<PAGE> 1
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 OCTOBER 30, 1999 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
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
(Registrant's telephone number, including area code)
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 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 December 1, 1999, 10,900,814 common shares were outstanding.
<PAGE> 2
INDEX
PAUL HARRIS STORES, INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements Page #
Consolidated Balance Sheets - October 30, 1999,
January 30, 1999 and October 31, 1998 3
Consolidated Statements of Income (Loss) -- For the thirteen
and thirty-nine weeks ended October 30, 1999 and October 31, 1998 4
Consolidated Statements of Cash Flows -- For the thirty-nine
weeks ended October 30, 1999 and October 31, 1998 5
Consolidated Statements of Shareholders' Equity -- For the
thirty-nine weeks ended October 30, 1999 and October 31, 1998 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
Item 3. Quantitative and Qualitative Disclosure About Market Risk 14
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 6. Exhibits and Reports on Form 8-K 14
2
<PAGE> 3
PAUL HARRIS STORES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
October 30, January 30, October 31,
1999 1999 1998
----------- ----------- -----------
(unaudited) (unaudited)
<S> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 1,686 $ 7,429 $ 3,000
Merchandise inventories 57,469 34,638 45,951
Construction allowances receivable 2,268 4,977 4,082
Income tax receivable 3,641 650 823
Other receivables 514 252 316
Prepaid expenses 1,738 1,381 1,402
Deferred income taxes - - 502
--------- --------- ---------
Total current assets 67,316 49,327 56,076
--------- --------- ---------
Property, fixtures and equipment
Land, building and improvements 6,166 6,013 5,978
Store fixtures and equipment 45,389 38,229 38,096
Leasehold improvements and other 34,419 27,981 24,812
--------- --------- ---------
85,974 72,223 68,886
Less: accumulated depreciation and amortization (27,198) (21,611) (20,509)
--------- --------- ---------
Property, fixtures and equipment, net 58,776 50,612 48,377
Other assets 4,649 746 752
--------- --------- ---------
Total assets $ 130,741 $ 100,685 $ 105,205
========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Short-term borrowings $ 18,400 $ - $ 4,900
Accounts payable 22,826 15,082 19,735
Compensation and related taxes 1,945 1,245 2,247
Deferred income taxes 856 1,235 -
Other accrued expenses 5,649 5,114 6,517
Current maturities of long-term debt 1,720 120 1,840
--------- --------- ---------
Total current liabilities 51,396 22,796 35,239
--------- --------- ---------
Long-term debt - 1,690 -
Deferred income taxes 5,249 2,577 992
Other non-current liabilities 4,057 3,121 3,468
Shareholders' equity
Preferred stock (no par value)
Authorized 1,000,000 shares; none issued
Common stock (no par value)
Authorized 40,000,000 shares; issued
11,401,000, 11,299,000 and 11,277,000 respectively 17,933 17,793 17,410
Additional paid-in capital 14,130 14,011 13,939
Unamortized restricted stock (36) (219) -
Retained earnings 42,428 43,332 38,573
--------- --------- ---------
74,455 74,917 69,922
Less: common stock in treasury, at cost
500,000, 500,000 and 500,000 respectively 4,416 4,416 4,416
--------- --------- ---------
Total shareholders' equity 70,039 70,501 65,506
--------- --------- ---------
Total liabilities and shareholders' equity $ 130,741 $ 100,685 $ 105,205
========= ========= =========
</TABLE>
See accompanying "Notes To Consolidated Financial Statements".
3
<PAGE> 4
PAUL HARRIS STORES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
UNAUDITED
(Dollars in thousands, except for per share data)
<TABLE>
<CAPTION>
For the thirteen For the thirty-nine
weeks ended weeks ended
-------------------------- --------------------------
October 30, October 31, October 30, October 31,
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $ 62,565 $ 61,212 $ 177,495 $ 161,585
Cost of sales, including certain occupancy expenses
exclusive of depreciation 39,709 37,526 111,999 99,473
--------- --------- --------- ---------
Gross income 22,856 23,686 65,496 62,112
Selling, general and administrative expenses 22,031 19,157 60,914 51,407
Depreciation and amortization 2,157 1,657 5,901 4,549
--------- --------- --------- ---------
Operating (loss) income (1,332) 2,872 (1,319) 6,156
Interest (expense) income and other income, net (311) (91) (129) 156
--------- --------- --------- ---------
(Loss) income before income taxes (1,643) 2,781 (1,448) 6,312
(Benefit) provision for income taxes (617) 1,099 (544) 2,485
--------- --------- --------- ---------
Net (loss) income $ (1,026) $ 1,682 $ (904) $ 3,827
========= ========= ========= =========
Basic (loss) earnings per share $ (0.09) $ 0.15 $ (0.08) $ 0.34
========= ========= ========= =========
Weighted average number of shares outstanding 10,887 11,000 10,841 11,174
========= ========= ========= =========
Diluted (loss) earnings per share $ (0.09) $ 0.15 $ (0.08) $ 0.33
========= ========= ========= =========
Weighted average number of shares and
share equivalents outstanding 10,982 11,248 10,984 11,469
========= ========= ========= =========
</TABLE>
See accompanying "Notes To Consolidated Financial Statements".
