18
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-
April 29, 1995 16131
HAROLD'S STORES, INC.
(Exact name of registrant as specified in its charter)
Delaware 73-1308796
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification
No.)
765 Asp Norman, Oklahoma 73069 (405) 329-4045
(Address of principal executive (Registrant's
offices) telephone number,
(Zip Code) 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 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 4,707,332
Harold's Stores, Inc. & Subsidiaries
Index to
Quarterly Report on Form 10-Q
For the Period Ended April 29, 1995
Part I. - FINANCIAL INFORMATION Page
Item 1. Financial Statements
Consolidated Balance Sheets - April 29, 1995
(unaudited) and January 28, 1995. 3
Consolidated Statements of Earnings -
Thirteen Weeks ended April 29, 1995 (unaudited)
and April 30, 1994 (unaudited) 5
Consolidated Statements of Stockholders' Equity -
Thirteen Weeks ended April 29, 1995 (unaudited)
and April 30, 1994 (unaudited) 6
Consolidated Statements of Cash Flows -
Thirteen Weeks ended April 29, 1995 (unaudited)
and April 30, 1994 (unaudited) 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Part II - OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 6. Exhibits and Reports on Form 8-K:
There were no reports on Form 8-K for the quarter ended
April 29, 1995
Signature 13
HAROLD'S STORES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
(In Thousands)
April 29, January
1995 28, 1995
(unaudited)
Current assets:
Cash $ 560 109
Trade accounts receivable, less
allowance 4,826 4,238
for doubtful accounts of $175
Other accounts receivable 999 671
Merchandise inventories 16,587 17,847
Prepaid expenses 845 646
Deferred income taxes 622 622
Total current assets 24,439 24,133
Property and equipment, at cost 16,281 15,186
Less accumulated depreciation and (5,357) (4,955)
amortization
Net property and equipment 10,924 10,231
Other assets 396 297
Total assets $35,759 34,661
See accompanying notes to interim consolidated financial
statements.
HAROLD'S STORES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
(In Thousands Except Share Data)
April 29, January
1995 28, 1995
(unaudited)
Current liabilities:
Note payable to bank $ 5,660 4,902
Current maturities of long-term debt 75 75
Accounts payable 4,074 4,154
Redeemable gift certificates 371 509
Accrued bonuses and payroll expenses 1,415 1,129
Accrued rent expense 227 257
Income taxes payable 345 583
Total current liabilities 12,167 11,609
Long-term debt, net of current maturities 575 594
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 4,705,205 in April, 47 47
4,698,174 in January
Additional paid-in capital 17,564 17,491
Retained earnings 5,208 4,722
Total stockholders' equity 22,819 22,260
Total liabilities and stockholders' $ 35,759 34,661
equity
See accompanying notes to interim consolidated financial
statements.
HAROLD'S STORES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(In Thousands Except Share Data)
13 Weeks 13 Weeks
Ended Ended April
April 29, 30, 1994
1995
(unaudited)
Net sales $21,316 16,753
Costs and expenses:
Cost of goods sold
(including occupancy and 13,868 11,097
central buying expenses)
Selling, general and 6,477 5,254
administrative expenses
Interest expense, net 160
26
20,505 16,377
Earnings before income 811 376
taxes
Provision for income taxes 325
154
Net earnings $ 486
222
Net earnings per common share .10
.05
Weighted average number of
common shares 4,718,549 4,681,266
outstanding
See accompanying notes to interim consolidated financial
statements.
HAROLD'S STORES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Dollars in Thousands)
13 Weeks 13 Weeks
Ended Ended
April 29, April 30,
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
Employee Stock Purchase Plan
73 51
Balance, end of period $ 17,564 13,098
Retained earnings:
Balance, beginning of period $ 4,722 6,906
Net earnings 486 222
Balance, end of period $ 5,208 7,128
See accompanying notes to interim consolidated financial
statements.
HAROLD'S STORES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
13 Weeks 13 Weeks
Ended Ended
April 29, April 30,
1995 1994
(unaudited)
Cash flows from operating activities:
Net earnings $ 486 222
Adjustments to reconcile net earnings
to net cash
provided by operating activities:
Depreciation and amortization 512 391
Shares issued under employee 73 51
incentive plan
Changes is assets and liabilities:
Increase in trade and other (916) (233)
accounts receivable
Decrease in merchandise inventories 1,260 708
Increase in income taxes receivable - (51)
Increase in other assets (99) (224)
Increase in prepaid expenses (199) (293)
Decrease in accounts payable (80) (250)
Decrease income taxes payable (238) -
Increase in accrued expenses 118 116
Net cash provided by operating 917 205
activities
Cash flows from investing activities:
Acquisition of property and (1,135) (301)
equipment
Proceeds from disposal of property (70) -
and equipment
Net cash used in investing activities (1,205) (301)
Cash flows from financing activities:
Advances on note payable 5,790 4,095
Payments of note payable (5,032) (3,700)
Payments of long-term debt (19) (19)
Net cash provided by financing 739 376
activities
Net increase in cash 451 280
Cash at beginning of year 109 143
Cash at end of year $ 560 423
See accompanying notes to interim consolidated financial
statements.
