<PAGE>
United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the Quarterly Period Ended July 31, 1998
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 0-22532
ULTIMATE ELECTRONICS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 84-0585211
------------------------------ ---------------
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
321A WEST 84TH AVENUE, THORNTON, COLORADO 80221
(Address of principal executive offices, zip code)
(303) 412-2500
(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 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
--- ---
The number of outstanding shares of common stock as of September 4, 1998 was
8,152,148.
<PAGE>
ULTIMATE ELECTRONICS, INC.
FORM 10-Q
INDEX
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Item 1. Financial Statements (Unaudited): Page No.
<S> <C> <C>
Condensed Consolidated Balance Sheets as of July 31, 1998 and
January 31, 1998 . . . . . . . . . . . . . . . . . 3
Consolidated Statements of Operations for the three and
six months ended July 31, 1998 and July 31, 1997 . . . . . . 4
Condensed Consolidated Statements of Cash Flows for the six
months ended July 31, 1998 and July 31, 1997. . . . . . . . 5
Notes to Condensed Consolidated Financial Statements . . . . . 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations . . . . . . . . . . . . . . . 7
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . 10
Item 2. Changes in Securities . . . . . . . . . . . . . . . 10
Item 3. Defaults Upon Senior Securities . . . . . . . . . . . . 10
Item 4. Submission of Matters to a Vote of Security Holders . . . . . 10
Item 5. Other Information . . . . . . . . . . . . . . . . 10
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . 11
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
ULTIMATE ELECTRONICS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except share data)
<TABLE>
<CAPTION>
(Unaudited)
July 31, January 31,
1998 1998
----------- -----------
<S> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents $ 2,503 $ 2,006
Accounts receivable 14,777 19,826
Merchandise inventories 43,895 43,908
Other assets 2,099 1,362
----------- -----------
Total current assets 63,274 67,102
Property and equipment, net 48,518 50,855
Property under capital leases, including related
parties, net 1,899 2,068
Goodwill, net 2,388 2,385
Other assets 994 1,036
----------- -----------
Total assets $ 117,073 $ 123,446
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Revolving line of credit $ 26,291 $ 26,564
Accounts payable 22,119 25,550
Other current liabilities 9,891 9,410
----------- -----------
Total current liabilities 58,301 61,524
Bonds payable 13,000 13,000
Term loans 490 642
Capital lease obligations, including related parties 1,888 2,049
Deferred tax liability 810 1,510
Commitments
Stockholders' equity:
Preferred stock, par value $.01 per share
Authorized shares - 10,000,000
No shares issued and outstanding - -
Common stock, par value $.01 per share
Authorized shares - 10,000,000
Issued and outstanding shares, 8,150,748
at July 31, 1998 and 8,139,548 at
January 31, 1998 82 81
Additional paid-in capital 33,883 33,868
Retained earnings 8,619 10,772
----------- -----------
Total stockholders' equity 42,584 44,721
----------- -----------
Total liabilities and stockholders' equity $ 117,073 $ 123,446
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to Condensed Consolidated Financial Statements.
3
<PAGE>
ULTIMATE ELECTRONICS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
July 31, July 31,
------------------------- -------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $ 71,182 $ 61,944 $ 142,064 $ 117,452
Cost of goods sold 49,279 45,030 101,901 86,088
----------- ----------- ----------- -----------
Gross profit 21,903 16,914 40,163 31,364
Selling, general and administrative expenses 20,675 16,615 41,373 30,775
----------- ----------- ----------- -----------
Income (loss) from operations 1,228 299 (1,210) 589
Interest expense, net 1,127 971 2,198 1,754
----------- ----------- ----------- -----------
Income (loss) before income taxes 101 (672) (3,408) (1,165)
Income tax expense (benefit) 43 (250) (1,255) (432)
----------- ----------- ----------- -----------
Net income (loss) $ 58 $ (422) $ (2,153) $ (733)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Income (loss) per share of common stock - basic and diluted $ .01 $ (. 06) $ (.26) $ (.10)
Weighted average shares outstanding - basic 8,151 7,327 8,145 7,164
Weighted average shares outstanding - diluted 8,221 7,327 8,145 7,164
</TABLE>
See accompanying notes to Condensed Consolidated Financial Statements.
