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Notice of 2015 Annual Meeting of Shareholders
Proxy Statement
2014 Annual Report
BED BATH & BEYOND INC.

Table of contents

  • Page 1
    BED BATH & BEYOND INC. Notice of 2015 Annual Meeting of Shareholders Proxy Statement 2014 Annual Report

  • Page 2
    ... 52 weeks, except for fiscal 2012 (ended March 2, 2013) which represents 53 weeks. The Company acquired Linen Holdings, LLC. on June 1, 2012 and Cost Plus, Inc. on June 29, 2012. Comparable sales include sales consummated through all retail channels which have been operating for twelve full months...

  • Page 3
    ...since January 2014. • Opened a total of 22 new stores, including our first buybuy BABY store in Canada, and closed five stores. We continue to actively manage our real estate portfolio in a manner that permits store sizes, layouts, locations and offerings to evolve over time to optimize our market...

  • Page 4
    ... the growth of our online direct-to-consumer channel and our health and beauty care offerings. The creation of more flexible fulfillment options will allow us to deliver orders more quickly and cost effectively. • Opening a new Customer Service Contact Center to support the anticipated growth...

  • Page 5
    ... our shareholders in the years to come. Thank you for your continued interest in Bed Bath & Beyond. WARREN EISENBERG Co-Chairman and Co-Founder May 29, 2015 LEONARD FEINSTEIN Co-Chairman and Co-Founder STEVEN H. TEMARES Chief Executive Officer and Director BED BATH & BEYOND 2014 ANNUAL REPORT 3

  • Page 6
    ...the names of Bed Bath & Beyond, Christmas Tree Shops, Christmas Tree Shops andThat! or andThat!, Harmon or Harmon Face Values, buybuy BABY and World Market, Cost Plus World Market or Cost Plus. The Company also operates Linen Holdings, a provider of a variety of textile products, amenities and other...

  • Page 7
    ... consolidated financial statements for information regarding the acquisitions of Cost Plus World Market and Linen Holdings). Additionally, the Company is a partner in a joint venture which operates five retail stores in Mexico under the name Bed Bath & Beyond. The Company accounts for its operations...

  • Page 8
    ... its capital needs while continuing to make investments, principally for information technology enhancements, including omnichannel capabilities, new stores, existing store improvements, and other projects whose impact is considered important to its future. BED BATH & BEYOND 2014 ANNUAL REPORT 6

  • Page 9
    .... The Company's share repurchase program could change, and would be influenced by several factors, including business and market conditions. In addition, the Company reviews its alternatives with respect to its capital structure on an ongoing basis. BED BATH & BEYOND 2014 ANNUAL REPORT 7

  • Page 10
    ...to an increase in the Company's new store sales. For fiscal 2013, approximately 62% of the increase in net sales was attributable to the inclusion of Cost Plus World Market prior to its inclusion in comparable sales and Linen Holdings prior to the anniversary of its acquisition, approximately 42% of...

  • Page 11
    ... 2013 and 2012 as a percentage of net sales was primarily due to higher technology expenses and depreciation and a relative increase in payroll and payroll-related items (including salaries, workers' compensation and medical insurance). The inclusion of the financial results of the acquisitions...

  • Page 12
    ... the name Bed Bath & Beyond. The Company plans to continue to expand its operations and invest in its infrastructure to reach its long term objectives. In fiscal 2015, the Company expects to open approximately 30 new stores company-wide and open a new customer service contact center to support the...

  • Page 13
    ...million of purchases of investment securities, net of redemptions. In fiscal 2012, net cash used in investing activities was due to payments, net of cash acquired, of $643.1 million related to the Cost Plus World Market and Linen Holdings acquisitions, $315.9 million for capital expenditures and $40...

  • Page 14
    ... and other indefinite lived intangible assets, accruals for self insurance, litigation, store opening, expansion, relocation and closing costs, stock-based compensation and income and certain other taxes. Actual results could differ from these estimates. BED BATH & BEYOND 2014 ANNUAL REPORT 12

  • Page 15
    .... 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 16
    ... merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon settlement with the taxing authorities. BED BATH & BEYOND 2014 ANNUAL REPORT 14

  • Page 17
    ... standards including, without limitation, changes to lease accounting standards; foreign currency exchange rate fluctuations; and the integration of acquired businesses. The Company does not undertake any obligation to update its forward-looking statements. BED BATH & BEYOND 2014 ANNUAL REPORT...

  • Page 18
    ... 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 19
    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 expense, net Earnings before provision for income taxes Provision for income ...

