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, 2000
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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
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Urban Outfitters, Inc.
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(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
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(Address of principal executive office) (Zip Code)
(215) 564-2313
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(Registrant's telephone number including area code)
N/A
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(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 September 13, 2000
------------------- ----------------------------
Common Shares, par value, $.0001 per share 17,253,486
<PAGE>
INDEX
<TABLE>
<CAPTION>
PAGE
----
PART I Financial Information
<S> <C> <C>
ITEM 1 Financial Statements
Condensed Consolidated Balance Sheets at July 31, 2000, 3
January 31, 2000, and July 31, 1999 (Unaudited)
Condensed Consolidated Statements of Income for the three 4
and six months ended July 31, 2000 and 1999 (Unaudited)
Condensed Consolidated Statements of Shareholders' 5
Equity (Unaudited)
Condensed Consolidated Statements of Cash Flows for the 6
six months ended July 31, 2000 and 1999 (Unaudited)
Notes to Condensed Consolidated Financial Statements 7 - 10
ITEM 2 Management's Discussion and Analysis of Financial 11 - 16
Condition and Results of Operations
PART II Other Information
ITEM 6 Exhibits and Reports on Form 8-K 17
SIGNATURES 18
</TABLE>
2
<PAGE>
URBAN OUTFITTERS, INC.
Condensed Consolidated Balance Sheets
(in thousands, except share and per share data)
(Unaudited)
<TABLE>
<CAPTION>
July 31, 2000 January 31, 2000 July 31, 1999
------------- ---------------- -------------
Assets
Current assets:
<S> <C> <C> <C>
Cash and cash equivalents $ 6,846 $ 12,727 $ 8,879
Marketable securities 8,319 11,225 10,188
Accounts receivable, net of allowance for doubtful accounts of $509,
$518 and $594, respectively 5,922 4,825 6,176
Inventories 41,548 26,868 31,083
Prepaid expenses and other current assets 7,841 10,433 6,740
--------- --------- ---------
Total current assets 70,476 66,078 63,066
Property and equipment, net 84,105 72,819 51,593
Marketable securities -- 8,646 17,294
Other assets 5,946 5,958 9,143
--------- --------- ---------
$ 160,527 $ 153,501 $ 141,096
========= ========= =========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 22,421 $ 16,760 $ 17,285
Accrued expenses and other current liabilities 9,280 11,312 8,715
--------- --------- ---------
Total current liabilities 31,701 28,072 26,000
Deferred rent 5,040 4,513 4,245
--------- --------- ---------
Total liabilities 36,741 32,585 30,245
--------- --------- ---------
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 17,537,041 issued and outstanding,
respectively 2 2 2
Additional paid-in capital 16,268 17,680 19,422
Retained earnings 108,341 103,614 91,981
Accumulated other comprehensive loss (825) (380) (554)
--------- --------- ---------
Total shareholders' equity 123,786 120,916 110,851
--------- --------- ---------
$ 160,527 $ 153,501 $ 141,096
========= ========= =========
</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 Six Months Ended
------------------------------- ------------------------------
July 31, July 31,
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales $ 66,301 $ 67,976 $ 131,592 $ 125,967
Cost of sales, including certain buying,
distribution and occupancy costs 46,522 41,680 88,599 78,243
------------ ------------ ------------ ------------
Gross profit 19,779 26,296 42,993 47,724
Selling, general and administrative expenses 16,769 15,664 34,971 31,080
------------ ------------ ------------ ------------
Income from operations 3,010 10,632 8,022 16,644
Other income (expense), net (41) (1,905) 59 (2,469)
------------ ------------ ------------ ------------
Income before income taxes 2,969 8,727 8,081 14,175
Income tax expense 1,232 4,630 3,354 7,128
------------ ------------ ------------ ------------
Net income $ 1,737 $ 4,097 $ 4,727 $ 7,047
============ ============ ============ ============
Net income per common share:
Basic $ 0.10 $ 0.23 $ 0.27 $ 0.40
============ ============ ============ ============
Diluted $ 0.10 $ 0.23 $ 0.27 $ 0.40
============ ============ ============ ============
Weighted average common shares outstanding:
outstanding:
Basic 17,253,486 17,463,954 17,260,805 17,477,153
============ ============ ============ ============
Diluted 17,254,799 17,854,249 17,269,745 17,780,847
============ ============ ============ ============
</TABLE>
See accompanying notes
4
<PAGE>
URBAN OUTFITTERS, INC.
