SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 29, 1996
[ ] 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: 0-19902
DAMARK INTERNATIONAL, INC.
(Exact name of Registrant as specified in its charter)
Minnesota 41-1551116
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7101 Winnetka Avenue North
Minneapolis, Minnesota 55428
(Address of principal executive offices)
(Zip code)
(612) 531-0066
(Registrant's telephone number, including area code)
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 Act of 1934 during the
preceding 12 months, and (2) has been subject to such filing requirements for
the past 90 days.
Yes __X__ No _____
On July 19, 1996, there were 8,460,895 shares of Class A Common Stock, $.01 par
value, of Damark International, Inc. outstanding.
DAMARK INTERNATIONAL, INC.
INDEX
PART I. FINANCIAL INFORMATION
PAGE
Item 1: Financial Statements.
Statements of Operations
For the Quarter and First Half ended June 29, 1996
and July 1, 1995 1
Balance Sheets
As of June 29, 1996 and December 31, 1995 2
Statements of Cash Flows
For the First Half ended June 29, 1996 and July 1, 1995 3
Notes to Financial Statements 4
Item 2: Management's Discussion and Analysis of
Financial Condition and Results of Operations 6
PART II. OTHER INFORMATION
Item 6: Exhibits and Reports on Form 8-K 10
<TABLE>
<CAPTION>
DAMARK INTERNATIONAL, INC.
STATEMENTS OF OPERATIONS
(in thousands except per share data)
(unaudited)
Quarter Ended First Half Ended
------------- -- ------------- ------------- -- -------------
June 29, July 1, June 29, July 1,
1996 1995 1996 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net revenues.............................................. $ 124,133 $ 111,702 $ 241,030 $ 239,964
Cost of products and services............................. 89,203 84,377 174,655 181,784
------------- ------------- ------------- -------------
Gross profit........................................... 34,930 27,325 66,375 58,180
Selling and administrative expenses....................... 32,695 31,182 64,414 63,623
------------- ------------- ------------- -------------
Operating income (loss)................................ 2,235 (3,857) 1,961 (5,443)
Interest income (expense), net............................ 89 (162) 74 (332)
Other income (expense), net .............................. 8 (63) 13 (99)
------------- ------------- ------------- -------------
Income (loss) before income taxes...................... 2,332 (4,082) 2,048 (5,874)
Income tax (provision) benefit ........................... (816) 1,367 (717) 1,996
------------- ------------- ------------- -------------
Net income (loss)...................................... $ 1,516 $ (2,715) $ 1,331 $ (3,878)
============= ============= ============= =============
Income (Loss) Per Common Share and Common Share
Equivalents - Primary and Fully Diluted:
Net income (loss)...................................... $ .17 $ (.30) $ .15 $ (.42)
Weighted average common shares and common share
equivalents outstanding............................... 8,930 9,027 8,815 9,216
============= ============= ============= =============
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
DAMARK INTERNATIONAL, INC.
BALANCE SHEETS
(in thousands except per share data)
(unaudited)
ASSETS
June 29, December 31,
1996 1995
------------- -------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents.......................................................... $ 6,222 $ 8,670
Trade accounts receivable, net..................................................... 22,516 25,465
Due from vendors and other, net.................................................... 3,885 5,177
Merchandise inventories............................................................ 56,375 53,544
Deferred catalog costs............................................................. 6,913 6,167
Other.............................................................................. 1,034 567
------------- -------------
Total current assets............................................................. 96,945 99,590
Property and Equipment, net........................................................... 33,142 33,335
Intangible and Other Assets........................................................... 9,044 8,803
------------- -------------
$ 139,131 $ 141,728
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable................................................................... $ 46,260 $ 49,547
Accrued liabilities................................................................ 11,868 9,956
Deferred membership revenue, net................................................... 14,911 13,588
Deferred income taxes.............................................................. 2,038 2,038
Current maturities of long-term debt............................................... -- 250
------------- -------------
Total current liabilities........................................................ 75,077 75,379
Deferred Income Taxes................................................................. 1,413 1,413
------------- -------------
Shareholders' Equity:
Class A Common Stock, $.01 par, 20 million shares authorized; 8,460,895 and
8,899,895 shares issued and outstanding at
June 29, 1996 and December 31, 1995, respectively................................ 85 90
Class B Common Stock, $.01 par, 2 million shares authorized;
none issued and outstanding...................................................... -- --
Paid-in capital.................................................................... 80,467 84,088
Accumulated deficit................................................................ (17,911) (19,242)
------------- -------------
Total shareholders' equity....................................................... 62,641 64,936
------------- -------------
$ 139,131 $ 141,728
============= =============
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
DAMARK INTERNATIONAL, INC.
