UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Quarterly Period Ended October 31, 20162017
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 No. 000-22754
Urban Outfitters, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Pennsylvania | ||
23-2003332 | ||
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) | |
5000 South Broad Street, Philadelphia, PA | 19112-1495 | |
(Address of Principal Executive Offices) | (Zip Code) |
Registrant’s telephone number, including area code: (215) 454-5500
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 ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of RegulationS-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”filer,” “smaller reporting company,” and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☒ | Accelerated filer | ☐ | |||
Non-accelerated filer | ☐ (Do not check if a smaller reporting company) | Smaller reporting company | ☐ | |||
Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Common shares, $0.0001 par value—116,233,781108,248,471 shares outstanding on December 5, 2016.2017.
PART I
FINANCIAL INFORMATION
Item 1. | ||||||
1 | ||||||
2 | ||||||
3 | ||||||
4 | ||||||
5 | ||||||
6 | ||||||
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 17 | ||||
Item 3. | 24 | |||||
Item 4. | 24 | |||||
PART II OTHER INFORMATION | ||||||
|
| |||||
Item 1. | 25 | |||||
Item 1A. | 25 | |||||
Item 2. | Unregistered Sales of Equity Securities and the Use of Proceeds | |||||
25 | ||||||
| ||||||
Item 6. | 26 | |||||
27 |
PART I
CONDENSED CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except share data)
(unaudited)
| October 31, |
|
| January 31, |
|
| October 31, |
| ||||||||||||||||
October 31, 2016 | January 31, 2016 | October 31, 2015 |
| 2017 |
|
| 2017 |
|
| 2016 |
| |||||||||||||
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Cash and cash equivalents | $ | 234,886 | $ | 265,276 | $ | 149,597 |
| $ | 234,726 |
|
| $ | 248,140 |
|
| $ | 234,886 |
| ||||||
Marketable securities | 24,644 | 61,061 | 69,545 |
|
| 93,228 |
|
|
| 111,067 |
|
|
| 24,644 |
| |||||||||
Accounts receivable, net of allowance for doubtful accounts of $568, $664 and $675, respectively | 68,896 | 75,723 | 68,332 | |||||||||||||||||||||
Accounts receivable, net of allowance for doubtful accounts of $710, $588 and $568, respectively |
|
| 78,348 |
|
|
| 54,505 |
|
|
| 68,896 |
| ||||||||||||
Inventory | 453,826 | 330,223 | 441,550 |
|
| 449,957 |
|
|
| 338,590 |
|
|
| 453,826 |
| |||||||||
Prepaid expenses, deferred taxes and other current assets | 107,767 | 102,078 | 118,202 | |||||||||||||||||||||
|
|
| ||||||||||||||||||||||
Prepaid expenses and other current assets |
|
| 111,050 |
|
|
| 129,095 |
|
|
| 107,767 |
| ||||||||||||
Total current assets | 890,019 | 834,361 | 847,226 |
|
| 967,309 |
|
|
| 881,397 |
|
|
| 890,019 |
| |||||||||
Property and equipment, net | 872,309 | 863,137 | 891,871 |
|
| 829,106 |
|
|
| 867,786 |
|
|
| 872,309 |
| |||||||||
Marketable securities | 5,605 | 36,600 | 54,138 |
|
| 41,254 |
|
|
| 44,288 |
|
|
| 5,605 |
| |||||||||
Deferred income taxes and other assets | 117,258 | 99,203 | 83,300 |
|
| 115,778 |
|
|
| 109,166 |
|
|
| 117,258 |
| |||||||||
|
|
| ||||||||||||||||||||||
Total Assets | $ | 1,885,191 | $ | 1,833,301 | $ | 1,876,535 |
| $ | 1,953,447 |
|
| $ | 1,902,637 |
|
| $ | 1,885,191 |
| ||||||
|
|
| ||||||||||||||||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Accounts payable | $ | 199,421 | $ | 118,035 | $ | 190,542 |
| $ | 208,567 |
|
| $ | 119,537 |
|
| $ | 199,421 |
| ||||||
Accrued expenses, accrued compensation and other current liabilities | 205,812 | 211,196 | 187,345 |
|
| 214,506 |
|
|
| 233,391 |
|
|
| 205,812 |
| |||||||||
|
|
| ||||||||||||||||||||||
Total current liabilities | 405,233 | 329,231 | 377,887 |
|
| 423,073 |
|
|
| 352,928 |
|
|
| 405,233 |
| |||||||||
Long-term debt | — | 150,000 | 115,000 |
|
| — |
|
|
| — |
|
|
| — |
| |||||||||
Deferred rent and other liabilities | 232,325 | 216,843 | 211,979 |
|
| 245,566 |
|
|
| 236,625 |
|
|
| 232,325 |
| |||||||||
|
|
| ||||||||||||||||||||||
Total Liabilities | 637,558 | 696,074 | 704,866 |
|
| 668,639 |
|
|
| 589,553 |
|
|
| 637,558 |
| |||||||||
|
|
| ||||||||||||||||||||||
Commitments and contingencies (see Note 11) |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Shareholders’ equity: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Preferred shares; $.0001 par value, 10,000,000 shares authorized, none issued | — | — | — |
|
| — |
|
|
| — |
|
|
| — |
| |||||||||
Common shares; $.0001 par value, 200,000,000 shares authorized, 116,233,584, 117,321,120 and 121,545,740 shares issued and outstanding, respectively | 12 | 12 | 12 | |||||||||||||||||||||
Common shares; $.0001 par value, 200,000,000 shares authorized, 108,248,471, 116,233,781 and 116,233,584 shares issued and outstanding, respectively |
|
| 11 |
|
|
| 12 |
|
|
| 12 |
| ||||||||||||
Additional paid-in-capital | — | — | — |
|
| — |
|
|
| — |
|
|
| — |
| |||||||||
Retained earnings | 1,285,268 | 1,160,666 | 1,184,308 |
|
| 1,309,541 |
|
|
| 1,347,141 |
|
|
| 1,285,268 |
| |||||||||
Accumulated other comprehensive loss | (37,647 | ) | (23,451 | ) | (12,651 | ) |
|
| (24,744 | ) |
|
| (34,069 | ) |
|
| (37,647 | ) | ||||||
|
|
| ||||||||||||||||||||||
Total Shareholders’ Equity | 1,247,633 | 1,137,227 | 1,171,669 |
|
| 1,284,808 |
|
|
| 1,313,084 |
|
|
| 1,247,633 |
| |||||||||
|
|
| ||||||||||||||||||||||
Total Liabilities and Shareholders’ Equity | $ | 1,885,191 | $ | 1,833,301 | $ | 1,876,535 |
| $ | 1,953,447 |
|
| $ | 1,902,637 |
|
| $ | 1,885,191 |
| ||||||
|
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(amounts in thousands, except share and per share data)
(unaudited)
| Three Months Ended |
|
| Nine Months Ended |
| |||||||||||||||||||||||||||
Three Months Ended October 31, | Nine Months Ended October 31, |
| October 31, |
|
| October 31, |
| |||||||||||||||||||||||||
2016 | 2015 | 2016 | 2015 |
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| |||||||||||||||||
Net sales | $ | 862,491 | $ | 825,258 | $ | 2,515,636 | $ | 2,431,728 |
| $ | 892,774 |
|
| $ | 862,491 |
|
| $ | 2,526,895 |
|
| $ | 2,515,636 |
| ||||||||
Cost of sales | 562,594 | 537,070 | 1,611,337 | 1,579,014 |
|
| 595,028 |
|
|
| 562,594 |
|
|
| 1,692,026 |
|
|
| 1,611,337 |
| ||||||||||||
|
|
|
| |||||||||||||||||||||||||||||
Gross profit | 299,897 | 288,188 | 904,299 | 852,714 |
|
| 297,746 |
|
|
| 299,897 |
|
|
| 834,869 |
|
|
| 904,299 |
| ||||||||||||
Selling, general and administrative expenses | 229,592 | 207,863 | 665,299 | 615,584 |
|
| 224,858 |
|
|
| 229,592 |
|
|
| 665,765 |
|
|
| 665,299 |
| ||||||||||||
|
|
|
| |||||||||||||||||||||||||||||
Income from operations | 70,305 | 80,325 | 239,000 | 237,130 |
|
| 72,888 |
|
|
| 70,305 |
|
|
| 169,104 |
|
|
| 239,000 |
| ||||||||||||
Other income (expense), net | 854 | 63 | 348 | (2,654 | ) | |||||||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||||||
Other (expense) income, net |
|
| (882 | ) |
|
| 854 |
|
|
| 1,173 |
|
|
| 348 |
| ||||||||||||||||
Income before income taxes | 71,159 | 80,388 | 239,348 | 234,476 |
|
| 72,006 |
|
|
| 71,159 |
|
|
| 170,277 |
|
|
| 239,348 |
| ||||||||||||
Income tax expense | 23,804 | 28,394 | 85,516 | 82,865 |
|
| 26,914 |
|
|
| 23,804 |
|
|
| 63,332 |
|
|
| 85,516 |
| ||||||||||||
|
|
|
| |||||||||||||||||||||||||||||
Net income | $ | 47,355 | $ | 51,994 | $ | 153,832 | $ | 151,611 |
| $ | 45,092 |
|
| $ | 47,355 |
|
| $ | 106,945 |
|
| $ | 153,832 |
| ||||||||
|
|
|
| |||||||||||||||||||||||||||||
Net income per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Basic | $ | 0.41 | $ | 0.42 | $ | 1.31 | $ | 1.19 |
| $ | 0.41 |
|
| $ | 0.41 |
|
| $ | 0.95 |
|
| $ | 1.31 |
| ||||||||
|
|
|
| |||||||||||||||||||||||||||||
Diluted | $ | 0.40 | $ | 0.42 | $ | 1.31 | $ | 1.18 |
| $ | 0.41 |
|
| $ | 0.40 |
|
| $ | 0.94 |
|
| $ | 1.31 |
| ||||||||
|
|
|
| |||||||||||||||||||||||||||||
Weighted-average common shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Basic | 116,829,912 | 123,442,931 | 117,087,696 | 127,478,092 |
|
| 109,667,224 |
|
|
| 116,829,912 |
|
|
| 113,113,597 |
|
|
| 117,087,696 |
| ||||||||||||
|
|
|
| |||||||||||||||||||||||||||||
Diluted | 117,393,710 | 123,725,581 | 117,453,005 | 128,506,955 |
|
| 110,100,254 |
|
|
| 117,393,710 |
|
|
| 113,432,367 |
|
|
| 117,453,005 |
| ||||||||||||
|
|
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(amounts in thousands)
(unaudited)
| Three Months Ended |
|
| Nine Months Ended |
| |||||||||||||||||||||||||||
Three Months Ended October 31, | Nine Months Ended October 31, |
| October 31, |
|
| October 31, |
| |||||||||||||||||||||||||
2016 | 2015 | 2016 | 2015 |
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| |||||||||||||||||
Net income. | $ | 47,355 | $ | 51,994 | $ | 153,832 | $ | 151,611 | ||||||||||||||||||||||||
Net income |
| $ | 45,092 |
|
| $ | 47,355 |
|
| $ | 106,945 |
|
| $ | 153,832 |
| ||||||||||||||||
Other comprehensive (loss) income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Foreign currency translation | (10,665 | ) | (2,688 | ) | (14,141 | ) | 2,810 |
|
| (1,388 | ) |
|
| (10,665 | ) |
|
| 9,342 |
|
|
| (14,141 | ) | |||||||||
Change in unrealized (losses) gains on marketable securities, net of tax | (55 | ) | 29 | (55 | ) | (34 | ) | |||||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||||||
Change in unrealized losses on marketable securities, net of tax |
|
| (13 | ) |
|
| (55 | ) |
|
| (17 | ) |
|
| (55 | ) | ||||||||||||||||
Total other comprehensive (loss) income | (10,720 | ) | (2,659 | ) | (14,196 | ) | 2,776 |
|
| (1,401 | ) |
|
| (10,720 | ) |
|
| 9,325 |
|
|
| (14,196 | ) | |||||||||
|
|
|
| |||||||||||||||||||||||||||||
Comprehensive income | $ | 36,635 | $ | 49,335 | $ | 139,636 | $ | 154,387 |
| $ | 43,691 |
|
| $ | 36,635 |
|
| $ | 116,270 |
|
| $ | 139,636 |
| ||||||||
|
|
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
(amounts in thousands, except share data)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
| ||||||||||||||||||||||||||
Common Shares | Additional Paid-in Capital | Retained Earnings | Accumulated Other Compre- hensive Loss | Total |
| Common Shares |
|
| Additional |
|
|
|
|
|
| Other |
|
|
|
|
| |||||||||||||||||||||||||||
Number of Shares | Par Value |
| Number of |
|
| Par |
|
| Paid-in |
|
| Retained |
|
| Comprehensive |
|
|
|
|
| ||||||||||||||||||||||||||||
Balances as of January 31, 2016 | 117,321,120 | $ | 12 | $ | — | $ | 1,160,666 | $ | (23,451 | ) | $ | 1,137,227 | ||||||||||||||||||||||||||||||||||||
|
| Shares |
|
| Value |
|
| Capital |
|
| Earnings |
|
| Loss |
|
| Total |
| ||||||||||||||||||||||||||||||
Balances as of January 31, 2017 |
|
| 116,233,781 |
|
| $ | 12 |
|
| $ | — |
|
| $ | 1,347,141 |
|
| $ | (34,069 | ) |
| $ | 1,313,084 |
| ||||||||||||||||||||||||
Comprehensive income | — | — | — | 153,832 | (14,196 | ) | 139,636 |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 106,945 |
|
|
| 9,325 |
|
|
| 116,270 |
| |||||||||||||||||
Share-based compensation | — | — | 20,032 | — | — | 20,032 |
|
| — |
|
|
| — |
|
|
| 13,831 |
|
|
| — |
|
|
| — |
|
|
| 13,831 |
| ||||||||||||||||||
Stock options and awards | 292,847 | — | 4,096 | — | — | 4,096 |
|
| 200,000 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
| ||||||||||||||||||
Excess tax deficiencies from share-based awards, net | — | — | (5,522 | ) | — | — | (5,522 | ) | ||||||||||||||||||||||||||||||||||||||||
Cumulative effect of change in accounting pronouncement |
|
| — |
|
|
| — |
|
|
| 1,607 |
|
|
| (760 | ) |
|
| — |
|
|
| 847 |
| ||||||||||||||||||||||||
Share repurchases | (1,380,383 | ) | — | (18,606 | ) | (29,230 | ) | — | (47,836 | ) |
|
| (8,185,310 | ) |
|
| (1 | ) |
|
| (15,438 | ) |
|
| (143,785 | ) |
|
| — |
|
|
| (159,224 | ) | ||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||
Balances as of October 31, 2016 | 116,233,584 | $ | 12 | $ | — | $ | 1,285,268 | $ | (37,647 | ) | $ | 1,247,633 | ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||
Balances as of October 31, 2017 |
|
| 108,248,471 |
|
| $ | 11 |
|
| $ | — |
|
| $ | 1,309,541 |
|
| $ | (24,744 | ) |
| $ | 1,284,808 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
(unaudited)
| For the Nine Months Ended |
| ||||||||||||||
Nine Months Ended October 31, |
| October 31, |
| |||||||||||||
2016 | 2015 |
| 2017 |
|
| 2016 |
| |||||||||
Cash flows from operating activities: |
|
|
|
|
|
|
|
| ||||||||
Net income | $ | 153,832 | $ | 151,611 |
