SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549
                               -------------------

                                    FORM 10-Q

[ X ]      QUARTERLY REPORT UNDER SECTION 13 or 15(d)
           OF THE SECURITIES EXCHANGE ACT OF 1934
           For the quarterly Period Ended April 30,July 31, 1996

                                       --------------

                                OROF

[   ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)15 (d) OF THE SECURITIES
           EXCHANGE ACT OF 1934
           For the transition period from ______________ to ______________

                         Commission File Number 0-16999
                             -----------------------

                             Urban Outfitters, Inc.
             (Exact name of registrant as specified in its charter)

                 PENNSYLVANIA                              23-2003332
    ---------------------------------------            -------------------
       (State or Other Jurisdiction of                  (I.R.S. Employer
        Incorporation of Organization)                 Identification No.)


     1809 Walnut Street, Philadelphia, PA                     19103
    ---------------------------------------            -------------------     
    (Address of principal executive office)                 (Zip Code)


                                 (215) 564-2313
- ------------------------------------------------------------------------------- 
               (Registrant's telephone number including area code)


                                       N/A
- -------------------------------------------------------------------------------
              (Former name, former address and former fiscal year,
                          if changed since last report)

                              ---------------------

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d)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____X___    No __________

            Title of Each Class                 Number of Shares Outstanding
              of Common Stock                         at June 1,August 31, 1996
 ---------------                             -----------------------------------------------------------------------     ----------------------------

 Common shares, par value, 17,487,700
$.0001 per share               17,518,698





                                      INDEX

                                                                           PAGE
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                      PART I  Financial Information


ITEM 1       Financial Statements                                  
- ------
             Consolidated Balance Sheets at April 30,July 31, 1996                   2
             (Unaudited) and January 31, 1996   

             Consolidated Statements of Income for the three and            3
             six months ended April 30,July 31, 1996 and 1995 (Unaudited)

             Consolidated Statements of Cash Flows for the                  4
             threesix months ended April 30,July 31, 1996 and 1995 (Unaudited)

             Notes to Consolidated Financial Statements                     5

ITEM 2       Management's Discussion and Analysis of Financial            6 - 89
- ------
             Condition and Results of Operations



                      PART II  Other Information


ITEM 6       Exhibits and Reports on Form 8-K                              910
- ------


