Bed, Bath and Beyond 2013 Annual Report Download

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Notice of 2014 Annual Meeting of Shareholders
Proxy Statement
2013 Annual Report
BED BATH & BEYOND INC.

Table of contents

  • Page 1
    BED BATH & BEYOND INC. Notice of 2014 Annual Meeting of Shareholders Proxy Statement 2013 Annual Report

  • Page 2
    ... Linen Holdings, LLC on June 1, 2012 and Cost Plus, Inc. on June 29, 2012. On March 22, 2007, the Company acquired Buy Buy BABY, Inc. On June 19, 2003, the Company acquired Christmas Tree Shops, Inc. Net earnings per share amounts for fiscal 2000 and prior have been adjusted for two-for-one stock...

  • Page 3
    ... Company adopted Staff Accounting Bulletin 108, ''Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements'' resulting in a one-time net reduction to Shareholders' equity of $34.3 million. (10) BED BATH & BEYOND 2013 ANNUAL REPORT 1

  • Page 4
    ... average equity was 25.5%. During fiscal 2013 we opened 33 new stores consisting of 13 Bed Bath & Beyond stores throughout the United States and Canada, 4 stores under the names Christmas Tree Shops andThat! or andThat!, 8 buybuy Baby stores, 3 Harmon Face Values stores and 5 Cost Plus World Market...

  • Page 5
    ... and over the longer term internationally, and we look forward with confidence to the years ahead. WARREN EISENBERG Co-Chairman and Co-Founder June 4, 2014 LEONARD FEINSTEIN Co-Chairman and Co-Founder STEVEN H. TEMARES Chief Executive Officer and Director BED BATH & BEYOND 2013 ANNUAL REPORT 3

  • Page 6
    ... in your name with Bed Bath & Beyond's transfer agent, you are considered the shareholder of record with respect to those shares, and these proxy materials are being sent directly to you. If you hold restricted stock under the Company's 2012 Incentive Compensation Plan (formerly known as the 2004...

  • Page 7
    ... products, amenities and other goods to institutional customers in the hospitality, cruise line, food service, healthcare and other industries. (See ''Acquisitions,'' Note 2 in the consolidated financial statements for the acquisitions of Cost Plus World Market and Linen Holdings). Additionally...

  • Page 8
    ...omnichannel capabilities, through, among other things, continuing to add new functionality and assortment to its selling websites, mobile sites and applications and opening an additional distribution facility for both direct to customer and store fulfillment. BED BATH & BEYOND 2013 ANNUAL REPORT 6

  • Page 9
    ... increase in comparable sales for fiscal 2012 was due to an increase in the average transaction amount partially offset by a decrease in the number of transactions. Comparable sales are calculated based on an equivalent number of weeks for each annual period. BED BATH & BEYOND 2013 ANNUAL REPORT 7

  • Page 10
    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Sales of domestics merchandise accounted for approximately 36%, 39% and 40% of net sales in fiscal 2013, 2012 and 2011, respectively, of which the Company estimates that bed linens accounted for ...

  • Page 11
    ... in a joint venture which opened one store during fiscal 2013 and as of March 1, 2014, operated a total of four retail stores in Mexico under the name Bed Bath & Beyond. During fiscal 2012, the Company acquired Linen Holdings and Cost Plus World Market. The Company plans to continue to expand its...

  • Page 12
    ... program will consider current business and market conditions. The Company has authorization to make repurchases from time to time in the open market or through other parameters approved by the Board of Directors pursuant to existing rules and regulations. BED BATH & BEYOND 2013 ANNUAL REPORT...

  • Page 13
    ...the retail values of inventories. The cost associated with determining the cost-to-retail ratio includes: merchandise purchases, net of returns to vendors, discounts and volume and incentive rebates; inbound freight expenses; duty, insurance and commissions. BED BATH & BEYOND 2013 ANNUAL REPORT 11

  • Page 14
    .... 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 the...

