Gottschalks Inc – ‘8-K/A’ for 8/20/98

As of:  Tuesday, 11/3/98   ·   For:  8/20/98   ·   Accession #:  790414-98-17   ·   File #:  1-09100

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Amendment to Current Report   —   Form 8-K
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 8-K/A       Amendment to Current Report                           30±   110K 

Document Table of Contents

Securities and Exchange Commission                                    
Washington, D. C. 20549                                   

Form 8-K/A                                    
Amendment No. 1                                   

Current Report                                    
Pursuant to Section 13 or 15(d) of the                                    
Securities Exchange Act of 1934                                   

Date of Report (Date of earliest event reported):      August 20, 1998          

Gottschalks Inc.                                    
(Exact Name of Registrant as specified in its charter)                          

Delaware           1-09100         77-0159791                                   
(State or other    (Commission    (IRS Employer                                 
jurisdiction       File Number    Identification                                
Number)     

7 River Park Place East, Fresno California   93720                              
(Address of Principal Executive Offices)   (Zip Code)                           

Registrant's telephone number including area code:     (209) 434-4800           

Not Applicable                                    
(Former name or former address, if changed since last report)                   

The purpose of this Form 8-K/A is to amend the Form 8-K, which                  
was filed on September 2, 1998, to provide the                                  
following required financial information:                                       

Item 7.  Financial Statements, Pro Forma Financial                              
Information and Exhibits.                                                       

INDEX                                   
                            Page
(a)  Financial Information of Business Acquired.                                

(i) Historical Financial Statements of The                                      
Harris Company                                                          

Audited financial statements for each of the three                              
years in the period ended January 31, 1998, and the                             
independent auditors' report of Eadie and Payne LLP                             
with respect thereto.....................           3 - 17                      

(ii) Unaudited Financial Statements of The                                      
Harris Company                                                    

Unaudited balance sheet as of                                                   
August 1, 1998..............................    19 - 20                     

Unaudited statement of operations for the                                       
six month period ended                                                      
August 1, 1998..............................         21                     

Unaudited statement of cash flows for the                                       
six month period ended August 1, 1998.......         22                     

Notes to unaudited financial statements for                                     
the six month period ended August 1, 1998...    23 - 24                     

(b)  Pro Forma Financial Information.                                           

Unaudited pro forma combined condensed                                          
consolidated balance sheet as of                                            
August 1, 1998..............................    26 - 27                     

Unaudited proforma combined consolidated                                        
statement of operations for the six month                                   
period ended August 1, 1998.................         28                     

Unaudited pro forma combined consolidated                                       
statement of operations for the fiscal year                                 
ended January 31,1998.......................         29                     

Notes to unaudited pro forma combined condensed                                 
consolidated financial statements..........       30 - 32                       

(c)  Exhibit and Signature                             33                       

THE HARRIS COMPANY                                    

Audited Financial Statements for                                    
each of the three years in the period                                     
ended January 31, 1998 and                                    
Independent Auditors' Report                                    

INDEPENDENT AUDITORS' REPORT                                    

Board of Directors                                                              
The Harris Company                                                              
San Bernardino, California                                                      

We have audited the accompanying balance sheets of The                          
Harris Company as of January 31, 1998 and February 1,                           
1997, and the related statements of operations,                                 
stockholders' equity, and cash flows for each of the                            
three years in the period ended January 31, 1998. These                         
statements are the responsibility of the Company's                              
management. Our responsibility is to express an opinion                         
on these financial statements based on our audits.                              

We conducted our audits in accordance with generally                            
accepted auditing standards. Those standards require                            
that we plan and perform the audit to obtain reasonable                         
assurance about whether the financial statements are                            
free of material misstatement. An audit includes                                
examining, on a test basis, evidence supporting the                             
amounts and disclosures in the financial statements. An                         
audit also includes assessing the accounting principles                         
used and significant estimates made by management, as                           
well as evaluating the overall financial statement                              
presentation. We believe that our audits provide a                              
reasonable basis for our opinion.                                               

In our opinion, the financial statements referred to                            
above present fairly, in all material respects, the                             
financial position of The Harris Company as of January                          
31, 1998 and February 1, 1997, and the results of its                           
operations and its cash flows for each of the three                             
years in the period ended January 31, 1998, in                                  
conformity with generally accepted accounting                                   
principles.                                                                     

s/Eadie and Payne LLP                                                           
EADIE AND PAYNE LLP                                                             
San Bernardino, California                                                      
March 20, 1998                                                                  

                                                                [Download Table]


THE HARRIS COMPANY                                                    
BALANCE SHEETS                                                        
(In thousands of dollars)                                             

                               ASSETS                                 

                                       January 31,         February 1,
                                          1998                1997    
CURRENT ASSETS:                                                       
                                                                      
  Cash                                   $ 1,270            $   1,894 
  Receivables:                                                        
   Customers' accounts, less allowances   16,584               20,024 
     of $444 in 1997 and $1,381 in 1996                               
   Other receivables                       1,897                2,118 
                                          18,481               22,142 
  Merchandise inventories                 25,512               28,575 
  Other                                    2,411                2,833 
     Total current assets                 47,674               55,444 

PROPERTY, LEASEHOLD IMPROVEMENTS,                                     
   AND EQUIPMENT:                                                     
  Land and land improvements                 524               11,881 
  Buildings                               13,708               37,720 
  Remodeling and improvements              7,657                7,633 
  Fixtures, furniture, and equipment      23,361               23,488 
  Construction-in-progress                                        252 
  Property and equipment under capital                                
    leases                                   112                  112 
                                          45,362               81,086 
  Less accumulated depreciation and                                   
    amortization                          23,228               24,792 
                                          22,134               56,294 
OTHER ASSETS                                 869                1,144 

TOTAL ASSETS                           $  70,677             $112,882 


The accompanying notes are an integral part of the financial statements.        

                                                                [Download Table]


THE HARRIS COMPANY                                                  
BALANCE SHEETS                                                      
(In thousands of dollars)                                           

                   LIABILITIES AND STOCKHOLDERS' EQUITY             

                                         January 31,     February 1,
                                           1998            1997     
CURRENT LIABILITIES:                                                
                                                                    
  Revolving line of credit - Note 4       $ 1,000         $ 18,800  
  Current portion of long-term debt -                               
    Note 5                                    202              423  
  Trade accounts payable                    4,429            4,665  
  Accrued expenses                          4,990            5,681  
    Total current liabilities              10,621           29,569  

LONG-TERM DEBT, less current portion:                               
  Mortgage loans payable - Note 5           6,855           29,849  
  Float loan payable - Note 5               3,150            3,150  
  Capitalized lease obligations                45               69  
                                           10,050           33,068  

DEFERRED INCOME AND OTHER                     202            8,508  

COMMITMENTS AND CONTINGENCIES - Note 10                             

STOCKHOLDERS' EQUITY:                                               
  Capital stock, par value $100; authorized                         
    2,000,000 and 1,000,000 shares,                                 
    respectively; issued and outstanding                            
    1,056,639 and 826,639 shares,                                   
    respectively                          109,447          86,447   
  Accumulated deficit                     (59,643)        (44,710)  
                                           49,804          41,737   

 TOTAL LIABILITIES AND STOCKHOLDERS'                                
   EQUITY                                $ 70,677        $112,882   


The accompanying notes are an integral part of the financial statements.        

