SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 10-Q

QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For Quarter Ended April 1, 1995 Commission File Number 0-14579

Gander Mountain, Inc.
(Exact name of registrant as specified in its charter)

Wisconsin 39-1742710
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)

P.O. Box 128, Highway W, Wilmot, Wisconsin 53192
(Address of principal executive offices)

Registrant's telephone number, including area code: 414-862-2331

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Sections 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

Yes X No
----- -----

On April 1, 1995, there were outstanding 3,247,193 shares of the Registrant's
$.01 par value common stock.
2

GANDER MOUNTAIN, INC.

FORM 10-Q

APRIL 1, 1995

REPORT INDEX

PAGE

PART I - FINANCIAL INFORMATION

Consolidated Statements of Operations for the Thirteen
Weeks Ended April 1, 1995 and April 2, 1994 . . . . . . . . . . . . . 3

Consolidated Statements of Operations for the Thirty-Nine
Weeks Ended April 1, 1995 and April 2, 1994 . . . . . . . . . . . . . 4

Consolidated Balance Sheets at April 1, 1995
and July 2, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Consolidated Statements of Cash Flows for the Thirty-Nine
Weeks Ended April 1, 1995 and April 2, 1994 . . . . . . . . . . . . . 6

Notes to Unaudited Consolidated Financial Statements . . . . . . . . . . 7

Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . . . 11

PART II - OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . 14

Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

2
3

GANDER MOUNTAIN, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share data)

(Unaudited)
Thirteen Weeks Ended
----------------------------
April 1, April 2,
1995 1994
-------- --------

Net sales $ 43,355 $ 40,534
Cost of goods sold 30,598 28,005
-------- -------

Gross Profit 12,757 12,529

Selling, general and administrative expenses 19,605 14,126
Special charge (See Note 2) 11,510 -
-------- -------

Loss from operations ( 18,358) ( 1,597)
-------- -------

Other Expense:
Net interest expense 1,110 510
Other - net 343 113
-------- -------
1,453 623
-------- -------
Loss before income taxes ( 19,811) ( 2,220)

Income tax benefit ( 7,689) ( 888)
-------- -------

Net Loss $( 12,122) $( 1,332)
======== =======

Earnings (loss) per share: (See Note 4)
Primary $( 3.82) $( 0.46)
======== =======

Fully diluted $( 3.82) $( 0.46)
======== =======

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

3
4

GANDER MOUNTAIN, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share data)

(Unaudited)
Thirty-Nine Weeks Ended
-----------------------------
April 1, April 2,
1995 1994
-------- --------

Net sales $ 243,895 $ 196,963
Cost of goods sold 164,515 132,535
------ ---------
Gross profit 79,380 64,428

Selling, general and administrative expenses 75,029 57,403
Special charge (See Note 2) 11,510 -
------- ---------
Income (loss) from operations ( 7,159) 7,025
------- ---------

Other expense:
Net interest expense 2,928 1,629
Other - net 503 242
------- ---------
3,431 1,871
------- ---------
Income (loss) before income taxes ( 10,590) 5,154

Income tax provision (benefit) ( 3,936) 2,055
------- ---------

Income (loss) before cumulative effect of a
change in accounting principle ( 6,654) 3,099

Cumulative effect of change in accounting
principle (See Note 6) - 120
------- ---------

Net income (loss) $( 6,654) $ 3,219
======= =========

Earnings (loss) per share: (See Note 4)
Primary:
Income (loss) per share before cumulative effect
of a change in accounting principle $( 2.32) $ 0.92
Per share cumulative effect of change in
accounting principle - 0.04
------- ---------
Net income (loss) per common share $( 2.32) $ 0.96
======= =========
Fully diluted:
Income (loss) per share before cumulative effect
of a change in accounting principle $( 2.32) $ 0.89
Per share cumulative effect of change in
accounting principle - 0.03
------- ---------
Net income (loss) per common share $( 2.32) $ 0.92
======= =========

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

4
5

GANDER MOUNTAIN, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)

(Unaudited)
----------------------------
April 1, July 2,
1995 1994
------- -------