Condensed Consolidated Statements of Shareholders' Equity
(in thousands, except share data)
(Unaudited)
<TABLE>
<CAPTION>
Comprehensive Common Shares
Income ------------------------------------------------------
Year-To- Number Additional
Quarter Date of Par Paid-in Retained
Shares Value Capital Earnings
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balances at February 1, 2000 17,358,186 $ 2 $ 17,680 $ 103,614
Net income $ 1,737 $ 4,727 - - - 4,727
------------ ------------
Comprehensive loss:
Foreign currency translation
adjustments, net (221) (356)
Unrealized marketable
securities losses, net (89) (89)
------------ ------------
(310) (445) - - - -
------------ ------------
Comprehensive income $ 1,427 $ 4,282
============ ============
Purchases and retirements of
common shares (104,700) - (1,412) -
---------- ------- ------------ ------------
Balances at July 31, 2000 17,253,486 $ 2 $ 16,268 $ 108,341
========== ======= ============ ============
-------------------------------------------------------------------------------------------------------------------------
Balances at February 1, 1999 17,639,754 $ 2 $ 20,825 $ 84,934
Net income $ 4,097 $ 7,047 - - - 7,047
Foreign currency translation
adjustments, net (273) (87) - - - -
------------ ------------
Comprehensive income $ 3,824 $ 6,960
============ ============
Exercises of stock options 268,832 - 3,591 -
Purchases and retirements of
common shares (371,545) - (4,994) -
---------- ------- ------------ ------------
Balances at July 31, 1999 17,537,041 $ 2 $ 19,422 $ 91,981
========== ======= ============ ============
</TABLE>
Accumulated
Other
Comprehensive
Loss Total
----------------------------------------------------------------------
Balances at February 1, 2000 $ (380) $ 120,916
Net income - 4,727
Comprehensive loss:
Foreign currency translation
adjustments, net
Unrealized marketable
securities losses, net
(445) (445)
Comprehensive income
Purchases and retirements of
common shares - (1,412)
---------- ------------
Balances at July 31, 2000 $ (825) $ 123,786
========== ============
----------------------------------------------------------------------
Balances at February 1, 1999 $ (467) $ 105,294
Net income - 7,047
Foreign currency translation
adjustments, net (87) (87)
Comprehensive income
Exercises of stock options - 3,591
Purchases and retirements of
common shares - (4,994)
---------- ------------
Balances at July 31, 1999 $ (554) $ 110,851
========== =============
See accompanying notes
5
<PAGE>
URBAN OUTFITTERS, INC.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
Cash flows from operating activities:
Net income $ 4,727 $ 7,047
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 5,347 3,918
Provision for losses of MXG Media, Inc. -- 3,500
Changes in assets and liabilities:
Increase in receivables (1,097) (1,352)
Increase in inventories (14,680) (9,202)
Decrease (increase) in prepaid expenses and other assets 2,604 (631)
Increase in payables, accrued expenses and other liabilities 4,156 2,176
-------- --------
Net cash provided by operating activities 1,057 5,456
-------- --------
Cash flows from investing activities:
Capital expenditures (16,481) (12,304)
Purchases of marketable securities (500) (11,572)
Sales and maturities of marketable securities 11,811 9,199
Advances to MXG Media, Inc. -- (5,575)
-------- --------
Net cash used in investing activities (5,170) (20,252)
-------- --------
Cash flows from financing activities:
Exercise of stock options -- 3,591
Purchases and retirement of common stock (1,412) (4,994)
-------- --------
Net cash used in financing activities (1,412) (1,403)
-------- --------
Effect of exchange rate changes on cash and cash equivalents (356) (87)
-------- --------
Decrease in cash and cash equivalents (5,881) (16,286)
Cash and cash equivalents at beginning of period 12,727 25,165
-------- --------
Cash and cash equivalents at end of period $ 6,846 $ 8,879
======== ========
</TABLE>
See accompanying notes
6
<PAGE>
URBAN OUTFITTERS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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. 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>
July 31, 2000 January 31, 2000 July 31, 1999
------------- ---------------- -------------
(in thousands)
<S> <C> <C> <C>
Current portion
Held-to-maturity........................... $ - $ 5,938 $ 7,565
Available-for-sale......................... 8,319 5,287 2,623
--------- -------- --------
8,319 11,225 10,188
Noncurrent portion
Held-to-maturity........................... - 8,646 17,294
--------- -------- --------
Total marketable securities................... $ 8,319 $ 19,871 $ 27,482
========= ======== ========
</TABLE>
The difference between the fair market value and amortized cost of
marketable securities is immaterial.
7
<PAGE>
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 1,031,000 and 237,500 shares were outstanding at July
31, 2000 and 1999, respectively, but were not included in the computation of EPS
because the options' exercise prices were greater than the average market price
of the common shares.
4. Segment Reporting
Urban Outfitters is a national retailer of lifestyle-oriented general
merchandise through 63 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 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 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.
