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
October 31, 1996
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
-----------------------
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 November 30, 1996
--------------- ----------------------------
Common shares, par value, $.0001 per share 17,528,698
<PAGE>
INDEX
PAGE
----
PART I Financial Information
ITEM 1 Financial Statements
- ------
Consolidated Balance Sheets at October 31, 1996 2
(Unaudited) and January 31, 1996
Consolidated Statements of Income for the three and 3
nine months ended October 31, 1996 and 1995 (Unaudited)
Consolidated Statements of Cash Flows for the 4
nine months ended October 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>
OCTOBER 31, 1996 JANUARY 31, 1996
(UNAUDITED) (AUDITED)
Assets
<S> <C> <C>
Current assets:
Cash and cash equivalents $13,512 $20,095
Marketable securities 9,968 9,499
Accounts receivable, net of allowance for
doubtful accounts of $701 and $531 at October 31, 1996
and January 31, 1996, respectively 5,862 1,573
Inventory 18,732 10,477
Prepaid expenses and other current assets 5,636 4,915
------- -------
Total current assets 53,710 46,559
Property and equipment, less accumulated depreciation and amortization 22,851 16,690
Marketable securities 12,711 6,247
Other assets 2,046 1,621
------- -------
$91,318 $71,117
======= =======
Liabilities and shareholders' equity
Current liabilities:
Accounts payable $12,135 $ 6,898
Accrued expenses and other current liabilities 4,290 3,174
------- -------
Total current liabilities 16,425 10,072
Accrued rent and other liabilities 2,053 1,593
------- -------
Total liabilities 18,478 11,665
------- -------
Shareholders' equity:
Preferred shares; $.0001 par, 10,000,000 authorized, none issued -- --
Common shares; $.0001 par, 50,000,000 shares authorized, 17,528,698
and 17,080,372 issued at October 31, 1996 and January 31, 1996,
respectively 1 1
Additional paid-in capital 20,398 17,417
Retained earnings 52,441 42,034
------- -------
Total shareholders' equity 72,840 59,452
------- -------
$91,318 $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 October 31 Nine Months Ended October 31
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 44,884 $ 38,842 $ 114,416 $ 96,642
Cost of sales 22,413 19,239 56,479 47,848
------------ ------------ ------------ ------------
Gross profit 22,471 19,603 57,937 48,794
Selling, general and administrative expenses 14,870 12,677 40,956 34,559
------------ ------------ ------------ ------------
Income from operations 7,601 6,926 16,981 14,235
Interest income, net 394 318 1,119 915
Other income (expenses), net (44) (92) (234) (118)
------------ ------------ ------------ ------------
Income before income taxes 7,951 7,152 17,866 15,032
Income tax expense 3,319 3,004 7,459 6,313
------------ ------------ ------------ ------------
Net income $ 4,632 $ 4,148 $ 10,407 $ 8,719
============ ============ ============ ============
Net income per common share $ .26 $ .23 $ .59 $ .49
============ ============ ============ ============
Weighted average common shares outstanding 17,840,541 17,630,726 17,786,429 17,613,620
============ ============ ============ ============
</TABLE>
See accompanying notes
3
<PAGE>
URBAN OUTFITTERS, INC.
Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED OCTOBER 31
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 10,407 $ 8,719
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 2,613 2,132
Provision for losses on accounts receivable 170 (20)
Changes in assets and liabilities:
Increase in receivables (4,459) (2,982)
Increase in inventory (8,255) (4,712)
(Increase)decrease in prepaid expenses and other assets 1,028 (344)
Increase in payables, accrued expenses and other liabilities 6,813 2,291
-------- --------
Net cash provided by operating activities 8,317 5,084
-------- --------
Cash flows from investing activities:
Capital expenditures (8,774) (4,222)
Purchase of investments held-to-maturity (18,713) (5,246)
Purchase of investment available-for-sale (2,350) --
Maturities of investments held-to-maturity 9,894 7,236
Sale of investments available-for-sale 4,236 --
-------- --------
Net cash used in investing activities (15,707) (2,232)
-------- --------
Cash flows from financing activities:
Exercise of stock options 807 466
Purchase of common shares -- (73)
-------- --------
Net cash provided by financing activities 807 393
-------- --------
Increase(decrease) in cash and cash equivalents (6,583) 3,245
Cash and cash equivalents at beginning of period 20,095 9,109
-------- --------
Cash and cash equivalents at end of period $ 13,512 $ 12,354
======== ========
</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:
October 31, 1996 January 31, 1996
---------------- ----------------
Current portion
Held-to-maturity.................. $ 8,868 $ 6,588
Available-for-sale................ 1,100 2,911
---------- ---------
9,968 9,499
--------- ---------
Noncurrent portion
Held-to-maturity.................. 12,711 6,247
-------- ---------
Total marketable securities.......... $22,679 $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 third quarter, the Company opened new Anthropologie stores in Newport
Beach and Santa Monica, California. Subsequent to the third quarter, the Company
opened Urban Retail stores in Montreal and Toronto, Canada, and another
Anthropologie store in Chicago, Illinois.
5
<PAGE>
PART I
FINANCIAL INFORMATION (continued)
ITEM 2 Management's Discussion and Analysis of Financial Condition
- ------ and Results of Operations
GENERAL
Sales growth for the total Company during the third quarter and nine months
ended October 31, 1996 compared to the same prior year periods was up 16 percent
and 18 percent, respectively. The Wholesale Company's sales increased 44.8
percent during the third quarter and 23.4 percent for the nine-months. Retail
comparable store sales slowed during the third quarter to a negative 1.9
percent. The nine-month period finished with a positive comparable store sales
growth of 5.7 percent. Four new Anthropologie stores were added during the nine
months ended October 31, 1996. No new Urban Retail stores were opened during
that time.
Management believes that several factors combined to lead to the third quarter
comparable store sales decline. Among those are: the third quarter last year was
the strongest "comping" quarter; there was not enough transitional merchandise
linking summer and fall; Back-to-School and early fall merchandise was too
concentrated, and to some extent, missed certain fashion changes; and finally,
several merchandise classifications did not have enough inventory throughout the
quarter. Efforts are underway to get the inventory properly balanced. Adding to
the sales issue is a shorter holiday season.
Management expects the fourth quarter to benefit from the continuing positive
trends in the Wholesale business, and the opening of the eighth Anthropologie
store (in Chicago, the fifth opening this year) and the opening of two new Urban
Retail stores in Montreal and Toronto in early December. Retail comparable store
sales, on the other hand, remain below plan and, if not improved during the
fourth quarter, will offset those benefits.
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 1997 will end on January
31, 1997. This discussion of results of operations covers the third quarter and
the first nine months of fiscal 97 and fiscal 96.
The following table sets forth, for the periods indicated, the percentage of the
Company's net sales represented by certain income statement data. The discussion
should be read in conjunction with the following table.
<TABLE>
<CAPTION>
THIRD QUARTER ENDED NINE MONTHS ENDED
OCTOBER 31 OCTOBER 31
---------------------- -----------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of goods sold 49.9% 49.5% 49.4% 49.5%
Gross profit 50.1% 50.5% 50.6% 50.5%
Selling, general and
administrative expenses 33.1% 32.6% 35.8% 35.8%
------ ------ ------ ------
Income from operations 17.0% 17.8% 14.8% 14.7%
Net interest and other income .8% .6% .8% .8%
------ ------ ------ ------
Income before income taxes 17.7% 18.4% 15.6% 15.6%
Income tax expense 7.4% 7.7% 6.5% 6.5%
------ ------ ------ ------
Net income 10.3% 10.7% 9.1% 9.0%
====== ====== ====== ======
</TABLE>
THIRD QUARTER ENDED OCTOBER 31, 1996 COMPARED
TO THE THIRD QUARTER ENDED OCTOBER 31, 1995
Net sales increased during the third quarter ended October 31, 1996 to $44.9
million, up 15.6 percent from the same period in the prior year. $3.7 million of
the $6.1 million increase was attributable to newly opened and enlarged stores;
comparable store sales were down $.6 million while the Wholesale Company
contributed $3.0 million to the third quarter sales growth.