STATEMENTS OF CASH FLOWS
(in thousands - unaudited)
First Half Ended
------------- -------- -------------
June 29, July 1,
1996 1995
------------- -------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss)............................................................ $ 1,331 $ (3,878)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization............................................ 3,467 2,312
Loss on disposal of property and equipment............................... -- 80
Deferred income tax benefit.............................................. -- (2,058)
Changes in operating assets and liabilities -
Receivables........................................................... 4,241 12,008
Merchandise inventories............................................... (2,831) 9,980
Deferred catalog costs and other current assets....................... (1,213) 551
Accounts payable and accrued liabilities.............................. (1,375) (18,867)
Deferred membership revenue........................................... 1,323 169
------------- -------------
Net cash provided by operating activities............................. 4,943 297
------------- -------------
INVESTING ACTIVITIES:
Property and equipment additions, net........................................ (2,844) (3,692)
Other, net................................................................... (671) 15
------------- -------------
Net cash used in investing activities................................. (3,515) (3,677)
------------- -------------
FINANCING ACTIVITIES:
Borrowings on revolving credit facility, net................................. -- 1,000
Payments on long term debt................................................... (250) --
Repurchase and retirement of common stock.................................... (3,757) (4,822)
Net proceeds from employee exercise of stock options......................... 131 --
------------- -------------
Net cash used in financing activities................................. (3,876) (3,822)
------------- -------------
Decrease in cash and cash equivalents................................. (2,448) (7,202)
Cash and cash equivalents, beginning of period............................... 8,670 7,205
------------- -------------
Cash and cash equivalents, end of period..................................... $ 6,222 $ 3
============= =============
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid during the period.............................................. $ 50 $ 298
Income taxes paid during the period.......................................... 875 347
============= =============
</TABLE>
See accompanying notes to financial statements.
DAMARK INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
The financial statements included herein have been prepared by Damark
International, Inc. (the "Company"), without audit, pursuant to the Rules
and Regulations of the Securities and Exchange Commission. The
information furnished in these financial statements includes normal
recurring adjustments and reflects all adjustments which are, in the
opinion of management, necessary for a fair presentation of such
financial statements. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. Although the Company believes
that the disclosures are adequate to make the information presented not
misleading, it is suggested that these financial statements be read in
conjunction with the audited financial statements and notes thereto
included in the Company's 1995 Annual Report to Shareholders and Form
10-K.
Due to the seasonality of the Company's business, net revenues and
operating results for the quarter or first half ended June 29, 1996 are
not necessarily indicative of the results to be expected for the full
year.
The Company's fiscal year ends on December 31; however, each quarter ends
on the last Saturday of a thirteen week period. As a result, the first
half of 1996 and 1995 included 181 and 182 days, respectively. In the
Company's opinion, this difference in days does not materially affect the
comparability of the financial results of the periods presented.
(2) EARNING PER COMMON SHARE
Primary and fully diluted earnings per common share are based on the
weighted average number of common share and common share equivalents
outstanding during each period. Common share equivalents include, among
others, the dilutive effects of options which are assumed to be exercised
or converted into common shares as of the beginning of the applicable
periods. Stock options were not included in the weighted average share
calculation in the quarter and the first half ended July 1, 1995 as their
inclusion would be antidilutive.
(3) FINANCING ARRANGEMENTS
In March 1996, the Company arranged a $30 million credit facility
consisting of a revolving line of credit and letter of credit facility
available through March 1999. The credit facility includes a $20 million
sublimit available for working capital and stand-by letter of credit
requirements with the entire facility available for documentary letters
of credit, in each case subject to a defined borrowing base. Borrowings
outstanding under the line of credit bear interest, at the Company's
option, at the prime rate of interest or LIBOR plus 1.75% and are
collateralized by receivables, inventories, intangible assets and
property and equipment other than buildings, land and vehicles. The
Company had letters of credit outstanding of $5.8 million at June 29,
1996; no borrowings were outstanding under the revolving line of credit.