SIGNATURES                                                                 1011

                                        1




                             URBAN OUTFITTERS, INC.
                           Consolidated Balance Sheets
                 (In thousands, except share and per share data)
APRIL 30,JULY 31, 1996 JANUARY 31, 1996 (UNAUDITED) (AUDITED) ------- ------- Assets Current assets: Assets Current assets: Cash and cash equivalents............................................... $20,783equivalents ......................................... $13,755 $20,095 Marketable securities................................................... 13,630securities ............................................. 8,799 9,499 Accounts receivable, net of allowance for doubtful accounts of $592$650 and $531 at April 30,July 31, 1996 and January 31, 1996, respectively................................... 3,331respectively ............................. 3,943 1,573 Inventory............................................................... 12,019Inventory ......................................................... 16,295 10,477 Prepaid expenses and other current assets............................... 5,037assets ......................... 7,296 4,915 ------- ------- Total current assets....................................................... 54,800assets ................................................. 50,088 46,559 Property and equipment, less accumulated depreciation and amortization..... 18,127amortization 19,327 16,690 Marketable securities...................................................... 4,476securities ................................................ 12,433 6,247 Other assets............................................................... 1,816assets ......................................................... 1,982 1,621 ------- ------- $79,219$83,830 $71,117 ======= ======= Liabilities and shareholders' equity Current liabilities: Accounts payable........................................................payable .................................................. $ 9,2109,985 $ 6,898 Income taxes payable.................................................... 1,129 -- Accrued expenses and other current liabilities.......................... 3,708liabilities .................... 4,099 3,174 ------- ------- Total current liabilities.................................................. 14,047liabilities ............................................ 14,084 10,072 Accrued rent and other liabilities......................................... 1,704liabilities ................................... 1,835 1,593 ------- ------- Total liabilities.......................................................... 15,751liabilities .................................................... 15,919 11,665 ------- ------- Shareholders' equity: Preferred shares; $.0001 par, 10,000,000 authorized, none issued........issued .. -- -- Common shares; $.0001 par, 50,000,000 shares authorized, 17,335,03617,505,966 and 17,080,372 issued at April 30,July 31, 1996 and January 31, 1996, respectively.........................................................respectively ................................................... 1 1 Additional paid-in capital.............................................. 18,506capital ........................................ 20,100 17,417 Retained earnings....................................................... 44,961earnings ................................................. 47,810 42,034 ------- ------- Total shareholders' equity................................................. 63,468equity ........................................... 67,911 59,452 ------- ------- $79,219$83,830 $71,117 ======= =======
See accompanying notes 2 URBAN OUTFITTERS, INC. Consolidated Statements of Income (In(in thousands, except share and per share data) (Unaudited) THREE MONTHS ENDED APRIL 30, ---------------------------- 1996 1995 ---- ---- Net Sales ...................................... $ 33,635 $ 27,919 Cost of Sales .................................. 16,570 13,812 ------------ ------------ Gross profit ......................... 17,065 14,107 Selling, general and administrative expenses ... 12,344 10,499 ------------ ------------ Income from operations ............... 4,721 3,608 Interest (income), net ......................... (361) (288) Other expense (income), net .................... 57 (12) ------------ ------------ Income before income taxes ........... 5,025 3,908 Income tax expense ............................. 2,098 1,641 ------------ ------------ Net income ........................... $ 2,927 $ 2,267 ============ ============ Net income per common share .................... $ .17 $ .13 ============ ============ Weighted average common shares outstanding ..... 17,686,800 17,589,480 ============ ============(UNAUDITED)
