<PAGE>
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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, 2000
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 (Zip Code)
office)
(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 [_]
<TABLE>
<CAPTION>
Number of Shares Outstanding
Title of Each Class of Common Stock at December 6, 2000
----------------------------------- ----------------------------
<S> <C>
Common Shares, par value, $.0001 per share 17,253,486
</TABLE>
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<PAGE>
INDEX
PART I
Financial Information
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
ITEM 1 Financial Statements
Condensed Consolidated Balance Sheets at October 31, 2000,
January 31, 2000, and October 31, 1999 (Unaudited)............. 3
Condensed Consolidated Statements of Income for the three and
nine months ended October 31, 2000 and 1999 (Unaudited)........ 4
Condensed Consolidated Statements of Shareholders' Equity for
the nine months ended October 31, 2000 and 1999 (Unaudited).... 5
Condensed Consolidated Statements of Cash Flows for the nine
months ended October 31, 2000 and 1999 (Unaudited)............. 6
Notes to Condensed Consolidated Financial Statements
(Unaudited).................................................... 7-9
ITEM 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations.......................................... 9-12
ITEM 3 Quantitative and Qualitative Disclosure About Market Risk....... 13
PART II
Other Information
ITEM 6 Exhibits and Reports on Form 8-K................................ 13
SIGNATURES.............................................................. 14
</TABLE>
2
<PAGE>
URBAN OUTFITTERS, INC.
Condensed Consolidated Balance Sheets
(in thousands, except share and per share data)
(Unaudited)
<TABLE>
<CAPTION>
October 31, 2000 January 31, 2000 October 31, 1999
---------------- ---------------- ----------------
<S> <C> <C> <C>
Assets
Current assets:
Cash and cash
equivalents.............. $ 7,157 $ 12,727 $ 7,306
Marketable securities..... 1,602 11,225 8,371
Accounts receivable, net
of allowance for doubtful
accounts of $599, $518
and and $563,
respectively............. 4,777 4,825 8,914
Inventories............... 44,986 26,868 32,527
Prepaid expenses and other
current assets........... 8,180 10,433 15,501
-------- -------- --------
Total current assets.... 66,702 66,078 72,619
Property and equipment,
net........................ 89,949 72,819 62,589
Marketable securities....... -- 8,646 13,785
Other assets................ 5,940 5,958 7,763
-------- -------- --------
$162,591 $153,501 $156,756
======== ======== ========
Liabilities and
Shareholders' Equity
Current liabilities:
Accounts payable.......... $ 20,521 $ 16,760 $ 19,688
Accrued expenses and other
current liabilities...... 10,636 11,312 14,070
-------- -------- --------
Total current
liabilities............ 31,157 28,072 33,758
Deferred rent............. 5,355 4,513 4,370
-------- -------- --------
Total liabilities....... 36,512 32,585 38,128
-------- -------- --------
Shareholders' equity:
Preferred shares; $.0001
par value, 10,000,000
authorized, none issued.. -- -- --
Common shares; $.0001 par
value, 50,000,000 shares
authorized, 17,253,486,
17,358,186 and 17,619,241
issued and outstanding,
respectively............. 2 2 2
Additional paid-in
capital.................. 16,268 17,680 20,876
Retained earnings......... 110,702 103,614 98,082
Accumulated other
comprehensive loss....... (893) (380) (332)
-------- -------- --------
Total shareholders'
equity................. 126,079 120,916 118,628
-------- -------- --------
$162,591 $153,501 $156,756
======== ======== ========
</TABLE>
See accompanying notes
3
<PAGE>
URBAN OUTFITTERS, INC.