| $ | 106,945 |
|
| $ | 153,832 |
| ||||
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
| ||||||||
Depreciation and amortization | 101,181 | 106,751 |
|
| 96,966 |
|
|
| 101,181 |
| ||||||
(Benefit) provision for deferred income taxes | (11,087 | ) | 448 | |||||||||||||
Excess tax benefits from share-based awards | (333 | ) | (6,419 | ) | ||||||||||||
Benefit for deferred income taxes |
|
| (4,771 | ) |
|
| (11,087 | ) | ||||||||
Share-based compensation expense | 20,032 | 12,141 |
|
| 13,831 |
|
|
| 20,032 |
| ||||||
Loss on disposition of property and equipment, net | 2,801 | 910 |
|
| 3,276 |
|
|
| 2,801 |
| ||||||
Changes in assets and liabilities: |
|
|
|
|
|
|
|
| ||||||||
Receivables | 6,261 | (6,217 | ) |
|
| (23,567 | ) |
|
| 6,261 |
| |||||
Inventory | (126,934 | ) | (82,780 | ) |
|
| (109,258 | ) |
|
| (126,934 | ) | ||||
Prepaid expenses and other assets | (7,331 | ) | 19,972 |
|
| 2,815 |
|
|
| (7,331 | ) | |||||
Payables, accrued expenses and other liabilities | 90,592 | 32,188 |
|
| 83,411 |
|
|
| 90,592 |
| ||||||
|
| |||||||||||||||
Net cash provided by operating activities | 229,014 | 228,605 |
|
| 169,648 |
|
|
| 229,347 |
| ||||||
|
| |||||||||||||||
Cash flows from investing activities: |
|
|
|
|
|
|
|
| ||||||||
Cash paid for property and equipment | (112,069 | ) | (109,128 | ) |
|
| (63,338 | ) |
|
| (112,069 | ) | ||||
Cash paid for marketable securities | (152,340 | ) | (213,423 | ) |
|
| (174,938 | ) |
|
| (152,340 | ) | ||||
Sales and maturities of marketable securities | 218,400 | 296,172 |
|
| 209,937 |
|
|
| 218,400 |
| ||||||
Acquisition of business | (15,325 | ) | — |
|
| — |
|
|
| (15,325 | ) | |||||
|
| |||||||||||||||
Net cash used in investing activities | (61,334 | ) | (26,379 | ) |
|
| (28,339 | ) |
|
| (61,334 | ) | ||||
|
| |||||||||||||||
Cash flows from financing activities: |
|
|
|
|
|
|
|
| ||||||||
Borrowings under long-term debt | — | 191,612 | ||||||||||||||
Repayments of long-term debt | (150,000 | ) | (76,612 | ) |
|
| — |
|
|
| (150,000 | ) | ||||
Proceeds from the exercise of stock options | 4,096 | 46,400 |
|
| — |
|
|
| 4,096 |
| ||||||
Excess tax benefits from share-based awards | 333 | 6,419 | ||||||||||||||
Share repurchases related to share repurchase program | (45,787 | ) | (365,527 | ) |
|
| (157,044 | ) |
|
| (45,787 | ) | ||||
Share repurchases related to taxes for share-based awards | (2,049 | ) | (10,119 | ) |
|
| (2,180 | ) |
|
| (2,049 | ) | ||||
|
| |||||||||||||||
Net cash used in financing activities | (193,407 | ) | (207,827 | ) |
|
| (159,224 | ) |
|
| (193,740 | ) | ||||
|
| |||||||||||||||
Effect of exchange rate changes on cash and cash equivalents | (4,663 | ) | 640 |
|
| 4,501 |
|
|
| (4,663 | ) | |||||
|
| |||||||||||||||
Decrease in cash and cash equivalents | (30,390 | ) | (4,961 | ) |
|
| (13,414 | ) |
|
| (30,390 | ) | ||||
Cash and cash equivalents at beginning of period | 265,276 | 154,558 |
|
| 248,140 |
|
|
| 265,276 |
| ||||||
|
| |||||||||||||||
Cash and cash equivalents at end of period | $ | 234,886 | $ | 149,597 |
| $ | 234,726 |
|
| $ | 234,886 |
| ||||
|
| |||||||||||||||
Supplemental cash flow information: |
|
|
|
|
|
|
|
| ||||||||
Cash paid during the period for: | ||||||||||||||||
Cash paid during the year for: |
|
|
|
|
|
|
|
| ||||||||
Income taxes | $ | 85,179 | $ | 60,521 |
| $ | 61,119 |
|
| $ | 85,179 |
| ||||
|
| |||||||||||||||
Non-cash investing activities—Accrued capital expenditures | $ | 16,012 | $ | 14,596 |
| $ | 8,560 |
|
| $ | 16,012 |
| ||||
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except share and per share data)
(unaudited)
1. Basis of Presentation
The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. These condensed financial statements should be read in conjunction with Urban Outfitters, Inc.’s (the “Company’s”) Annual Report on Form 10-K for the fiscal year ended January 31, 2016,2017, filed with the United States Securities and Exchange Commission on March 31, 2016.April 3, 2017.
The Company’s business experiences seasonal fluctuations and realizes greaterin net sales and operatingnet income, with a more significant portion typically realized in the fourth quartersecond half of each year reflectingpredominantly due to the year-end holiday period. Historically, and consistent with the retail industry, this seasonality also impacts our working capital requirements, particularly with regard to inventory. Accordingly, the results of operations for the three and nine months ended October 31, 20162017 are not necessarily indicative of the results to be expected for the full year.
The Company’s fiscal year ends on January 31. All references in these notes to the Company’s fiscal years refer to the fiscal years ended on January 31 in those years. For example, the Company’s fiscal year 20172018 will end on January 31, 2017.2018.
2. Recently IssuedRecent Accounting Pronouncements
Recently Adopted
In OctoberMarch 2016, the Financial Accounting Standards Board (“FASB”) issued an accounting standards update that simplifies several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. The Company adopted the new guidance on February 1, 2017 and recorded a cumulative effect reduction to beginning retained earnings of $(984) related to the Company’s election to record forfeitures as they occur and $224 related to the recognition of previously unrecognized excess tax benefits. In addition, the Company elected to retrospectively adopt the provision regarding the presentation of excess tax benefits (deficits) in the statement of cash flows, which resulted in an increase in net cash provided by operating activities and a decrease in net cash used in financing activities of $333 for the nine months ended October 31, 2016. The provision requiring the inclusion of excess tax benefits (deficits) as a component of the provision for income taxes in the consolidated results of operations has been applied prospectively. The Company recorded excess tax deficits of $3,072 during the nine months ended October 31, 2017.
Recently Issued
In October 2016, the FASB issued an accounting standards update that amends the existing guidance on the income tax effects of intra-entity asset transfers with the exception of transfers of inventory. The update requires the recognition of tax expense when an intra-entity asset transfer occurs as opposed to being deferred under the existing guidance. The updateCompany will beadopt the new guidance effective for the Company on February 1, 2018 and early adoption is permitted inusing the first interim period of a fiscal year. The update requires a modified retrospective transition approach, with a cumulative-effect adjustmentapproach. The net cumulative effect of this change will be recognized as an increase to retained earnings. The Company is currently assessing the potential effects this update may have on its consolidated financial statements and related disclosures.earnings as of January 31, 2018, which will not be material.
In June 2016, the FASB issued an accounting standards update that introduces a new model for recognizing credit losses on financial instruments based on an estimate of current expected credit losses. This includes loan commitments, accounts receivable, trade receivables, and certain off-balance sheet credit exposures. The guidance also modifies the impairment model for available-for-sale debt securities. The update will be effective for the
Company on February 1, 2020 and early adoption is permitted. The Company is currently assessing the potential effects this update may have on its consolidated financial statements and related disclosures.
In March 2016, the FASB issued an accounting standards update that makes several modifications to the accounting for employee share-based payment transactions, including the requirement to recognize excess tax benefits and tax deficiencies as income tax expense or benefit in the income statement rather than in additional-paid-in capital. The guidance also clarifies the classification of components of share-based awards on the statement of cash flows. The update will be effective for the Company on February 1, 2017 and early adoption is permitted. The Company is currently assessing the potential effects this update may have on its consolidated financial statements and related disclosures.
In February 2016, the FASB issued an accounting standards update that amends the existing accounting standards for lease accounting. This update requires lessees to recognize a right-of-use asset and lease liability for all leases with terms of more than twelve12 months. Lessees are permitted to make an accounting policy election to not recognize the asset and liability for leases with a term of twelve12 months or less. The update will be effective for the Company on February 1, 2019 and early adoption is permitted. The update requires a modified retrospective transition approach, which includes a number of practical expedients. While the Company expects adoption to result in a significant increase in the assets and liabilities recorded on its balance sheet, the Company is currently assessing the overall impact on its consolidated financial statements and related disclosures.
In July 2015, the FASB issued an accounting standards update that clarifies the measurement of inventory. The update applies to entities which utilize the first-in, first-out (“FIFO”) and average cost methods of measuring inventory and states that an entity should measure inventory at the lower of cost and net realizable value. Net realizable value represents the estimated selling price less costs associated with completion, disposal and transportation. The update will be effective for the Company on February 1, 2017 and early adoption is permitted. The update is to be adopted on a prospective basis. The Company has performed an assessment of its inventory measurement process and determined that the effects of this update will be immaterial to its consolidated financial statements and related disclosures.
In May 2014, the FASB issued an accounting standards update that clarifies the principles for recognizing revenue from contracts with customers. The update outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The update states that an entity should recognize revenue to depict the transfer of promised goods or services to customers in the amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. Entities are required to apply the following steps when recognizing revenue under the update: (1) identify the contract(s) with a customer; (2) identify the performance obligation in the contract;contract(s); (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract;contract(s); and (5) recognize revenue when (or as) the entity satisfies a performance obligation. The update allows for a “full retrospective” adoption, meaning the update is applied to all periods presented, or a “modified retrospective” adoption, meaning the update is applied only to the most current periods presented in the financial statements. In August 2015, the FASB issued an accounting standards update which approved a one-year deferral of the effective date that allows the Company to defer the effective date to February 1, 2018, but still permits the Company to adopt the update as of the original February 1, 2017 effective date. The Company is currently evaluatinghas determined it will adopt this update on February 1, 2018 using the modified retrospective approach. The Company expects adoption method to applyresult in a change in the timing of recognizing breakage income related to its gift cards and the impactin recognizing estimated sales returns on a gross basis on its balance sheet. The Company has concluded that the effects of this update will not have a material impact on its consolidated financial statements and related disclosures.
3. Acquisition
On February 1, 2016, the Company acquired certain assets of the Vetri Family group of restaurants, headquartered in Philadelphia, PA, for a total aggregate purchase price of approximately $18,937, of which $15,325 was paid in cash, $2,687 was satisfied through the settlement of a note receivable and up to an additional $925 that will be paidwas settled in cash in the fourth quarter of fiscal 2017.2018. No liabilities were assumed. Pro forma information related to this acquisition is not included because the impact on the Company’s Condensed Consolidated Statements of Income is not considered to be material.