                                                                [Download Table]


THE HARRIS COMPANY                                            
STATEMENTS OF OPERATIONS                                      
(In thousands of dollars)                                     

                             1997         1996         1995   

                                                              
Net sales                 $ 97,403      $ 97,538     $ 97,243 
Service charge income        2,900         3,469        3,573 
                           100,303       101,007      100,816 
Costs and expenses:                                           
  Cost of sales             66,259        62,747       64,137 
  Selling, general and                                        
    administrative                                            
    expenses                41,944        42,333       41,566 
  Depreciation and                                            
    amortization             3,388         3,590        3,644 
                           111,591       108,670      109,347 
     Operating loss        (11,288)       (7,663)     (8,531) 

Other (income) expense:                                       
   Interest expense          3,655         4,028        3,548 
   Miscellaneous income     (8,323)         (594)        (869)
                            (4,668)        3,434        2,679 

    Loss before income                                        
     taxes                  (6,620)      (11,097)     (11,210)

Income taxes - Note 7        ---           ---           ---  

    Net loss              $ (6,620)     $(11,097)    $(11,210)


The accompanying notes are an integral part of the financial statements.        

                                                                [Download Table]


THE HARRIS COMPANY                                             
STATEMENTS OF STOCKHOLDERS' EQUITY                             
(In thousands of dollars)                                      

                            Capital     Accumulated            
                             Stock       Deficit      Total    

BALANCE,                                                       
                                                               
  JANUARY 29, 1995          $ 86,447    $(22,403)     $ 64,044 
  Net loss                               (11,210)      (11,210)

 BALANCE,                                                      
  FEBRUARY 3, 1996            86,447     (33,613)       52,834 
  Net loss                               (11,097)      (11,097)

BALANCE,                                                       
  FEBRUARY 1, 1997            86,447     (44,710)       41,737 
  Net loss                                (6,620)       (6,620)
  Distribution to stockholder -                                
    Note 3                    23,000      (8,313)       14,687 

BALANCE,                                                       
 JANUARY 31, 1998           $109,447    $(59,643)     $ 49,804 


The accompanying notes are an integral part of the financial statements.        

                                                                [Download Table]


THE HARRIS COMPANY                                                   
STATEMENTS OF CASH FLOWS                                             
(In thousands of dollars)                                            

                                       1997        1996      1995    
CASH FLOWS FROM OPERATING ACTIVITIES                                 
                                                                     
Net loss                             $(6,620)   $(11,097)   $(11,210)
Adjustments to reconcile net loss                                    
  to net cash used in operating                                      
   activities:                                                       
     Depreciation and amortization     3,388       3,590       3,644 
   Provision for losses on accounts                                  
     receivable                        2,268       1,331       1,113 
   Amortization of contributed                                       
     property                           (872)       (872)       (872)
   Realized gain on distribution of                                  
     contributed property             (7,433)                        
   Loss on disposal of assets            252                       4 
   Software in progress written off                  420          45 
   (Increase) decrease in assets:                                    
      Receivables                      1,393          93       1,754 
      Merchandise inventories          3,063      (4,431)      3,601 
      Other current and long-term                                    
        assets                           422       1,379        (622)
    Increase (decrease) in liabilities:                              
      Trade accounts payable            (237)      1,244        (936)
      Other current and long-term                                    
        liabilities                     (690)      2,405      (1,647)
     Net cash used in operating                                      
        activities                    (5,066)     (5,938)     (5,126)
CASH FLOWS FROM INVESTING ACTIVITIES                                 
    Proceeds on disposal of furniture                                
      and fixtures                                    27          24 
    Purchases of property, leasehold                                 
      improvements and equipment        (333)     (1,153)     (1,037)
    Purchases of software                            (24)       (173)
     Net cash used in investing                                      
        activities                      (333)     (1,150)     (1,186)

CASH FLOWS FROM FINANCING ACTIVITIES                                 
    Net proceeds (repayments) under                                  
      revolving line of credit       (17,800)      7,800      (1,350)
    Proceeds from issuance of stock   23,000                         
    Proceeds from long-term debt                               7,350 
    Principal payments on long-term                                  
      debt                              (425)       (415)       (290)
     Net cash provided by financing                                  
        activities                     4,775       7,385       5,710 
NET INCREASE (DECREASE) IN CASH         (624)        297        (602)
CASH AT BEGINNING OF YEAR              1,894       1,597       2,199 
CASH AT END OF YEAR                  $ 1,270     $ 1,894     $ 1,597 
SUPPLEMENTAL DISCLOSURES OF CASH                                     
  FLOW  INFORMATION                                                  
    Cash payments for interest       $ 4,198     $ 3,964     $ 3,601 

SUPPLEMENTAL SCHEDULE OF NONCASH                                     
  INVESTING AND FINANCING ACTIVITIES                                 
    Purchase of equipment though the                                 
       issuance of capital leases    $  ---      $     8    $   104  
    Distribution of assets  - Note 3                                 


The accompanying notes are an integral part of the financial statements.        

THE HARRIS COMPANY                                                              
NOTES TO FINANCIAL STATEMENTS                                                   

1.   NATURE OF OPERATIONS                                                       
The Harris Company ("Harris") is a wholly-owned                                 
subsidiary of El Corte Ingles ("ECI") of Spain. Harris                          
currently operates nine retail department stores                                
located throughout southern California.                                         

2.   SIGNIFICANT ACCOUNTING POLICIES                                            
Fiscal Year - The Company reports on a 52/53-week                               
fiscal year ending on the Saturday nearest to January                           
31.  Fiscal years 1997, 1996 and 1995 ended on January                          
31, 1998, February 1, 1997 and February 3, 1996,                                
respectively.  Fiscal years 1997 and 1996 each                                  
contained 52 weeks; fiscal year 1995 contained 53                               
weeks.                                                                          

Use of Estimates - The preparation of the financial                             
statements in conformity with generally accepted                                
accounting principles requires management to make                               
estimates and assumptions that affect the reported                              
amounts of assets and liabilities at the date of the                            
financial statements and the reported amounts of                                
revenues and expenses during the reporting periods.                             
Such estimates and assumptions are subject to inherent                          
uncertainties which may result in actual results                                
differing from reported amounts.                                                

Cash and Cash Equivalents - For purposes of reporting                           
cash flows, the Company considers all highly liquid                             
debt instruments purchased with a maturity of three                             
months or less to be cash equivalents.                                          

Receivables - Trade accounts receivable consist of                              
revolving charge accounts with terms which, in some                             
cases, provide for payments exceeding one year. In                              
accordance with usual industry practice, such                                   
receivables are included in current assets. Earned                              
finance charges associated with the Company's customer                          
credit card receivables were $2,900,000, $3,469,000 and                         
$3,574,000 in 1997, 1996 and 1995.                                              

