SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10 - Q
X Quarterly report pursuant to Section 13 or 15(d) of the Securities
- -----
Exchange Act of 1934 for the quarterly period ended May 4, 1996 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.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Indiana 35-0907402
- ---------------------------------------- ------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6003 Guion Rd., Indianapolis, IN 46254
- ---------------------------------------- -----------------------
(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, address and 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
-------- --------
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
-------- --------
As of May 30, 1996, 10,028,982 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 - May 4, 1996,
February 3, 1996 and April 29, 1995 1
Consolidated Statements of Operations - For the thirteen
weeks ended May 4, 1996 and April 29, 1995 2
Consolidated Statements of Cash Flows - For the
thirteen weeks ended May 4, 1996 and April 29, 1995 3
Consolidated Statements of Shareholders' Equity -
For the thirteen weeks ended May 4, 1996 and April 29, 1995 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 8
<PAGE>
<TABLE><CAPTION>
PAUL HARRIS STORES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
UNAUDITED
(in thousands)
May 4, February 3, April 29,
1996 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 19,859 $ 19,886 $ 16,039
Merchandise inventories 20,864 17,645 22,335
Other receivables 565 539 927
Prepaid expenses 1,095 1,013 992
Income tax recoverable 0 0 629
---------- ---------- ----------
Total current assets 42,383 39,083 40,922
---------- ---------- ----------
Property, fixtures and equipment
Land, building and improvements 5,730 5,715 5,715
Store fixtures and equipment 11,964 11,575 10,958
Leasehold improvements and other 11,502 11,389 10,857
---------- ---------- ----------
29,196 28,679 27,530
Less accumulated depreciation and amortization (11,481) (10,785) (8,375)
---------- ---------- ----------
Property, fixtures and equipment, net 17,715 17,894 19,155
Other assets 843 873 1,115
---------- ---------- ----------
$ 60,941 $ 57,850 $ 61,192
========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 7,676 $ 6,012 $ 8,071
Compensation and related taxes 1,320 778 731
Income taxes payable 38 45 275
Other accrued expenses 4,176 3,447 4,050
Current maturities of long-term debt 4,320 4,320 4,320
---------- ---------- ----------
Total current liabilities 17,530 14,602 17,447
---------- ---------- ----------
Long-term debt 17,610 17,640 21,940
Other non-current liabilities 2,674 2,704 3,130
Shareholders' equity
Preferred stock (no par value)
Authorized 1,000 shares; none issued
Common stock (no par value)
Authorized 20,000 shares; issued and outstanding
10,024, 10,019 and 9,998 respectively 1,723 1,716 1,684
Additional paid-in capital 5,067 4,989 3,637
Retained earnings 16,337 16,199 13,354
---------- ---------- ----------
Total shareholders' equity 23,127 22,904 18,675
---------- ---------- ----------
$ 60,941 $ 57,850 $ 61,192
========== ========== ==========
See accompanying "Notes To Consolidated Financial Statements".
1
</TABLE>
<PAGE>
<TABLE><CAPTION>
PAUL HARRIS STORES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED
(in thousands, except per share data)
For the For the
thirteen thirteen
weeks ended weeks ended
May 4, April 29,
1996 1995
--------------- ---------------
<S> <C> <C>
Net sales $ 39,639 $ 34,801
Cost of sales, including occupancy expenses
exclusive of depreciation 26,812 24,617
--------------- ---------------
Gross income 12,827 10,184
Selling, general and administrative expenses 11,427 10,758
Depreciation and amortization 790 895
Interest expense, net 378 513
--------------- ---------------
Income (loss) before income taxes 232 (1,982)
Provision (credit) for income taxes 94 (767)
--------------- ---------------
Net income (loss) $ 138 $ (1,215)
=============== ===============
Net income (loss) per common share $ .01 $ (.12)
=============== ===============
Weighted average number of shares and
share equivalents outstanding 10,325 9,998
=============== ===============
See accompanying "Notes To Consolidated Financial Statements".