4
<PAGE> 5
PAUL HARRIS STORES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
(Dollars in thousands)
<TABLE>
<CAPTION>
For the thirty-nine weeks ended
-------------------------------
October 30, October 31,
1999 1998
----------- -----------
<S> <C> <C>
Cash flow from operating activities:
Net (loss) income $ (904) $ 3,827
Adjustments to reconcile net (loss) income to cash (used) provided:
Depreciation and amortization 5,901 4,549
Restricted stock expense 183 -
Net loss on disposal of assets 82 160
Deferred income taxes 2,293 1,566
(Increase) decrease in current assets:
Merchandise inventories (17,636) (14,011)
Construction allowances receivable 2,709 (1,156)
Income tax receivable (2,991) (823)
Other receivables (262) 88
Prepaid expenses (357) (43)
Increase (decrease) in current liabilities:
Accounts payable 7,744 7,010
Compensation and related taxes 700 (533)
Income taxes payable - (377)
Other accrued expenses 535 2,172
Other 897 363
-------- --------
Net cash flow (for) from operating activities (1,106) 2,792
-------- --------
Cash flow for investing activities:
Additions to fixed assets (11,376) (18,267)
Business acquisition (11,830) -
-------- --------
Net cash flow for investing activities (23,206) (18,267)
-------- --------
Cash flow from financing activities:
Direct borrowings under revolving line of credit 18,400 4,900
Repayment of long-term debt (90) (90)
Proceeds from issuance of common stock and
related tax benefits 259 91
Purchase of treasury stock - (4,416)
-------- --------
Net cash flow from financing activities 18,569 485
-------- --------
Cash used $ (5,743) $(14,990)
======== ========
Cash and cash equivalents:
At beginning of period $ 7,429 $ 17,990
At end of period 1,686 3,000
-------- --------
Cash used $ (5,743) $(14,990)
======== ========
</TABLE>
See accompanying "Notes To Consolidated Financial Statements".
5
<PAGE> 6
PAUL HARRIS STORES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
UNAUDITED
(in thousands)
<TABLE>
<CAPTION>
For the thirty-nine For the thirty-nine
weeks ended weeks ended
October 30, 1999 October 31, 1998
---------------------- ---------------------
SHARES AMOUNT SHARES AMOUNT
------ -------- ------ --------
<S> <C> <C> <C> <C>
PREFERRED STOCK (1,000 AUTHORIZED):
COMMON STOCK (40,000 AUTHORIZED):
Beginning balance 10,799 $ 17,793 11,256 $ 17,354
Issuance of stock grants 40 - - -
Exercise of stock options 62 140 21 56
------ --------- ------ ---------
Ending balance 10,901 $ 17,933 11,277 $ 17,410
====== ========= ====== =========
ADDITIONAL PAID-IN CAPITAL:
Beginning balance $ 14,011 $ 13,904
Tax benefit on exercise of stock options 119 35
--------- ---------
Ending balance $ 14,130 $ 13,939
========= =========
UNAMORTIZED RESTRICTED STOCK:
Beginning balance $ (219) $ -
Amortization of restricted stock 183 -
--------- ---------
Ending balance $ (36) $ -
========= =========
RETAINED EARNINGS:
Beginning balance $ 43,332 $ 34,746
Net (loss) income (904) 3,827
--------- ---------
Ending balance $ 42,428 $ 38,573
========= =========
TREASURY STOCK:
Beginning balance 500 $ 4,416 - $ -
Purchase of treasury stock - - 500 4,416
------ --------- ------ ---------
Ending balance 500 $ 4,416 500 $ 4,416
====== ========= ====== =========
</TABLE>
See accompanying "Notes To Consolidated Financial Statements".
6
<PAGE> 7
PAUL HARRIS STORES, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements include the
accounts of Paul Harris Stores, Inc. and its subsidiaries (the "Company"). The
Company is a specialty retailer known for its branded private-label apparel and
accessories for women.
The unaudited consolidated 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 30, 1999, 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 for the period ended October 30, 1999, and
for all other periods presented, have been made.
The Company's fiscal year ends on the Saturday closest to January 31. All
references in this report to fiscal years are to the calendar years in which
such fiscal years began. For example, fiscal 1999 refers to the fiscal year that
began on January 31, 1999, and will end on January 29, 2000.
The results of operations for the first, second and third quarters of fiscal
1999 are not necessarily indicative of the results to be expected for all of
fiscal 1999. 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 month of December.
Certain amounts in the prior periods have been reclassified to conform with the
current period presentation.
2. EARNINGS PER SHARE
Basic earnings per share are based on the weighted average number of common
shares outstanding during the quarter. Diluted earnings per share are based on
the weighted average number of common and common equivalent shares (dilutive
stock options) outstanding during the quarter. The following table (in
thousands) reconciles the numerators and denominators used in the basic and
diluted earnings per share computations:
<TABLE>
<CAPTION>
For the thirteen weeks ended For the thirty-nine weeks ended
---------------------------- -------------------------------
October 30, 1999 October 31, 1998 October 30, 1999 October 31, 1998
------------------ ------------------ ------------------ ------------------
Net Loss Shares Net Income Shares Net Loss Shares Net Income Shares
-------- ------ ---------- ------ -------- ------ ---------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Basic earnings and outstanding shares $ (1,026) 10,887 $ 1,682 11,000 $ (904) 10,841 $ 3,827 11,174
Effect of dilutive options - 95 - 248 - 143 - 295
-------- ------ ---------- ------ -------- ------ ---------- ------
Diluted earnings and outstanding
equivalent shares $ (1,026) 10,982 $ 1,682 11,248 $ (904) 10,984 $ 3,827 11,469
======== ====== ========== ====== ======== ====== ========== ======
</TABLE>
3. LONG-TERM DEBT AND CREDIT ARRANGEMENTS
The Company has a committed credit facility of $35.0 million, which may be used
for letters of credit or direct borrowings ("Credit Facility"). The facility was
amended October 21, 1999 to increase the facility to its current level and the
maximum revolving credit available to $25.0 million. The Credit Facility is
intended to provide the Company with cash and liquidity to conduct its
operations. The Credit Facility was previously modified on April 19, 1999 to
extend its term to June 30, 2000 and to allow the Company to borrow a maximum of
$10.0 million under the Credit Facility as a term note. The term note requires
only monthly interest payments with an interest rate equaling the prime rate (as
defined in the Credit Facility) or the LIBOR interest rate (as defined in the
Credit Facility) plus 2.0 percent. The Credit Facility remains unchanged with
respect to letter of credit issuance fees, covenants and stock repurchase
restrictions and collateralization of the Credit Facility. As of October 30,
1999, there were $18.4
7
<PAGE> 8
million of direct borrowings under the revolving credit commitment. The balance
of outstanding letters of credit was $8.0 million and the amount of available
borrowings under the borrowing formula of the Credit Facility was $8.6 million
at October 30, 1999.
