UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the quarterly period ended March 28, 1996
[ ] 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: 0-24466
THE BARBERS, HAIRSTYLING FOR MEN & WOMEN, INC.
(Exact name of registrant as specified in its charter)
Minnesota 41-0945858
(State or other Jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
300 Industrial Boulevard NE
Minneapolis, MN 55413
(Address of principal executive offices)
(612) 331-8500
(Registrant's telephone number, including area code)
Check whether the registrant: (1) 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 ___
On May 9, 1996, the registrant had 1,706,123 outstanding shares of
common stock, $. 10 par value.
THE BARBERS, HAIRSTYLING FOR MEN & WOMEN, INC.
INDEX
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Statements of Earnings for the Quarter Ended
March 28, 1996 and March 30, 1995
Condensed Consolidated Statements of Financial Position at
March 28, 1996 and September 28, 1995
Condensed Consolidated Statements of Cash Flows for the
Quarter Ended March 28, 1996 and March 30, 1995
Notes to Condensed Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Item 4. Submission of Matters to Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
Exhibit 11 Statement re: computation of earnings per share
Exhibit 10.16b Amendments to Term Loan and Credit Agreement between
The Barbers Hairstyling for Men & Women, Inc. and Norwest
Bank Minnesota, N.A.
Exhibit 27 Financial Data Schedule - For SEC use only
THE BARBERS, HAIRSTYLING FOR MEN & WOMEN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
SECOND QUARTER F1996
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 28, March 30, March 28, March 30,
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUES
Franchise Royalties $ 1,476,624 $ 1,316,463 $ 2,893,458 $ 2,584,636
Franchise Fees 217,000 224,350 610,050 380,750
Company-Owned Salons 563,705 300,343 1,084,316 563,707
Beauty Products & Equipment 2,034,407 1,912,616 4,063,078 3,596,211
Other 72,112 38,426 200,548 74,069
----------- ----------- ----------- -----------
Total Revenues 4,363,848 3,792,198 8,851,450 7,199,373
COSTS & EXPENSES
Franchise Operations
Salaries & Benefits 449,376 393,325 906,517 737,441
General & Administrative 225,299 202,361 525,312 374,605
----------- ----------- ----------- -----------
Total 674,675 595,686 1,431,829 1,112,046
----------- ----------- ----------- -----------
Company-Owned Salons
Salaries & Benefits 337,379 183,956 638,764 304,684
General & Administrative 190,136 102,390 349,102 194,054
Cost of Products & Services 80,403 56,533 166,290 119,024
----------- ----------- ----------- -----------
Total 607,918 342,879 1,154,156 617,762
----------- ----------- ----------- -----------
Distribution & General Administration
Salaries & Benefits 620,724 593,114 1,256,425 1,143,510
General & Administrative 481,390 498,710 1,122,140 1,019,942
Cost of Products & Equipment 1,597,410 1,487,527 3,210,326 2,804,948
----------- ----------- ----------- -----------
Total 2,699,524 2,579,351 5,588,891 4,968,400
----------- ----------- ----------- -----------
OPERATING INCOME 381,731 274,282 676,574 501,165
OTHER INCOME (EXPENSE)
Interest Income 29,580 26,299 60,175 56,998
Interest Expense (6,691) (5,581) (12,562) (21,152)
Net Gain on Disposal of Assets 75 9,069 31,092 9,087
----------- ----------- ----------- -----------
INCOME BEFORE INCOME TAXES 404,695 304,069 755,279 546,098
INCOME TAX EXPENSE 170,000 123,000 317,000 223,000
----------- ----------- ----------- -----------
NET INCOME $ 234,695 $ 181,069 $ 438,279 $ 323,098
=========== =========== =========== ===========
NET INCOME PER SHARE $ 0.13 $ 0.10 $ 0.24 $ 0.19
=========== =========== =========== ===========
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING 1,820,442 1,746,071 1,816,553 1,741,821
=========== =========== =========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
THE BARBERS, HAIRSTYLING FOR MEN & WOMEN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
March 28, September 28,
1996 1995
---------- ----------
ASSETS (Unaudited) (Note 1)
<S> <C> <C>
Current assets:
Cash $ 789,564 $2,121,310
Trade receivable, less allowance for doubtful
accounts of $285,000 in March 1996 and
$210,000 in September 1995 2,448,898 1,483,065
Notes receivable 138,612 113,699
Inventories held for resale 1,244,582 1,052,984
Prepaid expenses 120,694 36,837
Deferred income taxes 235,000 194,000
---------- ----------
Total current assets 4,977,350 5,001,895
