BJ's Wholesale Club, Inc. Will Adopt New Methods to Account for Membership Income and Store Preopening Expenses.NATICK Natick (nā`tĭk), town (1990 pop. 30,510), Middlesex co., E Mass., a residential and industrial suburb of Boston, on Lake Cochituate; founded as a Native American village by John Eliot 1651, settled by colonial Americans 1718, inc. 1781. , Mass.--(BUSINESS WIRE)--Oct. 19, 1998--BJ's Wholesale Club, Inc. (NYSE NYSE See: New York Stock Exchange :BJ) today announced that it will adopt a new method of accounting for membership income in anticipation The performance of an act or obligation before it is legally due. In patent law, the publication of the existence of an invention that has already been patented or has a patent pending, of changes the Securities and Exchange Commission (SEC) is expected to require the wholesale club industry to adopt later this year. The company will also implement early adoption of the American American, river, 30 mi (48 km) long, rising in N central Calif. in the Sierra Nevada and flowing SW into the Sacramento River at Sacramento. The discovery of gold at Sutter's Mill (see Sutter, John Augustus) along the river in 1848 led to the California gold rush of Institute of CPA's Statement of Position (SOP) 98-5, "Reporting on the Costs of Start-up Start-up The earliest stage of a new business venture. Activities," in the current quarter. ACCOUNTING FOR MEMBERSHIP FEES Historically, BJ's has recognized annual membership fees as revenue when received; that is, on a cash basis. Under its new accounting method, which will be adopted in the current quarter ending October October: see month. 31, 1998, BJ's will recognize membership income over the life of the membership, which is typically twelve months. Frank Forward, BJ's Chief Financial Officer, noted: "BJ's historical practice of recognizing membership fees when received was in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting (GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). ) and industry practice. Recently, however, the SEC has informed us that it plans to issue a Staff Accounting Bulletin in the near future that will change GAAP relative to the timing of recognition of membership fee income. We believe it makes sense to implement the change immediately. It is important to understand that the change will not have a material effect on the company's financial condition or ongoing operating results." Accordingly, BJ's will record a one-time one-time adj. 1. or one·time a. Occurring or undertaken only once: a one-time winner in 1995. b. , noncash, post-tax charge of approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $18.2 million to reflect the cumulative effect of the accounting change as of the beginning of the current fiscal year, and will also restate re·state tr.v. re·stat·ed, re·stat·ing, re·states To state again or in a new form. See Synonyms at repeat. re·state the first two quarters of this year to reflect the accounting change. BJ's anticipates that, as a result of adopting the new accounting method, reported earnings, excluding the cumulative effect of the accounting change, will be approximately 3% - 4% lower in the current fiscal year and approximately 2% - 3% lower next year, compared with earnings calculated using the prior accounting method. ACCOUNTING FOR PREOPENING EXPENSES Formerly, BJ's preopening expenses were charged to operations between the date a new club opened and the end of the fiscal year. Under SOP 98-5, preopening expenses will be expensed when they are incurred. BJ's will record a one-time, noncash, post-tax charge of $1.1 million as of the beginning of the current fiscal year to reflect the cumulative effect of adopting SOP 98-5, and will restate the first two quarters of this year to reflect the accounting change. The company estimates that adoption of SOP 98-5 will increase earnings, excluding the cumulative effect of the accounting change, in the current fiscal year by approximately 1%, compared with earnings calculated using the prior accounting method. SUMMARY: The combined effect of adopting the new methods of accounting for membership fees and pre-opening expenses in the current year will include a one-time, noncash, post-tax charge of $19.3 million and will result in a 2%-3% reduction in net income, exclusive of the one-time charge. For the first two quarters of this year, the combined effect