The Company maintains reserves for possible credit                              
losses based on the expected collectibility of all                              
receivables.                                                                    

Concentrations of Credit Risk - The Company extends                             
credit to individual customers based on their credit                            
worthiness and generally requires no collateral from                            
such customers. Such customers are primarily local                              
residents in the southern California area.                                      
Concentrations of credit risk with respect to the                               
Company's credit card receivables are limited due to                            
the large number of customers comprising the Company's                          
customer base.                                                                  

Merchandise Inventories - Inventories, which consist of                         
merchandise held for resale, are stated at the lower of                         
cost or market. The cost of inventories, which                                  
approximates replacement cost, is calculated on a                               
first-in, first-out basis determined by the retail                              
inventory method.                                                               

Property and Equipment - Property and equipment is                              
stated on the basis of cost or appraised value as to                            
certain contributed land and parking facilities.                                
Depreciation and amortization is computed by the                                
straight-line method for financial reporting purposes                           
over the estimated useful lives of the assets, which                            
range from 20 to 40 years for buildings, land                                   
improvements and leasehold improvements and 3 to 15                             
years for fixtures, furniture and equipment.                                    
Amortization of fixtures and equipment under capital                            
leases is computed by the straight-line method over the                         
lesser of the length of the related leases or the                               
estimated useful lives of the assets and is combined                            
with depreciation in the accompanying statements of                             
operations.                                                                     

Deferred Income - Deferred income consists of land,                             
cash and parking facilities contributed to the Company                          
by mall developers. Contributed land and parking                                
facilities are recorded at their appraised fair market                          
values with a related deferred credit which is recorded                         
and amortized to operations over the fifteen-year term                          
of the operating covenant for the related store.                                
Deferred income, net of accumulated amortization,                               
totaled $8,306,000 at February 1, 1997. There was no                            
deferred income as of January 31, 1998. Amortization of                         
deferred income totaled $872,000 in 1997, 1996 and                              
1995. As described more fully in Note 3, on January 30,                         
1998, all contributed property was distributed to ECI                           
and the unamortized portion of the credit, totaling                             
$7,433,000, was recognized as income.                                           

Software Development Costs - Certain software                                   
development costs are capitalized and amortized on a                            
straight-line basis over a period of five years from                            
the date the program is placed into service. Software                           
development costs, net of accumulated amortization,                             
totaling $248,000 at January 31, 1998 and $509,000 at                           
February 1, 1997, are included in other long-term                               
assets. Amortization of software development costs,                             
totaling $261,000 in 1997, $282,000 in 1996 and                                 
$284,000 in 1995, is included in depreciation and                               
amortization in the accompanying financial statements.                          

Store Pre-Opening Costs - Certain expenditures incurred                         
prior to the opening of new stores are deferred and                             
charged to expense over a twelve-month period following                         
the date the related store is opened. There were no                             
pre-opening costs charged to expense in 1997, 1996 or                           
1995. The Company has not opened a new store since                              
1992.                                                                           

Income Taxes - Deferred tax assets and liabilities are                          
generally recognized for the expected future tax                                
consequences of events that have been included in the                           
financial statements or tax returns, determined based                           
on the differences between the financial statement and                          
tax basis of assets and liabilities and net operating                           
loss and tax credit carryforwards, and by using enacted                         
tax rates in effect when the differences are expected                           
to reverse. Deferred tax assets are reduced by a                                
valuation allowance if it is more likely than not that                          
some portion or all of the deferred tax asset will not                          
be realized.                                                                    

Leased Department Sales - Net sales include leased                              
department sales of $4,310,000 , $3,665,000 and                                 
$2,134,000 in 1997, 1996 and 1995. Cost of sales                                
include related costs of $3,624,000, $3,063,000 and                             
$1,776,000 in 1997, 1996 and 1995.                                              

Fair Value of Financial Instruments - The carrying                              
value of the Company's cash and cash equivalents,                               
receivables, trade payables and other accrued expenses,                         
revolving line of credit and stand-by letters of credit                         
approximate their estimated fair values because of the                          
short maturities or variable interest rates underlying                          
those instruments. Management believes that the rates                           
currently available to the Company for debt of the same                         
remaining maturities as existing debt are not                                   
significantly different from the rates charged on                               
existing debt. Therefore, the aggregate fair values of                          
the Company's long-term debt is not significantly                               
different from its aggregate carrying values totaling                           
$7,035,000 at January 31, 1998 and $30,253,000 at                               
February 1, 1997.                                                               

Long-Lived Assets - The Company periodically evaluates                          
the carrying value of long-lived assets to be held and                          
used when events and circumstances warrant such a                               
review. The carrying value of a long-lived asset is                             
considered impaired when the anticipated undiscounted                           
cash flow from such an asset is separately identified                           
and is less than its carrying value. In that event, a                           
loss is recognized based on the amount by which the                             
carrying value exceeds the fair market value of the                             
long-lived asset. Fair market value is determined                               
primarily using the anticipated cash flows discounted                           
at a rate commensurate with the risks involved. Based                           
on such a review, the Company determined that no                                
impairment loss need be recognized for 1997 or 1996.                            

Recently Issued Accounting Standards - Statement of                             
Financial Accounting Standards ("SFAS") No. 130,                                
"Reporting Comprehensive Income" was recently issued                            
and establishes standards for reporting and displaying                          
comprehensive income and its components in a full set                           
of general-purpose financial statements. The new rules                          
are effective for fiscal years beginning after December                         
15, 1997 (fiscal 1998), with earlier application                                
permitted. SFAS No. 131, "Disclosure about Segments of                          
an Enterprise and Related Information" changes the                              
manner in which operating segments are defined and                              
reported externally to be consistent with the basis on                          
which they are defined and reported on internally. The                          
new rules are also effective for periods beginning                              
after December 15, 1997, with earlier application                               
permitted. The application of SFAS No. 130 and 131 will                         
not impact the Company's financial position, results of                         
operations or cash flows, and any effect will be                                
limited to the form and content of its disclosures. The                         
Company does not anticipate adoption of these standards                         
prior to their effective dates.                                                 

3.   CAPITAL CONTRIBUTION                                                       

ECI has traditionally provided the Company with                                 
significant financial support.  On January 30, 1998,                            
the Company distributed to ECI land and land                                    
improvements and buildings associated with three of its                         
department stores located in Palmdale, Bakersfield and                          
Moreno Valley. ECI also assumed all outstanding debt                            
associated with those properties, including accrued                             
interest payments. The difference between the net book                          
value of the assets distributed, totaling $31,127,000,                          
and the outstanding balances of the related mortgage                            
loans payable, totaling $22,814,000, has been reflected                         
as a capital contribution by ECI.  The Company issued                           
ECI 230,000 shares of capital stock in connection with                          
the distribution.                                                               

