<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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10-Q/A
AMENDMENT NO.1
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED APRIL 27, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
SECURITIES EXCHANGE ACTION OF 1934
COMMISSION FILE NUMBER 0-26732
GADZOOKS, INC.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
TEXAS 74-2261048
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(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION
INCORPORATION OR ORGANIZATION) NUMBER)
4801 SPRING VALLEY ROAD
SUITE 108B
DALLAS, TX 75244
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 214-991-5500
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(FORMER NAME, FORMER ADDRESS AND FISCAL YEAR, IF CHANGED SINCE LAST REPORT.)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes ( X ) No ( ___ )
The number of shares outstanding of the registrant's common stock
is 8,510,547 (as of June 6, 1996, including shares issued on May
30, 1996 in connection with the 3 for 2 stock split in the form of
a stock dividend to holders of record on May 16, 1996).
<PAGE> 2
GADZOOKS, INC.
FORM 10-Q/A
For the Quarter Ended April 27, 1996
INDEX
PAGE
PART I. FINANCIAL INFORMATION
<TABLE>
<S> <C> <C>
Item 1. Financial Statements
Condensed Balance Sheets as of April 27, 1996 3
and January 27, 1996
Condensed Statements of Operations for the 4
First Quarter Ended April 27, 1996 and
April 29, 1995
Condensed Statements of Cash Flows for the 5
First Quarter Ended April 27, 1996 and
April 29, 1995
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis 7 - 9
of Financial Condition and Results
of Operations
PART II. OTHER INFORMATION 9
SIGNATURE PAGE 10
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
GADZOOKS, INC.
CONDENSED BALANCE SHEETS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
APRIL 27, JANUARY 27,
1996 1996
----------- -----------
<S> <C> <C>
ASSETS
- ------
Current assets:
Cash and cash equivalents $17,927 $13,733
Accounts receivable 1,831 491
Inventory 20,311 18,707
Other current assets 734 1,161
------- -------
40,803 34,092
------- -------
Leaseholds, fixtures and equipment, net 13,270 11,519
------- -------
$54,073 $45,611
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Accounts payable $ 8,279 $ 8,495
Accrued expenses & other current liabilities 3,428 3,775
Income taxes payable 630 1,321
Current portion of long-term obligations -- 133
------- -------
12,337 13,724
------- -------
Accrued rent & other long-term obligation 1,156 1,122
Shareholders' equity:
Common stock 85 78
Additional paid-in capital 38,512 29,442
Retained earnings 1,983 1,245
------- -------
40,580 30,765
------- -------
$54,073 $45,611
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 4
GADZOOKS, INC.
CONDENSED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
FIRST QUARTER ENDED
---------------------------
APRIL 27, APRIL 29,
1996 1995
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<S> <C> <C>
Net Sales $23,486 $15,999
Cost of goods sold including buying,
distribution and occupancy costs 16,539 11,436
------- -------
Gross Profit 6,947 4,563
Selling, general and administrative expenses 5,986 4,108
------- -------
Operating Income 961 455
Interest income (expense), net 229 (81)
------- -------
Income before income taxes 1,190 374
Provision for income taxes 452 143
------- -------
Net income $ 738 $ 231
------- -------
Net income per common and common
equivalent share $ 0.08 $ 0.04
======= =======
Weighted average common and common
equivalent shares outstanding 9,030 6,075
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 5
GADZOOKS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
FIRST QUARTER ENDED
------------------------
APRIL 27, APRIL 29,
1996 1995
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES :
Net income $ 738 $ 231
Adjustments to reconcile net income to cash
provided by operating activities :
Depreciation 479 309
Changes to operating assets and liabilities (3,825) (1,340)
------- -------
NET CASH USED IN OPERATING ACTIVITIES (2,608) (800)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES :
Capital expenditures, net (2,230) (1,423)
------- -------
NET CASH USED IN INVESTING ACTIVITIES (2,230) (1,423)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES :
Proceeds from line of credit, net -- 2,585
Payments on long-term obligations (45) (247)
Issuance of common stock, net 8,952 --
Tax benefit from exercise of stock options 125 --
------- -------
NET CASH PROVIDED BY FINANCING ACTIVITIES 9,032 2,338
------- -------
Net increase in cash and cash equivalents 4,194 115
Cash and cash equivalents at beginning of period 13,733 321
------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $17,927 $ 436
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 6
GADZOOKS, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying condensed financial statements contain all
adjustments (consisting of only normal recurring accruals)
necessary to present fairly the financial position as of April 27,
1996 and April 29, 1995, and the results of operations and cash
flows for the three months then ended. The results of operations
for the first quarter ended April 27, 1996 and April 29, 1995 are
not necessarily indicative of the results to be expected for the
full fiscal year. The condensed balance sheet as of January 27,
1996 is derived from audited financial statements. The condensed
financial statements should be read in conjunction with the
financial statement disclosures contained in the Company's Report
to Shareholders for the year ended January 27,1996.