of adopting the new accounting methods will be to increase income before the cumulative effect of accounting changes by $.03 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share. (See attached table for quarterly restatement Restatement A revision in a company's earlier financial statements. Notes: The need for restating financial figures can result from fraud, misrepresentation, or a simple clerical error. of BJ's financial results to reflect these accounting changes.) The company said it estimates the combined effect of the accounting changes will reduce net income by about $.07 per diluted share in its third quarter and by $.02 to $.04 per diluted share in its fourth quarter. BJ's expects to report financial results for its third quarter on November November: see month. 17, 1998. This press release contains "forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. ," including estimates of the impact in future periods of the accounting changes being adopted by the company. For this purpose, any statements contained in this release that are not statements of historical fact, or include the words, "believes," "anticipates," "expects," or similar expressions, are forward-looking statements. Investors should consider a number of factors that could cause actual events and financial results to differ materially from those indicated by such forward-looking statements, including, but not limited to, the timing of BJ's club openings, membership growth, regional and economic conditions and competitive factors. In reading this release, investors should refer to BJ's Wholesale Club BJ's Wholesale Club, Inc. NYSE: BJ is a membership-only warehouse club chain operating in the East Coast of the United States, as well as in the state of Ohio. History , Inc. quarterly and annual reports filed with the SEC for comprehensive information about its business. BJ's Wholesale Club, Inc. introduced the warehouse club concept to New England New England, name applied to the region comprising six states of the NE United States—Maine, New Hampshire, Vermont, Massachusetts, Rhode Island, and Connecticut. The region is thought to have been so named by Capt. in 1984 and has since expanded to become a leading membership wholesale club in the eastern United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. . BJ's currently operates 90 clubs compared with 84 one year ago. -0-
BJ'S WHOLESALE CLUB, INC.
CONSOLIDATED STATEMENTS OF INCOME
Twenty-Six Weeks Ended August 1, 1998
(Unaudited)
As Increase
Reported Restated (Decrease)
(In Thousands except Per Share Amounts)
Net sales $ 1,614,351 $ 1,614,351 $ 0
Membership fees and other 32,401 35,567 3,166
Total revenues 1,646,752 1,649,918 3,166
Cost of sales, including
buying and occupancy
costs 1,475,258 1,475,258 0
Selling, general and
administrative expenses 122,091 122,091 0
Preopening expenses 1,206 2,563 1,357
Pension termination costs 1,521 1,521 0
Operating income 46,676 48,485 1,809
Interest on debt and
capital leases (net) (220) (220) 0
Income before income
taxes and cumulative
effect of accounting
changes 46,896 48,705 1,809
Provision for income
taxes 18,289 18,995 706
Income before cumulative
effect of accounting
changes 28,607 29,710 1,103
Cumulative effect of
accounting changes 0 (19,326) (19,326)
Net income $ 28,607 $ 10,384 ($ 18,223)
Diluted earnings per
share:
Income before
cumulative effect
of accounting
changes $ 0.75 $ 0.78 $ 0.03
Cumulative effect
of accounting
changes 0.00 (0.51) (0.51)
Net income $ 0.75 $ 0.27 ($ 0.48)
See Notes to Unaudited Consolidated Statements of Income
BJ'S WHOLESALE CLUB, INC.
CONSOLIDATED STATEMENTS OF INCOME
Thirteen Weeks Ended August 1, 1998
(Unaudited)
As Increase
Reported Restated (Decrease)
(In Thousands except Per Share Amounts)
Net sales $ 859,599 $ 859,599 $ 0
Membership fees and other 13,661 18,091 4,430
Total revenues 873,260 877,690 4,430
Cost of sales, including
buying and occupancy
costs 781,679 781,679 0
Selling, general and
administrative expenses 60,989 60,989 0
Preopening expenses 740 1,172 432
Operating income 29,852 33,850 3,998
Interest on debt and
capital leases (net) (352) (352) 0
Income before income taxes 30,204 34,202 3,998
Provision for income taxes 11,779 13,339 1,560
Net income $ 18,425 $ 20,863 $ 2,438
Diluted net income per
common share $ 0.48 $ 0.54 $ 0.06
See Notes to Unaudited Consolidated Statements of Income
BJ'S WHOLESALE CLUB, INC.