The agreement with respect to the credit facility includes covenants
which, among other matters, require the Company to satisfy certain
financial tests and ratios and place certain limitations on the
incurrence of additional indebtedness and the level of capital
expenditures. The Company was in compliance with all covenants of its
credit facility at June 29, 1996.
(4) COMMITMENTS AND CONTINGENCIES
During first half 1996, incentive stock options, non-statutory stock
options and non-qualified stock option transactions were as follows:
<TABLE>
<CAPTION>
1991 Stock Management and
Option Directors Nonqualified Options Exercise
Plan Stock Options Price Per Share
------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Options outstanding, January 1, 1996......... 567,669 457,421 $ 1.31 - 21.25
Options granted............................ 64,500 -- 6.63 - 11.38
Options canceled........................... (23,000) -- 5.88 - 14.50
Options exercised.......................... (9,000) (60,000) 1.31 - 7.75
------------------ ------------------ ------------------
Options outstanding, June 29, 1996........... 600,169 397,421 $ 1.31 - 21.25
================== ================== ==================
Options exercisable, June 29, 1996........... 253,105 377,421
================== ==================
</TABLE>
(5) COMMON STOCK
During first half 1996, the Company repurchased 508,000 shares of its
Class A common stock, in open market transactions, at an aggregate cost
of approximately $3.8 million.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The selected financial data presented below under the caption "Statements of
Operations Data" for each of the periods presented are derived from the
Company's financial statements and express the specific item noted as a
percentage of net revenues.
<TABLE>
<CAPTION>
Second Quarter First Half
--------------------------------- ----------------------------------
1996 1995 1996 1995
---------------- ---------------- ---------------- -----------------
<S> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA
Net revenues................................... 100.0% 100.0% 100.0% 100.0%
Gross profit................................... 28.1 24.5 27.5 24.2
Selling and administrative expenses............ 26.3 27.9 26.7 26.5
Operating income (loss)........................ 1.8 (3.5) 0.8 (2.3)
Net income (loss).............................. 1.2 (2.4) 0.6 (1.6)
================ ================ ================ =================
</TABLE>
Net revenues for second quarter 1996 of $124.1 million increased $12.4 million,
or 11.1%, over net revenues reported for second quarter 1995. The increase in
net revenues for second quarter 1996 was primarily a result of an increase in
total sales per catalog to $3.71, as compared to $3.55 per catalog in second
quarter 1995, partially offset by the decrease in circulation in the second
quarter 1996. In addition, the Company shipped a larger percentage of its
marketed orders during second quarter 1996, as compared to second quarter 1995.
The increase in total sales per catalog in second quarter 1996 reflects an
increase in the mix of product sales to customers of the Company's membership
clubs (who generally have the highest sales productivity rate) to 46%, as
compared to 41% in second quarter 1995, and an increase in sales per catalog to
non-club customers primarily as the result of offering free shipping and
handling to these customers, partially offset by a continued softness in
consumer response in each of its customer segments, but predominately in the
Company's front-end customer segment.
During first half 1996, net revenues increased $1.0 million or 0.4% to $241.0
million, as compared to $240.0 million in first half 1995. Although first half
1996 net revenues were relatively flat with net revenues for first half 1995,
67.8 million or 12.2% fewer catalogs were mailed in first half 1996 with sales
per catalog mailed improving to $3.69, as compared to $3.55 in first half 1995.
<TABLE>
<CAPTION>
Second Quarter First Half
--------------- ------------------ ----------------------------------
1996 1995 1996 1995
--------------- ------------------ ---------------- -----------------
<S> <C> <C> <C> <C>
CATALOG STATISTICS:
Number of catalogs mailed (in thousands)...... 34,100 35,200 67,800 77,300
Average order - total company................. $168 $159 $168 $163
Response rate - total company................. 2.21% 2.23% 2.19% 2.18%
Sales per catalog:............................
Front-end (new) customers................... $2.06 $2.23 $2.07 $2.29
Non-club (back-end) customers............... $3.24 $3.12 $3.40 $3.03
Club (back-end) customers................... $8.51 $8.69 $8.02 $8.68
Total company .............................. $3.71 $3.55 $3.69 $3.55
=============== ================== ================ =================
</TABLE>
Product returns from customers increased to 15.4% of gross product sales in
second quarter 1996, as compared with 14.2% in second quarter 1995, due
primarily to increases in returns for selected electronics product categories.
