Bed Bath & Beyond (BBBY)

Item 8.01               Other Events

Bed Bath & Beyond Inc. (the “Company”) is filing this Current Report on Form 8-K in connection with recent developments regarding the auction rate securities market. The Company currently has investments totaling approximately $326 million in auction rate securities. All of these investments carry triple-A credit ratings from one or more of the major credit rating agencies.  Approximately $283 million of these securities are invested in preferred shares of closed end municipal bond funds, which are required, pursuant to the Investment Company Act of 1940, to maintain minimum asset coverage ratios of 200%. The remaining approximate $43 million are invested in securities collateralized by student loans which are currently more than 100% collateralized and with approximately 90% of such collateral in the aggregate being guaranteed by the United States government. None of the auction rate securities held by the Company are mortgage-backed debt obligations. The Company, which also currently has approximately $250 million in U.S. Treasury money market funds and no bank debt, does not anticipate that any potential lack of liquidity in its auction rate securities, even for an extended period of time, will affect its ability to finance its operations, including its expansion program and planned capital expenditures.

The Company’s auction rate securities carry interest rates that reset periodically, every 7, 28 or 35 days, through an auction process. Due to current market conditions, the auction process for the Company’s auction rate securities has recently failed.  These failed auctions result in a lack of liquidity in the security but do not affect the value of the underlying collateral of the security.  Upon the auction failures of the securities held by the Company, the interest rates reset based on a predetermined maximum contractual rate, which is nominally higher than the interest rates earned prior to auction failures. The Company continues to earn and receive interest on these securities. The Company’s auction rate securities will continue to be presented for auction every 7, 28 or 35 days until the auction succeeds, the issuer calls the security, or they mature, as in the case of securities collateralized by student loans.

The Company is in the process of determining the fair market value of these securities as of March 1, 2008, the end of its fiscal year, but currently believes that an impairment, if any, would be temporary and would not result in a charge to its fiscal 2007 earnings.  Further, based on the current lack of liquidity related to these investments, the Company may reclassify all or a portion of its auction rate securities from current assets to long-term assets in its consolidated balance sheet as of March 1, 2008.

This Form 8-K may contain forward-looking statements.  Many of these forward-looking statements can be identified by use of words such as may, will, expect, anticipate, estimate, assume, continue, project, plan, and similar words and phrases.  The Company’s actual results and future financial condition may differ materially from those expressed in any such forward-looking statements as a result of many factors that may be outside the Company’s control.  Such factors include, without limitation: changes in the retailing environment and consumer preferences and spending habits; demographics and other macroeconomic factors that may impact the level of spending for the types of merchandise sold by the Company; general economic conditions; unusual weather patterns; competition from existing and potential competitors; competition from other channels of distribution; pricing pressures; the cost of labor, merchandise and other costs and expenses; the ability to find suitable locations at acceptable occupancy costs to support the Company’s expansion program; the impact of failed auctions for auction rate securities held by the Company; and matters arising out of or related to the Company’s stock option grants and procedures and related matters, including the outcome of the informal inquiry commenced by the SEC, the possibility that the SEC may not agree with all of the special committee’s findings and recommendations and may require additional or different remediation, any other proceedings which may be brought against the Company by the SEC or other governmental agencies, any tax implications relating to the Company’s stock option grants, the outcome of the shareholder derivative actions filed against certain of the Company’s officers and directors, and the possibility of other private litigation relating to such stock option grants and related matters. The Company does not undertake any obligation to update its forward-looking statements.

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The press release issued on September 26, 2007 also contained an announcement by the Company that the Board of Directors of the Company has approved a $1 billion share repurchase program, which authorizes the Company to repurchase shares of its common stock.

Item 8.01               Other Events.

Section 409A Remediation for Employee Stock Options

As previously disclosed, a special committee of two independent members of the Company’s Board of Directors, with the assistance of independent legal counsel and outside accounting advisors, conducted a review of the stock option grants and restricted share awards made by the Company during the period from its initial public offering in 1992 through May 15, 2006.  The review identified various deficiencies in the process of granting and documenting stock options and restricted shares.  As a result of these deficiencies, the special committee recommended, among other things, revised measurement dates for certain stock option grants.

For purposes of Section 409A, a stock option granted with an exercise price that has been deemed to be less than the fair market value of the underlying common stock on the date of grant, to the extent that it was not vested as of January 1, 2005, will be subject to adverse tax consequences unless brought into compliance with Section 409A (such stock options are referred to herein as the “Affected Options”).  Grants of the Affected Options were made to over 1,600 of the Company’s employees.  In order to protect the employees holding Affected Options from such adverse tax consequences under Section 409A, the Company’s Board of Directors (excluding the three directors who are officers of the Company) and the Compensation Committee of the Board of Directors jointly approved the following actions on December 21, 2006:

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·         With respect to all outstanding Affected Options held by Warren Eisenberg and Leonard Feinstein, the Co-Chairmen of the Company, and Steven Temares, the Chief Executive Officer of the Company, the exercise price of such options that were not vested as of January 1, 2005 will be increased prior to the end of calendar 2006 to the fair market value of the Company’s common stock on the new measurement dates.  Each of Messrs. Eisenberg, Feinstein and Temares has informed the Board that they decline to be considered for payment of the difference between the original exercise price and the fair market value of the Company’s common stock on the new measurement date for each Affected Option or any other payment or consideration in respect of such adjustment to the exercise price of the Affected Options held by him.

