FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report Pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For Quarterly Period Ended: April 28, 1996
Commission File Number: 0-24442
GARDEN RIDGE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 13-3671679
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
19411 Atrium Place, Suite 170, Houston, Texas 77084
(Address of principal executive offices) (Zip Code)
(713) 579-7901
(Registrant's telephone number, including area code)
NONE
(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 [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
CLASS OUTSTANDING AT JUNE 10, 1996
Common Stock, $.01 Par Value 8,713,533 shares
GARDEN RIDGE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
January 28, April 28,
ASSETS 1996 1996
-------- --------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents ............................ $ 7,544 $ 126
Accounts receivable .................................. 906 627
Notes receivable ..................................... 2,582 2,568
Inventories .......................................... 27,850 36,319
Deferred income taxes ................................ 575 575
Prepaid expenses ..................................... 1,114 2,151
-------- --------
Total current assets ........................ 40,571 42,366
PROPERTY AND EQUIPMENT, at cost:
Land held for sale/leaseback ......................... 478 478
Leasehold improvements ............................... 11,966 13,185
Furniture and fixtures ............................... 6,509 8,184
Equipment ............................................ 9,460 12,873
-------- --------
Total property and equipment ......................... 28,413 34,720
Less - Accumulated depreciation and amortization .............. (6,823) (7,696)
-------- --------
Net property and equipment ........................... 21,590 27,024
OTHER ASSETS:
Intangibles and deferred charges, net ................ 10,891 10,753
Deferred income taxes ................................ 136 136
Other ................................................ 138 141
======== ========
Total assets ................................ $ 73,326 $ 80,420
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable ..................................... $ 10,563 $ 18,755
Accrued liabilities .................................. 3,555 3,708
Federal income taxes payable ......................... 3,377 700
-------- --------
Total current liabilities .......................... 17,495 23,163
LONG-TERM DEBT AND OTHER, net of current portion .............. 300 1,100
COMMITMENTS AND CONTINGENCIES
COMMON STOCKHOLDERS' EQUITY:
Common stock, 7,545,051 and 7,709,433 shares outstanding . 79 79
Paid-in capital .......................................... 42,489 42,493
Retained earnings ........................................ 13,043 13,628
Less - Treasury stock, 357,557 and 193,175 shares, at cost (80) (43)
-------- --------
Total common stockholders' equity ................. 55,531 56,157
======== ========
Total liabilities and common stockholders' equity . $ 73,326 $ 80,420
======== ========
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
2
GARDEN RIDGE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Thirteen Weeks Ended
--------------------------
April 30, April 28,
1995 1996
----------- -----------
<S> <C> <C>
SALES .................................................... $ 26,597 $ 39,220
COST OF SALES ............................................ 16,896 25,097
----------- -----------
Gross Profit ..................................... 9,701 14,123
OPERATING EXPENSES:
Store operating ...................................... 7,420 10,941
General and administrative ........................... 1,179 1,473
Amortization of intangibles and deferred charges ..... 153 153
Preopening costs ..................................... 338 691
----------- -----------
Total operating expenses .......................... 9,090 13,258
----------- -----------
Income from operations ............................ 611 865
INTEREST INCOME (EXPENSE) ................................ (410) 95
----------- -----------
Income before income taxes ........................ 201 960
INCOME TAXES ............................................. 78 374
----------- -----------
Net income ........................................ 123 586
PREFERRED STOCK DIVIDENDS ................................ (148) --
----------- -----------
Net income (loss) available to common stockholders $ (25) $ 586
=========== ===========
INCOME PER COMMON AND COMMON
EQUIVALENT SHARE:
Net .............................................. $ .02 $ .07
Preferred stock dividends ........................ (.02) --
----------- -----------
Net income (loss) available to common stockholders $ (.00) $ .07
----------- -----------
WEIGHTED AVERAGE NUMBER OF COMMON AND
COMMON EQUIVALENT SHARES OUTSTANDING ................ 5,054,538 8,202,428
=========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
3
GARDEN RIDGE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Thirteen Weeks Ended
------------------
April 30, April 28,
1995 1996
------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ................................................ $ 123 $ 586
------- -------
Adjustments to reconcile net income to net cash provided by
(used in) operating activities --
Depreciation and amortization of property and equipment 498 872
Amortization of intangibles and deferred charges ....... 153 153
(Increase) decrease in assets -
Accounts receivable ................................. (203) 279
Notes receivable .................................... 16 14
Inventories .................................. (4,448) (8,469)
Prepaid expenses .................................... 297 (1,037)
Intangibles and deferred charges .................... (11) (15)
Deposits and other .................................. -- (3)