Product returns for first half 1996 were 15.1%, as compared to 15.3% in first
half 1995. The Company continues to place greater emphasis on product quality,
vendor criteria standards and more timely shipment of products to customers.
In addition to product shipments, net revenues include membership fees relating
to the Company's membership clubs. These fees increased to $12.4 million in
second quarter 1996, as compared to $11.9 million in 1995. During second quarter
1996, approximately 134,000 new members were added to the Company's clubs, as
compared to 149,000 new members added during second quarter 1995. The decrease
in new members added during second quarter 1996, as compared to second quarter
1995, was primarily the result of the softness in consumer response in the
front-end customer segment as fewer sale opportunities were created during the
quarter to convert first-time customers to Club members. During second quarter
1996, the Company continued to experience improvement in the number of Club
members renewing their membership for an additional year as 177,000 members
renewed during second quarter 1996, as compared to 125,000 members in second
quarter 1995.
For the first half of 1996, the Company reported membership related fees of
$24.0 million as compared to $23.2 million in first half 1995. These fees
reflect the addition of approximately 244,000 new members to the Company's clubs
in first half 1996, as compared to 319,000 new members in first half 1995. As
stated above, this decrease is due primarily to the softness in consumer
response in the front-end customer segment. The decline in revenue generated by
new members was offset by an increase in the number of Club members renewing
their membership (361,000 in first half 1996 as compared with 268,000 members in
first half 1995). Club membership totaled 1,015,000 at June 29, 1996, above year
end 1995 membership of 987,000 and membership of 968,000 at July 1, 1995.
<TABLE>
<CAPTION>
Second Quarter First Half
--------------------------------- ---------------------------------
1996 1995 1996 1995
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
CLUB STATISTICS:
Club membership, at period end.......... 1,015,000 968,000 1,015,000 968,000
Number of new Club members.............. 134,000 149,000 244,000 319,000
Number of members renewed............... 177,000 125,000 361,000 268,000
================ ================ ================ ================
</TABLE>
The Company's overall product profit margin is affected by the mix of sales from
the six primary product categories which the Company sells, the mix of sales to
Club members who receive a 10% discount, and shipping and handling fee revenue
generated from product shipments. Products with higher price points, such as
computers, consumer electronics and home office products, generally have lower
percentage profit margins but provide higher actual dollar margin contribution
per unit. Conversely, products with lower price points, such as home decor, home
improvement and sporting goods/fitness products, generally have higher
percentage profit margins but provide less actual dollar margin contribution per
unit.
<TABLE>
<CAPTION>
Second Quarter First Half
-------------- ----------------- ---------------------------------
1996 1995 1996 1995
-------------- ----------------- ---------------- ----------------
<S> <C> <C> <C> <C>
PERCENT OF SALES BY CUSTOMER SEGMENT:
Front-end customers..................... 28% 37% 30% 37%
Non-club customers...................... 26 22 24 22
Club customers.......................... 46 41 46 41
-------------- ----------------- ---------------- ----------------
100% 100% 100% 100%
============== ================= ================ ================
PERCENT OF SALES BY PRODUCT SEGMENT:
Computers............................... 29.1% 23.9% 30.6% 25.9%
Home office............................. 15.7 15.0 17.2 15.5
Consumer electronics.................... 16.8 18.5 16.8 18.5
Home decor.............................. 13.1 15.9 12.5 16.6
Home improvements....................... 16.0 16.1 14.3 14.4
Sporting goods/fitness.................. 9.3 10.6 8.6 9.1
-------------- ----------------- ---------------- ----------------
100.0% 100.0% 100.0% 100.0%
============== ================= ================ ================
</TABLE>
The overall gross profit margin, as a percentage of net revenues, increased to
28.1% in second quarter 1996, as compared to 24.5% for second quarter 1995, and
increased to 27.5% in first half 1996, as compared to 24.2% in first half 1995,
primarily as a result of increased product margins, reduced outbound freight
costs and increased membership renewal fees from Club members. The increased
product margins realized during 1996, as compared to 1995, were partially offset
by the higher mix of product sales to Club members and an increased sales mix of
computer products which have a lower percentage gross profit margin.