8
<PAGE>
4. Segment Reporting (continued)
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 Six Months Ended
July 31, July 31,
------------------------- -------------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Operating revenues
Retail operations.............................. $ 61,254 $ 62,728 $120,201 $115,171
Wholesale operations........................... 6,264 6,172 13,754 12,358
Intersegment elimination....................... (1,217) (924) (2,363) (1,562)
-------- -------- -------- --------
Total net sales................................ $ 66,301 $ 67,976 $131,592 $125,967
======== ======== ======== ========
Income from operations
Retail operations.............................. $ 2,507 $ 10,109 $ 6,695 $ 16,766
Wholesale operations........................... 1,321 1,366 2,958 1,865
Intersegment elimination....................... (258) (190) (520) (311)
-------- -------- -------- --------
Total segment operating income................. 3,570 11,285 9,133 18,320
General corporate expenses..................... (560) (653) (1,111) (1,676)
-------- -------- -------- --------
Total income from operations................... $ 3,010 $ 10,632 $ 8,022 $ 16,644
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
July 31, 2000 January 31, 2000 July 31, 1999
------------- ---------------- -------------
<S> <C> <C> <C>
Net fixed assets
Retail operations......................... $ 83,067 $ 71,805 $ 50,517
Wholesale operations...................... 1,037 1,013 1,075
Corporate................................. 1 1 1
-------- -------- --------
Total net fixed assets.................... $ 84,105 $ 72,819 $ 51,593
======== ======== ========
Inventory
Retail operations......................... $ 38,983 $ 25,217 $ 28,724
Wholesale operations...................... 2,565 1,651 2,359
-------- -------- --------
Total inventory........................... $ 41,548 $ 26,868 $ 31,083
======== ======== ========
</TABLE>
9
<PAGE>
5. Investment in MXG Media, Inc.
As of July 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 has 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 $2.5 million for the quarter and $3.5 million for the six months
ended July 31, 1999). These charges fully reserved for the Company's investment.
During the quarter ended July 31, 1999, the Company advanced $3.4 million
of bridge financing to MXG in the form of promissory notes. This amount,
together with previous and subsequent advances, was repaid with interest on
November 1, 1999. As of July 31, 1999, the Company's net investment in MXG was
$5.8 million.
On September 13, 2000, MXG 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 July 31, 2000, up to
880,500 additional shares are authorized for purchase under the January 2000
buy-back plan.
10
<PAGE>
PART I
FINANCIAL INFORMATION (continued)
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: industry competition factors, unavailability of
suitable retail space for expansion, timing of store openings, difficulty in
predicting and responding to fashion trend shifts, seasonal fluctuations in
gross sales, the departure of one or more key senior managers and other risks
identified in filings with the Securities and Exchange Commission.
Thus far this fiscal year, the Company has opened three new Urban Retail
stores and three new Anthropologie stores. Management plans to open
approximately six to eight additional new stores during the remainder of the
fiscal year.
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 second quarter and first six months of FY 2001 and FY
2000.
11
<PAGE>
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 Six Months Ended
July 31, July 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 70.2 61.3 67.3 62.1
----- ----- ----- -----
Gross profit 29.8 38.7 32.7 37.9
----- ----- ----- -----
Selling, general and administrative expenses 25.3 23.1 26.6 24.7
----- ----- ----- -----
Income from operations 4.5 15.6 6.1 13.2
Other income (expense), net (.1) (2.8) .1 (1.9)
----- ----- ----- -----
Income before income taxes 4.4 12.8 6.2 11.3
Income tax expense 1.8 6.8 2.6 5.7
----- ----- ----- -----
Net income 2.6% 6.0% 3.6% 5.6%
===== ===== ===== =====
</TABLE>
SECOND QUARTER ENDED JULY 31, 2000 COMPARED
TO THE SECOND QUARTER ENDED JULY 31, 1999
Net sales decreased during the second quarter ended July 31, 2000 to $66.3
million, down 2.5% from $68.0 million for the same quarter last year. The $1.7
million decrease versus the prior year's second quarter was primarily the result
of a 14% comparable store sales decrease of $8.2 million combined with a
Wholesale segment sales decrease of $0.2 million, which more than offset sales
increases at noncomparable and new stores of $5.5 million and increases at the
new Urban web site and the Anthropologie catalog and web site of $1.2 million.
The Company's gross profit margin expressed as a percentage of sales
decreased to 29.8% versus 38.7% for the comparable period last year, primarily
due to additional retail clearance markdowns and the deleveraging impact on
occupancy costs caused by the negative comparable store sales trend, as well as
the increased occupancy costs of noncomparable and new stores.