Condensed Consolidated Statements of Income
(in thousands, except share and per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
October 31, October 31,
---------------------- ----------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales..................... $ 76,501 $ 75,384 $ 208,093 $ 201,350
Cost of sales, including
certain buying, distribution
and occupancy costs.......... 52,030 46,716 140,629 124,959
---------- ---------- ---------- ----------
Gross profit................ 24,471 28,668 67,464 76,391
Selling, general and
administrative expenses...... 20,323 17,145 55,295 48,225
---------- ---------- ---------- ----------
Income from operations...... 4,148 11,523 12,169 28,166
Other expense, net............ (213) (388) (154) (2,856)
---------- ---------- ---------- ----------
Income before income taxes.. 3,935 11,135 12,015 25,310
Income tax expense............ 1,574 5,035 4,927 12,162
---------- ---------- ---------- ----------
Net income.................. $ 2,361 $ 6,100 $ 7,088 $ 13,148
========== ========== ========== ==========
Net income per common share:
Basic....................... $ 0.14 $ 0.35 $ 0.41 $ 0.75
========== ========== ========== ==========
Diluted..................... $ 0.14 $ 0.34 $ 0.41 $ 0.74
========== ========== ========== ==========
Weighted average common shares
outstanding: outstanding:
Basic....................... 17,253,486 17,594,467 17,258,348 17,516,687
========== ========== ========== ==========
Diluted..................... 17,275,640 17,965,089 17,269,282 17,862,669
========== ========== ========== ==========
</TABLE>
See accompanying notes
4
<PAGE>
URBAN OUTFITTERS, INC.
Condensed Consolidated Statements of Shareholders' Equity
(in thousands, except share data)
(Unaudited)
<TABLE>
<CAPTION>
Comprehensive
Income Common Shares
---------------- -------------------------------------
Accumulated
Year- Additional Other
To- Number of Par Paid-in Retained Comprehensive
Quarter Date Shares Value Capital Earnings Loss
------- ------- ---------- ----- ---------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at February 1, 2000................. 17,358,186 $ 2 $17,680 $103,614 $(380)
Net income................................... $2,361 $ 7,088 -- -- -- 7,088 --
Foreign currency translation adjustments,
net......................................... (131) (487) -- -- -- -- (487)
Unrealized marketable securities losses,
net......................................... 63 (26) -- -- -- -- (26)
------ -------
Comprehensive income......................... $2,293 $ 6,575
====== =======
Purchases and retirements of common shares... (104,700) -- (1,412) -- --
---------- --- ------- -------- -----
Balances at October 31, 2000................. 17,253,486 $ 2 $16,268 $110,702 $(893)
========== === ======= ======== =====
Balances at February 1, 1999................. 17,639,754 $ 2 $20,825 $ 84,934 $(467)
Net income................................... $6,100 $13,148 -- -- -- 13,148 --
Foreign currency translation adjustments,
net......................................... 222 135 -- -- -- -- 135
------ -------
Comprehensive income......................... $6,322 $13,283
====== =======
Exercises of stock options................... 351,032 -- 5,045 -- --
Purchases and retirements of common shares... (371,545) -- (4,994) -- --
---------- --- ------- -------- -----
Balances at October 31, 1999................. 17,619,241 $ 2 $20,876 $ 98,082 $(332)
--------------------------------------------------
========== === ======= ======== =====
<CAPTION>
Total
---------
<S> <C>
Balances at February 1, 2000................. $120,916
Net income................................... 7,088
Foreign currency translation adjustments,
net......................................... (487)
Unrealized marketable securities losses,
net......................................... (26)
Comprehensive income.........................
Purchases and retirements of common shares... (1,412)
---------
Balances at October 31, 2000................. $126,079
=========
Balances at February 1, 1999................. $105,294
Net income................................... 13,148
Foreign currency translation adjustments,
net......................................... 135
Comprehensive income.........................