During all periods shown, marketable securities are classified as available-for-sale. The amortized cost, gross unrealized gains (losses) and fair value of available-for-sale securities by major security type and class of security as of October 31, 2016,2017, January 31, 20162017 and October 31, 20152016 were as follows:
| Amortized |
|
| Unrealized |
|
| Unrealized |
|
| Fair |
| |||||||||||||||||||||
Amortized Cost | Unrealized Gains | Unrealized (Losses) | Fair Value |
| Cost |
|
| Gains |
|
| (Losses) |
|
| Value |
| |||||||||||||||||
As of October 31, 2016 | ||||||||||||||||||||||||||||||||
As of October 31, 2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Short-term Investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Corporate bonds | $ | 17,809 | $ | 1 | $ | (19 | ) | $ | 17,791 |
| $ | 67,275 |
|
| $ | 2 |
|
| $ | (71 | ) |
| $ | 67,206 |
| |||||||
Municipal and pre-refunded municipal bonds | 6,859 | — | (6 | ) | 6,853 |
|
| 24,676 |
|
|
| 4 |
|
|
| (14 | ) |
|
| 24,666 |
| |||||||||||
Certificates of deposit | — | — | — | — |
|
| 1,356 |
|
|
| — |
|
|
| — |
|
|
| 1,356 |
| ||||||||||||
|
|
|
| |||||||||||||||||||||||||||||
24,668 | 1 | (25 | ) | 24,644 | ||||||||||||||||||||||||||||
|
|
|
|
|
| 93,307 |
|
|
| 6 |
|
|
| (85 | ) |
|
| 93,228 |
| |||||||||||||
Long-term Investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Corporate bonds | 222 | 1 | — | 223 |
|
| 30,051 |
|
|
| 2 |
|
|
| (87 | ) |
|
| 29,966 |
| ||||||||||||
Municipal and pre-refunded municipal bonds | 307 | — | — | 307 |
|
| 1,362 |
|
|
| — |
|
|
| (2 | ) |
|
| 1,360 |
| ||||||||||||
Mutual funds, held in rabbi trust | 4,544 | — | (97 | ) | 4,447 |
|
| 5,639 |
|
|
| 109 |
|
|
| (2 | ) |
|
| 5,746 |
| |||||||||||
Certificates of deposit | 628 | — | — | 628 |
|
| 4,182 |
|
|
| — |
|
|
| — |
|
|
| 4,182 |
| ||||||||||||
|
|
|
|
|
| 41,234 |
|
|
| 111 |
|
|
| (91 | ) |
|
| 41,254 |
| |||||||||||||
5,701 | 1 | (97 | ) | 5,605 |
| $ | 134,541 |
|
| $ | 117 |
|
| $ | (176 | ) |
| $ | 134,482 |
| ||||||||||||
As of January 31, 2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Short-term Investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Corporate bonds |
| $ | 59,403 |
|
| $ | 7 |
|
| $ | (90 | ) |
| $ | 59,320 |
| ||||||||||||||||
Municipal and pre-refunded municipal bonds |
|
| 51,731 |
|
|
| 28 |
|
|
| (12 | ) |
|
| 51,747 |
| ||||||||||||||||
|
|
| 111,134 |
|
|
| 35 |
|
|
| (102 | ) |
|
| 111,067 |
| ||||||||||||||||
Long-term Investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Corporate bonds |
|
| 19,102 |
|
|
| 9 |
|
|
| (33 | ) |
|
| 19,078 |
| ||||||||||||||||
Municipal and pre-refunded municipal bonds |
|
| 19,488 |
|
|
| 35 |
|
|
| (9 | ) |
|
| 19,514 |
| ||||||||||||||||
Mutual funds, held in rabbi trust |
|
| 4,583 |
|
|
| 91 |
|
|
| (1 | ) |
|
| 4,673 |
| ||||||||||||||||
Certificates of deposit |
|
| 1,023 |
|
|
| — |
|
|
| — |
|
|
| 1,023 |
| ||||||||||||||||
|
|
|
|
|
| 44,196 |
|
|
| 135 |
|
|
| (43 | ) |
|
| 44,288 |
| |||||||||||||
$ | 30,369 | $ | 2 | $ | (122 | ) | $ | 30,249 |
| $ | 155,330 |
|
| $ | 170 |
|
| $ | (145 | ) |
| $ | 155,355 |
| ||||||||
As of October 31, 2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Short-term Investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Corporate bonds |
| $ | 17,809 |
|
| $ | 1 |
|
| $ | (19 | ) |
| $ | 17,791 |
| ||||||||||||||||
Municipal and pre-refunded municipal bonds |
|
| 6,859 |
|
|
| — |
|
|
| (6 | ) |
|
| 6,853 |
| ||||||||||||||||
|
|
|
|
|
| 24,668 |
|
|
| 1 |
|
|
| (25 | ) |
|
| 24,644 |
| |||||||||||||
Long-term Investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Corporate bonds |
|
| 222 |
|
|
| 1 |
|
|
| — |
|
|
| 223 |
| ||||||||||||||||
Municipal and pre-refunded municipal bonds |
|
| 307 |
|
|
| — |
|
|
| — |
|
|
| 307 |
| ||||||||||||||||
Mutual funds, held in rabbi trust |
|
| 4,544 |
|
|
| — |
|
|
| (97 | ) |
|
| 4,447 |
| ||||||||||||||||
Certificates of deposit |
|
| 628 |
|
|
| — |
|
|
| — |
|
|
| 628 |
| ||||||||||||||||
|
|
| 5,701 |
|
|
| 1 |
|
|
| (97 | ) |
|
| 5,605 |
| ||||||||||||||||
|
| $ | 30,369 |
|
| $ | 2 |
|
| $ | (122 | ) |
| $ | 30,249 |
|
Amortized Cost | Unrealized Gains | Unrealized (Losses) | Fair Value | |||||||||||||
As of January 31, 2016 | ||||||||||||||||
Short-term Investments: | ||||||||||||||||
Corporate bonds | $ | 33,885 | $ | 10 | $ | (25 | ) | $ | 33,870 | |||||||
Municipal and pre-refunded municipal bonds | 26,243 | 33 | — | 26,276 | ||||||||||||
Certificates of deposit | 915 | — | — | 915 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
61,043 | 43 | (25 | ) | 61,061 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Long-term Investments: | ||||||||||||||||
Corporate bonds | 12,227 | 9 | (35 | ) | 12,201 | |||||||||||
Municipal and pre-refunded municipal bonds | 18,028 | 58 | (2 | ) | 18,084 | |||||||||||
Mutual funds, held in rabbi trust | 4,604 | 6 | (247 | ) | 4,363 | |||||||||||
Certificates of deposit | 1,952 | — | — | 1,952 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
36,811 | 73 | (284 | ) | 36,600 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
$ | 97,854 | $ | 116 | $ | (309 | ) | $ | 97,661 | ||||||||
|
|
|
|
|
|
|
|
As of October 31, 2015 Short-term Investments: Corporate bonds Municipal and pre-refunded municipal bonds Certificates of deposit Long-term Investments: Corporate bonds Municipal and pre-refunded municipal bonds Mutual funds, held in rabbi trust Certificates of deposit Amortized
Cost Unrealized
Gains Unrealized
(Losses) Fair
Value $ 37,260 $ 4 $ (45 ) $ 37,219 31,100 46 (1 ) 31,145 1,181 — — 1,181 69,541 50 (46 ) 69,545 15,210 7 (28 ) 15,189 30,265 115 (2 ) 30,378 4,840 272 (1 ) 5,111 3,460 — — 3,460 53,775 394 (31 ) 54,138 $ 123,316 $ 444 $ (77 ) $ 123,683
Proceeds from the sales and maturities of available-for-sale securities were $218,400$209,937 and $296,172$218,400 for the nine months ended October 31, 20162017 and 2015,2016, respectively. The Company included in “Other (expense) income, (expense), net”net,” in the Condensed Consolidated Statements of Income, net realized losses of $2 and $11 for the three and nine months ended October 31, 2017, respectively, and net realized losses of $96 and $74 for the three and nine months ended October 31, 2016, respectively, and net realized gains of $11 and $53 for the three and nine months ended October 31, 2015, respectively. Amortization of discounts and premiums, net, resulted in a reduction of “Other (expense) income, (expense), net” of $538 and $2,066 for the three and nine months ended October 31, 2017, and $550 and $1,711 for the three and nine months ended October 31, 2016, and $997 and $3,155 for the three and nine months ended October 31, 2015, respectively. Mutual funds represent assets held
in an irrevocable rabbi trust for the Company’s Non-qualified Deferred Compensation Plan (“NQDC”). These assets are a source of funds to match the funding obligations to participants in the NQDC but are subject to the Company’s general creditors. The Company elected the fair value option for financial assets for the mutual funds held in the rabbi trust resulting in all unrealized gains and losses being recorded in “Other (expense) income, (expense), net” in the Condensed Consolidated Statements of Income.
5. Fair Value
The Company utilizes a hierarchy that prioritizes fair value measurements based on the types of inputs used for the various valuation techniques (market approach, income approach and cost approach that relate to its financial assets and financial liabilities). The levels of the hierarchy are described as follows:
Management’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of financial assets and liabilities and their placement within the fair value hierarchy. The Company’s financial assets that are accounted for at fair value on a recurring basis are presented in the tables below:
| Marketable Securities Fair Value as of |
| ||||||||||||||||||||||||||||||
Marketable Securities Fair Value as of October 31, 2016 |
| October 31, 2017 |
| |||||||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total |
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| |||||||||||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Corporate bonds | $ | 18,014 | $ | — | $ | — | $ | 18,014 |
| $ | 97,172 |
|
| $ | — |
|
| $ | — |
|
| $ | 97,172 |
| ||||||||
Municipal and pre-refunded municipal bonds | — | 7,160 | — | 7,160 |
|
| — |
|
|
| 26,026 |
|
|
| — |
|
|
| 26,026 |
| ||||||||||||
Mutual funds, held in rabbi trust | 4,447 | — | — | 4,447 |
|
| 5,746 |
|
|
| — |
|
|
| — |
|
|
| 5,746 |
| ||||||||||||
Certificates of deposit | — | 628 | — | 628 |
|
| — |
|
|
| 5,538 |
|
|
| — |
|
|
| 5,538 |
| ||||||||||||
|
|
|
|
| $ | 102,918 |
|
| $ | 31,564 |
|
| $ | — |
|
| $ | 134,482 |
| |||||||||||||
$ | 22,461 | $ | 7,788 | $ | — | $ | 30,249 | |||||||||||||||||||||||||
|
|
|
|
| Marketable Securities Fair Value as of |
| ||||||||||||||||||||||||||||||
Marketable Securities Fair Value as of January 31, 2016 |
| January 31, 2017 |
| |||||||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total |
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| |||||||||||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Corporate bonds | $ | 46,071 | $ | — | $ | — | $ | 46,071 |
| $ | 78,398 |
|
| $ | — |
|
| $ | — |
|
| $ | 78,398 |
| ||||||||
Municipal and pre-refunded municipal bonds | — | 44,360 | — | 44,360 |
|
| — |
|
|
| 71,261 |
|
|
| — |
|
|
| 71,261 |
| ||||||||||||
Mutual funds, held in rabbi trust | 4,363 | — | — | 4,363 |
|
| 4,673 |
|
|
| — |
|
|
| — |
|
|
| 4,673 |
| ||||||||||||
Certificates of deposit | — | 2,867 | — | 2,867 |
|
| — |
|
|
| 1,023 |
|
|
| — |
|
|
| 1,023 |
| ||||||||||||
|
|
|
|
| $ | 83,071 |
|
| $ | 72,284 |
|
| $ | — |
|
| $ | 155,355 |
| |||||||||||||
$ | 50,434 | $ | 47,227 | $ | — | $ | 97,661 | |||||||||||||||||||||||||
|
|
|
|
|
| Marketable Securities Fair Value as of |
| |||||||||||||
|
| October 31, 2016 |
| |||||||||||||
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| ||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate bonds |
| $ | 18,014 |
|
| $ | — |
|
| $ | — |
|
| $ | 18,014 |
|
Municipal and pre-refunded municipal bonds |
|
| — |
|
|
| 7,160 |
|
|
| — |
|
|
| 7,160 |
|
Mutual funds, held in rabbi trust |
|
| 4,447 |
|
|
| — |
|
|
| — |
|
|
| 4,447 |
|
Certificates of deposit |
|
| — |
|
|
| 628 |
|
|
| — |
|
|
| 628 |
|
|
| $ | 22,461 |
|
| $ | 7,788 |
|
| $ | — |
|
| $ | 30,249 |
|
Marketable Securities Fair Value as of October 31, 2015 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets: | ||||||||||||||||
Corporate bonds | $ | 52,408 | $ | — | $ | — | $ | 52,408 | ||||||||
Municipal and pre-refunded municipal bonds | — | 61,523 | — | 61,523 | ||||||||||||
Mutual funds, held in rabbi trust | 5,111 | — | — | 5,111 | ||||||||||||
Certificates of deposit | — | 4,641 | — | 4,641 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
$ | 57,519 | $ | 66,164 | $ | — | $ | 123,683 | |||||||||
|
|
|
|
|
|
|
|
Financial assets
Level 1 assets consist of financial instruments whose value has been based on inputs that use, as their basis, readily observable market data that are actively quoted and are validated through external sources, including third-party pricing services and brokers.
Level 2 assets consist of financial instruments whose value has been based on quoted prices for similar assets and liabilities in active markets as well as quoted prices for identical or similar assets or liabilities in markets that are not active.
Level 3 assets consist of financial instruments where there has been no active market. The Company held no Level 3 financial instruments as of October 31, 2016,2017, January 31, 20162017 and October 31, 2015.2016.
The fair value of cash and cash equivalents (Level 1) approximates carrying value since cash and cash equivalents consist of short-term highly liquid investments with maturities of less than three months at the time of purchase. As of October 31, 20162017 and 2015,2016, cash and cash equivalents included cash on hand, cash in banks, money market accounts and marketable securities with maturities of less than three months at the time of purchase. The fair value of debt approximates its carrying value as it is all variable rate debt.
Non-financial assets
The Company’s non-financial assets, primarily consisting of property and equipment and goodwill, are periodically tested for impairment annually and whenever events or changes in circumstances indicate that the carrying value may not be recoverable.
The fair value of the non-financial assetsproperty and equipment was determined using a discounted cash flowcash-flow model that utilized Level 3 inputs. The Company’s stores are reviewed for impairment at the store level, which is the lowest level at which individual cash flows can be identified. In calculating future cash flows, the Company makes estimates regarding future operating results based on its experience and knowledge of the market factors in which the store is located. Goodwill has been assigned to reporting units for purposes of impairment testing. The Company evaluates goodwill to determine if the carrying value exceeds the fair value of the reporting unit. For the three and nine months ended October 31, 20162017 and 2015,2016, impairment charges were zero.
6. Debt
On July 1, 2015, the Company and its domestic subsidiaries entered into a five-year asset-based revolving Credit Agreement (“Credit Agreement”) with certain lenders, including JPMorgan Chase Bank, N.A., as administrative agent, and J.P. Morgan Securities LLC and Wells Fargo Bank, National Association, as joint lead arrangers and co-book managers.
The Credit Agreement provides senior secured revolving credit for loans and letters of credit up to $400,000 (the “Credit Facility”), subject to a borrowing base that is comprised of the Company’s eligible accounts receivable and inventory. The Credit Facility includes a swing-line sub-facility, a multicurrency sub-facility and the option to expand the facility by up to $150,000. The funds available under the Credit Facility may be used for working capital and other general corporate purposes.
The Credit Facility provides for interest on borrowings, at the Company’s option, at either (i) adjusted LIBOR, CDOR or EURIBOR plus an applicable margin ranging from 1.125% to 1.625%, or (ii) an adjusted ABR plus an applicable margin ranging from 0.125% to 0.625%, each such rate baseddepending on the level of availability under the Credit Facility and the Company’s adjusted leverage ratio. Interest is payable either monthly or quarterly depending on the type of borrowing. A commitment fee is payable quarterly on the unused portion of the Credit Facility based on the Company’s adjusted leverage ratio.
All obligations under the Credit Facility are unconditionally guaranteed by the Company and its domestic subsidiaries. The obligations under the Credit Facility are secured by a first-priority security interest in inventory, accounts receivable, and certain other assets of the borrowers and guarantors. The Credit Agreement contains customary representations and warranties, negative and affirmative covenants and provisions relating to events of default.
As of October 31, 2016,2017, the Company was in compliance with all terms of the Credit Agreement and borrowings onunder the Credit Facility totaled $0 and$0. Outstanding stand-by letters of credit, outstandingwhich reduce the funds available under the Credit Facility, were $13,113.$10,565.
Additionally, the Company has borrowing agreements with two separate financial institutions under which the Company may borrow an aggregate of $130,000 for the purposes of trade letter of credit issuances. The availability of any future borrowings under the trade letter of credit facilities is subject to acceptance by the respective financial institutions. As of October 31, 2016,2017, the Company had outstanding trade letters of credit of $66,001,$69,223, and available trade letters of credit of $63,999$60,777 under these facilities.
