<PAGE>
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 March 29, 1997
[ ] 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)
Not Applicable
(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 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 May 7, 1997, there were 8,020,648 shares of Class A Common Stock, $.01 par
value, of Damark International, Inc. outstanding.
<PAGE>
DAMARK INTERNATIONAL, INC.
INDEX
-----
PART I. FINANCIAL INFORMATION PAGE
Item 1: Financial Statements.
Consolidated Statements of Operations
For the quarters ended March 29, 1997 and March 30, 1996 1
Consolidated Balance Sheets
As of March 29, 1997 and December 31, 1996 2
Consolidated Statements of Cash Flows
For the quarters ended March 29, 1997 and March 30, 1996 3
Notes to Consolidated 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
<PAGE>
DAMARK INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Quarter Ended
-------------------------
March 29, March 30,
1997 1996
-------- --------
Net revenues . . . . . . . . . . . . . . . . . . $128,622 $116,897
Cost of products and services. . . . . . . . . . 93,224 85,452
-------- --------
Gross profit . . . . . . . . . . . . . . . . . 35,398 31,445
Marketing and administrative expenses. . . . . . 34,628 31,719
-------- --------
Operating income (loss). . . . . . . . . . . . 770 (274)
Interest expense, net. . . . . . . . . . . . . . (177) (15)
Other income, net. . . . . . . . . . . . . . . . 14 5
-------- --------
Income (loss) before income taxes. . . . . . . 607 (284)
Income tax benefit (provision) . . . . . . . . . (206) 99
-------- --------
Net income (loss). . . . . . . . . . . . . . . $ 401 $ (185)
-------- --------
-------- --------
Net income (loss) per common share . . . . . . $ 0.05 $ (0.02)
Weighted average number of common and dilutive
common equivalent shares outstanding . . . . . 8,408 8,700
------- -------
------- -------
See accompanying notes to concolidated financial statements.
1
<PAGE>
DAMARK INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLAR AMOUNTS IN THOUSANDS)
(UNAUDITED)
ASSETS
March 29, December 31,
1997 1996
---------- ------------
Current Assets:
Cash and cash equivalents . . . . . . . . . . . . . $ 2 $ 2
Trade accounts receivable, net. . . . . . . . . . . 35,594 30,985
Due from vendors and other, net . . . . . . . . . . 6,625 6,602
Merchandise inventories . . . . . . . . . . . . . . 67,469 53,016
Deferred catalog costs. . . . . . . . . . . . . . . 7,796 6,613
Other . . . . . . . . . . . . . . . . . . . . . . . 1,150 1,257
------- -------
Total current assets. . . . . . . . . . . . . . . 118,636 98,475
Property and Equipment, net. . . . . . . . . . . . . 35,416 35,904
Intangible and Other Assets, net . . . . . . . . . . 8,186 8,411
------- -------
$162,238 $142,790
------- -------
------- -------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable. . . . . . . . . . . . . . . . . . $ 57,880 $ 41,880
Accrued liabilities . . . . . . . . . . . . . . . . 13,638 15,226
Deferred membership income, net . . . . . . . . . . 15,968 16,292
Deferred income taxes . . . . . . . . . . . . . . . 2,413 2,413
Borrowings under revolving credit facility. . . . . 8,000 3,000
------- -------
Total current liabilities . . . . . . . . . . . . 97,899 78,811
Deferred Income Taxes. . . . . . . . . . . . . . . . 1,435 1,435
------- -------
Shareholders' Equity:
Class A Common Stock, $.01 par, 20 million
shares authorized; 8,050,648 and 8,052,147
shares issued and outstanding at March 29,
1997 and December 31, 1996, respectively. . . . . 81 81
Class B Common Stock, $.01 par, 2 million
shares authorized;
none issued and outstanding . . . . . . . . . . . -- --
Paid-in capital . . . . . . . . . . . . . . . . . . 75,596 75,637
Accumulated deficit . . . . . . . . . . . . . . . . (12,773) (13,174)
------- -------
Total shareholders' equity. . . . . . . . . . . . 62,904 62,544
------- -------
$162,238 $142,790
------- -------
------- -------
See accompanying notes to consolidated financial statements.