Exercises of stock options................... 5,045
Purchases and retirements of common shares... (4,994)
---------
Balances at October 31, 1999................. $118,628
--------------------------------------------------
=========
</TABLE>
See accompanying notes
5
<PAGE>
URBAN OUTFITTERS, INC.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
October 31,
------------------
2000 1999
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income................................................ $ 7,088 $ 13,148
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization............................. 8,537 5,894
Provision for losses of MXG Media, Inc.................... -- 4,353
Changes in assets and liabilities:
Decrease (increase) in receivables...................... 48 (4,090)
Increase in inventories................................. (18,118) (10,646)
Decrease (increase) in prepaid expenses and other
assets................................................. 2,250 (6,290)
Increase in payables, accrued expenses and other
liabilities............................................ 3,927 10,059
-------- --------
Net cash provided by operating activities................. 3,732 12,428
-------- --------
Cash flows from investing activities:
Capital expenditures.................................... (25,453) (25,158)
Purchases of marketable securities...................... (600) (12,159)
Sales and maturities of marketable securities........... 18,650 14,994
Advances to MXG Media, Inc.............................. -- (8,150)
-------- --------
Net cash used in investing activities..................... (7,403) (30,473)
-------- --------
Cash flows from financing activities:
Exercise of stock options............................... -- 5,045
Purchases and retirements of common stock............... (1,412) (4,994)
-------- --------
Net cash (used in) provided by financing activities....... (1,412) 51
-------- --------
Effect of exchange rate changes on cash and cash
equivalents.............................................. (487) 135
-------- --------
Decrease in cash and cash equivalents..................... (5,570) (17,859)
Cash and cash equivalents at beginning of period.......... 12,727 25,165
-------- --------
Cash and cash equivalents at end of period................ $ 7,157 $ 7,306
======== ========
</TABLE>
See accompanying notes
6
<PAGE>
URBAN OUTFITTERS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Basis of Presentation
The accompanying unaudited condensed 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. The results of operations for the
three and nine months ended October 31, 2000 are not necessarily indicative of
the results to be expected for the full year. 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,
2000, filed with the Securities and Exchange Commission on April 14, 2000.
Certain prior period amounts have been reclassified to conform to the
current year's presentation.
2. Marketable Securities
Marketable securities are classified as follows:
<TABLE>
<CAPTION>
October 31, January 31, October 31,
2000 2000 1999
----------- ----------- -----------
(in thousands)
<S> <C> <C> <C>
Current portion
Held-to-maturity....................... $ -- $ 5,938 $ 6,374
Available-for-sale..................... 1,602 5,287 1,997
------ ------- -------
1,602 11,225 8,371
Noncurrent portion.......................
Held-to-maturity....................... -- 8,646 13,785
------ ------- -------
Total marketable securities.......... $1,602 $19,871 $22,156
====== ======= =======
</TABLE>
The difference between the fair market value and amortized cost of
marketable securities is immaterial.
3. Net Income Per Share
The difference between the number of weighted average common shares
outstanding used for basic net income per share and the number used for
dilutive net income per share represents the share effect of dilutive stock
options.
Options to purchase 1,181,000 and 237,500 shares were outstanding at October
31, 2000 and 1999, respectively, but were not included in the computation of
EPS because their effect would be antidilutive.
4. Segment Reporting
Urban Outfitters is a national retailer of lifestyle-oriented general
merchandise through 66 stores operating under the retail names "Urban
Outfitters" and "Anthropologie," and through a catalog and two web sites.
Sales from this retail segment account for over 90% of total consolidated
sales for the fiscal year ended January 31, 2000. The remainder is derived
from a wholesale division that manufactures and distributes apparel to the
retail segment and to over 1,300 better specialty stores worldwide.
The Company has aggregated its operations into these two reportable segments
based upon their unique management, customer base and economic
characteristics. Reporting in this format provides management with
7
<PAGE>
the financial information necessary to evaluate the success of the segments
and the overall business. The Company evaluates the performance of the
segments based on the net sales and pre-tax income from operations (excluding
intercompany royalty and interest charges) of the segment. Corporate expenses
include expenses incurred in and directed by the corporate office that are not
allocated to segments. The principal identifiable assets for each operating
segment are inventory and fixed assets. Other assets are comprised primarily
of general corporate assets, which principally consist of cash and cash
equivalents, marketable securities, accounts receivable and other assets. The
Company accounts for intersegment sales and transfers as if the sales and
transfers were made to third parties making similar volume purchases.
Both the retail and wholesale segment are highly diversified. No customer
comprises more than 10% of sales. Foreign operations are immaterial relative
to the overall Company.