4
<PAGE>
ULTIMATE ELECTRONICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(amounts in thousands)
<TABLE>
<CAPTION>
Six Months Ended
July 31,
-------------------------
1998 1997
----------- -----------
<C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash provided by operating activities $ 1,589 $ 6,903
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (543) (2,503)
Purchase of Audio King - (836)
----------- -----------
Net cash used in investing activities (543) (3,339)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net paydown on line of credit (273) (1,172)
Proceeds from exercise of stock options 16 -
Principal payments on term loans and capital lease obligations (292) (292)
----------- -----------
Net cash used in financing activities (549) (1,464)
----------- -----------
Net increase in cash and cash equivalents 497 2,100
Cash and cash equivalents at beginning of period 2,006 764
----------- -----------
Cash and cash equivalents at end of period $ 2,503 $ 2,864
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to Condensed Consolidated Financial Statements.
5
<PAGE>
ULTIMATE ELECTRONICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JULY 31, 1998
1. ACCOUNTING POLICIES
The Company's unaudited condensed consolidated financial statements have
been prepared by the Company in accordance with generally accepted
accounting principles for interim financial reporting and the
regulations of the Securities and Exchange Commission for quarterly
reporting. Accordingly, they do not include all information and
footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of the Company, the
statements include all adjustments, consisting only of normal recurring
adjustments, which are necessary for a fair presentation of the
financial position, results of operations and cash flows for the interim
periods. Operating results for the six month period ended July 31, 1998
are not necessarily indicative of the results that may be expected for
the year ending January 31, 1999. Seasonal fluctuations in sales of the
Company's products result primarily from the purchasing patterns of
individual consumers during the Christmas holiday season. These
patterns tend to moderately concentrate sales in the latter half of the
year, particularly in the fourth quarter. For further information,
refer to the financial statements and footnotes thereto included in the
Company's Annual Report to Stockholders for the year ended January 31,
1998.
2. PRINCIPLES OF CONSOLIDATION
The unaudited condensed consolidated financial statements include the
accounts of all subsidiaries. All intercompany accounts and
transactions have been eliminated upon consolidation.
3. MERGER
On June 27, 1997, the Company completed a merger in which the Company
acquired all of the outstanding shares of Audio King Corporation ("Audio
King"). Audio King, a consumer specialty electronics company, operated
11 retail stores; eight in Minnesota, two in Iowa and one in South
Dakota. The purchase price consisted of $2.5 million in cash, 986,432
shares of Ultimate's common stock valued at $2.6 million, assumed debt
of $7.2 million, and other expenses and severance costs of $1.2 million.
The transaction was accounted for as a purchase, whereby the purchase
price has been allocated to the acquired assets and liabilities based on
estimated fair value at the acquisition date. The transaction resulted
in the Company recording goodwill in the amount of $2.5 million. The
results of operations since the acquisition date are included in the
accompanying condensed consolidated financial statements.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Management's discussion and analysis of financial condition and results of
operations and the financial statements and accompanying notes contain
forward-looking information which is subject to risks and uncertainties that
may cause future results to vary materially. Such information includes
reference to future profitability and steps being taken to achieve that
result. Factors that may cause these results not to be achieved include,
without limitation, risks regarding increases in promotional activities of
competitors, changes in consumer buying, the presence or absence of new
products or product features in the Company's merchandise categories, changes
in the distribution strategy of the Company's vendors, changes in vendor
support for advertising and promotional programs, changes in the Company's
merchandise sales and mix as well as general economic conditions. Please
refer to a discussion of these and other factors in the Company's Annual
Report on Form 10-K for the year ended January 31, 1998 and other filings
with the Securities and Exchange Commission. The Company disclaims any
intent or obligation to update publicly these forward-looking statements,
whether as a result of new information, future events or otherwise.
