SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JANUARY 25, 1998
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 0-24442
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, INCLUDING ZIP CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
(281) 579-7901
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: None
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
Common Stock, $0.01 par value
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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein and will not be contained, to the
best of the registrant's knowledge, in the Proxy Statement or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ].
The aggregate market value of the outstanding Common Stock of the
registrant held by non-affiliates of the registrant as of April 20, 1998, based
on the closing sale price of the Common Stock on the Nasdaq National Market on
said date, was $366,777,506.
There were 18,001,350 shares of Common Stock of the registrant outstanding
as of April 20, 1998.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement issued in connection with the 1998 Annual
Meeting of Stockholders are incorporated into Part III of this Report.
<PAGE>
PART I
ITEM 1. BUSINESS
Garden Ridge is a rapidly growing megastore retailer offering dominant
assortments of products related to its central merchandise theme of decorative
home accessories, seasonal products and crafts. The Company's ten complementary
product categories are:
o floral (silk and dried flowers) o party supplies
o housewares o pottery
o seasonal o crafts
o pictures and frames o home accents
o candles o baskets
The Company's strategy of clustering dominant assortments of merchandise
from related categories in a single retail location differentiates Garden Ridge
from traditional single category superstores. The Company believes that
combining these related product categories in one store creates significant
cross-merchandising opportunities which fulfill, at a single destination, most
product requirements for the customer seeking decorative home accessories,
seasonal products and crafts. Garden Ridge uses an everyday low pricing strategy
and emphasizes customer service in its stores. The Company currently operates 21
megastores in ten states in the southern United States.
Garden Ridge began as a single location near San Antonio, Texas in 1979.
In 1988, the founder sold the Company, which then consisted of three stores.
Shortly thereafter, changes in merchandise strategy, excessive leverage and a
failed expansion plan caused poor financial performance. The present management
team was recruited in June 1990 and refocused the Company's merchandise
strategy, instituted tighter cost controls, improved management information
systems and developed the current megastore format and expansion strategy.
MERCHANDISING
PRODUCT CATEGORIES. Garden Ridge offers dominant assortments of
merchandise (aggregating at least 80,000 stock keeping units ("SKUs")) in ten
related categories.
FLORAL. The Company believes that it stocks one of the largest assortments
of silk and dried floral merchandise in the United States. Floral is the
Company's largest product category, representing over 20% of sales in fiscal
1998. The assortment of silk stems, dried flowers, silk and dried floral
arrangements, silk bushes, artificial trees, ribbons and supplies attracts both
retail and commercial customers such as professional floral designers. Customers
shop in this department for value-priced basic items as well as the newest
seasonal and promotional items. Additionally, the Company's floral arranging
staff makes standard and custom arrangements.
HOUSEWARES. This department offers a broad assortment of competitively
priced basic items as well as specialty items. The assortment focuses on both
highly identifiable branded product lines and defined product groupings such as
kitchen gadgets, pantry and closet supplies, glassware, kitchen linens, canning
supplies, bakeware, cookware, enamelware, serveware and dinnerware. Management
believes the Company's stores offer one of the broadest assortments of
Rubbermaid(TM) products in the United States.
SEASONAL. These products are for the Christmas, Thanksgiving, Halloween
and Easter holidays. Some of the major items within this category are artificial
Christmas trees, ornaments, greenery, lights, outdoor decor (such as nativity
scenes, wire sculptures and lighted displays) and costumes.
PICTURES AND FRAMES. The Company offers over 4,000 items in this category,
of which 50% are framed art items in a wide assortment of themes from many
different manufacturers. Low "value" prices on basic items are supplemented by
special purchases on assorted framed prints to further increase customer
traffic. Picture frames are offered in a variety of sizes and materials. The
Company also offers custom framing to its customers.
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CANDLES. The candle department carries a vast selection of basic and
decorative candles, scented candles, unique candle holders and potpourri. Garden
Ridge carries branded as well as private label items. This product category has
over 4,000 SKUs.
PARTY SUPPLIES. Garden Ridge carries an extensive assortment of party
supplies including paper plates and napkins, plastic cutlery, ribbons and wrap,
gourmet party foods, party favors and novelty gifts, balloons, pinatas and
greeting cards. The stores also feature a large assortment of wedding
decorations and other wedding related supplies.
POTTERY. This category includes a wide range of decorative clay, ceramic
and plastic pottery, as well as lawn art, concrete sculptures, wind chimes and
bird baths. The Company sources pottery and related items domestically as well
as from Italy, the Dominican Republic, Mexico and other countries.
CRAFTS. The crafts department includes wearable arts (T-shirts, paints and
iron-on transfers), children's crafts, needlework kits, unfinished woods,
paints, glues and stains and instructional books. The craft department sells
primarily branded product lines. Craft classes taught by outside instructors are
held in the stores on a regular basis.
HOME ACCENTS. This category includes a range of distinctive decorative
items such as oriental ceramics, statuary items, vases, accent furniture pieces,
porcelain products, metal decorative items and tabletop decor.
BASKETS. The Company offers an extensive selection of natural woven
baskets and other related wicker and rattan products. This department offers an
estimated 3,000 SKUs, including products such as door mats, tiki torches and
decorative products. The Company sources these products from around the world,
including products from China, Thailand, the Philippines, Indonesia, India and
Haiti. Direct import purchases are made to ensure low costs and unique
assortments.
OTHER. In addition to the above ten categories, Garden Ridge carries other
categories of products, such as nursery and tropical plants and decorator
pillows, and has a snack bar with seating area.
MANAGEMENT INFORMATION SYSTEMS
The Company believes that its management information system is an
important factor in allowing the Company to support its rapid growth and enhance
its competitive industry position. The Company has invested over $8 million in
this system, which provides integration of store, merchandising, distribution,
and financial systems. Merchandise is bar coded, enabling management to control
inventory and pricing by SKU, manage assortment within a category and produce
desired gross margins and inventory turnover. Sales are updated daily in the
merchandise reporting systems by polling all sales information from each store's
point-of-sale ("POS") terminals. The Company's POS systems consists of registers
providing price look-up and scanning of bar-coded tickets. Through automated
nightly two-way electronic communication with each store, sales information and
store initiated transfers are uploaded to the host system and price changes are
downloaded through the POS devices. This technology allows the Company to
provide price discounts at both the store level and the SKU level rather than at
the category level as is the case with some of its competitors. The nightly
communication with the stores also enables the Company to receive store transfer
and physical inventory details and send electronic mail. Information obtained
from such daily polling results in automatic merchandise replenishment in
response to specific SKU requirements of each store. The Company also evaluates
information obtained through daily reporting to implement merchandising
decisions. On a daily basis the Company monitors sales and cost of goods sold by
SKU, based on the average cost of actual SKUs sold and gross margin by store and
department.
MARKETING AND ADVERTISING
The Company budgets an amount equivalent to approximately 4-5% of its
annual sales to spend on its advertising through television, radio, newspapers,
newspaper inserts, the yellow pages and billboards. Management believes
television is an efficient medium for reaching the Company's target audience and
visually demonstrating the stores' size and product selection.
To reinforce its television advertising schedule, the Company distributes
eight-to-twelve page product inserts on a select zip code basis. The inserts are
theme driven by seasonal promotion and feature top-selling items in each
merchandise department. The inserts feature actual prices in order to reinforce
the everyday low price policy.
3
<PAGE>
The Company also uses radio and newspaper advertisements prior to extended
holiday weekends. The Company advertises in the yellow pages and through
billboards, which are primarily intended to call attention to and give customers
directions to the stores. The Company's major vendors provide cooperative
advertising funding to Garden Ridge.
PRODUCT SOURCING AND DISTRIBUTION
The Company purchases all of its inventory through its central purchasing
system. Management believes this strategy allows the Company to take advantage
of volume purchase discounts and improve controls over inventory and product
mix. The Company purchases its merchandise from over 800 suppliers and no
supplier represents over 3% of total purchases. In fiscal 1998, approximately
80% of the Company's merchandise was purchased from domestic suppliers
(including distributors that import goods) and the remaining 20% was imported
from foreign manufacturers or their agents, principally in the Far East (Hong
Kong, China, Taiwan and Thailand).
Garden Ridge purchases overseas products on a free-on-board (FOB) shipping
point basis, meaning the Company takes possession of the goods when they are
shipped by the manufacturer. The Company insures its overseas purchases at their
retail value.
Garden Ridge has the majority of its domestic products shipped directly to
its stores, thereby reducing freight and handling charges. From 1994 to 1996 the
Company maintained a warehouse arrangement with a third party located in Dallas,
Texas, which received, stored, and distributed the Company's imported and
private label merchandise. In May 1996, the company leased a 280,000 square foot
warehouse in Dallas and transitioned from the third party warehouse into the
leased Company warehouse. The third party operator provided labor at the leased
Company warehouse until March 1997. The Company now employs the labor at its
Dallas distribution center and believes this will result in a most cost
effective means of distributing its imported products.
As is customary in the industry, the Company does not have long-term or
exclusive contracts with any suppliers. The Company believes that alternate
sources of merchandise for all product categories are readily available at
comparable prices. Goods manufactured in the Far East generally require long
lead times and are ordered three to nine months in advance of delivery. All
purchases are made in United States dollars.
ASSOCIATES
As of April 20, 1998, Garden Ridge employed approximately 3,125
associates, equal to approximately 2,085 full-time equivalent associates, of
whom 87% were hourly sales associates. The majority of Garden Ridge's store
personnel earn slightly above minimum wage. Based on the level of transactions
experienced at different times of the day, week and year, store labor is planned
so as to serve customers effectively during peak periods while minimizing
overall labor costs. The Company's associates are not represented by any union
and management believes that labor relations are good. Due to the level of
temporary help the Company employs, such as college students during summer and
Christmas vacation, employee turnover is approximately 99% per annum for stores
open more than one year.
COMPETITION
The presence in the Company's markets of department stores, mass
merchandisers and specialty retailers (including superstores), which carry
merchandise similar to that of Garden Ridge makes these markets very
competitive. The Company believes that its stores compete on the basis of price,
depth and breadth of merchandise assortment, customer service and convenience.
Management believes that the Company's merchandise selection, everyday low
prices, marketing strategies and the size and location of its stores distinguish
the Company from its competitors.
Management believes that department stores do not pose significant
competition for the Company because, although they carry some housewares,
candles, pictures and frames and other merchandise in common with Garden Ridge,
their product offerings are limited in comparison to Garden Ridge, are generally
at higher price points and are targeted to a more upscale consumer. While mass
merchandisers carry several of Garden Ridge's product lines, they generally lack
the breadth of selection to be specific destination locations for those
merchandise categories. However, to the extent that mass merchandisers carry
particular items in common with the Company, they provide price competition.
4
<PAGE>
In general, the specialty retailers in Garden Ridge's markets do not carry
all of the Company's product categories. Their stores are much smaller, ranging
from approximately 10,000 to 30,000 square feet of selling space. Management
believes that Garden Ridge generally carries a much broader selection of
merchandise than these stores. In addition, Garden Ridge buyers regularly shop
these stores to ensure that Garden Ridge's prices are competitive. See
"Merchandising."