  • Page 15
    ... where the ultimate tax outcome is uncertain. Additionally, the Company's various tax returns are subject to audit by various tax authorities. Although the Company believes that its estimates are reasonable, actual results could differ from these estimates. BED BATH & BEYOND 2013 ANNUAL REPORT 13

  • Page 16
    ... existing tax laws; changes to, or new, accounting standards including, without limitation, changes to lease accounting standards; and the integration of acquired businesses. The Company does not undertake any obligation to update its forward-looking statements. BED BATH & BEYOND 2013 ANNUAL REPORT...

  • Page 17
    ... assets Long term investment securities Property and equipment, net Goodwill Other assets Total assets LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable Accrued expenses and other current liabilities Merchandise credit and gift card liabilities Current income taxes payable...

  • Page 18
    ... 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 (expense) income, net Earnings before provision for income taxes Provision for income...

  • Page 19
    ...of auction rate securities, net of taxes Pension adjustment, net of taxes Currency translation adjustment Other comprehensive loss Comprehensive income See accompanying Notes to Consolidated Financial Statements. March 1, 2014 $1,022,290 FISCAL YEAR ENDED March 2, February 25, 2013 2012 $1,037,788...

  • Page 20
    ...INCOME (LOSS) TOTAL Balance at February 26, 2011 Net earnings Other comprehensive loss Shares sold under employee stock option plans, net of taxes Issuance of restricted shares, net Stock-based compensation expense, net Director fees paid in stock Repurchase of common stock, including fees Balance...

  • Page 21
    ..., net of effect of acquisitions: Accounts payable Accrued expenses and other current liabilities Merchandise credit and gift card liabilities Income taxes payable Deferred rent and other liabilities Net cash provided by operating activities Cash Flows from Investing Activities: Purchase of held-to...

  • Page 22
    ... self insurance, litigation, store opening, expansion, relocation and closing costs, the provision for sales returns, vendor allowances, stock-based compensation and income and certain other taxes. Actual results could differ from these estimates. E. Cash and Cash Equivalents The Company considers...

  • Page 23
    ... values of inventories. The cost associated with determining the cost-to-retail 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...

  • Page 24
    ...K. 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 the...

  • Page 25
    ...tax and value added tax, are not included in sales. Revenues from gift cards, gift certificates and merchandise credits are recognized when redeemed. Gift cards have no provisions for reduction in the value of unused card balances over defined time periods and have no expiration dates. Sales returns...

  • Page 26
    ... for fiscal 2013, 2012 and 2011, respectively. 2. ACQUISITIONS On June 1, 2012, the Company acquired Linen Holdings, LLC (''Linen Holdings''), a provider of a variety of textile products, amenities and other goods to institutional customers in the hospitality, cruise line, food service, healthcare...

  • Page 27
    ... payment of assumed borrowings of $25.5 million under a credit facility. The acquisition was consummated by a wholly owned subsidiary of the Company through a tender offer and merger, pursuant to which the Company acquired all of the outstanding shares of common stock of Cost Plus World Market. Cost...

  • Page 28
    ... in active markets. • Level 3 - Valuations based on inputs that are unobservable and significant to the overall fair value measurement. As of March 1, 2014, the Company's financial assets utilizing Level 1 inputs include long term investment securities traded on active securities exchanges...

  • Page 29
    ... 2, 2013 are as follows: (in millions) Available-for-sale securities: Long term Trading securities: Long term Held-to-maturity securities: Short term Total investment securities March 1, 2014 $ 47.7 March 2, 2013 $ 49.0 39.7 28.3 489.3 $576.7 449.9 $527.2 BED BATH & BEYOND 2013 ANNUAL REPORT...

  • Page 30
    ... nonqualified deferred compensation plan, are stated at fair market value. The values of these trading investment securities included in the table above are approximately $39.7 million and $28.3 million as of March 1, 2014 and March 2, 2013, respectively. 7. PROVISION FOR INCOME TAXES The components...

  • Page 31
    ... 2, 2013 $ 33,699 82,123 55,070 33,486 22,683 81,069 42,024 42,506 57,129 (in thousands) Deferred tax assets: Inventories Deferred rent and other rent credits Insurance Stock-based compensation Merchandise credits and gift card liabilities Accrued expenses Obligations on distribution centers Net...