Notes receivable, less current portion and allowance for
doubtful notes of $55,000 in March 1996 and
$35,000 in September 1995 553,501 481,583
Property, equipment and leasehold impovements, at cost:
Equipment 1,863,954 1,602,181
Leasehold improvements 867,796 903,822
---------- ----------
2,731,750 2,506,003
Less accumulated depreciation 1,829,768 1,764,896
---------- ----------
Net property, equipment and leasehold improvements 901,982 741,107
Investment in franchise contracts, less accumulated
amortization of $189,050 in March 1996 and
$159,038 in September 1995 753,852 753,688
Deferred income taxes 335,000 316,000
Other assets 181,838 287,454
---------- ----------
Total assets $7,703,523 $7,581,727
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt and capital
lease obligations $ 89,795 $ 96,965
Accounts payable 952,999 838,109
Deferred franchise fees 126,166 212,977
Committed advertising 421,615 751,795
Accrued compensation and related payroll taxes 454,776 635,323
Other accrued expenses 338,564 185,456
Income taxes payable 39,731 42,836
---------- ----------
Total current liabilities 2,423,646 2,763,461
Long term debt and capital lease obligations 98,217 142,924
Deferred franchise fees 277,500 269,000
Deferred compensation 166,411 119,022
Shareholders' equity:
Common stock 169,419 169,257
Additional paid in capital 373,478 361,490
Retained earnings 4,194,852 3,756,573
---------- ----------
Total shareholder's equity 4,737,749 4,287,320
---------- ----------
Total liabilities and shareholders' equity $7,703,523 $7,581,727
========== ==========
</TABLE>
Note 1: The balance sheet at September 28, 1995 has been derived from the
audited financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. Certain 1995 items have been reclassified to
conform with the 1996 presentation.
See notes to condensed consolidated financial statements.
THE BARBERS, HAIRSTYLING FOR MEN & WOMEN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
March 28, March 30,
1996 1995
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 438,279 $ 323,098
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 169,158 163,928
Provision for losses on accounts and notes receivable 141,217 48,644
Gain on sales of property and equipment (31,092) (365)
Deferred income taxes (60,000) 50,000
Stock compensation 12,150 9,135
Changes in operating assets and liabilities:
Decrease (increase) in:
Accounts and notes receivable (1,108,881) (351,818)
Inventories held for resale (191,598) (118,664)
Prepaid expenses (83,857) (72,970)
Other assets 9,591 11,796
(Decrease) increase in:
Payables and accrued expenses (195,340) 23,213
Deferred franchise fees (78,311) (23,841)
Income taxes payable (3,105) (190,259)
----------- -----------
Net cash provided by (used in) operating activities (981,789) (128,103)
INVESTING ACTIVITIES
Proceeds from sale of property and equipment 35,880 1,445
Capital expenditures (303,783) (168,587)
Investment in franchise contracts (30,177) (35,398)
Payments received on notes receivable from related parties -- 122,858
----------- -----------
Net cash used in investing activities (298,080) (79,682)
FINANCING ACTIVITIES
Principle payments on long-term debt (37,500) (434,824)
Principle payments on capital lease obligations (14,377) (55,772)
Net sale (purchase) of Company stock -- 12,340
----------- -----------
Net cash used in financing activities (51,877) (478,256)
----------- -----------
Net decrease in cash and cash equivalents (1,331,746) (686,041)
Cash and cash equivalents at beginning of period 2,121,310 1,673,980
----------- -----------
Cash and cash equivalents at end of period $ 789,564 $ 987,939
=========== ===========
CASH PAID DURING PERIOD FOR:
Interest $ 12,562 $ 21,152
Taxes $ 380,105 $ 363,259
</TABLE>
See notes to condensed consolidated financial statements.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting solely of normal recurring accruals) considered necessary for a fair
presentation of results have been included. Operating results for the three
months ended March 28, 1996, are not necessarily indicative of the results that
may be expected for the year ended September 26, 1996. For further information,
refer to the consolidated financial statements and footnotes thereto included in
the Company's annual report for the fiscal year ended September 28, 1995.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company is in the business of franchising two different hair care
salon concepts that provide hair care products for men, women, and children.