2
<PAGE>
DAMARK INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLAR AMOUNTS IN THOUSANDS)
(UNAUDITED)
Quarter Ended
----------------------
March 29, March 30,
1997 1996
--------- ---------
OPERATING ACTIVITIES:
Net income (loss). . . . . . . . . . . . . . . . . $ 401 $ (185)
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities:
Depreciation and amortization. . . . . . . . . . . 1,932 1,637
Gain on sale of land . . . . . . . . . . . . . . . (152) --
Changes in working capital items -
Receivables. . . . . . . . . . . . . . . . . . . (4,632) 3,310
Merchandise inventories. . . . . . . . . . . . . (14,453) 5,933
Deferred catalog costs and other current assets. (1,076) (2,017)
Accounts payable and accrued liabilities . . . . 14,412 (4,205)
Deferred membership income . . . . . . . . . . . (324) 705
-------- -------
Net cash provided by (used in) operating
activities. . . . . . . . . . . . . . . . . . . (3,892) 5,178
-------- -------
INVESTING ACTIVITIES:
Property and equipment additions, net. . . . . . . . (1,066) (1,090)
Other, net . . . . . . . . . . . . . . . . . . . . . (1) (483)
-------- -------
Net cash used in investing activities. . . . . . (1,067) (1,573)
-------- -------
FINANCING ACTIVITIES:
Borrowings under revolving credit facility, net. . . 5,000 --
Repurchase and retirement of common stock. . . . . . (74) (3,181)
Net proceeds from employee exercise of stock
options . . . . . . . . . . . . . . . . . . . . . . 33 80
-------- -------
Net cash provided by (used in) financing
activities. . . . . . . . . . . . . . . . . . 4,959 (3,101)
-------- -------
Increase in cash and cash equivalents. . . . . . -- 504
Cash and cash equivalents, beginning of period . . . 2 8,670
-------- -------
Cash and cash equivalents, end of period . . . . . $ 2 $ 9,174
-------- -------
-------- -------
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid during the period. . . . . . . . . . $ 79 $ 10
Income taxes paid during the period. . . . . . . . 450 875
-------- -------
-------- -------
See accompanying notes to consolidated financial statements.
3
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENT
(CONTINUED)
1) BASIS OF PRESENTATION
The consolidated 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
consolidated financial statements and notes thereto included in the
Company's 1996 Annual Report to Shareholders and the Form 10-K filed with
the Securities and Exchange Commission.
Due to the seasonality of the Company's business, net revenues and
operating results for the quarter ended March 29, 1997 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 operating
results for the first quarter in 1997 and 1996 included 88 and 90 days,
respectively. In the Company's opinion, this difference in days does not
materially affect the comparability of the financial results for the
periods presented.
(2) EARNINGS PER COMMON SHARE
Primary and fully diluted earnings per common share are based on the
weighted average number of common and common equivalent shares outstanding
during each period. Common equivalent shares include, among others, the
dilutive effect of stock options which are assumed to be exercised or
converted into common shares as of the beginning of the applicable period.
In first quarter 1996, common equivalent shares were not included in the
calculation as their inclusion would have been antidilutive. Fully diluted
earnings per share did not differ significantly from primary earnings per
share for either period presented.
On March 3, 1997, the Financial Accounting Standards Board released
Statement of Financial Accounting Standards No. 128, "Earnings Per Share"
(FASB No. 128"). FASB No. 128 establishes standards for computing and
presenting earnings per share ("EPS") and is effective December 15, 1997.
Under FASB No. 128, the presentation of primary EPS is replaced with a
presentation of basic EPS. Diluted EPS is computed similarly to fully
diluted EPS pursuant to Accounting Principles Board Opinion No. 15,
"Earnings Per Share". Although early adoption of FASB No. 128 is not
permitted, FASB No. 128 requires the restatement of prior year's earnings
per share amounts. Earnings per share determined in accordance with FASB
No. 128 would have been as follows:
Basic Diluted
Quarter Ended EPS EPS
----------------- ------- -------
March 29, 1997 $0.05 $0.05
March 30, 1996 (0.02) (0.02)
------ ------
------ ------
4
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENT
(CONTINUED)
(3) FINANCING ARRANGEMENTS
The Company has 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 borrowings outstanding of $8.0 million under its
revolving line of credit and letters of credit outstanding of $9.5 million
at March 29, 1997.
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 is in
compliance with all covenants of its credit facility at March 29, 1997.
