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 26, 1998
[ ] 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 8, 1998, the registrant had 3,943,302 outstanding shares of
common stock, $. 10 par value.
<PAGE>
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 26, 1998 and March 27, 1997
Condensed Consolidated Statements of Financial Position at
March 26, 1998 and September 25, 1997
Condensed Consolidated Statements of Cash Flows for the
Quarter Ended March 26, 1998 and March 27, 1997
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 6. Exhibits and Reports on Form 8-K
SIGNATURES
Exhibit 27 Financial Data Schedule
<PAGE>
THE BARBERS, HAIRSTYLING FOR MEN & WOMEN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
SECOND QUARTER F1998
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 26, March 27, March 26, March 27,
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUES
Franchise Royalties $ 2,057,671 $ 1,754,202 $ 3,968,008 $ 3,251,267
Franchise Fees 211,500 193,200 542,000 424,318
Company-Owned Salons 1,474,100 1,042,828 2,806,804 2,124,877
Beauty Products & Equipment 2,568,186 2,446,643 5,208,493 4,291,935
Other 131,642 147,365 354,621 334,894
------------ ------------ ------------ ------------
Total Revenues 6,443,099 5,584,238 12,879,926 10,427,291
COSTS & EXPENSES
Franchise Operations
Salaries & Benefits 555,869 502,001 1,109,174 952,086
General & Administrative 232,601 235,033 634,976 537,936
------------ ------------ ------------ ------------
Total 788,470 737,034 1,744,150 1,490,022
------------ ------------ ------------ ------------
Company-Owned Salons
Salaries & Benefits 794,945 579,627 1,484,186 1,160,835
General & Administrative 391,858 296,333 719,221 614,615
Cost of Products & Services 251,137 142,145 493,201 303,041
------------ ------------ ------------ ------------
Total 1,437,940 1,018,105 2,696,608 2,078,491
------------ ------------ ------------ ------------
Distribution & General Administration
Salaries & Benefits 850,796 773,322 1,648,512 1,433,331
General & Administrative 650,274 629,086 1,466,749 1,233,283
Cost of Products & Equipment 1,945,178 1,859,832 4,036,122 3,272,722
------------ ------------ ------------ ------------
Total 3,446,248 3,262,240 7,151,383 5,939,336
------------ ------------ ------------ ------------
OPERATING INCOME 770,441 566,859 1,287,785 919,442
OTHER INCOME (EXPENSE)
Interest Income 53,517 37,629 106,303 67,467
Interest Expense (51,508) (35,368) (105,628) (41,066)
Net Gain on Disposal of Assets 20,070 2,476 20,070 3,066
------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAXES 792,520 571,596 1,308,530 948,909
INCOME TAX EXPENSE 333,000 241,000 550,000 399,000
------------ ------------ ------------ ------------
NET INCOME $ 459,520 $ 330,596 $ 758,530 $ 549,909
============ ============ ============ ============
AVERAGE SHARES OUTSTANDING 3,913,886 3,857,181 3,902,762 3,855,137
============ ============ ============ ============
BASIC EARNINGS PER SHARE $ 0.12 $ 0.09 $ 0.19 $ 0.14
============ ============ ============ ============
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING 4,338,734 4,227,083 4,315,419 4,217,124
============ ============ ============ ============
DILUTED EARNINGS PER SHARE $ 0.11 $ 0.08 $ 0.18 $ 0.13
============ ============ ============ ============
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE>
THE BARBERS, HAIRSTYLING FOR MEN & WOMEN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
March 26, September 25,
1998 1997
----------- -----------
<S> <C> <C>
ASSETS (Unaudited) (Note 1)
Current assets:
Cash $ 2,148,179 $ 2,789,933
Trade receivable, less allowance for doubtful
accounts of $550,000 in March 1998 and
$450,000 in September 1997 3,306,832 2,846,083
Notes receivable 626,263 596,635
Inventories held for resale 1,748,960 1,684,312
Prepaid expenses 116,197 120,744
Deferred income taxes 360,000 360,000
----------- -----------
Total current assets 8,306,431 8,397,707
Notes receivable, less current portion and allowance for
doubtful notes of $180,000 in March 1998 and
$125,000 in September 1997 391,653 621,877
Property, equipment and leasehold impovements, at cost:
Equipment 2,533,167 2,044,204
Leasehold improvements 945,150 945,150
----------- -----------
3,478,317 2,989,354
Less accumulated depreciation 2,227,479 2,094,285
----------- -----------
Net property, equipment and leasehold improvements 1,250,838 895,069
Investment in franchise contracts, less accumulated
amortization of $492,891 in March 1998 and
$419,260 in September 1997 2,505,692 2,321,618
Deferred income taxes 386,000 386,000
Other assets 322,784 286,271
----------- -----------
Total assets $13,163,398 $12,908,542
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt and capital
lease obligations $ 364,919 $ 339,150
Accounts payable 668,493 573,088
Deferred franchise fees 144,750 90,000
Committed advertising 547,413 933,502
Accrued compensation and related payroll taxes 725,594 935,653
Other accrued expenses 452,307 296,548
Income taxes payable 56,380 202,934
----------- -----------
Total current liabilities 2,959,856 3,370,875
Long term debt and capital lease obligations 1,937,436 2,111,689
Deferred franchise fees 201,000 201,000
Deferred compensation 323,674 287,786
Shareholders' equity:
Common stock 261,545 259,195
Additional paid in capital 501,017 457,657
Retained earnings 6,978,870 6,220,340
----------- -----------
Total shareholder's equity 7,741,432 6,937,192
----------- -----------
Total liabilities and shareholders' equity $13,163,398 $12,908,542
=========== ===========
</TABLE>
Note 1: The balance sheet at September 25, 1997 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 fiscal 1997 items have been
reclassified to conform with the fiscal 1998 presentation.