Most franchises do business under the names "Cost Cutters Family Hair Care(R)"
("Cost Cutters") and "City Looks Salons International(R)" ("City Looks"). The
Company also has a limited number of franchises operating under the names "The
Barbers, Hairstyling for Men & Women(R)", "Family Haircut Stores" and "The Hair
Performers". The Company currently sells only franchises in Cost Cutters and
City Looks.
The Company had 738 franchised and company-owned salons in operation as
of March 28, 1996, compared to 671 at March 30, 1995. The Company primarily
earns revenue through its franchise operations from initial franchise fees,
franchise royalties, and sales of beauty products and equipment to the
franchisees.
The Company operates on a 52/53 week year basis. The fiscal years 1996
and 1995 include 52 weeks of operations.
RESULTS OF OPERATIONS
REVENUES: The Company's total revenues were $4,363,848 for the second quarter of
fiscal 1996 and $8,851,450 for the first six months of fiscal 1996, an increase
of 15.1% and 22.9% respectively over the comparable periods of the previous
year. Franchise royalties totaled $1,476,624 for the second quarter of fiscal
1996 which is an increase of 12.2% over the second quarter of the previous year.
Franchise royalties for the first six months increased 11.9% to $2,893,458
versus the comparable period of the previous year. The increase in franchise
royalties was due to an increase in average per store sales by franchised salons
as well as an increase in the number of salons in operation in the first six
months of fiscal 1996 as compared to the same period of fiscal 1995. Franchise
fee revenue (initial franchise fees) was $217,000 during the second quarter of
fiscal 1996, a decrease of 3.3% versus the second quarter of fiscal 1996.
Excluding salon relocations, the company opened 20 franchised salons and six
company-owned salons in the second quarter of fiscal 1996 compared to 23
franchised salons and two company-owned salons during the second quarter of the
previous year. Year to date the franchise fee revenue has increased $229,300 or
60.2% over the prior year comparable period to $610,050. This represents
openings of 53 franchised locations and six company-owned salons versus 38
franchised locations and two company-owned salons for the first six months of
the previous year. Revenue from company-owned salons was $563,705 for the second
quarter and $1,084,316 for the first six months of fiscal 1996, an increase of
87.7% and 92.4% respectively over the comparable periods of the previous year.
The increase in revenue from company-owned salons is due primarily to the
addition of new company-owned salons. Beauty product and equipment sales for the
second quarter of fiscal 1996 were $2,034,407, an increase of $121,791 or 6.4%
over the second quarter of the previous year. Year to date revenue from beauty
products and equipment was $4,063,078, an increase of 13.0% over the first six
months of the previous year. The increase in beauty product and equipment sales
was attributable to the success of the Company's product marketing programs and
an increase in the number of salons.