TRADEMARKS
The Company owns the following federally registered servicemarks for its
retail services: "Garden Ridge," "Garden Ridge Pottery World Imports" (with
design), "Shopping Fun in the Giant Economy Size!" and "Do It Up Big!." The
Company also owns a federal trademark registration for "Garden Ridge Pottery and
World Imports," which is used on certain products sold at the Company's stores,
and has filed a federal servicemark application for "The Home Decor
Marketplace". The Company believes that certain of its marks are valuable and
intends to defend and maintain such marks and the related registrations.
However, in the event the Company ceases to use a particular mark, the Company
may permit any registration as to such mark to lapse. The Company is not aware
of any pending claims of infringement or other challenges to the Company's right
to use its marks in the United States.
5
<PAGE>
ITEM 2. PROPERTIES
The Company currently operates 21 stores and has six stores scheduled to
open in the following locations:
Approximate Fiscal
Square Feet Year
Of Selling
CITY STORE NAME Space OPENED
-------------
CURRENT STORES:
San Antonio, Texas Schertz 207,000 1980
Houston, Texas Katy 219,000 1987
Houston, Texas Airtex 207,000 1987
Houston, Texas Meadows 129,000 1993
Austin, Texas Austin 125,000 1995
Dallas/Ft. Worth, Texas Plano 125,000 1995
North Richland
Dallas/Ft. Worth, Texas Hills 125,000 1995
Louisville, Kentucky Louisville 125,000 1996
Memphis, Tennessee Memphis 125,000 1996
Dallas/Ft. Worth, Texas Mesquite 125,000 1996
Oklahoma City, Oklahoma Oklahoma City 125,000 1996
Charlotte, North Carolina Pineville 125,000 1997
Jacksonville, Florida Jacksonville 125,000 1997
Tulsa, Oklahoma Tulsa 125,000 1997
Houston, Texas Webster 135,000 1997
St. Louis, Missouri St. Louis 125,000 1997
Greenville, South
Carolina Greenville 125,000 1997
Richmond, Virginia Richmond 125,000 1997
Atlanta, Georgia Kennesaw 125,000 1998
Atlanta, Georgia Norcross 125000 1998
Dallas/Ft. Worth, Texas Lewisville 106,000 1998
STORES SCHEDULED TO OPEN:
O'Fallon, Illionis O'Fallon 125,000 (1)
Atlanta, Georgia Stockbridge 125,000 (1)
Dallas/Ft. Worth, Texas Ft. Worth 106,000 (1)
Nashville, Tennessee Nashville 106,000 (1)
Lexington, Kentucky Lexington 106,000 (1)
Columbus, Ohio Columbus 106,000 (1)
- ------------------
(1) Scheduled to open in fiscal 1999.
The Company's three original stores (the Schertz Store, Katy Store and
Airtex Store) are larger than the Company's current megastore format. All stores
opened subsequent to these three stores are in the megastore format with at
least 100,000 square feet of selling space. The Company's corporate offices are
located at the Katy Store.
All of the Company's 21 existing stores are leased. The Company intends to
lease stores or arrange with third parties to build-to-suit stores for lease by
the Company. Certain leases provide for fixed minimum rentals and provide for
contingent rental payments based on various specified percentages of sales above
minimum levels. The leases carry varying terms expiring between 2004 and 2019,
excluding options to extend. All stores and store sites are located adjacent to
interstate or other major highways.
6
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in various legal proceedings incidental to the
conduct of its business. The Company currently is not engaged in any legal
proceeding that is expected to have a material adverse effect on the Company's
results of operations or financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
COMMON STOCK PRICE RANGE AND DIVIDEND POLICY
The Common Stock of the Company is traded in the over-the-counter market
and is quoted on the Nasdaq National Market under the symbol "GRDG." The
following table sets forth on a per share basis, for the periods indicated, the
high and low sale prices of the Common Stock as reported by the Nasdaq National
Market. These price quotations reflect inter-dealer prices, without adjustment
for retail mark-ups, mark-downs or commissions and may not necessarily represent
actual transactions.
PRICE RANGE
---------------------
HIGH LOW
--------- --------
Year Ended January 26, 1997
First Quarter....................... 28 16 1/4
Second Quarter...................... 30 1/4 17 1/4
Third Quarter....................... 19 8 1/2
Fourth Quarter...................... 10 8
Year Ended January 25, 1998
First Quarter....................... 9 15/16 6 1/4
Second Quarter...................... 14 3/4 7 3/4
Third Quarter....................... 15 7/8 11 3/4
Fourth Quarter...................... 16 1/2 13 1/8
All prices reflect the 2-for-1 common stock split effective in June 1996.
On April 20, 1998, the last sale price of the Common Stock as reported on the
Nasdaq National Market was $20 3/8 per share. As of April 20, 1998, there were
approximately 5,000 holders of record of Common Stock.
The Company has never paid cash dividends on its Common Stock and the
Company does not intend to pay cash dividends at any time in the foreseeable
future. The Company expects that earnings will be retained for the continued
growth and development of the Company's business. Future dividends, if any, will
depend upon the Company's earnings, financial condition, cash requirements,
compliance with covenants in agreements to which the Company is or may be
subject, future prospects and other factors deemed relevant by the Company's
Board of Directors. See "Item 7 -- Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."
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<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA AND NUMBER OF STORES)
The following table sets forth consolidated financial data of Garden Ridge
Corporation and subsidiaries as of and for the fiscal years ended January 30,
1994, January 29, 1995, January 28, 1996, January 26, 1997 and January 25, 1998
derived from the financial statements audited by Arthur Andersen LLP.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JANUARY
-------------------------
1994 1995 1996 1997 1998
-------- --------- --------- --------- ---------
STATEMENT OF OPERATIONS DATA:
<S> <C> <C> <C> <C> <C>
Sales ......................... $ 64,014 $ 100,002 $ 148,087 $ 225,315 $ 304,732
Cost of Sales ................. 39,989 61,938 92,328 144,054 195,290
-------- --------- --------- --------- ---------
Gross profit ............... 24,025 38,064 55,759 81,261 109,442
Operating expenses:
Store operating ............ 15,513 24,146 37,318 60,320 80,912
General and administrative . 3,263 4,287 5,157 6,672 10,280
Amortization of intangibles
and deferred charges .... 617 621 612 717 735
Preopening costs ........... -- 1,017 1,395 2,368 1,122
-------- --------- --------- --------- ---------
Total operating expenses ...... 19,393 30,071 44,482 70,077 93,049
-------- --------- --------- --------- ---------
Income from operations ..... 4,632 7,993 11,277 11,184 16,393
Interest expense .............. (1,146) (1,859) (744) (67) (59)
Interest income ............... -- 459 735 1,538 ,478
Income before income taxes,
and cumulative effects of
accounting changes ...... 3,486 6,593 11,268 12,655 17,812
Income taxes .................. 1,352 2,441 4,390 4,619 6,379
-------- --------- --------- --------- ---------
Income before cumulative
effects of accounting
changes ................. 2,134 4,152 6,878 8,036 11,433
Accounting changes (1) ........ 439 -- -- -- --
-------- --------- --------- --------- ---------
Net income ................. 2,573 4,152 6,878 8,036 11,433
Preferred stock dividends ..... (516) (562) (153) -- --
-------- --------- --------- --------- ---------
Net income available to
common stockholders ..... $ 2,057 $ 3,590 $ 6,725 $ 8,036 $ 11,433
======== ========= ========= ========= =========
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JANUARY
--------------------------------------------------
1994 1995 1996 1997 1998
------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
Selected income per common and common equivalent share:
Income before extraordinary item and cumulative
effects of accounting changes ............................ $ 0.23 $ 0.41 $ 0.47 $ 0.45 $ 0.62
Net income .................................................... $ 0.28 $ 0.41 $ 0.47 $ 0.45 $ 0.62
Net income available to common stockholders, basic ............ $ 0.23 $ 0.40 $ 0.51 $ 0.47 $ 0.64
Net income available to common stockholders, diluted .......... $ 0.22 $ 0.36 $ 0.46 $ 0.45 $ 0.62
Weighted average number of common shares and
equivalents outstanding, basic ............................... 9,054 8,978 13,083 17,158 17,904
Weighted average number of common shares and
equivalents outstanding (2), diluted ......................... 9,316 10,096 14,515 17,925 18,473
</TABLE>
<TABLE>
<CAPTION>
JANUARY 30, JANUARY 29, JANUARY 28, JANUARY 26, JANUARY 25,
1994 1995 1996 1997 1998
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital .............................. $13,447 $12,168 $23,076 $ 63,277 $ 77,527
Total assets ................................. 32,364 43,992 73,326 137,382 160,212
Long-term debt obligations ................... 15,212 16,730 300 200 100
Redeemable 8% cumulative preferred
stock ................................... 6,783 7,345 -- -- --
Common stockholders' equity .................. 4,428 7,922 55,531 113,763 125,953
</TABLE>
- -------------
(1)Represents the cumulative effect of a change in accounting for income
taxes in fiscal 1994.
(2)Computed based on the weighted average number of shares of Common Stock
and common stock equivalents, which consist of warrants and options
outstanding during the period presented.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated income statement
data expressed as a percentage of sales.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JANUARY
------------------------------------
1996 1997 1998
-------- -------- ----------
<S> <C> <C> <C>
Sales.............................................................. 100.0% 100.0% 100.0%
Cost of Sales...................................................... 62.3 63.9 64.0
-------- -------- ----------
Gross profit......................................... 37.7 36.1 36.0
Operating expenses:
Store operating..................................... 25.2 26.8 26.6
General and administrative........................... 3.5 3.0 3.4
Amortization of intangibles and deferred charges..... 0.4 0.3 0.2
Preopening costs..................................... 1.0 1.0 0.4
-------- -------- ----------
Income from operations................... 7.6 5.0 5.4
Interest expense................................................... (0.5) --- ---
Interest income.................................................... 0.5 0.6 0.5
Income taxes....................................................... (3.0) (2.0) (2.1)
======== ======== ==========
Net income.................. 4.6% 3.6% 3.8%
======== ======== ==========
</TABLE>
FISCAL 1998 COMPARED TO FISCAL 1997
Sales in fiscal 1998 increased $79.4 million, or 35.2%, to $304.7 million
from $225.3 million in fiscal 1997. This increase was attributable to (i) the
opening of three new stores (which contributed $31.2 million in incremental
sales), (ii) the inclusion of a full year sales for the seven stores opened in
fiscal 1997, and (iii) a comparable store sales increase of 10.0%.
Gross profit as a percentage of sales decreased to 36.0% in fiscal 1998 as
compared to 36.1% in fiscal 1997 as a result of increased domestic freight costs
and buying expense offset by higher product margins.
Store operating expenses increased $20.6 million, or 34.1%, in fiscal 1998
to $80.9 million from $60.3 million in fiscal 1997. Store operating expenses as
a percentage of sales was 26.6% for fiscal 1998 and 26.8% for fiscal 1997. The
increased store operating expenses associated with the addition of three new
stores and the inclusion of a full year of operating expenses for the seven
stores opened in fiscal 1997 were offset by the sales increase allowing store
operating expenses to decline as a percentage of sales.
General and administrative expenses increased $3.6 million, or 54.1%, in
fiscal 1998 to $10.3 million from $6.7 million in fiscal 1997. This increase was
primarily a result of increased corporate payroll expense reflecting personnel
additions to support the Company's expansion program. General and administrative
expenses as a percentage of sales increased to 3.4% of sales in fiscal 1998 from
3.0% in fiscal 1997.