7. Share-Based Compensation
The Company maintains stock incentive plans pursuant to which it can grant restricted shares, unrestricted shares, incentive stock options, non-qualified stock options, restricted stock units (“RSU’s”), performance stock units (“PSU’s”) or stock appreciation rights (“SAR’s”). A lattice binomial pricing model was used to estimate the fair values of stock options and SAR’s. The fair value of each of the PSU’s was determined using a Monte Carlo simulation. Share-based compensation expense included in “Selling, general and administrative expenses” in the Condensed Consolidated Statements of Income, for the three and nine months ended October 31, 20162017 and 20152016 was as follows:
| Three Months Ended |
|
| Nine Months Ended |
| |||||||||||||||||||||||||||
Three Months Ended October 31, | Nine Months Ended October 31, |
| October 31, |
|
| October 31, |
| |||||||||||||||||||||||||
2016 | 2015 | 2016 | 2015 |
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| |||||||||||||||||
Stock Options | $ | 245 | $ | 202 | $ | 757 | $ | 627 |
| $ | 216 |
|
| $ | 245 |
|
| $ | 673 |
|
| $ | 757 |
| ||||||||
Stock Appreciation Rights | 60 | 439 | 179 | 1,389 |
|
| 24 |
|
|
| 60 |
|
|
| 125 |
|
|
| 179 |
| ||||||||||||
Performance Stock Units | 5,595 | 3,828 | 15,550 | 10,102 |
|
| (3,107 | ) |
|
| 5,595 |
|
|
| 5,702 |
|
|
| 15,550 |
| ||||||||||||
Restricted Stock Units | 1,380 | — | 3,546 | 23 |
|
| 2,742 |
|
|
| 1,380 |
|
|
| 7,331 |
|
|
| 3,546 |
| ||||||||||||
|
|
|
| |||||||||||||||||||||||||||||
Total | $ | 7,280 | $ | 4,469 | $ | 20,032 | $ | 12,141 |
| $ | (125 | ) |
| $ | 7,280 |
|
| $ | 13,831 |
|
| $ | 20,032 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
(1) Includes the reversal of $6,509 of previously recognized compensation expense in the three and nine months ended October 31, 2017, related to 476,611 PSU’s that will not vest as the achievement of the related performance targets is not probable. | (1) Includes the reversal of $6,509 of previously recognized compensation expense in the three and nine months ended October 31, 2017, related to 476,611 PSU’s that will not vest as the achievement of the related performance targets is not probable. |
| ||||||||||||||||||||||||||||||
|
|
|
Share-based awards granted and the weighted-average fair value of such awards for the nine months ended October 31, 20162017 was as follows:
|
| Nine Months Ended |
| |||||||||||||
|
| October 31, 2017 |
| |||||||||||||
|
|
|
|
| Weighted- |
| ||||||||||
Nine Months Ended October 31, 2016 |
| Awards |
|
| Average Fair |
| ||||||||||
Awards Granted | Weighted- Average Fair Value |
| Granted |
|
| Value |
| |||||||||
Stock Options | 140,000 | $ | 7.31 |
|
| 160,000 |
|
| $ | 5.37 |
| |||||
Stock Appreciation Rights | — | $ | — |
|
| — |
|
| $ | — |
| |||||
Performance Stock Units | 410,000 | $ | 27.30 |
|
| 390,000 |
|
| $ | 23.38 |
| |||||
Restricted Stock Units | 541,500 | $ | 27.94 |
|
| 609,000 |
|
| $ | 25.88 |
| |||||
| ||||||||||||||||
Total | 1,091,500 |
|
| 1,159,000 |
|
|
|
|
| |||||||
|
During the nine months ended October 31, 2016, 177,6252017, 200,000 PSU’s vested. No stock options were exercised, 67,975or SAR’s were exercised and 100,000 PSU’s vested. Nono RSU’s vested during the nine months ended October 31, 2016.2017.
The total unrecognized compensation cost related to outstanding share-based awards and the weighted-average period in which the cost is expected to be recognized as of October 31, 2016 is2017 was as follows:
|
| October 31, 2017 |
| |||||||||||||
| Unrecognized |
|
| Weighted- |
| |||||||||||
October 31, 2016 |
| Compensation |
|
| Average |
| ||||||||||
Unrecognized Compensation Cost | Weighted- Average Years |
| Cost |
|
| Years |
| |||||||||
Stock Options | $ | 546 | 0.6 |
| $ | 503 |
|
|
| 0.6 |
| |||||
Stock Appreciation Rights | 199 | 1.0 |
|
| 21 |
|
|
| 0.3 |
| ||||||
Performance Stock Units | 34,265 | 2.3 |
|
| 17,424 |
|
|
| 1.9 |
| ||||||
Restricted Stock Units | 10,826 | 2.3 |
|
| 16,998 |
|
|
| 2.2 |
| ||||||
| ||||||||||||||||
Total | $ | 45,836 | 2.3 |
| $ | 34,946 |
|
|
|
|
| |||||
|
8.Shareholders’ Equity
Share repurchase activity under the Company’s share repurchase programs iswas as follows:
| Three Months Ended |
|
| Nine Months Ended |
| |||||||||||||||||||||||||||
Three Months Ended October 31, | Nine Months Ended October 31, |
| October 31, |
|
| October 31, |
| |||||||||||||||||||||||||
2016 | 2015 | 2016 | 2015 |
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| |||||||||||||||||
Number of common shares repurchased and subsequently retired | 1,000,000 | 3,699,949 | 1,324,700 | 10,737,090 |
|
| 3,083,201 |
|
|
| 1,000,000 |
|
|
| 8,092,906 |
|
|
| 1,324,700 |
| ||||||||||||
Total cost | $ | 35,083 | $ | 111,909 | $ | 45,787 | $ | 365,527 |
| $ | 66,533 |
|
| $ | 35,083 |
|
| $ | 157,044 |
|
| $ | 45,787 |
| ||||||||
Average cost per share, including commissions | $ | 35.08 | $ | 30.25 | $ | 34.56 | $ | 34.04 |
| $ | 21.58 |
|
| $ | 35.08 |
|
| $ | 19.41 |
|
| $ | 34.56 |
|
On May 27, 2014,February 23, 2015, the Company’s Board of Directors authorized the repurchase of 10,000,00020,000,000 common shares under a share repurchase program; all shares were repurchased and the authorization was completed by the end of June 2015.August 2017. On February 23, 2015,August 22, 2017, the Company’s Board of Directors authorized the repurchase of 20,000,000 common shares under a new share repurchase program, of which 5,995,05917,902,153 common shares were remaining as of October 31, 2016.2017.
In addition to the shares repurchased under the share repurchase program, during the nine months ended October 31, 2017, the Company acquired and subsequently retired 92,404 common shares at a total cost of $2,180 from employees to meet minimum statutory tax withholding requirements. During the nine months ended October 31, 2016, the Company acquired and subsequently retired 55,683 common shares at a total cost of $2,049 from employees to meet minimum statutory tax withholding requirements. During the nine months ended October 31, 2015, the Company acquired and subsequently retired 247,124 common shares at a total cost of $10,119 from employees to meet minimum statutory tax withholding requirements.
9.Other Comprehensive Income (Loss) and Accumulated Other Comprehensive Loss
The following tables present the changes in “Accumulated other comprehensive income (loss),” by component, net of tax, for the three and nine months ended October 31, 20162017 and 2015, respectively:2016:
Three Months Ended October 31, 2016 | Nine Months Ended October 31, 2016 | |||||||||||||||||||||||
Foreign Currency Translation | Unrealized Gains and (Losses) on Available-for- Sale Securities | Total | Foreign Currency Translation | Unrealized Gains and (Losses) on Available-for- Sale Securities | Total | |||||||||||||||||||
Balance at beginning of period | $ | (26,955 | ) | $ | 28 | $ | (26,927 | ) | $ | (23,479 | ) | $ | 28 | $ | (23,451 | ) | ||||||||
Other comprehensive income (loss) before reclassifications | (10,665 | ) | 41 | (10,624 | ) | (14,141 | ) | 19 | (14,122 | ) | ||||||||||||||
Amounts reclassified from accumulated other comprehensive income (loss) | — | (96 | ) | (96 | ) | — | (74 | ) | (74 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net current-period other comprehensive income (loss) | (10,665 | ) | (55 | ) | (10,720 | ) | (14,141 | ) | (55 | ) | (14,196 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Balance at end of period | $ | (37,620 | ) | $ | (27 | ) | $ | (37,647 | ) | $ | (37,620 | ) | $ | (27 | ) | $ | (37,647 | ) | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended October 31, 2017 |
|
| Nine Months Ended October 31, 2017 |
| ||||||||||||||||||
|
|
|
|
|
| Unrealized Gains |
|
|
|
|
|
|
|
|
|
| Unrealized Gains |
|
|
|
|
| ||
|
| Foreign |
|
| and (Losses) on |
|
|
|
|
|
| Foreign |
|
| and (Losses) on |
|
|
|
|
| ||||
|
| Currency |
|
| Available-for- |
|
|
|
|
|
| Currency |
|
| Available-for- |
|
|
|
|
| ||||
|
| Translation |
|
| Sale Securities |
|
| Total |
|
| Translation |
|
| Sale Securities |
|
| Total |
| ||||||
Balance at beginning of period |
| $ | (23,282 | ) |
| $ | (61 | ) |
| $ | (23,343 | ) |
| $ | (34,012 | ) |
| $ | (57 | ) |
| $ | (34,069 | ) |
Other comprehensive income (loss) before reclassifications |
|
| (1,388 | ) |
|
| (11 | ) |
|
| (1,399 | ) |
|
| 9,342 |
|
|
| (6 | ) |
|
| 9,336 |
|
Amounts reclassified from �� accumulated other comprehensive income (loss) |
|
| — |
|
|
| (2 | ) |
|
| (2 | ) |
|
| — |
|
|
| (11 | ) |
|
| (11 | ) |
Net current-period other comprehensive income (loss) |
|
| (1,388 | ) |
|
| (13 | ) |
|
| (1,401 | ) |
|
| 9,342 |
|
|
| (17 | ) |
|
| 9,325 |
|
Balance at end of period |
| $ | (24,670 | ) |
| $ | (74 | ) |
| $ | (24,744 | ) |
| $ | (24,670 | ) |
| $ | (74 | ) |
| $ | (24,744 | ) |
|
| Three Months Ended October 31, 2016 |
|
| Nine Months Ended October 31, 2016 |
| ||||||||||||||||||
|
|
|
|
|
| Unrealized Gains |
|
|
|
|
|
|
|
|
|
| Unrealized Gains |
|
|
|
|
| ||
|
| Foreign |
|
| and (Losses) on |
|
|
|
|
|
| Foreign |
|
| and (Losses) on |
|
|
|
|
| ||||
|
| Currency |
|
| Available-for- |
|
|
|
|
|
| Currency |
|
| Available-for- |
|
|
|
|
| ||||
|
| Translation |
|
| Sale Securities |
|
| Total |
|
| Translation |
|
| Sale Securities |
|
| Total |
| ||||||
Balance at beginning of period |
| $ | (26,955 | ) |
| $ | 28 |
|
| $ | (26,927 | ) |
| $ | (23,479 | ) |
| $ | 28 |
|
| $ | (23,451 | ) |
Other comprehensive income (loss) before reclassifications |
|
| (10,665 | ) |
|
| 41 |
|
|
| (10,624 | ) |
|
| (14,141 | ) |
|
| 19 |
|
|
| (14,122 | ) |
Amounts reclassified from accumulated other comprehensive income (loss) |
|
| — |
|
|
| (96 | ) |
|
| (96 | ) |
|
| — |
|
|
| (74 | ) |
|
| (74 | ) |
Net current-period other comprehensive income (loss) |
|
| (10,665 | ) |
|
| (55 | ) |
|
| (10,720 | ) |
|
| (14,141 | ) |
|
| (55 | ) |
|
| (14,196 | ) |
Balance at end of period |
| $ | (37,620 | ) |
| $ | (27 | ) |
| $ | (37,647 | ) |
| $ | (37,620 | ) |
| $ | (27 | ) |
| $ | (37,647 | ) |
Balance at beginning of period Other comprehensive income (loss) before reclassifications Amounts reclassified from accumulated other comprehensive income (loss) Net current-period other comprehensive income (loss) Balance at end of period . Three Months Ended October 31, 2015 Nine Months Ended October 31, 2015 Foreign
Currency
Translation Unrealized Gains
and (Losses) on
Available-for-
Sale Securities Total Foreign
Currency
Translation Unrealized Gains
and (Losses) on
Available-for-
Sale Securities Total $ (10,018 ) $ 26 $ (9,992 ) $ (15,516 ) $ 89 $ (15,427 ) (2,688 ) 18 (2,670 ) 2,810 (87 ) 2,723 — 11 11 — 53 53 (2,688 ) 29 (2,659 ) 2,810 (34 ) 2,776 $ (12,706 ) $ 55 $ (12,651 ) $ (12,706 ) $ 55 $ (12,651 )
All unrealized gains and losses on available-for-sale securities reclassified from accumulated other comprehensive loss were recorded in “Other (expense) income, (expense), net” in the Condensed Consolidated Statements of Income.
10. Net Income per Common Share
The following is a reconciliation of the weighted-average common shares outstanding used for the computation of basic and diluted net income per common share:
Three Months Ended October 31, | Nine Months Ended October 31, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Basic weighted-average common shares outstanding | 116,829,912 | 123,442,931 | 117,087,696 | 127,478,092 | ||||||||||||
Effect of dilutive options, stock appreciation rights, performance stock units and restricted stock units | 563,798 | 282,650 | 365,309 | 1,028,863 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Diluted weighted-average shares outstanding | 117,393,710 | 123,725,581 | 117,453,005 | 128,506,955 | ||||||||||||
|
|
|
|
|
|
|
|
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| October 31, |
|
| October 31, |
| ||||||||||
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||
Basic weighted-average common shares outstanding |
|
| 109,667,224 |
|
| �� | 116,829,912 |
|
|
| 113,113,597 |
|
|
| 117,087,696 |
|
Effect of dilutive options, stock appreciation rights, performance stock units and restricted stock units |
|
| 433,030 |
|
|
| 563,798 |
|
|
| 318,770 |
|
|
| 365,309 |
|
Diluted weighted-average shares outstanding |
|
| 110,100,254 |
|
|
| 117,393,710 |
|
|
| 113,432,367 |
|
|
| 117,453,005 |
|
For the three months ended October 31, 20162017 and 2015,2016, awards to purchase 319,883 common shares ranging in price from $28.10 to $46.02 and 556,375 common shares with an exerciseranging in price range offrom $35.41 to $46.02, and 999,916 common shares with an exercise price range of $30.50 to $46.02, respectively,
were excluded from the Company’s computationcalculation of diluted weighted-average shares outstandingnet income per common share because their effectthe impact would have beenbe anti-dilutive. For the nine months ended October 31, 20162017 and 2015,2016, awards to purchase 1,016,733 common shares ranging in price from $25.60 to $46.02 and 857,331 common shares with an exerciseranging in price range offrom $28.10 to $46.02 and 553,208 common shares with an exercise price range of $30.50 to $46.02, respectively, were excluded from the Company’s computationcalculation of diluted weighted-average shares outstandingnet income per common share because their effectthe impact would have beenbe anti-dilutive.