<TABLE>
<CAPTION>
Three Months
Ended October Nine Months Ended
31, October 31,
---------------- ------------------
2000 1999 2000 1999
------- ------- -------- --------
<S> <C> <C> <C> <C>
Operating revenues
Retail operations.................... $71,637 $67,254 $191,838 $182,423
Wholesale operations................. 6,915 9,357 20,668 21,715
Intersegment elimination............. (2,051) (1,227) (4,413) (2,788)
------- ------- -------- --------
Total net sales.................... $76,501 $75,384 $208,093 $201,350
======= ======= ======== ========
Income from operations
Retail operations.................... $ 4,664 $10,292 $ 11,211 $ 27,049
Wholesale operations................. 607 1,929 3,712 3,802
Intersegment elimination............. (382) (255) (901) (566)
------- ------- -------- --------
Total segment operating income....... 4,889 11,966 14,022 30,285
General corporate expenses........... (741) (443) (1,853) (2,119)
------- ------- -------- --------
Total income from operations....... $ 4,148 $11,523 $ 12,169 $ 28,166
======= ======= ======== ========
</TABLE>
<TABLE>
<CAPTION>
October 31, January 31, October 31,
2000 2000 1999
----------- ----------- -----------
<S> <C> <C> <C>
Net fixed assets
Retail operations..................... $88,911 $71,805 $61,460
Wholesale operations.................. 1,037 1,013 1,128
Corporate............................. 1 1 1
------- ------- -------
Total net fixed assets.............. $89,949 $72,819 $62,589
======= ======= =======
Inventory
Retail operations..................... $42,707 $25,217 $31,580
Wholesale operations.................. 2,279 1,651 947
------- ------- -------
Total inventory..................... $44,986 $26,868 $32,527
======= ======= =======
</TABLE>
5. Investment in MXG Media, Inc.
As of January 31, 2000, the Company had invested approximately $2.0 million
in Series B Convertible Preferred Stock and $2.4 million in convertible
debentures of MXG Media, Inc. ("MXG"). MXG incurred losses since its
inception, and, in accordance with the equity method of accounting, the
Company recorded charges to earnings of $4.4 million for its portion of
operating losses related to the minority interest in MXG during the fiscal
year ended January 31, 2000 (including $0.9 million for the quarter and $4.4
million for the nine months ended October 31, 1999). These charges in FY 2000
fully reserved for the Company's investment and the Company made no additional
investments in FY 2001 in MXG.
8
<PAGE>
During the quarter ended October 31, 1999, the Company advanced $2.6 million
of bridge financing to MXG in the form of promissory notes. These notes,
together with previous advances, were repaid with interest on November 1,
1999. As of October 31, 1999, the Company's net investment in MXG was $7.6
million.
On September 13, 2000, MXG ceased operations and filed a Petition for Relief
under Chapter 7 of the United States Bankruptcy Code. MXG had been
unsuccessful in attempts to raise additional capital. The Company expects the
ultimate recovery of its investment in MXG, if any, to be di minimus.
6. Common Stock Purchase and Retirement
In February 2000, the Company purchased and retired 104,700 shares of its
common stock at a cost of $1.4 million, in open market transactions, pursuant
to a Board resolution adopted in January 2000. This resolution authorizes the
Company to purchase up to 1,000,000 shares of the Company's common stock, from
time-to-time, based on prevailing market conditions. As of October 31, 2000,
up to 880,500 additional shares are authorized for purchase under the January
2000 buy-back plan.
ITEM 2 Management's Discussion and Analysis of Financial Condition and Results
of Operations
GENERAL
This Securities and Exchange Commission filing is being made pursuant to the
"safe harbor" provisions of the Private Securities Litigation Reform Act of
1995. Certain matters contained in this filing may constitute forward-looking
statements. Any one, or all, of the following factors could cause actual
financial results to differ materially from those financial results mentioned
in the forward-looking statements: the difficulty in predicting and responding
to shifts in fashion trends, changes in the level of competitive pricing and
promotional activity and other industry factors, overall economic conditions
and the resultant impact on consumer spending patterns, unavailability of
suitable retail space for expansion, timing of store openings, seasonal
fluctuations in gross sales, the departure of one or more key senior managers,
import risks, including potential disruptions and changes in duties, tariffs
and quotas and other risks identified in filings with the Securities and
Exchange Commission. The Company disclaims any intent or obligation to update
forward-looking statements even if experience or future changes make it clear
that actual results may differ materially from any projected results expressed
or implied therein.