Amortization of intangibles and deferred charges in fiscal 1998 which
consisted of net assets and deferred loan costs (see Note 3 of the Notes to
Consolidated Financial Statements) increased to $735,000, from $717,000 in
fiscal 1997. As a percentage of sales, amortization of intangibles and deferred
charges decreased to 0.2% of sales in fiscal 1998 from 0.3% in fiscal 1997.
Preopening costs of $1.1 million in fiscal 1998 consisted of all labor,
operating and advertising charges incurred prior to opening the three new stores
in fiscal 1998. The Company opened seven new stores in fiscal 1997. The
Company's policy is to expense all preopening costs in the month a store
commences operations.
Income from operations increased 0.4% to $16.4 million, or 5.4% of sales,
as compared to 5.0% of sales in fiscal 1997.
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<PAGE>
Interest income in fiscal 1998 was $1.5 million, or 0.5% of sales as
compared to $1.5 million, or 0.6% of sales in fiscal 1997.
Income taxes in fiscal 1998 were $6.4 million, representing an effective
tax rate of 35.8%, as compared to $4.6 million, or an effective tax rate of
36.5% in fiscal 1997. The Company's lower effective tax rate is attributable to
the Company's geographic expansion resulting in a lower effective state tax
rate.
Net income in fiscal 1998 was $11.4 million, or 3.8% of sales, as compared
to $8.0 million, or 3.6% of sales, in fiscal 1997.
FISCAL 1997 COMPARED TO FISCAL 1996
Sales in fiscal 1997 increased $77.2 million, or 52.1%, to $225.3 million
from $148.1 million in fiscal 1996. This increase was attributable to (i) the
opening of seven new stores (which contributed $61.8 million in incremental
sales), (ii) the inclusion of a full year sales for the four stores opened in
fiscal 1996 and (iii) a comparable store sales decrease of 0.9%.
Gross profit as a percentage of sales decreased to 36.1% in fiscal 1997 as
compared to 37.7% in fiscal 1996 principally as a result of higher inventory
shrinkage and damage. The remaining reduction was due to higher buying and
occupancy costs as a percentage of sales.
Store operating expenses increased $23.0 million, or 61.6%, in fiscal 1997
to $60.3 million from $37.3 million in fiscal 1996. Store operating expenses as
a percentage of sales was 26.8% for fiscal 1997 and 25.2% for fiscal 1996. These
increases resulted primarily from the addition of seven new stores and the
inclusion of a full year of operating expenses for the four stores opened in
fiscal 1996.
General and administrative expenses increased $1.5 million or 29.4%, in
fiscal 1997 to $6.7 million from $5.2 million in fiscal 1996. This increase was
primarily a result of corporate personnel additions and recruiting costs to
support the Company's ongoing expansion strategy. General and administrative
expenses as a percentage of sales decreased in fiscal 1997 to 3.0% from 3.5% in
fiscal 1996, reflecting the higher level of sales in fiscal 1997.
Amortization of intangibles and deferred charges in fiscal 1997 increased
to $717,000, from $612,000 in fiscal 1996 as a result of an asset purchase for a
Houston store. As a percentage of sales, amortization of intangibles and
deferred charges decreased to 0.3% of sales in fiscal 1997 from 0.4% in fiscal
1996.
Preopening costs of $2.4 million in fiscal 1997 consisted of all labor,
operating and advertising charges incurred prior to the opening of seven new
stores in fiscal 1997. The Company opened four stores in fiscal 1996.
Income from operations decreased 0.1% to $11.2 million, or 5.0% of sales,
as compared to $11.3 million, or 7.6% of sales in fiscal 1996. This decrease in
operating income resulted from decreases in gross profit margins and higher
store costs.
Interest income in fiscal 1997 increased to $1.5 million from $0.7 million
due to the investment of proceeds from the Company's secondary common stock
offering.
Income taxes in fiscal 1997 were $4.6 million, representing an effective
tax rate of 36.5%, as compared to $4.4 million, or an effective rate of 39.0% in
fiscal 1996. The Company's lower effective tax rate is attributable to the
Company's geographic expansion resulting in a lower effective state tax rate.
Net income in fiscal 1997 was $8.0 million, or 3.6% of sales, as compared
to $6.9 million, or 4.6% of sales, in fiscal 1996.
LIQUIDITY AND CAPITAL RESOURCES
In May 1995, the Company completed an initial public offering of Common
Stock pursuant to which the Company sold 5,800,000 shares of Common Stock at the
price of $7.50 per share (including 780,000 shares sold pursuant to the exercise
of the underwriters' over-allotment option). Net proceeds of the initial public
offering, after deducting the underwriting discount and expenses,
11
<PAGE>
were approximately $39.5 million. Proceeds of the initial public offering were
used as follows: (i) $7.5 million to redeem all of the Company's preferred
stock, including the payment of accrued dividends, (ii) $15.0 million to repay
the Company's fixed rate and floating rate subordinated notes, and (iii) $6.0
million to repay the Company's lines of credit. The remaining proceeds of
approximately $11.0 million were retained by the Company to fund expansion and
for general working capital requirements.
The Company completed a secondary public offering of its common stock on
April 30, 1996 pursuant to which the Company sold 2,000,000 shares of Common
Stock at the price of $25.88 per share (including 420,000 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.
Garden Ridge's primary sources of working capital are cash flow from
operations and borrowings under its Line of Credit. The Company had working
capital of $23.1 million, $63.3 million and $77.5 million at the end of fiscal
1996, 1997 and 1998, respectively. The principal uses of working capital are to
purchase inventory and finance the expansion of the Company's operations.
The Company currently has a $15 million unsecured Line of Credit with
NationsBank of Texas, N.A. The Company has no outstanding borrowings under the
credit agreement which expires June 30, 1998. The Company is currently
negotiating a two year extension to the Line of Credit.
Garden Ridge's primary capital requirements are for the opening of new
stores. The Company estimates the total cash required to open a leased store,
including store fixtures, equipment, inventory and preopening expenses, to be
approximately $3.0 million, including approximately $1.5 million in initial
inventory (net of approximately $500,000 of vendor financing). An additional
$6.0 to $9.0 million (depending on real estate costs) would be required for the
Company to construct a store. Management believes it will be able to lease
stores or arrange with third parties to build-to-suit stores for lease by the
Company, although there can be no assurance that it will be able to do so.
The Company anticipates opening six additional stores by fiscal year end.
In fiscal 2000, the Company anticipates opening eight additional stores. The
Company estimates the total cash required to open the six additional stores in
fiscal 1999 will be approximately $18.0 million and to open the eight additional
stores in fiscal 2000 will be approximately $24.0 million, assuming all of the
stores are leased. The Company believes cash generated from operations,
availability under its Line of Credit, traditional funding sources and financing
provided by the Company's vendors will be adequate to fund its anticipated
capital requirements for expansion through at least the end of fiscal 2000.
YEAR 2000
The Company is currently assessing the impact of "Year 2000" related
issues on its operational and financial computer systems. The Company has not
yet determined the operational impact, if any, which may result in the future.
Therefore, the Company is unable to determine the potential impact, if any, on
its results of operations or financial condition.
OTHER MATTERS
The Company experiences seasonal fluctuations in its business. The highest
sales period for the Company is generally the fourth fiscal quarter. This
period, which includes the Christmas selling season, accounted for approximately
34%, 34% and 35% of the Company's sales for stores open the entire fiscal year,
and approximately 80%, 80% and 84% of the Company's income from operations
(including income from stores not open for the entire fiscal year) in fiscal
1996, 1997 and 1998, respectively. The Company also experiences lower gross
margins in January due to clearance sales.
Although the Company cannot accurately determine the precise effect of
inflation on its operations, it does not believe inflation has had a material
effect on sales or results of operations.
DISCLOSURES REGARDING FORWARD-LOOKING STATEMENTS
In its disclosure herein, the Company has included certain statements
(other than statements of historical fact) that constitute forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
When used herein, words such as "anticipate," "expects," "believes," "intends"
or "estimates" and similar expressions are intended to identify forward-looking
statements. It is important to note that the Company's
12
<PAGE>
actual results could differ materially from those projected by such
forward-looking statements. Although the Company believes that the expectations
reflected in such forward-looking statements are reasonable and such
forward-looking statements are based on the best data available at the time this
Form 10-K is filed with the Securities and Exchange Commission, no assurance can
be given that such expectations will prove correct. Factors that could cause the
Company's results to differ materially from the results discussed in such
forward-looking statements include, but are not limited to, the following:
customer demands and trends and the Company's responses and reactions to them,
competitive factors and pricing pressures, the availability of real estate, and
the ability of the Company to implement its business strategy. All such
forward-looking statements in this Form 10-K are expressly qualified in their
entirety by the cautionary statements in this paragraph.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Filed herein as pages 18 through 30.
ITEM 9. CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
In accordance with paragraph (3) of General Instruction G to Form 10-K,
Part III of this Report is omitted because the Registrant will file with the
Securities and Exchange Commission, not later than 120 days after January 25,
1998, a definitive proxy statement pursuant to Regulation 14A involving the
election of directors. Reference is made to the sections of such proxy statement
entitled "Common Stock Outstanding and Principal Holders Thereof," "Proposal No.
1 -- Election of Directors" and "Certain Transactions," which sections of such
proxy statement are incorporated herein.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a)(1) FINANCIAL STATEMENTS:
PAGE NO.
IN THE
ANNUAL
REPORT
--------
Report of Independent Public Accountants.............................. 17
Consolidated Balance Sheets as of January 26, 1997 and January
25, 1998........................................................... 18
Consolidated Statements of Operations for the Fifty-Two Week
Periods Ended January 28, 1996, January 26, 1997 and
January 25, 1998................................................... 19
Consolidated Statements of Preferred Stock and Common
Stockholders' Equity for the Fifty-Two Week Periods Ended
January 28, 1996, January 26, 1997 and January 25, 1998............ 20
Consolidated Statements of Cash Flows for the Fifty-Two Week
Periods Ended January 28, 1996, January 26, 1997 and January
25, 1998........................................................... 21
Notes to Consolidated Financial Statements............................ 22
(2) FINANCIAL STATEMENT SCHEDULE:
None.
13
<PAGE>
(3) EXHIBITS
Exhibit
NUMBER IDENTIFICATION OF EXHIBITS
------ --------------------------
*3.1 -- Restated Certificate of Incorporation effective May 16, 1995
(filed as Exhibit 3.5 to the Registration Statement on Form S-1
(No. 33-90748) (the "1995 Form S-1"), and incorporated herein by
reference)
*3.2 -- Bylaws (filed as Exhibit 3.4 to the 1995 Form S-1, and
incorporated herein by reference)
*3.3 -- Form of Amendment No. 1 to the Bylaws effective May 16, 1995
(filed as Exhibit 3.6 to the 1995 Form S-1, and incorporated
herein by reference)
*4.1 -- Specimen Common Stock Certificate (filed as Exhibit 4.1 to the
1995 Form S-1, and incorporated herein by reference)
*10.1 -- Amended and Restated 1992 Stock Option Plan (filed as Exhibit
10.1 to the 1995 Form S-1, and incorporated herein by reference)
10.2 -- Amended and Restated 1994 Stock Option Plan
*10.3 -- Second Amended and Restated Credit Agreement dated October 26,
1995 between NationsBank of Texas, N.A. and the Company (filed
as Exhibit 10.3 to the Form 10-K for the fiscal year ended
January 28, 1996, and incorporated herein by reference)
*10.4 -- Amendment No. 1 dated as of November 15, 1996, between
NationsBank of Texas, N.A. and the Company (filed as Exhibit
10.4 to the Form 10-K for the fiscal year ended January 26,
1997, and incorporated herein by reference)
*10.7 -- Demand Registration Rights Agreement dated May 16, 1995 by and
among the Company and the parties named therein (filed as
Exhibit 10.24 to the 1995 Form S-1, and incorporated herein by
reference)
*10.9 -- Advisory Agreement dated July 16, 1996 between the Company and
Three Cities Research, Inc. (filed as Exhibit 10.9 to Form 10-K
for the fiscal year ended January 26, 1997, and incorporated
herein by reference)
21.1 -- Subsidiaries of the Company
23.1 -- Consent of Arthur Andersen LLP
27.1 -- Financial Data Schedule
- ------------------
* Incorporated by reference
(b) REPORTS ON FORM 8-K:
None.