4. ACQUISITION OF ASSETS
On March 12, 1999, the Company acquired from The J. Peterman Company ("J.
Peterman") substantially all of the assets of J. Peterman for approximately
$10.0 million in cash. This transaction did not include any assumption of debt.
The estimated cost of $11.8 million includes estimated purchase liabilities of
$1.8 million primarily associated with a plan to exit three of the thirteen
acquired store locations and close the J. Peterman distribution facility. The
Company expects to complete its plan of acquisition by March 2000. The
acquisition was accounted for under the purchase method and, accordingly,
results of J. Peterman's operations are included in the consolidated financial
statements as of the date of acquisition. The purchase price has been
preliminarily allocated based upon estimated fair values of the assets acquired
which may vary once the actual fair value of the assets are determined.
The following unaudited pro forma information (dollars in thousands, except per
share data) presents a summary of the Company's consolidated results of
operations as if the acquisition of J. Peterman had taken place on January 31,
1999 and on February 1, 1998:
<TABLE>
<CAPTION>
Three months ended Nine months ended
------------------------ ------------------------
10/30/99 10/31/98 10/30/99 10/31/98
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales $ 62,565 $ 74,522 $ 178,751 $ 193,214
Net (loss) earnings $ (1,026) $ 536 $ (1,436) $ (337)
Per share data:
Basic $ (0.09) $ 0.05 $ (0.13) $ (0.03)
Diluted $ (0.09) $ 0.05 $ (0.13) $ (0.03)
</TABLE>
These unaudited pro forma results have been prepared for comparative purposes
only and include the effects of preliminary estimates of fair value and certain
adjustments and assumptions based upon available information that management
believes are reasonable in the circumstances. They do not purport to be
indicative of the results of operations which would have actually resulted had
the acquisition been in effect on February 1, 1998 or of future results of
operations.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Certain statements made in this report may constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause the actual results, performances
or achievements of the Company or the retailing industry to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements. Such factors include, among others:
local, regional and national economic conditions; extreme or unseasonable
weather conditions; locating stores correctly and generating increased sales and
productivity; legislation and regulatory matters affecting payroll costs or
other aspects of retailing; the ability to identify and respond to emerging
fashion trends; internal computerized systems functioning properly; Year 2000
readiness of direct and down line vendors and service providers; foreign and
domestic labor and manufacturing conditions; and governmental actions such as
import or trade restrictions.
8
<PAGE> 9
OVERVIEW
As of October 30, 1999, the Company operated 317 stores in 29 states under the
Paul Harris name. These stores are a specialty retailer of moderately priced
casual apparel and accessories for women sold under the Paul Harris, Paul Harris
Design, Paul Harris Denim and other Paul Harris brand names. The Paul Harris
stores have a significant concentration of locations in the Midwest. The Company
also operates 12 stores in nine states under the J. Peterman name. J. Peterman
is a nationally recognized upscale apparel, accessory and novelty retailer well
known for its catalog and unique merchandise collection.
The Company's stores currently average approximately 4,900 gross square feet and
are located primarily in regional enclosed shopping malls and, to a lesser
extent, strip shopping centers. During the first nine months of fiscal 1999, the
Company opened 18 and closed five Paul Harris stores, acquired 13 J. Peterman
stores and subsequently closed three J. Peterman stores and opened two new J.
Peterman stores during the period. The Company expects that any new Paul Harris
stores will be generally located in the Company's existing markets in order to
enhance recognition of the Paul Harris name, facilitate targeted marketing
efforts and efficiently utilize the Company's sales team. The Company currently
has no plans to open any new J. Peterman stores during the remainder of the
fiscal year.
RESULTS OF OPERATIONS
The following discussion is based upon the unaudited consolidated financial
statements appearing elsewhere in this report. The following table sets forth
certain income statement items as a percentage of net sales.
PAUL HARRIS STORES, INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS AS A PERCENT OF NET SALES
<TABLE>
<CAPTION>
Thirteen weeks ended Thirty-nine weeks ended
-------------------- -----------------------
October 30, October 31, October 30, October 31,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales, including certain occupancy expenses
exclusive of depreciation (1) 63.5% 61.3% 63.1% 61.6%
------------- ------------- ------------- -------------
Gross income 36.5% 38.7% 36.9% 38.4%
Selling, general and administrative expenses (2) 35.2% 31.3% 34.3% 31.8%
Depreciation and amortization 3.4% 2.7% 3.3% 2.8%
------------- ------------- ------------- -------------
Operating (loss) income (2.1%) 4.7% (0.7%) 3.8%
Interest (expense) income and other income, net (0.5%) (0.1%) (0.1%) 0.1%
------------- ------------- ------------- -------------
(Loss) income before income taxes (2.6%) 4.6% (0.8%) 3.9%
(Benefit) provision for income taxes (1.0%) 1.8% (0.3%) 1.5%
------------- ------------- ------------- -------------
Net (loss) income (1.6%) 2.8% (0.5%) 2.4%
============= ============= ============= =============
</TABLE>
- -------------------------------------
(1) Occupancy expenses include store level base rent, percentage rent and real
estate taxes.