2
</TABLE>
<PAGE>
<TABLE><CAPTION>
PAUL HARRIS STORES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
(in thousands)
For the For the
thirteen thirteen
weeks ended weeks ended
May 4, April 29,
1996 1995
--------------- ---------------
<S> <C> <C>
Cash flow from operating activities:
Net income $ 138 $ (1,215)
Adjustments to reconcile earnings to cash provided:
Depreciation and amortization 790 895
Net disposal of assets 231 0
Utilization of net operating loss carryforward 78 0
(Increase) decrease in current assets:
Merchandise inventories (3,219) (2,768)
Other receivables (26) 22
Prepaid expenses (82) 24
Income taxes recoverable 0 (629)
Increase (decrease) in current liabilities:
Accounts payable 1,664 464
Compensation and related taxes 542 (651)
Income taxes payable (7) (141)
Other accrued expenses 729 (660)
Decrease (increase) in other assets 20 66
Decrease in other non-current liabilities (30) (29)
--------------- ---------------
Net cash flow from operating activities 828 (4,622)
--------------- ---------------
Net cash flow from investing activities:
Additions to fixed assets (832) (658)
--------------- ---------------
Cash flow from financing activities:
Repayment of long-term debt (30) (30)
Sale of common stock under stock plan 7 0
--------------- ---------------
Net cash flow from financing activities (23) (30)
--------------- ---------------
$ (27) $ (5,310)
=============== ===============
Cash and cash equivalents
At beginning of period $ 19,886 $ 21,349
At end of period 19,859 16,039
--------------- ---------------
$ (27) $ (5,310)
=============== ===============
Supplemental disclosures of cash flow information:
Cash paid during the period for interest $ 82 $ 1,455
=============== ===============
Cash paid during the period for income taxes $ 23 $ 2
=============== ===============
See accompanying "Notes To Consolidated Financial Statements".
3
</TABLE>
<PAGE>
<TABLE><CAPTION>
PAUL HARRIS STORES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
UNAUDITED
(in thousands)
For the thirteen For the thirteen
weeks ended weeks ended
May 4, 1996 April 29, 1995
------------------ -------------------
SHARES AMOUNT SHARES AMOUNT
-------- -------- -------- ---------
<S> <C> <C> <C> <C>
PREFERRED STOCK (1,000 AUTORIZED):
COMMON STOCK (20,000 AUTHORIZED):
(16,5000 voting shares; 3,500 non-voting shares)
Beginning balance 10,019 $ 1,716 9,998 $ 1,684
Exercise of stock options 5 7 0 0
-------- -------- -------- ---------
Ending balance 10,024 $ 1,723 9,998 $ 1,684
======== ======== ======== =========
ADDITIONAL PAID IN CAPITAL:
Beginning balance $ 4,989 $ 3,637
Benefit of net operating loss carryforward 78 0
-------- ---------
Ending balance $ 5,067 $ 3,637
======== =========
RETAINED EARNINGS:
Beginning balance $ 16,199 $ 14,569
Net income (loss) 138 (1,215)
-------- ---------
Ending balance $ 16,337 $ 13,354
======== =========
See accompanying "Notes To Consolidated Financial Statements".
4
</TABLE>
<PAGE>
PAUL HARRIS STORES, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED 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 February 3, 1996 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 May 4, 1996 and for all other periods
presented have been made.
The results of operations for the first quarter of fiscal year 1996 are not
necessarily indicative of the results to be expected for the entire fiscal year
1996. The Company has historically produced a majority of its 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. Accounting and Disclosure of Stock-Based Compensation
The Company has adopted the Financial Accounting Standards Board Statement No.
123, "Accounting for Stock-Based Compensation" (FASB 123) and elected to remain
under the existing accounting rules for stock options as contained in APB
Opinion No. 25. There will be no effect on the financial statements of the
Company as a result of this election under FASB 123.
<PAGE>
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of operations
The Company's net sales increased 14% to $39,639,000 in the first quarter of
fiscal year 1996 from $34,801,000 in the first quarter of fiscal year 1995. The
increase in net sales was attributable to a 16% increase in comparable store
sales, which was partially offset by a decrease in the number of stores open at
the end of the first quarter of fiscal year 1996 compared to the end of the
first quarter of fiscal year 1995. The Company operated 227 stores as of May 4,
1996 compared to 249 stores on April 29, 1995. The 16% comparable store sales
increase was due to an increase in consumer demand and acceptance of the
product offering as reflected by the increase in average number of customer
transactions per store as well as an increase in the average price per unit
sold.