Excluded from the calculation of diluted net income per common share as of October 31, 2017 and 2016 were 2,610,295 and 2015 were 2,442,345 and 3,702,743 performance-based equity awards, respectively, sincebecause they did not meet the required performance criteria.
11. Commitments and Contingencies
The Company is party to various legal proceedings arising from normal business activities. Management believes that the ultimate resolution of these matters will not have a material adverse effect on the Company’s financial position, or results of operations.operations or cash flows.
12. Segment Reporting
The Company is a portfolio of global consumer brands that offeroffers lifestyle-oriented general merchandise and consumer products and services withthrough a portfolio of global consumer brands. The Company operates two reportable segments—“Retail” “Retail” and “Wholesale.” The Company’s Retail segment consists of the aggregation of its six brands operating under the names “Anthropologie,” “Bhldn,” “Free People,” “Terrain,”“Terrain” and “Urban Outfitters” brands and “Vetri Family.”the Food and Beverage division. The Anthropologie, Bhldn and Terrain brands make up the “Anthropologie Group.” As of October 31, 2016,2017, there were 242245 Urban Outfitters stores, 226227 Anthropologie Group stores, 124132 Free People stores and 12 restaurants.restaurants under the Food and Beverage division. Each of Urban Outfitters, the Anthropologie Group and Free People, including their stores and direct-to-consumer channels, and the restaurants operated under the Company’s Food and Beverage division are each considered an operating segment. Net sales from the Retail segment accounted for approximately 90.6% of total consolidated net sales for the three and nine months ended October 31, 2017. Net sales from the Retail segment accounted for approximately 91.0% and 91.5% of total consolidated net sales for the three and nine months ended October 31, 2016, respectively. Net sales from the Retail segment accounted for approximately 92.8% and 92.4% of total consolidated net sales for the three and nine months ended October 31, 2015, respectively. The remaining net sales are derived from the Company’s Wholesale segment that distributesconsists of the Free People and Anthropologie Group wholesale divisions that primarily design, develop and market young women’s contemporary casual apparel, including intimates and activewear, shoes toand home goods sold through approximately 1,800 better1,900 department and specialty retailersstores worldwide, third-party websites and to the Retail segment. The Anthropologie Group wholesale division was established in the third quarter of fiscal 2018.
The Company has aggregated its brands into the Retail segment based upon their shared management, customer base and economic characteristics. Reporting in this format provides management with the financial information necessary to evaluate the success of the segments and the overall business. The Company evaluates the performance of the segments based on the net sales and pre-tax income from operations (excluding intercompany charges) of the segment. Corporate expenses include expenses incurred and directed by the corporate office that are not allocated to segments. The principal identifiable assets for each reporting segment are inventory and property and equipment.
Other assets are comprised primarily of general corporate assets, which principally consist of cash and cash equivalents, marketable securities, deferred taxes and prepaid expenses, which are typically not allocated to the Company’s segments. The Company accounts for intersegment sales and transfers as if the sales and transfers were made to third parties making similar volume purchases.
The Company’s omni-channel strategy enhances its customers’ brand experience by providing a seamless approach to the customer shopping experience. All available shopping channels are fully integrated, including stores, websites, mobile applications, catalogs and customer contact centers. The Company’s investments in areas such as marketing campaigns and technology advancements are designed to generate demand for the omni-channel and not the separate store or direct-to-consumer channels. Store sales are primarily fulfilled from that store’s inventory, but may also be shipped from any of the Company’s fulfillment centers or from a different store location if an item is not available at the original store. The Company also allows customers to view in-store inventory from its websites and mobile applications. Direct-to-consumer orders are primarily shipped to the Company’s customers
through its fulfillment centers, but may also be shipped from any store, or a combination of fulfillment centers and stores depending on the availability of a particular item. Direct-to-consumer orders may also be picked up at a store location. Customers may also return certain merchandise purchased through direct-to-consumer channels at store locations. As the Company’s customers continue to shop across multiple channels, the Company has adapted its approach towards meeting this demand. Due to the availability of like product in a variety of shopping channels, the Company sources these products utilizing single stock keeping units based on the omni-channel demand rather than the demand of the separate channels. These and other technological capabilities allow the Company to better serve its customers and help it to complete a salesales that otherwise may not have occurred due to out-of-stock positions. As a result of changing customer behavior and the substantial integration of the operations of the Company’s store and direct-to-consumer channels, the Company manages and analyzes its performance based on a single omni-channel rather than separate channels and believes that the omni-channel results present the most meaningful and appropriate measure of the Company’s performance. Over the next several years the Company plans to continue to shift investment to the direct-to-consumer channel to align with changing customer preferences, and focus on improving its speed-to-customer capabilities.
The accounting policies of the reportable segments are the same as the policies described in Note 2, “Summary of Significant Accounting Policies,” in the Notes to Consolidated Financial Statements included in
the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2016.2017. Both the Retail and Wholesale segments are highly diversified. No one customer constitutes more than 10% of the Company’s total consolidated net sales. A summary of the information about the Company’s operations by segment is as follows:
| Three Months Ended |
|
| Nine Months Ended |
| |||||||||||||||||||||||
October 31, 2016 | January 31, 2016 | October 31, 2015 |
| October 31, |
|
| October 31, |
| ||||||||||||||||||||
Inventory | ||||||||||||||||||||||||||||
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||||||||||||||
Net sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Retail operations | $ | 415,923 | $ | 289,170 | $ | 391,771 |
| $ | 808,546 |
|
| $ | 785,026 |
|
| $ | 2,289,526 |
|
| $ | 2,300,981 |
| ||||||
Wholesale operations | 37,903 | 41,053 | 49,779 |
|
| 88,663 |
|
|
| 81,552 |
|
|
| 245,866 |
|
|
| 222,712 |
| |||||||||
|
|
| ||||||||||||||||||||||||||
Total inventory | $ | 453,826 | $ | 330,223 | $ | 441,550 | ||||||||||||||||||||||
|
|
| ||||||||||||||||||||||||||
Property and equipment, net | ||||||||||||||||||||||||||||
Intersegment elimination |
|
| (4,435 | ) |
|
| (4,087 | ) |
|
| (8,497 | ) |
|
| (8,057 | ) | ||||||||||||
Total net sales |
| $ | 892,774 |
|
| $ | 862,491 |
|
| $ | 2,526,895 |
|
| $ | 2,515,636 |
| ||||||||||||
Income from operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Retail operations | $ | 869,042 | $ | 859,277 | $ | 887,927 |
| $ | 61,667 |
|
| $ | 67,981 |
|
| $ | 150,575 |
|
| $ | 234,022 |
| ||||||
Wholesale operations | 3,267 | 3,860 | 3,944 |
|
| 20,866 |
|
|
| 17,006 |
|
|
| 57,373 |
|
|
| 44,213 |
| |||||||||
|
|
| ||||||||||||||||||||||||||
Total property and equipment, net | $ | 872,309 | $ | 863,137 | $ | 891,871 | ||||||||||||||||||||||
|
|
| ||||||||||||||||||||||||||
Intersegment elimination |
|
| 61 |
|
|
| (317 | ) |
|
| 91 |
|
|
| (568 | ) | ||||||||||||
Total segment operating income |
|
| 82,594 |
|
|
| 84,670 |
|
|
| 208,039 |
|
|
| 277,667 |
| ||||||||||||
General corporate expenses |
|
| (9,706 | ) |
|
| (14,365 | ) |
|
| (38,935 | ) |
|
| (38,667 | ) | ||||||||||||
Total income from operations |
| $ | 72,888 |
|
| $ | 70,305 |
|
| $ | 169,104 |
|
| $ | 239,000 |
|
Three Months Ended October 31, | Nine Months Ended October 31, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Net sales | ||||||||||||||||
Retail operations | $ | 785,026 | $ | 765,525 | $ | 2,300,981 | $ | 2,246,275 | ||||||||
Wholesale operations | 81,552 | 62,170 | 222,712 | 194,410 | ||||||||||||
Intersegment elimination | (4,087 | ) | (2,437 | ) | (8,057 | ) | (8,957 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total net sales | $ | 862,491 | $ | 825,258 | $ | 2,515,636 | $ | 2,431,728 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Income from operations | ||||||||||||||||
Retail operations | $ | 67,981 | $ | 76,095 | $ | 234,022 | $ | 227,684 | ||||||||
Wholesale operations | 17,006 | 12,094 | 44,213 | 40,182 | ||||||||||||
Intersegment elimination | (317 | ) | (203 | ) | (568 | ) | (809 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total segment operating income | 84,670 | 87,986 | 277,667 | 267,057 | ||||||||||||
General corporate expenses | (14,365 | ) | (7,661 | ) | (38,667 | ) | (29,927 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total income from operations | $ | 70,305 | $ | 80,325 | $ | 239,000 | $ | 237,130 | ||||||||
|
|
|
|
|
|
|
|
|
| October 31, |
|
| January 31, |
|
| October 31, |
| |||
|
| 2017 |
|
| 2017 |
|
| 2016 |
| |||
Inventory |
|
|
|
|
|
|
|
|
|
|
|
|
Retail operations |
| $ | 403,631 |
|
| $ | 301,519 |
|
| $ | 415,923 |
|
Wholesale operations |
|
| 46,326 |
|
|
| 37,071 |
|
|
| 37,903 |
|
Total inventory |
| $ | 449,957 |
|
| $ | 338,590 |
|
| $ | 453,826 |
|
Property and equipment, net |
|
|
|
|
|
|
|
|
|
|
|
|
Retail operations |
| $ | 826,296 |
|
| $ | 864,396 |
|
| $ | 869,042 |
|
Wholesale operations |
|
| 2,810 |
|
|
| 3,390 |
|
|
| 3,267 |
|
Total property and equipment, net |
| $ | 829,106 |
|
| $ | 867,786 |
|
| $ | 872,309 |
|
The following table summarizes the percentage of net sales by merchandise category for the Company:
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| October 31, |
|
| October 31, |
| ||||||||||
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||
Net sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Apparel (1) |
|
| 69 | % |
|
| 68 | % |
|
| 69 | % |
|
| 69 | % |
Home (2) |
|
| 14 | % |
|
| 14 | % |
|
| 14 | % |
|
| 14 | % |
Accessories (3) |
|
| 12 | % |
|
| 13 | % |
|
| 12 | % |
|
| 13 | % |
Other (4) |
|
| 5 | % |
|
| 5 | % |
|
| 5 | % |
|
| 4 | % |
Total net sales |
|
| 100 | % |
|
| 100 | % |
|
| 100 | % |
|
| 100 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Apparel includes intimates and activewear |
| |||||||||||||||
(2) Home includes home furnishings, electronics, gifts and decorative items |
| |||||||||||||||
(3) Accessories includes footwear, jewelry and handbags |
| |||||||||||||||
(4) Other includes beauty, shipping and handling revenues and the Food and Beverage division |
|
The Company has foreign operations primarily in Europe and Canada. Revenues and long-lived assets, based upon the Company’s domestic and foreign operations, are as follows:
| October 31, |
|
| January 31, |
|
| October 31, |
| ||||||||||||||||
October 31, 2016 | January 31, 2016 | October 31, 2015 |
| 2017 |
|
| 2017 |
|
| 2016 |
| |||||||||||||
Property and equipment, net |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Domestic operations | $ | 767,916 | $ | 742,171 | $ | 754,284 |
| $ | 735,731 |
|
| $ | 766,419 |
|
| $ | 767,916 |
| ||||||
Foreign operations | 104,393 | 120,966 | 137,587 |
|
| 93,375 |
|
|
| 101,367 |
|
|
| 104,393 |
| |||||||||
|
|
| ||||||||||||||||||||||
Total property and equipment, net | $ | 872,309 | $ | 863,137 | $ | 891,871 |
| $ | 829,106 |
|
| $ | 867,786 |
|
| $ | 872,309 |
| ||||||
|
|
|
| Three Months Ended |
|
| Nine Months Ended |
| |||||||||||||||||||||||||||
Three Months Ended October 31, | Nine Months Ended October 31, |
| October 31, |
|
| October 31, |
| |||||||||||||||||||||||||
2016 | 2015 | 2016 | 2015 |
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| |||||||||||||||||
Net Sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Domestic operations | $ | 760,074 | $ | 720,671 | $ | 2,211,925 | $ | 2,126,877 |
| $ | 779,790 |
|
| $ | 760,074 |
|
| $ | 2,222,589 |
|
| $ | 2,211,925 |
| ||||||||
Foreign operations | 102,417 | 104,587 | 303,711 | 304,851 |
|
| 112,984 |
|
|
| 102,417 |
|
|
| 304,306 |
|
|
| 303,711 |
| ||||||||||||
|
|
|
| |||||||||||||||||||||||||||||
Total net sales | $ | 862,491 | $ | 825,258 | $ | 2,515,636 | $ | 2,431,728 |
| $ | 892,774 |
|
| $ | 862,491 |
|
| $ | 2,526,895 |
|
| $ | 2,515,636 |
| ||||||||
|
|
|
|
Certain matters contained in this filing with the United States Securities and Exchange Commission (“SEC”) may contain forward-looking statements and are being made pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. When used in this Quarterly Report on Form 10-Q, the words “project,” “believe,” “plan,” “will,” “anticipate,” “expect” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Any one, or all, of the following factors could cause actual financial results to differ materially from those financial results mentioned in the forward-looking statements: the difficulty in predicting and responding to shifts in fashion trends, changes in the level of competitive pricing and promotional activity and other industry factors, overall economic and market conditions and worldwide political events and the resultant impact on consumer spending patterns, lowered levels of consumer confidence and higher levels of unemployment, lowered levels of consumer spending resulting from worldwide political and economic events, any effects of war, terrorism and civil unrest, natural disasters or severe weather conditions, increases in labor costs, availability of suitable retail space for expansion, timing of store openings, risks associated with international expansion, seasonal fluctuations in gross sales, the departure of one or more key senior executives, import risks, changes to U.S. and foreign trade policies, including potential disruptions and changesthe enactment of tariffs, border adjustment taxes or increases in duties tariffs andor quotas, the closing or disruption of, or any damage to, any of our distribution centers, our ability to protect our intellectual property rights, risks associated with internet sales, response to new store concepts, our ability to integrate acquisitions, failure of our manufacturers and third-party vendors to comply with our social compliance program, changes in our effective income tax rate, changes in accounting standards and subjective assumptions, regulatory changes and legal matters and other risks identified in our filings with the SEC, including those set forth in Item 1A of our Annual Report on Form 10-K for the fiscal year ended January 31, 2016,2017, filed on March 31, 2016.April 3, 2017. We disclaim any intent or obligation to update forward-looking statements even if experience or future changes make it clear that actual results may differ materially from any projected results expressed or implied therein.
