UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
| x | Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended July 31, 2004 |
or
| ¨ | Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from to |
Commission File Number: 0-15827
SHARPER IMAGE CORPORATION
(Exact name of registrant as specified in its charter)
| Delaware | 94-2493558 | |
| (State of Incorporation) | (I.R.S. Employer Identification No.) | |
| 650 Davis Street, San Francisco, California | 94111 | |
| (Address of principal executive offices) | (Zip Code) | |
Registrant’s telephone number, including area code: (415) 445-6000
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.
Yes x No ¨
Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes x No ¨
Indicate the number of shares outstanding of each of the issuer’s classes of Common Stock, as of the latest practicable date.
Common Stock, $0.01 par value, 15,704,730 shares as of September 7, 2004
1
SHARPER IMAGE CORPORATION
FORM 10-Q
For the Quarter Ended July 31, 2004
| Page | ||||
| PART I. |
FINANCIAL INFORMATION | |||
| ITEM 1. |
Financial Statements (Unaudited) |
|||
| Condensed Balance Sheets as of July 31, 2004, January 31, 2004 and July 31, 2003 |
3 | |||
| Condensed Statements of Operations for the three-months and six-months ended July 31, 2004 and 2003 |
4 | |||
| Condensed Statements of Cash Flows for the six-months ended July 31, 2004 and 2003 |
5 | |||
| 6 - 9 | ||||
| ITEM 2. |
Management’s Discussion and Analysis of Results of Operations and Financial Condition |
10 - 26 | ||
| ITEM 3. |
27 | |||
| ITEM 4. |
27 | |||
| PART II. |
OTHER INFORMATION | |||
| ITEM 4. |
28 | |||
| ITEM 6. |
28 | |||
| SIGNATURE PAGE | 29 | |||
2
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements (Unaudited)
Sharper Image Corporation
Condensed Balance Sheet
(In thousands, except share amounts)
| July 31, 2004 |
January 31, (Note A) |
July 31, 2003 | |||||||
| ASSETS |
|||||||||
| Current Assets: |
|||||||||
| Cash and cash equivalents |
$ | 64,114 | $ | 83,471 | $ | 64,687 | |||
| Short-term investments |
— | — | 3,000 | ||||||
| Accounts receivable, net of allowance for doubtful accounts of $1,099, $1,266 and $708 |
23,039 | 21,196 | 10,785 | ||||||
| Merchandise inventories |
102,790 | 110,058 | 90,361 | ||||||
| Prepaid expenses, deferred taxes and other |
22,976 | 20,303 | 19,849 | ||||||
| Total Current Assets |
212,919 | 235,028 | 188,682 | ||||||
| Property and equipment, net |
85,869 | 70,190 | 55,564 | ||||||
| Deferred taxes and other assets |
4,874 | 4,337 | 2,145 | ||||||
| Total Assets |
$ | 303,662 | $ | 309,555 | $ | 246,391 | |||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
|||||||||
| Current Liabilities: |
|||||||||
| Accounts payable |
$ | 18,797 | $ | 23,434 | $ | 22,239 | |||
| Accrued expenses |
18,360 | 16,126 | 14,770 | ||||||
| Accrued compensation |
4,929 | 11,793 | 6,528 | ||||||
| Reserve for refunds |
17,215 | 17,161 | 13,680 | ||||||
| Deferred revenue |
24,393 | 25,781 | 19,346 | ||||||
| Income taxes payable |
94 | 9,399 | — | ||||||
| Total Current Liabilities |
83,788 | 103,694 | 76,563 | ||||||
| Other liabilities |
19,778 | 15,935 | 10,217 | ||||||
| Commitments and contingencies |
— | — | — | ||||||
| Total Liabilities |
103,566 | 119,629 | 86,780 | ||||||
| Stockholders’ Equity: |
|||||||||
| Preferred stock, $0.01 par value: |
|||||||||
| Authorized 3,000,000 shares: Issued and outstanding, none |
— | — | — | ||||||
| Common stock, $0.01 par value: |
|||||||||
| Authorized 25,000,000 shares: Issued and outstanding, 15,704,730, 15,322,635 and 15,028,660 shares |
157 | 153 | 150 | ||||||
| Additional paid-in capital |
104,595 | 97,211 | 90,667 | ||||||
| Retained earnings |
95,344 | 92,562 | 68,794 | ||||||
| Total Stockholders’ Equity |
200,096 | 189,926 | 159,611 | ||||||
| Total Liabilities and Stockholders’ Equity |
$ | 303,662 | $ | 309,555 | $ | 246,391 | |||
See Notes to Condensed Financial Statements
3