Three Months Ended July 31 Six Months Ended July 31 1996 1995 1996 1995 ----------- ----------- ----------- ----------- Net Sales $ 35,898 $ 29,881 $ 69,532 $ 57,801 Cost of Sales 17,496 14,797 34,066 28,610 ----------- ----------- ----------- ----------- Gross profit 18,402 15,084 35,466 29,191 Selling, general and administrative expenses 13,743 11,383 26,086 21,883 ----------- ----------- ----------- ----------- Income from operations 4,659 3,701 9,380 7,308 Interest (income), net (355) (309) (725) (597) Other expenses (income), net 123 38 189 25 ----------- ----------- ----------- ----------- Income before income taxes 4,891 3,972 9,916 7,880 Income tax expense 2,042 1,668 4,140 3,310 ----------- ----------- ----------- ----------- Net income 2,849 2,304 5,776 4,570 =========== =========== =========== =========== Net income per common share $ .16 $ .13 $ .33 $ .26 =========== =========== =========== =========== Weighted average common shares outstanding 17,831,946 17,620,656 17,759,373 17,605,068 =========== =========== =========== ===========
See accompanying notes 3 URBAN OUTFITTERS, INC. Consolidated Statements of Cash Flows (In thousands, Unaudited)(in thousands)
THREESIX MONTHS ENDED APRIL 30, ----------------------------JULY 31 ------------------------ (UNAUDITED) (UNAUDITED) 1996 1995 ---- ------------ -------- Cash flows from operating activities: Net income..............................................................Income $ 2,9275,776 $ 2,2674,570 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization........................................ 821 672amortization 1,682 1,387 Provision for losses on accounts receivable.......................... 61 12 Deferred income recognized........................................... (15) (15)receivable 119 73 Changes in assets and liabilities: Increase in receivables........................................... (1,819) (2,377)receivables (2,489) (2,667) Increase in inventory............................................. (1,542) (1,253) Increaseinventory (5,819) (3,350) (Increase)/decrease in prepaid expenses and other assets..................... (317) (256)assets (742) 50 Increase in payables, accrued expenses and other liabilities...... 4,101 718liabilities 4,254 389 -------- --------------- Net cash (used) provided by operating activities........................ 4,217 (232)activities 2,781 452 -------- --------------- Cash flows from investing activities: Capital expenditures.................................................... (2,259) (1,711)expenditures (4,319) (3,177) Purchase of investments held-to-maturity................................ (6,245) (798)held-to-maturity (14,096) (1,592) Purchase of investments available-for-sale.............................. (850) -0-available-for-sale (1,750) 0 Maturities of investments held-to-maturity.............................. 2,485 100 Salesheld-to-maturity 6,499 3,706 Sale of investments available-for-sale................................. 2,250 -0-available-for-sale 3,861 0 -------- --------------- Net cash used in investing activities................................... (4,619) (2,409)activities (9,805) (1,063) -------- --------------- Cash flows from financing activities: IssuanceExercise of stock options 684 153 Purchase of common shares............................................... 1,090 75shares 0 (73) -------- --------------- Net cash provided byused in financing activities............................... 1,090 75activities 684 80 -------- ------- Increase (decrease)-------- Decrease in cash and cash equivalents........................... 688 (2,566)equivalents (6,340) (531) Cash and cash equivalents at beginning of period...........................period 20,095 9,109 -------- --------------- Cash and cash equivalents at end of period................................. $20,783period $ 6,54313,755 $ 8,578 ======== ===============
See accompanying notes 4 URBAN OUTFITTERS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended January 31, 1996, filed with the Securities and Exchange Commission on April 23, 1996. 2. Marketable Securities Marketable securities are classified as follows: April 30,July 31, 1996 January 31, 1996 --------------------------- ---------------- Current portion Held-to-maturity .................... $12,119Held-to-maturity.................... $ 7,999 $ 6,588 Available-for-sale .................. 1,511Available-for-sale.................. 800 2,911 ------- ------- 13,6308,799 9,499 ------- ------- Noncurrent portion Held-to-maturity .................... 4,476Held-to-maturity.................... 12,433 6,247 ------- ------- Total marketable securities ............ $18,106........ $21,232 $15,746 ======= ======= 3. Stock Split On May 21, 1996, the Board of Directors of Urban Outfitters, Inc. declared a two for one stock split in the form of a stock dividend for shareholders of record on June 1, 1996. That stock split is retroactively reflected inAll applicable shares and per share data have been adjusted for the financial statements for all periods presented. 5 split. 