Unless the context otherwise requires, all references to “Urban Outfitters,” the “Company,” “we,” “us,”“us” or “our” or “our company” refer to Urban Outfitters, Inc., together with its subsidiaries.
Overview
We operate two reportable segments: a leading lifestyle specialty Retail segment and a Wholesale segment. Our Retail segment consists of our Anthropologie, Bhldn, Free People, Terrain and Urban Outfitters brands and Vetri Family brands.our Food and Beverage division. Our Retail segment consumer products and services are sold directly to our customers through our stores, websites, mobile applications, catalogs and customer contact centers. Our Wholesale segment consists of the Free People and Anthropologie Group wholesale divisiondivisions that primarily designs, developsdesign, develop and marketsmarket young women’s contemporary casual apparel, including intimates and activewear, shoes and home goods sold through individualapproximately 1,900 department and chain specialty stores worldwide, third-party websites and department stores.our Retail segment.
Our fiscal year ends on January 31. All references to our fiscal years refer to the fiscal years ended on January 31 in those years. For example, our fiscal year 20172018 will end on January 31, 2017.2018.
Retail Segment
Our omni-channel strategy enhances our customers’ brand experience by providing a seamless approach to the customer shopping experience. All available shopping channels are fully integrated, including stores, websites, mobile applications, catalogs and customer contact centers. Our investments in areas such as marketing campaigns and technology advancements are designed to generate demand for the omni-channel and not the separate store or direct-to-consumer channels. Store sales are primarily fulfilled from that store’s inventory, but may also be shipped from any of our fulfillment centers or from a different store location if an item is not available at the original store. We also allow customers to view in-store inventory from our websites and mobile applications. Direct-to-consumer orders are primarily shipped to our customers through our fulfillment centers, but may also be shipped from any store, or a combination of fulfillment centers and stores depending on the availability of particular items. Direct-to-consumer orders may also be picked up at a store location. Customers may also return certain merchandise purchased through direct-to-consumer channels at store
locations. As our customers continue to shop across multiple channels, we have adapted our approach towards meeting this demand. Due to the availability of like product in a
variety of shopping channels, we source these products utilizing single stock keeping units based on the omni-channel demand rather than the demand of the separate channels. These and other technological capabilities allow us to better serve our customers and help us complete sales that otherwise may not have occurred due to out-of-stock positions. As a result of changing customer behavior and the substantial integration of the operations of our store and direct-to-consumer channels, we manage and analyze our performance based on a single omni-channel rather than separate channels and believe that the omni-channel results present the most meaningful and appropriate measure of our performance. Over the next several years we plan to continue to shift investment to the direct-to-consumer channel to align with changing customer preferences, and focus on improving our speed-to-customer capabilities.
Our comparable Retail segment net sales data is equal to the sum of our comparable store and comparable direct-to-consumer channel net sales. A store is considered to be comparable if it has been open at least twelve12 full months, unless it was materially expanded or remodeled within that year or was not otherwise operating at its full capacity within that year. A direct-to-consumer channel is considered to be comparable if it has been operational for at least twelve12 full months. There is no overlap between comparable store net sales and comparable direct-to-consumer net sales. Sales from stores and direct-to-consumer channels that do not fall within the definition of comparable store or channel are considered to be non-comparable. The effects of foreign currency translation are also considered non-comparable.
We monitor customer traffic, average unit selling price, transactions and average units per transaction at our stores, and customer sessions, average order value and conversion rates on our websites and mobile applications. We believe that changes in any of these metrics may be caused by a response to our brands’ fashion offerings, our marketing and digital marketing campaigns, circulation of our catalogs and an overall growth in brand recognition as we expand our store base.recognition.
As of October 31, 2016,2017, we operated 242245 Urban Outfitters stores of which 180181 were located in the United States, 18 were located in Canada and 4446 were located in Europe. For the nine months ended October 31, 2016,2017, we opened threefour new Urban Outfitters stores, twoone located in the United States and onethree located in Europe, and we closed one Urban Outfitters store located in the United States. Total store selling square footage increased 1.6%0.5% over the prior year period to 2.2 million square feet. Urban Outfitters operates websites and mobile applications in North America and Europe that capture the spirit of the brand by offering a similar yet broader selection of merchandise as found in ourits stores. Urban Outfitters offers a catalog in Europe offering select merchandise, most of which is also available in our Urban Outfitters stores. Urban Outfitters targets young adults aged 18 to 28 through a unique merchandise mix, compelling store environment, websites and websites.mobile applications. Urban Outfitters’ product offering includes women’s and men’s fashion apparel, activewear, intimates, footwear, beauty and accessories, home goods, activewearelectronics and gear, electronics, as well asbeauty. A large portion of our merchandise is exclusive to Urban Outfitters, consisting of an assortment of exclusive product through collaborationsdesigned internally and designed in collaboration with global third-party brands. We plan to open additional stores over the next several years. Urban Outfitters’ North American and European Retail segment net sales accounted for approximately 32.4%30.7% and 7.4% of consolidated net sales, respectively, for the nine months ended October 31, 2016,2017, compared to 32.4% and 7.8%7.4%, respectively, for the comparable period in fiscal 2016.2017.
The Anthropologie Group consists of the Anthropologie, Bhldn and Terrain brands. We initially operated the Bhldn and Terrain brands as standalone concepts and opened two Bhldn stores and two Terrain garden centers. We ultimately determined that the Bhldn and Terrain brands were complementary to the Anthropologie brand and integrated those brands into the Anthropologie Group during fiscal 2015 and 2016, respectively. As of October 31, 2016,2017, we operated 226227 Anthropologie Group stores, of which 203 were located in the United States, 13 were located in Canada and ten11 were located in Europe. For the nine months ended October 31, 2016,2017, we opened ninethree new Anthropologie Group stores, seven in the United States, one in Canada and one in Europe, and we closed one Anthropologie Group store, all located in the United States. Total store selling square footage increased 7.7%2.6% over the prior year period to 1.7 million square feet driven mainly by the opening of expanded format stores. The Anthropologie Group operates websites and mobile applications in North America and Europe and a mobile application in North America that capture the spirit of ourits brands by offering a similar yet broader selection of merchandise as found in ourits stores. The Anthropologie brand offers registry services through ourits website and mobile applicationsapplication and in all of ourits stores throughout the United States, allowing our customers to create gift
registries for any occasion. In addition, the brand offers catalogs in North America and Europe that market select merchandise, most of which is also available in our Anthropologie brand stores. Merchandise at the Anthropologie brand is tailored to sophisticated and contemporary women aged 28 to 45. Product assortment includes women’s casual apparel and accessories, intimates, shoes, beauty, home furnishings, and a diverse array of gifts and decorative items.items and beauty. The Bhldn brand emphasizes every element that contributes to a wedding. The Bhldn brand offers a curated collection of heirloom quality wedding gowns, bridesmaid frocks, party dresses, assorted jewelry, headpieces, footwear, lingerie and decorations. The Terrain brand is designed to appeal to women and men interested in a creative and sophisticated
outdoor living and gardening experience. Merchandise includes lifestyle home, garden and gardenoutdoor living products, combined with antiques, live plants, flowers, wellness products and accessories. We plan to open additional Anthropologie Group stores, some of which willmay be expanded format stores that include multiple Anthropologie Group brands and that allow us to present a broader product offering by presenting all Anthropologie Group brands and by expandingan expanded assortment of products in certain categories such as petites, jewelry and accessories, footwear, intimates, beauty and home furnishings. The Anthropologie Group’s North American and European Retail segment net sales accounted for approximately 39.2%39.0% and 1.4%1.6% of consolidated net sales, respectively, for the nine months ended October 31, 2016,2017, compared to 40.5%39.2% and 1.6%1.4%, respectively, for the comparable period in fiscal 2016.2017.
As of October 31, 2016,2017, we operated 124132 Free People stores, of which 118126 were located in the United States and six were located in Canada. For the nine months ended October 31, 2016,2017, we opened 11eight new Free People stores, ten located in the United States and one located in Canada, and we closed one Free People storethree stores, all located in the United States. Total store selling square footage increased 28.5%17.4% over the prior year period to 244,000 square feet.287,000. The increase in selling square footage compared to the prior year period was a result of operating 12eight net new stores, and the addition ofincluding expanded format stores, that were not in operation during the prior twelve12 month period. Free People operates websites and mobile applications in North America, Europe and Asia that capture the spirit of the brand by offering a similar yet broader selection of merchandise as found in ourits stores, as well as substantially all of the Free People product wholesale offerings. Free People also offers a catalog that markets select merchandise, most of which is also available in our Free People stores. Free People focuses its product offering on private label merchandise targeted to young contemporary women aged 25 to 30 and provides a unique merchandise mix of casual women’s apparel, activewear, intimates, shoes, activewear, accessories, home products, gifts and beauty and wellness, home products and gifts.wellness. We plan to open additional stores over the next several years, some of which will be expanded format stores that allow us to present an expanded assortment of intimates, shoes, party dresses and activewear. Free People’s Retail segment net sales accounted for approximately 10.4%11.2% of consolidated net sales for the nine months ended October 31, 2016,2017, compared to approximately 10.1%10.4% for the comparable period in fiscal 2016.2017.
In February 2016,As of October 31, 2017, we acquired sixoperated 12 restaurants as part of our acquisition of the Vetri Family group of restaurants. During fiscal 2017, our existing cafes were combined with the Vetri Family restaurants to formunder our Food and Beverage division.division, all of which were located in the United States. For the nine months ended October 31, 2017, we opened one new restaurant, and we closed one restaurant. The Food and Beverage division focuses on a dining experience that provides excellence in food, beverage and service. For the nine months ended October 31, 2016, we opened two restaurants. The Food and Beverage division net sales accounted for less than 1.0% of consolidated net sales for the nine months ended October 31, 2016.2017 and the comparable period in fiscal 2017.
We plan to open approximately 3219 new stores during fiscal 2017,2018, including fourfive Urban Outfitters stores, tenfour Anthropologie Group stores, 15nine Free People stores and three restaurants.one restaurant. We plan to close approximately eight stores during fiscal 2018, including two Urban Outfitters stores, one Anthropologie Group store, four Free People stores and one restaurant. Within the United States and Canada, future new store growth will be driven by the Free People brand, as both Urban Outfitters and Anthropologie brands are at or close to our currently planned total store count. Our net store growth strategy for the Anthropologie Group will focus on relocation or the conversion of existing stores into expanded format stores. In the future, we plan for new store growth for the Urban Outfitters, Anthropologie and Free People brands to come from modest expansion internationally, which may include franchise and joint venture agreements.
Wholesale Segment
Our Wholesale segment consists of the Free People and Anthropologie Group wholesale divisiondivisions that designs, developsdesign, develop and marketsmarket young women’s contemporary casual apparel, including intimates and activewear, shoes that areand home goods sold through approximately 1,800 better1,900 department and specialty stores worldwide, third-party websites and our own Free People stores.Retail segment. The Anthropologie Group wholesale division was established in the third quarter of fiscal 2018. Our Wholesale segment net sales accounted for approximately 8.5%9.4% of consolidated net sales for the nine months ended October 31, 2016,2017, compared to 7.6%8.5% for the comparable period in fiscal 2016.
Critical Accounting Policies and Estimates
Our Condensed Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States. These generally accepted accounting principles require management to make estimates and assumptions that affect the reported amounts of assets, liabilities, net sales and expenses during the reporting period.
Our senior management has reviewed the critical accounting policies and estimates with the Audit Committee of our Audit Committee.Board of Directors. Our significant accounting policies are described in Note 2, “Summary of Significant Accounting Policies,” in the Notes to our Consolidated Financial Statements for the fiscal year ended January 31, 2016,2017, which are included in our Annual Report on Form 10-K filed with the SEC on March 31, 2016.April 3, 2017. Critical accounting policies are those that are most important to the portrayal of our financial condition, results of operations and cash flows and require management’s most difficult, subjective and complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. If actual results were to differ significantly from estimates made, the reported results could be materially affected. We are not currently aware of any reasonably likely events or circumstances that would cause our actual results to be materially different from our estimates. We believe thatadopted the new accounting standard related to share-based compensation on February 1, 2017, which changed our accounting policy for forfeitures (See Note 2, “Recent Accounting Pronouncements,” of the Notes to our Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q). Other than the adoption of the new accounting standard, there have been no significant changes to our critical accounting policies during the nine months ended October 31, 2016.2017.