(2) Includes all store level occupancy expenses not included in cost of sales.
9
<PAGE> 10
THIRD QUARTER OF FISCAL 1999
The Company's net sales increased to $62.6 million in the third quarter of
fiscal 1999 from $61.2 million in the third quarter of fiscal 1998, an increase
of $1.4 million or 2.2 percent. The increase in net sales was primarily
attributable to a 12.7 percent increase in the number of stores operating during
the third quarter of fiscal 1999 as compared to the third quarter of fiscal
1998. Comparable store sales decreased by 7.8 percent during the quarter.
Comparable store sales were negatively impacted during August and early
September due to the interruption of the Company's normal distribution of
merchandise to the stores as a result of a significant hardware and software
conversion that took place in early July. The Company operated 329 stores as of
October 30, 1999 compared to 292 stores as of October 31, 1998.
Gross income decreased to $22.9 million in the third quarter of fiscal 1999 from
$23.7 million for the same period in the prior year, a decrease of $830,000 or
3.5 percent. Gross income was negatively effected by a 16.4 percent increase in
occupancy costs primarily due to a 19.4 percent increase in total square feet
occupied and positively impacted by the $1.4 million increase in sales. Gross
income as a percentage of net sales decreased to 36.5 percent in the third
quarter of 1999 compared to 38.7 percent in the third quarter of 1998. The
decrease was attributable to lower selling margins primarily due to our knit
business and higher occupancy expense as a percentage of net sales due to
increased occupancy costs for newer and larger stores and as a result of the
re-negotiation of leases of several existing store locations.
Selling, general and administrative expenses increased to $22.0 million, or 35.2
percent of net sales, for the third quarter of fiscal 1999 from $19.2 million,
or 31.3 percent of net sales, for the third quarter of fiscal 1998. The increase
of $2.9 million or 15.0 percent of net sales was primarily due to increased
store-payroll and occupancy costs as a result of the increase in number of store
locations, the settlement of an outstanding legal dispute (see Part II, Item 1)
and an unanticipated non-recurring employee medical claim of approximately
$200,000.
Depreciation and amortization increased to $2.2 million for the third quarter of
fiscal 1999 from $1.7 million for the third quarter of fiscal 1998, an increase
of $500,000 or 30.2 percent. As a percentage of net sales, depreciation and
amortization increased to 3.4 percent in the third quarter of fiscal 1999 from
2.7 percent in the third quarter of fiscal 1998, primarily as a result of
approximately $34 million in fixed asset expenditures during the 1999 and 1998
fiscal years. The increase in fixed assets includes the new point of sale
system, which has a shorter depreciable life than most other depreciable assets
of the Company.
The operating loss of $1.3 million for the third quarter of fiscal 1999 was a
decrease of $4.2 million from operating income of $2.9 million for the third
quarter of fiscal 1998. As a percentage of net sales, the Company had an
operating loss of 2.1 percent in the third quarter of fiscal 1999 compared to
operating income of 4.7 percent in the third quarter of fiscal 1998.
Interest (expense) income and other income, net, of ($311,000) for the third
quarter of fiscal 1999 was the result of increased borrowings under the
Company's revolving line of credit resulting from a business acquisition in
March 1999 and to fund seasonal inventories and operations. The Company had
interest (expense) income and other income, net, of ($91,000) for the third
quarter of fiscal 1998 as a result of borrowings from the Company's revolving
line of credit to fund seasonal inventories.
The benefit for income taxes was $617,000 for the third quarter of fiscal 1999
compared to a provision of $1.1 million for the third quarter of 1998. The
Company's effective tax rate of 37.5 percent in the third quarter of fiscal 1999
was lower than the 39.5 percent in the third quarter of fiscal 1998 primarily as
a result of the Company benefiting from a lower state effective income tax rate.
As a result of the above factors, the Company's net income decreased to a loss
of $1.0 million or $0.09 per diluted share for the third quarter of fiscal 1999
from income of $1.7 million or $0.15 per diluted share for the third quarter of
fiscal 1998.
10
<PAGE> 11
FIRST NINE MONTHS OF FISCAL 1999
The Company's net sales increased to $177.5 million in the first nine months of
fiscal 1999 from $161.6 million in the first nine months of fiscal 1998, an
increase of $15.9 million or 9.8 percent. The increase in net sales was
primarily attributable to a 12.7 percent increase in store count. The Company
operated 329 stores as of October 30, 1999 compared to 292 stores on October 31,
1998. Comparable store sales decreased by 2.0 percent for the first nine months
of fiscal 1999.
Gross income increased to $65.5 million in the first nine months of fiscal 1999
from $62.1 million for the same period in the prior year, an increase of $3.4
million or 5.4 percent. Gross income increased primarily as a result of the
increase in net sales. Gross income, as a percentage of net sales, decreased to
36.9 percent in the first nine months of fiscal 1999 from 38.4 percent for the
same period of fiscal 1998. Gross income, as a percentage of net sales, was
negatively impacted by the increase in occupancy expenses, especially for stores
opened in the last twelve months.
