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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM 10-Q
[ X ] QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly Period Ended April 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to ______________
Commission File Number 0-16999
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Urban Outfitters, Inc.
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 23-2003332
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation of Organization) Identification No.)
1809 Walnut Street, Philadelphia, PA 19103
(Address of principal executive office) (Zip Code)
(215) 564-2313
(Registrant's telephone number including area code)
N/A
(Former name, former address and former fiscal year,
if changed since last report)
---------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
---- ----
Title of Each Class Number of Shares Outstanding
of Common Stock at June 1, 1997
------------------- -----------------------------
Common Shares, par value, $.0001 per share 17,588,696
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INDEX
PAGE
----
PART I Financial Information
ITEM 1 Financial Statements
- ------
Consolidated Balance Sheets at April 30, 1997 2
(Unaudited) and January 31, 1997
Consolidated Statements of Income for the three 3
months ended April 30, 1997 and 1996 (Unaudited)
Consolidated Statements of Cash Flows for the 4
three months ended April 30, 1997 and 1996 (Unaudited)
Notes to Consolidated Financial Statements 5 - 6
ITEM 2 Management's Discussion and Analysis of Financial 6 - 9
- ------ Condition and Results of Operations
PART II Other Information
ITEM 6 Exhibits and Reports on Form 8-K 9
- ------
SIGNATURES 10
1
URBAN OUTFITTERS, INC.
Consolidated Balance Sheets
(In thousands, except share and per share data)
APRIL 30, JANUARY 31,
1997 1997
(UNAUDITED) (AUDITED)
------- -----------
Assets
Current assets:
Cash and cash equivalents ................................................................ $14,967 $14,581
Marketable securities .................................................................... 9,976 9,255
Accounts receivable, net of allowance for
doubtful accounts of $714 and $643 at April 30, 1997
and January 31, 1997, respectively .................................................... 5,155 2,827
Inventory ................................................................................ 18,605 16,965
Prepaid expenses and other current assets ................................................ 6,642 7,236
------- -------
Total current assets ........................................................................ 55,345 50,864
Property and equipment, less accumulated depreciation and amortization ...................... 24,736 25,209
Marketable securities ....................................................................... 12,517 12,047
Other assets ................................................................................ 1,543 1,555
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$94,141 $89,675
======= =======
Liabilities and shareholders' equity
Current liabilities:
Accounts payable ......................................................................... $ 8,981 $ 8,699
Income taxes payable ..................................................................... 1,230 388
Accrued expenses and other current liabilities ........................................... 3,179 2,538
------- -------
Total current liabilities ................................................................... 13,390 11,625
Accrued rent and other liabilities .......................................................... 2,612 2,358
------- -------
Total liabilities ........................................................................... 16,002 13,983
------- -------
Shareholders' equity:
Preferred shares; $.0001 par, 10,000,000 authorized, none issued ......................... -- --
Common shares; $.0001 par, 50,000,000 shares authorized, 17,588,696
and 17,528,698 issued at April 30, 1997 and January 31, 1997,
respectively .......................................................................... 2 2
Additional paid-in capital ............................................................... 20,420 20,396
Retained earnings ........................................................................ 57,717 55,294
------- -------
Total shareholders' equity .................................................................. 78,139 75,692
------- -------
$94,141 $89,675
======= =======
See accompanying notes
2
URBAN OUTFITTERS, INC.
Consolidated Statements of Income
(In thousands, except share and per share data)
(Unaudited)
THREE MONTHS ENDED APRIL 30,
----------------------------
1997 1996
---- ----
Net sales ...................................... $ 37,197 $ 33,635
Cost of sales .................................. 18,589 16,570
----------- -----------
Gross profit ......................... 18,608 17,065
Selling, general and administrative expenses ... 14,761 12,344
----------- -----------
Income from operations ............... 3,847 4,721
Interest (income) .............................. (376) (361)
Other expense (income), net .................... 81 57
----------- -----------
Income before income taxes ........... 4,142 5,025
Income tax expense ............................. 1,719 2,098
----------- -----------
Net income ........................... $ 2,423 $ 2,927
=========== ===========
Net income per common share .................... $ .14 $ .17
=========== ===========
Weighted average common shares outstanding ..... 17,738,597 17,686,800
=========== ===========
See accompanying notes
3
URBAN OUTFITTERS, INC.