(4) COMMITMENTS AND CONTINGENCIES
During first quarter 1997, stock option transactions were as follows:
Weighted Average
Shares Exercise Price
--------- ----------------
Options outstanding, January 1, 1997. . . 1,188,672 $8.31
Options granted. . . . . . . . . . . . . 4,500 9.50
Options canceled . . . . . . . . . . . . (3,668) 8.23
Options exercised. . . . . . . . . . . . (6,001) 5.29
---------- ------
Options outstanding, March 29, 1997 . . . 1,183,503 8.34
---------- ------
---------- ------
Options exercisable, March 29, 1997 . . . 719,977 8.41
---------- ------
---------- ------
(5) COMMON STOCK
During the first quarter of 1997 and 1996, the Company repurchased 7,500
and 448,000 shares, respectively, of its Class A Common Stock, in open
market transactions.
5
<PAGE>
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 consolidated financial statements and express the specific item noted
as a percentage of the Company's net revenues for the applicable period.
First Quarter
-------------------------
1997 1996
--------- --------
STATEMENTS OF OPERATIONS DATA:
Net revenues . . . . . . . . . . . . . . . . 100.0% 100.0%
Gross profit . . . . . . . . . . . . . . . . 27.5 26.9
Marketing and administrative expenses. . . . 26.9 27.1
Operating income (loss). . . . . . . . . . . 0.6 (0.2)
Net income (loss). . . . . . . . . . . . . . 0.3 (0.2)
------- -------
------- -------
Net revenues for first quarter 1997 of $128.6 million increased $ 11.7 million,
or 10.0%, as compared with net revenues for first quarter 1996. This increase
in net revenues was primarily the result of an increase in sales per catalog
mailed to $3.98, as compared with sales productivity of $3.71 per catalog mailed
in first quarter 1996, and an increase in overall circulation from 32.9 million
catalogs mailed during first quarter 1996 to 34.2 million catalogs mailed during
first quarter 1997. The sales productivity, on a per catalog basis, in first
quarter 1997 reflects the increased mix of product sales to members of the
Company's clubs, who generally have the highest sales productivity rate, to 50%,
as compared with 46% of product sales in first quarter 1996.
First Quarter
-------------------------
1997 1996
-------- --------
CATALOG STATISTICS:
Number of catalogs mailed (in thousands). . . 34,200 32,900
Average order - total company . . . . . . . . $ 171 $ 171
Response rate - total company . . . . . . . . 2.33% 2.17%
Sales per catalog:. . . . . . . . . . . . . .
Front-end (new) customers . . . . . . . . . $ 2.03 $ 2.09
Non-club (back-end) customers . . . . . . . $ 3.64 $ 3.58
Club (back-end) customers . . . . . . . . . $ 8.16 $ 7.71
Total company . . . . . . . . . . . . . . . $ 3.98 $ 3.71
-------- --------
-------- --------
Product returns from customers increased to 15.7% of gross product sales in
first quarter 1997, as compared with 14.8% in first quarter 1996, due primarily
to increased sales of computer and other electronic products which generally
return at a higher rate. In a continuing effort of servicing its customers
better, the Company has implemented numerous enhancements to improve customer
satisfaction including, among others, the adoption of next day shipping of
products to credit approved customers and improving product in-stock rates. In
addition, various potential actions are currently being investigated by the
Company in an attempt to reduce the overall product return rate.
6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
In addition to product shipments, net revenues include membership fees earned
from the Company's clubs. These fees increased from $11.7 million in first
quarter 1996 to $14.1 million in first quarter 1997. Approximately 180,000 new
club members were added during first quarter 1997, as compared with 110,000 new
members in first quarter 1996. The increase in new members added during first
quarter 1997 was primarily the result of the introduction of two new clubs
(Vacation Passport and Insiders') during the last half of 1996. Because of a
change in mailing strategy, the Company mailed fewer catalogs to its front-end
customer segment during first quarter 1997, as compared with first quarter
1996. Although this change in mailing strategy resulted in fewer sales
opportunities for the Company to convert first-time customers to club members
during first quarter 1997, the Company currently plans to mail a larger quantity
of front end catalogs during 1997 than it mailed in 1996. During first quarter
1997, the Company continued to experience improvement in the number of members
renewing their membership for an additional year as 197,000 members renewed
during first quarter 1997, as compared with 193,000 members in first quarter
1996. Total club membership totaled 1,083,000 at March 29, 1997, as compared
with 982,000 members at March 30, 1996.