  • Page 20
    ... Notes to Consolidated Financial Statements. February 28, 2015 $957,474 143 (5,552) (23,057) (28,466) $929,008 FISCAL YEAR ENDED March 1, March 2, 2014 2013 $1,022,290 (792) 3,249 (11,984) (9,527) $1,012,763 $1,037,788 1,017 146 (3,604) (2,441) $1,035,347 BED BATH & BEYOND 2014 ANNUAL REPORT 18

  • Page 21
    ...fees Balance at March 1, 2014 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 at February 28, 2015...

  • Page 22
    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 and amortization Stock-based compensation Tax benefit from...

  • Page 23
    ... ''Company'') is a retailer which operates under the names Bed Bath & Beyond (''BBB''), Christmas Tree Shops, Christmas Tree Shops andThat! or andThat! (collectively, ''CTS''), Harmon or Harmon Face Values (collectively, ''Harmon''), buybuy BABY and World Market, Cost Plus World Market or Cost Plus...

  • Page 24
    ... The cost of maintenance and repairs is charged to earnings as incurred; significant renewals and betterments are capitalized. Maintenance and repairs amounted to $120.3 million, $111.9 million and $106.1 million for fiscal 2014, 2013 and 2012, respectively. BED BATH & BEYOND 2014 ANNUAL REPORT 22

  • Page 25
    ... 28, 2015 and March 1, 2014, respectively. M. Treasury Stock 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 2014 ANNUAL REPORT 23

  • Page 26
    ...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 are provided for in...

  • Page 27
    ... 2014, 2013 and 2012, respectively. T. Stock-Based Compensation The Company measures all employee stock-based compensation awards using a fair value method and records such expense in its consolidated financial statements. The Company adopted the accounting guidance related to stock compensation...

  • Page 28
    ... is not expected to have a significant effect on our consolidated financial position, results of operations, or cash flows. 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...

  • Page 29
    ...in active markets for identical instruments (i.e., Level 1 valuation). Long Term Trading Investment Securities The Company's long term trading investment securities, which are provided as investment options to the participants of the nonqualified deferred compensation plan, are stated at fair market...

  • Page 30
    ..., with expiration dates of September 1, 2015 and February 28, 2016, respectively. These uncommitted lines of credit are currently and are expected to be used for letters of credit in the ordinary course of business. During fiscal 2014 and 2013, the Company did not have any direct borrowings under...

  • Page 31
    ... Cost Plus World Market acquisition (See ''Acquisitions,'' Note 2), the Company has federal net operating loss carryforwards of $13.7 million (tax effected), which will begin expiring in 2025, state net operating loss carryforwards of $9.1 million (tax effected), which will expire between 2014 and...

  • Page 32
    ... store sales exceeding stipulated amounts and are immaterial in fiscal 2014, 2013 and 2012), 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 2014 ANNUAL REPORT...

  • Page 33
    ... of the Cost Plus World Market acquisition on June 29, 2012 and in addition to the amounts disclosed above, the Company assumed two sale/leaseback agreements and recorded financing obligations, which approximated the discounted fair value of the minimum lease payments, had a residual fair value at...

  • Page 34
    ... February 28, 2015, March 1, 2014 and March 2, 2013, 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...

  • Page 35
    ... market prices close to the exercise prices of the employee stock options and were measured on the stock option grant date. Based on the U.S. Treasury constant maturity interest rate whose term is consistent with the expected life of the stock options. (4) BED BATH & BEYOND 2014 ANNUAL REPORT 33

  • Page 36
    ..., respectively. Net cash proceeds from the exercise of stock options for fiscal 2014 were $41.2 million and the net associated income tax benefit was $13.9 million. Restricted Stock Restricted stock awards are issued and measured at fair market value on the date of grant and generally become vested...

  • Page 37
    ... assumption on a quarterly basis and adjusts compensation expense related to these awards, as appropriate. Prior to the first quarter of fiscal 2014, the Company had not granted any PSUs. For fiscal 2014, the Company granted 390,803 PSUs with a weighted average grant date fair value of $62.34. 14...

