BJ's Wholesale Club Reports Second Quarter EPS of $.39: Updates Earnings Guidance for Full Year.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. -- 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. (NYSE NYSE See: New York Stock Exchange : BJ) today reported net income for its second quarter ended July July: see month. 29, 2006 of $26.4 million, or $.39 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, compared to net income of $30.5 million, or $.44 per diluted share for the second quarter of 2005. Results for the second quarter of 2006 included $3.4 million post-tax, or $.05 per diluted share, for stock-based compensation expense versus $.2 million post-tax for stock-based compensation expense last year. Net income for the first half of 2006 was $41.8 million, or $.62 per diluted share, compared to net income of $49.1 million, or $.71 per diluted share, for the comparable period in 2005. Results for the first half of 2006 included income of $2.1 million post-tax, or $.03 per diluted share, for House2Home bankruptcy bankruptcy, in law, settlement of the liabilities of a person or organization wholly or partially unable to meet financial obligations. The purposes are to distribute, through a court-appointed receiver, the bankrupt's assets equitably among creditors and, in most recoveries, and expense of $5.8 million post-tax, or $.09 per diluted share, for stock-based compensation expense. Results for the first half of 2005 included income of $2.9 million post-tax, or $.04 per diluted share, for House2Home bankruptcy recoveries, expense of $1.8 million post-tax, or $.03 per diluted share, related to the Company's reserve for credit card claims, and $.4 million post-tax for stock-based compensation expense. (See notes to attached financial statements.) During the first quarter of 2006 BJ's adopted FASB Statement FASB Statement A standard set by the Financial Accounting Standards Board regarding a financial accounting and reporting method. Essentially, FASB statements determine the acceptable accounting practices that Certified Public Accountants use in reporting Number 123R "Share-Based Payment," using the modified mod·i·fy v. mod·i·fied, mod·i·fy·ing, mod·i·fies v.tr. 1. To change in form or character; alter. 2. prospective application transition method. The Company also announced revised earnings guidance for the full year in the range of $1.69 to $1.77 per diluted share. Net sales Net Sales The amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight for the second quarter ended July 29, 2006 were approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $2.1 billion, an increase of 5.6% over the second quarter of 2005. Comparable club sales for the second quarter of 2006 increased by 1.8%, including a contribution from sales of gasoline gasoline or petrol, light, volatile mixture of hydrocarbons for use in the internal-combustion engine and as an organic solvent, obtained primarily by fractional distillation and "cracking" of petroleum, but also obtained from natural gas, by of 1.9%. For the first half of 2006, total sales increased by 6.0% and comparable club sales increased by 1.9%, including a contribution from sales of gasoline of 1.7% The Company also announced that it purchased approximately 2 million shares of BJ's common stock during the second quarter at an average price of $27.89, or $55 million. Year to date, the Company has purchased approximately 2.6 million shares of BJ's common stock at an average price of $28.56 per share, or approximately $75 million. Conference Call on Second Quarter Financial Results As previously announced, BJ's management will hold a conference call to discuss the second quarter financial results and the outlook for the second half of 2006 today at 8:30 a.m. Eastern Time. To access the webcast (including financial and other statistical information being presented, as well as reconciliation information with respect to any non-GAAP financial measures being presented), visit www.bjsinvestor.com/medialist.cfm to hear the call live, or listen to an archive (1) A file that contains one or more compressed files. Most archive formats are also capable of storing folders in order to reconstruct the file/folder relationship when decompressed. See archive formats. of the call, which will be available for approximately 90 days following the call. BJ's introduced the wholesale 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 warehouse chain 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. . The Company currently operates 167 clubs, including two ProFoods Restaurant Supply Clubs. BJ's press releases and filings with the SEC are available on the Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the at www.bjs.com. 