Selling, general and administrative expenses increased to $60.9 million, or 34.3
percent of net sales, for the first nine months of fiscal 1999 from $51.4
million, or 31.8 percent of net sales, for the first nine months of fiscal 1998.
The increase of $9.5 million was primarily the result of increased store payroll
costs and occupancy expenses to support the increase in the number of store
locations, the settlement of an outstanding legal dispute (see Part II, Item 1)
and an unanticipated non-recurring employee medical claim of approximately
$200,000. The increase as a percent of net sales was primarily the result of
higher costs associated with the increase in total square feet operated by the
Company.
Depreciation and amortization increased to $5.9 million for the first nine
months of fiscal 1999 from $4.5 million in fiscal 1998, an increase of $1.4
million or 29.7 percent. As a percentage of net sales, depreciation and
amortization increased to 3.3 percent in the first nine months of fiscal 1999
from 2.8 percent in the same period of fiscal 1998. The increase is a result of
the approximate $15.6 million in fixed asset expenditures since the end of the
third quarter of fiscal 1998.
The first nine months of fiscal 1999 resulted in an operating loss of $1.3
million, a decrease of $7.5 million from operating income of $6.2 million for
the same period of fiscal 1998. As a percent of net sales, the operating loss in
the first nine months of fiscal 1999 was a negative 0.7 percent compared to 3.8
percent for the operating income in the first nine months of fiscal 1998.
Interest (expense) income and other income, net, of ($129,000) for the first
nine months of fiscal 1999 decreased from income of $156,000 for the first nine
months of fiscal 1998. This decrease was primarily due to short term borrowing
as a result of the business acquisition in March 1999 and funding of seasonal
inventories and operations, partially offset by the receipt of $435,000 for
unclaimed note redemption accrediting back to the Company according to the terms
of the note agreement during the first nine months of fiscal 1999.
Income taxes was a benefit of $544,000 for the first nine months of fiscal 1999
compared to expense of $2.5 million for the first nine months of fiscal 1998, a
decrease of $3.0 million, as a result of the decrease in income before income
taxes. The Company's effective tax rate of 37.5 percent in the first nine months
of fiscal 1999 was lower than the 39.4 percent in the first nine months of
fiscal 1998 primarily as a result of lower state effective income tax rates.
As a result of the above factors, the Company posted a net loss of $904,000 or
$0.08 per diluted share for the first nine months of fiscal 1999 compared to net
income of $3.8 million or $0.33 per diluted share for the same period of fiscal
1998.
11
<PAGE> 12
SEASONALITY
The Company's business, like that of most retailers, is subject to seasonal
influences. A significant portion of the Company's net sales and profits are
realized during the Company's fourth fiscal quarter, which includes the holiday
selling season. Results for any quarter are not necessarily indicative of the
results that may be achieved for a full fiscal year. Quarterly results may
fluctuate materially depending upon, among other things, the timing of new store
openings, net sales and profitability contributed by new stores, increases or
decreases in comparable store sales, adverse weather conditions, shifts in the
timing of certain holidays and promotions, and changes in the Company's
merchandise mix.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of working capital consist of internally generated
cash and a $35.0 million secured revolving credit facility. The Credit Facility
is intended to provide the Company with cash and liquidity to conduct its
operations. The credit facility expires June 30, 2000. The Company anticipates
that it will be able to extend or replace the current credit facility with
similar terms and conditions. The annual interest rate on the direct borrowings
outstanding under the credit facility is a variable rate equal to the prime rate
of the Company's lender. Term note borrowings under the facility have an annual
interest rate equal to the lender's prime rate or LIBOR plus 2 percent. In
addition, letters of credit under the facility carry an initial issuance fee,
plus a fee of 0.25 percent of the face amount of such letters of credit. The
credit facility also contains certain financial covenants that set limits on
tangible net worth and cash flow from operations. The credit facility is secured
by a security interest in the Company's inventory, equipment, fixtures, cash and
an assignment of leases. As of October 30, 1999, there were $18.4 million of
direct borrowings under the revolving credit commitment. The balance of
outstanding letters of credit was $8.0 million and the amount of available
borrowings under the borrowing formula of the Credit Facility was $8.6 million
at October 30, 1999.
Net cash used for operating activities was $1.1 million in the first nine months
of fiscal 1999 compared to net cash provided of $2.8 million in the first nine
months of fiscal 1998. The primary reason for the decrease in net cash flow from
operating activities was reduced cash flows from earnings and higher inventory
levels for the first nine months of fiscal 1999 compared to the first nine
months of fiscal 1998.
Net cash used for investing activities was $23.2 million in the first nine
months of fiscal 1999, which includes capital expenditures of $11.8 million for
the acquisition of J. Peterman assets (see Note 4. "Acquisition of Assets" of
"Notes To Consolidated Financial Statements") and $11.4 million for new stores,
computer system upgrades and remodeling existing stores. The Company anticipates
opening a total of 21 new Paul Harris stores and will remodel or relocate a
total of 10 Paul Harris stores during the 1999 fiscal year. Excluding the $11.8
incurred for J. Peterman, the Company will spend approximately $14.0 million on
new store additions, remodels and other capital expenditures during the 1999
fiscal year.
Net cash flow from financing activities was $18.6 million for the first nine
months of fiscal 1999 and primarily was the result of direct borrowings of $18.4
million under the Company's revolving credit facility (see Note 4. "Acquisition
of Assets" of "Notes To Consolidated Financial Statements").