Gross income increased from 29% of net sales in the first quarter of fiscal
year 1995 to 32% of net sales for the first quarter of fiscal year 1996. This
was primarily due to increased gross margins as a result of less promotional
markdowns for the first quarter of fiscal year 1996 when compared to the first
quarter of fiscal year 1995.
Selling, general and administrative expenses were $11,427,000, or approximately
29% of net sales, for the first quarter of fiscal year 1996 compared to
$10,758,000, or approximately 31% of net sales, for the first quarter of fiscal
year 1995. This percentage decrease is primarily the result of fixed expenses
leveraged over a higher sales base due to comparable store sales increases.
Depreciation and amortization decreased approximately 12%, from $895,000 for
the first quarter of fiscal year 1995 to $790,000 for the first quarter of
fiscal year 1996. This decrease is primarily due to reduced capital spending
levels over the past few years.
Interest expense, net, decreased approximately 26% from $513,000 for the first
quarter of fiscal year 1995 to $378,000 for the first quarter of fiscal year
1996. Interest expense, net, was primarily reduced as a result of the first two
semi-annual principal payments of $2.1 million each, on July 31, 1995 and
January 31, 1996, on the $24,000,000 of 11.375% Notes and in addition reflects
the maintenance of higher cash balances in the first quarter of fiscal year
1996 compared to the first quarter of fiscal year 1995.
The Company has provided for income taxes based on statutory rates of $94,000
for the first quarter of fiscal year 1996. Due to the utilization of tax loss
carryforwards the Company benefited by a credit to additional paid-in capital
of $78,000. The Company expects to pay, in cash, only minimal income taxes for
fiscal year 1996.
As a result of the above factors, the Company had net income of $138,000 for
the first quarter of fiscal year 1996 compared to a net loss of $1,215,000 for
the first quarter of fiscal year 1995. The Company historically has produced a
majority of its net income in the fourth quarter of its fiscal year due to
stronger sales experienced during the December holiday season.
<PAGE>
Liquidity and Capital Resources
Cash and cash equivalents totaled $19,859,000 at the end of the first quarter
of fiscal year 1996, a 24% increase from the total of $16,039,000 at the end of
the first quarter of fiscal year 1995. During the first quarter of fiscal year
1996, the Company used $27,000 of cash compared to $5,310,000 of cash used
during the first quarter of fiscal year 1995. On May 29, 1996 the Company made
a prepayment of $3,000,000 principal plus interest relating to its 11.375%
Notes. After the prepayment, the total principal balance of the Notes now
outstanding is $16,800,000. The Company will also make its normal semi-annual
installment of $2.1 million on July 31, 1996 on the Notes.
Merchandise inventories decreased 7% from $22,335,000 at the end of the first
quarter of fiscal year 1995 to $20,864,000 at the end of the first quarter of
fiscal year 1996. The Company's inventory turn, at cost, increased 20% for the
first quarter of fiscal year 1996 compared to the first quarter of fiscal year
1995.
On May 8, 1996, the Company and its primary lender, entered into an agreement
which increased the revolving bank line of credit facility from $15 million to
$20 million and extended the maturity of the facility from June 30, 1996
through June 30, 1997. In addition, the amounts that can be borrowed directly
by the Company were increased from $3.5 million to $10 million. This credit
facility is principally intended for the funding of letters of credit for
merchandise purchased overseas.
Capital spending by the Company for the first quarter of fiscal year 1996 was
$832,000, primarily for updated store fixtures, new stores and upgrades for the
Company's management information systems. During the first quarter of fiscal
year 1996, the Company opened 1 store and closed 9 stores. The Company plans to
open approximately 5-10 new stores during the remainder of fiscal year 1996.
Sales levels to date, during the second quarter of fiscal year 1996 have been
favorable. Unexpectedly harsh weather during the 1996 December holiday season
or a severe economic down-turn could negatively impact earnings and cash flow;
however, the Company anticipates it will be able to satisfy its ongoing cash
requirements for its operations and capital spending, including debt service
payments, primarily with cash flows from operations supplemented by the
increased and extended revolving bank line of credit facility.
