1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended Commission File No. 0-
October 28, 1995 16131
HAROLD'S STORES, INC.
(Exact name of registrant as specified in its charter)
Oklahoma 73-1308796
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
765 Asp Norman, Oklahoma 73069
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code: (405) 329-
4045
NO CHANGE
(Former name, former address and former fiscal year, if changed
since last report.)
Indicate by check mark whether the registrant (1) has
filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90
days.
Yes X . No .
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
Common Stock 4,719,165
Harold's Stores, Inc. & Subsidiaries
Index to
Quarterly Report on Form 10-Q
For the Period Ended October 28, 1995
Part I. - FINANCIAL INFORMATION Page
Item 1. Financial Statements
Consolidated Balance Sheets - October 28, 1995
(unaudited) and January 28, 1995. 3
Consolidated Statements of Earnings -
Thirteen Weeks and Thirty-nine Weeks ended October
28, 199 (unaudited)and October 29, 1994 (unaudited) 5
Consolidated Statements of Stockholders' Equity -
Thirty-nine Weeks ended October 28, 1995
(unaudited) and October 29, 1994 (unaudited) 6
Consolidated Statements of Cash Flows -
Thirty-nine Weeks ended October 28, 1995
(unaudited) and October 29, 1994 (unaudited) 7
Item 2. Management's' Discussion and Analysis of Financial Condition
andResults of Operations 9
Part II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
HAROLD'S STORES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
(In Thousands)
October 28, January 28,
1995 1995
(unaudited)
Current Assets:
Cash $ $ 109
182
Trade accounts receivable, less
allowance 5,585 4,238
for doubtful accounts of $175
Other accounts receivable 1,333 671
Merchandise inventories 22,449 17,847
Prepaid expenses 1,136 646
Deferred income taxes 622 622
Total current assets 31,307 24,133
Property and equipment, at cost 17,413 15,186
Less accumulated depreciation and (5,684) (4,955)
amortization
Net property and equipment 11,729 10,231
Other assets 776 297
Total assets $ 43,812 $ 34,661
HAROLD'S STORES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
(In Thousands Except Share Data)
October 28, January 28,
1995 1995
(unaudited)
Current liabilities:
Note payable to bank $ 10,082 $ 4,902
Current maturities of long-term debt 75 75
Accounts payable 6,060 4,154
Redeemable gift certificates 318 509
Accrued bonuses and payroll expenses 1,594 1,129
Accrued rent expense 441 257
Income taxes payable 259 583
Total current liabilities 18,829 11,609
Long-term debt, net of current maturities 538 594
Deferred income taxes 198 198
Stockholders' equity:
Preferred stock of $.01 par value
Authorized 1,000,000 shares; none -- --
issued
Common stock of $.01 par value
Authorized 7,500,000 shares; issued and
outstanding 4,717,296 in October, 47 47
4,698,174
in January
Additional paid-in capital 17,688 17,491
Retained earnings 6,512 4,722
Total stockholders' equity 24,247 22,260
Total liabilities and stockholders' $ 43,812 $ 34,661
equity
HAROLD'S STORES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(In Thousands Except Share Data)
13 Weeks Ended 39 Weeks Ended
October October October October
28, 1995 29, 1994 28, 1995 29, 1994
(unaudited)
Net sales $ 25,415 21,031 65,800 53,199
Costs and expenses:
Cost of goods sold
(including occupancy and 16,170 13,537 41,856 34,646
central buying expenses)
Selling, general and 7,811 6,324 20,621 16,174
administrative expenses
Interest expense, net 108 100 340 171
24,089 19,961 62,817 50,991
Earnings before income 1,326 1,070 2,983 2,208
taxes
Provision for income taxes 530 438 1,193 905
Net earnings $ 796 632 1,790 1,303
Net earnings per common $ .17 .13 .38 .27
share
Weighted average number of
common shares outstanding 4,725,504 4,691,805 4,719,164 4,686,899
HAROLD'S STORES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Dollars in Thousands)
39 Weeks Ended
October 28, October 29,
1995 1994
(unaudited)
Common stock:
Balance, beginning and end of $ 47 43
period
Additional paid-in capital:
Balance, beginning of period $17,491 13,047
Proceeds of common stock purchase 197
plans 143
Balance, end of period $17,688 13,190
Retained earnings:
Balance, beginning of period $ 4,722 6,906
Net earnings 1,790 1,303
Balance, end of period $ 6,512 8,209
HAROLD'S STORES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
39 Weeks 39 Weeks
Ended Ended
October 28, October 29,
1995 1994
(unaudited)
Cash flows from operating
activities:
Net earnings $ 1,790 1,303
Adjustments to reconcile net
earnings to net cash
provided by operating
activities:
Depreciation and 1,481 1,241
amortization
Shares issued under 197 143
employee incentive plan
Changes in assets and
liabilities:
Increase in trade and other (2,009) (842)
accounts receivable
Increase in merchandise (4,602) (4,619)
inventories
Increase (decrease) in - 9
income taxes receivable
Increase in other assets (479) (378)
Increase in prepaid (490) (200)