Management believes that cash generated from operations and borrowings under the
Company's credit facility, if any, will be sufficient to meet the Company's
working capital and capital expenditure needs in the foreseeable future.
12
<PAGE> 13
YEAR 2000 COMPLIANCE
The year 2000 ("Y2K") will pose a unique set of challenges to those industries
reliant on information technology. As a result of methods employed by early
programmers, many software applications and operational programs may be unable
to distinguish the year 2000 from the year 1900. If not effectively addressed,
this problem could result in the production of inaccurate data, or, in the worst
cases, the inability of the systems to continue to function. The problem also
extends to many non-software systems, that are operating and control systems
that rely on embedded chip systems. The Company and other retailers are
vulnerable to the industry's dependence on electronic point of sale, inventory
control systems and other system failures such as payroll, accounting and
security. The Company must also be aware of the effect of Y2K failures on the
part of its suppliers, landlords and public or private infrastructure service
providers, which include electricity, water, gas, transportation and
communication.
The Company's efforts in addressing the Y2K issues are directed by senior-level
management. These efforts represent a significant commitment of time of the
Company's information system staff, the efforts of outside consultants and
software testing applications. Management periodically reports to the Board of
Directors with respect to the Company's Y2K efforts. In May 1996, the Company
initiated the process of preparing its computer systems and applications for Y2K
when the decision to replace the store point of sale equipment was made. The
store point of sale systems were replaced during the third quarter of 1997. The
Y2K process also involves upgrading corporate hardware and software components.
Management estimates the total cumulative costs will be approximately $11.7
million, which includes the $6.2 million already invested in the new point of
sale systems and $5.2 million for application software and development.
The Company's six-phase approach and anticipated timing of each phase are
described below.
Phase 1 - Inventory. The Company's hardware and software (including business and
operational applications and operating systems) have already been inventoried.
Third party businesses have already been solicited as to their preparation on
this issue.
Phase 2 - Assessment. The Y2K task force has completed the assessment of the
business systems and established a priority for their repair or replacement. The
assessment process for internal non-IT systems and for key third-party
businesses has also been completed. Systems that are known to be critical or
important are receiving top priority in the remediation phase.
Phase 3 - Strategy. This phase involves the development of appropriate remedial
strategies for both IT and non-IT systems. These strategies may include
repairing, testing and certifying, replacing or abandonment of particular
systems. The strategy phase has been completed for all IT and non-IT systems.
Phase 4 - Remediation. The remediation phase involves the execution of the
strategies chosen. The IT systems remediation and non-critical systems
corrections have been substantially completed.
Phase 5 - Test and Certification. The Company has substantially completed all
system testing and certification. Testing for non-IT systems has been initiated:
however, due to the Company's reliance on many third-party vendors, this phase,
with respect to non-IT systems, may not be completed by December 31, 1999.
Phase 6 - Contingency Planning. This phase involves addressing operational
issues that may arise due to the failure of the Company's or third-party
preparations. The Company has assessed and developed plans for such issues as
the loss of communication, banking, transportation and infrastructure services.
Based upon its efforts to date, the Company believes that the vast majority of
both its IT and its non-IT systems will remain up and running after January 1,
2000. Accordingly, the Company does not currently anticipate that internal
systems failure will result in any material adverse effect
13
<PAGE> 14
to its operations or financial condition. At this time, the Company believes
that the most likely "worst case" scenario involves potential disruptions in
areas in which the Company's operations must rely on third-party systems.
Nonetheless, the Y2K problem is pervasive and complex and can potentially affect
any system. Accordingly, no assurance can be given that Y2K compliance can be
achieved without additional unanticipated expenditures and uncertainties that
might affect future financial results.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company considers the market risks of its variable interest rate borrowings
to not be material to its financial condition.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On October 15, 1997, the Company initiated a declaratory judgement action in the
United States District Court for the Southern District of Indiana in response to
certain demands made by Citibank (South Dakota), N.A. ("Citibank"). The demands
by Citibank related to a credit plan agreement under which Citibank would have
assumed the Company's private label credit card operation. In December 1997,
Citibank filed a counter-claim against the Company alleging breach of said
credit plan agreement and damages in excess of $3.0 million. On October 11,
1999, the Company paid Citibank $400,000 to settle this matter resulting in a
complete dismissal and release of all claims involved.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: 4(a)(xi) Ninth Modification of Amended and Restated Secured
Credit Agreement and Other Related Documents
dated October 21, 1999
27 Financial Data Schedule
(b) Reports on Form 8-K: None.
14
<PAGE> 15
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: December 14, 1999 /s/ Keith L. Himmel, Jr.
------------------------
Vice President - Finance, Controller and
Corporate Secretary
(Signing on behalf of the registrant and as
principal financial officer)
15
<PAGE> 1
EXHIBIT 4(a)(xi)
NINTH MODIFICATION OF AMENDED AND RESTATED
SECURED CREDIT AGREEMENT
AND OTHER RELATED DOCUMENTS
THIS NINTH MODIFICATION OF AMENDED AND RESTATED SECURED CREDIT
AGREEMENT AND OTHER RELATED DOCUMENTS (this "Agreement") is made as of October
21, 1999, by and among PAUL HARRIS STORES, INC., an Indiana corporation ("PH
Stores"), PAUL HARRIS MERCHANDISING, INC., an Indiana corporation ("PH
Merchandising"), PAUL HARRIS RETAILING, INC., an Indiana corporation ("PH
Retailing"), and THE J. PETERMAN COMPANY, an Indiana corporation ("Peterman"),
and LASALLE BANK NATIONAL ASSOCIATION, a national banking association, the
successor to LaSalle National Bank (herein, together with its successors and
assigns, called the "Bank").