  • Page 32
    ... store sales exceeding stipulated amounts and are immaterial in fiscal 2013, 2012 and 2011), scheduled rent increases and renewal options. The Company is obligated under a majority of the leases to pay for taxes, insurance and common area maintenance charges. BED BATH & BEYOND 2013 ANNUAL REPORT...

  • Page 33
    ... Fiscal Year: 2014 2015 2016 2017 2018 Thereafter Total future minimum lease payments Expenses for all operating leases were $559.8 million, $536.1 million and $456.2 million for fiscal 2013, 2012 and 2011, respectively. As a result of the Cost Plus World Market acquisition on June 29, 2012 and in...

  • Page 34
    ... 2014, March 2, 2013 and February 25, 2012, respectively. 13. STOCK-BASED COMPENSATION The Company measures all employee stock-based compensation awards using a fair value method and records such expense, net of estimated forfeitures, in its consolidated financial statements. Currently, the Company...

  • Page 35
    ... equal annual installments beginning one to three years from the date of grant. The Company generally issues new shares for stock option exercises and restricted stock awards. As of March 1, 2014, unrecognized compensation expense related to the unvested portion of the Company's stock options and...

  • Page 36
    ... FINANCIAL STATEMENTS (continued) The weighted average fair value for the stock options granted in fiscal 2013, 2012 and 2011 was $22.28, $22.95 and $19.65, respectively. The weighted average remaining contractual term and the aggregate intrinsic value for options outstanding as of March 1, 2014...

  • Page 37
    ...(UNAUDITED) (in thousands, except per share data) June 1, 2013 FISCAL 2013 QUARTER ENDED August 31, 2013 November 30, 2013 March 1, 2014 Net sales Gross profit Operating profit Earnings before provision for income taxes Provision for income taxes Net earnings EPS-Basic(1) EPS-Diluted(1) $2,612,140...

  • Page 38
    ... Organizations of the Treadway Commission in September 1992, and our report dated April 29, 2014 expressed an unqualified opinion on the effectiveness of the Company's internal control over financial reporting. Short Hills, New Jersey April 29, 2014 BED BATH & BEYOND 2013 ANNUAL REPORT 36

  • Page 39
    ... 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 March 1, 2014 and March 2, 2013, and the related consolidated statements of earnings, comprehensive income, shareholders' equity...

  • Page 40
    ... Organizations of the Treadway Commission (''COSO'') in Internal Control-Integrated Framework. Our management has concluded that, as of March 1, 2014, our internal control over financial reporting is effective based on these criteria. April 29, 2014 BED BATH & BEYOND 2013 ANNUAL REPORT 38

  • Page 41
    ... the 2014 fiscal year (Proposal 2). To consider the approval, by non-binding vote, of the 2013 compensation paid to the Company's named executive officers (commonly known as a ''say-on-pay'' proposal) (Proposal 3). To transact such other business as may properly be brought before the Annual Meeting...

  • Page 42
    ... Bed Bath & Beyond Inc.'s transfer agent, American Stock Transfer & Trust Company, you are considered the shareholder of record with respect to those shares, and these proxy materials are being sent directly to you. If you hold restricted stock under the Company's 2012 Incentive Compensation Plan...

  • Page 43
    ... 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 44
    ... Statement or the Annual Meeting or would like additional copies of this document or our 2013 Annual Report on Form 10-K, please contact: Bed Bath & Beyond Inc., 650 Liberty Avenue, Union, NJ 07083, Attention: Investor Relations Dept., Telephone: (908) 688-0888. BED BATH & BEYOND PROXY STATEMENT...

  • Page 45
    ..., where she held executive and management positions in North America and Asia Pacific in sales, services, consulting, strategy development, and product management. She has been a director of the Company since February 2014. Ms. Elliott is also a director of Whirlpool Corporation. Among other things...

  • Page 46
    ... addition to the fees above, each director received an automatic grant of restricted stock under the Company's 2012 Incentive Compensation Plan with a fair market value on the date of the Company's Annual Meeting of Shareholders during such fiscal year (the average of the high and low trading prices...

  • Page 47
    ... stock of the Company pursuant 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) based on the fair market value per share on the second business day following the announcement of the Company's financial...