4.   REVOLVING LINE OF CREDIT                                                   

The Company has a revolving line of credit agreement                            
with Bank of America, N.A., which provides for                                  
borrowings of up to $34,250,000 through July 31, 1998.                          
Borrowings under the line of credit are limited to                              
$34,250,000, less standby letters of credit issued                              
totaling $6,100,000 at January 31, 1998, or                                     
$28,150,000. Such borrowings are collateralized by                              
accounts receivable and are fully guaranteed by ECI.                            
Interest on outstanding borrowings under the line of                            
credit is charged at the variable prime rate (7.80% at                          
January 31, 1998). Outstanding borrowings totaled                               
$1,000,000 at January 31, 1998 and $18,800,000 at                               
February 1, 1997. The standby letters of credit                                 
outstanding may not exceed $7,000,000 and may not                               
extend beyond July 31, 1999. The weighted-average                               
interest rate charged on the Company's revolving line                           
of credit arrangement was 7.80% in 1997, 7.61% in 1996                          
and 8.16% in 1995.                                                              

The agreement contains various loan covenants which,                            
among other things, require the Company to maintain a                           
minimum ratio of quick assets to current liabilities                            
and a minimum tangible net worth. The Company was in                            
compliance with all applicable loan covenants as of                             
January 31, 1998.                                                               

5.   LONG-TERM DEBT                                                             

Mortgage loans payable consist of the following:                                

                                                                [Download Table]


                             January 31,   February 1,
(In thousands of dollars)      1998          1998     
HUD Section 108 Loan - City                           
  of San Bernardino                                   
  Principal is payable                                
  annually beginning                                  
  on August 1, 1996 with                              
  the final payment due                               
  August 1, 2015; interest                            
  is payable semi- annually                           
  at a variable rate                                  
  currently at 7.2059%;                               
  secured by real estate                              
  and building located in                             
                                                      
  San Bernardino              $7,035      $7,200      
Mortgage Payable - Banco                              
  Central Hispanoamericano                            
  Due in quarterly                                    
  installments of $158,237,                           
  including interest at                               
  10.005% through June 5, 2000;                       
  secured by real estate and                          
  building located in                                 
  Bakersfield                              5,706      

Mortgage Payable - Banco                              
  Central Hispanoamericano                            
   Due in quarterly installments                      
   of $208,240, including interest                    
   at 9.85% through November 20, 2000;                
   secured by real estate and building                
   located in Palmdale                     7,638      

Mortgage Payable - Banco                              
  Central Hispanoamericano                            
   Due in quarterly installments of                   
   $231,027, including interest at                    
   8.50% through November 19, 2002;                   
   secured by real estate and                         
   building located in Moreno                         
   Valley                                  9,709      
                                  7,035   30,253      

Less: Current portion               180      404      

TOTALS                           $6,855  $29,849      


As described more fully in Note 3, ECI assumed                                  
responsibility for the payment of the three mortgage                            
loans with Banco Central Hispanoamericano during 1997.                          

The Company entered into the HUD Section 108 loan for                           
the purpose of financing a portion of the $10,500,000                           
purchase price of its department store in San                                   
Bernardino. The Company had previously sold the                                 
property to a third party and had leased it back under                          
an operating lease. The HUD loan contains certain                               
restrictive covenants which are designed to be                                  
consistent with the covenants contained in the                                  
previously described revolving line of credit agreement                         
(see Note 4.)                                                                   

The future minimum loan principal payments required on                          
mortgage loans payable as of January 31, 1998 are                               
$180,000, $195,000, $210,000 and $230,000 and $250,000                          
for 1998 through 2002, respectively, with $5,970,000                            
due thereafter.                                                                 

Float Loan.    On January 30, 1995, the Company entered                         
into an agreement with the City of San Bernardino,                              
whereby the City provided the Company with a float loan                         
("Float" loan) in the amount of $3,150,000 for the                              
purpose of financing a portion of the total $10,500,000                         
purchase price of its downtown store in San Bernardino.                         
The Float loan bears interest at a rate 8.5%, with                              
principal due and payable on February 1, 2000. The City                         
may extend the maturity of the loan at its option for                           
up to an additional five years after its original                               
maturity date with the same terms and conditions.                               
Monthly interest payments of $22,313 are retained by                            
the City in a separate sinking fund account, along with                         
interest earned by those funds. The Float loan is                               
secured by a letter of credit in the amount of                                  
$3,150,000 which matures on February 1, 2000 and                                
contains certain restrictive covenants which are                                
designed to be consistent with the covenants contained                          
in the previously described revolving line of credit                            
agreement (see Note 4).                                                         

The Float Loan also requires the Company to maintain                            
operations in its downtown San Bernardino store for a                           
period of up to ten years and maintain specific                                 
employment guidelines as specified by the City. In the                          
event the Company maintains compliance with all                                 
applicable requirements, the accumulated interest                               
payments and earnings thereon retained by the City in                           
the separate sinking fund account  may be credited                              
against the final principal payment due on the loan on                          
February 1, 2000, or at a later date if so extended by                          
the City.                                                                       

6.   LEASES                                                                     

The Company leases five of its retail department                                
stores, and certain land and equipment under                                    
noncancellable operating leases that expire in various                          
years through 2007. Certain of the leases provide for                           
the payment of additional contingent rentals based on a                         
percentage of sales in excess of specified minimum                              
levels, require the payment of property taxes,                                  
insurance and maintenance costs and have renewal                                
options for one or more periods ranging from one to ten                         
years. One of the operating leases also provides for                            
scheduled rent increases over the lease term. On                                
February 1, 1998, subsequent to year end, the Company                           
entered into an agreement to lease the three store                              
locations distributed to ECI (see Note 3).                                      

Future minimum lease payments, by year and in the                               
aggregate, under noncancellable operating leases with                           
initial or remaining terms of one year or more consist                          
of the following at January 31, 1998:                                           

                                                                [Download Table]


                                   Operating        Capital
(In thousands of dollars)           Leases           Leases
                                                           
         1998                      $ 2,958             $ 30
         1999                        2,986               29
         2000                        3,012               19
         2001                        2,895                1
         2002                        2,744                 
         Thereafter                 16,573                 
         Total minimum lease                               
           payments                $31,168               79
         Amount representing                               
           interest                                      12
          Present value of minimum                         
            lease payments                               67
          Less current portion                           22
                                                       $ 45

Rental expense consists of the following:                                       

                                                                [Download Table]


(In thousands of dollars)                1997       1996        1995
Operating leases:                                                   
                                                                    
   Minimum rentals                     $1,717     $1,946      $1,695
   Contingent rentals                     166        161         216
   Executory costs                        565        522         529
                                       $2,448     $2,629      $2,440

7.   INCOME TAXES                                                               

There was no current or deferred income tax provision                           
provided for in 1997, 1996 or 1995. The principal                               
components of deferred tax assets and liabilities (in                           
thousands of dollars) are as follows:                                           

                                                                [Download Table]


