14
UNITED STATES
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, Commission File No. 1-
1999 10892
OR
[ ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
HAROLD'S STORES, INC.
(Exact name of registrant as specified in its charter)
Oklahoma 73-1308796
(State or other (IRS Employer
jurisdiction of Identification No.)
incorporation or
organization)
765 Asp Norman, Oklahoma (405)329-4045
73069 (Registrant's telephone
(Address of principal number,
executive offices) including area code)
(Zip 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 [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
As of November 30, 1999, the registrant had 6,075,272 shares of Common
Stock outstanding.
Harold's Stores, Inc. & Subsidiaries
Index to
Quarterly Report on Form 10-Q
For the Period Ended October 30, 1999
Part I - FINANCIAL INFORMATION Page
Item 1. Financial Statements
Consolidated Balance Sheets - October 30, 1999 (unaudited) and 3
January 30, 1999
Consolidated Statements of Earnings -
Thirteen Weeks and Thirty-nine Weeks ended October 30,
1999 (unaudited) and October 31, 1998 (unaudited) 5
Consolidated Statements of Cash Flows -
Thirty-nine Weeks ended October 30, 1999 (unaudited) and
October 31, 1998 (unaudited) 6
Notes to Interim Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 8
Part II - OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
HAROLD'S STORES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
(In Thousands)
October 30, January 30,
1999 1999
(Unaudited)
Current assets:
Cash $ 1,206 $ 450
Trade accounts receivable, less
allowance for doubtful accounts
of $233 in October and $223 in
January 6,910 6,335
Other accounts receivable 1,769 1,059
Merchandise inventories 40,606 29,486
Prepaid expenses 3,246 2,428
Prepaid income tax 289 -
Deferred income taxes 1,268 1,268
Total current assets 55,294 41,026
Property and equipment, at cost 35,083 31,304
Less accumulated depreciation
and amortization (13,160) (10,671)
Net property and equipment 21,923 20,633
Other receivables, non-current 1,052 1,750
Other assets 87 508
Total assets $78,356 $63,917
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)
October 30, January 30,
1999 1999
(Unaudited)
Current liabilities:
Accounts payable $ 6,989 $ 4,460
Redeemable gift certificates 244 782
Accrued bonuses and payroll
expenses 1,101 1,533
Accrued rent expense 644 178
Income taxes payable - 480
Current maturities of long-term
debt 555 549
Total current liabilities 9,533 7,982
Long-term debt, net of current
maturities 29,049 16,330
Deferred income taxes 84 84
Stockholders' equity:
Preferred stock of $.01 par
value
Authorized 1,000,000 shares;
none issued - -
Common stock of $.01 par value
Authorized 25,000,000 shares;
issued and outstanding
6,075,182 in October,
6,073,868 in January 60 60
Additional paid-in capital 34,170 34,161
Retained earnings 5,460 5,300
Total stockholders' equity 39,690 39,521
Total liabilities and
stockholders' equity $78,356 $63,917
See accompanying notes to interim consolidated financial statements.
HAROLD'S STORES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(In Thousands Except Per Share Data)
13 Weeks Ended 39 Weeks Ended
October 30, October 31, October 30, October 31,
1999 1998 1999 1998
(Unaudited)
Sales $32,814 $32,220 $97,942 $93,475
Costs and expenses:
Costs of goods sold (including
occupancy and central buying
expenses, exclusive of items
shown separately below) 22,473 20,835 65,003 61,378
Selling, general and
administrative expenses 9,716 8,862 28,659 26,067
Depreciation and amortization 1,050 974 3,283 2,835
Interest expense 336 200 734 623
33,575 30,871 97,679 90,903
Earnings (loss) before income
taxes and cumulative effect
of change in accounting
principle (761) 1,349 263 2,572
Provision (benefit) for
income taxes (296) 520 103 1,009
Earnings (loss) before
cumulative effect of change
in accounting principle (465) 829 160 1,563
Cumulative effect of change
in accounting principle - - - 50
Net earnings (loss) $(465) $ 829 $ 160 $ 1,513
Net earnings (loss) per common
share before cumulative
effect of change in
accounting principle:
Basic and diluted $(0.08) $ 0.14 $ 0.03 $ 0.26
Net earnings (loss) per common
share:
Basic and diluted $(0.08) $ 0.14 $ 0.03 $ 0.25
Weighted average number of
common shares - basic 6,075 6,073 6,075 6,063
See accompanying notes to interim consolidated financial statements.