RESULTS OF OPERATIONS
Net sales for the three months ended July 31, 1998 increased 15% to $71.2
million from $61.9 million for the three months ended July 31, 1997. Net
sales for the six months ending July 31, 1998 increased 21% to $142.1 million
from $117.5 million for the six months ended July 31, 1997. The increase in
sales during these periods was due primarily to the acquisition of Audio King
effective June 27, 1997. Sales of comparable stores were flat compared to
the same quarter in the prior year and decreased 1% for the six months ended
July 31, 1998. As previously announced, the Company proceeded with its
planned reduction in sales and mix of computer products. Excluding the
computer category, comparable store sales were up 4% for the quarter ending
July 31, 1998.
Gross profit for the three months ended July 31, 1998 increased 30% to $21.9
million (30.7% of net sales) from $16.9 million (27.3% of net sales) for the
three months ended July 31, 1997. Gross profit for the six months ended July
31, 1998 increased 28% to $40.2 million (28.3% of net sales) from $31.4
million (26.7% of net sales) for the six months ended July 31, 1997. Margins
in the first quarter were impacted by significant sales of discontinued
computers as well as an increase in the Company's reserve for discontinued
computer inventory of $700,000. Additionally, the Company liquidated its
35mm camera inventory and eliminated two audio speaker lines which resulted
in a reduction of gross profit of $500,000. The improvement in gross margins
for the second quarter of fiscal 1999 over the first quarter and the same
period in the prior year was a direct result of the Company's efforts to
reduce its exposure to computers and concentrate on the sales of products in
the higher margin categories of audio, video and mobile electronics where the
Company believes it has a competitive advantage.
Selling, general and administrative expenses for the three months ended July
31, 1998 increased to $20.7 million (29.0% of net sales) from $16.6 million
(26.8% of net sales) for the three months ended July 31, 1997. Selling,
general, and administrative expenses for the six months ending July 31, 1998
increased to $41.4 million (29.1% of net sales) from $30.8 million (26.2% of
net sales) for the six months ended July 31, 1997. Selling, general and
administrative expenses were impacted by higher store and advertising
expenses associated with the Company's strategic initiatives to increase the
sales in the stores acquired through the Audio King merger.
As a result of the foregoing, income from operations increased to $1.2
million (1.7% of net sales) for the three months ended July 31, 1998,
compared to income from operations of $299,000 (0.5% of net sales) for the
three months ended July 31, 1997. Loss from operations was $1.2 million
(0.8% of net sales) for the six months ended July 31, 1998 compared to income
from operations of $589,000 (0.5% of net sales) for the six months ended July
31, 1997.
Interest expense increased to $1.1 million and $2.2 million for the three and
six months ended July 31, 1998, respectively, from $1.0 and $1.8 million for
the three and six months ended July 31, 1997. This increase was due
7
<PAGE>
primarily to higher average amounts outstanding under the Company's revolving
line of credit that was used for the acquisition of Audio King.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company's primary sources of liquidity for funding
expansion and growth have been net cash from operations, revolving credit
lines, term loans and issuance of common stock. The Company's initial public
offering in October 1993 resulted in proceeds of $17.8 million (net of all
offering costs). The Company completed a second offering of its common stock
in November 1995 and received net proceeds of $12.5 million (net of all
offering costs). With the addition of Audio King, the Company now operates a
total of 30 stores in nine states.
In March 1995, the Company received proceeds of $12.3 million (net of the
underwriting discount and other associated costs) from the sale of $13.0
million aggregate principal amount of 10.25% First Mortgage Bonds (the "Bond
Offering"). The proceeds of the Bond Offering were used to fund a
substantial portion of the construction of the Company's warehouse, office,
service and store facility in Thornton, Colorado (the "Thornton Facility").