Increase (decrease) in liabilities -
Accounts payable .................................... 4,991 8,192
Accrued liabilities ................................. 189 153
Federal income taxes payable ........................ (1,522) (2,677)
------- -------
Total adjustments ................................... (40) (2,538)
------- -------
Net cash provided by (used in) operating activities . 83 (1,952)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ...................................... (3,601) (6,307)
------- -------
Net cash used in investing activities ............... (3,601) (6,307)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under revolving credit agreement ............... 3,650 800
Purchase of treasury stock ................................ -- 37
Proceeds from exercise of stock options and warrants ...... -- 4
Payments on term loan ..................................... (48) --
------- -------
Net cash provided by (used in) financing activities . 3,602 841
------- -------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS .................................................... 84 (7,418)
------- -------
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD ......................................................... 117 7,544
======= =======
CASH AND CASH EQUIVALENTS AT END OF PERIOD ..................... $ 201 $ 126
======= =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for --
Interest ..................................... $ 537 $ 27
Income taxes ................................. 1,600 3,010
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
4
GARDEN RIDGE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION:
The accompanying consolidated financial statements have been prepared
by the Company without audit pursuant to the rules and regulations of the
Securities and Exchange Commission. Pursuant to such regulations, certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted. In the opinion of the Company, all adjustments necessary
for the fair presentation of the unaudited results for the periods have been
included. Because of the seasonal nature of the Company's business, results for
such interim periods are not necessarily indicative of the results for the full
year. These interim consolidated financial statements should be read in
conjunction with the Company's Annual Report on Form 10-K for fiscal year ended
January 28, 1996.
Earnings per common share and common equivalent share were computed
using the treasury stock method and by dividing net income available to common
stockholders by the weighted average number of shares of common stock of the
Company and common stock equivalents, which consist of warrants and options,
outstanding during the periods.
In connection with the Company's Initial Public Offering of its common
stock on May 16, 1995 (the "Initial Offering"), the Company's Board of Directors
approved a 4.5 to 1 stock split which has been reflected in the Company's
accompanying consolidated financial statements and notes thereto.
2. PUBLIC OFFERINGS:
The Company completed its Initial Offering, pursuant to which the
Company sold 2,900,000 shares of Common Stock at the price of $15.00 per share
(including 390,000 shares sold pursuant to the exercise of the underwriters'
over-allotment option). Net proceeds of the Initial Offering, after deducting
the underwriting discount and expenses, were approximately $39.5 million.
Proceeds of the Initial Offering were used to (i) redeem all of the Company's
preferred stock including dividends, (ii) repay the Company's fixed rate and
floating rate subordinated notes, and (iii) repay the Company's lines of credit.
The remaining proceeds of approximately $11 million from the Initial Offering
were retained to fund expansion and for general working capital requirements.
The Company completed a secondary public offering of its common stock
on April 30, 1996 (the "Secondary Offering"), pursuant to which the Company sold
1,000,000 shares of Common Stock at the price of $51.75 per share (including
210,000 shares sold pursuant to the exercise of the underwriters' over-allotment
option). Net proceeds of the Secondary Offering, after deducting the
underwriting discount and expenses were approximately $48.7 million. Proceeds
were retained to fund expansion and for general working capital purposes.
5
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The Company's fiscal year ends on the last Sunday in January in each
year resulting in either a 52 or 53 week year. References to fiscal years by
date refer to the fiscal year ending in that calendar year, for example, "fiscal
1997" refers to the fiscal year ending January 26, 1997.
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated income
statement data expressed as a percentage of sales.
Thirteen Weeks Ended
--------------------
April 30, April 28,
1995 1996
------- -------
Sales .............................................. 100.0% 100.0%
Cost of sales ...................................... 63.5 64.0
------- -------
Gross profit .................................. 36.5 36.0
Operating expenses:
Store operating ............................... 27.9 27.9
General and administrative .................... 4.4 3.7
Amortization of intangibles and deferred
charges ............................................ 0.6 0.4
Preopening costs .............................. 1.3 1.8
------- -------
Income from operations ................... 2.3 2.2
Interest income (expense) .......................... (1.5) 0.2
Income taxes ....................................... (0.3) (0.9)
======= =======
Net income .......................... 0.5% 1.5%
======= =======
FIRST QUARTER ENDED APRIL 28, 1996 COMPARED TO FIRST QUARTER ENDED APRIL 30,
1995
Sales in the first quarter of fiscal 1997 increased $12.6 million, or
47.0%, to $39.2 million from $26.6 million in the first quarter of fiscal 1996.