HAROLD'S STORES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
39 Weeks Ended
October 30, October 31,
1999 1998
(Unaudited)
Cash flows from operating
activities:
Net earnings $ 160 $ 1,513
Adjustments to reconcile net
earnings to net cash provided by
(used in) operating activities:
Depreciation and amortization 3,283 2,835
Loss (gain) on sale of assets (4) 10
Shares issued under employee
incentive plan 9 215
Changes in assets and
liabilities:
Increase in trade and other
accounts receivable (1,285) (907)
Decrease (increase) in
merchandise inventories (11,120) 268
Decrease (increase) in other
assets 421 (162)
Increase in prepaid expenses (818) (17)
Decrease (increase) in prepaid
income tax (289) 890
Increase in accounts payable 2,529 483
Decrease in income taxes payable (480) -
Increase (decrease) in accrued
expenses (503) 889
Net cash provided by (used in)
operating activities (8,097) 6,017
Cash flows from investing
activities:
Acquisition of property and
equipment (4,576) (3,951)
Proceeds from disposal of
property and equipment 7 48
Payment of principal on term
loan to others 698 337
Net cash used in investing
activities (3,871) (3,566)
Cash flows from financing
activities:
Advances on revolving line of
credit 42,284 34,030
Payments on revolving line of (28,735 (32,732
credit (28,735 (32,732)
Payments of long-term debt (825) (1,269)
Net cash provided by financing
activities 12,724 29
Increase in cash and cash
equivalents 756 2,480
Cash and cash equivalents at
beginning of period 450 130
Cash and cash equivalents at end
of period $ 1,206 $ 2,610
See accompanying notes to interim consolidated financial statements.
HAROLD'S STORES, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
October 30, 1999 and October 31, 1998
(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 30, 1999
and the results of its operations and cash flows for the thirteen-week
periods and thirty-nine week periods ended October 30, 1999 and October 31,
1998. The results of operations for the thirteen-week periods and thirty-
nine week periods ended October 30, 1999 and October 31, 1998 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 31, 1999 through January
29, 2000, has been designated as fiscal 2000.
3. Impact of New Accounting Pronouncement
During the thirteen weeks ended May 2, 1998, the Company elected early
adoption of The American Institute of Certified Public Accountants
Statement of Position (SOP) 98-5 "Reporting on the Costs of Start-Up
Activities". This SOP requires that costs incurred during start-up
activities, including organization costs, be expensed as incurred. The
$83,000 effect ($50,000 net of tax) of this early adoption is reported as
the cumulative effect of a change in accounting principle. Had the Company
not elected early adoption of SOP 98-5, net earnings would have increased
by $12,000 for the thirteen weeks ended May 2, 1998.
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting
for Derivative Instruments and for Hedging Activities", with an effective
date for periods beginning after June 15, 1999. In July 1999, the FASB
issued SFAS No. 137, "Accounting for Derivative Instruments and Hedging
Activities - Deferral of the Effective Date of FASB Statement No. 133".
Adoption of SFAS No. 133 is now required for financial statements for
periods beginning after June 15, 2000. The Company will adopt this new
standard effective February 1, 2001, and management believes the adoption
of this new standard will not have a material impact on its consolidated
financial position or results of operations.