All capitalized terms and phrases, unless defined herein, shall have
the specific meanings ascribed to such terms in that certain Secured Credit
Agreement originally dated as of October 28, 1993, by and between PH Stores and
Bank, as amended and restated by that certain Amended and Restated Secured
Credit Agreement dated as of January 20, 1994, as modified and amended by those
certain First through Eighth Modifications of the Amended and Restated Secured
Credit Agreement, and Related Documents dated as of October 31, 1994, January
31, 1995, September 28, 1995, May 8, 1996, April 9, 1997, November 19, 1998,
February 1, 1999, and April 19, 1999 (as so amended, the "Credit Agreement").
WHEREAS, Borrower (as that term is defined in the Credit Agreement) has
requested that Bank make various modifications to the Credit Agreement and
certain of the Related Documents, 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
hereby are 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. Each definition, numbered section and provision of the Credit
Agreement set forth below in this paragraph 2 supersedes and replaces the
corresponding definition, numbered section and provision of the Credit
Agreement. To the extent that any of the definitions, numbered sections and
provisions of the Credit Agreement set forth below in this paragraph 2 do not
correspond to any definition, numbered section or provision of the Credit
Agreement, such definition, numbered section or provision shall be deemed to
have been added to the Credit Agreement as set forth below and in the
appropriate order. The Table of Contents to the Credit Agreement shall be
understood to have been modified to reflect these changes and incorporated
<PAGE> 2
provisions. Accordingly, effective as of October 21, 1999 (the "Modification
Date"), the Credit Agreement is modified as set forth below in this paragraph 2:
(a)
""MAXIMUM REVOLVING CREDIT AVAILABILITY" means, as of any
given date, the lesser of (i) the Borrowing Base minus the Letter
of Credit Reserve minus the Revolving Loan Balance and minus the
Term B Loan Balance or (II) $25,000,000 minus the Letter of Credit
Reserve minus the Revolving Loan Balance and minus the Term B Loan
Balance, each such amount calculated as of such date and subject
further to the limitations set forth in Section 2.1.@
(b)
"2.1 (a) 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) $25,000,000; provided, however, that the
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.@
(c)
"2.5 REVOLVING LOAN AND TERM B LOAN NON-USE FEE. During the term of
this Agreement and continuing until, but excluding, the Maturity
Termination Date, Borrower shall pay to Bank, on a quarterly basis,
a non-use fee of one-quarter of one percent (0.25%) per annum on
the lesser of (i) the excess of (A) $35,000,000.00 over (B) the
daily average of the aggregate principal amount of (X) all
outstanding Revolving Loans and (Y) all outstanding Term B Loans
and (Z) all Letters of Credit for the quarter (or, if applicable,
shorter period) then ending and (ii) $15,000,000.00. Such non-use
fee shall be payable in arrears on the first day of each May,
August, November and February, for the quarters ending on January
31, April 30, July 31 and October 31 of each year during the term
of this Agreement and on the Revolving Credit Termination Date."
3. REFERENCES. All references in the Loan Documents to the Credit
Agreement hereby are understood to be to the Credit Agreement as modified
hereby.
4. CONDITIONS TO EFFECTIVENESS. Provided that no unwaived Default or
Event of Default shall then exist other than those that would exist but for the
execution of this Amendment, this Amendment shall be deemed to be effective as
of October 21, 1999 (the "Effective Date"),
2
<PAGE> 3
provided all of the following conditions are satisfied in a manner, form and
substance acceptable to Bank:
(a) EXECUTION OF AMENDMENT. This Amendment (including the attached
Joinder) and a Second Amended and Restated Revolving Note, duly
authorized and fully executed, and in form and substance satisfactory
to Bank shall have been delivered to Bank.
(b) DELIVERY OF OTHER DOCUMENTS.
(i) True, complete and accurate copies, duly certified by an
officer of each entity comprising Borrower, of all documents
evidencing any necessary corporate action, resolutions, consents
and governmental approvals, if any, required for the execution,
delivery and performance of this Amendment, and the Joinder and any
other document, instrument or agreement executed or delivered in
connection therewith by the Borrower shall have been delivered to
Bank; and
(ii) Such other documents, instruments or agreements as the
Bank may reasonably request shall have been delivered to Bank.
5. In the event of any conflict among the terms of the Credit
Agreement and the Related 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 Related 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.
6. 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 Credit Agreement and the Related Documents.
7. 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.
8. Borrower agrees to pay all fees and expenses associated with the
consummation of the transactions contemplated in this Agreement, including,
without limitation, reasonable fees and expenses of Bank's counsel and related
expenses.
9. Time is of the essence of this Agreement.
10. 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.
3
<PAGE> 4
11. 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 Credit Agreement and the Related
Documents, each as modified hereby.
[END OF PAGE]
4
<PAGE> 5
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/ Keith L. Himmel, Jr.
--------------------------------
Name: Keith L. Himmel, Jr.
------------------------------
Title: Vice President - Finance,
------------------------------
Controller and Corporate Secretary
PAUL HARRIS MERCHANDISING, INC.,
an Indiana corporation
By: /s/ Keith L. Himmel, Jr.
--------------------------------
Name: Keith L. Himmel, Jr.
------------------------------
Title: Vice President - Finance,
------------------------------
Controller and Corporate Secretary
PAUL HARRIS RETAILING INC.,
an Indiana corporation
By: /s/ Keith L. Himmel, Jr.