First Quarter
----------------------------
1997 1996
--------- -------
MEMBERSHIP STATISTICS:
Membership, at period end 1,083,000 982,000
Number of new members 180,000 110,000
Number of members renewed 197,000 193,000
--------- -------
--------- -------
The Company's overall product profit margin is affected by the mix of sales
among the six primary product categories which the Company sells, the mix of
sales to Preferred Buyers' Club and Insiders' members who receive a 10%
discount, and shipping and handling revenue generated as a result of 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 sports/fitness products, generally have higher percentage profit
margins but provide less actual dollar margin contribution per unit.
First Quarter
-------------------------
1997 1996
--------- --------
PERCENT OF SALES BY CUSTOMER SEGMENT:
Front-end customers 25% 34%
Non-club customers 25 20
Club customers 50 46
--------- ---------
100% 100%
--------- ---------
--------- ---------
PERCENT OF SALES BY PRODUCT SEGMENT:
Computers 32.7% 32.1%
Home Office 16.4 18.9
Consumer Electronics 17.7 16.7
Home Decor 13.9 11.9
Home Improvements 13.3 12.4
Sports/Fitness 6.0 8.0
--------- ---------
100.0% 100.0%
--------- ---------
--------- ---------
The overall gross profit margin, as a percentage of net revenues, increased to
27.5% in first quarter 1997, as compared with 26.9% for first quarter 1996,
primarily as a result of greater emphasis being placed on increasing product
profitability, the increase in new members added and increased membership fees
from renewing club members. The increased product margins realized during first
quarter 1997, as compared with first quarter 1996, were partially offset by the
higher mix of product sales to Preferred Buyers' Club and Insiders' members who
receive the 10% product discount and the increased sales mix of lower margin
computer and other electronics products.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
Marketing and administrative expenses totaled $34.6 million, or 26.9% of net
revenues, in first quarter 1997, as compared with $ 31.7 million, or 27.1% of
net revenues, in first quarter 1996. As a result of the improved customer
response and sales productivity rates, the increased sales mix to club customers
and lower overall paper costs, the Company was able to achieve greater
advertising leverage during first quarter 1997. During first quarter 1997, the
Company continued to incur additional administrative and other costs in
connection with the expansion of its infrastructure capabilities and information
technology resources.
The Company reported net interest expense of $177,000 and $15,000 in first
quarter 1997 and 1996, respectively. This expense results primarily from
interest costs associated with borrowings under the Company's bank credit
facility, partially offset by interest earned on short term investments of the
Company's excess cash.
The Company's effective tax rate was 33.9% and 34.9% for first quarter 1997 and
1996, respectively.
As a result of the above factors, the Company reported net income of $401,000,
or $.05 per share, for first quarter 1997, as compared with a net loss of
$185,000, or a loss of $.02 per share, for first quarter 1996. The weighted
average number of common shares outstanding during first quarter 1997 decreased
to 8.4 million shares, as compared with 8.7 million weighted average shares
outstanding during first quarter 1996, primarily as a result of the Company's
ongoing stock repurchase program.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity, as measured by its net working capital, was $20.7
million at March 29, 1997, as compared with $19.7 million at December 31, 1996.
The Company's current ratio was 1.2 to 1.0 at March 29, 1997, as compared with
1.3 to 1.0 at December 31, 1996.
Net cash used in operating activities totaled $3.9 million for first quarter
1997, as compared with cash provided by operating activities of $5.2 million
during the same period in 1996. During first quarter 1997, the Company's net
working capital requirements increased primarily as a result of increased
merchandise inventories planned in response to an anticipated increase in sales
volume and an increase in installment plan receivables due to the introduction
of a six payment installment plan to compliment the Company's existing four
payment installment plan. Deferred club membership revenue, recorded net of
initial direct acquisition-related costs, totaled $16.0 million at March 29,
1997, down slightly from the $16.3 million which was deferred at year end 1996.
During first quarter 1997, the Company made capital expenditures of
approximately $2.3 million, as compared with approximately $1.1 million during
first quarter 1996. The expenditures during first quarter 1997 consisted
primarily of computer hardware and software enhancements to accommodate the
Company's enhanced customer service levels, higher operational efficiency
standards and anticipated future growth. The Company plans to open an
additional teleservices center later in 1997. The Company continues to evaluate
its needs for additional investment to further enhance customer satisfaction,
information technologies and infrastructure capabilities, management currently
anticipates that the Company will spend between $8 and $11 million on capital
expenditures during the year ended December 31, 1997.