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. Statements contained in this press release, including earnings guidance, that are not purely historical are forward-looking statements for purposes of the safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. provisions under The Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. Actual results may differ materially from those indicated by these forward-looking statements. Factors that may cause or contribute to such differences include, without limitation, levels of gasoline profitability, levels of customer demand, economic and weather conditions, state and local regulation in the Company's markets, and competitive conditions, success in settling lease obligations for closed clubs and credit and debit card debit card, card that allows the cost of goods or services that are purchased to be deducted directly from the purchaser's checking account. They can also be used at automated teller machines for withdrawing cash from the user's checking account. claims, and other factors discussed in the Company's Annual Report on SEC Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the fiscal year ended January January: see month. 28, 2006. Any forward-looking statements represent our estimates only as of today and should not be relied upon as representing our estimates as of any subsequent date. While we may elect to update forward-looking statements at some point in the future, we specifically disclaim dis·claim v. dis·claimed, dis·claim·ing, dis·claims v.tr. 1. To deny or renounce any claim to or connection with; disown. 2. To deny the validity of; repudiate. 3. any obligation to do so, even if our estimates change. -See Financial Tables-
BJ's Wholesale Club, Inc. and Consolidated Subsidiaries
STATEMENTS OF INCOME (Unaudited)
(Dollars in Thousands Except Per Share Amounts)
Thirteen Weeks Ended Twenty-Six Weeks Ended
------------------------ ------------------------
July 29, July 30, July 29, July 30,
2006 2005 2006 2005
----------- ----------- ----------- -----------
Net sales $ 2,093,524 $ 1,981,593 $ 3,973,597 $ 3,750,382
Membership fees
and other 43,381 40,945 85,869 81,706
----------- ----------- ----------- -----------
Total revenues 2,136,905 2,022,538 4,059,466 3,832,088
----------- ----------- ----------- -----------
Cost of sales,
including buying
and occupancy
costs 1,926,922 1,816,478 3,665,951 3,452,459
Selling, general
and
administrative
expenses 166,221 154,385 327,585 298,876
Provision for
credit card
claims - - - 3,000
Preopening
expenses 1,306 1,950 2,581 3,047
----------- ----------- ----------- -----------
Operating income 42,456 49,725 63,349 74,706
Interest income,
net 954 572 2,030 847
Gain on contingent
lease obligations - - 3,119 4,277
----------- ----------- ----------- -----------
Income from
continuing
operations before
income taxes 43,410 50,297 68,498 79,830
Provision for
income taxes 16,936 19,767 26,535 30,597
----------- ----------- ----------- -----------
Income from
continuing
operations 26,474 30,530 41,963 49,233
Loss from
discontinued
operations, net
of income tax
benefit (73) (77) (146) (157)
----------- ----------- ----------- -----------
Net income $ 26,401 $ 30,453 $ 41,817 $ 49,076
=========== =========== =========== ===========
Basic earnings per
common share:
Income from
continuing
operations $ 0.40 $ 0.45 $ 0.63 $ 0.72
Loss from
discontinued
operations - - - -
----------- ----------- ----------- -----------
Net income $ 0.40 $ 0.45 $ 0.63 $ 0.72
=========== =========== =========== ===========
Diluted earnings
per common share:
Income from
continuing
operations $ 0.40 $ 0.44 $ 0.62 $ 0.71
Loss from
discontinued
operations (0.01) - - -
----------- ----------- ----------- -----------
Net income $ 0.39 $ 0.44 $ 0.62 $ 0.71
=========== =========== =========== ===========
Number of common
shares for
earnings per
share
computations:
Basic 66,192,730 68,338,863 66,703,704 68,581,905
Diluted 66,952,101 69,140,923 67,508,985 69,390,817
Clubs in operation
- end of period 167 161
BJ's Wholesale Club, Inc. and Consolidated Subsidiaries
CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
(Dollars in Thousands)
Twenty-Six Weeks Ended
-----------------------
July 29, July 30,
2006 2005
----------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 41,817 $ 49,076
Provision for credit card claims - 3,000
Provision for store closing costs 243 262
Depreciation and amortization 52,953 52,507