--------------------------------
Name: Keith L. Himmel, Jr.
------------------------------
Title: Vice President - Finance,
------------------------------
Controller and Corporate Secretary
THE J. PETERMAN COMPANY,
an Indiana corporation
By: /s/ Keith L. Himmel, Jr.
--------------------------------
Name: Keith L. Himmel, Jr.
------------------------------
Title: Vice President - Finance,
------------------------------
Controller and Corporate Secretary
BANK: LASALLE BANK NATIONAL ASSOCIATION,
a national banking association
By: /s/ Ann H. Ellingsen
------------------------------
Name: Ann H. Ellingsen
------------------------------
Title: Vice President
------------------------------
Commercial Banking
------------------------------
5
<PAGE> 6
SECOND AMENDED AND RESTATED
REVOLVING NOTE
$25,000,000.00 CHICAGO, ILLINOIS
AS OF OCTOBER 21, 1999
FOR VALUE RECEIVED, PAUL HARRIS STORES, INC., an Indiana corporation
PAUL HARRIS MERCHANDISING, INC., an Indiana corporation, PAUL HARRIS RETAILING,
INC., an Indiana corporation, and THE J. PETERMAN COMPANY, an Indiana
corporation (together with their successors and assigns, "Maker"), jointly and
severally, promise to pay to the order of LASALLE BANK NATIONAL ASSOCIATION, a
national banking association (together with its successors and assigns, "Bank"),
on or before the Revolving Credit Maturity Date, at the Bank's principal office
in Chicago, Illinois, the principal sum of TWENTY-FIVE MILLION AND NO/100
DOLLARS ($25,000,000.00), 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 Amended and Restated Secured Credit
Agreement dated as of January 20, 1994, among 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.
This Note is executed to evidence the Revolving Loan described in, and
is subject to the terms and conditions of, the Credit Agreement. This Note shall
bear interest at the applicable rates set forth in the Credit Agreement, and
interest on this Note shall be paid, and principal on this Note shall and may be
prepaid, in accordance with the terms of the Credit Agreement.
Payments of both principal and interest are to be made in the lawful
money of the United States of America.
This Note is secured pursuant to the Credit Agreement and various
Collateral Documents referred to therein, and reference is made thereto for a
statement of terms and provisions.
In addition to, and not in limitation of, the foregoing and the
provisions of the Credit Agreement hereinabove referred to, Maker further
agrees, subject only to any limitation imposed by applicable law, to pay all
expenses, including reasonable attorneys' fees and expenses, incurred by the
holder of this Note in seeking to collect any amounts payable hereunder which
are not paid when due, whether by acceleration or otherwise.
<PAGE> 7
This Note is binding upon Maker and its successors and assigns, jointly
and severally, and shall inure to the benefit of the Bank and its successors and
assigns. This Note is made under and governed by the laws of the State of
Illinois without regard to conflict of laws principles.
This Note is an amendment and restatement in the entirety of that
certain Amended and Restated Revolving Note made by Maker dated April 19, 1999
and is made in substitution and not in payment thereof, and is not intended and
shall not be deemed to constitute a novation.
2
<PAGE> 8
IN WITNESS WHEREOF, the undersigned, intending to be legally bound
hereby, have executed and delivered this Note, on a joint and several basis, as
of the day and year first above written.
MAKER: PAUL HARRIS STORES, INC.,
an Indiana corporation
By: /s/ Keith L. Himmel, Jr.
---------------------------------
Name: Keith L. Himmel, Jr.
-------------------------------
Title: Vice President - Finance,
------------------------------
Controller and Corporate
------------------------------
Secretary
------------------------------
PAUL HARRIS MERCHANDISING, INC.,
an Indiana corporation
By: /s/ Keith L. Himmel, Jr.
---------------------------------
Name: Keith L. Himmel, Jr.
-------------------------------
Title: Vice President - Finance,
------------------------------
Controller and Corporate
------------------------------
Secretary
------------------------------
PAUL HARRIS RETAILING INC.,
an Indiana corporation
By: /s/ Keith L. Himmel, Jr.
---------------------------------
Name: Keith L. Himmel, Jr.
-------------------------------
Title: Vice President - Finance,
------------------------------
Controller and Corporate
------------------------------
Secretary
------------------------------
THE J. PETERMAN COMPANY,
an Indiana corporation
By: /s/ Keith L. Himmel, Jr.
---------------------------------
Name: Keith L. Himmel, Jr.
-------------------------------
Title: Vice President - Finance,
------------------------------
Controller and Corporate
------------------------------
Secretary
------------------------------
3
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-2000
<PERIOD-END> OCT-30-1999
<CASH> 1,686,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 57,469,000
<CURRENT-ASSETS> 67,316,000
<PP&E> 85,974,000
<DEPRECIATION> (27,198,000)
<TOTAL-ASSETS> 130,741,000
<CURRENT-LIABILITIES> 51,396,000
<BONDS> 0
0
0
<COMMON> 17,933,000
<OTHER-SE> 56,522,000
<TOTAL-LIABILITY-AND-EQUITY> 130,741,000
<SALES> 177,495,000
<TOTAL-REVENUES> 177,495,000
<CGS> 111,999,000
<TOTAL-COSTS> 111,999,000
<OTHER-EXPENSES> 66,815,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (129,000)
<INCOME-PRETAX> (1,448,000)
<INCOME-TAX> (544,000)
<INCOME-CONTINUING> (904,000)
<DISCONTINUED> 0
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<CHANGES> 0
<NET-INCOME> (904,000)
<EPS-BASIC> (0.08)
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