Interest on the bonds accrues at the rate of 10.25% per year until maturity
or earlier redemption. The Company is required to redeem $3.25 million
aggregate principal amount of the bonds annually (reduced to the extent of
the bonds purchased or redeemed by the Company earlier) on January 31, 2002
and on January 31 of each of the three years thereafter, at a redemption
price equal to par plus accrued interest to the date of redemption. The
bonds are not redeemable prior to March 31, 2000 and are secured by the
Thornton Facility.
Net cash provided by operations was $1.6 million for the six months ended
July 31, 1998 compared to net cash provided by operations of $6.9 million
for the six months ended July 31, 1997.
The Company intends to continue its expansion into select metropolitan areas
in the Rocky Mountain, Midwest and Southwest regions with its larger format
stores. The Company has begun analyzing new store opportunities in existing
markets to replace some of the Company's smaller locations. The Company
completed the conversion of its County Line store from an outlet store to a
regular store on September 4, 1998. The Company expects to relocate and
expand two to five of its locations within the next three years along with
the possibility of adding new stores. At the present time, no firm
commitments for relocated or new stores have been made. The Company
currently anticipates these events to occur after fiscal 1999. The size of
these future stores is anticipated to be approximately 24,000 to 36,000
square feet at a projected cost of $30 to $55 per square foot. The inventory
requirement for the Company's new larger format stores averages approximately
$2.0 million per store, approximately $1.0 million of which is financed
through credit.
The Company's primary capital requirements are directly related to
expenditures for new store openings and the remodeling and upgrading of
existing store locations. With the exception of the Thornton Facility, all
stores are leased. Capital expenditures to relocate and expand existing
stores are expected to average $1.3 million per store, excluding preopening
expenses averaging $250,000. Preopening costs include such items as
advertising prior to opening, recruitment and training of new employees and
any costs of early termination of store leases.
The Company's revolving line of credit agreement with Norwest Bank Colorado,
N.A. expires on September 30, 1998, at which time all outstanding principal
borrowings become due. Accordingly, at July 31, 1998 amounts payable under
the revolving line of credit agreement have been classified in the accompanying
balance sheet as short term. The Company has signed a letter of intent and
has received loan approval for a new three year $40 million credit agreement
with Foothill Capital Corporation (a wholly owned Norwest Bank subsidiary).
The new facility is expected to close prior to October 1, 1998. Borrowings
under the Company's existing revolving line of credit are limited to the
lesser of $35 million or 70% of eligible inventory. Borrowings under this
credit facility in the amount of $26.3 million were outstanding as of July
31, 1998. Borrowings are secured by accounts receivable, inventories and
equipment. The Company was in compliance with all covenants at July 31, 1998.
8
<PAGE>
The Company believes that its cash flow from operations and borrowings under
its new credit facilities will be sufficient to fund the Company's operations
and debt repayment for fiscal 1999.
To fund the capital requirements for its anticipated expansion plans beyond
fiscal 1999, the Company may be required to seek additional financing, which
may take the form of expansion of its new credit facility, or possibly
additional debt or equity financings. There can be no assurance that the
Company will be able to obtain such funds on favorable terms, if at all.
SEASONALITY
The Company's business is affected by seasonal consumer buying patterns. As
is the case with many other retailers, the Company's sales and profits have
been greatest in the fourth quarter (which includes the holiday selling
season). Operating results are dependent upon a number of factors, including
discretionary consumer spending, which is affected by local, regional or
national economic conditions affecting disposable consumer income, such as
employment, business conditions, interest rates and taxation. The Company's
quarterly results of operations may fluctuate significantly as a result of a
number of factors, including the timing of new or relocated and expanded
store openings and related expenses, the success of new stores and the impact
of new stores on existing stores, among others. As the Company has opened
additional stores or relocated and expanded stores within markets it already
serves, sales at existing stores have been adversely affected. Such adverse
effects may occur in the future. The Company's quarterly operating results
also may be affected by increases in merchandise costs, price changes in
response to competitive factors, new and increased competition, product
availability and the costs associated with the opening of new stores.
