & BEYOND...

  • Page 75
    ...persons or entities for transactions in our common stock and their common stock holdings for fiscal 2008, we believe that all reporting requirements under Section 16(a) for such fiscal year were met in a timely manner by our directors and executive officers. BED BATH & BEYOND PROXY STATEMENT 73

  • Page 76
    ... executive offices at 650 Liberty Avenue, Union, New Jersey 07083 between the close of business on March 2, 2010 and the close of business on April 1, 2010, and is otherwise in compliance with the requirements set forth in the Company's Amended By-laws. If the date of the 2010 Annual Meeting...

  • Page 77
    ... of Management Practice, Harvard Business School Senior Director, The Goldman Sachs Group, Inc. New York, New York Victoria A. Morrison Executive Vice President & General Counsel, Edison Properties, LLC Newark, New Jersey Fran Stoller Partner, Loeb & Loeb LLP New York, New York OFFICERS Warren...

  • Page 78
    ...: 774/213-6000 Bed Bath & Beyond Procurement Co. Inc. 110 Bi-County Boulevard, Suite 114 Farmingdale, New York 11735 Telephone: 631/420-7050 Buy Buy Baby, Inc. 895 East Gate Blvd. Garden City, New York 11530 Telephone: 516/ 507-3410 Shareholder Information A copy of the Company's 2008 Form 10-K as...

  • Page 79
    ... BABY STORES 2 29 9 40 Florida Illinois Maryland Michigan New Jersey New York 1 1 1 2 3 5 1 1 15 For exact Christmas Tree Shops locations, visit us at www.christmastreeshops.com. Ohio Virginia Total For exact buybuy BABY locations, visit us at www.buybuybaby.com. For exact Bed Bath & Beyond...

  • Page 80
    BED BATH & BEYOND INC. 650 Liberty Avenue Union, NJ 07083 908/688-0888