14
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
GARDEN RIDGE CORPORATION
By: /s/ JANE L. ARBUTHNOT
-------------------------------
JANE L. ARBUTHNOT
Chief Financial Officer
Date: April 27, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ ARMAND SHAPIRO Chairman of the Board and April 27, 1998
- -------------------------- Chief Executive Officer
ARMAND SHAPIRO (Principal Executive
Officer)
/s/ JANE L. ARBUTHNOT Chief Financial Officer and April 27, 1998
- -------------------------- Secretary (Principal
JANE L. ARBUTHNOT Financial and
Accounting Officer)
/s/ TERRY S. BOYCE Director April 27, 1998
- --------------------------
TERRY S. BOYCE
/s/ ALYSON HENNING Director April 27, 1998
- --------------------------
ALYSON HENNING
/s/ NOLAN LEHMANN Director April 27, 1998
- --------------------------
NOLAN LEHMANN
/s/ IRA NEIMARK Director April 27, 1998
- --------------------------
IRA NEIMARK
/s/ RONALD RASHKOW Director April 27, 1998
- --------------------------
RONALD RASHKOW
/s/ SAM J. SUSSER Director April 27, 1998
- --------------------------
SAM J. SUSSER
/s/ H. WHITNEY WAGNER Director April 27, 1998
- --------------------------
H. WHITNEY WAGNER
15
<PAGE>
GARDEN RIDGE CORPORATION AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
Report of Independent Public Accountants................................. 17
Consolidated Balance Sheets as of January 26, 1997 and January 25,
1998................................................................... 18
Consolidated Statements of Operations for the Fifty-Two Week Periods
Ended January 28, 1995, January 28, 1996 and January 26, 1997.......... 19
Consolidated Statements of Preferred Stock and Common Stockholders'
Equity for the Fifty-Two Week Periods Ended January 29, 1995,
January 28, 1996 and January 26, 1997.................................. 20
Consolidated Statements of Cash Flows for the Fifty-Two Week Periods
Ended January 29, 1995, January 28, 1996 and January 26, 1997.......... 21
Notes to Consolidated Financial Statements............................... 22
16
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Garden Ridge Corporation:
We have audited the accompanying consolidated balance sheets of Garden
Ridge Corporation, a Delaware corporation, and subsidiaries (the Company) as of
January 26, 1997, and January 25, 1998, and the related consolidated statements
of operations, preferred stock and common stockholders' equity and cash flows
for the fifty-two week periods ended January 28, 1996, January 26, 1997, and
January 25, 1998. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Company as of January
26, 1997, and January 25, 1998, and the results of their operations and their
cash flows for the fifty-two week periods ended January 28, 1996, January 26,
1997, and January 25, 1998, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Houston, Texas
March 10, 1998
17
<PAGE>
GARDEN RIDGE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
JANUARY 26, JANUARY 25,
ASSETS 1997 1998
----------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents ...................................... $ 32,494 $ 44,586
Marketable securities .......................................... 5,168 3,150
Accounts receivable ............................................ 1,725 1,785
Inventories .................................................... 43,617 57,773
Deferred income taxes .......................................... 480 1,225
Prepaid expenses ............................................... 2,950 2,492
Deposits ....................................................... 225 80
--------- ---------
Total current assets ...................................... 86,659 111,091
PROPERTY AND EQUIPMENT, at cost:
Land held for sale/leaseback ................................... 5,976 241
Leasehold improvements ......................................... 16,660 18,830
Furniture and fixtures ......................................... 11,327 13,832
Equipment ...................................................... 18,015 24,741
--------- ---------
Total property and equipment ............................. 51,978 57,644
Less - Accumulated depreciation and amortization ............... (11,620) (17,977)
--------- ---------
Net property and equipment ............................... 40,358 39,667
OTHER ASSETS:
Intangibles and deferred charges, net .......................... 10,189 9,454
Other .......................................................... 176 --
========= =========
Total assets ............................................. $ 137,382 $ 160,212
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable ............................................... $ 15,011 $ 17,448
Accrued liabilities ............................................ 4,377 8,529
Federal income taxes payable ................................... 3,994 7,587
--------- ---------
Total current liabilities ................................ 23,382 33,564
LONG-TERM DEBT, net ................................................. 200 100
DEFERRED INCOME TAXES ............................................... 37 595
COMMITMENTS AND CONTINGENCIES
COMMON STOCKHOLDERS' EQUITY:
Common stock, $0.1 par value; 20,000,000 and 40,000,000
shares authorized, 18,187,716 and 18,314,116 shares
issued, and 17,830,764 and 17,991,890 shares outstanding
in 1997 and 1998, respectively .................................. 182 183
Paid-in capital ................................................... 92,542 93,293
Retained earnings ................................................. 21,079 32,512
Less - Treasury stock, 356,952 and 322,226 shares at cost ......... (40) (35)
--------- ---------
Total common stockholders' equity ....................... 113,763 125,953
--------- ---------
Total liabilities and common stockholders' equity ....... $ 137,382 $ 160,212
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
18
<PAGE>
GARDEN RIDGE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FIFTY-TWO WEEK PERIODS ENDED
-------------------------------------
JANUARY JANUARY JANUARY
28, 26, 25,
1996 1997 1998
------------ ------------ ------------
<S> <C> <C> <C>
SALES ............................................................ $ 148,087 $ 225,315 $ 304,732
COST OF SALES .................................................... 92,328 144,054 195,290
------------ ------------ ------------
Gross profit ............................................... 55,759 81,261 109,442.
OPERATING EXPENSES:
Store operating .............................................. 37,318 60,320 80,912.
General and administrative ................................... 5,157 6,672 10,280
Amortization of intangibles and deferred charges ............. 612 717 735
Preopening costs ............................................. 1,395 2,368 1,122
------------ ------------ ------------
Total operating expenses .................................. 44,482 70,077 93,049
------------ ------------ ------------
Income from operations .................................... 11,277 11,184 16,393
INTEREST EXPENSE ................................................. (744) (67) (59)
INTEREST INCOME .................................................. 735 1,538 1,478
------------ ------------ ------------
Income before income taxes ................................ 11,268. 12,655 17,812
INCOME TAXES ..................................................... 4,390 4,619 6,379
------------ ------------ ------------
Net income ................................................ 6,878 8,036 11,433
PREFERRED STOCK DIVIDENDS ........................................ (153) -- --
============ ============ ============
Net income available to common stockholders ............... $ 6,725 $ 8,036 $ 11,433
============ ============ ============
INCOME PER COMMON AND COMMON
EQUIVALENT SHARE:
Net income available to common stockholders, basic ....... $ .51 $ .47 $ .64
------------ ------------ ------------
Net income available to common stockholders, diluted ..... $ .46 $ .45 $ .62
------------ ------------ ------------
WEIGHTED AVERAGE SHARES OUTSTANDING,
BASIC ...................................................... 13,083,454 17,157,742 17,904,447
============ ============ ============
WEIGHTED AVERAGE SHARES OUTSTANDING,
DILUTED .................................................... 14,515,240 17,924,980 18,472,759
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
19
<PAGE>
GARDEN RIDGE CORPORATION
CONSOLIDATED STATEMENTS OF PREFERRED STOCK AND
COMMON STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
REDEEMABLE
8% CUMULATIVE
PREFERRED
STOCK COMMON STOCK
($.01 PAR ($.01 PAR
VALUE) VALUE)
------------------- ---------------
PAID-IN RETAINED TREASURY
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS STOCK
------ ------ ------ ------ ------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 29, 1995 .............. 1,000 $ 7,345 9,451 $ 94 $ 1,606 $ 6,318 $(96)
Initial public offering, net
of $960 of offering cost .......... -- -- 5,800 58 39,437 -- --
Exercise of warrants ................ -- -- 306 4 1,019 -- --
Exercise of stock options ........... -- -- 248 2 329 -- --
Exercise of employee options ........ -- -- -- -- 19 -- 16
Cumulative dividends on
preferred stock ($.153 per
share) ............................ -- 153 -- -- -- (153) --
Redemption of preferred
stock ............................. (1,000) (7,498) -- -- -- -- --
Net income .......................... -- -- -- -- -- 6,878 --
------ ------- ------ ---- ------- -------- ----
BALANCE AT JANUARY 28, 1996 .............. -- -- 15,805 158 42,410 13,043 (80)
Secondary public offering, net
of $3,019 of offering cost ....... -- -- 2,000 20 48,721 -- --
Exercise of warrants ................ -- -- 382 4 1,346 -- --
Exercise of employee options ........ -- -- -- -- 65 -- 40
Net income .......................... -- -- -- -- -- 8,036 --
------ ------- ------ ---- ------- -------- ----
BALANCE AT JANUARY 26, 1997 .............. -- -- 18,187 182 92,542 21,079 (40)
Exercise of warrants ................ -- -- 112 1 477 -- --
Exercise of employee options ........ -- -- -- -- 108 -- 5
Employee stock purchase plan ........ -- -- 15 -- 166 -- --
Net income .......................... -- -- -- -- -- 11,433 --
------ ------- ------ ---- ------- -------- ----
BALANCE AT JANUARY 25, 1998 .............. -- $ -- 18,314 $183 $93,293 $ 32,512 $(35)
====== ======= ====== ==== ======= ======== ====
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
20
<PAGE>
GARDEN RIDGE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FIFTY-TWO WEEK PERIODS ENDED
-----------------------------------------
JANUARY 28, JANUARY 26, JANUARY 25,
1996 1997 1998
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................................................. $ 6,878 $ 8,036 $ 11,433
-------- -------- --------
Adjustments to reconcile net income to net cash provided by
(used in) operating activities --
Depreciation and amortization of property and equipment .............. 2,501 4,797 6,629
Amortization of intangibles and deferred charges ..................... 612 717 735
Deferred income tax (benefit) provision .............................. (121) 268 (187)
(Increase) decrease in assets -
Marketable securities ................................................ -- (5,168) 2,018
Accounts receivable .................................................. (576) (819) (60)
Notes receivable ..................................................... 1,619 2,582 --
Inventories .......................................................... (11,284) (15,767) (14,156)
Prepaid expenses ..................................................... 169 (1,836) 458
Deposits and other ................................................... 1,210 (263) 321
Intangibles and deferred charges ..................................... (2,449) (15) --
Increase in liabilities -
Accounts payable ..................................................... 2,564 4,448 2,437
Accrued liabilities .................................................. 1,277 822 4,152
Federal income taxes payable ......................................... 1,659 617 3,593
-------- -------- --------
Total adjustments .................................................. (2,819) (9,617) 5,940
-------- -------- --------
Net cash provided by (used in) operating activities ................ 4,059 (1,581) 17,373
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ................................................... (13,188) (18,067) (11,673)
Sale (purchase) of land held for sale/leaseback ........................ -- (5,498) 5,735
-------- --------
Net cash used in investing activities ................................ (13,188) (23,565) (5,938)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under revolving credit agreement ............................ 4,625 -- --
Payments on revolving credit agreement ................................. (6,275) -- --
Payments on term loan .................................................. (80) -- --
Payments on subordinated notes payable ................................. (15,000) -- --
Payments on notes payable .............................................. (100) (100) (100)
Sale of common and preferred stock, net of offering costs .............. 39,495 48,741 --
Common stock reissued from treasury .................................... 16 40 5
Redemption of preferred stock and cumulative dividends ................. (7,498) -- --
Proceeds from exercise of stock options and warrants ................... 1,373 1,415 752
-------- -------- --------
Net cash provided by financing activities ............................ 16,556 50,096 657
-------- -------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS ................................ 7,427 24,950 12,092
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ......................... 117 7,544 32,494
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ............................... $ 7,544 $ 32,494 $ 44,586
======== ======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for --
Interest............................................................. $ 755 $ 67 $ 59
Income taxes ......................................................... 2,692 3,010 2,775
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
21
<PAGE>
GARDEN RIDGE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS AND CONSOLIDATION:
The consolidated financial statements include the accounts of Garden Ridge
Corporation (a Delaware corporation) and its wholly owned subsidiaries (the
Company or Garden Ridge). Significant intercompany accounts and transactions are
eliminated in consolidation.