COSTS & EXPENSES - FRANCHISE OPERATIONS: Total franchise operations expenses
were $674,675 for the second quarter and $1,431,829 for the first six months of
fiscal 1996. This was an increase of 13.3% and 28.8% respectively over the
comparable periods of fiscal 1995. The operating expenses of the first quarter
of fiscal 1996 include the travel and meeting costs for a franchisee convention
which was not held the previous year. In addition, there were increases in sales
commissions on new salon openings, growth in the field staff to service new
salons, and general salary increases averaging about 4.0%.
COSTS & EXPENSES - COMPANY-OWNED SALONS: The Company presently owns and operates
15 salons: 14 operate as Cost Cutters salons and one operates as a City Looks.
During the first six months of fiscal 1996, the Company sold one salon that had
operated under the name The Barbers, Hairstyling for Men & Women. Seven of the
Cost Cutters salons were opened in the later half of fiscal 1995; six of the
Cost Cutters salons were opened in the first half of fiscal 1996 All of these
new salons operate inside Wal-Mart Supercenters. Second quarter operating costs
for the company-owned salons were $607,918 as compared to $342,879 for the
second quarter of the previous year, an increase of 77.3%. Year to date
operating costs were $1,154,156 versus $617,762 for the comparable period of the
previous year. The increase was primarily due to the addition of the new Cost
Cutters salons.
COSTS & EXPENSES - DISTRIBUTION AND GENERAL ADMINISTRATION: Total operating
expenses for distribution and general administration for the second quarter of
fiscal 1996 were $2,699,524 which is an increase of $120,173 or 4.7% over the
second quarter of the prior year. Expenses for the first half of fiscal 1996
were $5,588,891 as compared to $4,968,400 in fiscal 1995, an increase of 12.5%.
Most of this increase was due to increased cost of products and equipment sold,
which corresponds to the increase in sales of products and equipment. The second
quarter cost of products and equipment sold was $1,597,410 versus a prior year
cost of $1,487,527, an increase of 7.4%. Year to date costs of products and
equipment were $3,210,326 versus $2,804,948 the previous year, an increase of
14.5%. Margins on the sale of products and equipment were 21.5% and 21.0% for
the second quarter and first six months respectively. This compares with 22.2%
and 22.0% for the same periods of the previous year. The decline in margins is
primarily to due to changes in product mix. Salaries and benefits were $620,724
and $1,256,425 for the second quarter and first six months of fiscal 1996. This
compares with $593,114 and $1,143,510 for the comparable periods of the previous
year and represents an increase of 4.7% and 9.9% respectively. The increase was
due to increases in staff size, increases in the employee incentive plan as a
result of increased profits, as well as an average increase in salaries of 4.0%.
General and administrative expenses for the second quarter decreased 3.5% to
$481,390. Year to date general and administrative expenses increased by $102,198
or 10.0% over the previous year to $1,122,140.
OPERATING INCOME: Operating income was $381,731 for the second quarter and
$676,574 for the first six months of fiscal 1996. This compares to $274,282 and
$501,165 for the comparable periods of the prior year, an increase of 39.2% and
35.0% respectively. Operating income as a percent of revenue was 8.7% for the
second quarter and 7.6% for the first six months of fiscal 1996. This compares
to 7.2% and 7.0% for the comparable periods of the previous fiscal year.
INTEREST INCOME AND EXPENSE: Interest income was $29,580 for the second quarter
and $60,175 for the first six months of fiscal 1996, an increase versus the
previous year of 12.5% and 5.6% respectively. Interest expense was $6,691 for
the second quarter and $12,562 for the first six months of fiscal 1996. This
compares to $5,581 and $21,152 for the comparable periods of fiscal 1995. This
decrease in interest expense was due to decreases in long term debt and lower
interest rates on term loans.
NET GAIN ON DISPOSAL OF ASSETS: During the first quarter of fiscal 1996, the
Company sold one company-owned salon, one rental property, and miscellaneous
assets. The Company recorded a net gain on disposal of these assets of $31,017.
Gains during the second quarter as well as the comparable periods of the
previous year were minimal.