Consolidated Statements of Cash Flows
(In thousands, Unaudited)
THREE MONTHS ENDED APRIL 30,
----------------------------
1997 1996
-------- --------
Cash flows from operating activities:
Net income ......................................................................... $ 2,423 $ 2,927
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ................................................... 1,121 821
Provision for losses on accounts receivable ..................................... 71 61
Changes in assets and liabilities:
Increase in receivables ...................................................... (2,399) (1,819)
Increase in inventory ........................................................ (1,640) (1,542)
(Increase) decrease in prepaid expenses and other assets ..................... 606 (317)
Increase in payables, accrued expenses and other liabilities ................. 2,019 4,086
-------- --------
Net cash provided by operating activities .......................................... 2,201 4,217
-------- --------
Cash flows from investing activities:
Capital expenditures ............................................................... (648) (2,259)
Purchase of investments held-to-maturity ........................................... (1,538) (6,245)
Purchase of investments available-for-sale ......................................... (2,250) (850)
Maturities of investments held-to-maturity ......................................... 1,797 2,485
Sales of investments available-for-sale ............................................ 800 2,250
-------- --------
Net cash used in investing activities .............................................. (1,839 (4,619)
-------- --------
Cash flows from financing activities:
Issuance of common shares .......................................................... 24 1,090
-------- --------
Net cash provided by financing activities .......................................... 24 1,090
-------- --------
Increase in cash and cash equivalents ................................................. 386 688
Cash and cash equivalents at beginning of period ...................................... 14,581 20,095
-------- --------
Cash and cash equivalents at end of period ............................................ $ 14,967 $ 20,783
======== ========
See accompanying notes
4
URBAN OUTFITTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. For further information, refer to the Consolidated Financial
Statements and footnotes thereto included in the Company's Annual Report on Form
10-K for the fiscal year ended January 31, 1997, filed with the Securities and
Exchange Commission on April 21, 1997.
2. Marketable Securities
Marketable securities are classified as follows:
April 30, 1997 January 31, 1997
-------------- ----------------
Current portion
Held-to-maturity.......................... $ 8,226 $ 8,955
Available-for-sale......................... 1,750 300
--------- ----------
9,976 9,255
--------- ---------
Noncurrent portion
Held-to-maturity........................... 12,517 12,047
-------- --------
Total marketable securities .............. $22,493 $21,302
======= =======
3. Stock Split
On May 21, 1996, the Board of Directors of Urban Outfitters, Inc. declared a
two-for-one stock split in the form of a stock dividend for shareholders of
record on June 1, 1996. That stock split is retroactively reflected in the
financial statements for the period ended April 30, 1996.
5
4. Additional Information
No new stores were opened during the first quarter of this year.
PART I
FINANCIAL INFORMATION (continued)
ITEM 2 Management's Discussion and Analysis of Financial Condition and Results
- ------ of Operations
GENERAL
- -------
Sales for the first quarter of fiscal 1998 were up 10.6%, a modest gain compared
to prior year's quarters. There were a number of factors contributing to this
year's lower gain including :
o difficulty in matching Urban Retail's comparable store sales and new
store sales growth in the prior year's first quarter (Urban Retail
represents 61% of total Company sales)
o Urban Retail's inventory turns and average selling prices were down in
this year's first quarter compared to last year's.
o fashion direction that was less defined and not as compelling in the
early part of this year compared to the same period last year.
Conversely, but representing only 39% of total Company sales and having lower
gross profit margins, both Anthropologie and Wholesale enjoyed sales gains
during the first quarter of this year. Anthropologie grew 170% in the first
quarter of this year compared to 28% last year and enjoyed higher and over plan
comparable store sales. The Wholesale company grew at a 12% rate compared to 8%
last year.