4. Additional Information During the quarter, the Company opened a new Anthropologie store in Greenvale, NYNew York City and, subsequent to the quarter, has opened another Anthropologie store in New York City.Santa Monica, CA. 5 PART I FINANCIAL INFORMATION (continued) ITEM 2 Management's Discussion and Analysis of Financial Condition and - ------ and Results of Operations GENERAL SalesTotal Company sales growth in the second quarter and the first six months of this fiscal year was 20 percent for both periods. This compares to the same prior year periods of 23 percent and 22 percent, respectively. While relatively the same growth rates, the source of the growth varies considerably. In the prior year, sales growth was almost entirely from new stores opened in Urban Retail with little contribution from comparable store sales and no contribution from Wholesale. Conversely, sales growth in the second quarter and the first six months of this year was from comparable store sales growth of 9.0 percent and 10.4 percent, respectively, from new store openings in Anthropologie and comparative Wholesale sales growth of 15.9 percent and 11.6 percent for the second quarter and six months. The type of sales growth in the current year for the second quarter and the six months contributed more to earnings than the type of sales growth in the same periods last yearyear. High increases in comparable store sales and in Wholesale led to higher inventory turns, lower markdowns, and higher gross profit margins. Growth in comparable store sales and in Wholesale are subjected to much lower variable expenses, and therefore, preserve more gross profit to operating profit and net increase. In contrast, last year's sales growth was primarily from new store openingsstores which did not create higher turns and, indeed, burdened gross profit with no contribution from stores opened more than one year or from the Wholesale Company. Conversely, the first quartera full range of this year experienced sales growth in all three areas, led by comparablenew store sales increases of 12.2%. The earnings benefit from improved comparative store sales and the Wholesale Company included higher inventory turnover and higher margins, as well as, more sales leveraging on operating expenses. Notwithstanding these favorable trends, the second quarter saw a slight increase in operating expenses as a percentage of sales due to Anthropologie's current higher expense to sales ratio and its accelerated growth. This .18 percent growth represents a $37,646.00 reduction in net income. These benefitstrends are reflected in the percentpercentage to sales figures shown below. The comparative store sales increases in the first quarter of thisLast year, are primarily a result of the recovery of average selling prices to the level of the first quarter two years ago and slightly beyond. Average selling prices in the first, second and third quarters of last year were below the FY'95 levels. Unit sales were near flat to last year. Looking ahead, comparable store sales growth in the second quarter of FY'96 were only slightly ahead of the prior year, while comparative store sales were up 5% and 3% during the third and fourth quarters were 5 percent and 3 percent, respectively. The second quarter could offerLooking ahead, selling against these higher levels combined with delayed openings of new Urban Retail stores will put some opportunity forpressure on earnings growth in comparable store sales, while the third and fourth quarters become somewhat more difficult. Atquarter. Helping to offset those pressures are Wholesale bookings that, at this point in time, it appears that planned store openings will take place although somewhat delayed for Urban Retail stores.date, are running ahead of last year and plan. Store openings and the timing of those openings will continue to be a risk due to the nature of the stores, and management's very deliberate style in selecting store locations and in completing lease negotiations. 6 RESULTS OF OPERATIONS The Company's operating years end on January 31, and include 12 periods ending on the last day of the month. For example, FY'97fiscal year 1996 will end on January 31, 1997.1996. This discussion of results of operations covers the second quarter and the first quartersix months of FY'97FY97 and FY'96.FY96. The following table sets forth, for the periods indicated, the percentage of the Company's net sales represented by certain income statement data. The following discussion should be read in conjunction with the table which follows: THREE MONTHS ENDED ------------------------------- April 30, 1996 April 30, 1995 -------------- -------------- Net Sales 100.0% 100.0% Cost of goods sold 49.3% 49.5% Gross profit 50.7% 50.5% Selling, general and administrative expenses 36.7% 37.6% ----- ------ Income from operations 14.0% 12.9% Net interest & other (income) ( .9%) ( 1.1%) ----- ------ Income before income taxes 14.9% 14.0% Income tax expense 6.2% 5.9% ----- ------ Net income 8.7% 8.1%follows.
SECOND QUARTER ENDED SIX MONTHS ENDED JULY 31 JULY 31 1996 1995 1996 1995 ----- ----- ----- ----- Net sales 100.0% 100.0% 100.0% 100.0% Cost of goods sold 48.7% 49.5% 49.0% 49.5% Gross profit 51.3% 50.5% 51.0% 50.5% Selling, general and administrative expenses 38.3% 38.1% 37.5% 37.9% ----- ----- ----- ----- Income from operations 13.0% 12.4% 13.5% 12.6% Net interest & other income .6% .9% .8% 1.0% ----- ----- ----- ----- Income before income taxes 13.6% 13.3% 14.3% 13.6% Income tax expense 5.7% 5.6% 6.0% 5.7% ----- ----- ----- ----- Net income 7.9% 7.7% 8.3% 7.9% ===== ===== ===== ===== ====== FIRST