See notes to condensed consolidated financial statements.
<PAGE>
THE BARBERS, HAIRSTYLING FOR MEN & WOMEN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
March 26, March 27,
1998 1997
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 758,530 $ 549,909
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 235,494 232,564
Provision for losses on accounts and notes receivable 181,253 60,000
Gain on sales of property and equipment (20,070) (3,066)
Stock compensation 20,400 19,080
Changes in operating assets and liabilities:
Decrease (increase) in:
Accounts and notes receivable (441,406) (888,570)
Inventories held for resale (64,648) (198,658)
Prepaid expenses 4,547 (20,414)
Other assets (36,513) (47,087)
(Decrease) increase in:
Payables and accrued expenses (309,096) 337,118
Deferred franchise fees 54,750 2,500
Income taxes payable (146,554) (73,900)
----------- -----------
Net cash provided by (used in) operating activities 236,687 (30,524)
INVESTING ACTIVITIES
Proceeds from sale of property and equipment 55,100 98,590
Capital expenditures (538,463) (219,834)
Investment in franchise contracts (271,904) (2,029,182)
----------- -----------
Net cash used in investing activities (755,267) (2,150,426)
FINANCING ACTIVITIES
Additions to long-term debt -- 2,500,000
Principle payments on long-term debt (148,484) (63,882)
Principle payments on capital lease obligations -- (7,204)
Proceeds from issuance of stock options 25,310 --
----------- -----------
Net cash provided by (used in) financing activities (123,174) 2,428,914
----------- -----------
Net increase (decrease) in cash and cash equivalents (641,754) 247,964
Cash and cash equivalents at beginning of period 2,789,933 1,317,448
----------- -----------
Cash and cash equivalents at end of period $ 2,148,179 $ 1,565,412
=========== ===========
CASH PAID DURING PERIOD FOR:
Interest $ 105,628 $ 41,066
Taxes $ 696,554 $ 448,900
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE>
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 six months
ended March 26, 1998, are not necessarily indicative of the results that may be
expected for the year ended September 24, 1998. 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 25, 1997.
NOTE B - EARNINGS PER SHARE
In 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, EARNINGS PER SHARE. Statement 128
replaced the previously reported primary and fully diluted earnings per share.
Unlike primary earnings per share, basic earnings per share excludes any
dilutive effects of options, warrants, and convertible securities. Diluted
earnings per share is very similar to the previously reported fully diluted
earnings per share. All earnings per share amounts for all periods have been
presented, and where necessary, restated to conform to the Statement 128
requirements.
The following table sets forth the computation of basic and diluted
earnings per share:
<TABLE>
<CAPTION>
Quarter ended Six months ended
----------------------- -----------------------
March 26, March 27, March 26, March 27,
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Numerator:
Net Income $ 459,520 $ 330,596 $ 758,530 $ 549,909
========== ========== ========== ==========
Denominator:
Denominator for basic earnings
per share - weighted average
shares 3,913,886 3,857,181 3,902,762 3,855,137
Effect of dilutive stock options and
warrants 424,848 369,902 412,657 361,987
---------- ---------- ---------- ----------
Denominator for diluted earnings
per share - adjusted weighted
average shares 4,338,734 4,227,083 4,315,419 4,217,124
========== ========== ========== ==========
Basic earnings per share $ 0.12 $ 0.09 $ 0.19 $ 0.14
========== ========== ========== ==========
Diluted earnings per share $ 0.11 $ 0.08 $ 0.18 $ 0.13
========== ========== ========== ==========
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company is in the business of franchising three 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"), "City Looks Salons International(R)" ("City Looks") and "We
Care Hair(R)". 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, City Looks and We Care Hair.