·         With respect to all outstanding Affected Options held by six senior officers of the Company (including Eugene Castagna, Matthew Fiorilli and Arthur Stark, each of whom is an “executive officer” as defined in Rule 16a-1(f) promulgated under the Securities Exchange Act of 1934, as amended), each such officer will be given the choice, with respect to each grant of Affected Options, to either (i) select a calendar year in which such Affected Options will be exercisable (with earlier limited exercise periods in the case of such officer’s separation from service under pre-existing employment agreements, subject to the six month delay to the extent required by Section 409A), or (ii) elect to increase the exercise price of such Affected Options to the fair market value of the Company’s common stock on the new measurement dates, in which case the officer agreed he will not receive the difference between the original exercise price and the fair market value of the Company’s common stock on the new measurement date for each applicable Affected Option or any other payment or consideration in respect of such adjustment to the exercise price of the Affected Options held by such officer.

·         With respect to all outstanding Affected Options held by all other employees and/or former employees of the Company (other than three former employees who made the election described in clause (i) of the immediately preceding bullet point), the exercise price of such Affected Options that were not vested as of January 1, 2005 will be increased, effective as of the close of trading on December 29, 2006, to the fair market value of the Company’s common stock on the new measurement date for each such Affected Option and such employees and former employees will receive a cash payment from the Company in early 2007 in an amount equal to the difference between the original exercise price and the fair market value of the Company’s common stock on the new measurement dates for each Affected Option (less applicable payroll tax withholdings).  Employees terminated for “cause” prior to the payment date will not be entitled to the cash payment.  An employee who resigns prior to the payment date, will receive a cash payment applicable only to those Affected Options that are vested upon such employee’s termination date.

·                  With respect to Affected Options that were exercised during the 2006 calendar year, the Company will reimburse any holder for any tax liability (beyond typical income tax and other usual payroll deductions) resulting under Section 409A due to the exercise of such Affected Option.  No executive officer has exercised Affected Options during calendar 2006.

While the Company is currently reviewing the accounting treatment related to the remediation for employee stock options as described above, the Company believes it is likely it will recoup a substantial portion of the cash payments described above over the next several years through higher proceeds from the exercise of the Affected Options at the higher exercise prices.  The Internal Revenue Service has not yet issued final guidance under Section 409A.  To the extent that such final guidance requires any changes to the approved actions, the Company will so notify affected option holders.

In order to update the Company’s systems and commence processing the payments described above, the Company plans to designate a time period during which affected optionholders will be unable to exercise grants containing their Affected Options using the on-line broker-assisted cashless exercise system which assists the Company in the administration of its stock option plans.  This time period will begin after the close of the trading day on December 29, 2006 and will end as soon as the Company has completed all processing, which is currently expected by January 31, 2007.  Additionally, the Company anticipates that there will be a short time during this period when the on-line cashless exercise system will not be available to any users while system maintenance is being performed.  Although the on-line system may not be available during these time periods, employees may exercise any vested shares with broker assistance.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

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Item 8.01               Other Events

The press release issued on December 20, 2006 also contained an announcement by the Company that the Board of Directors of the Company has approved a $1 billion share repurchase program, which authorizes the Company to repurchase shares of its common stock.

Item 8.01               Other Events

An independent committee of the Company’s Board of Directors is carrying out a review of the Company’s stock option grants and procedures.  The independent committee’s review was initiated voluntarily by the Company and is being conducted with the assistance of independent legal counsel and outside accounting experts selected by the committee.  The independent committee’s review is not complete. The Company expects to report further with respect to the review in its Form 10-Q for the quarter ended August 26, 2006, which the Company expects to file on a timely basis on or before October 5, 2006.

The foregoing may contain forward-looking statements.  Many of these forward-looking statements can be identified by use of words such as may, will, expect, anticipate, estimate, assume, continue, project, plan and similar words and phrases.  The Company’s actual results and future financial condition may differ materially from those expressed in any such forward-looking statements as a result of many factors that may be outside the Company’s control.  Such factors include, without limitation: changes in the retailing environment and consumer preferences and spending habits; demographics and other macroeconomic factors that may impact the level of spending for the types of merchandise sold by the Company; general economic conditions; unusual weather patterns; competition from existing and potential competitors; competition from other channels of distribution; pricing pressures; the cost of labor, merchandise and other costs and expenses; the ability to find suitable locations at acceptable occupancy costs to support the Company’s expansion program; and the outcome of the independent committee’s review of the Company’s stock option grants and procedures.  The Company does not undertake any obligation to update its forward-looking statements.

The Company is pleased to report it has substantially completed its $600 million share repurchase program. This amount includes the $200 million increase authorized by the Company’s Board of Directors on January 25, 2006.  Approximately 16,404,000 shares were acquired through and including Thursday, February 9, 2006.

The Company’s earnings release and conference call for its 2005 fiscal fourth quarter and fiscal year ending February 25, 2006 are planned for April 5, 2006.

On January 25, 2006, Bed Bath & Beyond Inc. (the “Company”) issued a press release announcing its Board of Directors’ approval of a $200 million increase to its previously announced $400 million share repurchase program.  A copy of this press release is attached hereto as Exhibit 99.1.

On October 26, 2005, Bed Bath & Beyond Inc. (the “Company”) issued a press release announcing its Board of Directors’ approval of a $400 million share repurchase program.  A copy of this press release is attached hereto as Exhibit 99.1.

The Company is pleased to report it has completed the $350 million share repurchase program announced December 15, 2004.  Approximately 8,762,000 shares were acquired through and including Friday, February 11, 2005.

The Company’s earnings release and conference call for its 2004 fiscal fourth quarter and fiscal year ending February 26, 2005 are planned for April 6, 2005.