SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
-------------------
FORM 10-Q
[ X ] QUARTERLY REPORT UNDER SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly Period Ended July 31, 1996
OF
[ ] 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
-----------------------
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 August 31, 1996
------------------------------------------ ----------------------------
Common shares, par value, $.0001 per share 17,518,698
<PAGE>
INDEX
PAGE
PART I Financial Information
ITEM 1 Financial Statements
- ------
Consolidated Balance Sheets at July 31, 1996 2
(Unaudited) and January 31, 1996
Consolidated Statements of Income for the three and 3
six months ended July 31, 1996 and 1995 (Unaudited)
Consolidated Statements of Cash Flows for the 4
six months ended July 31, 1996 and 1995 (Unaudited)
Notes to Consolidated Financial Statements 5
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 10
- ------
SIGNATURES 11
1
<PAGE>
URBAN OUTFITTERS, INC.
Consolidated Balance Sheets
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
JULY 31, 1996 JANUARY 31, 1996
(UNAUDITED) (AUDITED)
------- -------
Assets
Current assets:
<S> <C> <C>
Cash and cash equivalents ......................................... $13,755 $20,095
Marketable securities ............................................. 8,799 9,499
Accounts receivable, net of allowance for
doubtful accounts of $650 and $531 at July 31, 1996
and January 31, 1996, respectively ............................. 3,943 1,573
Inventory ......................................................... 16,295 10,477
Prepaid expenses and other current assets ......................... 7,296 4,915
------- -------
Total current assets ................................................. 50,088 46,559
Property and equipment, less accumulated depreciation and amortization 19,327 16,690
Marketable securities ................................................ 12,433 6,247
Other assets ......................................................... 1,982 1,621
------- -------
$83,830 $71,117
======= =======
Liabilities and shareholders' equity
Current liabilities:
Accounts payable .................................................. $ 9,985 $ 6,898
Accrued expenses and other current liabilities .................... 4,099 3,174
------- -------
Total current liabilities ............................................ 14,084 10,072
Accrued rent and other liabilities ................................... 1,835 1,593
------- -------
Total liabilities .................................................... 15,919 11,665
------- -------
Shareholders' equity:
Preferred shares; $.0001 par, 10,000,000 authorized, none issued .. -- --
Common shares; $.0001 par, 50,000,000 shares authorized, 17,505,966
and 17,080,372 issued at July 31, 1996 and January 31, 1996,
respectively ................................................... 1 1
Additional paid-in capital ........................................ 20,100 17,417
Retained earnings ................................................. 47,810 42,034
------- -------
Total shareholders' equity ........................................... 67,911 59,452
------- -------
$83,830 $71,117
======= =======
</TABLE>
See accompanying notes
2
<PAGE>
URBAN OUTFITTERS, INC.
Consolidated Statements of Income
(in thousands, except share and per share data)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended July 31 Six Months Ended July 31
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net Sales $ 35,898 $ 29,881 $ 69,532 $ 57,801
Cost of Sales 17,496 14,797 34,066 28,610
----------- ----------- ----------- -----------
Gross profit 18,402 15,084 35,466 29,191
Selling, general and administrative expenses 13,743 11,383 26,086 21,883
----------- ----------- ----------- -----------
Income from operations 4,659 3,701 9,380 7,308
Interest (income), net (355) (309) (725) (597)
Other expenses (income), net 123 38 189 25
----------- ----------- ----------- -----------
Income before income taxes 4,891 3,972 9,916 7,880
Income tax expense 2,042 1,668 4,140 3,310
----------- ----------- ----------- -----------
Net income 2,849 2,304 5,776 4,570
=========== =========== =========== ===========
Net income per common share $ .16 $ .13 $ .33 $ .26
=========== =========== =========== ===========
Weighted average common shares outstanding 17,831,946 17,620,656 17,759,373 17,605,068
=========== =========== =========== ===========
</TABLE>
See accompanying notes
3
<PAGE>
URBAN OUTFITTERS, INC.
Consolidated Statements of Cash Flows
(in thousands)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JULY 31
------------------------
(UNAUDITED) (UNAUDITED)
1996 1995
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net Income $ 5,776 $ 4,570
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,682 1,387
Provision for losses on accounts receivable 119 73
Changes in assets and liabilities:
Increase in receivables (2,489) (2,667)
Increase in inventory (5,819) (3,350)
(Increase)/decrease in prepaid expenses and other assets (742) 50
Increase in payables, accrued expenses and other liabilities 4,254 389
-------- --------
Net cash (used) provided by operating activities 2,781 452
-------- --------
Cash flows from investing activities:
Capital expenditures (4,319) (3,177)
Purchase of investments held-to-maturity (14,096) (1,592)
Purchase of investments available-for-sale (1,750) 0
Maturities of investments held-to-maturity 6,499 3,706
Sale of investments available-for-sale 3,861 0
-------- --------
Net cash used in investing activities (9,805) (1,063)
-------- --------
Cash flows from financing activities:
Exercise of stock options 684 153
Purchase of common shares 0 (73)
-------- --------
Net cash used in financing activities 684 80
-------- --------
Decrease in cash and cash equivalents (6,340) (531)
Cash and cash equivalents at beginning of period 20,095 9,109
-------- --------
Cash and cash equivalents at end of period $ 13,755 $ 8,578
======== ========
</TABLE>
See accompanying notes
4
<PAGE>
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, 1996, filed with the Securities and
Exchange Commission on April 23, 1996.