expenses
Increase in accounts 1,906 1,592
payable
Increase (decrease) in (324) 422
income taxes payable
Increase in accrued 458 201
expenses
Net cash used in operating (2,072) (1,128)
activities
Cash flows from investing
activities:
Acquisition of property and (2,979) (2,731)
equipment
Proceeds from disposal of - 35
property and equipment
Net cash used in investing (2,979) (2,696)
activities
Cash flows from financing
activities:
Advances on note payable 23,324 18,718
Payments of note payable (18,144) (14,842)
Payments of long-term debt (56)
(56)
Net cash provided by financing 5,124 3,820
activities
Net increase (decrease) in 73 (4)
cash
Cash at beginning of period 109 143
Cash at end of period $ 182 139
HAROLD'S STORES, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
October 28, 1995 and October 29, 1994
(Unaudited)
1. Unaudited Interim Periods
In the opinion of the Company's management, all
adjustments (all of which are normal and recurring) have been
made which are necessary to fairly state the financial position
of the Company as of October 28, 1995 and the results of its
operations and cash flows for the thirteen week and thirty-nine
week periods ended October 28, 1995 and October 29, 1994. The
results of operations for the thirteen weeks and thirty-nine
weeks ended October 28, 1995 and October 29, 1994 are not
necessarily indicative of the results of operations that may be
achieved for the entire fiscal year.
2. Definition of Fiscal Year
The Company has a 52-53 week fiscal year which ends on the
Saturday closest to January 31. The period from January 29,
1995 through February 3, 1996, has been designated as fiscal
1996.
3. Reclassifications
Certain comparative prior year amounts in the consolidated
financial statements have been reclassified to conform with the
current year presentation.
4. Net Earnings Per Common Share
Net earnings per common share are based upon the weighted
average number of common shares outstanding during the period
restated for the ten percent stock dividend in fiscal 1994.
Outstanding stock options are excluded because they are not
material or antidilutive.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
The following table sets forth for the periods indicated,
the percentage of net sales represented by items in the
Company's statement of earnings.
52 Weeks 39 Weeks 39 Weeks
Ended Ended Ended
January 28, October 28, October 29,
1995 1995 1994
Net sales 100.0% 100.0% 100.0%
Cost of goods
sold(including occupancy (65.2) (63.6) (65.1)
and central buying expense)
Selling, general and (29.8) (31.3) (30.4)
administrative expenses
Interest expense, net (0.3) (0.5) (0.3)
Earnings before income 4.7 4.6 4.2
taxes
Provision for income taxes (1.9) (1.8) (1.7)
Net earnings 2.8% 2.8% 2.5%
The following table reflects the sources of the increases
in Company sales for the periods indicated.
13 Weeks Ended 39 Weeks Ended
October October October 28, October
28, 1995 29, 1994 1995 29,1994
Store sales (000's) $ 22,829 19,074 59,189 48,230
Catalog sales (000's) 2,586 1,957 6,611 4,969
Net sales (000's) $ 25,415 21,031 65,800 53,199
Total sales growth 20.8% 18.8% 23.7% 24.3%
Growth in comparable
store sales 7.9% 5.4% 7.4% 11.2%
(52 week basis)
Growth in catalog 32.1% 13.4% 33.0% 34.0%
sales
Store locations:
Existing stores 27 23 26 22
New stores opened 1 2 2 3
28 25 28 25
The opening of new stores, the expansion of existing
stores, as well as the increase in comparable stores sales and
the growth in catalog sales contributed to total sales growth
for the third quarters and thirty-nine weeks of fiscal 1996 and
1995.
New stores opened during the prior twelve months include a
5,000 square foot men's and ladies' store in Phoenix, Arizona
in November 1994 (fourth quarter), a 4,200 square foot men's
and ladies' store opened in St. Louis, Missouri in March 1995
(first quarter) and a 4,298 square foot men's and ladies' store
opened in Louisville, Kentucky in September, 1995 (third
quarter).
Significant increases in mail order catalog sales are the
direct result of the Company's expansion of this segment of the
business. The Company has continued to expand its regular
catalog to include six seasonal issues throughout the year.
For the previous fiscal year, the Company's catalog averaged 65
pages per issue with an aggregate mailing (including abridged
issues) of approximately 4.7 million catalogs.
The Company's gross margin increased for the current
thirteen week and thirty-nine week period compared to the same
period in the prior fiscal year. These increases are the
result of improved initial mark-up and reduced markdowns in the
current fiscal year related to increased store sales.
Selling, general and administrative expenses continue to
increase. These increases were primarily the result of
expenses relating to the Company's commencement of operations
in new stores opened during the previous twelve months and
related increases in advertising and catalog production costs.