Selling and administrative expenses were $32.7 million, or 26.3% of net
revenues, in second quarter 1996, compared to $31.2 million, or 27.9% of net
revenues in second quarter 1995. This decrease in selling and administrative
expenses, as a percent of net revenues, is primarily due to the Company's change
in catalog promotion strategy during first half 1996, as compared with first
half 1995, whereby the Company achieved greater advertising leverage. On a year
to date basis, selling and administrative expenses increased slightly as a
percent of net revenues to 26.7% in first half 1996 from 26.5% in first half
1995. During 1996, the Company continues to incur administrative and other costs
in connection with building additional infrastructure capabilities and
information technology resources to handle increased sales volumes, enhanced
customer service, and expanded membership club concepts.
The Company reported net interest income of $89,000 in second quarter 1996,
primarily as a result of income earned from short term investment of its excess
cash. In second quarter 1995, the Company reported net interest expense of
$162,000 resulting from interest costs associated with borrowings and fees under
the Company's bank credit facility.
The Company's effective tax rate was 35.0% and 33.5% for second quarter 1996 and
1995, respectively.
As a result of the above, the Company reported net income of $1.5 million, or
$0.17 per share, for second quarter 1996, as compared with a net loss of $2.7
million, or $0.30 per share, for second quarter 1995. For first half 1996, the
Company reported net income of $1.3 million or $0.15 per share, as compared to a
net loss of $3.9 million or $0.42 per share in first half 1995. At June 29,
1996, the Company had 8.4 million shares of common stock outstanding. Weighted
average shares outstanding decreased from 9.0 million shares in second quarter
1995 to 8.9 million in second quarter 1995 as the impact of the Company's stock
repurchase program was offset by the inclusion of stock options in the 1996
calculation of weighted average shares.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity, as measured by its net working capital, was $21.9
million at June 29, 1996, as compared to $24.2 million at December 31, 1995. The
Company's current ratio was 1.3 to 1.0 at June 29,1996, unchanged from its
current ratio at December 31, 1995.
Net cash provided by operating activities totaled $4.9 million for first half
1996, as compared with $0.3 million during the same period in 1995. During 1996,
the Company's net working capital requirements declined primarily as a result of
a greater emphasis on cash management, along with a decreased level of
merchandise inventories, offset by a smaller decline in the level of accounts
payable and accrued liabilities. Deferred Club membership revenue, recorded net
of initial direct acquisition-related costs, totaled $14.9 million at June 29,
1996, up slightly from the $13.6 million which was deferred at year end 1995.
During first half 1996, the Company had capital expenditures of approximately
$2.8 million, as compared with approximately $3.7 million during the same period
of 1995. The expenditures during first half 1996 consisted primarily of
additional computer hardware and software development costs to accommodate the
Company's expected product sales and membership growth, its enhanced customer
service levels and higher operational efficiency standards. While the Company
continues to evaluate its needs for additional investment to further enhance
customer satisfaction and its information technologies and infrastructure
capabilities, management currently anticipates that it will spend between $8 to
$10 million on capital expenditures during the year ended December 31, 1996.
In March 1996, the Company arranged a $30 million credit facility consisting of
a revolving line of credit and letter of credit facility available through March
1999. The credit facility includes a $20 million sublimit available for working
capital and stand-by letter of credit requirements with the entire facility
available for documentary letters of credit, in each case subject to a defined
borrowing base. Borrowings outstanding under the line of credit bear interest,
at the Company's option, at the prime rate of interest or LIBOR plus 1.75% and
are collateralized by receivables, inventories, intangible assets and property
and equipment other than buildings, land and vehicles. The Company had letters
of credit outstanding of $5.8 million at June 29, 1996; no borrowings were
outstanding under the revolving line of credit at quarter end.
The Company offers its customers a four-pay installment credit plan with no
finance fee. As a result, the Company supported installment plan receivables
aggregating approximately $16.2 million and $22.2 million at June 29, 1996 and
December 31, 1995, respectively. The Company's receivable balance at any time is
generally reflective of sales volume fluctuations as approximately 28% to 30% of
the Company's net revenues are generally financed by customers on the Company's
installment plan. Continuation of the four-pay installment credit plan will
require the allocation of capital resources which the Company expects to fund
from internal operations and availability under its revolving credit facility.
The Company also issues its own private label credit card which provides credit
to DAMARK customers, without recourse to the Company, through an independent
bank.
During first half 1996, the Company repurchased 508,000 shares of its Class A
Common Stock at an aggregate cost of $3.8 million.