The Company had 976 franchised and company-owned salons in operation as
of March 26, 1998, compared to 945 at March 27, 1997. 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 1998
and 1997 include 52 weeks of operations.
RESULTS OF OPERATIONS
REVENUES: The Company's total revenues were $6,443,099 for the second quarter of
fiscal 1998 and $12,879,926 for the first six months of fiscal 1998, an increase
of 15.4% and 23.5% respectively over the comparable periods of the previous
year. Franchise royalties totaled $2,057,671 for the second quarter of fiscal
1998 which is an increase of 17.3% over the second quarter of the previous year.
Franchise royalties for the first six months increased 22.0% to $3,968,008
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 1998 as compared to the same period of fiscal 1997. Franchise
fee revenue (initial franchise fees) was $211,500 during the second quarter of
fiscal 1998, an increase of 9.5% versus the second quarter of fiscal 1997. The
increase in franchise fee revenue was due to an increase in the number of salons
opened during the comparable periods. A total of twenty-one new salons opened in
the second quarter of fiscal 1998 versus fifteen new salons in the second
quarter of the previous year. Year to date the franchise fee revenue has
increased $117,682 or 27.7% over the prior year comparable period to $542,000.
This represents openings of 51 franchised locations and one company-owned salon
versus 29 franchised locations and four company-owned salons for the first six
months of the previous year. Revenue from company-owned salons was $1,474,100
for the second quarter and $2,806,804 for the first six months of fiscal 1998,
an increase of 41.4% and 32.1% 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 and sales growth at salons
opened last year. Beauty product and equipment sales for the second quarter of
fiscal 1998 were $2,568,186, an increase of $121,543 or 5.0% over the second
quarter of the previous year. Year to date revenue from beauty products and
equipment was $5,208,493, an increase of 21.4% over the first six months of the
previous year. The increase in beauty product and equipment sales was
attributable to the addition of new product lines, merchandising programs and an
increase in the total number of new salons opened during the first six months of
fiscal 1998 compared to the same period for the previous year.
COSTS & EXPENSES - FRANCHISE OPERATIONS: Total franchise operations expenses
were $788,470 for the second quarter and $1,744,150 for the first six months of
fiscal 1998. This was an increase of 7.0% and 17.1% respectively over the
comparable periods of fiscal 1997. The increase was due to growth in field
<PAGE>
staff and related travel to service new salons including the new We Care Hair
salons, and general salary increases averaging about 4.0%. Also, the operating
expenses of the first quarter of fiscal 1998 include travel and meeting costs
for a franchisee convention held at a remote location. The franchisee convention
was held locally in the first quarter of fiscal 1997.
COSTS & EXPENSES - COMPANY-OWNED SALONS: The Company presently owns and operates
26 salons: 25 operate as Cost Cutters salons and one operates as a City Looks.
Twenty-one of the Cost Cutters salons operate inside Wal-Mart Supercenters.
During the second quarter of fiscal 1998 two Company-owned salons were sold.
Second quarter operating costs for the company-owned salons were $1,437,940 as
compared to $1,018,105 for the second quarter of the previous year, an increase
of 41.2%. Year to date operating costs were $2,696,608 versus $2,078,491 for the
comparable period of the previous year. This increase was primarily due to the
costs associated with increase sales of services and beauty products in the
salons.
COSTS & EXPENSES - DISTRIBUTION AND GENERAL ADMINISTRATION: Total operating
expenses for distribution and general administration for the second quarter of
fiscal 1998 were $3,446,248 which is an increase of $184,008 or 5.6% over the
second quarter of the prior year. Expenses for the first half of fiscal 1998
were $7,151,383 as compared to $5,939,336 in fiscal 1997, an increase of 20.4%.