Thus far this fiscal year, the Company has opened four new Urban Retail
stores and five new Anthropologie stores. Management plans to open one or two
additional stores during the remainder of the fiscal year.
9
<PAGE>
RESULTS OF OPERATIONS
The Company's operating years end on January 31 and include twelve periods
ending on the last day of the calendar month. For example, the fiscal year
2001 ("FY 2001") will end on January 31, 2001. This discussion of results of
operations addresses the third quarter and first nine months of FY 2001 and FY
2000.
The following table sets forth, for the periods indicated, the percentage of
the Company's net sales represented by certain income statement data. The
following discussion should be read in conjunction with the table that
follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
October 31, October 31,
-------------------- ------------------
2000 1999 2000 1999
--------- --------- -------- --------
<S> <C> <C> <C> <C>
Net sales........................ 100.0% 100.0% 100.0% 100.0%
Cost of sales, including certain
buying, distribution and
occupancy costs................. 68.0 62.0 67.6 62.1
--------- --------- -------- --------
Gross profit................... 32.0 38.0 32.4 37.9
Selling, general and
administrative expenses......... 26.6 22.7 26.6 23.9
--------- --------- -------- --------
Income from operations......... 5.4 15.3 5.8 14.0
Other expense, net............... (0.3) (0.5) (0.1) (1.4)
--------- --------- -------- --------
Income before income taxes..... 5.1 14.8 5.7 12.6
Income tax expense............... 2.1 6.7 2.3 6.1
--------- --------- -------- --------
Net income..................... 3.0% 8.1% 3.4% 6.5%
========= ========= ======== ========
</TABLE>
Third Quarter Ended October 31, 2000 Compared to the Third Quarter Ended
October 31, 1999
Net sales increased during the third quarter ended October 31, 2000 to $76.5
million, up 1.5% from $75.4 million for the same quarter last year. The $1.1
million increase versus the prior year's third quarter was primarily the
result of noncomparable and new store sales increases of $9.8 million, which
more than offset the 9% comparable store sales decrease of $5.4 million due to
what management believes was a lackluster customer response to the Company's
fashion product and the Wholesale segment sales decrease of $3.3 million.
The Company's gross profit margin expressed as a percentage of sales
decreased to 32.0% versus 38.0% for the comparable period last year, primarily
due to additional retail clearance markdowns, the deleveraging impact on
occupancy costs caused by the negative comparable store sales trend, and the
increased occupancy costs of noncomparable and new stores.
Selling, general and administrative expenses expressed as a percentage of
sales for the quarter ended October 31, 2000 increased to 26.6% compared to
22.7% for the same quarter last year. For the retail store operations, the
Company's cost control efforts continued to reduce the deleveraging impact of
the comparable store sales decreases. Noncomparable and new stores, however,
with lower average sales volumes, have higher proportionate expenses than
comparable stores and accounted for the majority of the increase.
Anthropologie direct response operations experienced an increase in operating
expense percentages for the quarter primarily due to the deleveraging of
catalog production costs caused by reduced customer response rates on
increased catalog circulation. Additionally, start-up costs were incurred for
the design, production and administration of the new Urban e-commerce web site
(www.urbn.com) which launched in May 2000.
Net income for the quarter ended October 31, 2000 was $2.4 million compared
to $6.1 million for the comparable quarter last year.