YEAR 2000 ISSUE
Until recently most computer programs were written to store only two digits
of date related information in order to more efficiently handle and sort
data. As a result, these programs were unable to properly distinguish
between dates occurring in the year 1900 and dates occurring in the year
2000. This is referred to as the "Year 2000 Issue". During fiscal 1999, the
Company has begun to review all applications to evaluate the Company's
exposure to the year 2000 issue. Management does not believe the Company
will have to modify or replace any significant portion of its computer
applications in order for its computer systems to function properly with
respect to dates in the year 2000 and thereafter. In addition, the Company
is coordinating with significant third party entities with which it does
business to address potential year 2000 issues in order to minimize the
potential adverse consequences, if any, that could result from failure of
such entities to address this issue.
9
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
From time to time, the Company is a party to certain legal
proceedings arising in the ordinary course of its business.
Management believes that any resulting liability, individually or
in the aggregate, will either be covered by insurance or will not
have a material adverse effect on the Company's financial condition.
ITEM 2. CHANGES IN SECURITIES.
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The 1998 Annual Meeting of Stockholders of Ultimate Electronics,
Inc. was held on June 17, 1998. At the meeting, Alan E. Kessock
and Robert W. Beale were elected as Class I Directors for
three-year terms expiring at the 2001 Annual Meeting of
Stockholders. David J. Workman, Randall F. Bellows and William J.
Pearse continue their respective terms as Directors of the Company.
The matters voted upon and passed at the Meeting were the election
of the above noted directors and the ratification of the
appointment of Ernst & Young LLP as the Company's independent
public accountants for the fiscal year ending January 31, 1999.
The results of the voting on these matters is outlined in the
following table.
<TABLE>
<CAPTION>
VOTES VOTES VOTES
PROPOSAL FOR AGAINST ABSTAINED
--------------------------------- --------- ------- ----------
<S> <C> <C> <C>
Election of Directors:
Alan E. Kessock 7,260,752 - 60,411
Robert W. Beale 7,267,586 - 53,517
Ratification of Ernst & Young LLP 7,299,709 15,884 5,570
</TABLE>
ITEM 5. OTHER INFORMATION.
None
10
<PAGE>
PART II. OTHER INFORMATION (CONTINUED)
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
Documents filed with this report:
10.23 Fifth amendment to Credit Agreement between
Ultimate Electronics, Inc. and Norwest Bank
Colorado, National Association and Norwest
Business Credit, Inc. dated June 30, 1998
27 Financial Data Schedule
(b) Reports on Form 8-K:
None.
11
<PAGE>
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.
Ultimate Electronics, Inc.
Date: September 4, 1998 By: /s/ Alan E. Kessock
------------------- ------------------------------------------
Alan E. Kessock
Vice President, Chief Financial Officer,
Secretary and a Director (Principal Financial
and Accounting Officer)
12
<PAGE>
FIFTH AMENDMENT
TO
CREDIT AGREEMENT
This Fifth Amendment is made this 30th day of June, 1998, by and between
ULTIMATE ELECTRONICS, INC., a Delaware corporation (the "Borrower"), NORWEST
BANK COLORADO, NATIONAL ASSOCIATION (the "Lender") and NORWEST BUSINESS CREDIT,
INC, a Minnesota corporation, as administrative agent for the Lender (the
"Administrative Agent").
RECITALS
The Borrower, the Lender and the Administrative Agent entered into a Credit
Agreement dated as of November 21, 1996, as amended (the "Credit Agreement").
The Borrower has requested that the Lender change a certain covenant in the
Credit Agreement. The Lender is willing to do so on the terms and subject to
the conditions set forth herein.