2. COMMON STOCK OFFERING
On January 31, 1996, the Company completed a secondary offering of 600,000
shares of its common stock, while an additional 1,987,500 shares were sold
by other selling shareholders (after giving effect to the stock split
described in Note 3). The Company's portion of the net proceeds after
deducting expenses associated with the offering of $9.0 million will be
used to finance new store openings, store remodelings, and for other
general corporate purposes.
3. STOCK SPLIT
On May 1, 1996, the Board of Directors declared a three-for-two
split of the Company's common stock in the form of a 50 percent
stock dividend. The stock split was payable on May 30, 1996 to
holders of record on May 16, 1996, and has been given retroactive
effect in these financial statements.
6
<PAGE> 7
Management's Discussion and Analysis of Financial
Condition and Results of Operations
GENERAL
Gadzooks is a rapidly growing, mall-based specialty retailer of casual
apparel and related accessories for young men and women principally between
the ages of 13 and 19. The Company opened its first store in 1983, and
had 146 stores in operation at April 27, 1996, located in 22 states
throughout the Southwestern, Midwestern, and Southeastern regions of the
United States.
The Company accelerated its expansion program in late fiscal 1992 and
opened 10 new stores in the second six months of that fiscal year, followed
by 23 new stores in fiscal 1993, 26 new stores in fiscal 1994, and 39 new
stores in fiscal 1995. The Company has opened 20 new stores since the
beginning of fiscal 1996.
The Company's business is subject to seasonal influences with slightly
higher sales during the Christmas holiday, back-to-school, and spring break
seasons. Management's discussion and analysis should be read in
conjunction with the Company's financial statements and the notes related
thereto.
RESULTS OF OPERATIONS
First Quarter Ended April 27, 1996 Compared to First Quarter Ended April
29,1995
Net sales increased approximately $7.5 million, or 46.8 percent to
$23,486,000 during the first quarter of fiscal 1996 from $15,999,000 during
the comparable quarter of fiscal 1995. Comparable store sales increased
7.3 percent for the first quarter of fiscal 1996. The balance of the sales
increase was attributable to new stores not yet included in the comparable
store sales base. A store becomes comparable after it has been open for 14
full fiscal months.
Gross profit increased approximately $2.4 million to $6,947,000 during the
first quarter of fiscal 1996 from $4,563,000 during the comparable quarter
of fiscal 1995. As a percentage of net sales, gross profit increased to
29.6 percent compared to 28.5 percent in the comparable quarter of last
year. The Company's merchandise margin was substantially higher than in
the prior year's quarter due to fewer price-based promotional activities
during the first quarter of fiscal 1996. The Company entered the first
quarter of 1996 with less fall and winter markdown
7
<PAGE> 8
merchandise to clear from its store system than in the prior year primarily
due to strong sales during the 1995 Christmas holiday season. Store
occupancy costs, included in cost of goods sold, increased slightly as a
percentage of sales as a result of the large number of new stores opened in
recent periods, but was offset by a reduction in buying and distribution
costs as a percentage of sales, as a result of the Company's larger store
base.
Selling, general and administrative expenses increased approximately $1.9
million to $5,986,000 during the first quarter of 1996 from $4,108,000
during the comparable quarter of fiscal 1995. As a percentage of net
sales, selling, general and administrative expenses decreased to 25.5
percent of sales during the first quarter of fiscal 1996 from 25.7 percent
of sales during the comparable quarter of last year. The decrease as a
percentage of net sales was due to leveraging of certain store expenses as
a percentage of sales as a result of the comparable store sales increases
achieved during the quarter, and to a slight reduction in corporate
overhead as a percentage of sales due to leverage achieved through the
Company's larger store base.