CONSOLIDATED STATEMENTS OF INCOME
Thirteen Weeks Ended May 2, 1998
(Unaudited)
As Increase
Reported Restated (Decrease)
(In Thousands except Per Share Amounts)
Net sales $ 754,752 $ 754,752 $ 0
Membership fees and
other 18,740 17,476 (1,264)
Total revenues 773,492 772,228 (1,264)
Cost of sales, including
buying and occupancy
costs 693,579 693,579 0
Selling, general and
administrative expenses 61,102 61,102 0
Preopening expenses 466 1,391 925
Pension termination costs 1,521 1,521 0
Operating income 16,824 14,635 (2,189)
Interest on debt and
capital leases (net) 132 132 0
Income before income
taxes and cumulative
effect of accounting
changes 16,692 14,503 (2,189)
Provision for income
taxes 6,510 5,656 (854)
Income before cumulative
effect of accounting
changes 10,182 8,847 (1,335)
Cumulative effect of
accounting changes 0 (19,326) (19,326)
Net income (loss) $ 10,182 ($ 10,479) ($ 20,661)
Diluted earnings (loss)
per share:
Income before cumulative
effect of accounting
changes $ 0.27 $ 0.23 ($ 0.04)
Cumulative effect of
accounting changes 0.00 (0.50) (0.50)
Net income (loss) $ 0.27 ($ 0.27) ($ 0.54)
See Notes to Unaudited Consolidated Statements of Income
BJ'S WHOLESALE CLUB, INC.
CONSOLIDATED STATEMENTS OF INCOME
Fiscal Year Ended January 31, 1998
(Unaudited)
As Increase
Historical Basis Reported Pro Forma (Decrease)
(In Thousands except Per Share Amounts)
Net sales $3,159,786 $3,159,786 0
Membership fees and other 67,556 65,161 (2,395)
Total revenues 3,227,342 3,224,947 (2,395)
Cost of sales, including
buying and occupancy costs 2,872,303 2,872,303 0
Selling, general and
administrative expenses 231,203 231,203 0
Preopening expenses 3,190 5,005 1,815
Operating income 120,646 116,436 (4,210)
Interest on debt and capital
leases (net) 8,733 8,733 0
Income before income taxes 111,913 107,703 (4,210)
Provision for income taxes 43,646 42,004 (1,642)
Net income $ 68,267 $ 65,699 ($ 2,568)
Diluted net income per
common share $ 1.81 $ 1.74 ($ 0.07)
As Increase
Analytical Basis Reported Pro Forma (Decrease)
(In Thousands except Per Share Amounts)
Net sales $3,159,786 $3,159,786 $ 0
Membership fees and other 67,556 65,161 (2,395)
Total revenues 3,227,342 3,224,947 (2,395)
Cost of sales, including
buying and occupancy costs 2,872,303 2,872,303 0
Selling, general and
administrative expenses 232,203 232,203 0
Preopening expenses 3,190 5,005 1,815
Operating income 119,646 115,436 (4,210)
Interest on debt and capital
leases (net) 3,873 3,873 0
Income before income taxes 115,773 111,563 (4,210)
Provision for income taxes 45,175 43,533 (1,642)
Net income $ 70,598 $ 68,030 ($ 2,568)
Diluted net income per
common share $ 1.86 $ 1.79 ($ 0.07)
See Notes to Unaudited Consolidated Statements of Income
BJ'S WHOLESALE CLUB, INC.