The Company anticipates that its available cash, cash generated from operations
and available borrowing capacity under its current credit facility will be
sufficient to fund the Company's operations, expected working capital
requirements and capital expenditures for the next twelve months.
SEASONALITY
The Company's business is subject to significant seasonal variations in consumer
demand which the Company believes are generally associated with the direct
marketing and retail industries. Historically, the Company's net revenues are
the largest during the fourth calendar quarter and a significant portion of its
earnings have been realized during this same period. The Company's operating
results during this period may be affected by holiday spending patterns, as well
as the timing and effectiveness of catalog mailings and general economic and
other conditions. In anticipation of its peak selling season, the Company hires
additional flex-time employees in its teleservices, order processing and
distribution areas; increases its merchandise inventories; and incurs
significant catalog production and mailing costs. The Company's annual operating
results could be adversely affected if, among other factors, the Company's
revenues were to be substantially below seasonal expectations during the October
through December period or if a sufficient number of qualified employees would
not be available on a flex-time or other non permanent basis.
FORWARD-LOOKING INFORMATION
Forward-looking statements contained herein are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. There are
certain important factors that could cause results to differ materially from
those anticipated by some of the statements made above. Investors are cautioned
that all forward-looking statements involve risks and uncertainty. The factors,
among others, that could cause actual results to differ materially include:
consumer spending and debt levels; interest rates; continuity of relationships
with or purchases from major vendors; product mix; competitive pressures on
sales and pricing, and increases in catalog production and other costs which
cannot be recovered through improved pricing of products and services.
INFLATION
While inflation, excluding increases in postage and paper costs, has not had,
and the Company does not expect it to have, a material impact on operating
results, there can be no assurance that the Company's business will not be
affected by inflation in the future. However, the Company did experience
significant increases in the cost of paper and postage during 1995. While the
increases in paper costs have subsided, significant cost increases in these
areas could have a material impact on advertising and other promotional costs in
future periods.
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
a. Exhibits:
Exhibit 11 - Computation of Earnings per Share
Exhibit 27 - Financial Data Schedule
b. No Form 8-K's were filed during the quarter ended
June 29, 1996.
SIGNATURE
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.
DAMARK INTERNATIONAL, INC.
Date: July 22, 1996 By: /s/Arlyn J. Lomen
-----------------
Arlyn J. Lomen
Senior Vice President - Finance &
Administration Group
and Chief Financial Officer
EXHIBIT 11
<TABLE>
<CAPTION>
DAMARK INTERNATIONAL, INC.
COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
QUARTER ENDED FIRST HALF ENDED
JUNE 29, JULY 1, JUNE 29, JULY 1,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
PRIMARY EARNINGS PER SHARE
Net income (loss) applicable to common stock..................... $ 1,516 $ (2,715) $ 1,331 $ (3,878)
======== ========= ========== ==========
Weighted average number of common and common
equivalent shares outstanding:
Weighted average common shares outstanding................ 8,461 9,027 8,581 9,216
Dilutive effect of stock options after application of
treasury stock method................................... 402 -- 201 --
-------- -------- --------- ---------
8,863 9,027 8,782 9,216
======== ======== ========= =========
Net income (loss) per share applicable to common stock........... $ .17 $ (.30) $ .15 $ (.42)
======== ========= ========== ==========
FULLY DILUTED EARNINGS PER SHARE
Net income (loss) applicable to common stock..................... $ 1,516 $ (2,715) $ 1,331 $ (3,878)
======== ========= ========== ==========
Weighted average number of common and common
equivalent shares outstanding:
Weighted average common shares outstanding................ 8,461 9,027 8,581 9,216
Dilutive effect of stock options after application of
treasury stock method................................... 469 -- 234 --
-------- -------- --------- ---------
8,930 9,027 8,815 9,216
======== ======== ========= =========
Net income (loss) per share applicable to common stock........... $ .17 $ (.30) $ .15 $ (.42)
======== ========= ========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-29-1996
<CASH> 6,222
<SECURITIES> 0
<RECEIVABLES> 27,846
<ALLOWANCES> 1,445
<INVENTORY> 56,375
<CURRENT-ASSETS> 96,945
<PP&E> 46,785
<DEPRECIATION> 13,643
<TOTAL-ASSETS> 139,131
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0
0
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</TABLE>