                             January 31,  February 1,
                                1998         1997    
Deferred Tax Assets:                                 
Current:                                             
                                                     
   Reserve for bad debts       $  274     $  683     
   Capitalized inventory costs    647        671     
   Vacation accrual               341        355     
                                1,262      1,709     
 Long-Term:                                          
   Net operating loss                                
     carryforwards              23,105    20,266     
   General business credit                           
     carryforwards                 100       191     
   Alternative minimum tax                           
     credit carryforwards          374       374     
   Workers' compensation accrual   249       249     
   Other                           135       196     
                                23,963    21,276     

Deferred Tax Liabilities:                            
Long-Term:                                           
  Depreciation expense             775     1,056     
  Deferred gain on contributed                       
   property                                2,069     
                                   775     3,125     
Net deferred tax asset          24,450    19,860     
Valuation allowance            (24,450)  (19,860)    
Net deferred tax asset        $  ---    $   ---      

The realization of the deferred tax assets associated                           
with the net operating loss carryforwards and tax                               
credit carryforwards are dependent upon generating                              
sufficient taxable income prior to their expiration.                            
Management has established a valuation allowance in an                          
amount that is not expected to be realized.                                     

The income tax benefit varies from the amount computed                          
by applying the statutory federal income tax rate to                            
the loss before income taxes. The reasons for this                              
difference are as follows:                                                      

                                                                [Download Table]

                        1997     1996      1995 
                                                
Statutory rate        (35.0)%   (35.0)%  (35.0)%
Valuation allowance    35.0      35.0     35.0  

Effective rate          0.0%      0.0%     0.0% 

At January 31, 1998, the Company has, for federal tax                           
purposes, net operating loss carryforwards of                                   
$60,635,000 which expire in the years 2007 through                              
2012, general business credits of $100,000 which expire                         
in the years 1998 through 2000, and alternative minimum                         
tax credits of $374,000 which may be used for an                                
indefinite period. At January 31, 1998, the Company                             
has, for state tax purposes, net operating loss                                 
carryforwards of $28,156,000 which expire in the years                          
1998 through 2002.                                                              

8.   EMPLOYEE BENEFIT PLAN                                                      

The Company maintains a 401(k) Plan that covers all                             
employees who have completed one year of service and                            
attained the age of 21. The Company did not make                                
contributions to the Plan in 1997, 1996 or 1995, but                            
allowed employees to make elective income deferrals to                          
the Plan per Plan specifications. The Company has the                           
option of making matching contributions to the Plan.                            

9.   RELATED PARTY TRANSACTIONS                                                 

The Company purchases certain merchandise from ECI in                           
the ordinary course of business. Management believes                            
these transactions are under terms no less favorable to                         
the Company than those arranged with other parties.                             
Total merchandise purchased from ECI was $339,000,                              
$439,000 and $407,000 in 1997, 1996 and 1995. In 1993,                          
the Company established an office in New York for the                           
purpose of purchasing certain merchandise on behalf of                          
ECI. The Company earned commission income on those                              
purchases totaling $69,000, $1,114,000 and $999,000 in                          
fiscal 1997, 1996 and 1995 and such amounts are                                 
included in miscellaneous income in the accompanying                            
statements of operations. ECI has fully guaranteed all                          
outstanding borrowings under the Company's line of                              
credit agreement with Bank of America (see Note 4). As                          
described more fully in Note 3,  ECI contributed                                
$8,313,000 to the Company in 1997 in return for 230,000                         
shares of common stock.                                                         

10.  COMMITMENTS AND CONTINGENCIES                                              

The Company issues letters of credit in the ordinary                            
course of business pursuant to certain factor and                               
vendor contracts. (See Note 4). In managements opinion,                         
the likelihood of non-performance under such contracts                          
is remote.                                                                      

The Company is party to legal proceedings and claims                            
which arise in the ordinary course of business. In the                          
opinion of management, the ultimate outcome of such                             
litigation and claims will not have a material adverse                          
effect on the Company's financial position or results                           
of its operations.                                                              

THE HARRIS COMPANY                                    

Unaudited Financial Statements                                    
as of and for the six month                                     
period ended August 1, 1998                                   

                                                                [Download Table]


THE HARRIS COMPANY                              
UNAUDITED BALANCE SHEET                         
(In thousands of dollars)                       

                            ASSETS              
                                  August 1, 1998
CURRENT ASSETS:                                 
                                                
 Cash                              $   1,318    
 Receivables:                                   
     Customers' accounts,                       
       less allowance of $566         12,657    
     Other receivables                   931    
                                      13,588    
  Merchandise inventories             24,466    
  Other                                2,697    
        Total current assets          42,069    

PROPERTY, LEASEHOLD IMPROVEMENTS,               
 AND EQUIPMENT:                                 
 Remodeling and improvements          7,657     
 Fixtures, furniture, and equipment  23,361     
 Construction-in-progress               475     
 Property and equipment under                   
   capital leases                       262     
                                     31,755     

Less accumulated depreciation                   
  and amortization                  (23,083)    
                                      8,672     
OTHER ASSETS                            715     

TOTAL ASSETS                        $51,456     


See accompanying notes to unaudited financial statements.                       

                                                                [Download Table]


THE HARRIS COMPANY                                         
UNAUDITED BALANCE SHEET                                    
(In thousands of dollars)                                  

                   LIABILITIES AND STOCKHOLDERS' EQUITY    

                                             August 1, 1998
CURRENT LIABILITIES:                                       
                                                           
  Revolving line of credit                    $  500       
  Current portion of long-term debt               48       
  Trade accounts payable                       4,077       
  Accrued expenses                             3,846       
     Total current liabilities                 8,471       

DEFERRED INCOME AND OTHER                        351       

STOCKHOLDERS' EQUITY:                                      
 Capital stock, par value $100; authorized                 
   2,000,000 and 1,000,000 shares,                         
   respectively; issued and outstanding                    
   1,056,639 shares                          109,447       
 Accumulated deficit                         (66,813)      
                                              42,634       
TOTAL LIABILITIES AND STOCKHOLDERS'                        
  EQUITY                                    $ 51,456       


See accompanying notes to unaudited financial statements.                       

                                                                [Download Table]


THE HARRIS COMPANY                                        
UNAUDITED STATEMENT OF OPERATIONS                         
(In thousands of dollars)                                 
                                  For the six month period
                                    ended August 1, 1998  

                                                          
Net sales                               $ 43,885          
Service charge income                      1,439          
                                          45,324          
Costs and expenses:                                       
   Cost of sales                          28,315          
   Selling, general and administrative                    
     expenses                             19,143          
   Depreciation and amortization           1,228          
                                          48,686          
         Operating loss                   (3,362)         

Other (income) expense:                                   
   Interest expense                          137          
   Miscellaneous income                      (49)         
                                              88          
          Loss before income taxes        (3,450)         

Income taxes                                 ---          

          Net loss                       $(3,450)         


See accompanying notes to unaudited financial statements.                       