Very high comparable store sales continued into the second quarter last year and
will make it difficult to exceed flat to low single digit comps in the second
quarter. The comparisons become easier in the third and fourth quarters.
6
With the lower gross profit margin companies growing at higher rates in the
first half of fiscal 1998, there has been and will be pressure on the overall
company margins. If during the second half, Urban Retail returns to planned
comparable store sales levels, the margin pressure should ease.
At this point in time, it appears that planned store openings will take place
although somewhat delayed. Store openings, and the timing of those openings,
will continue to be a risk due to the nature of the stores, and, management's
very deliberate style in selecting store locations and in completing lease
negotiations.
RESULTS OF OPERATIONS
The Company's operating years end on January 31, and include 12 periods ending
on the last day of the month. For example, FY'98 will end on January 31, 1998.
This discussion of results of operations covers the first quarter of FY'98 and
FY'97.
The following table sets forth, for the periods indicated, the percentage of the
Company's net sales represented by certain income statement data. The following
discussion should be read in conjunction with the table that follows:
THREE MONTHS ENDED
April 30, 1997 April 30, 1996
Net sales 100.0% 100.0%
Cost of goods sold 50.0% 49.3%
Gross profit 50.0% 50.7%
Selling, general and
administrative expenses 39.7% 36.7%
------- ------
Income from operations 10.3% 14.0%
Net interest & other (income) ( .8%) ( .9%)
------- ------
Income before income taxes 11.1% 14.9%
Income tax expense 4.6% 6.2%
------- ------
Net income 6.5% 8.7%
======= ======
7
FIRST QUARTER ENDED APRIL 30, 1997, COMPARED
TO THE FIRST QUARTER ENDED APRIL 30, 1996
Net sales increased during the first quarter ended April 30, 1997 to $37.2
million, up 10.6% from $33.6 million during the same period of the prior year.
The net sales increase included a reduction in comparable store sales of $(2.0)
million, an increase of new and enlarged store sales of $4.7 million and a $.9
million increase from the Wholesale company. Reasons for the negative comparable
store sales during the first quarter of fiscal year 1998 were defined in the
previous paragraphs under the GENERAL section. New and enlarged store sales
increases included two Urban Retail stores and five Anthropologie stores.
Wholesale continued its growth domestically with new customers, increased order
size with existing customers, and new business internationally, especially
Canada.
The gross profit margin during the first quarter ended April 30, 1997 was $18.6
million, up $1.5 million or 9.0% from the prior year first quarter of $17.1
million. The dollar increase resulted from the volume increases previously
discussed. Offsetting the volume was a declining gross profit margin percentage
from 50.7% last year to 50.0% this year. The decline results from lower sales
and resulting markdowns in the first quarter of this year compared to last
year's first quarter and sales increases in Anthropologie and Wholesale, both of
which have lower gross profit margins than Urban Retail.
Selling, general and administrative expenses during the first quarter ended
April 30, 1997 were $14.8 million, up $2.4 million or 19.6% from the prior year
of $12.4 million. The dollar increases were almost entirely due to new stores
opened. Stated as a percentage of sales, selling, general and administrative
expenses increased to 39.7% from 36.7% in the prior year. Negative comparable
store sales in Urban Retail led to the higher percentage. Wholesale was flat to
the prior year's first quarter while Anthropologie's percentage was highly
leveraged down.
Income from operations during the first quarter ended April 30, 1997 was $3.8
million, down $.9 million or (18.5%) from the prior year first quarter of $4.7
million.
The effective income tax rate for the quarter of 42% remains unchanged from last
year.
Net income during the first quarter ended April 30, 1997 was $2.4 million, down
$504,000 (17.2%) from the prior year of $2.9 million. Increased sales volumes
were offset by gross profit margin percentage declines and increases in
operating expense dollars and percentages.
8
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents increased to $15.0 million at April 30, 1997 from
$14.6 million at January 31, 1997. The $386,000 increase in cash and cash
equivalents comes from cash from operations of $3.6 million, net growth in
short-term payables of $2.6 million, offset by the seasonal growth of inventory
and accounts receivable of $(4.0) million, capital expenditures of $(0.6)
million and the net purchase of investments of $(1.2) million.