  • Page 48
    ... and Nominating and Corporate Governance Committees are considered independent pursuant to applicable Securities and Exchange Commission (''SEC'') and NASDAQ rules. None of the members of the Compensation Committee was (i) during fiscal 2013, an officer or employee of the Company or any of...

  • Page 49
    ...Additional Information; Risk Management A complete copy of the charter of each of the Audit Committee, the 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...

  • Page 50
    ... acquisitions of Linen Holdings, LLC and Cost Plus, Inc. and ''audit-related fees'' included fees for procedures required due to a Form S-8 registration statement. In fiscal 2013 and fiscal 2012, ''tax fees'' included fees associated with tax planning, tax compliance (including review of tax returns...

  • Page 51
    ... that the Board of Directors include the audited financial statements in the Company's Annual Report on Form 10-K for the year ended March 1, 2014, filed with the SEC on April 29, 2014. This audit committee report is not deemed filed under the Securities Act of 1933 or the Securities Exchange Act of...

  • Page 52
    ...directly to Mr. Temares: Barry Feld, Chief Executive Officer - Cost Plus, Inc., Scott Hames, Vice President - Marketing and Analytics, Richard McMahon, Chief Strategy Officer and Vice President - Corporate Operations and President - BBB Canada Ltd., Allan N. Rauch, Vice President - Legal and General...

  • Page 53
    ... named executive officers for fiscal 2012 indicated continuing shareholder support, in light of the decline in the percentage of approval votes between the 2012 and 2013 Annual Meetings, members of the Compensation and Nominating and Corporate Governance Committees, together with senior management...

  • Page 54
    ... one-third in stock options. • The base salary of the Company's Chief Executive Officer for fiscal 2014 has not been increased from 2013, with such executive receiving an increase in 2014 equity compensation in line with the increase in total compensation for other members of senior management if...

  • Page 55
    ... consists of three members of our Board of Directors, all of whom are ''independent'' as defined by the NASDAQ listing standards and the applicable tax and securities rules and regulations. The Compensation Committee members since the spring of 2013 have been Ms. Morrison and Messrs. Adler and...

  • Page 56
    ... stock awards), retirement and other benefits (consisting of health plans, a limited 401(k) plan match and a nonqualified deferred compensation plan) and perquisites. The Company places greater emphasis in the compensation packages for named executive officers on equity incentive compensation...

  • Page 57
    ... the long term retention of its executives and key associates, including its named executive officers. Consistent with the Company's historic practice, the stock options vest over time, subject, in general, to the named executive officers remaining in the Company's employ on specified vesting dates...

  • Page 58
    ... on the date of grant determined in accordance with Accounting Standards Codification Topic No. 718, ''Compensation - Stock Compensation'' (the ''Stock Option Fair Value''). All awards of restricted stock and stock options are made under the Company's 2012 Incentive Compensation Plan (formerly known...

  • Page 59
    ...'s 401(k) plan account, and the payment of a portion of the named executive officer's premiums for healthcare and basic life insurance. The Company has a nonqualified deferred compensation plan for the benefit of certain highly compensated associates, including the named executive officers. The plan...

  • Page 60
    ... the Company's Annual Report on Form 10-K for fiscal 2013 for filing with the SEC. The foregoing report is provided by the following directors, who constitute the fiscal year 2013 Compensation Committee: COMPENSATION COMMITTEE Dean S. Adler Stanley F. Barshay Victoria A. Morrison BED BATH & BEYOND...

  • Page 61
    ... fiscal year of the grant, and (ii) assuming the performance-based test is met, time vesting, subject in general to the executive remaining in the Company's employ on specific vesting dates. The performance-based tests for fiscal years 2013, 2012 and 2011 were met. The fair value of the performance...

  • Page 62
    ... of the Company's Nonqualified Deferred Compensation Plan. Such amount for fiscal 2013 is also reported in the Nonqualified Deferred Compensation Table below. The change in pension value for fiscal 2013, 2012 and 2011 is an increase in the actuarial present value of the benefits payable under the...