Gross profit during the third quarter ended October 31, 1996 was $22.5 million,
up $2.9 million or 14.6 percent from the prior year quarter. The dollar increase
resulted from the volume increases previously described. The gross profit margin
percentage to sales decreased to 50.1 percent during the third quarter of this
year from 50.5 percent last year. All three companies' gross profit margin
percentages improved during the third quarter. However, the total percentage
decline was due to a higher sales mix of Anthropologie and Wholesale, both of
which have lower gross profit margin percentages than Urban Retail.
7
<PAGE>
Selling, general and administrative expenses during the third quarter ended
October 31, 1996 were $14.9 million, up $2.2 million or 17.3 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 slightly to 33.1
percent from 32.6 percent in the third quarter of the prior year. Both Wholesale
and Anthropologie leveraged expenses on higher sales growth. Urban Retail, with
lower sales growth, experienced expense growth in dollars and in percentage.
Income from operations during the third quarter of fiscal 97 was $7.6 million,
up from $6.9 million in the prior year's third quarter. The Wholesale Company
experienced the most significant operating profit growth during the quarter.
The effective income tax rate for the third quarter of 42 percent remains
unchanged from last year.
Net income during the third quarter of fiscal 97 was $4.6 million, up $.5
million or 11.7 percent from the prior year's third quarter.
NINE MONTHS ENDED OCTOBER 31, 1996
COMPARED TO THE NINE MONTHS ENDED OCTOBER 31, 1995
Net sales increased during the nine months ended October 31, 1996 to $114.4
million, up 18.4 percent from $96.6 million during the same period of the prior
year. The nine-month-to-nine-month $17.8 million increase was provided by sales
from newly opened and enlarged stores of $9.2 million, comparable store sales
increases of $4.2 million (a 5.7 percent increase) and increases from the
Wholesale Company of $4.4 million.
Gross profit during the nine months ended October 31, 1996 was $57.9 million, up
$9.1 million (an 18.7 percent increase) from the same prior year period of $48.8
million. The dollar increases resulted from the sales volume growth previously
described. The gross profit margin percentage to sales improved slightly to 50.6
percent from 50.5 percent during the nine-month period last year.
Selling, general and administrative expenses during the nine months ended
October 31, 1996 were $41.0 million, up $6.4 million or 18.5 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 Urban Retail, Anthropologie and in Wholesale. Stated
as a percentage of sales, selling, general and administrative expenses were flat
at 35.8 percent during the nine-month periods of both years.
8
<PAGE>
Income from operations during the nine months ended October 31, 1996 was $17.0
million, up $2.7 million or 19.3 percent from the same period in the prior year.
The Wholesale Company contributed $.6 million to the growth during the
nine-month period.
The effective income tax rate for the nine months ended October 31, 1996 of 42
percent remains unchanged from last year.
Net income during the nine months ended October 31, 1996 was $10.4 million, up
$1.7 million or 19.4 percent from the same period in the prior year.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents decreased to $13.5 million at October 31, 1996 from
$20.1 million at January 31, 1996. The $6.6 million net decrease results from an
increase in cash from operating activity of $8.3 million, and net issuance of
common stock of $807,000, offset by capital expenditures of $8.8 million and net
purchases of investments of $6.9 million.
The Company's net working capital increased from $36.5 million at January 31,
1996 to $37.2 million at October 31, 1996. The $.7 million increase in net
working capital during the nine-month period ended October 31, 1996 results from
net income of $10.4 million and stock options exercised and tax benefits from
those exercised of $3.0 million, offset by investments in long-term marketable
securities purchased of $6.5 million and net property and equipment purchased of
$6.2 million.
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 October 31,
1996 were $5.3 million and $3.1 million, respectively. The Company has never
borrowed against the available cash line of credit. There were no loan balances
at January 31, 1996 or October 31, 1996.
The Company expects that capital expenditures during fiscal 97 will be
approximately $10.0 million depending upon the number of stores opened, enlarged
or improved during the year. In future years, the Company expects to invest
amounts greater than that figure, again depending on new and existing stores
opened or expanded. The Company believes that existing cash, marketable
securities at October 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: December 13, 1996
11
<PAGE>
EXHIBIT 11
Urban Outfitters, Inc.