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: (4)(h) Fourth Modification of Secured Credit
Agreement, Revolving Note and Other Loan Documents
dated as of May 8, 1996 by and between Paul Harris
Stores, Inc. and LaSalle National Bank.
(27) Financial Data Schedule
(b) Exhibits and Reports on Form 8-K: None
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 14, 1996 /s/ John H. Boyers
------------------- --------------------------
John H. Boyers
Senior Vice President - Finance and Treasurer
Signing on behalf of the registrant and as
principal financial officer.
FOURTH MODIFICATION OF SECURED CREDIT AGREEMENT,
REVOLVING NOTE AND OTHER LOAN DOCUMENTS
THIS FOURTH MODIFICATION OF SECURED CREDIT AGREEMENT, REVOLVING NOTE AND
OTHER LOAN DOCUMENTS (this "Agreement") is made, and shall be deemed effective,
as of the 8th of May, 1996 by and between PAUL HARRIS STORES, INC., an Indiana
corporation (herein, together with its successors and assigns, called the "Bor-
rower") and LASALLE NATIONAL BANK, a national banking association (herein,
together with its successors and assigns, called the "Bank").
All capitalized terms and phrases, unless defined herein, shall have the
specific meanings as are set forth in that certain Secured Credit Agreement
dated as of October 28, 1993, by and between Borrower and Bank, as amended and
restated by that certain Amended and Restated Secured Credit Agreement dated as
of January 20, 1994, as modified by that certain First Modification of Secured
Credit Agreement, Notes, Mortgage and Other Loan Documents dated as of October
31, 1994, as modified by that certain Second Modification of Secured Credit
Agreement, Notes, Mortgage and Other Loan Documents dated as of January 31,
1995, as modified by that certain Third Modification of Secured Credit
Agreement, Notes, Mortgage and Other Loan Documents dated as of September 28,
1995 (the "Credit Agreement").
WHEREAS, Borrower has previously requested loans and advances from Bank
for the purpose of funding Borrower's working capital needs, and in connection
therewith, Borrower and Bank entered into and executed the Credit Agreement,
pursuant to which the Bank, inter alia, agreed to make a revolving credit loan
in an amount of up to $15,000,000.00 to the Borrower; and
WHEREAS, Borrower has previously executed and delivered to Bank a Secured
Promissory Note (Revolver) dated October 28, 1993, as amended (the "Revolving
Note"), in the principal amount of $15,000,000.00, evidencing an indebtedness
owed by Borrower to Bank in like amount (the "Revolving Loan"); and
WHEREAS, repayment of the Revolving Note is secured by a certain Security
Agreement and Financing Statement dated as of October 28, 1993, as amended (the
"Security Agreement"), made by Borrower to Bank; and
WHEREAS, repayment of the Revolving Note is additionally secured by a
certain Assignment of Leases dated as of October 28, 1994, as amended, made by
Borrower to Bank (the "Assignment"), affecting the Premises; and
<PAGE>
WHEREAS, repayment of the Revolving Note is additionally secured by UCC
Financing Statements made by Borrower, as debtor, to Bank, as secured party
(the "Financing Statements"); and
WHEREAS, the Credit Agreement, the Revolving Note, the Security Agreement,
the Assignment and the Financing Statements, together with all other documents
and instruments now or hereafter securing repayment of the Liabilities, or any
portion thereof, evidenced by the Revolving Note are hereinafter collectively
referred to as the "Loan Documents"; and
WHEREAS, Borrower has requested that Bank increase the present Revolving
Loan Commitment and extend the present Revolving Credit Maturity Date, and Bank
has so agreed, on the terms and conditions more specifically set forth herein.
NOW, THEREFORE, for and in consideration of the foregoing premises and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Borrower and Bank do hereby agree as follows:
1. The preambles to this Agreement are fully incorporated herein by this
reference thereto with the same force and effect as though restated herein.