2. Marketable Securities
Marketable securities are classified as follows:
July 31, 1996 January 31, 1996
------------- ----------------
Current portion
Held-to-maturity.................... $ 7,999 $ 6,588
Available-for-sale.................. 800 2,911
------- -------
8,799 9,499
------- -------
Noncurrent portion
Held-to-maturity.................... 12,433 6,247
------- -------
Total marketable securities ........ $21,232 $15,746
======= =======
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. All applicable shares and per share data have been adjusted for
the split.
4. Additional Information
During the quarter, the Company opened a new Anthropologie store in New York
City and, subsequent to the quarter, opened another Anthropologie store in Santa
Monica, CA.
5
<PAGE>
PART I
FINANCIAL INFORMATION (continued)
ITEM 2 Management's Discussion and Analysis of Financial Condition
- ------ and Results of Operations
GENERAL
Total Company sales growth in the second quarter and the first six months of
this fiscal year was 20 percent for both periods. This compares to the same
prior year periods of 23 percent and 22 percent, respectively. While relatively
the same growth rates, the source of the growth varies considerably. In the
prior year, sales growth was almost entirely from new stores opened in Urban
Retail with little contribution from comparable store sales and no contribution
from Wholesale. Conversely, sales growth in the second quarter and the first six
months of this year was from comparable store sales growth of 9.0 percent and
10.4 percent, respectively, from new store openings in Anthropologie and
comparative Wholesale sales growth of 15.9 percent and 11.6 percent for the
second quarter and six months.
The type of sales growth in the current year for the second quarter and the six
months contributed more to earnings than the type of sales growth in the same
periods last year. High increases in comparable store sales and in Wholesale led
to higher inventory turns, lower markdowns, and higher gross profit margins.
Growth in comparable store sales and in Wholesale are subjected to much lower
variable expenses, and therefore, preserve more gross profit to operating profit
and net increase. In contrast, last year's sales growth was primarily from new
stores which did not create higher turns and, indeed, burdened gross profit with
a full range of new store operating expenses. Notwithstanding these favorable
trends, the second quarter saw a slight increase in operating expenses as a
percentage of sales due to Anthropologie's current higher expense to sales ratio
and its accelerated growth. This .18 percent growth represents a $37,646.00
reduction in net income. These trends are reflected in the percentage to sales
figures shown below.
Last year, comparable store sales growth in the third and fourth quarters were 5
percent and 3 percent, respectively. Looking ahead, selling against these higher
levels combined with delayed openings of new Urban Retail stores will put some
pressure on earnings growth in the third and fourth quarter. Helping to offset
those pressures are Wholesale bookings that, at this date, are running ahead of
last year and plan.
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
locations and in completing lease negotiations.
6
<PAGE>
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, fiscal year 1996 will end on January
31, 1996. This discussion of results of operations covers the second quarter and
the first six months of FY97 and FY96.
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 which follows.
<TABLE>
<CAPTION>
SECOND QUARTER ENDED SIX MONTHS ENDED
JULY 31 JULY 31
1996 1995 1996 1995
----- ----- ----- -----
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of goods sold 48.7% 49.5% 49.0% 49.5%
Gross profit 51.3% 50.5% 51.0% 50.5%
Selling, general and
administrative expenses 38.3% 38.1% 37.5% 37.9%
----- ----- ----- -----
Income from operations 13.0% 12.4% 13.5% 12.6%
Net interest & other income .6% .9% .8% 1.0%
----- ----- ----- -----
Income before income taxes 13.6% 13.3% 14.3% 13.6%
Income tax expense 5.7% 5.6% 6.0% 5.7%
----- ----- ----- -----
Net income 7.9% 7.7% 8.3% 7.9%
===== ===== ===== =====
</TABLE>
SECOND QUARTER ENDED JULY 31, 1996 COMPARED
TO THE SECOND QUARTER ENDED JULY 31, 1995
Net sales increased during the second quarter ended July 31, 1996 to $35.9
million, up 20.1 percent from $29.9 million during the same period of the prior
year. The $6.0 million increase over the prior year's second quarter was split
among comparable store sales increases of $2.2 million, sales from stores opened
less than 13 months and new stores of $3.0 million, and Wholesale sales growth
of $.8 million. The increases in part relate to increases in average selling
prices at retail and very good consumer acceptance of the products offered at
Retail and at Wholesale.
