SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10 - Q
X Quarterly report pursuant to Section 13 or 15(d) of the Securities
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Exchange Act of 1934. For the quarterly period ended April 29, 1995
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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 0-7264
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PAUL HARRIS STORES, INC.
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Indiana 35-0907402
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6003 Guion Rd., Indianapolis, IN 46254
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(Address of principal executive offices) (Zip Code)
(317) 293-3900
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark 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 periods 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
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Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12,13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a
plan confirmed by a court.
Yes X No
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As of June 2, 1995, 9,997,616 common shares were outstanding (including
2,850,912 shares of non-voting common stock).
<PAGE>
INDEX
PAUL HARRIS STORES, INC. AND SUBSIDIARIES
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - April 29, 1995,
January 28, 1995 and April 30, 1994 1
Consolidated Statements of Income - For the thirteen
weeks ended April 29,1995 and April 30, 1994 2
Consolidated Statements of Cash Flows - For the
thirteen weeks ended April 29, 1995 and April 30, 1994 3
Consolidated Statements of Shareholders' Equity - For the
thirteen weeks ended April 29, 1995 and April 30, 1994 4
Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 6-7
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 7
<PAGE>
<TABLE><CAPTION>
PAUL HARRIS STORES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
UNAUDITED
(in thousands)
April 29, 1995 January 28, 1995 April 30, 1994
------------------ ------------------ ------------------
<S> <C> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 16,039 $ 21,349 $ 12,186
Merchandise inventories 22,335 19,567 22,179
Other receivables 927 949 1,100
Prepaid expenses 992 1,016 965
Income tax recoverable 629 - -
------------------ ------------------ ------------------
Total current assets
40,922 42,881 36,430
------------------ ------------------ ------------------
Property, fixtures and equipment
Land, building and improvements 5,715 5,693 5,665
Store fixtures and equipment 10,958 10,617 9,058
Leasehold improvements and other 10,857 10,524 9,793
------------------ ------------------ ------------------
27,530 26,834 24,516
Less accumulated depreciation and
amortization (8,375) (7,507) (4,958)
------------------ ------------------ ------------------
19,155 19,327 19,558
Other assets 1,115 1,246 1,042
------------------ ------------------ ------------------
$ 61,192 $ 63,454 $ 57,030
================== ================== ==================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 8,071 $ 7,607 $ 6,913
Compensation and related taxes 731 1,382 694
Income taxes payable 275 416 339
Other accrued expenses 3,569 4,225 3,378
Current maturities of long-term debt 4,320 4,320 120
Accrued reorganization expenses and
settlements 481 485 821
------------------ ------------------ ------------------
Total current liabilities
17,447 18,435 12,265
------------------ ------------------ ------------------
Long-term debt 21,940 21,970 26,265
Other non-current liabilities 3,130 3,159 3,176
Shareholders' equity
Preferred stock (no par value)
Authorized 1,000 shares; non issued
Common stock (no par value)
Authorized 20,000 shares; issued
9,998, 9,998 and 9,975 1,576 1,576 1,576
Additional paid in capital 3,745 3,745 2,131
Retained earnings 13,354 14,569 11,617
------------------ ------------------ ------------------
Total shareholders' equity
18,675 19,890 15,324
------------------ ------------------ ------------------
$ 61,192 $ 63,454 $ 57,030
================== ================== ==================
See accompanying "Notes To Consolidated Financial Statements"
</TABLE>
1
<PAGE>
<TABLE><CAPTION>
PAUL HARRIS STORES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
UNAUDITED
(in thousands, except per share data)
For the For the
thirteen weeks thirteen weeks
ended ended
April 29, 1995 April 30, 1994
---------------- ----------------
<S> <C> <C>
Net sales $ 34,801 $ 34,083
Cost of sales, including occupancy
expenses exclusive of depreciation 24,617 22,375
---------------- ----------------
Gross Income 10,184 11,708
Selling, general and administrative 10,758 10,014
expenses
Depreciation and amortization 895 843
Interest expense, net 513 649
---------------- ----------------
Income (loss) before income taxes (1,982) 202
Provision (credit) for income taxes (767) 77
---------------- ----------------
Net income (loss) (1,215) $ 125
================ ================
Net income (loss) per common share $ (0.12) $ 0.01
================ ================
Weighted average number of shares and
share equivalents outstanding 9,998 10,181
================ ================
See accompanying "Notes To Consolidated Financial Statements"
</TABLE>
2
<PAGE>
PAUL HARRIS STORES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
(in thousands)
<TABLE><CAPTION>
For the For the
thirteen thirteen
weeks weeks
ended ended
April 29, April 30,
1995 1994
---------------- ----------------
<S> <C> <C>
Cash flow from operating activities:
Net income (loss) $ (1,215) $ 125
Adjustments to reconcile earnings to cash provided:
Depreciation and amortization 895 843
Utilization of net operating loss carryforward - 65
(Increase) decrease in current assets:
Merchandise inventories (2,768) (3,142)
Other receivables 22 199
Prepaid expenses 24 10
Income taxes recoverable 629 -
Increase (decrease) in current liabilities:
Accounts payable 464 959
Accrued compensation and expenses (625) (1,149)
Accrued interest (683) (682)
Accrued income taxes payable (141) (52)
(Increase) decrease in other assets 66 (194)
Increase (decrease) in other non-current liabilities (29) 41
---------------- ----------------
Net cash flow from operating activities (4,618) (2,977)
---------------- ----------------
Net cash flow from investing activities:
Additions to fixed assets (658) (1,309)
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Cash flow from financing activities:
Repayment of long-term debt (30) (664)
Sale of common stock under stock option plan -- 38
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Net cash flow from financing activities (30) (626)
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Cash flow effect of reorganization activities:
Payment of accrued reorganization expense (4) (115)
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$ (5,310) $ (5,027)
================ ================
Cash and cash equivalents
At beginning of period $ 21,349 $ 17,213
At end of period $ 16,039 $ 12,186
---------------- ----------------
$ (5,310) $ (5,027)
================ ================
Supplemental disclosures of cash flow information:
Cash paid during the period for interest $ 1,455 $ 1,471
================ ================
Cash paid during the period for income taxes $ 2 $ 48
================ ================
See accompanying "Notes to Consolidated Financial Statements"
</TABLE>
3
<PAGE>
<TABLE><CAPTION>
PAUL HARRIS STORES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
UNAUDITED
(in thousands)
For the thirteen weeks ended
-------------------------------------------------------------
April 29, 1995 April 30, 1994
SHARES AMOUNT SHARES AMOUNT
---------- ----------- ---------- -------------
<S> <C> <C> <C> <C>
PREFERRED STOCK (1,000 AUTHORIZED):
COMMON STOCK (20,000 AUTHORIZED):
(16,500 voting shares; 3,500 non-voting
shares)
Beginning balance 9,998 $ 1,576 9,662 $ 1,576
Issuance of Common Stock -- -- 313 --
---------- ----------- ---------- -------------
Ending balance 9,998 1,576 9,975 1,576
========== =========== ========== =============
ADDITIONAL PAID IN CAPITAL:
Beginning balance $ 3,745 $ 2,028
Benefit of the net operating loss
carryforward -- 65
Exercise of stock options -- 38
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Ending balance $ 3,745 $ 2,131
=========== =============
RETAINED EARNINGS:
Beginning balance $ 14,569 $ 11,492
Net income (loss) (1,215) 125
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Ending balance $ 13,354 $ 11,617
=========== =============
See accompanying "Notes to Consolidated Financial Statements"
</TABLE>
4
<PAGE>
PAUL HARRIS STORES, INC., AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying unaudited financial statements of the Company have been
prepared in accordance with instructions to Form 10-Q and Article 10 of
Regulation S-X and accordingly certain information and footnote disclosures
have been condensed or omitted. These condensed financial statements
should be read in conjunction with the financial statements and notes
thereto included in the Company's January 28, 1995 Annual Report on Form
10-K.
In the opinion of management, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial position,
results of operations and cash flows at April 29, 1995 and for all other
periods presented have been made.
The results of operations for the first quarter of fiscal year 1995 are not
necessarily indicative of the results to be expected for the entire fiscal
year 1995. The Company historically produces a majority of its net income
in the fourth quarter of the fiscal year due to the stronger sales
experienced during the December holiday season.
Certain amounts in the prior periods have been reclassified to conform with
the current period presentation.
2. Income Tax Recoverable
The Company has provided for tax credits based upon statutory rates for the
first quarter of 1995 based on the expectation of a net profit for the
entire fiscal year 1995.
5
<PAGE>
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
---------------------------------------------
Results of operations
The Company's net sales increased to $34,801,000 in the first quarter of
fiscal year 1995 (the thirteen weeks ended April 29, 1995) from $34,083,000
in the first quarter of fiscal year 1994 (the thirteen weeks ended April
30, 1994), an increase of $718,000, or 2%. The increase in net sales was
attributable to a net increase in the number of stores open at the end of
the first quarter of the fiscal year 1995 compared to the end of the first
quarter of fiscal year 1994 which was partially offset by a 9% decrease in
comparable store sales. The Company operated 249 stores on April 29, 1995
compared to 216 stores on April 30, 1994. The 9% comparable store sales
decline was due to a general weakness in consumer demand for women's
apparel which resulted in a decline in the number of customer transactions
per store and a slight decline in the average price per unit.
During the first quarter of fiscal year 1995, the fashion division and The
$5-$10-$15-$20 Place division ("$5-20") accounted for approximately 86% and
14%, respectively, of the Company's revenue, and approximately 96% and 4%,
respectively, of the Company's operating profit before home office
overhead.