Results of Operations
As a Percentage of Net Sales
The following table sets forth, for the periods indicated, the percentage of our net sales represented by certain income statement data and the change in certain income statement data from period to period. This table should be read in conjunction with the discussion that follows:
| Three Month Ended |
|
| Nine Months Ended |
| |||||||||||||||||||||||||||
Three Months Ended October 31, | Nine Months Ended October 31, |
| October 31, |
|
| October 31, |
| |||||||||||||||||||||||||
2016 | 2015 | 2016 | 2015 |
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| |||||||||||||||||
Net sales | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % |
|
| 100.0 | % |
|
| 100.0 | % |
|
| 100.0 | % |
|
| 100.0 | % | ||||||||
Cost of sales | 65.2 | 65.1 | 64.1 | 64.9 |
|
| 66.6 |
|
|
| 65.2 |
|
|
| 67.0 |
|
|
| 64.1 |
| ||||||||||||
|
|
|
| |||||||||||||||||||||||||||||
Gross profit | 34.8 | 34.9 | 35.9 | 35.1 |
|
| 33.4 |
|
|
| 34.8 |
|
|
| 33.0 |
|
|
| 35.9 |
| ||||||||||||
Selling, general and administrative expenses | 26.6 | 25.2 | 26.4 | 25.3 |
|
| 25.2 |
|
|
| 26.6 |
|
|
| 26.3 |
|
|
| 26.4 |
| ||||||||||||
|
|
|
| |||||||||||||||||||||||||||||
Income from operations | 8.2 | 9.7 | 9.5 | 9.8 |
|
| 8.2 |
|
|
| 8.2 |
|
|
| 6.7 |
|
|
| 9.5 |
| ||||||||||||
Other income (expense), net | 0.1 | 0.0 | 0.0 | (0.2 | ) | |||||||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||||||
Other (expense) income, net |
| (0.1) |
|
|
| 0.1 |
|
|
| 0.0 |
|
|
| 0.0 |
| |||||||||||||||||
Income before income taxes | 8.3 | 9.7 | 9.5 | 9.6 |
|
| 8.1 |
|
|
| 8.3 |
|
|
| 6.7 |
|
|
| 9.5 |
| ||||||||||||
Income tax expense | 2.8 | 3.4 | 3.4 | 3.4 |
|
| 3.0 |
|
|
| 2.8 |
|
|
| 2.5 |
|
|
| 3.4 |
| ||||||||||||
|
|
|
| |||||||||||||||||||||||||||||
Net income | 5.5 | % | 6.3 | % | 6.1 | % | 6.2 | % |
|
| 5.1 | % |
|
| 5.5 | % |
|
| 4.2 | % |
|
| 6.1 | % | ||||||||
|
|
|
|
Three Months Ended October 31, 20162017 Compared To Three Months Ended October 31, 20152016
Net sales in the third quarter of fiscal 2017 increased by 4.5%2018 were $892.8 million, compared to $862.5 million, from $825.3 million in the third quarter of fiscal 2016.2017. The $37.2$30.3 million increase was attributable to a $19.5$23.5 million, or 2.5%3.0%, increase in Retail segment net sales and a $17.7$6.8 million, or 29.7%8.7%, increase in our Wholesale segment net sales. Retail segment net sales for the third quarter of fiscal 20172018 accounted for 91.0%90.6% of total net sales compared to 92.8%91.0% of total net sales in the third quarter of fiscal 2016.2017.
The growthincrease in our Retail segment net sales during the third quarter of fiscal 20172018 was due to an increase of $7.3$9.4 million, or 1.0%1.2%, in Retail segment comparable net sales, which includes our direct-to-consumer channel, and an increase of $12.2$14.1 million in non-comparable net sales, including new store net sales. Retail segment
comparable net sales increased 5.2% at Urban Outfitters and decreased 1.5% at Free People and 2.7% at the Anthropologie Group. The increase in Retail segment comparable net sales was driven by continued growth in the direct-to-consumer channel, which was partially offset by negative comparable store net sales. The direct-to-consumer net sales increase was driven by an increase in sessions and conversion rate, while average order value decreased. Negative comparable store net sales resulted from a decrease in average unit selling price and transactions, while units per transaction increased. The increase in net sales attributable to non-comparable sales was primarily the result of operating 49 new stores during the third quarter of fiscal 2017 that were not in operation for the full comparable quarter in fiscal 2016 including sales from the newly acquired Vetri Family restaurants, partially offset by the negative impact of foreign currency translation. Thus far during the fourth quarter of fiscal 2017, comparable Retail segment net sales are low single-digit positive.
The increase in Wholesale segment net sales in the third quarter of fiscal 2017, as compared to the third quarter of fiscal 2016, was primarily due to increased selling square footage at select department stores to support our category expansions including shoes and activewear. This increase was also attributable to the delay at our recently opened east coast fulfillment center that caused approximately $8.9 million of shipments to move out of the third quarter of fiscal 2016 and into the fourth quarter of fiscal 2016.
Gross profit percentage for the third quarter of fiscal 2017 decreased to 34.8% of net sales, from 34.9% of net sales in the comparable quarter in fiscal 2016. Gross profit increased to $299.9 million in the third quarter of fiscal 2017 compared to $288.2 million in the comparable quarter in fiscal 2016. The reduction in gross profit rate was primarily driven by the increased penetration of the direct-to-consumer channel resulting in increased delivery and overall logistics expense rates. Within gross profit, maintained margins for the quarter were flat compared to the prior year comparable period with lower initial mark-ups offset by lower markdowns. Initial mark-up was lower due to the increased penetration of Wholesale segment net sales which has a lower initial mark-up compared to the Retail segment. Initial mark-up in the Retail segment increased due to improvements at each of the brands. The markdown rate was lower due to lower markdowns at the Urban Outfitters brand, which more than offset higher markdowns at the Free People and Anthropologie brands. The dollar increase in gross profit was due to higher net sales. Total inventory at October 31, 2016 increased by $12.3 million, or 2.8%, to $453.8 million from $441.6 million at October 31, 2015. The increase in inventory is primarily due to an increase in non-comparable inventory to support our new and expanded stores. Comparable Retail segment inventory increased 0.6% at cost.
Selling, general and administrative expenses as a percentage of net sales increased during the third quarter of fiscal 2017 to 26.6% of net sales, compared to 25.2% of net sales for the third quarter of fiscal 2016. The increase in selling, general and administrative expenses as a percentage of net sales was partially due to the net effect of one-time legal settlements, which accounted for approximately 50 basis points of deleverage. The remaining change primarily related to an increase in direct store controllable expenses that were largely due to pre-opening expenses and initial staffing levels for several large format Anthropologie stores opened during the third quarter of fiscal 2017 or previously opened. Selling, general and administrative expenses increased by $21.7 million, or 10.5%, to $229.6 million, in the third quarter of fiscal 2017, from $207.9 million in the third quarter of fiscal 2016. The dollar increase versus the prior year was primarily related to the operating expenses of non-comparable stores, the net effect of one-time legal settlements and increased marketing expense to support our customer acquisition and retention efforts.
Income from operations decreased to 8.2% of net sales, or $70.3 million, for the third quarter of fiscal 2017 compared to 9.7%, or $80.3 million, for the third quarter of fiscal 2016.
Our effective tax rate for the third quarter of fiscal 2017 was 33.5% of income before income taxes compared to 35.3% of income before income taxes in the third quarter of fiscal 2016. The decrease in the effective tax rate was due to the ratio of foreign taxable losses to global taxable profits for the year.
Nine Months Ended October 31, 2016 Compared To Nine Months Ended October 31, 2015
Net sales for the nine months ended October 31, 2016 increased by 3.5% to $2.52 billion, from $2.43 billion in the comparable period of fiscal 2016. The $83.9 million increase was attributable to a $54.7 million, or 2.4%, increase in Retail segment net sales and a $29.2 million, or 15.7%, increase in our Wholesale segment net sales. Retail segment net sales for the nine months ended October 31, 2016 accounted for 91.5% of total net sales compared to 92.4% of total net sales during the nine months ended October 31, 2015.
The growth in Retail segment net sales during the first nine months of fiscal 2017 was driven by an increase of $24.2 million, or 1.2%, in Retail segment comparable net sales, which includes our direct-to-consumer channel, and a $30.5 million increase in non-comparable net sales, including new store net sales. Retail segment comparable net sales increased 4.6% at Urban Outfitters, and decreased 0.7% and 1.8%4.1% at Free People, and1.7% at the Anthropologie Group respectively.and 0.1% at Urban Outfitters. Excluding the estimated impact of the North American hurricanes in the quarter, comparable Retail segment net sales increased 1.9%, and by brand, comparable Retail segment net sales increased 4.8% at Free People, 2.4% at the Anthropologie Group and 0.8% at Urban Outfitters. The increase in the Retail segment comparable net sales was driven by continued growth in the direct-to-consumer channel, partially offset by negative comparableretail store net sales. Direct-to-consumerThe direct-to-consumer net sales wereincrease was driven by an increaseincreases in sessions and conversion rate, whilewhich more than offset a small decrease in average order value decreased.value. Negative comparable store net sales resulted from a reductiondeclines in transactions, and average unit selling price whileand units per transaction were flat. transaction. Store traffic for the quarter increased, with strong growth in our European market.
The increase in net sales attributable to non-comparable sales was primarily the result of operating 6235 new stores and restaurants during the first nine monthsthird quarter of fiscal 20172018 that were not in operation for the full comparable quarter in fiscal 2017. Thus far during the fourth quarter of fiscal 2018, comparable Retail segment net sales are mid single-digit positive.
The increase in Wholesale segment net sales in the third quarter of fiscal 2018, as compared to the third quarter of fiscal 2017, was due to domestic and international growth at department stores, specialty stores and third-party websites. Wholesale sales growth was driven by an increase in units and average unit selling price.
Gross profit percentage for the third quarter of fiscal 2018 decreased to 33.4% of net sales, from 34.8% of net sales in the comparable quarter in fiscal 2017. Gross profit decreased to $297.7 million in the third quarter of fiscal 2018 from $299.9 million in the comparable quarter in fiscal 2017. The decline in gross profit percentage was driven by deleverage in delivery and logistics expense due to increased penetration of the direct-to-consumer channel, higher international sales and increased sales of furniture. Total inventory at October 31, 2017 decreased by $3.8 million, or 0.9%, to $450.0 million from $453.8 million at October 31, 2016. Comparable Retail segment inventory decreased 1.4% at cost, which was partially offset by inventory to stock non-comparable stores.
Selling, general and administrative expenses as a percentage of net sales decreased during the third quarter of fiscal 2018 to 25.2% of net sales, compared to 26.6% of net sales for the third quarter of fiscal 2017. Selling, general and administrative expenses decreased by $4.7 million, or 2.1%, to $224.9 million, in the third quarter of fiscal 2018, from $229.6 million in the third quarter of fiscal 2017. The leverage and decrease in expenses were primarily due to savings associated with our store organization project and lower share-based compensation expense, partially offset by increased investments in digital marketing expenditures to drive sales.
Income from operations remained flat at 8.2% of net sales, or $72.9 million, for the third quarter of fiscal 2018 compared to 8.2%, or $70.3 million, for the third quarter of fiscal 2017.
Our effective tax rate for the third quarter of fiscal 2018 was 37.4% of income before income taxes compared to 33.5% of income before income taxes in the third quarter of fiscal 2017. The increase in the effective tax rate was primarily due to the ratio of certain foreign taxable profits and losses to global taxable profits and the adoption of the new accounting standard related to share-based compensation (See Note 2, “Recent Accounting Pronouncements,” of the Notes to our Condensed Consolidated Financial Statement included in this Quarterly Report on Form 10-Q).
Nine Months Ended October 31, 2017 Compared To Nine Months Ended October 31, 2016
Net sales for the nine months ended October 31, 2017 were $2.53 billion, compared to $2.52 billion in the comparable period of fiscal 2017. The $11.3 million increase was attributable to a $22.7 million, or 10.6%, increase in Wholesale segment net sales, partially offset by an $11.4 million, or 0.5%, decrease in our Retail segment net sales. Retail segment net sales for the nine months ended October 31, 2017 accounted for 90.6% of total net sales compared to 91.5% of total net sales in the nine months ended October 31, 2016.
The decline in our Retail segment net sales during the first nine months of fiscal 2016 and2018 was due to a decrease of $43.0 million, or 2.0%, in Retail segment comparable net sales, from the newly acquired Vetri Family restaurants,which includes our direct-to-consumer channel, partially offset by an increase of $31.6 million in non-comparable net sales, including new store net sales. Retail segment comparable net sales increased 3.4% at Free People, but decreased 1.7% at the Anthropologie Group and 3.6% at Urban Outfitters. The decrease in Retail segment comparable net sales was driven by negative impactcomparable store net sales, which were partially offset by continued growth in the direct-to-consumer channel. Negative comparable store net sales resulted from decreased transactions and average unit selling price, while units per transaction were flat. Store traffic was also flat, with declines in North America offsetting growth in Europe. The direct-to-consumer net sales increase was driven by an increase in sessions and conversion rate, which more than offset a decrease in average order value. The increase in net sales attributable to non-comparable sales was primarily the result of foreign currency translation.operating 48 new stores and restaurants during the first nine months of fiscal 2018 that were not in operation for the full comparable period of fiscal 2017.
The increase in Wholesale segment net sales during the first nine months of fiscal 2017,2018, as compared to the first nine months of fiscal 2016,2017, was primarily due to increased sales todomestic and international growth at department andstores, specialty stores driven by increased selling square footage at select department stores and growth in our European distribution.third-party websites. Wholesale sales growth was driven by an increase in units that was partially offset by a decrease in average unit selling price.
Gross profit percentage for the first nine months of fiscal 2017 increased2018 decreased to 35.9%33.0% of net sales, from 35.1%35.9% of net sales in the comparable period in fiscal 2016.2017. Gross profit increaseddecreased to $904.3$834.9 million for the first nine months of fiscal 2017 compared to $852.72018 from $904.3 million in the comparable period in fiscal 2016.2017. The increasedecline in gross profit percentage was primarily driven by improvementdeleverage in maintained margins at the Urban Outfittersdelivery and Anthropologie brands due to higher initial mark-ups and lower merchandise markdowns compared to the prior year. The percentage increase was partially offset by lower maintained margins at Free People due to higher merchandise markdowns. The dollar increase in gross profit waslogistics expenses primarily due to the penetration of the direct-to-consumer channel, higher netinternational sales and increased sales of furniture and higher markdowns due to underperforming women’s apparel and accessories product at Anthropologie and Urban Outfitters.
Selling, general and administrative expenses increased by $0.5 million, or 0.1%, to $665.8 million, in the increasefirst nine months of fiscal 2018, from $665.3 million in gross profit percentage.
the first nine months of fiscal 2017. Selling, general and administrative expenses as a percentage of net sales increaseddecreased during the first nine months of fiscal 20172018 to 26.4%26.3% of net sales, compared to 25.3%26.4% of net sales for the first nine months of fiscal 2016.2017. The increase in selling, general and administrative expenses as a percentage of net sales wasleverage is primarily driven by direct store controllable expenses to support our 5.4% square footage growth and an increase in direct marking and technology related expense to support our direct-to-consumer growth. Selling, general and administrative expenses increased by $49.7 million, or 8.1%, to $665.3 million, in the first nine months of fiscal 2017, from $615.6 million in the first nine months of fiscal 2016. The dollar increase versus the prior year was primarily relateddue to the operating expenses of non-comparable storesnet savings associated with our store organization project and lower share-based compensation expense, partially offset by increased investments in digital marketing and technology expenses, which helpedexpenditures to drive higher direct-to-consumer traffic.sales.
Income from operations expressed as a percentagedecreased to 6.7% of net sales, decreased to 9.5% of net salesor $169.1 million, for the first nine months of fiscal 20172018 compared to 9.8%9.5%, or $239.0 million, for the first nine months of fiscal 2016. Income from operations increased by $1.9 million, or 0.8%, to $239.0 million, in the first nine months of fiscal 2017, from $237.1 million in the first nine months of fiscal 2016.2017.