INCOME TAXES: The Company's effective tax rate for the second quarter and first
half of fiscal 1996 was 42.0% versus a rate of 40.5% for the second quarter and
40.8% for the first six months of fiscal 1995. The increase was largely
attributable to increases in state and local taxes. The Company anticipates that
the rate for the balance of fiscal 1996 will be approximately 42%.
NET INCOME: The Company's net income for the second quarter of 1996 was $234,695
or $.13 per share. This was an increase of $53,626 or 29.6% over the second
quarter of fiscal 1995 net income and an increase of $.03 per share. Net income
for the first six months of fiscal 1996 was up 35.6% to $438,279. Earnings per
share for the first six months were $.24 per share as compared to $.19 for the
previous year.
LIQUIDITY AND CAPITAL RESOURCES: The Company has generally been able to produce
sufficient cash from operations to support expansion of its business, and
expects to continue to do the same in fiscal 1996. The Company expects capital
expenditures during fiscal 1996 to be approximately $500,000, primarily due to
the addition of several new company-owned salons and routine replacement of
office equipment.
The Company currently has a line of credit in the amount of $1,000,000 which
carries an interest rate of .50% over the bank's prime rate which expires April
30, 1997. In addition, the Company also has a term loan with this same lender.
The interest rate on this loan is .75% over the bank's prime rate. The balance
on the loan as of the end of the second quarter of fiscal 1996 was $168,750. All
other long term debt represents capital leases.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
As of March 28, 1996, the Company was not a party to any material litigation and
is not aware of any threatened litigation that would have a material adverse
effect upon its business.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
On December 29, 1995, proxy statements were mailed to the holders of record of
1,694,193 shares of common stock to solicit proxies in connection with the
Annual Meeting of Shareholders on January 30, 1996. Two proposals were submitted
to a vote of shareholders, as follows:
(a) Election of Directors - the following Directors were nominated for
re-election for terms of one year: Florence F. Francis, Frederick A.
Huggins, Marcia J. Bystrom, David E. Emerson, Susan F. Goldstein,
Richard H. King, and James L. Reissner. All directors were re-elected.
1,544,597 shares voted yes, 0 shares voted no, and 262 shares were
withheld for directors Francis, Huggins, Bystrom, Emerson, King, and
Reissner. 1,541,597 shares voted yes, 3000 shares voted no, and 262
shares were withheld for Susan Goldstein.
(b) Ratification and Appointment of Independent Auditors - Ernst & Young
LLP were auditors for the fiscal year ended September 28, 1995. The
Company has appointed Ernst & Young LLP as auditors for the year ending
September 26, 1996. The appointment of Ernst & Young as auditors for
fiscal 1996 was ratified by a vote of shareholders with 1,535,645
shares voting yes, 0 shares voting no, and 9,214 shares abstaining.
ITEM 5. OTHER INFORMATION
On March 14, 1996, the Board of Directors of The Barbers, Hairstyling for Men &
Women, Inc. announced a one time stock bonus to all employees. Under this bonus
program, 193 employees were each issued ten shares of stock. Effective May 1,
1996, a total of 1,930 shares were issued to employees.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are included herein:
Exhibit
Number Description
------ -----------
11 Statement re: computation of earnings per share
10.16b Amendments to Term Loan and Credit Agreement between
The Barbers Hairstyling for Men & Women, Inc. and
Norwest Bank Minnesota, N.A.
27 Financial Data Schedule - For SEC use only
(b) The Company did not file any reports on Form 8-K during the
three months ended March 28, 1996.
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.
THE BARBERS, HAIRSTYLING FOR MEN & WOMEN, INC.