Cost of sales, including occupancy expenses exclusive of depreciation,
increased to 71% of net sales during the first quarter of fiscal year 1995
from 66% of net sales during the first quarter of fiscal year 1994. This
increase was due to greater than planned promotional markdowns aimed at
stimulating consumer demand which was brought about by lower than expected
sales in the first quarter of fiscal year 1995.
Selling, general and administrative expenses were $10,768,000, or 31% of
net sales, for the first quarter of fiscal year 1995 compared to
$10,014,000, or 29% of net sales, for the first quarter of fiscal year
1994. The dollar increase primarily resulted from increases in selling
payroll due to the net increase in stores open. Selling, general and
administrative expenses declined by 7% on a store by store basis from the
first quarter of fiscal 1994 to the first quarter of fiscal 1995. The
increase in selling, general and administrative expenses expressed as a
percentage of net sales was primarily due to the decline in comparable
store sales.
Depreciation and amortization expenses increased from $843,000 in the first
quarter of fiscal 1994 to $895,000 for the first quarter of fiscal 1995 as
a result of increased capital expenditures over the last two years related
mainly to the opening of new stores.
Net interest expense for the first quarter of fiscal year 1995 decreased to
$513,000 from $649,000 for the first quarter of fiscal year 1994. This
decrease in net interest expense reflects an increase in the interest rate
earned on short-term investments as well as the maintenance of higher cash
balances compared to the first quarter of fiscal year 1994.
The Company has provided for tax credits based on statutory rates of
$767,000 for the first quarter of fiscal year 1995 based on the expectation
of a net profit for the entire fiscal year 1995.
As a result of all the above factors, the Company had a net loss of
$1,215,000 for the first quarter of fiscal year 1995 compared to net income
of $125,000 for the first quarter fiscal year 1994. The Company
historically produces a majority of its net income in the fourth quarter of
the fiscal year due
6
<PAGE>
to the stronger sales experienced during the December holiday season.
Liquidity and Capital Resources
Cash and cash equivalents totaled $16,039,000 at the end of the first
quarter of fiscal year 1995, a 32% increase from the first quarter of
fiscal 1994 total of $12,186,000. During the first quarter of fiscal year
1995, the Company used $5,310,000 of cash compared to the $5,027,000 of
cash used during the first quarter of fiscal 1994.
While merchandise inventories increased slightly from $22,179,000 at the
end of the first quarter of fiscal year 1994, as compared to $22,335,000 at
the end of the first quarter of fiscal year 1995, inventory on a store for
store basis was 13% lower. The Company's inventory turnover increased
slightly for the first quarter of fiscal year 1995 when compared to the
first quarter of fiscal year 1994.
The Company has a $13.5 million revolving bank line of credit facility
which is principally intended for the funding of letters of credit for
merchandise from overseas. The Company may make direct borrowings of up to
$3.5 million of this revolving bank line of credit facility.
Capital spending by the Company for the first quarter of fiscal year 1995
was $696,000, primarily for new stores' fixtures and leasehold
improvements. The Company was operating 249 stores at the end of the
first quarter of fiscal year 1995. During the first quarter of fiscal year
1995 the Company opened 12 fashion division stores, closed two $5-20 stores
and converted one store from $5-20 to a fashion store. The Company plans
to open approximately seven more fashion division stores and convert two
more $5-20 stores to fashion stores during the remainder of fiscal year
1995. The Company plans to close approximately 15 to 20 stores which would
include a minimum of eight of $5-20 division stores. The majority of these
planned closings are expected to take place in the later part of the fourth
quarter of fiscal year 1995.
Sales since the end of the first quarter of fiscal year 1995 continue to be
disappointing.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
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(a) 27 Financial Data Schedule
(b) Reports on Form 8-K : None
7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PAUL HARRIS STORES, INC.
(Registrant)
Date: June 9, 1995 /s/ John H. Boyers
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John H. Boyers
Senior Vice President - Finance and Treasurer
Signing on behalf of the Registrant and as
Chief Financial Officer
8
<TABLE> <S> <C>
<ARTICLE> 5
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-29-1995
<PERIOD-END> APR-29-1995
<CASH> 16,039,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 22,335,000
<CURRENT-ASSETS> 40,922,000
<PP&E> 27,530,000
<DEPRECIATION> (8,375,000)
<TOTAL-ASSETS> 61,192,000
<CURRENT-LIABILITIES> 17,447,000
<BONDS> 21,940,000
<COMMON> 1,576,000
0
0
<OTHER-SE> 17,099,000
<TOTAL-LIABILITY-AND-EQUITY> 61,192,000
<SALES> 34,801,000
<TOTAL-REVENUES> 34,801,000
<CGS> 24,617,000
<TOTAL-COSTS> 24,617,000
<OTHER-EXPENSES> 11,653,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 513,000
<INCOME-PRETAX> (1,982,000)
<INCOME-TAX> (767,000)
<INCOME-CONTINUING> (1,215,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,215,000)
<EPS-PRIMARY> (0.12)
<EPS-DILUTED> (0.12)
</TABLE>