4. Derivatives
From time to time the Company utilizes forward exchange contracts to
secure firm pricing related to purchase commitments to be denominated in
foreign currencies. The Company's objective in managing its exposure to
foreign currency exchange rate fluctuations is to reduce the impact of
adverse fluctuations in earnings and cash flows associated with foreign
currency exchange rate changes. The Company regularly monitors its foreign
exchange exposures to ensure the overall effectiveness of its foreign
currency hedge positions. Unrealized gains or losses related to hedges of
firm commitments are deferred and included in the basis of the transaction
when completed.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
From time to time, the Company may publish forward-looking statements
relating to certain matters including anticipated financial performance,
business prospects, the future opening of stores, inventory levels,
anticipated capital expenditures, and other matters. All statements other
than statements of historical fact contained in this Form 10-Q or in any
other report of the Company are forward-looking statements. The Private
Securities Litigation Reform Act of 1995 provides a safe harbor for forward-
looking statements. In order to comply with the terms of that safe harbor,
the Company notes that a variety of factors, individually or in the
aggregate, could cause the Company's actual results and experience to
differ materially from the anticipated results or other expectations
expressed in the Company's forward-looking statements including, without
limitation, the following: consumer spending trends and habits;
competition in the retail clothing segment; weather conditions in the
Company's operating regions; laws and government regulations; general
business and economic conditions; availability of capital; success of
operating initiatives and marketing and promotional efforts; and changes in
accounting policies. In addition, the Company disclaims any intent or
obligation to update those forward-looking statements.
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.
HAROLD'S STORES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
13 Weeks Ended 39 Weeks Ended
October 30, October 31, October 30, October 31,
1999 1998 1999 1998
Sales 100.0% 100.0% 100.0% 100.0%
Costs of goods sold (including
occupancy and central buying
expenses, exclusive of items
shown separately below) (68.5) (64.7) (66.4) (65.7)
Selling, general and
administrative expenses (29.6) (27.5) (29.2) (27.9)
Depreciation and amortization (3.2) (3.0) (3.4) (3.0)
Interest expense (1.0) (0.6) (0.7) (0.6)
Earnings (loss) before income
taxes and cumulative effect
of change in accounting
principle (2.3) 4.2 0.3 2.8
(Provision) benefit for
income taxes 0.9 (1.6) (0.1) (1.1)
Earnings (loss) before
cumulative effect of change
in accounting principle (1.4) 2.6 0.2 1.7
Cumulative effect of change
in accounting principle - - - (0.1)
Net earnings (loss) (1.4)% 2.6% 0.2% 1.6%
The following table reflects the sources of the increases in Company
sales for the periods indicated.
13 Weeks Ended 39 Weeks Ended
October 30, October 31, October 30, October 31,
1999 1998 1999 1998
Store sales (000's) 31,812 30,491 93,662 86,972
Catalog sales (000's) 1,002 1,729 4,280 6,503
Net sales (000's) 32,814 32,220 97,942 93,475
Total sales growth 1.8% 0.8% 4.8% 7.2%
Decrease in comparable store
sales
(52 week basis) (8.8)% (3.5)% (2.0)% (2.9)%
Decrease in catalog sales (42.0)% (28.6)% (34.2)% (7.5)%
Store locations:
Existing stores 48 42 44 41
Stores closed - - (1) -
New stores opened 3 - 8 1
Total stores at end of period 51 42 51 42
The Company opened three new locations (Atlanta, Georgia; Phoenix,
Arizona; and Williamsburg, Virginia) and relocated two stores (Utica Square
in Tulsa, Oklahoma and the Sealy outlet from Houston to Katy, Texas) during
the thirteen weeks ended October 30, 1999 as compared to the opening of no
new locations in the comparable period of the prior year. During the
thirty-nine weeks ended October 30, 1999, the Company opened eight new
store locations (Palo Alto, California; Tampa, Florida; Southlake, Texas;
Houston, Texas; Indianapolis, Indiana; Atlanta, Georgia; Phoenix, Arizona;
and Williamsburg, Virginia), as compared to the opening of one store (San
Antonio, Texas) in the same period of the prior year. The opening of new
stores and expansion of existing stores contributed to total sales growth
for the third quarter and the thirty-nine weeks ended October 30, 1999.