                                                                [Download Table]


THE HARRIS COMPANY                                          
UNAUDITED STATEMENT OF CASH FLOWS                           
(In thousands of dollars)                                   
                                    For the six month period
                                      ended August 1, 1998  

OPERATING ACTIVITIES:                                       
                                                            
Net loss                                      $ (3,450)     
Adjustments:                                                
   Depreciation and amortization                 1,228      
   Provision for losses on                                  
      accounts receivable                          417      
   (Increase) decrease in assets:                           
      Receivables                                3,510      
      Merchandise inventories                    1,046      
      Other current and long-term assets           680      
  Increase (decrease) in liabilities:                       
     Trade accounts payable                       (352)     
     Other current and long-term liabilities      (995)     
     Net cash used in operating activities       2,084      

INVESTING ACTIVITIES:                                       
Purchases of property, leasehold                            
    improvements and equipment                    (645)     
    Net cash used in investing activities         (645)     

FINANCING ACTIVITIES:                                       
Net repayments under revolving                              
      line of credit                              (500)     
Principal payments on long-term debt              (891)     
    Net cash used in financing activities       (1,391)     

INCREASE IN CASH                                    48      

CASH AT BEGINNING OF YEAR                        1,270      

CASH AT END OF PERIOD                            1,318      

NON-CASH INVESTING AND                                      
 FINANCING ACTIVITIES -- Note 3                             


See accompanying notes to unaudited financial statements.                       

THE HARRIS COMPANY                                                              
NOTES TO UNAUDITED FINANCIAL STATEMENTS                                         

Six month period ended August 1, 1998                                           

1.   NATURE OF OPERATIONS AND BASIS OF PRESENTATION                             

The Harris Company ("Harris") is a wholly-owned                                 
subsidiary of El Corte Ingles ("ECI") of Spain. Harris                          
currently operates nine retail department stores                                
located throughout southern California.                                         

The accompanying unaudited balance sheet and statement                          
of operations (collectively, the "interim financial                             
statements") have been prepared in accordance with                              
generally accepted accounting principals for interim                            
financial information. Such interim financial                                   
statements do not include all of the information and                            
footnotes required by generally accepted accounting                             
principals for complete financial statements. In the                            
opinion of management, all adjustments (consisting                              
primarily of normal recurring accruals) considered                              
necessary for a fair presentation have been included.                           
These financial statements should be read in                                    
conjunction with the Company's audited financial                                
statements and footnotes thereto for the year ended                             
January 31, 1998 included elsewhere in this Form 8-K/A.                         

2.   ASSET PURCHASE AGREEMENT                                                   

On July 21, 1998, the Company entered into an Asset                             
Purchase Agreement, pursuant to which the Company sold                          
substantially all of its assets to Gottschalks Inc.                             
Gottschalks Inc. is a regional department and specialty                         
store chain based in Fresno, California. The purchase                           
price for the assets consisted of the issuance to                               
Harris of 2,095,900 shares of Gottschalks common stock,                         
the issuance of an 8% Non-Negotiable, Extendable,                               
Subordinated Note due August 20, 2003 in the principal                          
amount of $22,179,598 and the assumption of certain                             
liabilities, including vendor payables, store leases                            
and certain other contracts. The assets sold consisted                          
primarily of merchandise inventory, customer credit                             
card receivables, fixtures and equipment and certain                            
intangibles. The Company's revolving line of credit                             
with Bank of America, N.A. was terminated in connection                         
with the sale of assets and all outstanding borrowings                          
were repaid as of that date.  Outstanding borrowings                            
under the arrangement totaled $500,000 as of August 1,                          
1998.  The acquisition was finalized on August 20,                              
1998. Harris will continue to provide certain services                          
to ECI, including the coordination of certain                                   
merchandise purchasing activities in the United States.                         

3.   CAPITAL TRANSACTION                                                        

In May 2, 1998, the Company distributed to ECI the land                         
and building associated with its department store                               
located in San Bernardino, California.  ECI also                                
assumed the outstanding debt associated with the                                
property.  The difference between the net book value of                         
the assets distributed, totalling $13,033,000, and the                          
outstanding balances of the related debt obligations,                           
totalling $9,313,000, has been reflected as a reduction                         
to capital.                                                                     

4.   INCOME TAXES                                                               

The Company has increased its previously established                            
valuation allowance for its net deferred tax asset by                           
$1,311,000 for the six month period ended August 1,                             
1998, representing the amount that is not expected to                           
be realized.  The adjustment to the valuation allowance                         
resulted in no current or deferred income tax benefit                           
recognized in the six month period ended August 1,                              
1998.                                                                           

UNAUDITED PRO FORMA COMBINED CONDENSED                                    
CONSOLIDATED FINANCIAL INFORMATION                                    

The following unaudited pro forma combined                            
condensed consolidated financial statements of                                  
Gottchalks Inc. and Subsidiary (the "Company") give                             
effect to the acquisition of certain of the assets and                          
the assumption of certain of the liabilities of The                             
Harris Company, ("Harris") on August 20, 1998. The                              
acquisition was accounted for under the purchase method                         
of accounting, which requires the purchase price to be                          
allocated to the acquired assets and liabilities                                
assumed of Harris on the basis of their estimated fair                          
values as of the date of acquisition. The following                             
unaudited pro forma combined condensed consolidated                             
balance sheet gives effect to the acquisition of Harris                         
as if it had occurred on August 1, 1998, and the                                
unaudited pro forma combined condensed consolidated                             
statements of operations (collectively, the "Unaudited                          
Pro Forma Financial Information") reflects the results                          
of operations of the Company for the six month period                           
ended August 1, 1998 and the fiscal year ended January                          
31, 1998 as if the acquisition of Harris had occurred                           
on February 1, 1998 (the first day of fiscal 1998) and                          
February 2, 1997, (the first day of fiscal 1997) and                            
includes adjustments directly attributable to the                               
acquisition and expected to have a continuing impact on                         
the combined company. The Unaudited Pro Forma Financial                         
Information has been prepared based on preliminary                              
estimates of certain direct costs and liabilities                               
associated with the transaction, and amounts actually                           
recorded may change upon final determination of such                            
amounts.  Specifically, additional information is                               
expected to be obtained for the value of inventories,                           
customer credit card receivables, and accrued expenses                          
and exit costs related to the acquisition.                                      

The Unaudited Pro Forma Financial Information                         
and related notes are provided for informational                                
purposes only and are not necessarily indicative of                             
what the Company's actual financial position or results                         
of operations would have been had the forgoing                                  
transaction been consummated on such dates, nor does it                         
give effect to the synergies, cost savings and other                            
charges expected to result from the acquisition.                                
Accordingly, the pro forma financial information does                           
not purport to be indicative of the Company's financial                         
position or results of operations as of the date hereof                         
or for any period ended on the date hereof or as of or                          
for any other future date or period.                                            

The following unaudited pro forma financial                           
information is based in part on the historical                                  
consolidated financial statements of the Company, and                           
the related notes thereto, which are included in the                            
Company's Annual Report on Form 10-K for the fiscal                             
year ended January 31, 1998, and the Company's                                  
Quarterly Report on Form 10-Q for the six month period                          
ended August 1, 1998, and the historical financial                              
statements of Harris, and the related notes thereto,                            
presented elsewhere in this Current Report on Form 8-K/A.                       