Gross profit during the second quarter ended July 31, 1996 was $18.4 million, up
$3.3 million or 22.0 percent from the prior year quarter. The dollar increase
resulted from the volumes described above and improved Retail gross profit
margin percentages due to initial markup increases and lower markdowns.
Wholesale gross profit margins were down in the second quarter when compared to
the same quarter in the prior year. The reason for the decline was higher growth
of a lower gross profit margin product line compared to the growth of other
product lines.
7
<PAGE>
Selling, general and administrative expenses during the second quarter ended
July 31, 1996 were $13.7 million, up $2.4 million or 20.7 percent from the prior
year quarter. These dollar increases were attributed to new stores opened,
enlarged stores, and investments in people and systems necessary to manage the
planned sales growth, particularly in Anthropologie. Stated as a percentage of
sales, selling, general and administrative expenses increased to 38.3 percent
from 38.1 percent in the prior year. As previously mentioned, the increase
represents an after tax effect of $37 thousand and is due to the growth of
Anthropologie.
Income from operations during the second quarter ended July 31, 1996 was $4.7
million, up $1 million or 25.9 percent from the prior year's second quarter.
The effective income tax rate for the quarter of 42 percent remains unchanged
from last year.
Net income during the second quarter ended July 31, 1996 was $2.8 million, up
$545,000 or 23.7 percent from the prior year.
SIX MONTHS ENDED JULY 31, 1996
COMPARED TO THE SIX MONTHS ENDED JULY 31, 1995
Net sales increased during the six months ended July 31, 1996 to $69.5 million,
up 20.3 percent from $57.8 million during the same period last year. The $11.7
million increase over the prior year's first six months was split among
comparable store sales increase of $4.6 million, sales from stores opened less
than 13 months and new stores of $5.7, and Wholesale sales growth of $1.4
million. The increases relate to increases in average selling prices at retail
and very good consumer acceptance of the products offered at Retail and at
Wholesale.
Gross profit during the six months ended July 31, 1996 was $35.5 million, up
$6.3 million from the same prior year period, a 21.5 percent increase. The
dollar increases come from the volume increases previously described and
improved Retail gross profit margin percentages due to initial markup increases
and lower markdowns. Wholesale gross profit margins were down in the six months
when compared to the same six months in the prior year. The reason for the
decline was higher growth of a lower gross profit margin product line compared
to the growth of other product lines.
Selling, general and administrative expenses during the six months ended July
31, 1996 were $26.1 million, up $4.2 million or 19.2 percent from the same
period in the prior year. These dollar increases were attributed to newly opened
and enlarged stores and investments in people and systems necessary to manage
the sales growth in comparable stores, particularly in Anthropologie. Stated as
a percentage of sales, selling, general and administrative expenses decreased to
37.5 percent from 37.9 percent during the six months compared to the same period
in the preceding year. The percent to sales improvement results from leveraging
on high comparable stores sales, new stores, and Wholesale sales growth.
8
<PAGE>
Income from operations during the six months ended July 31, 1996 was $9.4
million, up $2.1 million or 28.3 percent from the same period in the prior year.
The effective income tax rate for the six months of 42 percent remains unchanged
from last year.
Net income during the six months ended July 31, 1996 was $5.8 million, up $1.2
million or 26.4 percent from the same period in the prior year.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents decreased $6.3 million to $13.8 million at July 31,
1996 from $20.1 million at January 31, 1996. This decrease was primarily a
result of a $4.3 million increase in leasehold improvements, other capital
assets and the new Distribution Center. Additionally, cash of $5.5 million was
used to purchase marketable securities. Offsetting these uses of cash was $.7
million received from the exercise of stock options and cash from operating
activities of $2.8 million.
The Company's net working capital decreased from $36.5 million at January 31,
1996 to $36.0 million at July 31, 1996. The $.5 million decrease in net working
capital during the six month period ended July 31, 1996 results primarily from
the use of cash and short term marketable securities to purchase long term
marketable securities and property and equipment.
The Company maintains a line of credit of $10.0 million which is available for
any combination of cash borrowing or letters of credit. The line is unsecured
and any cash borrowing under the line would accrue interest at the LIBOR rate
plus 1/2 of one percent. The Company uses international letters of credit to
purchase private label merchandise and merchandise for the Wholesale Company.
Outstanding balances of letters of credit at January 31, 1996 and at July 31,
1996 were $5.3 million and $4.3 million, respectively. The Company has never
borrowed against the available cash line of credit. The last long-term borrowing
was paid down to zero during the second quarter of fiscal 1994. There were no
loan balances at January 31, 1996 or July 31, 1996.