This growth was partially offset by a decrease in catalog sales. Catalog
sales declined during the thirty-nine week period ended October 30, 1999 as
compared to the same period of the prior year as a result of a strategic
initiative to reduce the total number of catalogs circulated during the
period.
Comparable stores sales decreased during the third quarter and thirty-
nine week period of fiscal 2000, as compared to the same periods of fiscal
1999. The Company believes the decrease experienced in comparable store
sales during the periods was primarily attributable to lack of customer
acceptance of the Company's ladies' merchandise assortment.
The Company's gross margin was 31.5% for the third quarter of fiscal
2000, as compared to 35.3% in the same period of last year. The gross
margin also decreased for the thirty-nine week period ended October 30,
1999 to 33.6%, from 34.3% in the same period of last year. The decrease in
gross margin for both periods can be primarily attributed to aggressive
markdowns taken as the ladies' sales trends slowed. In addition, occupancy
costs did not leverage as planned due to the sales shortfall during the
period.
Selling, general and administrative expenses (including advertising
and catalog production costs) as a percent of sales increased 2.1
percentage points from the third quarter of fiscal 1999 to the third
quarter of fiscal 2000 and 1.3 percentage points for the thirty-nine weeks
ended October 30, 1999 as compared to the same period of the prior year.
The increase was principally the result of increased selling expenses and
expenses incurred toward new store openings. Other factors included were
increased advertising and catalog production costs as a percent of sales
and some one-time expenses incurred to position the Company for future
growth and improved profitability. These one-time expenses included
severance costs associated with corporate cut-backs, recruiting fees
related to the hiring of a new General Merchandise Manager, and consulting
fees related to a real estate demographic study on current and future real
estate locations.
The average balance of total outstanding debt was $27,100,000 for the
quarter ended October 30, 1999 compared to $17,700,000 for the third
quarter of fiscal 1999. This increase in average balances resulted
principally from increases in working capital needs. Average interest
rates on the Company's line of credit were approximately the same for the
quarter ended October 30, 1999 and the comparable quarter in the prior
fiscal year. As the Company's growth continues, cash flow may require
additional borrowed funds that may cause an increase in interest expense.
Capital Expenditures, Capital Resources and Liquidity
Cash Flows From Operating Activities. For the thirty-nine weeks ended
October 30, 1999, net cash used in operating activities was $8,097,000 as
compared to net cash provided by operating activities of $6,017,000 for the
same period of fiscal 1999. The significant decrease can be primarily
attributed to an increase of $11,120,000 in the Company's inventories for
the thirty-nine weeks ended October 30, 1999 as compared to a decrease of
$268,000 for the same period of fiscal 1999. This increase is partially
attributable to new store openings. Management expects the dollar amounts
of the Company's merchandise inventories to increase with the expansion of
its product development programs, private label merchandise and chain of
retail stores with related increases in trade accounts receivable and
accounts payable. Also, period to period differences in timing of
inventory purchases and deliveries will affect comparability of cash flows
from operating activities.
In addition, the difference in cash flows from operating activities is
partially due to (i) the timing of cash disbursements as reflected in an
increase in accounts payable of $2,529,000 for the thirty-nine weeks ended
October 30, 1999 as compared to an increase in accounts payable of $483,000
during the same period of fiscal 1999, (ii) a decrease in income taxes
payable of $480,000 for the thirty-nine weeks ended October 30, 1999
compared to no change in income taxes payable during the same period of
fiscal 1999, and (iii) a decrease in accrued expenses of $503,000 for the
thirty-nine weeks ended October 30, 1999 compared to an increase in accrued
expenses of $889,000 during the same period of fiscal 1999.
Cash Flows From Investing Activities. For the thirty-nine weeks ended
October 30, 1999, net cash used in investing activities totaled $3,871,000
compared to net cash used in investing activities of $3,566,000 for the
same period in fiscal 1999. Capital expenditures were invested in new
stores, and remodeling and equipment expenditures in existing operations.