The Company's net working capital increased from $39.2 million at January 31,
1997, to $42.0 million at April 30, 1997. The $2.8 million increase in net
working capital was funded by the cash from net income, adjusted up for non-cash
charges and the proceeds from the issuance of common shares.
The Company has a $10.0 million revolving line of credit available to facilitate
letter of credit transactions and cash advances. Interest on any outstanding
balance is payable monthly based on the London Interbank Offered Rate (LIBOR)
plus 1/2%. No cash borrowing has ever taken place on this line and, accordingly,
no principal amounts were outstanding at January 31, 1997, or April 30, 1997.
Outstanding letters of credit totaled $4.3 million and $6.5 million at January
31, 1997, and April 30, 1997, respectively. These letters of credit, which have
terms from one month to one year, collateralize the Company's obligation to
third parties for the purchase of inventory. The fair value of these letters of
credit is estimated to be the same as the contract values. There were no loan
balances of any kind at January 31, 1997 or April 30, 1997.
The Company expects that capital expenditures during FY'98 will be approximately
$10.0 million depending upon the number of stores opened, enlarged or improved
during the year. The Company believes that existing cash and investments at
April 30, 1997, as well as cash from future operations, will be sufficient to
meet the Company's cash needs through at least FY'98, FY'99 and FY'00.
PART II
OTHER INFORMATION
ITEM 6 Exhibits and Reports on Form 8-K
- ------
(a) Exhibits: Exhibit 11 - Income Per Share Calculation
(b) Reports on Form 8-K: During the quarter ended April
30, 1996, Urban Outfitters filed one current report
on Form 8-K. That current report was filed on April
11, 1996 in connection with the safe harbor
provisions of the Private Securities Litigation
Reform Act of 1995.
9
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 thereunto duly authorized.
URBAN OUTFITTERS, INC.
(Registrant)
By: /s/ Richard A. Hayne
----------------------
Richard A. Hayne,
Chairman of the Board of
Directors
By: /s/ Kenneth K. Cleeland
----------------------
Kenneth K. Cleeland,
Treasurer
(Principal Financial Officer)
Dated: June 13, 1997
10
Urban Outfitters, Inc. Exhibit 11
INCOME PER SHARE CALCULATION:
APRIL 30, 1997 & 1996
INCOME PER SHARE CALCULATION:
Three Months Ended April 30,
----------------------------------------------------------------------------------
1997 1996
-------------------------------------- --------------------------------------
NET INCOME 2,423,000 $0.14 2,927,000 $0.17
============ ================ ============ ================
WEIGHTED AVERAGE COMMON
SHARES & COMMON SHARE
EQUIVALENTS OUTSTANDING 17,738,597 17,686,800
================ ================
COMPUTATION OF COMMON SHARES
& COMMON SHARE EQUIVALENTS OUTSTANDING:
Three Months Ended April 30,
----------------------------------------------------------------------------------
1997 1996
-------------------------------------- ---------------------------------------
End of Period Weighted Ave. End of Period Weighted Ave.
------------- ------------- ------------- -------------
COMMON SHARES OUTSTANDING 17,588,696 17,537,461 17,335,036 17,196,804
------------------- -------------
COMMON SHARE EQUIVALENTS:
OPTIONS 472,936 524,171 529,278 667,510
ASSUMED REPURCHASED
AT AVERAGE PRICE (323,035) (177,514)
------------------- -------------
WEIGHTED AVERAGE COMMON
EQUIVALENTS 201,136 489,996
------------------- -------------
TOTAL WEIGHTED AVERAGE
COMMON SHARES & COMMON
SHARE EQUIVALENTS OUTSTANDING 17,738,597 17,686,800
=================== =============
5
1,000
3-MOS
JAN-31-1998
APR-30-1997
14,967
9,976
5,155
0
18,605
55,345
24,736
0
94,141
13,390
0
0
0
2
78,137
94,149
37,197
37,197
18,589
18,589
0
0
(376)
4,142
1,719
2,423
0
0
0
2,423
.14
.14