The Company expects that capital expenditures during FY97 will be approximately
$10 million depending upon the number of stores opened and stores enlarged or
improved during the year. In future years, the Company expects to invest an
amount equal to or greater than that figure, again depending on new and existing
store plans. The Company believes that existing cash, marketable securities at
July 31, 1996, and cash from future operations will be sufficient to meet the
Company's cash needs for at least the next three years.
9
<PAGE>
PART II
OTHER INFORMATION
ITEM 6 Exhibits and Reports on Form 8-K
- ------
(a) Exhibits: Income Per Share Calculation
(b) Reports on Form 8-K: None
10
<PAGE>
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
(Chief Financial Officer)
Dated: September 13, 1996
11
<PAGE>
Urban Outfitters, Inc. Exhibit 11
INCOME PER SHARE CALCULATION:
JULY 31, 1996 & 1995
<TABLE>
<CAPTION>
INCOME PER SHARE CALCULATION:
Three Months Ended July 31
----------------------------------------------------------------
1996 1995
----------------------------------------------------------------
<S> <C> <C> <C> <C>
$ Per Share $ Per Share
NET INCOME 2,849,000 $0.16 2,304,000 $0.13
========== ========== ========== ==========
WEIGHTED AVERAGE COMMON
SHARES & COMMON SHARE
EQUIVALENTS OUTSTANDING 17,831,946 17,620,656
========== ==========
COMPUTATION OF COMMON SHARES
& COMMON SHARE EQUIVALENTS
OUTSTANDING:
Three Months Ended July 31,
--------------------------------------------------------------------
1996 1995
-------------------------------- --------------------------------
End of Period Weighted Avg. End of Period Weighted Avg.
------------- ------------- ------------- -------------
COMMON SHARES OUTSTANDING 17,505,966 17,471,225 17,026,372 17,018,894
---------- ----------
COMMON SHARE EQUIVALENTS:
OPTIONS 495,669 530,411 837,942 848,812
ASSUMED REPURCHASED
AT AVERAGE PRICE (169,690) (247,050)
---------- ----------
WEIGHTED AVERAGE COMMON
EQUIVALENTS 360,721 601,762
---------- ----------
TOTAL WEIGHTED AVERAGE
COMMON SHARES & COMMON
SHARE EQUIVALENTS OUTSTANDING 17,831,946 17,620,656
========== ==========
</TABLE>
<TABLE>
<CAPTION>
INCOME PER SHARE CALCULATION:
Six Months Ended July 31
------------------------------------------------------------------
1996 1995
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ Per Share $ Per Share
NET INCOME 5,776,000 $0.33 4,570,000 $0.26
========== ========= ========== ==========
WEIGHTED AVERAGE COMMON
SHARES & COMMON SHARE
EQUIVALENTS OUTSTANDING 17,759,373 17,605,068
========== ==========
COMPUTATION OF COMMON SHARES
& COMMON SHARE EQUIVALENTS
OUTSTANDING:
Six Months Ended July 31,
--------------------------------------------------------------------
1996 1995
--------------------------------------------------------------------
End of Period Weighted Avg. End of Period Weighted Avg.
------------- ------------- ------------- -------------
COMMON SHARES OUTSTANDING 17,505,966 17,334,014 17,026,372 16,990,736
---------- ----------
COMMON SHARE EQUIVALENTS:
OPTIONS 495,669 598,961 837,942 788,944
ASSUMED REPURCHASED
AT AVERAGE PRICE (173,602) (174,612)
---------- ----------
WEIGHTED AVERAGE COMMON
EQUIVALENTS 425,359 614,332
---------- ----------
TOTAL WEIGHTED AVERAGE
COMMON SHARES & COMMON
SHARE EQUIVALENTS OUTSTANDING 17,759,373 17,605,068
========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-1996
<PERIOD-END> JUL-31-1996
<CASH> 13,755
<SECURITIES> 8,799
<RECEIVABLES> 3,943
<ALLOWANCES> 0
<INVENTORY> 16,295
<CURRENT-ASSETS> 50,088
<PP&E> 19,327
<DEPRECIATION> 0
<TOTAL-ASSETS> 83,830
<CURRENT-LIABILITIES> 14,084
<BONDS> 0
0
0
<COMMON> 1
<OTHER-SE> 67,910
<TOTAL-LIABILITY-AND-EQUITY> 83,830
<SALES> 69,532
<TOTAL-REVENUES> 69,532
<CGS> 34,066
<TOTAL-COSTS> 34,066
<OTHER-EXPENSES> 26,275
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (725)
<INCOME-PRETAX> 9,916
<INCOME-TAX> 4,140
<INCOME-CONTINUING> 5,776
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,776
<EPS-PRIMARY> .33
<EPS-DILUTED> .33
</TABLE>