Share-based compensation expense 9,753 701
Deferred income taxes (4,674) 1,042
(Increase) decrease in merchandise
inventories, net of accounts payable (14,209) 13,514
Decrease in closed store lease obligations (496) (6,796)
Other (12,791) (26,196)
----------- ----------
Net cash provided by operating activities 72,596 87,110
----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Property additions (93,388) (51,847)
Property disposals 20 51
Purchase of marketable securities (68) (95,825)
Sale of marketable securities - 120,625
----------- ----------
Net cash used in investing activities (93,436) (26,996)
----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Excess tax benefit from exercise of stock
options 1,929 -
Purchase of treasury stock (75,378) (48,608)
Proceeds from issuance of common stock 8,479 13,923
Repayment of long-term debt (227) (211)
----------- ----------
Net cash used in financing activities (65,197) (34,896)
----------- ----------
Net increase (decrease) in cash and cash
equivalents $ (86,037) $ 25,218
=========== ==========
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. In the first quarter of this year, the Company implemented
Statement of Financial Accounting Standards No. 123R,
"Share-Based Payment," using the modified prospective application
("MPA") transition method. Under this approach, the Company began
recognizing the fair value of stock options in this year's first
quarter. The Company recorded pretax stock-based compensation of
$5.7 million ($3.4 million post-tax, or $.05 per diluted share) in
the second quarter. For the first six months of the year, pretax
stock-based compensation was $9.8 million ($5.8 million post-tax,
or $.09 per diluted share).
Prior to this fiscal year, the Company accounted for stock-based
employee compensation under APB Opinion No. 25 and related
interpretations, and no expense for stock options was reflected in
net income, as all options granted under our plans had an exercise
price equal to the market value of the underlying common stock on
the grant date. In last year's second quarter, the Company
recorded stock-based compensation of $0.4 million ($0.2 million
post-tax). For the first six months of last year, pretax
stock-based compensation was $0.7 million, ($0.4 million post-tax,
or $.01 per diluted share).
We have included stock-based employee compensation for restricted
stock in net income in both this year and prior years.
2. In last year's first half, the Company recorded first quarter
pretax charges of $3.0 million ($1.8 million post-tax, or $.03 per
diluted share) to increase its reserve for claims seeking
reimbursement for fraudulent credit and debit card charges and the
cost of replacing cards, monitoring expenses and related fees and
expenses.
3. During this year's first half, the Company received first quarter
pretax recoveries of House2Home bankruptcy claims of $3.1 million,
which are included in gain on contingent lease obligations. On a
post-tax basis, these gains were $2.1 million, or $.03 per diluted
share.
In last year's first half, the Company received first quarter
pretax recoveries of House2Home bankruptcy claims of $4.3 million.
On a post-tax basis, these gains were $2.9 million, or $.04 per
diluted share.
4. Certain amounts in the prior year's financial statements have been
reclassified for comparative purposes.
BJ's Wholesale Club, Inc. and Consolidated Subsidiaries
CONDENSED BALANCE SHEETS (Unaudited)
(Dollars in Thousands)
July 29, July 30,
2006 2005
---------- ----------
ASSETS
Current assets:
Cash and cash equivalents $ 76,127 $ 150,776
Marketable securities 37 -
Accounts receivable 90,694 81,803
Merchandise inventories 802,694 766,719
Current deferred income taxes 25,385 22,486
Prepaid expenses 17,272 19,597
---------- ----------
Total current assets 1,012,209 1,041,381
Property, net of depreciation 863,295 804,492
Other assets 23,470 23,866
---------- ----------
TOTAL ASSETS $1,898,974 $1,869,739
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt $ 476 $ 444
Accounts payable 525,296 548,142
Closed store lease obligations 712 959
Accrued expenses and other current
liabilities 261,771 247,559
---------- ----------
Total current liabilities 788,255 797,104
Long-term debt, less portion due within one
year 2,494 2,970
Noncurrent closed store lease obligations 7,989 8,498
Other noncurrent liabilities 77,119 72,983
Deferred income taxes 20,538 30,261
Stockholders' equity 1,002,579 957,923
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,898,974 $1,869,739
========== ==========
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