Our effective tax rate for the first nine months of fiscal 20172018 was 35.7%37.2% of income before income taxes compared to 35.3%35.7% of income before income taxes in the first nine months of fiscal 2016.2017. The increase in the effective tax rate was primarily due to the ratio of certain foreign taxable profits and losses to global taxable profits and the adoption of the new accounting standard related to share-based compensation (See Note 2, “Recent Accounting Pronouncements,” of the Notes to our Condensed Consolidated Financial Statement included in this Quarterly Report on Form 10-Q).
Liquidity and Capital Resources
Cash, cash equivalents and marketable securities were $369.2 million as of October 31, 2017, as compared to $403.5 million as of January 31, 2017 and $265.1 million as of October 31, 2016, as2016. Our working capital was $544.2 million at October 31, 2017 compared to $362.9$528.5 million as ofat January 31, 20162017 and $273.3$484.8 million at October 31, 2016. The increase in working capital as of October 31, 2015.2017 compared to January 31, 2017 was primarily due to the increase in accounts receivable and inventory attributable to the seasonality of the business. The decreaseincrease in working capital as of October 31, 2017 compared to October 31, 2016 was primarily due to the increase in cash, cash equivalents and marketable securities as compared to January 31, 2016 was primarily due to cash used for the repaymentutilization of long-term debt and for share repurchases. Our working capital was $484.8 million at October 31, 2016 compared to $505.1 million at January 31, 2016 and $469.3 million at October 31, 2015. The decrease in working capital as compared to January 31, 2016 was primarily due to the decrease inexcess cash, cash equivalents and marketable securities noted above.to pay down long-term debt balances during fiscal 2017.
During the last two years, we have satisfied our cash requirements primarily through our cash flow from operating activities. In fiscal 2016, we utilized borrowings on our long-term debt facility as an additional source of cash that were used for the repurchase of our common shares. In addition to repurchasing common shares, ourOur primary uses of cash have been to repurchase our common shares, repay our long-term debt, open new stores, purchase inventory and expand our home offices and fulfillment facilities. We have also continued to invest in our omni-channel capabilities and technology.
Cash Flows from Operating Activities
Cash provided by operating activities during the first nine months of fiscal 2017 increased2018 decreased by $0.4$59.7 million to $229.0$169.6 million from $228.6$229.3 million in the first nine months of fiscal 2016.2017. For both periods, our major source of cash from operations was merchandise sales and our primary outflow of cash forfrom operations was for the payment of operational costs. The period over period decrease in cash flows from operations was primarily due to lower net income.
Cash Flows from Investing Activities
Cash used in investing activities during the first nine months of fiscal 2017 increased2018 decreased by $34.9$33.0 million to $61.3$28.3 million from $26.4$61.3 million in the first nine months of fiscal 2016. For both periods, our primary outflow of cash for investing activities was for the payment of property and equipment.2017. Cash paid for property and equipment for the nine months ended October 31, 2016 and 2015 was $112.1 million and $109.1 million, respectively, and was used in fiscal 2017 primarily to expand our store base and in fiscal 2016 primarily to expand our store base and home offices and to increase our fulfillment capabilities. Additionally, the increase in cash used in investing activities was drivenin both periods primarily related to purchases of marketable securities and property and equipment, partially offset by the sales and maturities of marketable securities. Cash used in investing activities in the first nine months of fiscal 2017 also included $15.3 million used to acquire the Vetri Family group of restaurantsrestaurants. Cash paid for property and a $16.6equipment in the first nine months of fiscal 2018 and 2017 was $63.3 million changeand $112.1 million, respectively, which was primarily used to expand our store base in net purchases of marketable securities.fiscal 2018 and to expand our store base and fulfillment facilities in fiscal 2017.
Cash Flows from Financing Activities
Cash used in financing activities during the first nine months of fiscal 2018 decreased by $34.5 million to $159.2 million from $193.7 million in the first nine months of fiscal 2017. Cash used in financing activities in the first nine months of fiscal 2018 primarily related to $157.0 million of repurchases of our common shares under share repurchase programs. Cash used in financing activities in the first nine months of fiscal 2017 was $193.4 million, primarily related to $150.0 million in long-term debt repayments and $45.8 million of repurchases of our common shares under our February 23, 2015a share repurchase program.
Credit Facilities
On July 1, 2015, we entered into a five-year asset-based revolving Credit Agreement (“Credit Agreement”) with certain lenders, including JPMorgan Chase Bank, N.A., as administrative agent, and J.P. Morgan Securities LLC and Wells Fargo Bank, National Association, as joint lead arrangers and co-book managers. The Credit Agreement provides senior secured revolving credit for loans and letters of credit up to $400.0 million (the “Credit Facility”), subject to a borrowing base that is comprised of our eligible accounts receivable and inventory. The Credit Facility includes a swing-line sub-facility, a multicurrency sub-facility and the option to expand the facility by up to $150.0 million. The funds available under the Credit Facility may be used for working capital and other general corporate purposes.
The Credit Facility provides for interest on borrowings, at our option, at either (i) adjusted LIBOR, CDOR or EURIBOR plus an applicable margin ranging from 1.125% to 1.625%, or (ii) an adjusted ABR plus an applicable margin ranging from 0.125% to 0.625%, each such rate based on the level of availability under the Credit Facility and our adjusted leverage ratio. Interest is payable either monthly or quarterly depending on the type of borrowing. A commitment fee is payable quarterly on the unused portionSee Note 6, “Debt,” of the Credit Facility basedNotes to our Condensed Consolidated Financial Statement included in this Quarterly Report on our adjusted leverage ratio.Form 10-Q for additional information regarding the Company’s debt.
All obligations under the Credit Facility are unconditionally guaranteed by us and our domestic subsidiaries. The obligations under the Credit Facility are secured by a first-priority security interest in inventory, accounts receivable, and certain other assets of the borrowers and guarantors. The Credit Agreement contains customary representations and warranties, negative and affirmative covenants and provisions relating to events of default.
As of October 31, 2016, we were in compliance with all terms of the Credit Agreement, we had no borrowings on the Credit Facility and stand-by letters of credit outstanding were $13.1 million.
Additionally, we have borrowing agreements with two separate financial institutions under which we may borrow an aggregate of $130.0 million for the purposes of trade letter of credit issuances. The availability of any future borrowings under the trade letter of credit facilities is subject to acceptance by the respective financial institutions. As of October 31, 2016, we had $66.0 million in outstanding trade letters of credit, and $64.0 million available for future trade letters of credit under these facilities.
Capital and Operating Expenditures
During fiscal 2017,2018, we plan to construct and open approximately 3219 new stores, including ourone restaurant, locations, expand or relocate certain existing stores, complete the construction of our new east coast fulfillment center,repurchase common shares, upgrade our systems, improve our capabilities in the digital channel, invest in omni-channel marketing and purchase inventory for our Retail and Wholesale segments at levels appropriate to maintain our planned sales growth. We believe that new store openings, merchandise expansion, and our marketing, social media, merchandise expansion, website and mobile initiatives are a significant contributor to our Retail segment sales growth. During fiscal 2017,2018, we plan to continue our investment in these initiatives for all brands. We anticipate our capital expenditures during fiscal 20172018 to be approximately $160$90 million, all of which are expected to be financed by cash flow fromflows provided by operating activities. We believe that our new store investments have the potential to generate positive cash flow within a year. We may also enter into one or more acquisitions or transactions related to the expansion of our brand offerings.offerings, including franchise and joint venture agreements. We believe that our existing cash and cash equivalents, availableavailability under our current credit facilities and future cash flows fromprovided by operations will be sufficient to fund these initiatives.
Share Repurchases
See Note 8, “Shareholders’ Equity”Equity,” of the Notes to our Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for certain financialadditional information regarding the Company’s share repurchases.
Off-Balance Sheet Arrangements
As of and for the nine months ended October 31, 2016,2017, except for operating leases entered into in the normal course of business, we were not party to any material off-balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, revenues, expenses, results of operations, liquidity, capital expenditures or capital resources.
See Note 2, “Recently Issued“Recent Accounting Pronouncements,” of the Notes to our Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for a description of recently issued accounting pronouncements.
We are exposed to the following types of market risks—fluctuations in the purchase price of merchandise, as well as other goods and services, the value of foreign currencies in relation to the U.S. dollar, and changes in interest rates. Due to our inventory turnover rate and our historical ability to pass through the impact of any generalized changes in our cost of goods to our customers through pricing adjustments, commodity and other product risks are not expected to be material. We purchase the majority of our merchandise in U.S. dollars, including a majority of the goods for our stores located in Canada and a portion of the goods for our stores located in Europe.
Our exposure to market risk for changes in foreign currencies is due to our financial statements being presented in U.S. dollars and our international subsidiaries transacting in currencies other than U.S. dollars. Fluctuations in exchange rates in effect during or at the end of the reporting period may affect the value of the reported amounts of revenues, expenses, assets and liabilities. As we expand our international operations, the potential impact of currency fluctuations increases.
Our exposure to market risk for changes in interest rates relates to our cash, cash equivalents and marketable securities and our Credit Facility. As of October 31, 2016,2017, our cash, cash equivalents and marketable securities consisted primarily of cash on hand and in banks, money market accounts, municipal and pre-refunded municipal bonds rated “BBB” or better, corporate bonds rated “BBB” or better, certificates of deposit and mutual funds. Due to the short average maturity and conservative nature of our investment portfolio, we believe a 100 basis point change in interest rates would not have a material effect on the Condensed Consolidated Financial Statements. As the interest rates on a material portion of our cash, cash equivalents and marketable securities are variable, a change in interest rates earned on the cash, cash equivalents and marketable securities would impact interest income along with cash flows, but would not impact the fair market value of the related underlying instruments.
We are exposed to market risks relating to changes in interest rates on outstanding borrowings under our Credit Facility because these borrowings bear interest at variable rates. A 100 basis point change in our applicable interest rate would not have a material impact to interest expense for the nine months ended October 31, 2016.2017.
We maintain disclosure controls and procedures designed to ensure that information required to be disclosed by us in our Securities Exchange Act of 1934 reports is recorded, processed, summarized and reported on a timely basis and that such information is accumulated and communicated to management, including the Principal Executive Officer and the Principal Financial Officer, as appropriate, to allow timely decisions regarding the required disclosure. As of the end of the period covered by this Quarterly Report on Form 10-Q, an evaluation was performed under the supervision and with the participation of our management, including the Principal Executive Officer and the Principal Financial Officer, of the effectiveness of the design and operation of these disclosure controls and procedures. Based on that evaluation, the Principal Executive Officer and the Principal Financial Officer concluded that our disclosure controls and procedures were effective.
There have been no changes in our internal controls over financial reporting during the quarter ended October 31, 20162017 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
OTHER INFORMATION
We are party to various legal proceedings arising from normal business activities. Management believes that the ultimate resolution of these matters will not have a material adverse effect on our financial position, results of operations or cash flows.
There have been no material changes in our risk factors since January 31, 2016.2017. Please refer to our Annual Report on Form 10-K for the fiscal year ended January 31, 2016,2017, filed with the United States Securities and Exchange CommissionSEC on March 31, 2016,April 3, 2017, for our risk factors.
Issuer Purchase of Equity Securities
A summary of the repurchase activity under the Company’s share repurchase program for the quarter ended October 31, 20162017 is as follows:
Total Number of Shares (or Units) Purchased(1) | Average Price Paid per share (or Unit) | Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs | Maximum Number of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs(2) | |||||||||||||
August 1, 2016 through August 31, 2016 | — | $ | — | — | 6,995,059 | |||||||||||
September 1, 2016 through September 30, 2016 | 957,327 | $ | 35.10 | 957,327 | 6,037,732 | |||||||||||
October 1, 2016 through October 31, 2016 | 42,673 | $ | 34.77 | 42,673 | 5,995,059 | |||||||||||
|
|
|
|
|
| |||||||||||
Total Fiscal 2017 Third Quarter | 1,000,000 | 1,000,000 | 5,995,059 | |||||||||||||
|
|
|
|
|
|
Period |
| Total Number of Shares Purchased (1) |
|
| Average Price Paid per share |
|
| Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs |
|
| Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (2)(3) |
| ||||
August 1, 2017 through August 31, 2017 |
|
| 1,500,000 |
|
| $ | 20.56 |
|
|
| 1,500,000 |
|
|
| 19,485,354 |
|
September 1, 2017 through September 30, 2017 |
|
| 583,201 |
|
| $ | 21.58 |
|
|
| 583,201 |
|
|
| 18,902,153 |
|
October 1, 2017 through October 31, 2017 |
|
| 1,000,000 |
|
| $ | 23.10 |
|
|
| 1,000,000 |
|
|
| 17,902,153 |
|
Total Fiscal 2018 Third Quarter |
|
| 3,083,201 |
|
|
|
|
|
|
| 3,083,201 |
|
|
| 17,902,153 |
|
1 | In addition to the shares repurchased under the share repurchase program, for the quarter ended October 31, |
2 | On February 23, 2015, the Company’s Board of Directors authorized the repurchase of 20,000,000 shares under a share repurchase program. |
3 | On August 22, 2017, the Company’s Board of Directors authorized the repurchase of 20,000,000 shares under a new share repurchase program. |
Amendments to the Company’s Second Amended and Restated By-laws
On December 12, 2016, the Company’s Board of Directors (the “Board”) amended and restated the Company’s Second Amended and Restated By-laws (the “By-laws”) to implement “proxy access,” a means for the Company’s eligible shareholders to include shareholder-nominated director candidates in the Company’s proxy materials for annual meetings of shareholders (the “Amendments”). The Amendments took effect immediately upon approval by the Board. The Amendments were undertaken in response to the approval by shareholders at the Company’s 2016 Annual Meeting of Shareholders of a non-binding shareholder proposal to adopt proxy access.
Section 1.10 has been added to the By-laws to allow a shareholder, or a group of up to 20 shareholders, owning at least 3% of the number of outstanding common shares of the Company continuously for at least three
years, to include in the Company’s proxy materials for an annual meeting of shareholders a number of director nominees up to the greater of two or 25% of the Board, provided that the shareholder(s) and the nominee(s) satisfy the requirements specified therein. Certain conforming and technical amendments were also made to the By-laws.
The foregoing description of the Amendments is qualified in its entirety by the full text of the Amended and Restated By-laws, a copy of which is filed as Exhibit 3.4 to this Quarterly Report on Form 10-Q and is incorporated herein by reference.
Exhibit Number | Description
Attached as Exhibits 101 to this report are the following financial statements from the Company’s Quarterly Report on Form 10-Q for the three and nine months ended October 31, 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.
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