SECOND QUARTER ENDED APRIL 30,JULY 31, 1996 COMPARED TO THE FIRSTSECOND QUARTER ENDED APRIL 30,JULY 31, 1995 Net sales increased during the firstsecond quarter ended April 30,July 31, 1996 to $33.6$35.9 million, up 20.5%20.1 percent from $27.9$29.9 million during the same period of the prior year. The sales increases were from$6.0 million increase over the prior year's second quarter was split among comparable store sales increases of $2.5$2.2 million, sales from stores opened less than 13 months and new and enlarged store salesstores of $2.6$3.0 million, and $600,000 from the Wholesale Company. The comparable store sales growth was a result of $.8 million. The increases in thepart relate to increases in average selling prices over the first quarterat retail and very good consumer acceptance of the prior year. The increases brought the average selling prices back in line with earlier years. New store sales increases were from four Urban stores openedproducts offered at various times last yearRetail and one Anthropologie store openedat Wholesale. Gross profit during the first quarter of this year. Wholesale grew at 8.4% when compared to last year's first quarter. The gross profit margin during the firstsecond quarter ended April 30,July 31, 1996 was $17.1$18.4 million, up $3.0$3.3 million or 21.0%22.0 percent from the prior year quarter of $14.1 million.quarter. The dollar increase resulted from the volumes previously described above and from an improved Retail gross profit margin percentage of 50.7% up from 50.5% duringpercentages due to initial markup increases and lower markdowns. Wholesale gross profit margins were down in the second quarter when compared to the same quarter ofin the prior year. The improved percentage resulted fromreason for the decline was higher initial mark-ups andgrowth of a lower mark-downs duringgross profit margin product line compared to the quarter from both retail companies, offset by a higher mixgrowth of lower margin sales in the Wholesale Company.other product lines. 7 Selling, general and administrative expenses during the firstsecond quarter ended April 30,July 31, 1996 were $12.3$13.7 million, up $1.8$2.4 million or 17.6%20.7 percent from the prior year quarter. These dollar increases were attributed to new stores opened, enlarged stores, and investments in people and systems necessary to manage the planned sales growth, particularly in Anthropologie. Stated as a percentage of $10.5sales, selling, general and administrative expenses increased to 38.3 percent from 38.1 percent in the prior year. As previously mentioned, the increase represents an after tax effect of $37 thousand and is due to the growth of Anthropologie. Income from operations during the second quarter ended July 31, 1996 was $4.7 million, up $1 million or 25.9 percent from the prior year's second quarter. The effective income tax rate for the quarter of 42 percent remains unchanged from last year. Net income during the second quarter ended July 31, 1996 was $2.8 million, up $545,000 or 23.7 percent from the prior year. SIX MONTHS ENDED JULY 31, 1996 COMPARED TO THE SIX MONTHS ENDED JULY 31, 1995 Net sales increased during the six months ended July 31, 1996 to $69.5 million, up 20.3 percent from $57.8 million during the same period last year. The $11.7 million increase over the prior year's first six months was split among comparable store sales increase of $4.6 million, sales from stores opened less than 13 months and new stores of $5.7, and Wholesale sales growth of $1.4 million. The increases relate to increases in average selling prices at retail and very good consumer acceptance of the products offered at Retail and at Wholesale. Gross profit during the six months ended July 31, 1996 was $35.5 million, up $6.3 million from the same prior year period, a 21.5 percent increase. The dollar increases were almost entirelycome from the volume increases previously described and improved Retail gross profit margin percentages due to newinitial markup increases and lower markdowns. Wholesale gross profit margins were down in the six months when compared to the same six months in the prior year. The reason for the decline was higher growth of a lower gross profit margin product line compared to the growth of other product lines. Selling, general and administrative expenses during the six months ended July 31, 1996 were $26.1 million, up $4.2 million or 19.2 percent from the same period in the prior year. These dollar increases were attributed to newly opened and enlarged stores opened.and investments in people and systems necessary to manage the sales growth in comparable stores, particularly in Anthropologie. Stated as a percentage of sales, selling, general and administrative expenses decreased to 36.7%37.5 percent from 37.6%37.9 percent during the six months compared to the same period in the priorpreceding year. ExpenseThe percent to sales improvement results from leveraging on relatively high growth in comparable storestores sales, provided for the reduced percentage.new stores, and Wholesale sales growth. 