The increase was primarily attributable to the opening of the Pineville
(Charlotte) and Jacksonville stores in March 1996, sales from three stores
opened in the third quarter of fiscal 1996 and the results of a full quarter's
sales volume from the Louisville store which opened in March 1995. Comparable
store sales were even with the same period last year. Excluding the first week
of February when many of the Company's stores were closed due to ice storms and
inclement weather, sales at comparable stores increased 2%.
Gross profit as a percentage of sales decreased to 36.0% in the first
quarter of fiscal 1997 as compared to 36.5% for the comparable period in fiscal
1996. This decrease in gross profit as a percentage of sales was due to higher
occupancy costs as a percentage of sales.
6
Store operating expenses increased $3.5 million, or 47.3%, in the first
quarter of fiscal 1997 primarily as a result of the opening of new stores.
General and administrative expenses increased $294,000, or 24.9%, to
$1.5 million in the third quarter of fiscal 1997 as compared to $1.2 million in
the first quarter of fiscal 1996. This increase generally related to corporate
personnel additions. General and administrative expenses as a percentage of
sales decreased in the first quarter of fiscal 1997 to 3.7% from 4.4% in the
comparable period of 1996, reflecting the higher level of sales in fiscal 1997.
Preopening costs of $691,000 in the first quarter of fiscal 1997 relate
to the opening of the Pineville (Charlotte) and Jacksonville stores in March
1996. The Company's policy is to expense preopening costs in the month a store
commences operations.
Interest income was $95,000, or 0.2% of sales in the first quarter of
fiscal 1997, as compared to interest expense of $410,000, or 1.5% of sales in
the comparable period of 1996. This change primarily resulted from the repayment
of the Company's long-term debt with proceeds from the Initial Offering and the
investment of excess cash by the Company.
Income taxes were $374,000, representing an effective tax rate of 39.0%
for the first quarter of fiscal 1997, as compared to $78,000, or 38.8% in the
comparable period of fiscal 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company completed a secondary public offering of its common stock
on April 30, 1996 (the "Secondary Offering"), pursuant to which the Company sold
1,000,000 shares of Common Stock at the price of $51.75 per share (including
210,000 shares sold pursuant to the exercise of the underwriters' over-allotment
option). Net proceeds of the Secondary Offering, after deducting the
underwriting discount and expenses were approximately $48.7 million. Proceeds
were retained to fund expansion and for general working capital purposes.
The Company's primary sources of working capital are cash flow from
operations and borrowings under its lines of credit. The Company had working
capital of $19.2 million at April 28, 1996. The Company currently has a $10
million line of credit and $5 million real estate line of credit which, after
giving effect to the proceeds of the Secondary Offering, have no outstanding
borrowings under them. Management believes the Company has sufficient working
capital, cash flow from operating activities and available unused credit
capacity to sustain current growth plans.
7
GARDEN RIDGE CORPORATION
PART II - OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27. Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the period
covered by this report.
8
GARDEN RIDGE CORPORATION
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed, on its behalf by the
undersigned thereunto duly authorized.
Date: June 11, 1996 GARDEN RIDGE CORPORATION
(Registrant)
By: /s/ Jane L. Arbuthnot
Jane. L. Arbuthnot
Chief Financial Officer
9
EXHIBIT INDEX
Sequential
EXHIBIT NUMBER DESCRIPTION PAGE NUMBER
27 Financial Data Schedule 11
10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM [Identify specific financial statements] AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1996
<PERIOD-END> APR-28-1996
<CASH> 126
<SECURITIES> 0
<RECEIVABLES> 627
<ALLOWANCES> 0
<INVENTORY> 36319
<CURRENT-ASSETS> 42366
<PP&E> 34720
<DEPRECIATION> (7696)
<TOTAL-ASSETS> 80420
<CURRENT-LIABILITIES> 23163
<BONDS> 1100
0
0
<COMMON> 79
<OTHER-SE> 56078
<TOTAL-LIABILITY-AND-EQUITY> 80420
<SALES> 39220
<TOTAL-REVENUES> 39220
<CGS> 25097
<TOTAL-COSTS> 13258
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (95)
<INCOME-PRETAX> 960
<INCOME-TAX> 374
<INCOME-CONTINUING> 586
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 586
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
</TABLE>
