UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 11-K
(Mark One)
(X) Annual Report Pursuant to Section 15(d)
of the Securities Exchange Act of 1934 (No Fee
Required)
For the Year Ended December 31, 1999
or
( ) Transition Report Pursuant to Section
15(d) of the Securities Exchange Act of 1934
(No Fee Required) for the Transition Period
from ________ to _________
Commission File Number 1-09100
A. Full title of the plan and the address of
the plan, if different from that of the issuer
named below:
Gottschalks Inc. Retirement Savings Plan
B. Name of issuer of the securities held
pursuant to the plan and the address of
its principal executive office:
Gottschalks Inc.
7 River Park Place East
Fresno, CA 93720
(559) 434-4800
SIGNATURE
The Plan. Pursuant to the requirements of the
Securities Exchange Act of 1934, the trustee
(or other persons who administer the employee
benefit plan) has duly caused this annual
report to be signed on its behalf by the
undersigned hereunto duly authorized.
Gottschalks Inc.
Retirement Savings Plan
Date: June 6, 2000
By /s/ Michael S. Geele
Senior Vice President/Chief Financial
Officer
GOTTSCHALKS INC.
RETIREMENT SAVINGS PLAN
FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
GOTTSCHALKS INC.
RETIREMENT SAVINGS PLAN
Financial Statements
Years ended December 31, 1999 and 1998
Table of Contents
Independent Accountants' Report 4
Financial Statements:
Statements of Net Assets Available for
Benefits 5
Statement of Changes in Net Assets Available
for Benefits 6
Notes to Financial Statements 7
To the Participants and
Plan Administrator of the
Gottschalks Inc.
Retirement Savings Plan
INDEPENDENT ACCOUNTANTS' REPORT
We were engaged to audit the financial
statements of the Gottschalks Inc. Retirement
Savings Plan (the Plan) as of December 31,
1999 and 1998, and for the years then ended,
as listed in the accompanying table of
contents. These financial statements are the
responsibility of the Plan's management. Our
responsibility is to express an opinion on
these financial statements based on our
audits.
We conducted our audits in accordance
with generally accepted auditing
standards. Those standards require that we
plan and perform the audits to obtain
reasonable assurance about whether the
financial statements are free of material
misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts
and disclosures in the financial statements.
An audit also includes assessing the
accounting principles used and significant
estimates made by the Plan's management, as
well as evaluating the overall financial
statement presentation. We believe that our
audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements
referred to above present fairly, in all
material respects, the net assets available
for benefits of the Plan as of December 31,
1999 and 1998, and the changes in net assets
available for benefits for the years then
ended, in conformity with generally accepted
accounting principles.
By /s/Mohler, Nixon & Williams
------------------------------------------
MOHLER, NIXON & WILLIAMS
Accountancy Corporation
Campbell, California
June 6, 2000
<TABLE>
<CAPTION>
GOTTSCHALKS INC.
RETIREMENT SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR
BENEFITS
December 31,
------------------
1999 1998
----- ------
<S> <C> <C>
Investments, at fair value $21,056,466 $16,822,472
---------- ----------
Assets held for investment
purposes 21,056,466 16,822,472
Employer's contribution
receivable 106,325 94,061
---------- ----------
Net assets available for
benefits $21,162,791 $16,916,533
========== ==========
</TABLE>
See independent accountants' report and
accompanying notes to financial statements.
<TABLE>
<CAPTION>
GOTTSCHALKS INC.
RETIREMENT SAVINGS PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
For the years ended
December 31,
--------------------------
1999 1998
---------- ----------
Additions to net assets attributed to:
Investment income:
<S> <C> <C>
Dividends and interest $ 583,236 $ 403,746
Net realized and unrealized
appreciation in fair value of
investments 2,029,012 427,410
--------- ---------
2,612,248 831,156
--------- ---------
Contributions:
Participants' 3,120,929 3,168,937
Employer's 532,059 338,449
--------- ---------
3,652,988 3,507,386
--------- ---------
Total additions 6,265,236 4,338,542
--------- ---------
Deductions from net assets attributed to:
Withdrawals and distributions 1,920,349 1,443,085
Administrative expenses 98,629 68,993
--------- ---------
Total deductions 2,018,978 1,512,078
--------- ---------
Net increase in net assets 4,246,258 2,826,464
--------- ---------
Net assets available for benefits:
Beginning of year 16,916,533 14,090,069
---------- ----------
End of year $21,162,791 $16,916,533
========== ==========
</TABLE>
See independent accountants' report and
accompanying notes to financial statements.
GOTTSCHALKS INC.
RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 1999 and 1998
Note 1 - The Plan and its significant accounting policies:
The following description of the Gottschalks Inc. (the Company) Retirement
Savings Plan (the Plan) provides only general information. Participants should
refer to the Plan agreement for a more complete description of the Plan's
provisions.
The Plan is a defined contribution plan that was established in 1986 by the
Company to provide benefits to eligible employees. The Plan covers all full-
time employees of the Company who have a minimum of one year of service with not
less than 1,000 hours of service, are age 21 or older and not otherwise covered
by a collective bargaining agreement, or a leased employee.