2. Effective as of May 8, 1996 (the "Modification Date"), the Credit
Agreement is modified as set forth below:
a. Within the definition of "Borrowing Base" set forth in Section
1.1 of the Credit Agreement, each reference to "forty percent (40.0%)" is
deleted in its entirety and the phrase "sixty percent (60.0%)" is substituted
in its place and stead.
b. The definition of "Revolving Credit Maturity Date" set forth in
Section 1.1 of the Credit Agreement is deleted in its entirety and the
following definition is substituted therefor:
"Revolving Credit Maturity Date" means, with respect to the
Revolving Credit Commitment, June 30, 1997.
c. Section 2.1 is deleted in its entirety and the following is
substituted in its place and stead:
2.1 Revolving Credit Commitment. On the terms and subject to
the conditions set forth in this Agreement, Bank agrees to make Revolving Loans
to Borrower and to issue Letters of Credit, pursuant to Section 2.3, for the
account of the Borrower, from time to time before the Revolving Credit
Termination Date in such aggregate amounts as Borrower may from time to time
request but not exceeding at any one time outstanding the lesser of (i) the
Borrowing Base or (ii) $20,000,000; provided, however, that (a) Revolving Loans
shall be limited to $10,000,000 in the aggregate, and (b) the
-2-
<PAGE>
issuance of standby Letters of Credit shall be limited to $1,000,000 in the
aggregate. Borrower shall have the right to repay and reborrow any of the
Revolving Loans in increments of $100,000 (or $25,000 integral multiples);
provided, however, that it shall be a condition precedent to any reborrowing
that as of the date of any reborrowing all of the conditions to borrowing set
forth in this Agreement shall be satisfied and all representations and
warranties made herein shall be true and correct in all material respects as of
such date.
Notwithstanding the foregoing, it is understood and agreed to by
and between the Bank and the Borrower that during the period commencing on June
1, 1996 and ending on the Revolving Credit Maturity Date, the Borrower shall be
required to reduce the Revolving Loan Balance to zero for a period of ninety
(90) consecutive days.
d. Section 8.9 is hereby deleted in its entirety and the following
is substituted in its place and stead:
8.9 Minimum Tangible Net Worth. Not permit Borrower's Tangible
Net Worth to be less than $15,000,000 for the period commencing on January 30,
1996 and ending on the Maturity Date, measured quarterly.
e. Section 9.1(d) is hereby deleted in its entirety and the
following is substituted in its place and stead:
(d) Schedules of Inventory. On or before the second (2nd)
Business Day of each week, an updated Schedule of Inventory.
f. Schedule A to the Credit Agreement is deleted in its entirety
and the revised Schedule A, attached hereto and made a part hereof, is
substituted in its place and stead.
3. All references in the Loan Documents to the Credit Agreement are
hereby understood to be to the Credit Agreement as modified hereby.
4. Effective as of the Modification Date, paragraph one of page one of
the Revolving Note is hereby deleted in its entirety and the following is sub-
stituted in its place and stead:
-3-
<PAGE>
REVOLVING NOTE
$20,000,000.00 Chicago, Illinois
October 28, 1993
FOR VALUE RECEIVED, PAUL HARRIS STORES, INC., an Indiana corporation
(together with its successors and assigns, "Maker"),promises to pay to the
order of LASALLE NATIONAL BANK, a national banking association (together with
its successors and assigns, "Bank"), on or before June 30, 1997, at the Bank's
principal office in Chicago, Illinois, the principal sum of TWENTY MILLION AND
NO/100THS DOLLARS ($20,000,000.00), or, if less, the Revolving Loan Balance at
such time, plus accrued and unpaid interest thereon and all other charges
applicable thereto, all as set forth more fully in that Secured Credit
Agreement dated as of October 28, 1993, between Maker and Bank (as the same may
be amended, modified, supplemented or restated from time to time, the "Credit
Agreement"). All capitalized terms used but not elsewhere defined herein shall
have the same meanings as are ascribed to them in the Credit Agreement.
5. All references in the Loan Documents to the Revolving Note are hereby
understood to be the Revolving Note as modified hereby.
6. In the event of any conflict among the terms of the Credit Agreement
and the other Loan Documents as modified by this Agreement, the terms of the
Credit Agreement as modified by this Agreement shall control. All terms and
provisions of the Loan Documents corresponding to terms and provisions of the
Credit Agreement prior to the date of this Agreement shall be deemed modified
in accordance with the terms of this Agreement.