The Company has 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. At March 29, 1997, the Company had letters
of credit of $9.5 million and borrowings of $8.0 million outstanding under its
credit facility.
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
The Company offers its customers varying installment billing plans with no
finance charges payable to the Company. As a result, the Company supported
installment plan receivables aggregating $25.7 million and $24.3 million at
March 29, 1997 and December 31, 1996, respectively. The Company's receivable
balance at any time is generally reflective of sales volume fluctuations as
approximately 25% of its net revenues are generally financed by customers on one
of the Company's installment plans. With the recent offering of a six payment
installment plan to its customers, the Company anticipates that its overall
receivable balance will continue to increase. As a result, the Company is
currently exploring alternative methods to finance these receivables over the
longer term. In the shorter term, the Company expects to fund its receivables
from internal operations and from availability under its revolving credit
facility.
In December, 1996, the Company's Board of Directors authorized the Company to
repurchase up to 400,000 shares of its common stock. During first quarter 1997,
the Company repurchased 7,500 shares of its common stock under this program.
The Company currently anticipates that 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 remainder of 1997. However,
because the Company anticipates the expansion of its offerings of extended
payment plans to customers, it is currently exploring alternative methods of
financing these receivables. Of course, there can be no assurance that the
Company will be able to, among other things, consummate any such alternative
methods of financing or obtain additional financing to accommodate the Company's
anticipated growth.
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 that 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.
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. The Company did experience significant
increases in the cost of paper and postage during 1995. While the increases in
these areas have subsided, continued cost increases in these areas could have a
material impact on advertising and other promotional costs in future periods.
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. Certain
important factors exist 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 pressure on sales
and pricing, and increases in catalog production and other costs which cannot be
recovered through improved pricing of products and services.
9
<PAGE>
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 March 29, 1997.
10
<PAGE>
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: May 8, 1997 By: /s/ Arlyn J. Lomen
------------------
Arlyn J. Lomen
Senior Vice President -
Finance & Administration Group
and Chief Financial Officer
11
<PAGE>
EXHIBIT 11
DAMARK INTERNATIONAL, INC.
COMPUTATION OF EARNINGS PER SHARE
(DOLLAR AND SHARE AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Quarter Ended
------------------------
March 29, March 30,
1997 1996
--------- ---------
PRIMARY EARNINGS PER SHARE
Income (loss) applicable to common stock . . . . . . . $ 401 $ (185)
----- -----
----- -----
Weighted average number of common and common
equivalent shares outstanding:
Weighted average common shares outstanding. . . . 8,054 8,700
Dilutive effect of stock options
after application of treasury stock method. . . 354 --
----- -----
8,408 8,700
----- -----
----- -----
Income (loss) per common and common equivalent share .$ .05 $ (.02)
----- -----
----- -----
FULLY DILUTED EARNINGS PER SHARE
Income (loss) applicable to common stock . . . . . . .$ 401 $ (185)
----- -----
----- -----
Weighted average number of common and common
equivalent shares outstanding:
Weighted average common shares outstanding. . . . 8,054 8,700
Dilutive effect of stock options
after application of treasury stock method. . . 354 --
----- -----
8,408 8,700
----- -----
----- -----
Income (loss) per common and common equivalent share .$ .05 $ (.02)
----- -----
----- -----
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-29-1997
<CASH> 2
<SECURITIES> 0
<RECEIVABLES> 43,363
<ALLOWANCES> 1,144
<INVENTORY> 67,469
<CURRENT-ASSETS> 118,636
<PP&E> 53,580
<DEPRECIATION> 18,164
<TOTAL-ASSETS> 162,238
<CURRENT-LIABILITIES> 97,899
<BONDS> 0
0
0
<COMMON> 81
<OTHER-SE> 62,823
<TOTAL-LIABILITY-AND-EQUITY> 162,238
<SALES> 128,622
<TOTAL-REVENUES> 128,622
<CGS> 93,224
<TOTAL-COSTS> 127,852
<OTHER-EXPENSES> 177
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 177
<INCOME-PRETAX> 607
<INCOME-TAX> 206
<INCOME-CONTINUING> 401
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 401
<EPS-PRIMARY> 0.05
<EPS-DILUTED> 0.05
</TABLE>