(Registrant)
Date: May 10, 1996 By: /s/ J. Brent Hanson
J. Brent Hanson
Vice President
By: /s/ J. Brent Hanson
J. Brent Hanson
Chief Financial Officer
EXHIBIT 11 - STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
THE BARBERS, HAIRSTYLING FOR MEN & WOMEN, INC.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 28, March 30, March 28, March 30,
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
EARNINGS PER SHARE:
Average shares outstanding 1,694,193 1,684,114 1,693,499 1,682,918
Net effect of dilutive stock options and
warrants -- based on the treasury stock
method using average market price 126,249 61,957 123,054 58,903
---------- ---------- ---------- ----------
Total 1,820,442 1,746,071 1,816,553 1,741,821
========== ========== ========== ==========
Net income $ 234,695 $ 181,069 $ 438,279 $ 323,098
========== ========== ========== ==========
Net income per share of Common
Stock $ 0.13 $ 0.10 $ 0.24 $ 0.19
========== ========== ========== ==========
</TABLE>
Exhibit 10.16b
THIRD AMENDMENT TO CREDIT AGREEMENT
This Third Amendment to Credit Agreement ("Third Amendment") is entered into
this 14th day of February, 1996, by and between The Barbers, Hairstyling For Men
& Women, Inc. ("Borrower") and Norwest Bank Minnesota, National Association
("Bank").
WHEREAS, the Borrower and the Bank executed a Credit Agreement dated July 8,
1994, amended by a First Amendment dated February 24, 1995 and a Second
Amendment dated March 29,1995 (together referred to as the "Agreement") with
regard to repayment of the obligations of the Borrower to the Bank as more fully
described in the Agreement ("Obligations"); and
Whereas, the Borrower has requested that the Bank increase the Termination Date
of the Agreement to April 30, 1997;
NOW, THEREFORE, in consideration of the premises and other valuable
consideration, the Borrower and the Bank hereby agree as follows:
1. AMENDMENTS TO TERMS. Except as revised, amended or modified herein, all
other terms and conditions of the Agreement and all other loan
documents attached thereto or incorporated therein remain in full force
and effect and are incorporated herein and shall remain fully
enforceable and in effect and survive and default herein by Borrower.
1.1 Section 1.16 of the Agreement shall be amended to delete
"April 30, 1996" and insert "April 30, 1997."
2. AMENDMENTS TO CREDIT.
2.1 Section 2.2 of the Agreement is hereby amended by changing the
interest rate margin referenced in said Section from
three-fourths percent (.75%) to one-half percent (.50%).
3. NEW NOTE. Borrower shall execute and deliver to the Bank a promissory
note in the original principal amount of $1,000,000.00 in the form
attached hereto as Exhibit "A" (the "New Note") to evidence the renewal
of the Current Note and not as payment of the Current Note. All
references in the Agreement to the Current Note shall herein refer to
the "New Note."
4. AMENDMENTS TO THE TERM LOAN.
4.1 Section 3.2 of the Agreement is hereby amended by changing the
interest rate margin referenced in said Section from one
percent (1.00%) to three-fourths percent (.75%).
5. AMENDMENTS TO COVENANTS.
5.1 Section 8.1 of the Agreement is hereby amended by changing the
year referenced in said section from 1995 to 1996.
5.2 Section 8.2 of the Agreement shall be amended to delete
"Permit its Tangible Net Worth to be less than $1,811,000.00
as of September 29, 1995" to "Permit its Tangible Net Worth to
be less than $2,000,000.00 as of September 29, 1996."
5.3 Section 8.3 of the Agreement is hereby amended by changing the
date referenced in said section from September 29, 1995 to
September 29, 1996.
5.4 Section 8.4 of the Agreement is hereby amended by changing the
year referenced in said section from 1995 to 1996.
6. SECURITY.
6.1 To secure the New Note and the performance of its additional
obligations as set forth hereunder, the Borrower shall, at the
Bank's sole election, execute and deliver to the Bank on or
before the Closing Date further Security Agreements and
financing statements, in form and substance satisfactory to
the Bank, granting to the Bank a first security interest in
inventory, accounts receivable, machinery, equipment,
furniture, fixtures, and general intangibles, now owned or
hereafter acquired. The Borrower acknowledges that the bank
currently has a security interest in the Borrower's inventory,
accounts receivable, machinery, equipment, furniture,
fixtures, and general intangibles pursuant to a Security
Agreement dated July 8, 1994.
