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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[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
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
TEXAS | 74-2261048 |
---|---|
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION) |
(I.R.S. EMPLOYER IDENTIFICATION NUMBER) |
4801 SPRING VALLEY ROAD SUITE 108B DALLAS, TX |
75244 |
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) | (ZIP CODE) |
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 214-991-5500
(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).
For the Quarter Ended April 27, 1996
(In thousands)
(Unaudited)
APRIL 27, 1996 |
JANUARY 27, 1996 |
|
---|---|---|
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 |
The accompanying notes are an integral part of these financial statements.
(In thousands, except per share data)
(Unaudited)
FIRST QUARTER ENDED |
||
---|---|---|
APRIL 27, 1996 |
APRIL 29, 1996 |
|
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 | 61 | 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 |
The accompanying notes are an integral part of
these financial statements.
(IN THOUSANDS)
(UNAUDITED)
FIRST QUARTER ENDED |
||
---|---|---|
APRIL 27, 1996 |
APRIL 29, 1996 |
|
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 |
The accompanying notes are an integral part of
these 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.
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
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.
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.
Items 1-6 are not applicable.
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 |