Operating income increased approximately $0.5 million to $961,000 during
the first quarter of fiscal 1996 from $455,000 during the comparable
quarter of last year. As a percentage of net sales, operating income
increased to 4.1 percent of sales from 2.8 percent of sales during the
comparable quarter of last year.
Net interest income increased approximately $0.3 million to $229,000 during
the first quarter of fiscal 1996 from $81,000 net interest expense in the
comparable period of last year. The Company's interest income increased
due to temporary investments of cash available from the two public stock
offerings completed in October, 1995 and January, 1996.
LIQUIDITY AND CAPITAL RESOURCES
General. The Company's primary uses of cash are financing new store
openings and purchasing merchandise inventories. The Company is currently
meeting its cash requirements through cash flow from operations and
proceeds of its initial public offering completed in October, 1995, and a
secondary public offering completed in January, 1996.
Cash Flows. At April 27, 1996, cash and cash equivalents were $17.9
million, an increase of $4.2 million since January 27, 1996. Sources of
cash for the first quarter of fiscal 1996 were primarily proceeds from the
issuance of common stock of $9.0 million and net cash from operations of
$1.2 million. The primary uses of cash were increased inventory levels of
$1.6 million, reductions in liabilities of $1.4 million, increases in other
assets of $0.8 million, and capital expenditures of $2.2 million. The Company
opened 20 new stores during the first quarter of 1996 as compared with 11 new
stores in the sames period of the prior year.
8
<PAGE> 9
Credit Facility. The Company currently has a loan agreement with First
Interstate Bank of Texas, N.A., Dallas, Texas, which provides for a
revolving line of credit of $7.0 million. Amounts borrowed under the
Revolving Line bear interest at the bank's prime rate minus 0.65 percent.
The Company must also pay a commitment fee of 0.35 percent per annum on the
unused portion of the revolving line. As of April 27, 1996, no amounts
were outstanding under the revolving line. The Revolving Line also
provides for the issuance of letters of credit that are generally used in
certain circumstances in connection with merchandise purchases. As of
June 10, 1996, letters of credit in the amount of $1.4 million were issued
and outstanding.
Capital Expenditures. The Company anticipates opening approximately 30 new
stores during the remaining quarters of fiscal 1996. The Company estimates
that its average capital expenditures to open a new store, including
leasehold improvements and furniture and fixtures, will be approximately
$155,000 (approximately $100,000 net of all landlord allowances). The cost
of initial inventory for a new store is approximately $100,000; however,
the immediate cash requirement for inventory is partially financed through
the Company's payment terms with its vendors. Pre-opening costs range from
$8,000 to $10,000 for travel, hiring and training, and other miscellaneous
costs associated with the setup of a new store prior to its opening for
business. Pre-opening costs are expensed in the period of which the store
opens.
PART II - OTHER INFORMATION
Items 1-6 are not applicable.
9
<PAGE> 10
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GADZOOKS, INC.
(Registrant)
DATE: June 10, 1996 By: /s/ MONTY R. STANDIFER
-------------------------------
Monty R. Standifer
Senior Vice President and
Chief Financial Officer
10
<PAGE> 11
Exhibit Index
Exhibit
- -------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-25-1997
<PERIOD-END> APR-27-1996
<CASH> 17,927
<SECURITIES> 0
<RECEIVABLES> 1,831
<ALLOWANCES> 0
<INVENTORY> 20,311
<CURRENT-ASSETS> 40,803
<PP&E> 13,270
<DEPRECIATION> 0
<TOTAL-ASSETS> 54,073
<CURRENT-LIABILITIES> 12,337
<BONDS> 0
<COMMON> 85
0
0
<OTHER-SE> 40,495
<TOTAL-LIABILITY-AND-EQUITY> 54,073
<SALES> 23,486
<TOTAL-REVENUES> 0
<CGS> 16,539
<TOTAL-COSTS> 5,986
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 229
<INCOME-PRETAX> 1,190
<INCOME-TAX> 452
<INCOME-CONTINUING> 738
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 738
<EPS-PRIMARY> .08
<EPS-DILUTED> 0
</TABLE>