HAROLD'S STORES, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
April 29, 1995 and April 30, 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 April 29, 1995 and the results of its
operations and cash flows for the thirteen week periods ended
April 29, 1995 and April 30, 1994. The results of operations
for the thirteen weeks ended April 29, 1995 and April 30, 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 28,
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 1995.
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 13 Weeks 13 Weeks
Ended Ended Ended
January 28, April 29, April 30,
1995 1995 1994
Net Sales 100.0% 100.0% 100.0%
Cost of goods sold (65.2) (65.1) (66.2)
Selling, general and (29.8) (30.3) (31.3)
administrative expenses
Interest expense, net (0.3) (0.8) (0.2)
Earnings before income 4.7 3.8 2.3
taxes
Provision for income taxes (1.9) (1.5) (1.0)
Net earnings 2.8% 2.3% 1.3%
The following table reflects the sources of the increases
in Company sales for the periods indicated.
13 Weeks 13 Weeks
Ended Ended
April 29, April 30,
1995 1994
Store sales (000's) $ 18,783 $ 14,871
Catalog sales (000's) 2,533 1,882
Net sales (000's) $ 21,316 $ 16,753
Total sales growth 27.2% 36.3%
Growth in comparable store 7.8% 20.0%
sales (52 week basis)
Growth in catalog sales 34.6% 79.9%
Store locations:
Existing stores 26 22
New stores opened 1 -
27 22
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 first quarters of fiscal 1996 and 1995.
New stores opened during the prior 12 months include a
4,000 square foot men's and ladies' store in Charlotte, North
Carolina opened in July 1994 (second quarter of the fiscal year
ended January 28, 1995), a 3,300 square foot ladies' store
opened in Austin, Texas in September 1994 (third quarter), a
5,500 square foot men's and ladies' store opened in Plano,
Texas in October 1994 (third quarter), a 5,000 square foot
men's and ladies' store opened in Phoenix, Arizona in November
1994 (fourth quarter), and a 4,200 square foot men's and
ladies' store opened in St. Louis, Missouri in March 1995
(first quarter of the fiscal year ended February 3, 1996).
Significant increases in mail order catalog sales are the
direct result of the Company's expansion of this segment of the
business. Since the 1989 test market of Harold's first
catalog, the Company has expanded its regular catalog to
include four seasonal issues each 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 period compared to the same period in the prior
fiscal year. This increase is the result of reduced markdowns
in the current fiscal year related to increased store sales.
Selling, general and administrative expenses decreased as
a percentage of sales. Increased expenses during the prior
thirteen week period relating to advertising and catalog
production costs was the primary reason for this decrease.
Management anticipates that selling, general and administrative
expenses will 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
$6,040,000 for the first quarter of fiscal 1996 compared to
$2,240,000 for the first quarter of fiscal 1995. 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 quarter 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 differences in the
first quarter of fiscal 1996 compared to the tax rates in prior
period.
Capital Expenditures, Capital Resources and Liquidity
Cash Flows From Operating Activities. For the quarter ended
April 29, 1995, net cash provided by operating activities was
$917,000 as compared to $205,000 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 between the first
quarters ended April 29, 1995 and April 30, 1994, included an
increase of $588,000 in trade receivables. The increase in
trade accounts receivable is the result of management's
decision to promote sales on Company credit. These promotions
are in conjunction with new store openings, as well as existing
stores, and are 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 two fiscal periods is partially due to
(i) a decrease of $1,260,000 in the Company's merchandise
inventories for the quarter ended April 29, 1995, as compared
to the prior fiscal year, during which inventories decreased by
$708,000 and (ii) a decrease of $80,000 in the Company's
accounts payable during the quarter ended April 29, 1995,
versus a decrease in payables of $250,000 for the prior fiscal
year. Management expects the dollar size of its merchandise
inventories will increase as it expands its chain 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 quarter
ended April 29, 1995, net cash used in investing activities
totaled $1,205,000. Capital expenditures were invested in new
stores, and remodeling and equipment expenditures in existing
operations.
Cash Flows From Financing Activities. During the quarter
ended April 29, 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 November 9, 1994 to a
$10 million credit facility. This line had an average balance
of $5,390,000 and $1,500,000 for the first quarter of fiscal
1996 and 1995, respectively. During the first quarter ended
April 29, 1995, this line of credit had a high balance of
$6,600,000 and a $5,660,000 balance as of April 29, 1995. The
balance as of June 2, 1995 was $5,813,000.
Liquidity. The Company considers the following as
measures of liquidity and capital resources as of the dates
indicated.
January April 29, April 30,
28, 1995 1995 1994
Working capital (000's) $12,524 $12,272 $12,892
Current ratio 2.08:1 2.00:1 3.28:1
Ratio of working capital .36:1 .34:1 .48:1
to total assets
Ratio of total debt to .25:1 .28:1 .13:1
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 season. 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 1. LEGAL PROCEEDINGS
NONE
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
Chief Financial Officer
Date: June 6, 1995
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