NOW THEREFORE, in consideration of the premises and the mutual promises
herein contained, the parties hereto agree as follows:
1. Section 6.13 of the Credit Agreement is hereby amended by amending
subsection (b) thereto to read in its entirety as follows:
"(b) Maintain during each of the periods set forth below, a minimum
Net Worth calculated as at the end of each month in such period in an
amount which is greater than or equal to the amount set forth opposite such
period; PROVIDED THAT the minimum Net Worth that the Borrower is required
to maintain shall be increased by the sum of 100% of the net proceeds
received by the Borrower for the sale of any equity securities after the
date of this Agreement:
<TABLE>
<CAPTION>
Period Minimum Net Worth
------ -----------------
<S> <C>
May 1, 1998 to and including $41,950,000
May 31, 1998
June 1, 1998 to and including $41,400,000
June 30, 1998
July 1, 1998 to and including $41,250,000
July 31, 1998
August 1, 1998 to and including $41,500,000
August 31, 1998
September 1, 1998 to and including $41,625,000
September 30, 1998"
</TABLE>
2. NO OTHER CHANGES. Except as explicitly amended by this Amendment, all
of the terms and conditions of the Credit Agreement shall remain in full force
and effect and shall apply to any advance thereunder.
3. CONDITIONS PRECEDENT. This Amendment shall be effective when the
Lender shall have received an executed original hereof.
4. NO WAIVER. The execution of this Amendment shall not be deemed to be a
waiver of any Default or Event of Default under the Credit Agreement or breach,
default or event of default under any Security Document or other document held
by the Lender, whether or not known to the Lender and whether or not existing on
the date of this Amendment.
5. RELEASE. The Borrower hereby absolutely and unconditionally releases
and forever discharges the Lender, and any and all participants, parent
corporations, subsidiary corporations, affiliated corporations, insurers,
indemnitors, successors and assigns thereof, together with all of the present
and former directors, officers, agents and employees of any of the foregoing,
from any and all claims, demands or causes of action of any kind, nature or
description, whether arising in law or equity or upon contract or tort or under
any state or federal law or otherwise, which the Borrower has had, now has or
has made claim to have against any such person for or by reason of any act,
omission, matter, cause or thing whatsoever arising from the beginning of time
to and including the date of this Amendment, whether such claims, demands and
causes of action are matured or unmatured or known or unknown.
-2-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Fifth Amendment to
be duly executed as of the day and year first above written.
ULTIMATE ELECTRONICS, INC.
By: /s/ Alan E. Kessock
---------------------------------------
Its: Vice President of Finance
-------------------------------------
NORWEST BANK COLORADO, NATIONAL ASSOCIATION
By: /s/ Karen D. Hardy
---------------------------------------
Its: Vice President
-------------------------------------
NORWEST BUSINESS CREDIT, INC.
By: /s/ Pamela Klempel
---------------------------------------
Its: Assistant Vice President
-------------------------------------
-3-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JUL-31-1998
<CASH> 2,503
<SECURITIES> 0
<RECEIVABLES> 14,985
<ALLOWANCES> 208
<INVENTORY> 43,895
<CURRENT-ASSETS> 63,274
<PP&E> 64,802
<DEPRECIATION> 16,284
<TOTAL-ASSETS> 117,073
<CURRENT-LIABILITIES> 58,301
<BONDS> 41,669
0
0
<COMMON> 82
<OTHER-SE> 42,502
<TOTAL-LIABILITY-AND-EQUITY> 117,073
<SALES> 142,064
<TOTAL-REVENUES> 142,064
<CGS> 101,901
<TOTAL-COSTS> 143,274
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,198
<INCOME-PRETAX> (3,408)
<INCOME-TAX> (1,255)
<INCOME-CONTINUING> (2,153)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,153)
<EPS-PRIMARY> (.26)
<EPS-DILUTED> (.26)
</TABLE>