Cash Flows From Financing Activities. During the thirty-nine weeks
ended October 30, 1999, the Company made periodic borrowings under its
revolving long-term line of credit to finance its inventory purchases,
product development and private label programs, store expansion, remodeling
and equipment purchases.
The Company has available a long-term line of credit with its bank.
This line had an average balance of $17,595,000 and $13,162,000 for the
thirty-nine weeks ended October 30, 1999 and October 31, 1998,
respectively. During the thirty-nine weeks ended October 30, 1999, this
line of credit had a high balance of $27,362,000 and a high balance of
$16,439,000 for the thirty-nine weeks ended October 31, 1998. The balance
outstanding on October 30, 1999 was $26,421,000 compared to $16,334,000 on
October 31, 1998.
Liquidity. The Company considers the following as measures of
liquidity and capital resources as of the dates indicated:
January 30, October 30, October 31,
1999 1999 1998
Working capital (000's) $33,044 $45,761 $36,399
Current ratio 5.14:1 5.80:1 5.14:1
Ratio of working capital
to total assets .52:1 .58:1 .54:1
Ratio of total debt to
stockholders' equity .43:1 .75:1 .54:1
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. Cash flow from operations and proceeds
from credit facilities represent the Company's principal sources of
liquidity. Management anticipates these sources of liquidity to be
sufficient in the foreseeable future.
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
Holiday 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 Company's
operations.
Year 2000
Many computer systems use only two digits to identify a year (for
example, "99" is used for the year "1999"). As a result, these systems may
be unable to process accurately dates later than December 31, 1999, since
they may recognize "00" as the year "1900", instead of the year "2000".
This anomaly is often referred to as the "Year 2000 compliance" issue.
Since 1997, the Company has been executing a plan to remediate or replace
affected systems on a timely basis. Equipment and other non-information
technology systems that use microchips or other embedded technology, such
as certain conveyor systems at the Company's distribution center, are also
covered by the Company's Year 2000 compliance project.
The Company's Year 2000 compliance project includes four phases: (1)
evaluation of the Company's owned or leased systems and equipment to
identify potential Year 2000 compliance issues; (2) remediation or
replacement of Company systems and equipment determined to be non-compliant
(and testing of remediated systems before returning them to production);
(3) inquiry regarding Year 2000 readiness of material business partners and
other third parties on whom the Company's business is dependent; and (4)
development of contingency plans, where feasible, to address potential
third party non-compliance or failure of material Company systems.
The initial phase of the Company's Year 2000 compliance project was
the evaluation of all software, hardware and equipment owned, leased or
licensed by the Company, and identification of those systems and equipment
requiring Year 2000 remediation. This analysis was completed during fiscal
1999.
All computer hardware in the Company's corporate office and
distribution center that was not Year 2000 compliant has been remediated or
replaced, and all computer hardware in the Company's retail stores that was
not Year 2000 compliant was remediated or replaced by the end of the second
quarter of fiscal 2000. Of those software systems that were found not to
be Year 2000 compliant, all material systems have been remediated or
replaced by Year 2000 compliant software as of the date of this report.
Over the past few years, the Company's strategic plan has included
significant investment in and modernization of many of the Company's
computer systems. As a result, much of the costs and timing for replacement
of certain of the Company's systems that were not Year 2000 compliant were
already anticipated as part of the Company's planned information systems
spending and did not need to be accelerated as a result of the Company's
Year 2000 project. The Company estimates that the total cost of managing
its Year 2000 project, remediating existing systems and replacing or
upgrading non-compliant systems, is approximately $2 million, of which
approximately $500,000 is anticipated to be expended in fiscal 2000. This
approximately $2 million of costs principally relates to the purchase of
new capitalizable software and hardware investments.