  • Page 38
    ... Committee of Sponsoring Organizations of the Treadway Commission, and our report dated April 28, 2015 expressed an unqualified opinion on the effectiveness of the Company's internal control over financial reporting. Short Hills, New Jersey April 28, 2015 BED BATH & BEYOND 2014 ANNUAL REPORT 36

  • Page 39
    ...' equity and cash flows for each of the fiscal years in the three-year period ended February 28, 2015, and our report dated April 28, 2015 expressed an unqualified opinion on those consolidated financial statements. Short Hills, New Jersey April 28, 2015 BED BATH & BEYOND 2014 ANNUAL REPORT 37

  • Page 40
    ... of the Treadway Commission (''COSO''), released in 2013, Internal Control-Integrated Framework. Our management has concluded that, as of February 28, 2015, our internal control over financial reporting is effective based on these criteria. April 28, 2015 BED BATH & BEYOND 2014 ANNUAL REPORT 38

  • Page 41
    BED BATH & BEYOND INC. NOTICE OF ANNUAL MEETING OF SHAREHOLDERS JULY 2, 2015 TIME 9:00 A.M. on Thursday, July 2, 2015 PLACE The Madison Hotel One Convent Road Morristown, New Jersey 07960 ITEMS OF BUSINESS (1) To elect ten directors until the Annual Meeting in 2016 and until their respective ...

  • 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
    ...• Vote by 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...

  • Page 44
    ... Statement or the Annual Meeting or would like additional copies of this document or our 2014 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
    ... 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. Additionally, Ms. Elliott is founder of Broadrooms.com, an informational resource for executive women serving on corporate boards...

  • Page 46
    ... 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 BED BATH & BEYOND PROXY STATEMENT 44

  • Page 47
    ... stock of the Company granted under the Company's 2012 Incentive Compensation Plan at fair market value on the date of the Company's 2014 Annual Meeting of Shareholders ($59.285 per share, the average of the high and low trading prices on July 7, 2014), such restricted stock to vest on the last day...

  • 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 2014, an officer or employee of the Company or any of...

  • Page 49
    ... is to assist the Board of Directors in fulfilling its oversight responsibilities by (i) overseeing the Company's accounting and financial reporting processes and the audits of the Company's financial statements, and (ii) reviewing the financial reports and other financial information provided by...

  • Page 50
    ... 2014 through June 1, 2015, at a total cost of approximately $261,000. The primary carrier is Arch Insurance Company. Although no assurances can be provided, the Company intends to obtain similar coverage from June 1, 2015 through June 1, 2016. Management regularly reports to the Board of Directors...

  • Page 51
    ...assessment of the Company's internal control over financial reporting as integrated with the annual audit of the Company's financial statements and the quarterly reviews of the financial statements included in its Form 10-Q filings. In fiscal 2014, ''audit-related fees'' included fees for procedures...

  • Page 52
    ... the Board of Directors include the audited financial statements in the Company's Annual Report on Form 10-K for the year ended February 28, 2015, filed with the SEC on April 28, 2015. This audit committee report is not deemed filed under the Securities Act of 1933 or the Securities Exchange Act of...

  • Page 53
    ... Chief Executive Officer - Cost Plus, Inc., Scott Hames, Vice President - Marketing and Analytics, Allan N. Rauch, Vice President - Legal and General Counsel, and G. William Waltzinger, Jr., Vice President - Corporate Development and President - Harmon Stores, Inc. BED BATH & BEYOND PROXY STATEMENT...

  • Page 54
    ... of Directors recommends a vote in favor of the following resolution: ''RESOLVED, that the compensation paid to the Company's named executive officers for fiscal 2014, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and...

  • Page 55
    ... the business and aligning with shareholder value creation. In creating the new compensation structure, the Compensation Committee also considered the Company's strategy, which includes a focus on current performance while at the same time making long-term investments to capitalize on opportunities...

  • Page 56
    ... the form of performance stock units and stock options) which represents 79% of the Chief Executive Officer's cash and equity compensation for 2014, and the majority of cash and equity compensation for the other named executive officers. - No increase in base salary for the Company's Chief Executive...

  • Page 57
    ... of the Company's compensation programs for its executive officers and certain other key executives are base salary, equity compensation (consisting of awards of performance stock units and stock options), retirement and other benefits (consisting of health plans, a limited 401(k) plan match and...

  • Page 58
    ... into consideration that the Company does not pay annual cash bonuses. Equity Compensation Performance Stock Units (PSUs) In early fiscal 2014, the Company significantly redesigned its equity incentive program for its named executive officers and certain other key executives with a view toward...

  • Page 59
    ... executive officers remaining in the Company's service on specified vesting dates. Time Vested Restricted Stock All executives (other than named executive officers and other key executives whose compensation is determined by the Compensation Committee) and associates awarded incentive compensation...

  • Page 60
    ... offered to all other associates. The cost of these benefits constitutes a small percentage of each named executive officer's total compensation. Key benefits include paid vacation, premiums paid for long-term disability insurance, a matching contribution to the named executive officer's 401(k) plan...