Selling, general and administrative expenses expressed as a percentage of
sales for the quarter ended July 31, 2000 increased to 25.3% compared to 23.1%
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 a decrease in operating expense percentages for
the quarter due to the leveraging of production and fulfillment costs as a
result of the elimination of third-party service providers and increased demand
and circulation. Additionally, start-up costs were incurred for the design,
12
<PAGE>
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 July 31, 2000 was $1.7 million compared to
$4.1 for the comparable quarter last year.
As of July 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 has 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 $2.5 million for the quarter and $3.5 million for the six months
ended July 31, 1999). These charges fully reserved for the Company's investment.
During the quarter ended July 31, 1999, the Company advanced $3.4 million
of bridge financing to MXG in the form of promissory notes. This amount,
together with previous and subsequent advances, was repaid with interest on
November 1, 1999. As of July 31, 1999, the Company's net investment in MXG was
$5.8 million.
On September 13, 2000, MXG 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.
SIX MONTHS ENDED JULY 31, 2000 COMPARED
TO THE SIX MONTHS ENDED JULY 31, 1999
Net sales increased during the six months ended July 31, 2000 to $131.6
million, up 4.4% from $126.0 million for the same period last year. The $5.6
million increase over the prior year's first six months was the result of new
and noncomparable stores' sales increases of $11.7 million; Urban web site and
Anthropologie catalog and web site sales increases of $2.6 million; and
Wholesale segment sales increases of $0.6 million. These increases were offset
by a 9% comparable store sales decrease which accounted for a $9.3 million
reduction in sales.
The Company's gross profit margin for the six months ended July 31, 2000,
expressed as a percentage of sales, decreased to 32.7% from 37.9% for the
comparable period last year. This decrease was due primarily to additional
retail clearance markdowns to move seasonal merchandise and the deleveraging of
occupancy costs because of the negative comparable store sales trend, as well as
the increased occupancy costs of noncomparable and new stores.
13
<PAGE>
Selling, general and administrative expenses for the six months ended July
31, 2000, expressed as a percentage of sales, increased to 26.6% versus 24.7%
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. As mentioned
above, Anthropologie direct response operations exhibited an increase in demand
and circulation while start-up costs were incurred for the design, production
and administration of the new Urban e-commerce web site (www.urbn.com).
Net income for the six months ended July 31, 2000 was $4.7 million versus
$7.0 million for the comparable period last year.
LIQUIDITY AND CAPITAL RESOURCES
Cash, cash equivalents and marketable securities were $15.2 million at July
31, 2000, as compared to $32.6 million at January 31, 2000 and $36.4 million at
July 31, 1999. The Company's net working capital was $38.8 million at July 31,
2000, as compared to $38.0 million at January 31, 2000 and $37.1 million at July
31, 1999. The decrease in cash, cash equivalents and marketable securities at
July 31, 2000 from year end principally reflects the funding of FY 2001's
capital expenditures (primarily for new store construction), 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 cash generated from net income.
Total inventories at July 31, 2000 increased by 33.7% versus the comparable
period end last year, principally attributable to new store requirements and a
19% increase in comparable store inventories. Comparable store inventories at
July 31, 1999 were below planned levels because of the strong comparable stores
sales trend last year. This year, earlier receipt of certain merchandise
categories and this quarter's negative comparable store sales trend account for
the remainder of the increase. Direct response inventories are higher due to
expanded catalog circulation and demand. The Wholesale segment's inventories
increased 9%, in line with fall merchandise sales trends.
The Company expects that capital expenditures for the current year will be
approximately $35.0 million. The Company expects that existing cash and
investments at July 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, 2001.
14
<PAGE>
Accrued expenses and other current liabilities increased to $9.3 million as
of July 31, 2000 from $8.7 million at July 31, 1999. The increase 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 additional stores.
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
six months ended July 31, 2000, there were no borrowings. Outstanding letters of
credit totaled $11.6 million, $6.6 million and $8.0 million at July 31, 2000,
January 31, 2000 and July 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") which was adopted in Fiscal 2001. 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.
Market Risks
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," the market risk is
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.
15
<PAGE>
Seasonality and Quarterly Results
While Urban Outfitters has been profitable in each of its last 42 operating
quarters, its operating results are subject to seasonal fluctuations. While the
Company's negative comparable store sales trend has continued since July 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.
16
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PART II
OTHER INFORMATION
ITEM 6 Exhibits and Reports on Form 8-K
(a) Exhibits: None
(b) Reports on Form 8-K: None
17
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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)
By: /s/ Richard A. Hayne
--------------------------
Richard A. Hayne
Chairman of the Board of
Directors
By: /s/ Stephen A. Feldman
--------------------------
Stephen A. Feldman
Chief Financial Officer
Dated: September 13, 2000
18