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements (Unaudited)
Sharper Image Corporation
Condensed Statements of Operations
(In thousands, except share and per-share amounts)
| Three Months Ended July 31, |
Six Months Ended July 31, |
|||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
| REVENUES: |
||||||||||||||||
| Net sales |
$ | 145,378 | $ | 121,532 | $ | 298,089 | $ | 235,060 | ||||||||
| Delivery |
3,390 | 3,053 | 6,988 | 5,788 | ||||||||||||
| List rental and licensing |
195 | 114 | 291 | 160 | ||||||||||||
| 148,963 | 124,699 | 305,368 | 241,008 | |||||||||||||
| COSTS AND EXPENSES: |
||||||||||||||||
| Cost of products |
65,394 | 53,526 | 127,831 | 101,143 | ||||||||||||
| Buying and occupancy |
16,963 | 13,174 | 33,012 | 26,195 | ||||||||||||
| Advertising |
28,755 | 25,877 | 65,827 | 51,442 | ||||||||||||
| General, selling, and administrative |
36,768 | 30,935 | 74,161 | 59,835 | ||||||||||||
| 147,880 | 123,512 | 300,831 | 238,615 | |||||||||||||
| OTHER INCOME: |
||||||||||||||||
| Interest income |
177 | 361 | 341 | 460 | ||||||||||||
| Interest expense |
(51 | ) | (75 | ) | (89 | ) | (126 | ) | ||||||||
| Other expense |
(64 | ) | (104 | ) | (74 | ) | (209 | ) | ||||||||
| 62 | 182 | 178 | 125 | |||||||||||||
| Earnings Before Income Tax Expense |
1,145 | 1,369 | 4,715 | 2,518 | ||||||||||||
| Income tax expense |
469 | 561 | 1,933 | 1,032 | ||||||||||||
| Net Earnings |
$ | 676 | $ | 808 | $ | 2,782 | $ | 1,486 | ||||||||
| Net Earnings per Share |
||||||||||||||||
| Basic |
$ | 0.04 | $ | 0.05 | $ | 0.18 | $ | 0.11 | ||||||||
| Diluted |
$ | 0.04 | $ | 0.05 | $ | 0.17 | $ | 0.10 | ||||||||
| Weighted Average Number of Shares |
||||||||||||||||
| Basic |
15,636,000 | 14,763,000 | 15,566,000 | 13,725,000 | ||||||||||||
| Diluted |
16,386,000 | 15,717,000 | 16,408,000 | 14,572,000 | ||||||||||||
See Notes to Condensed Financial Statements
4
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements (Unaudited)
Sharper Image Corporation
Condensed Statements of Cash Flows
(In thousands)
| Six Months Ended July 31, |
||||||||
| 2004 |
2003 |
|||||||
| Cash provided by (used for) operating activities: |
||||||||
| Net earnings |
$ | 2,782 | $ | 1,486 | ||||
| Adjustments to reconcile net earnings to net cash provided by (used for) operating activities: |
||||||||
| Depreciation and amortization |
9,479 | 8,641 | ||||||
| Tax benefit from stock option exercises |
3,591 | 1,612 | ||||||
| Deferred rent expenses and landlord allowances |
582 | 178 | ||||||
| Loss on disposal of equipment |
76 | 199 | ||||||
| Change in operating assets and liabilities: |
||||||||
| Accounts receivable |
(1,843 | ) | 1,812 | |||||
| Merchandise inventories |
7,268 | (15,605 | ) | |||||
| Prepaid expenses and other |
(3,210 | ) | (2,718 | ) | ||||
| Accounts payable, reserve for refunds and accrued expenses |
(9,213 | ) | (5,488 | ) | ||||
| Deferred revenue, taxes payable, and other liabilities |
(7,432 | ) | (4,957 | ) | ||||
| Cash provided by (used for) operating activities |
2,080 | (14,840 | ) | |||||
| Cash provided by (used for) investing activities: |
||||||||
| Property and equipment expenditures |
(25,234 | ) | (12,235 | ) | ||||
| Purchases of short-term investments |
— | (3,000 | ) | |||||
| Cash used for investing activities |
(25,234 | ) | (15,235 | ) | ||||
| Cash provided by financing activities: |
||||||||
| Proceeds from issuance of common stock due to public offering, net of fees |
— | 38,471 | ||||||
| Proceeds from issuance of common stock resulting from stock options exercised |
3,797 | 658 | ||||||
| Cash provided by financing activities |
3,797 | 39,129 | ||||||
| Net increase (decrease) in cash and cash equivalents |
(19,357 | ) | 9,054 | |||||
| Cash and cash equivalents at beginning of period |
83,471 | 55,633 | ||||||
| Cash and cash equivalents at end of period |
$ | 64,114 | $ | 64,687 | ||||
| Supplemental disclosure of cash paid for: |
||||||||
| Interest expense |
$ | 79 | ||||||