The Company operates 21 retail megastores in ten states, primarily in
Texas and the southeastern United States, which sell a broad assortment of
decorative home accessories, seasonal products and crafts.
The Company's business is seasonal, with its highest sales levels
occurring in its fourth fiscal quarter. This period, which includes the
Christmas selling season, accounted for approximately 34 percent, 34 percent and
35 percent of the Company's sales for stores open the entire fiscal year, and
approximately 80 percent, 80 percent and 84 percent of the Company's income from
operations (including income from stores not open for the entire fiscal year) in
fiscal 1996, 1997 and 1998, respectively. A significant adverse trend in sales
for the fourth fiscal quarter would have a material adverse effect on the
Company's results of operations for the full year.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
USE OF ESTIMATES
The preparation of financial statements in accordance with generally
accepted accounting principles requires the use of certain estimates by
management in determining the Company's assets, liabilities, revenues and
expenses. Actual results could differ from those estimates.
FISCAL YEAR
The fiscal year of the Company ends on the last Sunday in January of each
calendar year, resulting in either a 52- or 53-week fiscal year.
RECLASSIFICATION
Certain reclassifications have been made to the fiscal 1996 and 1997
financial statements to conform with the fiscal 1998 presentation.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with original
maturities of three months or less at the time of purchase to be cash
equivalents.
MARKETABLE SECURITIES
The Company accounts for marketable securities in accordance with
Statement of Financial Accounting Standard (SFAS) No. 115, "Accounting for
Certain Investments in Debt and Equity Securities". All of the Company's
marketable securities are classified as held to maturity securities. At January
25, 1998, the carrying value approximated fair value.
INVENTORIES
Inventories are stated at the lower of cost or market, determined by the
weighted average cost method.
22
<PAGE>
GARDEN RIDGE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Depreciation and amortization
are determined using the straight-line method for financial reporting purposes.
The amortization of leasehold improvements is based on the shorter of the term
of the respective lease or the estimated useful life of the related improvement.
Depreciation of all other tangible assets is based on the estimated useful life
of the respective asset, which is five years for substantially all assets.
Expenditures for major renewals and betterments are capitalized while
maintenance and repairs are expensed. When property is retired or otherwise
disposed of, the related cost and accumulated depreciation are removed from the
accounts and any resulting gain or loss is reflected in the consolidated
statements of operations.
INTANGIBLES AND DEFERRED CHARGES
Excess cost over net assets acquired is amortized on a straight-line basis
over 20 years. Deferred loan costs are amortized on the effective interest
method over the term of the loan. Management continually evaluates the
realization of its intangible assets based upon projected income from operations
over the lives of such assets. Management believes all such assets are fully
realizable. However, in the event of any impairment, such intangibles would be
charged to expense and reflected as a direct write-down in the balance sheet in
the period such impairment is deemed to have occurred.
COST OF SALES
Included in cost of sales are cost of merchandise sold, occupancy and
buying costs.
PREOPENING COSTS
The Company capitalizes certain direct costs incurred in conjunction with
site selection for future store locations and with the commencement of each
store's operations. Amounts capitalized are expensed in the month the store
commences operations. As of January 26, 1997, and January 25, 1998 there were no
such preopening costs that needed to be expensed. Included in prepaid expenses
in the accompanying consolidated balance sheets as of January 26, 1997, and
January 25, 1998, were $1,473,000 and $1,400,000, respectively, related to
capitalizable costs incurred in conjunction with the opening of new stores, most
of which will be recorded to property and equipment when the stores are
completed.
STOCK SPLIT
In conjunction with the Company's initial public offering of its common
stock on May 16, 1995, the Company's board of directors approved a 4.5-for-1
stock split. On June 28, 1996, the Company's board of directors approved a
2-for-1 stock split. The impact of both stock splits has been reflected in the
Company's accompanying consolidated financial statements and notes thereto.
REALIZATION OF LONG-LIVED ASSETS
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of," requires that long-lived assets and
certain identifiable intangibles to be held and used by an entity be reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. The adoption of SFAS No. 121
on January 29, 1996, did not materially impact the Company's results of
operations.
23
<PAGE>
GARDEN RIDGE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. INTANGIBLES AND DEFERRED CHARGES:
Intangible assets and deferred charges consists of the following at
January 26, 1997, and January 25, 1998 (in thousands):
JANUARY JANUARY
26, 25,
1997 1998
---------- -----------
Cost in excess of net assets acquired... $ 11,708 $ 11,708
Deferred loan costs..................... 849 849
Noncompetition agreement................ 500 500
---------- -----------
13,057 13,057
Less - Accumulated amortization......... 2,868 3,603
========== ===========
$ 10,189 $ 9,454
========== ===========
The Company entered into an asset purchase agreement in December 1995
whereby the Company paid $2.3 million to acquire store fixtures, equipment and
goodwill associated with a store in Houston, Texas and entered into a
noncompetition agreement with the seller for $500,000. As of January 26, 1997
and January 25, 1998, the noncompetition agreement has an outstanding liability
of $300,000 and $200,000, respectively, which is to be paid in annual increments
of $100,000. Accordingly, $200,000 and $100,000 of this liability is included in
long term debt in the consolidated balance sheets at January 26, 1997 and
January 25, 1998, respectively.
4. DEBT:
Long term debt included term loans which were payable through October
1996, with interest payable monthly at 7.9% through 16.8%. The unpaid balance
was paid in full in November 1996.
The Company has a line-of-credit agreement, as amended (Line of Credit),
which provides for a commitment not to exceed the greater of $15.0 million or
the Company's borrowing base, as defined, reduced by the aggregate amount of
outstanding letters of credit and bears interest at the prime rate or, at the
Company's option, LIBOR plus either 1.75 percent or 2.25 percent depending upon
certain financial conditions. The Line of Credit extends through June 30, 1998.
The Company is required to pay an annual commitment fee of 0.375 percent per
annum on the unused portion of the Line of Credit. During fiscal years 1997 and
1998 the Company made no borrowings under the Line of Credit and at January 25,
1998, there was approximately $15.0 million of available borrowings.
Restrictions under the Line of Credit and term loans include, among other
things, limits on capital expenditures, annual store openings, incurrence of
additional indebtedness and mergers or consolidations and certain financial
covenants.
5. FEDERAL INCOME TAXES:
INCOME TAXES
The Company accounts for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes". This standard provides the method for determining
the appropriate asset and liability for deferred taxes which are computed by
applying applicable tax rates to temporary (timing) differences. Therefore,
expenses recorded for financial statement purposes before they are deducted for
tax purposes create temporary differences which give rise to deferred tax
assets. Expenses deductible for tax purposes before they are recognized in the
financial statements create temporary differences which give rise to deferred
tax liabilities.
The Company and its subsidiaries file a consolidated tax return. Deferred
income taxes are provided in recognition of timing differences in reporting
certain transactions for financial reporting and income tax reporting purposes.
24
<PAGE>
GARDEN RIDGE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The provision (benefit) for income taxes is as follows (in thousands):
FOR THE FIFTY-TWO WEEK PERIODS ENDED
-------------------------------------
JANUARY JANUARY JANUARY
28, 26, 25,
1996 1997 1998
----------- ----------- -----------
Current.................... $4,511 $4,351 $6,566
Deferred................... (121) 268 (187)
=========== =========== ===========
$4,390 $4,619 $6,379
=========== =========== ===========
The primary reasons for the difference between income taxes computed by
applying the statutory federal income tax rate and the provision for income
taxes in the financial statements are as follows:
FOR THE FIFTY-TWO WEEK PERIODS ENDED
-------------------------------------
JANUARY JANUARY JANUARY
28, 26, 25,
1996 1997 1998
----------- ----------- -----------
Statutory federal rate......... 35% 35% 35%
State taxes and expenses not
deductible for tax purposes.... 4 2 1
=========== =========== ===========
39% 37% 36%
=========== =========== ===========
The significant components of the deferred tax assets and liabilities are
as follows (in thousands):
JANUARY JANUARY
26, 25,
1997 1998
------ ------
Deferred tax assets -
Inventory .................................. $ 759 $1,030
Deferred rent .............................. 280 451
Accruals ................................... 125 556
Other ...................................... 23 60
------ ------
Total deferred tax assets ................ 1,187 2,097
Deferred tax liabilities -
Depreciation ............................... 106 873
Prepaid expenses ........................... 405 361
Other ...................................... 233 233
------ ------
Total deferred tax liabilities ........... 744 1,467
------ ------
Net deferred tax assets ...................... $ 443 $ 630
====== ======
A valuation allowance is provided when it is more likely than not that
some portion of the deferred tax assets will not be realized. Management of the
Company believes the net deferred tax assets will be utilized in full based on
the nature of the assets and the Company's estimates of the timing of reversals
of temporary differences and on the expected generation of taxable income before
such reversals.
25
<PAGE>
GARDEN RIDGE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. PREFERRED STOCK AND COMMON STOCKHOLDERS' EQUITY:
In May 1995, the Company completed an initial public offering of common
stock pursuant to which the Company sold 5,800,000 shares of common stock at the
price of $7.50 per share (the IPO). Net proceeds of the IPO were approximately
$39.5 million. Net proceeds of the IPO were used as follows: (i) $7.5 million to
redeem all of the Company's Preferred Shares, including payment of the accrued
dividends, (ii) $15.0 million to repay the Company's Floating Rate Notes and
(iii) $6.0 million to repay the Company's lines of credit.