10
<PAGE>
As of January 31, 2000, the Company had invested approximately $2.0 million
in Series B Convertible Preferred Stock and $2.4 million in convertible
debentures of MXG Media, Inc. ("MXG"). MXG incurred losses since its
inception, and, in accordance with the equity method of accounting, the
Company recorded charges to earnings of $4.4 million for its portion of
operating losses related to the minority interest in MXG during the fiscal
year ended January 31, 2000 (including $0.9 million for the quarter and $4.4
million for the nine months ended October 31, 1999). These charges in FY 2000
fully reserved for the Company's investment and the Company made no additional
investments in FY 2001 in MXG.
During the quarter ended October 31, 1999, the Company advanced $2.6 million
of bridge financing to MXG in the form of promissory notes. These notes,
together with previous advances, were repaid with interest on November 1,
1999. As of October 31, 1999, the Company's net investment in MXG was $7.6
million.
On September 13, 2000, MXG ceased operations and filed a Petition for Relief
under Chapter 7 of the United States Bankruptcy Code. MXG had been
unsuccessful in attempts to raise additional capital. The Company expects the
ultimate recovery of its investment in MXG, if any, to be di minimus.
Nine Months Ended October 31, 2000 Compared to the Nine Months Ended October
31, 1999
Net sales increased during the nine months ended October 31, 2000 to $208.1
million, up 3.3% from $201.4 million for the same period last year. The $6.7
million increase over the prior year's nine months was the result of new and
noncomparable stores' sales increases of $20.9 million and Anthropologie
catalog and web site sales and Urban web site increases of $2.7 million. These
increases were offset by a 9% comparable store sales decrease due to what
management believes was a lackluster customer response to the Company's
product, which accounted for a $14.2 million reduction in sales, along with a
14% decrease in Wholesale segment sales which accounted for a $2.7 million
reduction in sales.
The Company's gross profit margin for the nine months ended October 31,
2000, expressed as a percentage of sales, decreased to 32.4% from 37.9% for
the comparable period last year. This decrease was due primarily to additional
retail clearance markdowns, the deleveraging impact on occupancy costs caused
by the negative comparable store sales trend, and the increased occupancy
costs of noncomparable and new stores.
Selling, general and administrative expenses for the nine months ended
October 31, 2000, expressed as a percentage of sales, increased to 26.6%
versus 23.9% for the comparable period last year. For the retail store
operations, the Company's cost control efforts continued to reduce the
deleveraging impact of the comparable store sales decreases. Noncomparable and
new stores, however, with lower average sales volumes, have higher
proportionate expenses than comparable stores and accounted for the majority
of the increase. Anthropologie direct response operations experienced an
increase in operating expense percentages for the quarter primarily due to the
deleveraging of catalog production costs caused by reduced customer response
rates on increased catalog circulation. This effect was partially offset by
the leveraging of fulfillment costs as a result of the elimination of third-
party service providers. Additionally, start-up costs were incurred for the
design, production and administration of the new Urban e-commerce web site
(www.urbn.com) which launched in May 2000.
Net income for the nine months ended October 31, 2000 was $7.1 million
versus $13.1 million for the comparable period last year.
LIQUIDITY AND CAPITAL RESOURCES
Cash, cash equivalents and marketable securities were $8.8 million at
October 31, 2000, as compared to $32.6 million at January 31, 2000 and $29.5
million at October 31, 1999. The Company's net working capital was $35.5
million at October 31, 2000, as compared to $38.0 million at January 31, 2000
and $38.9 million at October 31, 1999. The decrease in cash, cash equivalents
and marketable securities at October 31, 2000 from year end principally
reflects the funding of FY 2001's capital expenditures (primarily for new
store construction),
11
<PAGE>
the increase in inventory for new stores and the seasonal building of
inventory in existing stores. Cash requirements for these activities, combined
with $1.4 million expended to purchase 104,700 shares of the Company's common
stock, more than offset other cash generated from operations.
Total inventories at October 31, 2000 increased by 38.3% versus the
comparable period end last year, principally attributable to new store
requirements and a 13% increase in comparable store inventories. Comparable
store inventories at October 31, 1999 were below planned levels because of the
strong comparable stores sales trend last year. This year's negative
comparable store sales trend accounts for the remainder of the increase.