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 $1,945,178 versus a prior year
cost of $1,859,832, an increase of 4.6%. Year to date costs of products and
equipment were $4,036,122 versus $3,272,722 the previous year, an increase of
23.3%. Margins on the sale of products and equipment were 24.3% and 22.5% for
the second quarter and first six months respectively. This compares with 24.0%
and 23.7% for the same periods of the previous year. The decrease in the first
six months margins is primarily due to changes in product mix. Salaries and
benefits were $850,796 and $1,648,512 for the second quarter and first six
months of fiscal 1998. This compares with $773,322 and $1,433,331 for the
comparable periods of the previous year and represents an increase of 10.0% and
15.0% respectively. The increase was due to increases in staff size, as well as
an average increase in salaries of 4.0%. General and administrative expenses for
the second quarter increased 3.4% to $650,274. Year to date general and
administrative expenses increased by $233,466 or 18.9% over the previous year to
$1,466,749. A large portion of the increase is due to additional professional
fees associated with the acquisition of We Care Hair salons, amortization of the
We Care Hair investment and increases in reserves for bad debts.
OPERATING INCOME: Operating income was $770,441 for the second quarter and
$1,287,785 for the first six months of fiscal 1998. This compares to $566,859
and $919,442 for the comparable periods of the prior year, an increase of 35.9%
and 40.1% respectively. Operating income as a percent of revenue was 12.0% for
the second quarter and 10.0% for the first six months of fiscal 1998. This
compares to 10.2% and 8.8% for the comparable periods of the previous fiscal
year.
INTEREST INCOME AND EXPENSE: Interest income was $53,517 for the second quarter
and $106,303 for the first six months of fiscal 1998, an increase versus the
previous year of 42.2% and 57.6% respectively. Interest expense was $51,508 for
the second quarter and $105,628 for the first six months of fiscal 1998. This
compares to $35,368 and $41,066 for the comparable periods of fiscal 1997. This
increase in interest expense was due to additions in long term debt related to
the acquisition of We Care Hair.
NET GAIN ON DISPOSAL OF ASSETS: During the second quarter of fiscal 1998, the
Company sold two company-owned salons and miscellaneous assets. The Company
recorded a net gain on disposal of these assets of $20,070. During the second
quarter of fiscal 1997, the Company sold four company-owned salons and
miscellaneous assets. The Company recorded a net gain on disposal of these
assets of $2,476. Gains during the first quarter of fiscal 1998 as well as the
first quarter of the previous year were minimal.
<PAGE>
INCOME TAXES: The Company's effective tax rate for the second quarter and first
half of fiscal 1998 was 42.0%, versus a rate of 42.2% for the second quarter of
fiscal 1997 and 42.0% first six months of fiscal 1997. The Company anticipates
that the rate for the balance of fiscal 1998 will be approximately 42%.
NET INCOME: The Company's net income for the second quarter of 1998 was $459,520
or $.11 per diluted share. This was an increase of $128,924 or 39.0% over the
second quarter of fiscal 1997 net income and an increase of $.03 per share. Net
income for the first six months of fiscal 1998 was up 37.9% to $758,530. Diluted
earnings per share for the first six months were $.18 per share as compared to
$.13 for the previous year. Earnings per share have been adjusted to reflect the
3-for-2 stock split which was issued April 17, 1998.
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 1998. The Company expects capital
expenditures during fiscal 1998 to be approximately $500,000 to $600,000,
primarily due to the addition of new company-owned salons, routine replacement
of office equipment, and the addition of a new warehouse.
The Company currently has a line of credit in the amount of $1,500,000 which
carries an interest rate at the bank's prime rate which expires June 30, 1998.
The Company expects that the bank will renew this line of credit under similar
terms and conditions. In addition, the Company also has three term loans with
this same lender. One of these loans carries an interest rate equal to the
bank's prime rate and had a balance of $18,750 at March 26, 1998. A second loan
also carries an interest rate equal to the bank's prime rate and had a balance
of $972,224 at the end of the quarter. The third loan carries an interest rate
of 8.82% and had a balance of $1,311,381.
Management believes that cash generated from operating activities, together with
funds available from its line of credit will be sufficient to fund its
anticipated operations, capital expenditures, and required debt repayments for
the foreseeable future.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Other than as set forth below, the Company is not currently a party to
any material pending legal proceedings. From time to time the Company may become
involved in routine litigation incidental to its business.
LELA BISHOP, ET AL. V. DOCTOR'S ASSOCIATES, INC., FREDERICK DELUCA,
PETER H. BUCK, FRANCHISE WORLD HEADQUARTERS, INC., WE CARE HAIR
DEVELOPMENT, INC., JOHN AMICO, SR., FRED FLORIO, THE BARBERS,
HAIRSTYLING FOR MEN & WOMEN, INC., WE CARE HAIR REALTY, INC., FRANCHISE
REAL ESTATE LEASING CORP., JOHN F. AMICO & COMPANY, WCH, INC. AND JAMI
INTERNATIONAL, INC. (Circuit Court, Third Judicial Circuit, Madison
County, Illinois, Cause No. 97-L-231, filed February 4, 1997).