  • Page 61
    ... and the return to its shareholders over time. The Company believes that its compensation programs will allow it to retain the executives who are part of the Company's executive team and attract highly qualified executives when new executives are required. BED BATH & BEYOND PROXY STATEMENT 59

  • Page 62
    ...Annual Report on Form 10-K for fiscal 2014 for filing with the SEC. The foregoing report is provided by the following directors, who constitute the fiscal year 2014 Compensation Committee: COMPENSATION COMMITTEE Dean S. Adler Stanley F. Barshay Victoria A. Morrison BED BATH & BEYOND PROXY STATEMENT...

  • Page 63
    ...in footnote 13 to the Company's financial statements in the Company's Form 10-K for fiscal 2014. Stock awards and option awards are rounded up to the nearest whole share when converted from dollars to shares. The amounts shown in the table reflect the total fair value on the date of grant and do not...

  • Page 64
    ...Compensation for Mr. Fiorilli includes incremental costs to the Company for car allowance of $14,579 and $14,175 and employer 401(k) plan and nonqualified deferred compensation plan matching contributions of $7,575 and $7,650 for fiscal 2014 and 2013, respectively. BED BATH & BEYOND PROXY STATEMENT...

  • Page 65
    ... of compensation payable to such named executive officers in each termination situation is listed in the table below. The table is presented using an assumed termination date and an assumed change in control date of February 28, 2015, the last day of fiscal 2014 and a price per share of common stock...

  • Page 66
    ... taking into account the excise tax imposed by Section 4999 of the Code. The agreements also provide that upon a change in control of the Company, the Company will fund a ''rabbi trust'' for each of the executives to hold an amount equal to the value of the payments and certain benefits payable to...

  • Page 67
    ... in the agreements as when the executive has: (i) acted in bad faith or with dishonesty; (ii) willfully failed to follow reasonable and lawful directions of the Company's Chief Executive Officer or the Board of Directors, as applicable; (iii) performed his or her duties with gross negligence; or...

  • Page 68
    ... Stock Units in the Equity Compensation section of the Compensation Discussion & Analysis above. Represents the estimated present value of continued health and welfare benefits and other perquisites for the life of the executive and his spouse. (3) (4) (5) (6) BED BATH & BEYOND PROXY STATEMENT...

  • Page 69
    ... was a ''Termination Without Cause.'' Cash severance represents 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...

  • Page 70
    ... stock units awarded during fiscal 2014 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 2014. All Other Option Awards: Number of Securities Underlying Options...

  • Page 71
    ... forth information for each of the named executive officers with respect to the value of all unexercised options, unvested restricted stock awards and unvested performance stock units as of February 28, 2015, the end of fiscal 2014. Option Awards Stock Awards Equity Incentive Plan Awards: Market or...

  • Page 72
    ..., the 5,214 PSU awards are scheduled to vest on May 12, 2018. (17) Mr. Temares' 374,288 exercisable option awards that expire on May 12, 2016 include 187,144 option awards held by him individually and 187,144 option awards held by a family limited partnership. BED BATH & BEYOND PROXY STATEMENT 70

  • Page 73
    ... stock. Mr. Stark exercised stock options on April 17, 2014 and November 13, 2014. Mr. Castagna exercised stock options on November 6, 2014, November 14, 2014 and February 6, 2015. Mr. Fiorilli exercised stock options on April 14, 2014 and January 16, 2015. BED BATH & BEYOND PROXY STATEMENT...

  • Page 74
    ...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 75
    ... Bed Bath & Beyond Inc., 650 Liberty Avenue, Union, New Jersey 07083. Number of Shares of Common Stock Beneficially Owned and Percent of Class as of May 6, 2015 10,125,858 9,852,640 9,605,096 9,436,637 Co-Chairman and Director Co-Chairman and Director Chief Executive Officer and Director President...

  • Page 76
    ... include store operations, merchandising, store design and product sourcing. For fiscal 2014, his salary was $506,530 and he received other benefits consistent with his position and tenure, including a restricted stock award valued at $150,000, and an automotive allowance and employer 401(k) match...

  • Page 77
    ...entities for transactions in our common stock and their common stock holdings for fiscal 2014, 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, except for one late Form 4 filing for each of Eugene...

  • Page 78
    ... executive offices at 650 Liberty Avenue, Union, New Jersey 07083 between the close of business on March 4, 2016 and the close of business on April 3, 2016, and is otherwise in compliance with the requirements set forth in the Company's Amended By-laws. If the date of the 2016 Annual Meeting...

  • Page 79
    ... 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 2, 2015, at...

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