The Company expects that capital expenditures for the current year will be
approximately $34.0 million. The Company expects that existing cash and
investments at October 31, 2000, as well as cash from future operations and
available credit under the Company's line of credit facilities will be
sufficient to meet the Company's cash needs through January 31, 2002.
Accrued expenses and other current liabilities decreased to $10.6 million as
of October 31, 2000 from $14.0 million at October 31, 1999. The decrease in
the components of accrued expenses and other current liabilities (which
includes accrued incentive and other compensation, accrued benefits and
accrued income taxes) is primarily attributable to a reduction in accruals
related to construction-in-progress.
The Company has lines of credit, aggregating $26.2 million, available to
facilitate letter of credit transactions and cash advances. As of and during
the nine months ended October 31, 2000, there were no borrowings. Outstanding
letters of credit totaled $8.5 million, $6.6 million and $7.1 million at
October 31, 2000, January 31, 2000 and October 31, 1999, respectively. The
fair value of these letters of credit is estimated to be the same as the
contract values.
OTHER MATTERS
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS No. 133"). The standard is effective for fiscal
years beginning after June 2000, and, accordingly, the Company will adopt the
standard in Fiscal 2002. The Company currently enters into short-term foreign
currency forward exchange contracts to manage exposures related to its
Canadian dollar denominated investments and anticipated cash flow. The amounts
of the contracts and related gains and losses have not been material. The
adoption of SFAS No. 133 is not expected to have a significant effect on the
financial position or results of operations of the Company.
Seasonality and Quarterly Results
While Urban Outfitters has been profitable in each of its last 43 operating
quarters, its operating results are subject to seasonal fluctuations. While
the Company's negative comparable store sales trend has continued since
October 31, 2000, the Company's results of operations in any one fiscal
quarter are not necessarily indicative of the results of operations that can
be expected for any other fiscal quarter or for the full fiscal year. The
Company's highest sales levels have historically occurred during the five-
month period from August 1 to December 31 of each year (the "Back-to-School"
and Holiday periods). Sales generated during these periods have traditionally
had a significant impact on the Company's results of operations.
The Company's results of operations may also fluctuate from quarter to
quarter as a result of the amount and timing of expenses incurred in
connection with, and sales contributed by, new stores, store expansions and
the integration of new stores into the operations of the Company or by the
size and timing of mailings and web site traffic for the Company's direct
response operations. Fluctuations in the bookings and shipments of Wholesale
merchandise between quarters can also have positive or negative effects on
earnings during the quarters.
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ITEM 3 Quantitative and Qualitative Disclosure About Market Risk
The Company is exposed to the following types of market risks--fluctuations
in the purchase price of merchandise, as well as other goods and services; the
value of foreign currencies in relation to the U.S. dollar; and changes in
interest rates. Due to the Company's inventory turn and its historical ability
to pass through the impact of any generalized changes in its cost of goods to
its customers through pricing adjustments, commodity and other product risks
are not expected to be material. The Company purchases substantially all its
merchandise in U.S. dollars, including a portion of the goods for its stores
located in Canada and the United Kingdom. As explained in the section above on
"Recent Accounting Pronouncements," market risks are further limited by the
Company's purchase of foreign currency forward exchange contracts.
Since the Company has not been a borrower thus far this year, its exposure
to interest rate fluctuations has been limited to the impact on its marketable
securities portfolio. This exposure is minimized by the limited investment
maturities and "put" options available to the Company. The impact of a
hypothetical two percent increase or decrease in prevailing interest rates
would not materially affect the Company's consolidated financial position or
results of operations.
PART II
OTHER INFORMATION
ITEM 6 Exhibits and Reports on Form 8-K
(a) Exhibits: None
(b) Reports on Form 8-K: None
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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)
/s/ Richard A. Hayne
By: _________________________________
Richard A. Hayne
Chairman of the Board of Directors
/s/ Stephen A. Feldman
By: _________________________________
Stephen A. Feldman
Chief Financial Officer
Dated: December 6, 2000
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