Management anticipates that selling, general and administrative
expenses will continue to increase as a result of the Company's
expansion plans, with improvement in net operating profits, if
any, coming from new store sales and improvements in maintained
gross margins.
The average balance on total outstanding debt was
$6,997,000 compared to $3,103,000 for the first thirty-nine
weeks of fiscal 1996 and fiscal 1995, respectively. Average
interest rates on the Company's lines of credit were
approximately the same in both the current and prior fiscal
years. As the Company's growth continues, cash flow may
require additional borrowed funds which may cause an increase
in interest expense.
The Company's income tax rate decreased to 40% for the
first thirty-nine weeks of fiscal 1996 compared to 41% in
fiscal 1995. This decreased tax rate is attributable to the
Company's estimation of lower tax rates on temporary diferences
in the third quarter of fiscal 1996 compared to tax rates in
the prior period.
Capital Expenditures, Capital Resources and Liquidity
Cash Flows From Operating Activities. For the thirty-nine
weeks ended October 28, 1995, net cash used in operating
activities was $2,072,000 as compared to $1,128,000 for the
same period in fiscal 1995. The increase is partially
attributable to the timing of cash receipts and disbursements.
Significant changes in the timing of cash receipts and
disbursements included an increase of $2,009,000 for the thirty-
nine weeks ended October 28, 1995 compared to a increase of
$842,000 for the same period ended October 29, 1994, in trade
and other accounts receivables. The increase in trade accounts
receivable was the result of management's decision to promote
sales on Company credit cards. These promotions were in
conjunction with new store openings, as well as existing
stores, and were designed to provide a convenient source of
credit for the Company's customers at all Harold's locations
and to increase the Company's finance charge revenues.
In addition, the difference in cash flows from operating
activities between the fiscal periods is partially due to an
increase of $1,906,000 in the Company's accounts payable during
the thirty-nine weeks ended October 28, 1995, versus an
increase in payables of $1,592,000 for the prior fiscal year.
Management expects the dollar size of its merchandise
inventories will increase as it expands its number of retail
stores and catalog operation, with related increases in trade
accounts payable, and that period-to-period differences in
timing of inventory purchases and deliveries will affect
comparability of cash flows from operating activities.
Cash Flows From Investing Activities. For the thirty-nine
weeks ended October 28, 1995, net cash used in investing
activities totaled $2,979,000. Capital expenditures were
invested in new stores, and remodeling and equipment in
existing operations.
Cash Flows From Financing Activities. During the thirty-
nine weeks ended October 28, 1995, the Company made periodic
borrowings under its revolving credit facility (described
below) to finance its inventory purchases, store expansion,
remodeling and equipment purchases.
The Company has available a short term line of credit with
its bank, which was increased effective August 22, 1995 to $12
million. This line had an average balance of $6,355,000 and
$2,387,000 for the first thirty-nine weeks of fiscal 1996 and
1995, respectively. During the thirty-nine weeks ended October
28, 1995, this line of credit had a high balance of $10,082,000
and a $10,082,000 balance as of October 28, 1995. The balance
as of November 30, 1995 was $9,998,000.
Liquidity. The Company considers the following as
measures of liquidity and capital resources as of the dates
indicated.
January October October
28, 1995 28, 1995 31, 1994
Working capital (000's) $12,524 $12,478 $12,329
Current ratio 2.08:1 1.66:1 2.05:1
Ratio of working capital .36:1 .28:1 .36:1
to total assets
Ratio of total debt to .25:1 .44:1 .28:1
stockholders' equity
The Company's primary needs for liquidity are to finance
its inventories and revolving charge accounts and to invest in
new stores, remodeling, fixtures and equipment.
Management believes that cash flow from operations and its
existing banking arrangements should be sufficient to meet its
operating needs and capital requirements through the fiscal
year ending February 3, 1996.
Seasonality
The Company's business is subject to seasonal influences,
with the major portion of sales realized during the fall season
(third and fourth quarters) of each fiscal year, which includes
the back-to-school and Christmas selling seasons. In light of
this pattern, selling, general and administrative expenses are
typically higher as a percentage of sales during the spring
season (first and second quarters) of each fiscal year.
Inflation
Inflation affects the costs incurred by the Company in its
purchase of merchandise and in certain components of its
selling, general and administrative expenses. The Company
attempts to offset the effects of inflation through price
increases and control of expenses, although the Company's
ability to increase prices is limited by competitive factors in
its markets. Inflation has had no meaningful effect on the
other assets of the Company.
Part II
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.See Exhibits Index immediately
preceding exhibits.
(b) Reports on Form 8-K. The company filed no
reports on Form 8-K during the quarter ended
October 28, 1995.
SIGNATURE
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, hereunto duly
authorized.
HAROLD'S STORES, INC.
By:/s/H. Rainey Powell
H. Rainey Powell
President, CFO
Date: December 4, 1995
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