8 Income from operations during the first quartersix months ended April 30,July 31, 1996 was $4.7$9.4 million, up $1.1$2.1 million or 30.8%28.3 percent from the same period in the prior year first quarter of $3.6 million. The Wholesale Company contributed about one third of those earnings.year. The effective income tax rate for the quartersix months of 42%42 percent remains unchanged from last year. Net income during the first quartersix months ended April 30,July 31, 1996 was $2.9$5.8 million, up $660,000$1.2 million or 29.1%26.4 percent from the same period in the prior year of $2.3 million. Increased sales volumes, higher gross profit margins and expense leveraging contributed to the net income growth.year. LIQUIDITY AND CAPITAL RESOURCES Cash and cash equivalents increaseddecreased $6.3 million to $20.8$13.8 million at April 30,July 31, 1996 from $20.1 million at January 31, 1996. The $688,000This decrease was primarily a result of a $4.3 million increase in leasehold improvements, other capital assets and the new Distribution Center. Additionally, cash of $5.5 million was used to purchase marketable securities. Offsetting these uses of cash was $.7 million received from the exercise of stock options and cash equivalents comes from cash from operationsoperating activities of $3.8 million, proceeds from the issuance of common shares of $1.1 million, net growth in short-term payables of $3.8 million, offset by the seasonal growth of inventory and accounts receivable of $(3.3) million, capital expenditures of $(2.3) million and the net purchase of investments of $(2.4)$2.8 million. The Company's net working capital increaseddecreased from $36.5 million at January 31, 1996 to $40.8$36.0 million at April 30,July 31, 1996. The $4.3$.5 million increasedecrease in net working capital was funded byduring the cash from net income, adjusted up for non-cash charges and the proceedssix month period ended July 31, 1996 results primarily from the issuanceuse of common shares.cash and short term marketable securities to purchase long term marketable securities and property and equipment. The Company maintains a line of credit of $10.0 million which is available for any combination of cash borrowing or letters of credit. The line is unsecured and any cash borrowing under the line would accrue interest at the LIBOR rate plus 1/2 of one percent. The Company uses international letters of credit to purchase private label merchandise and merchandise for the Wholesale Company. Outstanding balances of letters of credit at January 31, 1996 and at July 31, 1996 were $5.3 million and $4.3 million, respectively. The Company has a $10.0 million revolvingnever borrowed against the available cash line of credit availablecredit. The last long-term borrowing was paid down to facilitate letterzero during the second quarter of credit transactions and cash advances. Interest on any outstanding balance is payable monthly based on the London Interbank Offered Rate (LIBOR) plus 1/2%. No cash borrowing has ever taken place on this line and, accordingly,fiscal 1994. There were no principal amounts were outstandingloan balances at January 31, 1996 or April 30, 1996. Outstanding letters of credit totaled $5.3 million and $4.1 million at JanuaryJuly 31, 1996, and April 30, 1996, respectively. These letters of credit, which have terms from one month to one year, collateralize the Company's obligation to third parties for the purchase of inventory. The fair value of these letters of credit is estimated to be the same as the contract values. There were no loan balances of any kind at January 31, 1996 or April 30, 1996. The Company expects that capital expenditures during FY'97FY97 will be approximately $13$10 million depending upon the number of stores opened and stores enlarged or improved during the yearyear. In future years, the Company expects to invest an amount equal to or greater than that figure, again depending on new and the timing of the new distribution center construction.existing store plans. The companyCompany believes that existing cash, and investmentsmarketable securities at April 30,July 31, 1996, as well asand cash from future operations will be sufficient to meet the Company's cash needs throughfor at least FY'97, FY'98 and FY'99. 8the next three years. 9 PART II OTHER INFORMATION ITEM 6 Exhibits and Reports on Form 8-K - ------ (a) Exhibits: Exhibit 11 - Income Per Share Calculation Exhibit 27 - Financial Data Schedule (b) Reports on Form 8-K: During the quarter ended April 30, 1996, Urban Outfitters filed one current report on Form 8-K. That current report was filed on April 11, 1996 in connection with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. 9None 10 Pursuant to the requirements of the Securities Exchange Act of 1934, the registrantRegistrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. URBAN OUTFITTERS, INC. (Registrant) By: /s/ RICHARDRichard A. HAYNE ------------------------Hayne --------------------------------- Richard A. Hayne Chairman of the Board of Directors By: /s/ KENNETHKenneth K. CLEELAND ---------------------------Cleeland --------------------------------- Kenneth K. Cleeland Treasurer (Principal(Chief Financial Officer) Dated: June 14,September 13, 1996 10 11