Although the Company believes its Year 2000 compliance efforts with
respect to its systems will be successful, any failure or delay could
result in actual costs and timing differing materially from that presently
contemplated, and in a disruption of business. The Company is developing a
contingency plan to permit its primary operations to continue if the
Company's modifications and conversions of its systems are not successfully
completed on a timely basis, but the foregoing cost estimates do not take
into account any expenditures arising out of a response to any such
contingencies that materialize. The Company's cost estimates also do not
include time or costs that may be incurred as a result of third parties'
failure to become Year 2000 compliant on a timely basis.
The Company is communicating with its business partners, including
key manufacturers, vendors, banks and other third parties with whom it does
business, to obtain information regarding their state of readiness with
respect to the Year 2000 issue. Assessment of third party Year 2000
readiness of those third parties whose services are most significant to the
Company's business was substantially completed by the end of the second
quarter of fiscal 2000. The Company intends to continue to monitor the
Year 2000 readiness of its key suppliers of its goods and services.
Potential interruptions of such third parties' businesses or services to
the Company resulting from Year 2000 issues will be addressed in the
Company's contingency planning efforts, discussed below. Failure of third
parties to remediate Year 2000 issues affecting their respective businesses
on a timely basis, or to implement contingency plans sufficient to permit
uninterrupted continuation of their businesses in the event of a failure of
their systems, could have a material adverse effect on the Company's
business and results of operations.
The Company's Year 2000 compliance project also includes development
of a contingency plan designed to support critical business operations in
the event of the occurrence of systems failures or the occurrence of
reasonably likely worst case scenarios. Such contingency plans were
substantially developed by the end of the second quarter of fiscal 2000.
The Company operates a large number of retail stores in widely disbursed
geographical locations, and Company merchandise is manufactured by a large
number of suppliers and factories. The Company believes that these factors
will help to mitigate the adverse impact of potential Year 2000 failures by
third party suppliers or utilities. The Company believes that the most
reasonably likely worst case scenarios would involve an interruption of the
supply of merchandise to the Company's stores, as a result of the delay in
completion of the Company's merchandise orders by manufacturers, or a delay
in the delivery of merchandise to the Company's stores due to a disruption
of service at ports of export or at the U.S. port of import, or a
disruption in service by transportation providers, or a disruption in
operation of the Company's distribution center.
The Company may not be able to compensate adequately for business
interruption caused by certain third parties. Potential risks include
suspension or significant curtailment of service or significant delays by
banks, utilities or common carriers, or at U.S. ports of entry. The
Company's business also could be materially adversely affected by the
failure of governmental agencies to address Year 2000 issues affecting the
Company's operations. For example, a significant amount of the Company's
merchandise is manufactured outside the United States, and the Company is
dependent upon the issuance by foreign governmental agencies of export
visas for, and upon the U.S. Customs Service to process and permit entry
into the United States of, such merchandise. If failures in government
systems result in the suspension or delay of these agencies' services, the
Company could experience significant interruption or delays in its
inventory flow.
The costs and timing for management's completion of Year 2000
compliance modification and testing processes are based on management's
best estimates, which were derived utilizing numerous assumptions of future
events, including the continued availability of certain resources, the
success of third parties' Year 2000 compliance efforts and other factors.
There can be no assurance that these assumptions will be realized or that
actual results will not materially vary.
PART II
ITEM 1. LEGAL PROCEEDINGS
The Company is from time to time involved in routine litigation
incidental to the conduct of its business. As of this date, the Company is
not a party to, nor is any of its property subject to, any material pending
legal proceedings.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: The following exhibit is filed as part of this Form 10-Q:
No. Description
27.1 Financial Data Schedule
(b) Reports on Form 8-K: A Form 8-K/A was filed on October 8, 1999,
with the Securities and Exchange Commission ("SEC") regarding the
Registrant's change in independent public accountant. This Form 8-K/A
amended a Form 8-K filed on October 1, 1999, with the SEC, to include
specific information required by Regulation S-K which was previously
omitted.
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, Chief Operating Officer
By:/s/Jodi L. Taylor
Jodi L. Taylor
Chief Financial Officer
Date: December 14, 1999
INDEX TO EXHIBITS
No. Description
27.1 Financial Data Schedule