The Company completed a secondary public offering of its common stock on
April 30, 1996 (the Secondary Offering), pursuant to which the Company sold
2,000,000 shares of common stock at the price of $25.88 per share (including
420,000 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.
Although there are no shares of preferred stock outstanding and the
Company has no present plans to issue any shares of preferred stock, the Amended
and Restated Certificate of Incorporation authorizes the Board, without further
action of the stockholders of the Company, to issue up to 2,500,000 shares of
preferred stock at $.01 par value
7. EARNINGS PER SHARE
The Financial Accounting Standards Board issued SFAS No. 128, "Earnings
Per Share" in February 1997. Implementation of SFAS No. 128 is required for
periods ending after December 15, 1997. SFAS No. 128 requires dual presentation
of earnings per share (EPS); basic EPS and diluted EPS. Basic EPS excludes
dilution and is computed by dividing net income by the weighted average number
of common shares outstanding for the period. Diluted EPS reflects the potential
dilution that could occur if securities or other contracts to issue common stock
were exercised or converted into common stock. For purposes of this calculation
outstanding stock options are considered common stock equivalents. The following
table summarizes the basic EPS and diluted EPS computations for fiscal 1996,
1997 and 1998:
<TABLE>
<CAPTION>
JANUARY JANUARY JANUARY
28, 26, 25,
1996 1997 1998
------- ------- -------
(In thousands, except per share data)
<S> <C> <C> <C>
Basic earnings per share:
Net income available to common stockholders ..... $ 6,725 $ 8,036 $11,433
------- -------
-------
Weighted average number of common shares ........ 13,083 17,158 17,904
======= ======= =======
Basic earnings per share ........................ $ 0.51 $ 0.47 $ 0.64
======= ======= =======
Diluted earnings per share:
Net income available to common stockholders ..... $ 6,725 $ 8,036 $11,433
------- ------- -------
Weighted average number of common shares ........ 13,083 17,158 17,904
Stock options and other ......................... 1,432 767 569
------- ------- -------
Adjusted weighted average number of common shares 14,515 17,925 18,473
------- ------- -------
Diluted earnings per share ........................... $ 0.46 $ 0.45 $ 0.62
======= ======= =======
</TABLE>
26
<PAGE>
GARDEN RIDGE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. STOCK OPTIONS AND WARRANTS:
Pro forma information regarding net income and earnings per share is
required by SFAS No. 123, "Accounting for Stock-Based Compensation", and has
been determined as if the Company has accounted for its stock options under the
fair value method as provided therein. The fair value of each option grant is
estimated on the date of grant using the Black-Scholes option pricing model with
the following weighted average assumptions used for options issued in fiscal
1997 and fiscal 1998, respectively: risk-free interest rate of 6.6 percent and
6.5 percent; expected lives of eight years and seven years; expected volatility
of 43 percent and 27 percent; and no expected dividends.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. Set forth
below is a summary of the Company's net income and earnings per share as
reported and pro forma as if the fair value based method of accounting defined
in SFAS No. 123 had been applied. The pro forma information is not meant to be
representative of the effects of reported net income for future years because,
as provided by SFAS No. 123, only the effects of awards granted after January
30, 1995, are considered in the pro forma calculation.
JANUARY 26, 1997 JANUARY 25, 1998
------------------- -------------------
AS PRO AS PRO
REPORTED FORMA REPORTED FORMA
-------- ----- -------- -----
Net income (in thousands)...... $8,036 $7,763 $11,433 $11,131
Earnings per share............. $ 0.45 $ 0.43 $ 0.62 $ 0.60
In August 1992, the Company adopted the 1992 stock option plan, as amended
(the 1992 Plan), which expired upon the public offering of the Company's common
stock in May 1995. The 1992 Plan permitted the Company to grant incentive and
nonqualified stock options to purchase 1,130,822 shares of the Company's common
stock to key executives and employees. The exercise price of incentive stock
options is not less than the fair value of the shares at the date of grant, and
the exercise price of nonqualified stock options is determined by the
compensation committee of the Company's board of directors, subject to certain
restrictions. Options presently outstanding vest at the rate of 33-1/3 percent
per year beginning one year after the date of grant and expire 10 years from the
date of grant.
A summary of stock option activity under the 1992 Plan follows:
WEIGHTED
OPTIONS AVERAGE
OUTSTANDING EXERCISE PRICE
---------- ---------------
Balance at January 29, 1995.................. 1,070,972 $0.89
Exercised............................ (145,894) $0.24
Canceled............................. (1,950) $2.22
----------
Balance at January 28, 1996.................. 923,128 $0.99
Exercised............................ (336,962) $0.16
Canceled............................. (3,974) $2.84
----------
Balance at January 26, 1997.................. 582,192 $1.48
Exercised............................ (32,776) $3.16
Canceled............................. (976) $2.22
==========
Balance at January 25, 1998.................. 548,440 $1.37
==========
At January 25, 1998, there were no shares reserved for future stock option
grants under the 1992 Plan and options to acquire 548,440 shares were
exercisable under the 1992 Plan.
27
<PAGE>
GARDEN RIDGE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In April 1994, the Company adopted the 1994 Stock Option Plan (the 1994
Plan). The 1994 Plan permits the Company to grant incentive and nonqualified
stock options to purchase 519,176 shares of the Company's common stock to key
executives and employees. The exercise price of incentive stock options will not
be less than the fair value of the shares at the date of grant and the exercise
price of nonqualified stock options will be determined by the compensation
committee of the Company's board of directors, subject to certain restrictions.
The vesting and terms of each stock option will be determined by the
compensation committee, subject to certain limitations. The 1994 Plan expires 10
years after its effective date.
A summary of stock option activity under the 1994 Plan follows:
WEIGHTED
OPTIONS AVERAGE
OUTSTANDING EXERCISE PRICE
---------- ---------------
Balance at January 29, 1995.................. 67,500 $ 2.33
Granted.............................. 32,724 $ 6.65
Canceled............................. (2,924) $ 3.33
----------
Balance at January 28, 1996.................. 97,300 $ 3.28
Granted.............................. 160,000 $ 13.43
Exercised............................ (21,198) $ 2.39
Canceled............................. (4,000) $ 16.44
----------
Balance at January 26, 1997.................. 232,102 $ 10.39
Granted.............................. 176,000 $ 12.05
Exercised............................ (1,950) $ 3.33
Canceled............................. (25,000) $ 10.78
==========
Balance at January 25, 1998.................. 381,152 $ 9.66
==========
At January 25, 1998, there were 114,876 shares reserved for future stock
option grants and 172,571 shares were exercisable under the 1994 Plan.
The exercise price of the options outstanding under the 1992 Plan and 1994
Plan at January 25, 1998 range from $0.11 to $3.33 and $2.33 to $18.75,
respectively. The weighted average contractual life of options outstanding at
January 25, 1998 was five years and six years, respectively for both the 1992
Plan and 1994 Plan. The weighted average fair value of options granted in fiscal
1997 and 1998 was $8.84 and $5.29 under the 1994 Plan.
In fiscal 1994, the Company issued warrants to purchase 450,000 shares of
common stock to certain investors and a warrant to purchase 194,400 shares of
common stock to the Lessor in connection with a lease agreement for retail
space. Both of the warrants were exercisable at a price of $3.33 per share. The
Lessor exercised his warrants in May 1995. The remaining unexercised warrants
issued to the investors were exercised in full during fiscal year 1998.
During fiscal 1996, the Company issued warrants to purchase 135,000 shares
of common stock to outside parties for $5.00 per share. The outside parties
exercised 45,000 shares in April 1996, and 90,000 shares in May 1997.
No value was assigned to these warrants in the accompanying consolidated
financial statements as their value as of the valuation date was deemed to be DE
MINIMIS.
The Non-Employee Directors Stock Option Plan adopted in fiscal 1997
permits the issuance of up to 70,000 shares of common stock to directors who are
not employees of the Company. Under this plan 5,000 options to purchase shares
of common stock at the fair market value on the date of grant are granted to
each non-employee director annually. As of January 26,1997, and January 25, 1998
options for 25,000 and 57,500 shares, respectively, had been granted to
non-employee directors under this Plan.
28
<PAGE>
GARDEN RIDGE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. EMPLOYEE STOCK PURCHASE PLAN:
In May 1996, the stockholders approved the Employee Stock Purchase Plan and
reserved 100,000 shares of common stock for issuance thereunder. The plan
permits full-time employees who meet certain requirements to purchase common
stock through payroll deductions (which cannot exceed 10% of each employee's
compensation) at 85% of the fair market value at the end of each calendar
quarter. The Plan became effective on January 1, 1997.
10. COMMITMENTS AND CONTINGENCIES:
LEASES
The Company leases its retail facilities pursuant to noncancelable
operating leases that expire at various dates through 2019. A number of the
leases have renewal options for various periods of time at the option of the
Company. Total rental expense included in the accompanying consolidated
financial statements for the period ended January 28, 1996, January 26, 1997,
and January 25, 1998, is $7,260,000, $12,530,000 and $17,054,000, respectively.
The Company is responsible for taxes, utilities, insurance and repairs and
maintenance of each of the retail properties. Certain leases require the payment
of contingent rentals based on a specified percentage of a store's gross sales,
as defined and subject to certain limitations. To date, no contingent rent
amounts have been paid.
Future minimum rentals required under the operating leases are as follows
(in thousands):
Fiscal year ending ---
1999.................................... $ 17,830
2000.................................... 17,212
2001.................................... 17,524
2002.................................... 17,090
2003.................................... 16,836
Thereafter.............................. 199,995
==========
$286,487
==========
INSURANCE
The Company is fully insured for claims over certain deductible amounts.
The insurance provides for payment of accidental death and medical claims of
employees as specified within the policies. Historically, the Company has not
incurred any significant losses on workers' compensation or employee medical
insurance claims, and management believes the Company's reserves are sufficient
to cover the Company's liabilities for claims incurred.
LITIGATION
The Company is involved in various legal proceedings incidental to the
conduct of its business. The Company currently is not engaged in any legal
proceedings that are expected to have a material adverse effect on the Company's
results of operations or financial position.
11. RELATED-PARTY TRANSACTIONS:
EMPLOYMENT AGREEMENT
On July 16, 1992, the Company entered into an employment agreement, as
amended, with an officer and stockholder of the Company. The employment
agreement, as amended, expired on July 15, 1997.
29
<PAGE>
GARDEN RIDGE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FINANCIAL ADVISORY CONSULTING AGREEMENTS
In July 1996, the Company entered into a five-year financial advisory
agreement with a stockholder. The agreement provides for an annual fee of
$50,000 and reimbursement of out-of-pocket expenses.
OTHER
In fiscal 1996, 1997, and 1998, the Company paid approximately $778,382,
$996,024 and $455,484, respectively, to a supplier for the design, construction
and installation of its signs. The owner of the supplier is the spouse of an
officer of the Company.
Two officers of the Company were minority stockholders of a long distance
telephone service provider, which provided long distance services to the
Company. In fiscal 1996, the Company paid approximately $80,000 for this
company's service. During fiscal year 1997 and 1998, the Company obtained no
services from the long distance telephone service provider.
The Company believes the foregoing transactions were on terms at least as
favorable to the Company as those which could have been obtained elsewhere.
12. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED):
<TABLE>
<CAPTION>
FISCAL QUARTER ENDED
--------------------------------------------
APRIL JULY OCTOBER JANUARY
28, 28, 27, 26,
1996 1996 1996 1997
--------- -------- -------- --------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Sales ............................................. $39,220 $45,116 $55,631 $85,348
Gross profit ...................................... 14,123 16,221 20,511 30,406
Income from operations ............................ 865 588 740 8,991
Net income ........................................ 586 679 670 6,101
Net income per common share, diluted .............. $ .03 $ .04 $ .04 $ .33
Weighted average shares outstanding, diluted ...... 16,405 18,457 18,426 18,358
</TABLE>
<TABLE>
<CAPTION>
FISCAL QUARTER ENDED
---------------------------------------
APRIL JULY OCTOBER JANUARY
27, 27, 26, 25,
1997 1997 1997 1998
-------- ------- ------- --------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Sales ............................................. $59,493 $63,634 $71,122 $110,483
Gross profit ...................................... 20,600 21,203 26,360 41,279
Income from operations ............................ 355 799 1,492 13,747
Net income ........................................ 470 682 1,043 9,238
Net income per common share, diluted .............. $ .03 $ .04 $ .06 $ .50
Weighted average shares outstanding, diluted ...... 18,355 18,473 18,521 18,548
</TABLE>
30
EXHIBIT 10.2
GARDEN RIDGE CORPORATION
AMENDED AND RESTATED
1994 STOCK OPTION PLAN
Effective June 3, 1997
ARTICLE I
---------
PURPOSE
The purpose of this Amended and Restated 1994 Stock Option Plan (the
"Plan") of Garden Ridge Corporation, a Delaware corporation (the "Company"), is
to secure for the Company and its stockholders the benefits arising from stock
ownership by selected executive employees and other key employees of the Company
or its subsidiaries as the Board of Directors of the Company (the "Board"), or a
Committee constituted for such purpose, may from time to time determine. The
Plan will provide a means whereby (i) such employees may purchase shares of the
common stock, $0.01 par value per share (the "Common Stock"), of the Company
pursuant to stock options which will qualify as "incentive stock options" under
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code") and
(ii) such employees may purchase shares of the Common Stock of the Company
pursuant to "non-incentive" or "non-qualified" stock options.
ARTICLE II
----------
ADMINISTRATION
The Plan shall be administered by the Stock Option Committee (the
"Committee"), which shall at all times consist of not less than two members of
the Board, and all members of the Committee shall be "disinterested persons"
within the meaning of Rule 16b-3 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as amended (the "1934 Act"). All members of the
Committee shall be selected by (and serve at the pleasure of) the Board. Subject
to the express provisions of the Plan and the policies of each stock exchange on
which any of the Company's stock may at any time be traded, the Committee shall
have plenary authority, in its discretion, to recommend to the Board the
individuals within the class set forth in ARTICLE IV to whom, and the time and
price per share at which, stock options shall be granted, the number of shares
to be subject to each stock option and the other terms and provisions of their
respective Agreements (as defined herein), which need not be identical. In
making such recommendations and determinations, the Committee may take into
account the nature of the services rendered by the respective employees, their
present and potential contributions to the Company's success and such other
factors as the Committee in its discretion shall deem relevant.
Subject to the express provisions of the Plan, the Committee shall have
authority (i) to construe and interpret the Plan, (ii) to define the terms used
therein, (iii) to prescribe, amend and rescind rules and regulations relating to
the Plan, (iv) to recommend to the Board the terms
<PAGE>
and provisions of the respective stock options, (v) to approve and determine the
duration of leaves of absence which may be granted to participants without
constituting a termination of their employment for the purposes of the Plan, and
(vi) to make all other determinations necessary or advisable for the
administration of the Plan. All determinations and interpretations made by the
Committee shall be binding and conclusive on all participants in the Plan and
their legal representatives and beneficiaries. The Committee shall hold meetings
at such times and places as it may determine. Acts by the majority of the
Committee or acts reduced to or approved in writing by a majority of the members
of the Committee shall be the valid acts of the Committee. From time to time,
the Board may increase the size of the Committee and appoint additional members
thereof, remove members (with or without cause), and appoint new members in
substitution therefore, or fill vacancies however caused, subject to the
requirements that the members of the Committee shall be "disinterested persons"
as described above and that there always be at least two members of the
Committee. No member of the Committee shall be liable for any action, failure to
act, determination or interpretation made in good faith with respect to the Plan
or any transaction under the Plan.
ARTICLE III
-----------
SHARES SUBJECT TO PLAN AND DURATION OF PLAN
Under the Plan, the Board may, but only upon recommendation of the
Committee, grant to eligible persons incentive stock options (as defined in the
Code) and/or non-qualified stock options, to purchase up to but not exceeding an
aggregate amount of 519,176 shares of the Company's Common Stock (subject to
adjustment as provided in ARTICLE X). Shares subject to stock options under the
Plan may be either authorized and unissued shares or issued shares that have
been acquired by the Company and held in its treasury, in the discretion of the
Board. When stock options have been granted under the Plan and have lapsed
unexercised or partially unexercised or have been surrendered for cancellation
by the optionee thereof, the unexercised shares which were subject thereto may
be reoptioned under the Plan. No stock options shall be granted after April
2004.
ARTICLE IV
----------
ELIGIBILITY AND PARTICIPATION
To the fullest extent permitted by applicable laws, all executive
employees and other key employees of the Company or of any subsidiary
corporation (as defined in Section 424(f) of the Code) shall be eligible for
selection to fully participate in the Plan; provided, however, that no member of
the Committee shall be entitled to receive a stock option under this Plan while
serving as a member of the Committee. Directors of the Company who are not
regular employees of the Company are not eligible to participate in the Plan. An
individual who has been granted an option may, if such individual is otherwise
eligible, be granted an additional option or options if the Board or the
Committee shall so determine, subject to the other provisions of the Plan.
<PAGE>
ARTICLE V
---------
TERMS AND CONDITIONS OF STOCK OPTIONS
Each stock option granted under the Plan shall be evidenced by a stock
option agreement (the "Agreement"), the form of which shall have been approved
by the Committee. The Agreement shall be executed by the Company and the
optionee and shall set forth the terms and conditions of the stock option, which
terms and conditions shall include, but not be limited to the following:
(a) OPTION PRICE. The option price shall be determined by the
Committee, but shall not in any event be less than the par value of the Common
Stock.
(b) TERM OF STOCK OPTION. The term of the stock option shall be
selected by the Committee, but in no event shall such term exceed ten years from
the grant thereof. Each stock option shall be subject to earlier termination as
hereinafter provided.
(c) TRANSFERABILITY. The stock options granted hereunder shall
not be transferable other than by will or operation of the laws of descent and
distribution or pursuant to a qualified domestic relations order, as defined in
the Code or Title I of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), or the rules thereunder. During the lifetime of the optionee,
stock options granted hereunder shall be exercisable only by the optionee, the
optionee's guardian or legal representative.
(d) VESTING. The Committee shall have complete discretion in
determining when stock options granted hereunder are to vest; provided, however,
that the sale of shares of Common Stock issued upon the exercise of a stock
option by any person subject to Section 16 of the 1934 Act shall not be allowed
until at least six months after the grant of the stock option. Such
determination for each stock option is to be made prior to or at the time that
stock option is granted and shall be set forth in each Agreement.
(e) TERMINATION OF EMPLOYMENT. In the event of an optionee's
termination of employment with the Company for any reason other than death, all
stock options shall terminate to the extent they were not exercisable at the
date of the optionee's termination, but to the extent they were then exercisable
by the optionee, the optionee shall be entitled to exercise such options for a
period of 30 days from the date of the optionee's termination. Upon the
termination of an optionee's employment by reason of death, the optionee's stock
options shall terminate to the extent they were not exercisable at the date of
the optionee's death, but to the extent they were then exercisable by the
optionee, the optionee's estate or the beneficiaries thereof shall be entitled
to exercise such options for a period of one year from the date of the
optionee's death but not thereafter. Notwithstanding any other provisions of
this subparagraph (e), no stock option shall be exercised after the expiration
of ten years from the date such stock option is granted.
<PAGE>
(f) OTHER CONDITIONS. At its sole discretion, the Committee may
impose other conditions upon the stock options granted hereunder, so long as
those conditions do not conflict with any other provisions of the Plan. Such
conditions may include, by way of illustration, but not by way of limitation,
percentage limitations upon the exercisability of stock options granted
hereunder.
ARTICLE VI
----------
INCENTIVE STOCK OPTIONS
The Committee, in recommending and granting stock options hereunder,
shall have the discretion to determine that certain stock options shall be
incentive stock options, as defined in Section 422 of the Code, while other
stock options shall be non-qualified stock options. Neither the members of the
Committee, the members of the Board nor the Company shall be under any
obligation or incur any liability to any person by reason of the determination
by the Committee or the Board whether a stock option granted under the Plan
shall be an incentive stock option or a non-qualified stock option. The
provisions of this ARTICLE VI shall be applicable to all incentive stock options
at any time granted or outstanding under the Plan.
All incentive stock options granted or outstanding under the Plan shall
be granted and held subject to and in compliance with terms and conditions
previously set forth in ARTICLES II, III, IV AND V hereof and, in addition,
subject to and in compliance with the following further terms and conditions:
(a) The per share option price of all incentive stock options
shall not be less than 100% of the Fair Market Value (as defined below) of one
share of the Company's Common Stock at the time the stock option is granted
(notwithstanding any provision of ARTICLE V hereof to the contrary);
(b) No incentive stock option shall be granted to any person who,
at the time of the grant, owns stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company or any subsidiary
corporation of the Company; provided, however, that this ownership limitation
will be waived if at the time the option is granted the per share option price
is at least 110% of the Fair Market Value of one share of the Company's Common
Stock and such stock option by its terms is not exercisable after the expiration
of five years from the date such option is granted;
(c) An incentive stock option shall not be transferable other
than by will or the laws of descent and distribution, and shall be exercisable
during the lifetime of the optionee, only by the optionee; and
(d) The aggregate Fair Market Value of all shares of Common Stock
(determined at the time of the grant of the stock option) with respect to which
incentive stock options are exercisable for the first time by any optionee
during any one calendar year shall not exceed $100,000.
<PAGE>
ARTICLE VII
-----------
EXERCISE OF STOCK OPTIONS
Each stock option granted hereunder may be exercised in such
installments during the period prior to its expiration date as the Committee
shall determine; provided that, unless otherwise determined by the Committee, if
the optionee shall not in any given installment period purchase all of the
shares which the optionee is entitled to purchase in such installment period,
then the optionee's right to purchase any shares not purchased in such
installment period shall continue until the expiration date or sooner
termination of the optionee's stock option.
The purchase price of the shares of Common Stock acquired upon exercise
of a stock option shall be paid in full at the time of exercise in cash or by
certified or cashier's check payable to the order of the Company, or, upon
receipt of all required regulatory approvals, if any, by delivery of shares of
Common Stock of the Company already owned by, and in the possession of, the
stock option holder having a Fair Market Value equal to such stock option price,
or any combination thereof. Shares of Common Stock used to satisfy the exercise
price of a stock option shall be valued at their Fair Market Value determined as
of the close of business on the date such stock option is exercised, or if such
date is not a business day, on the business day immediately preceding the date
of exercise. Deliveries of cash, shares and notices to the Company shall be
directed to the Secretary of the Company.