Approximately 58 present or former We Care Hair(R) franchisees have
joined in this lawsuit and requested certification of the lawsuit as a
class action pursuant to 735 ILCS Section 5/2-801 et seq. on behalf of
all past and present We Care Hair(R) franchisees. This lawsuit has been
brought against the above defendants for alleged breaches of fiduciary
duty. The plaintiffs further allege that We Care Hair Development, Inc.
and all other defendants in this lawsuit have violated the Illinois
Anti-trust Statute, 740 ILCS Section 10/3 (2) or (3), by requiring We
Care Hair(R) franchisees to purchase alleged unusable hair care
products. The plaintiffs further allege that We Care Development, Inc.
and all other defendants in this lawsuit have violated the Illinois
Franchise Disclosure Act by using a standard franchise agreement for We
Care Hair(R) franchises that
<PAGE>
violated the anti-waiver provisions of 815 ILCS Section 705/41, and by
engaging in fraudulent practices and selling franchises at certain
times during which We Care Development, Inc.'s registration with the
Illinois Attorney General's Office had lapsed. The Company and its
subsidiary, WCH, Inc., have been named as defendants in this lawsuit
under the theory that they acted with all other defendants pursuant to
a civil conspiracy and/or mutual scheme with concerted action for the
purpose of constructively terminating the We Care Hair(R) franchises
throughout the country by convincing We Care Hair(R) franchisees to
execute new franchise agreements with the Company to operate as Cost
Cutters franchisees and decrease and/or eliminate all services and
advertising for the remaining We Care Hair(R) franchisees in violation
of the Illinois Franchise Disclosure Act. We Care Hair Realty, Inc., a
wholly-owned subsidiary of WCH, Inc., has been named as a defendant in
this lawsuit under the theory that it also participated in the
conspiracy or scheme by attempting to transfer the We Care Hair(R)
subleases to the Company and WCH, Inc. The plaintiffs seek to recover
an award of actual damages, punitive damages, treble damages and
attorneys fees in an amount not to exceed, in the aggregate, under all
counts of the complaint, against all defendants, the sum of $74,950 for
each franchisee, and for court costs.
This case is in the early pretrial stage. The Company, WCH, Inc. and We Care
Hair Realty, Inc. have initiated an action in Illinois Federal District Court
seeking to compel arbitration of the claims of the plaintiffs. The co-defendants
have initiated a separate action in Illinois Federal District Court also seeking
to compel arbitration of the claims of the plaintiffs. By order dated September
25, 1997, the Federal district Court compelled all non-Illinois plaintiffs to
arbitrate their disputes with the co-defendants, and enjoined all non-Illinois
plaintiffs from continuing the lawsuit against all defendants, including the
Company, WCH, Inc. and We Care Hair Realty, Inc. The plaintiffs have appealed
this ruling. In addition, on March 9, 1998, the Appellate Court of Illinois -
Fifth District ordered the State Court proceeding to be transferred to the
Circuit Court of Cook County, Illinois.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
On December 30, 1997, proxy statements were mailed to the holders of record of
2,594,532 shares of common stock to solicit proxies in connection with the
Annual Meeting of Shareholders on January 27, 1998. 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
with 2,385,685 shares voting yes.
(b) Ratification and Appointment of Independent Auditors - Ernst & Young
LLP were auditors for the fiscal year ended September 25, 1997. The
Company has appointed Ernst & Young LLP as auditors for the year ending
September 24, 1998. The appointment of Ernst & Young as auditors for
fiscal 1998 was ratified by a vote of shareholders with 2,382,505
shares voting yes, 68 shares voting no, and 3,682 shares abstaining.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are included herein:
Exhibit
Number Description
- -------- -----------
27 Financial Data Schedule
<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.
THE BARBERS, HAIRSTYLING FOR MEN & WOMEN, INC.
(Registrant)
Date: May 8, 1998 By: /s/ Frederick A. Huggins
------------------------
Frederick A. Huggins
President & Chief Executive Officer
By: /s/ J. Brent Hanson
------------------------
J. Brent Hanson
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED FINANCIAL STATEMENTS FOR THE 2ND QUARTER OF FISCAL 1998 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
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