7. NOTIFICATION. Section 11.4.B. of the Agreement is hereby amended by
changing Bank address and contact person as follows:
Norwest Bank Minnesota, National Association
St Paul Office
55 East 5th Street
St Paul, MN 55101
Attention: Brian J. Opp, Vice President
8. RELEASE. In consideration of the accommodations by the Bank hereunder,
Borrower does hereby, on behalf of itself, its agents, insurers, heirs,
successors and assigns, releases, acquits and forever discharges the
Bank and Norwest Corporation (and any and all of their parent
corporations, subsidiary corporations, affiliated corporations,
insurers, indemnitors, successors and assigns, together with all of
their present and former directors, officers, agents and employees)
from any and all claims, demand 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 party for
or by reason of any act, omission, matter, cause or thing whatsoever
from the beginning of time to and including the date of the Third
Amendment, whether such claims, demands and causes of action are
matured or unmatured or known or unknown.
9. ADVICE OF COUNSEL. Borrower acknowledges that it has reviewed this
Third Amendment in its entirety, having consulted such legal, tax or
other advisors as it deems appropriate, and understands and agrees to
each of the provisions of the Third Amendment, and future acknowledges
that it has entered into this Third Amendment voluntarily.
10. FULL FORCE AND EFFECT. Except as revised, amended, or modified herein,
all other terms and conditions of the Agreement and all other loan
documents attached thereto or incorporated therein remain in full force
and effect and are incorporated herein and shall remain fully
enforceable and in effect and survive and default herein by Borrower.
11. ACKNOWLEDGMENT. Borrower acknowledges that nothing contained in this
Third Amendment or any prior actions or inactions of the Bank shall be
construed as a waiver of the Bank's existing rights and remedies under
the New Note, the Agreement, or the collateral documents; nor shall the
Bank's actions or inactions constitute a course of dealing.
IN WITNESS WHEREOF, the parties hereto have duly executed the Third
Amendment as of the day and year first above written.
THE BARBERS, HAIRSTYLING NORWEST BANK MINNESOTA,
FOR MEN & WOMEN, INC. NATIONAL ASSOCIATION
By: /s/ J. Brent Hanson By: /s/ Brian J. Opp
Its: Vice President & CFO Its: Vice President
SECOND AMENDMENT TO NOTE
THIS SECOND AMENDMENT is made on the 14th day of February, 1996 and is
by and between The Barbers, Hairstyling For Men & Women, Inc. (the "Borrower"),
and Norwest Bank Minnesota, National Association (the "Bank").
REFERENCE IS HEREBY MADE to that certain Promissory Note dated July 8,
1994, as amended by a First Amendment dated March 29, 1995 (as amended, the
"Note") made by the Borrower in the face amount of $300,000.00 payable to the
Bank. Capitalized terms not otherwise defined herein shall have the respective
meanings ascribed to them in the Note.
WHEREAS, the Borrower and the Bank have agreed to modify the rate at
which interest on the Note accrues;
NOW, THEREFORE, in consideration of the premises and for other valuable
consideration received, it is agreed as follows;
1. The Note is hereby amended by changing the margin above the
Base Rate referenced in the first paragraph of the Note from
"one percent ( 1.0%)" to "three-fourths percent (.75%)".
2. The effective date of this Second Amendment shall be February
14, 1996.
3. Except as expressly modified by this Second Amendment, the
Note remains unchanged and in full force and effect.
IN WITNESS WHEREOF, the Borrower and the Bank have executed this Second
Amendment on the date first written above.