  • Page 63
    ... agreements, each of Messrs. Eisenberg and Feinstein may at any time elect senior status (i.e., to be continued to be employed to provide non-line executive consultative services) at an annual salary of the greater of $400,000 (increased for cost of living adjustments) or 50% of his average salary...

  • Page 64
    ... and lawful directions of the Company's Chief Executive Officer or the Board of Directors, as applicable, commensurate with his titles and duties; (iii) performed his duties with gross negligence; or (iv) been convicted of a felony. Upon a termination of BED BATH & BEYOND PROXY STATEMENT 62

  • Page 65
    ... retirement or other separation from service from the Company. The retirement benefit will be payable in the form of a lump sum equal to the present value of an annual amount equal to 50% of Mr. Temares' annual base salary on the date of termination of employment if such annual amount were paid for...

  • Page 66
    ...Feinstein (nor their respective estates) will receive either ''Senior Status Salary Continuation'' or ''Benefit Continuation'' payments. Represents $400,000, adjusted for the cost of living increase between June 30, 2000 and June 30, 2013 for the CPI-U for NY, Northern NJ and LI, for 10 years during...

  • Page 67
    ...one times current salary payable over a period of one year. In the event of a termination of employment due to death or disability, the named executive officer (or the executive's estate) will receive the same payments as if there were a ''Termination Without Cause.'' (10) (11) (12) (13) BED BATH...

  • Page 68
    ... granted and restricted stock awarded during fiscal 2013 to each of the named executive officers under the Company's 2012 Incentive Compensation Plan (the ''2012 Plan''). The Company did not grant any non-equity incentive plan awards in fiscal 2013. All Other Option Awards: Number of Securities...

  • Page 69
    ... (8) $ 6,850,159 Susan E. Lattmann Matthew Fiorilli 21,986 (9) 97,322 (10) $ 1,491,091 $ 6,600,378 (1) Market value is based on the closing price of the Company's common stock of $67.82 per share on February 28, 2014, the last trading day in fiscal 2013. BED BATH & BEYOND PROXY STATEMENT 67

  • Page 70
    ...the Company's achievement of a performance-based test for the fiscal year of the grant, 3,439 on May 10, 2014 and 3,440 on each of May 10, 2015, 2016, 2017 and 2018. Mr. Temares' 14,286 exercisable option awards that expire on April 17, 2014 include option awards held by a family limited partnership...

  • Page 71
    ... VESTED Option Exercises and Restricted Stock Vested for Fiscal 2013 The following table includes certain information with respect to the exercise of options and vesting of restricted stock by named executive officers during fiscal 2013. Option Awards Number of Shares Acquired on Value Realized on...

  • Page 72
    ...excluding 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 73
    ... to future executive compensation matters. THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE APPROVAL, ON AN ADVISORY BASIS, OF THE COMPENSATION OF THE COMPANY'S NAMED EXECUTIVE OFFICERS FOR FISCAL 2013 AS DISCLOSED IN THIS PROXY STATEMENT. BED BATH & BEYOND PROXY STATEMENT 71

  • Page 74
    ... ordinary course of business. The Schedule 13G also states that BlackRock, Inc. has the sole power to dispose or to direct the disposition of 10,903,117 shares of common stock. The address of BlackRock, Inc. is 40 East 52nd Street, New York, NY 10022. (2) (3) BED BATH & BEYOND PROXY STATEMENT 72

  • Page 75
    ... sales of merchandise to the Company of approximately $1.2 million in fiscal 2013. Colordrift LLC had a pre-existing sales relationship with the Company at the time such managing member became Mr. Stark's son-in-law, which was during the Company's fiscal 2012 year. BED BATH & BEYOND PROXY STATEMENT...

  • Page 76
    ...stock and their common stock holdings for fiscal 2013, 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. STOCK PRICE PERFORMANCE GRAPH The graph shown below compares the performance of the Company...

  • Page 77
    ... of the Company's Policy of Ethical Standards for Business Conduct is also provided at this location. Stock Listing Shares of Bed Bath & Beyond Inc. are traded on the NASDAQ Stock Market under the symbol BBBY. Annual Meeting The Annual Meeting of Shareholders will be held at 9 a.m. July 7, 2014, at...

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