CONSOLIDATED STATEMENTS OF INCOME
Fiscal Year Ended January 25, 1997
(Unaudited)
As Increase
Historical Basis Reported Pro Forma (Decrease)
(In Thousands except Per Share Amounts)
Net sales $2,859,950 $2,859,950 $ 0
Membership fees and other 64,746 63,506 (1,240)
Total revenues 2,924,696 2,923,456 (1,240)
Cost of sales, including
buying and occupancy costs 2,605,602 2,605,602 0
Selling, general and
administrative expenses 208,077 208,077 0
Preopening expenses 6,447 5,899 (548)
Operating income 104,570 103,878 (692)
Interest on debt and capital
leases (net) 16,838 16,838 0
Income before income taxes 87,732 87,040 (692)
Provision for income taxes 34,108 33,839 (269)
Net income $ 53,624 $ 53,201 ($ 423)
Diluted net income per common
share $ 1.43 $ 1.42 ($ 0.01)
As Increase
Analytical Basis Reported Pro Forma (Decrease)
(In Thousands except Per Share Amounts)
Net sales $2,859,950 $2,859,950 $ 0
Membership fees and other 64,746 63,506 (1,240)
Total revenues 2,924,696 2,923,456 (1,240)
Cost of sales, including buying
and occupancy costs 2,605,602 2,605,602 0
Selling, general and
administrative expenses 210,077 210,077 0
Preopening expenses 6,447 5,899 (548)
Operating income 102,570 101,878 (692)
Interest on debt and capital
leases (net) 6,471 6,471 0
Income before income taxes 96,099 95,407 (692)
Provision for income taxes 37,497 37,228 (269)
Net income $ 58,602 $ 58,179 ($ 423)
Diluted net income per common
share $ 1.54 $ 1.53 ($ 0.01)
See Notes to Unaudited Consolidated Statements of Income
NOTES TO UNAUDITED CONSOLIDATED con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: STATEMENTS OF INCOME 1. The accompanying ac·com·pa·ny v. ac·com·pa·nied, ac·com·pa·ny·ing, ac·com·pa·nies v.tr. 1. To be or go with as a companion. 2. tables summarize sum·ma·rize intr. & tr.v. sum·ma·rized, sum·ma·riz·ing, sum·ma·riz·es To make a summary or make a summary of. sum the effects of changes in accounting for membership fee income and preopening expenses which will be adopted by BJ's Wholesale Club, Inc. in its current fiscal quarter ending October 31, 1998. Financial information for the first two quarters of the current fiscal year ending January January: see month. 30, 1999 will be restated by applying the newly adopted accounting principles to those periods. The cumulative effect of these changes on retained earnings Retained Earnings The percentage of net earnings not paid out in dividends, but retained by the company to be reinvested in its core business or to pay debt. It is recorded under shareholders equity on the balance sheet. at the beginning of the Company's current fiscal year will be included in restated net income of the first fiscal quarter ended May 2, 1998. 2. The "As Reported" column on the accompanying tables presents the Company's Statements of Income as previously reported, with certain amounts reclassified for comparative purposes going forward. Preopening expenses were previously included in the "Selling, general and administrative expenses" line; they are now presented on a separate line. BJ's previously netted membership fees received before a new club opened against preopening expenses; these fees are now included in the "Membership fees and other" line. The "Restated" column on the Statements of Income for the first two quarters of the current fiscal year presents data adjusted for the newly adopted accounting principles. 3. The "Pro Forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma " column on the accompanying Statements of Income for the fiscal years ended January 31, 1998 and January 25, 1997 presents data as if the newly adopted accounting principles had been applied during each of those years. 4. BJ's Wholesale Club, Inc. commenced operations as a separate entity immediately following its July July: see month. 28, 1997 spin-off The situation that arises when a parent corporation organizes a subsidiary corporation, to which it transfers a portion of its assets in exchange for all of the subsidiary's capital stock, which is subsequently transferred to the parent corporation's shareholders. from Waban Waban (1604-1685?) was an American Indian tribal chief of the Nonantum Tribe and was the first American Indian converted to Christianity in Massachusetts.[1] On October 28, 1646, the Rev. Inc. Therefore, reported financial results through the first half of the fiscal year ended January 31, 1998 reflect BJ's historical position as a division of Waban Inc. and, as such, may not be indicative indicative: see mood. of performance after the spin-off. The attached "Analytical analytical, analytic pertaining to or emanating from analysis. analytical control control of confounding by analysis of the results of a trial or test. Basis" Statements of Income for the fiscal years ended January 31, 1998 and January 25, 1997 adjust data contained in the historical presentation to reflect certain changes to ongoing operations after the spin-off. See "Management's Discussion and Analysis Management's discussion and analysis (MD&A) A report from management to shareholders that accompanies the firm's financial statements in the annual report. It explains the period's financial results and enables management to discuss topics that may not be apparent in the financial of Financial Condition and Results of Operations" in BJ's quarterly and annual reports filed with the SEC for additional information. |
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