7. Borrower hereby warrants and represents that (i) Borrower has no
defense, offset or counterclaim with respect to the payment of any sum owed to
Bank, or with respect to any covenant in the Loan Documents; (ii) Bank, on and
as of the date hereof, has fully performed all obligations to Borrower which it
may have had or has on and as of the date hereof; and (iii) other than as
expressly set forth herein, by entering into this Agreement, Bank does not
waive any condition or obligation in the Loan Documents.
8. Borrower hereby agrees to execute and deliver promptly to Bank, at
Bank's request, such other documents as Bank, in its reasonable discretion,
shall deem necessary or appropriate to evidence the transaction contemplated
herein.
9. Borrower agrees to pay all fees and expenses associated with the
consummation of the transactions contemplated in this
-4-
<PAGE>
Agreement, including, without limitation, the commitment fee of $18,750, fees
and expenses of Bank's counsel and related expenses.
10. Time is of the essence of this Agreement. Unless this Agreement is
executed by Borrower and Bank on or before May 14, 1996, it shall become null
and void and shall have no force or effect.
11. This Agreement may be executed in any number of counterparts, each
of which shall constitute an original, but all of which, taken together, shall
constitute one and the same Agreement.
12. Except as otherwise set forth herein to the contrary, the Loan
Documents remain unmodified and continue in full force and effect. Borrower
hereby reaffirms, confirms and ratifies each and every covenant, condition,
obligation and provision set forth in the Loan Documents, each as modified
hereby.
[End of Page]
-5-
<PAGE>
IN WITNESS WHEREOF, the undersigned, intending to be legally bound
hereby, have executed and delivered this Agreement as of the day and year first
above written.
BORROWER:
PAUL HARRIS STORES, INC., an Indiana corporation
By:/s/John H. Boyers
Title: Sr. V.P. - Finance and Treasurer
Its:_______________________________
BANK:
LASALLE NATIONAL BANK, a national banking
association
By:/s/ Ann Ellingsen
Title: Vice President
Its:_______________________________
-6-
<PAGE>
<TABLE><CAPTION>
SCHEDULE A
Additional Financial Covenants
(amounts in thousands except Fixed Charge Ratios)
Quarter 1 2 3 4 1 2
Fiscal Year 96 96 96 96 96 96
Period Ending Apr.96 Jul.96 Oct.96 Jan.97 Apr.97 Jul.97
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Capital Expenditures (1) 8,000 8,000 8,000 9,000 9,000 9,000
Cash Balance (2) 4,000 4,000 4,000 12,000 4,000 4,000
Opening Cash Flow Before
Working Capital Changes (3) 8,000 8,000 8,000 9,000 8,000 9,000
Fixed Charge Ratio 2.0 2.0 2.01 2.0 2.0 2.0
</TABLE>
_______________________________
(1) MAXIMUM cumulative Capital Expenditures for prior eight quarters.
(2) MINIMUM financial accounting ("GAAP") "Cash and cash equivalents" at
each quarter end.
(3) MINIMUM cumulative cash flow on a rolling four quarter basis.
-7-
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CAPTION>
EXHIBIT 27 - FINANCIAL DATA SCHEDULE
PAUL HARRIS STORES, INC. AND SUBSIDIARIES
FORM 10-Q FOR THE THREE MONTHS ENDED MAY 4, 1996
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-01-1997
<PERIOD-END> MAY-04-1996
<CASH> 19,859,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 20,864,000
<CURRENT-ASSETS> 42,383,000
<PP&E> 29,196,000
<DEPRECIATION> (11,481,000)
<TOTAL-ASSETS> 60,941,000
<CURRENT-LIABILITIES> 17,530,000
<BONDS> 17,610,000
<COMMON> 1,723,000
0
0
<OTHER-SE> 21,404,000
<TOTAL-LIABILITY-AND-EQUITY> 60,941,000
<SALES> 39,639,000
<TOTAL-REVENUES> 39,639,000
<CGS> 26,812,000
<TOTAL-COSTS> 26,812,000
<OTHER-EXPENSES> 12,217,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 378,000
<INCOME-PRETAX> 232,000
<INCOME-TAX> 94,000
<INCOME-CONTINUING> 138,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 138,000
<EPS-PRIMARY> 0.01
<EPS-DILUTED> 0.01
</TABLE>