No stock option granted hereunder shall be exercisable unless the Plan
and all shares issuable on the exercise thereof have been registered under the
Securities Act of 1933, as amended (the "1933 Act"), and all other applicable
securities laws, and there is available for delivery a prospectus meeting the
requirements of Section 10 of the 1933 Act, or the Company shall have first
received assurance that registration under the 1933 Act and all other applicable
securities laws is not required in connection with such issuance. At the time of
exercise, if the shares with respect to which the stock option is being
exercised have not been registered under the 1933 Act and all other applicable
securities laws, the Company may require the optionee to provide the Company
whatever written assurance counsel for the Company may require that the shares
are being acquired for investment and not with a view to the distribution
thereof, and that the shares will not be disposed of without the written opinion
of counsel acceptable to the Company that registration under the 1933 Act and
all other applicable securities laws is not required. Share certificates issued
to the optionee upon exercise of the stock option shall bear a legend to the
foregoing effect to the extent counsel for the Company deems it advisable.
ARTICLE VIII
------------
FAIR MARKET VALUE OF COMMON STOCK
For purposes of the Plan, the term "Fair Market Value" on any date shall
mean (i) if the Common Stock is not listed or admitted to trade on a national
securities exchange and if bid and asked prices for the Common Stock are not
furnished through NASDAQ or a similar organization as described below, the value
established by the Committee, in its sole discretion, for purposes of the Plan;
(ii) if the Common Stock is listed or admitted to trade on a national
<PAGE>
securities exchange or national market system, the closing price of the Common
Stock, as published in THE WALL STREET JOURNAL, so listed or admitted to trade
on such date or, if there is no trading of the Common Stock on such date, then
the closing price of the Common Stock on the next preceding date on which there
was trading in such shares; or (iii) if the Common Stock is not listed or
admitted to trade on a national securities exchange or national market system,
the mean between the bid and asked price for the Common Stock on such date, as
furnished by the National Association of Securities Dealers, Inc. through NASDAQ
or a similar organization if NASDAQ is no longer reporting such information. In
addition to the above rules, Fair Market Value shall be determined without
regard to any restriction other than a restriction which, by its terms, will
never lapse.
ARTICLE IX
----------
WITHHOLDING TAX
Upon (i) the disposition by an employee or other person of shares of
Common Stock acquired pursuant to the exercise of an incentive stock option
granted pursuant to the Plan within two years of the granting of the incentive
stock option or within one year after exercise of the incentive stock option, or
(ii) the exercise of "non-incentive" or "non-qualified" options, the Company
shall have the right to require such employee or such other person to pay the
Company the amount of any taxes (including but not limited to any federal, state
and local income taxes, old-age, survivors, and disability insurance premiums
and taxes, medicare taxes, FICA taxes and any other withholding taxes) which the
Company may be required to withhold with respect to such shares.
ARTICLE X
---------
ADJUSTMENTS
(a) ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. Subject to any
required action by the Company's directors and stockholders, the number of
shares provided for in each outstanding stock option and the price per share
thereof, and the number of shares provided for in the Plan, shall be
proportionately adjusted for any increase or decrease in the number of issued
shares of the Company's Common Stock resulting from a subdivision or
consolidation of shares or the payment of a stock dividend (but only on the
Common Stock), a stock split, a reverse stock split, or any other increase or
decrease in the number of such shares effected without receipt of consideration
by the Company, and shall also be proportionately adjusted in the event of a
spin-off, spin-out, or other distribution of assets to stockholders of the
Company, to the extent necessary to prevent dilution of the interests of
grantees pursuant to the Plan or of the other stockholders of the Company, as
applicable. If the Company shall engage in a merger, consolidation,
reorganization or recapitalization, each outstanding stock option (or if such
transaction involves less than all of the shares of the Company's Common Stock,
then a number of stock options proportionate to the number of such involved
shares), shall become exercisable for the securities and other consideration to
which a holder of the number of shares of the Company's Common Stock subject to
each such stock option would have been entitled to receive in any such merger,
consolidation, reorganization or recapitalization.
<PAGE>
(b) SIGNIFICANT EVENT. In the event of a potential merger or
consolidation involving the Company regardless of whether the Company is the
surviving entity of such merger or consolidation, a potential liquidation or
dissolution of the Company, a potential sale or other disposition by the Company
of all or substantially all of its assets, a potential sale or other disposition
by the stockholders of the Company of all or substantially all of the
outstanding Common Stock to one purchaser, or an underwritten public offering of
the Common Stock of the Company (any such merger, consolidation, liquidation,
dissolution, sale or offering being referred to herein as a "Significant
Event"), then the Company, upon obtaining approval of the Board, may (but shall
not be required to) waive any and all restrictions on the vesting of optionees'
rights under stock options granted pursuant to the Plan by providing written
notice thereof to the optionees. If the Company, upon obtaining approval of the
Board, elects to waive any such vesting restrictions, the optionees' rights
under their respective stock options shall vest in accordance with the terms of
such waiver, subject to the actual occurrence of the Significant Event. In
consideration for any such waiver of vesting restrictions by the Company, the
Company shall have the option (the "Termination Option") to require all
optionees to exercise their vested (determined after taking into account any
waiver of vesting restrictions) but unexercised stock options upon the
occurrence of the Significant Event, by providing written notice to all
optionees at least 10 days before the occurrence of the Significant Event. Any
exercise by an optionee in these circumstances may be conditioned upon the
occurrence of the Significant Event. If the Company exercises the Termination
Option under this paragraph (b), upon the actual occurrence of the Significant
Event, each stock option that is vested (determined after taking into account
any waiver of vesting restrictions) but unexercised as of such date shall
terminate. If the potential Significant Event does not in fact occur for any
reason, then any waiver by the Company of the vesting restrictions and any
exercise by the Company of the Termination Option under this paragraph (b) shall
have no effect, and the optionee's rights will be vested only to the extent that
they would be vested if no restrictions on vesting had been waived by the
Company herein.
(c) CHANGE OF PAR VALUE. In the event of a change in the
Company's Common Stock which is limited to a change of all of its authorized
shares with par value into the same number of shares with a different par value
or without par value, the shares resulting from any such change shall be deemed
to be Common Stock within the meaning of the Plan.
(d) MISCELLANEOUS. The adjustments provided for in this Article
shall be made by the Committee whose determination in that respect shall be
final, binding and conclusive. Except as hereinbefore expressly provided in this
Article, the holder of a stock option shall not be entitled to the privilege of
stock ownership as to any shares of Common Stock or other stock not actually
issued and delivered to the holder. Any issue by the Company of shares of stock
of any class, or securities convertible into shares of stock of any class, shall
not affect and no adjustment by reason thereof shall be made with respect to the
number or price of shares of the Company's Common Stock subject to any stock
option. The grant of a stock option pursuant to the Plan shall not affect in any
way the right or power of the Company to, among other things, make adjustments,
reclassifications, reorganizations or changes of its capital or business
<PAGE>
structure or to merge or to consolidate or to dissolve or liquidate or sell or
transfer all or any part of its business or assets.
ARTICLE XI
----------
PRIVILEGES OF STOCK OWNERSHIP
No person entitled to exercise any stock option granted under the Plan
shall have any of the rights or privileges of a stockholder of the Company in
respect of any shares of stock issuable upon exercise of such stock option until
certificates representing such shares shall have been issued and delivered. Upon
exercise of a stock option, the person exercising the stock option shall be
entitled to one stock certificate evidencing the shares acquired upon such
exercise.
ARTICLE XII
-----------
CONTINUATION OF EMPLOYMENT
Nothing contained in the Plan (or in any stock option granted pursuant
to the Plan) shall confer upon any employee any right to continue in the employ
of the Company or any subsidiary corporation or constitute any contract or
agreement of employment or interfere in any way with the right of the Company or
any subsidiary corporation to reduce any person's compensation from the rate in
existence at the time of the granting of a stock option or to terminate such
person's employment. Nothing contained herein or in any Agreement shall affect
any other contractual rights of an employee.
ARTICLE XIII
------------
AMENDMENT OR DISCONTINUANCE
The Board or the Committee may at any time and from time to time amend,
rescind, suspend or terminate the Plan, as it shall deem advisable, provided
that the Plan may not be amended more than once every six months, other than to
comport with changes in the Code, ERISA, or the rules thereunder. In addition to
Board approval of any amendment to the Plan, if the Board or Committee further
determines on advice of counsel that it is necessary or desirable to obtain
stockholder approval of any amendment to the Plan in order to comply with Rule
16b-3 of the General Rules and Regulations under the 1934 Act, or any successor
rule, as it shall read as of the time of amendment, or for any other reason,
then the effectiveness of any such amendment may be conditioned upon its
approval by the affirmative votes of the holders of a majority of the
outstanding voting stock of the Company (voting as a single class) present, or
represented, and entitled to vote at a meeting duly held in accordance with the
applicable laws of the state or other jurisdiction in which the Company is
incorporated.
No change may be made in, and no amendment, rescission, suspension or
termination of the Plan shall have an effect on, stock options previously
granted under the Plan which may impair or alter the rights or obligations of
the holders thereof, except that any change may be made in stock options
previously granted with the consent of the optionees.
<PAGE>
ARTICLE XIV
-----------
EFFECTIVE DATE OF PLAN; STOCKHOLDER APPROVAL
The Plan shall be effective as of March 6, 1996, the date on which it
received the approval of a majority of the disinterested members of the Board.
However, the Plan and all stock options granted under the Plan shall be void if
the Plan is not approved by the stockholders within twelve (12) months from the
date the Plan is approved by the Board. The Plan shall be deemed approved by the
holders of the outstanding voting stock of the Company by the affirmative votes
of the holders of a majority of the outstanding voting stock of the Company
present, or represented, and entitled to vote at a meeting duly held in
accordance with the applicable laws of the state or other jurisdiction in which
the Company is incorporated. No stock option granted under the Plan shall be
exercisable in whole or in part unless and until such stockholder approval is
obtained.
EXHIBIT 21.1
SUBSIDIARIES OF THE COMPANY
NAME STATE OF
---- ORGANIZATION
------------
Garden Ridge Management, Inc. Delaware
Garden Ridge Investment, Inc. Delaware
Garden Ridge Finance
Corporation Delaware
Garden Ridge, L.P. Delaware
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our report included in this Form 10-K, into the Company's previously filed
Form S-8 Registration Statement File No. 33-95064, and Form S-8 Registration
Statement File No.
333-13785.
ARTHUR ANDERSEN LLP
Houston, Texas
April 27, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ITEM 8.,
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-25-1998
<PERIOD-END> JAN-25-1998
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<RECEIVABLES> 1,785
<ALLOWANCES> 0
<INVENTORY> 57,773
<CURRENT-ASSETS> 111,091
<PP&E> 57,644
<DEPRECIATION> (17,977)
<TOTAL-ASSETS> 160,212
<CURRENT-LIABILITIES> 33,564
<BONDS> 0
0
0
<COMMON> 183
<OTHER-SE> 125,770
<TOTAL-LIABILITY-AND-EQUITY> 160,212
<SALES> 304,732
<TOTAL-REVENUES> 304,732
<CGS> 195,290
<TOTAL-COSTS> 93,049
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (1,419)
<INCOME-PRETAX> 17,812
<INCOME-TAX> 6,379
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<EPS-PRIMARY> .64
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