The Plan was amended to change the definition of compensation such that
only compensation earned subsequent to employee's participation date is
recognized.
The Plan administrator believes that the Plan is currently designed and
operated in compliance with the applicable requirements of the Internal Revenue
Code and the provisions of the Employee Retirement Income Security Act of 1974
(ERISA).
Administration -
The Company has appointed an Administrative Committee (the Committee) to
manage the operation and administration of the Plan. A third-party
administrator, appointed by the Committee, processes and maintains the records
of participant data. The Company has contracted with The Charles Schwab Trust
Company (Charles Schwab) to act as the trustee. All significant expenses
incurred for administering the Plan are paid by the Company, except for loan
fees, which are paid by participants and an annual management trustee fee
ranging from 0.08% to 0.12% of Plan assets, which is paid by the Plan.
Basis of accounting -
The financial statements of the Plan are prepared on the accrual method of
accounting. Participant and Company contributions are recorded in the period
during which the Company withholds payroll deductions from participant's
earnings. Company discretionary contributions are recorded in the period to
which they relate. Benefits are recorded when paid.
Investments -
During 1999 and 1998, investments of the Plan were held by Charles Schwab,
and invested based solely upon instructions received from participants for
participant directed funds. Participants could direct their employee
contributions among any of the investment options. No assurance of actual fund
performance can be given. Employer contributions to the Plan are non-
participant directed and invested in the Gottschalks Inc. Common Stock Fund.
Fund options available to Plan participants during the year ended December
31, 1999 and 1998 were as follows:
Schwab Value Advantage Fund - Funds were invested in a money market
account.
Strategy Portfolio Funds - Funds were invested in five diversified
strategy portfolios consisting of Strong Advantage Fund, Warburg
Pincus Fixed Income Fund, Loomis Sayles Bond Fund, Federated High
Yield Fund, PIMCO Foreign Fund, Schwab S & P 500 Fund, Sound Shore
Fund, Managers Special Equity Fund, Davis Real Estate Fund and Janus
Worldwide Fund. The allocation of investments within each of the
portfolios varies among the funds to provide for different levels of
risk.
Mutual Funds - Funds were invested in individual mutual funds
including Strong Advantage Fund, Warburg Pincus Fixed Inc. Fund,
Loomis Sayles Bond Fund, Schwab S & P 500 Fund, Sound Shore Fund,
Managers Special Equity Fund, and Janus Worldwide Fund.
Gottschalks Inc. Common Stock Fund - Funds were invested in common
stock of Gottschalks Inc.
Cash and cash equivalents -
All highly liquid investments purchased with an original maturity of three
months or less (generally money market funds) are considered to be cash
equivalents. These investments are usually held for a short period of time,
pending long-term investment.
Income taxes -
The Plan has been amended since receiving its latest favorable
determination letter dated April 10, 1998. However, the Company believes that
the Plan is operated in accordance with, and continues to qualify under the
applicable requirements of the Internal Revenue Code, and that the trust, which
forms a part of the Plan, is exempt from federal income and state franchise
taxes.
Reconciliation of financial statements to Form 5500 -
The differences between the information reported in the financial
statements and the information reported in the Form 5500 arise primarily from
presenting the financial statements on the accrual basis of accounting.
Reclassifications -
Certain reclassifications were made in the 1998 financial statements to
conform with the 1999 presentations.
Estimates -
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, and
changes therein, and disclosure of contingent assets and liabilities. Actual
results could differ from those estimates.
Risks and uncertainties -
The Plan provides for various investment options in any combination of
stocks, bonds, fixed income securities, mutual funds and other investment
securities. Investment securities are exposed to various risks, such as
interest rate, market fluctuations and credit risks. Due to the level of risk
associated with certain investment securities, it is at least reasonably
possible that changes in risks in the near term would materially affect
participants' account balances and the amounts reported in the statements of net
assets available for benefits and the statements of changes in net assets
available for benefits.
New accounting pronouncement -
In September 1999, the Accounting Standards Executive Committee of the
American Institute of Certified Public Accountants issued Statement of Position
(SOP) 99-3, "Accounting for and Reporting of Certain Defined Contribution
Benefit Plan Investments and Other Disclosure Matters." This SOP eliminates the
previous requirement for a defined contribution plan to disclose participant-
directed investment programs by fund.
The Plan has adopted SOP 99-3 in its financial statements for the years
ended December 31, 1999 and 1998.
Note 2 - Related party transactions:
Certain Plan investments are in mutual funds managed by Charles Schwab.
Any purchases and sales of these funds are open market transactions at fair
market value. Such transactions, although considered party-in-interest under
ERISA regulations are permitted under the provisions of the Plan and are exempt
from the prohibition of party-in-interest transactions under ERISA.