INCOME PER SHARE CALCULATION:
OCTOBER 31, 1996 & 1995
<TABLE>
<CAPTION>
INCOME PER SHARE CALCULATION:
Three Months Ended October 31,
-----------------------------------------------------------------
1996 1995
---------------------------- ------------------------------
<S> <C> <C> <C> <C>
$ Per Share $ Per Share
NET INCOME 4,632,000 $0.26 4,148,000 $0.23
============= ============= ============= =============
WEIGHTED AVERAGE COMMON
SHARES & COMMON SHARE
EQUIVALENTS OUTSTANDING 17,840,541 17,630,726
============= =============
COMPUTATION OF COMMON
SHARES & COMMON SHARE
EQUIVALENTS OUTSTANDING:
Three Months Ended October 31,
-----------------------------------------------------------------
1996 1995
---------------------------- ------------------------------
End of Period Weighted Ave. End of Period Weighted Ave.
------------- ------------- ------------- -------------
COMMON SHARES OUTSTANDING 17,528,698 17,520,771 17,080,372 17,053,580
------------- -------------
COMMON SHARE EQUIVALENTS:
OPTIONS 472,937 480,864 783,942 810,734
ASSUMED REPURCHASED
AT AVERAGE PRICE (161,094) (233,588)
------------- -------------
WEIGHTED AVERAGE COMMON
EQUIVALENTS 319,770 577,146
------------- -------------
TOTAL WEIGHTED AVERAGE
COMMON SHARES & COMMON
SHARE EQUIVALENTS OUTSTANDING 17,840,541 17,630,726
============= =============
INCOME PER SHARE CALCULATION:
Nine Months Ended October 31,
-----------------------------------------------------------------
1996 1995
---------------------------- ------------------------------
$ Per Share $ Per Share
NET INCOME 10,407,000 $0.59 8,719,000 $0.49
============= ============= ============= =============
WEIGHTED AVERAGE COMMON
SHARES & COMMON SHARE
EQUIVALENTS OUTSTANDING 17,786,429 17,613,620
============= =============
COMPUTATION OF COMMON
SHARES & COMMON SHARE
EQUIVALENTS OUTSTANDING:
Nine Months Ended October 31,
-----------------------------------------------------------------
1996 1995
---------------------------- ------------------------------
End of Period Weighted Ave. End of Period Weighted Ave.
------------- ------------- ------------- -------------
COMMON SHARES OUTSTANDING 17,528,698 17,396,267 17,080,372 17,011,684
------------- -------------
COMMON SHARE EQUIVALENTS:
OPTIONS 472,937 559,595 783,942 796,208
ASSUMED REPURCHASED
AT AVERAGE PRICE (169,433) (194,272)
------------- -------------
WEIGHTED AVERAGE COMMON
EQUIVALENTS 390,162 601,936
------------- -------------
TOTAL WEIGHTED AVERAGE
COMMON SHARES & COMMON
SHARE EQUIVALENTS OUTSTANDING 17,786,429 17,613,620
============= =============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-31-1996
<PERIOD-END> OCT-31-1996
<CASH> 13,512
<SECURITIES> 9,968
<RECEIVABLES> 5,862
<ALLOWANCES> 0
<INVENTORY> 18,732
<CURRENT-ASSETS> 53,710
<PP&E> 22,851
<DEPRECIATION> 0
<TOTAL-ASSETS> 91,318
<CURRENT-LIABILITIES> 16,425
<BONDS> 0
0
0
<COMMON> 1
<OTHER-SE> 72,839
<TOTAL-LIABILITY-AND-EQUITY> 91,318
<SALES> 114,416
<TOTAL-REVENUES> 114,416
<CGS> 56,479
<TOTAL-COSTS> 56,479
<OTHER-EXPENSES> 41,190
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (1,119)
<INCOME-PRETAX> 17,866
<INCOME-TAX> 7,459
<INCOME-CONTINUING> 10,407
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,407
<EPS-PRIMARY> .59
<EPS-DILUTED> .59
</TABLE>