The retail business is seasonal in nature, with                       
a higher proportion of sales and earnings usually being                         
generated in the months of November and December than                           
in other periods. Because of this seasonality and other                         
factors, results of operations for an interim period                            
are not necessarily indicative of results of operations                         
for an entire fiscal year.                                                      

                                                                [Download Table]


GOTTSCHALKS INC. AND HARRIS                                             
UNAUDITED PRO FORMA COMBINED CONDENSED                                  
  CONSOLIDATED BALANCE SHEET                                            
AS OF AUGUST 1, 1998                                                    
(In thousands of dollars)                                               

                                  ASSETS                                

                              Historical          Pro-Forma    Pro-Forma
                          Gottschalks  Harris    Adjustments   Combined 

CURRENT ASSETS:                                                         
                                                                        
  Cash                     $ 1,785    $ 1,318                  $ 3,103  
  Retained interest in                                                  
    receivables sold         9,653       ---                     9,653  
  Receivables - net          4,595     13,588                   18,183  
  Merchandise inventories  105,297     24,466    $(5,687)(a)   124,076  
   Other                    10,033      2,697                   12,730  
Total current assets       131,363     42,069     (5,687)      167,745  

PROPERTY AND                                                            
  EQUIPMENT, NET           102,620      8,672     (3,313)(b)   107,979  
OTHER LONG-TERM ASSETS       8,010        715      5,786 (c)    14,511  

TOTAL ASSETS              $241,993    $51,456   $ (3,214)     $290,235  


See accompanying notes to unaudited proforma financial information.             

                                                                [Download Table]


GOTTSCHALKS INC. AND HARRIS                                               
UNAUDITED PRO FORMA COMBINED CONDENSED                                    
   CONSOLIDATED BALANCE SHEET                                             
AS OF AUGUST 1, 1998                                                      
(In thousands of dollars)                                                 

                   LIABILITIES AND STOCKHOLDERS' EQUITY                   

                                 Historical         Pro-Forma    Pro-Forma
                            Gottschalks  Harris     Adjustments   Combined

CURRENT LIABILITIES:                                                      
                                                                          
 Revolving line of credit    $ 22,724    $ 500                    $ 23,224
 Cash management liability      6,416     ---                        6,416
 Trade accounts payable        18,819    4,077                      22,896
 Accrued expenses and                                                     
    other liabilities          15,280    3,846       $ 2,800(d)     21,926
 Taxes, other than income                                                 
   taxes                        4,501     ---                        4,501
 Current portion of long-term                                             
     obligations                4,314       48                       4,362
       Total current                                                      
         liabilities           72,054    8,471         2,800        83,325

LONG-TERM OBLIGATIONS,                                                    
  (less current portion):                                                 
   Line of credit              25,000     ---                       25,000
   Notes and mortgage loans                                               
     payable                   28,820     ---         20,467(e)     49,287
   Capitalized lease                                                      
     obligations                6,974     ---                        6,974
                               60,794     ---         20,467        81,261

DEFERRED INCOME                17,923     ---                       17,923

DEFERRED LEASE                                                            
   PAYMENTS AND OTHER          10,656     351            515        11,522

STOCKHOLDERS' EQUITY           80,566  42,634        (26,996)(f)    96,204
                             $241,993 $51,456       $ (3,214)     $290,235


See accompanying notes to unaudited pro forma financial information.            

                                                                [Download Table]


GOTTSCHALKS INC. AND HARRIS                                                 
UNAUDITED PRO FORMA COMBINED CONSOLIDATED                                   
   STATEMENT OF OPERATIONS                                                  
FOR THE SIX MONTH PERIOD ENDED AUGUST 1, 1998                               
(In thousands of dollars, except per share data)                            

                               Historical         Pro-Forma    Pro-Forma    
                           Gottschalks  Harris   Adjustments   Combined     

                                                                            
Net sales                   $199,599   $ 43,885                 $243,484    
Net credit revenues            3,051      1,439                    4,490    
                             202,650     45,324                  247,974    
COSTS & EXPENSES:                                                           
   Cost of sales             137,057     28,315                  165,372    
   Selling, general and                                                     
      administrative                                                        
       expenses               63,785     19,143    $ (417)(g)     82,511    
   Depreciation                                                             
      and amortization         4,013      1,228      (808)(h)      4,433    
                             204,855     48,686    (1,225)       252,316    
Operating loss                (2,205)    (3,362)    1,225         (4,342)   

Other (income) expense:                                                     
   Interest expense            4,058        137       887(i)       5,082    
   Miscellaneous income         (545)       (49)                    (594)   
                               3,513         88       887          4,488    
LOSS BEFORE INCOME                                                          
   TAX BENEFIT                (5,718)    (3,450)      338         (8,830)   

Income tax benefit            (2,372)      ---        139(j)      (2,233)   

NET LOSS                     $(3,346)   $(3,450)    $ 199       $ (6,597)   

Net loss per common share -                                                 
   basic and diluted         $(  .32)   $  ---                   $  (.52)(k)

Weighted average number of                                                  
   common shares outstanding  10,479      ---                      12,575(k)


See accompanying notes to unaudited pro forma financial information.            

                                                                [Download Table]


GOTTSCHALKS INC. AND HARRIS                                                
UNAUDITED PRO FORMA COMBINED CONSOLIDATED                                  
   STATEMENT OF OPERATIONS                                                 
FOR THE YEAR ENDED JANUARY 31, 1998                                        
(In thousands of dollars, except per share data)                           

                                Historical        Pro-Forma     Pro-Forma  
                            Gottschalks   Harris  Adjustments    Combined  

                                                                           
Net sales                   $448,192    $97,403                 $545,595   
Net credit revenues            6,385      2,900                    9,285   
                             454,577    100,303                  554,880   
COSTS & EXPENSES:                                                          
   Cost of sales             304,558     66,259                  370,817   
   Selling, general and                                                    
      administrative                                                       
       expenses              130,922     41,944   $    74(l)     172,940   
   Depreciation                                                            
      and amortization         6,667      3,388    (2,549)(m)      7,506   
                             442,147    111,591    (2,475)       551,263   
Operating income (loss)       12,430    (11,288)    2,475          3,617   

Other (income) expense:                                                    
   Interest expense            7,325      3,655     1,774 (n)     12,754   
   Miscellaneous income       (1,955)    (8,323)                 (10,278)  
   Acquisition related                                                     
     expenses                    673       ---                       673   
                               6,043     (4,668)    1,774          3,149   
 INCOME (LOSS) BEFORE                                                      
   INCOME TAX EXPENSE                                                      
    (BENEFIT)                  6,387     (6,620)      701            468   

Income tax expense                                                         
  (benefit)                    2,657        ---       292 (o)      2,949   

NET INCOME (LOSS)           $  3,730     $(6,620) $   409       $ (2,481)  

Net income (loss) per common share -                                       
   basic and diluted        $    .36    $   ---                 $  (.20)(p)

Weighted average number of                                                 
   common shares outstanding  10,474        ---                  12,570 (p)


See accompanying notes to unaudited pro forma financial information.            