Note 3 - Participation and benefits:
Participant contributions -
Effective January 1, 1999, participants may elect to have the Company
contribute a percentage, from 1% to 20%, of their eligible pre-tax compensation
up to the amount allowable under current income tax regulations. Participants
who elect to have the Company contribute a portion of their compensation to the
Plan agree to accept an equivalent reduction in taxable compensation.
Contributions withheld are invested in accordance with the participant?s
direction and are allocated to funds in whole percentage increments.
Participants are also allowed to make rollover contributions of amounts
received from other tax-qualified employer-sponsored retirement plans. Such
contributions are deposited in the appropriate investment funds in accordance
with the participant's direction and the Plan's provisions.
Employer contributions -
The Company is allowed to make matching contributions as defined in the
Plan and as approved by the Board of Directors. The Company's contributions may
be made in the form of cash or common stock of the Company. An employee must be
employed on the last day of the Plan year and have made a contribution to the
Plan. During 1999, the Company made discretionary contributions on a quarterly
basis of up to 3% of a participants' quarterly eligible compensation. The
Company's actual contribution is reduced by available forfeitures, if any,
during the Plan year. During 1999, the Company made matching contributions of
approximately $540,000, which includes forfeitures of approximately $22,000, and
during 1998, the Company made matching contributions of approximately $340,000,
which includes forfeitures of approximately $18,000.
Participant accounts -
Each participant's account is credited with the participant's contribution,
Plan earnings or losses, administration fees and an allocation of the Company's
contribution, if any. An allocation of the Company's contribution is based on
participant contributions, as defined in the Plan. The benefit to which a
participant is entitled is the benefit that can be provided from the
participant's vested account.
Payment of benefits -
Upon termination, the participant or beneficiary will receive the benefits
in a lump sum amount equal to the value of the participant's vested interest in
his or her account. The Plan allows for automatic lump sum distribution of
participant vested account balances that do not exceed $5,000.
Loans to participants -
The Plan allows participants to borrow not less than $500 and up to the
lesser of $50,000 or 50% of their vested account balance. The loans are secured
by the participant's vested balance. Such loans bear interest at the prime rate
plus 1% and must be repaid to the Plan within a five-year period, unless the
loan is used for the purchase of a primary residence in which case the maximum
repayment period is 15 years. Interest rates on outstanding participant loans
currently range from 7.82% to 10.49%. The specific terms and conditions of such
loans are established by the Plan administrator.
Vesting -
Participants are immediately vested in their salary deferral, rollover
contributions and related earnings. A participant vests ratably and is fully
vested in the employer's matching contributions allocated to their account after
four years of credited service or after age 65, or because of disability or
death.
Note 4 - Investments:
The following table includes the fair values of investments and investment
funds that represent 5% or more of the Plan's net assets at December 31:
1999 1998
------ ------
Cash $ 277,899
Schwab Value Advantage Fund $ 1,183,453 941,921
Strategy Portfolio Funds 11,744,999 9,064,773
Mutual Funds 3,152,405 1,605,528
Gottschalks Inc. Common Stock Fund 1,424,762 1,481,716
Gottschalks Inc. Common Stock Fund 2,738,956* 2,592,814*
Participant Loans 811,891 857,821
---------- ---------
$21,056,466 $16,822,472
========== ==========
* Nonparticipant-directed
During 1999 and 1998, the Plan's investments (including gains and losses on
investments bought and sold, as well as held during the year) appreciated
(depreciated) in value as follows:
1999 1998
------ ------
Strategy Portfolio Funds $1,624,392 $ 612,359
Mutual Funds 533,726 155,668
Gottschalks Inc. Common Stock Fund (129,106) (340,617)
--------- --------
$2,029,012 $ 427,410
========= ========
Note 5 - Nonparticipant-directed investments:
Information about the net assets and the significant components of the
changes in net assets relating to the nonparticipant-directed investments is as
follows at December 31:
1999 1998
------ ------
Net assets: $2,738,956 $2,592,814
========= =========
Years ended December 31,
1999 1998
Changes in net assets: ---- ----
Contributions $519,795 $484,495
Net depreciation (86,794) (207,562)
Benefits paid to participants (286,859) (248,407)
------- -------
$146,142 $ 28,526
======= =======
Note 6 - Party-in-interest transactions:
Employer contributions are invested in common stock of the Company. In
addition, as allowed in the Plan, participants may elect to invest a portion of
their accounts in the common stock of the Company. Aggregate investment in
Company common stock was as follows at December 31, 1999 and 1998:
Date Number of shares Fair value Cost
---- ---------------- ---------- ----
1999 557,820 $4,163,718 $4,892,713
1998 533,471 $4,074,530 $4,692,978
Note 7 - Plan termination and/or modification:
The Company intends to continue the Plan indefinitely for the benefit of
its employees; however, it reserves the right to terminate and/or modify the
Plan at any time by resolution of its Board of Directors and subject to the
provisions of ERISA. In the event the Plan is terminated in the future,
participants would become fully vested in their accounts.
Note 8 - Subsequent event:
As of May 31, 2000, Plan assets have decreased in value since December 31,
1999 by approximately $1,650,000 due to market fluctuations.