THE BARBERS, HAIRSTYLING NORWEST BANK MINNESOTA,
FOR MEN & WOMEN, INC. NATIONAL ASSOCIATION
By: /s/ J. Brent Hanson By: /s/ Brian J. Opp
Its: Vice President & CFO Its: Vice President
PROMISSORY NOTE
$1,000,000.00 FEBRUARY 14, 1996
FOR VALUE RECEIVED, the undersigned, THE BARBERS, HAIRSTYLING FOR MEN &
WOMEN, INC., a Minnesota corporation with offices in Minneapolis, Minnesota,
promises to pay on April 30, 1997 to the order of Norwest Bank Minnesota,
National Association (the "Bank") at the Bank's St. Paul Office in St. Paul,
Minnesota, or at any other place designated at any time by the holder hereof, in
lawful money of the United States of America, the principal sum of ONE MILLION
AND NO/100 DOLLARS ($1,000,000.00), or so much thereof as is disbursed and
remains outstanding hereunder as shown by the Bank's liability record on the
dates payments are due hereunder, together with interest on the unpaid balance
hereof from the date hereof until this Note is fully paid, at an annual rate
equal to one-half percent (.50%) in excess of the rate of interest established
from time to time by the Bank as its Base Rate. The interest rate of this Note
shall change simultaneously with each change in the Base Rate and shall be
calculated on the basis of actual number of days elapsed and a 360-day year.
Interest on this Note is payable ON DEMAND, but until such demand is
made, interest shall be payable monthly, commencing February 29, 1996, and
continuing on the last day of each succeeding month.
This Note constitutes the Current Note issued pursuant to the
provisions of that certain Credit Agreement dated as of July 8, 1994, as amended
February 24, 1995 and March 29, 1995, and as amended of even date herewith
(collectively referred to as the "Credit Agreement") made between the
undersigned and the Bank. Reference is hereby made to the Credit Agreement for a
statement of the terms pursuant to which the indebtedness evidenced hereby was
created, is secured, may be voluntarily prepaid, may be reborrowed, and may be
accelerated.
Unless prohibited by law, the undersigned agrees to pay all costs of
collection, including reasonable attorneys' fees and legal expenses, incurred by
the holder hereof in the event that this Note is not duly paid. The holder
hereof may change any terms of payment of this Note, including extensions of
time and renewals, and may release any security for, or any party to, this Note,
without notifying or releasing any accommodation of maker, endorser, or
guarantor from liability in connection with this Note. Presentment or other
demand for payment, notice of dishonor, and protest are hereby waived by the
undersigned and each endorser or guarantor. This Note shall be governed by the
substantive laws of the State of Minnesota.
THE BARBERS, HAIRSTYLING
FOR MEN & WOMEN, INC.
By: /s/ J. Brent Hanson
Its: Vice President & CFO
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
unaudited financial statements for the Second Quarter of Fiscal 1996 contained
in the Company's report on Form 10-QSB and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-26-1996
<PERIOD-START> SEP-29-1995
<PERIOD-END> MAR-28-1996
<CASH> 789,564
<SECURITIES> 0
<RECEIVABLES> 2,872,510
<ALLOWANCES> 285,000
<INVENTORY> 1,244,582
<CURRENT-ASSETS> 4,977,350
<PP&E> 2,731,750
<DEPRECIATION> 1,829,768
<TOTAL-ASSETS> 7,703,523
<CURRENT-LIABILITIES> 2,423,646
<BONDS> 0
0
0
<COMMON> 169,419
<OTHER-SE> 4,568,330
<TOTAL-LIABILITY-AND-EQUITY> 7,703,523
<SALES> 4,063,078
<TOTAL-REVENUES> 8,851,450
<CGS> 3,210,326
<TOTAL-COSTS> 4,364,482
<OTHER-EXPENSES> 3,810,394
<LOSS-PROVISION> 141,217
<INTEREST-EXPENSE> 12,562
<INCOME-PRETAX> 755,279
<INCOME-TAX> 317,000
<INCOME-CONTINUING> 438,279
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 438,279
<EPS-PRIMARY> .24
<EPS-DILUTED> .24
</TABLE>