GOTTSCHALKS INC. AND HARRIS                                                     
NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION                              
(In thousands of dollars)                                                       

Note 1.   Notes to Unaudited Pro Forma Combined                                 
Condensed Consolidated Balance Sheet as of                  
August 1, 1998                                              

(a)  Represents the following:                                                  
Adjustment to record acquired                                 
merchandise inventory at estimated                    
fair value                         (7,554)            
Adjustment to conform Harris'                                 
direct cost method of                                 
accounting for inventory                                    
to the full cost method used                          
by the Company                         1,867                
Net adjustment                  $(5,687)          

(b)  Adjustment to record acquired                                              
leaseholds, fixtures and equipment                                
at estimated fair value.                                          

(c)  Represents the adjustment to record                                        
the excess of purchase price                                      
over the estimated fair value of                                      
identifiable net assets acquired                                  
as computed below:                                                    

Fair value of common stock                                    
issued to Harris                 $14,273              
Fair value of 8% Junior                                       
Subordinated Note issued to                           
Harris                            20,467              
Total estimated direct fees                                 
and expenses in connection                        
with the acquisition             1,218            
Total purchase price           $35,958            

Preliminary allocation of                                   
purchase price:                                   
Customer credit card and other                          
receivables                  $12,149          
Merchandise inventories            20,850               
Other current and long-term                             
assets                         3,486          
Leaseholds, fixtures and                                
equipment                      5,731          
Current liabilities                (9,947)              
Deferred tax liability               (515)              
Accrued purchase liabilities       (1,582)              
Excess of purchase price over                           
the estimated fair value                      
of identifiable net assets                        
acquired                     5,786        

Total purchase price           $35,958            

(d)  Adjustment to reflect the following:                                       

To accrue for estimated severance                           
costs associated with                             
contractual obligations of                        
former Harris employees        $ 1,382            
To accrue for estimated costs                               
associated with exiting certain                   
activities of the acquired                        
business                          200             
To accrue for estimated direct                              
fees and expenses in connection                   
with the acquisition of Harris  1,218             
Net adjustment                $ 2,800             

(e)  Adjustment to reflect the issuance of 8% Junior                            
Subordinated Note to Harris at fair value.                        

(f)  Adjustment to reflect the following:                                       
Issuance of 2,095,900 shares of                             
common stock to Harris     $ 14,273             
Adjustment to eliminate                                     
historical capital of                           
Harris                      (41,269)            
Net adjustment              $(26,996)             

Note 2.   Notes to Unaudited Pro Forma Combined                                 
Consolidated Statement of                             
Operations for the six-month                          
period ended August 1, 1998                           

(g)  Adjustment to reflect the following:                                       

To eliminate rental expense for                             
former store lease agreements                     
of Harris                    $(1,678)             
To reflect rental expense for                               
new lease agreements entered                      
into in connection with the                             
acquisition                     261             
Net adjustment              $   (417)             

(h)  Adjustment to reflect the following:                                       

To eliminate historical basis                               
depreciation and amortization                     
expense of Harris            $(1,228)             
To reflect depreciation expense                             
based on the fair value of the                    
assets acquired                  288              
To reflect the amortization of                              
estimated excess of cost                          
over net assets acquired over                     
an assumed 20-year period        132              
Net adjustment               $  (808)             

(i)  Adjustment to reflect  interest expense on                                 
acquisition debt.                                                 

(j)  To reflect income tax benefit for certain                                  
proforma adjustments based upon an assumed                            
composite (federal, state, and local) income tax                      
rate of 41.0%.                                                        

(k)  To reflect the issuance of 2,095,000 common                                
shares of the Company's common stock in                               
connection with the acquisition of Harris.                            

Note 3.   Notes to Unaudited Pro Forma Combined                                 
Consolidated Statement of                             
Operations for the fiscal year ended                  
January 31, 1998                                      

(l)  Adjustment to reflect the following:                                       

To eliminate rental expense for former                      
store lease agreements of                         
Harris                          $(2,448)          
To reflect rental expense for                               
new lease agreements entered                      
into in connection with the                             
acquisition                      2,522          
Net adjustment                  $    74           

(m)  Adjustment to reflect the following:                                       

To eliminate historical basis                               
depreciation and                                  
amortization expense of Harris  $(3,388)          
To reflect depreciation expense                             
based on the fair value of the                    
assets acquired                     575           

To reflect the amortization of                              
estimated excess of cost                          
over net assets acquired                                
over an assumed 20-year period     264          
Net adjustment                  $(2,549)          

(n)  Adjustment to reflect interest expense on                                  
acquisition debt.                                                               

(o)  To reflect income tax benefit for certain                                  
proforma adjustments based upon an assumed                            
composite (federal, state, and local) income tax                      
rate of 41.6%.                                                        

(p)  To reflect the issuance of 2,095,000 common                                
shares of the Company's common stock in                               
connection with the acquisition of Harris at                          
fair value.                                                           

(c)  Exhibits.                                                                  

Exhibit                                                               
Number          Description                                           

23.1         Consent of Eadie and Payne LLP.                          

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.                                                                

Gottschalks Inc.                        

By: /s/ James R. Famalette              
President and           
Chief Operating         
Officer                 

Dated:         November 2, 1998                                                 

EXHIBIT 23.1                                    

INDEPENDENT AUDITORS' CONSENT                                                   

We consent to the filing of our reports on the                                  
financial statements of The Harris Company dated April                          
8, 1996, April 1, 1997 and March 20, 1998 with this                             
Current Report on Form 8-K of Gottschalks Inc. and to                           
the incorporation by reference in Registration                                  
Statements No. 33-54783, No. 33-54789, No. 333-61471                            
and No. 333-61473 of Gottschalks Inc. on Form S-8.                              

s/Eadie and Payne LLP                                                           

Eadie and Payne LLP                                                             

San Bernardino, California                                                      
October 31, 1998                                                                

Dates Referenced Herein   and   Documents Incorporated by Reference

This ‘8-K/A’ Filing		Date		Other Filings
		8/1/15
		8/20/03
		11/19/02
		11/20/00
		6/5/00
		2/1/00
		7/31/99		10-Q
Filed on:		11/3/98
		11/2/98
		10/31/98		10-Q
		9/2/98
For Period End:		8/20/98		8-K
		8/1/98		10-Q
		7/31/98
		7/21/98		8-K
		5/2/98		10-Q
		3/20/98
		2/1/98
		1/31/98		10-K
		1/30/98
		12/15/97
		4/1/97
		2/2/97
		2/1/97		10-K
		8/1/96
		4/8/96
		2/3/96		10-K
		1/30/95
		1/29/95
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