ASSETS
- - ------
Current assets:
Cash $ 2,924 $ 2,337
Accounts receivable 8,875 7,091
Refundable income taxes 1,121 2,210
Inventories 85,866 68,967
Prepaid catalog expenses 5,733 14,526
Other assets 393 917
---------- ---------
104,912 96,048
---------- ---------
Property and equipment:
Projects in progress 7,978 5,504
Land and building 18,488 18,486
Furniture and equipment 20,587 20,842
---------- ---------
47,053 44,832
Less: Accumulated depreciation ( 14,822) ( 11,459)
---------- ---------
32,231 33,373
---------- ---------
Intangible assets - net 682 835
---------- ---------
$ 137,825 $ 130,256
========== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
- - ------------------------------------
Current liabilities:
Accounts payable $ 18,986 $ 23,218
Notes payable to bank 54,750 33,868
Current portion of long-term obligations 900 2,400
Deferred income taxes 50 2,597
Other current liabilities 7,192 4,673
---------- ---------
81,878 66,756
---------- ---------
Long-term obligations 19,500 18,400
---------- ---------
Deferred income taxes 1,677 3,373
---------- ---------
Preferred redeemable stock 20,000 20,000
---------- ---------
Shareholders' equity:
Class B preferred stock - -
Common stock 32 32
Additional paid-in capital 13,031 12,653
Retained earnings 2,807 10,292
Less notes receivable from stockholders ( 1,100) ( 1,250)
---------- ---------
14,770 21,727
---------- ---------
$ 137,825 $ 130,256
========== =========

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

5
6

GANDER MOUNTAIN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

(Unaudited)
Thirty-Nine Weeks Ended
----------------------------
April 1, April 2,
1995 1994
-------- --------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $( 6,654) $ 3,219

Adjustments to reconcile net income to net cash
provided by (used for) operating activities:
Cumulative effect of change in accounting principle - ( 120)
Depreciation and amortization 3,709 2,594
Deferred income taxes ( 1,696) 1,320
Special charge 11,510 -

Changes in operating assets and liabilities
Accounts receivable ( 2,284) ( 3,316)
Refundable income taxes 1,089 476
Inventories ( 21,399) ( 8,835)
Prepaid catalog expenses 8,793 7,811
Accounts payable ( 4,232) ( 12,857)
Short term deferred taxes ( 2,547) 181
Other 1,588 ( 1,298)
------- --------
Cash used by operating activities ( 12,123) ( 10,825)
------- --------

CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property, plant and equipment ( 7,475) ( 7,982)
------- --------
Cash used for investing activities ( 7,475) ( 7,982)
------- --------

CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from line of credit agreements 20,882 7,560
Net repayments on and proceeds
from long-term obligations ( 400) 1,931
Proceeds from sale of preferred stock - 10,000
Cash dividends on preferred stock ( 825) ( 125)
Notes receivable from stockholders 250 50
Exercised stock options 278 169
------- --------

Cash provided by financing activities 20,185 19,585
------- --------

INCREASE IN CASH 587 778
CASH BEGINNING OF PERIOD 2,337 1,312
------- --------

CASH END OF PERIOD $ 2,924 $ 2,090
======= ========

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

6
7

GANDER MOUNTAIN, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The consolidated financial statements for the interim periods are unaudited.
However, these consolidated financial statements reflect all adjustments,
consisting of only normal recurring accruals and disclosures which, in the
opinion of management, are necessary for a fair presentation. Changing
economic conditions and seasonality of the business may have a significant
impact on the operating results. As a consequence, the statements of
operations for any interim period are not necessarily indicative of the
results that can be expected for the entire year.

Certain reclassifications may have been made to the fiscal 1994 consolidated
financial statements presented herein to conform to the presentation for
fiscal 1995. For more complete financial information, these consolidated
financial statements should be read in conjunction with the consolidated
financial statements and the applicable notes that appear in the Company's
1994 Annual Report to Shareholders.

Certain of these notes are presented below to provide more current financial
information.

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies as previously presented in the Company's
1994 Annual Report to Shareholders are consistent with those policies in
existence as of April 1, 1995.

NOTE 2 - SPECIAL CHARGE
During the third quarter of fiscal 1995, the Company incurred a significantly
larger than planned loss from its catalog operations, primarily from the
under performance of its Spring, 1995 catalogs. After identifying the issues
giving rise to this under performance, the Company has made several changes,
including personnel and process changes, within its catalog operations to
improve future profitability. Additionally, the Company has decided to slow
the growth in its catalog operations to allow it to better focus on improving
profitability within this unit, while at the same time allowing it to invest
in its retail operations. The implementation of these changes has resulted
in a $11.5 million special charge. The special charge is comprised of the
following:

($ in millions)
---------------------

Abandonment of internally developed software $ 5.0
Aged inventory write-off 4.5
Other catalog charges 2.0
--------
Total $ 11.5
=======

Abandonment of Software
During the past several years, the Company has been developing an information
system to be used principally in its catalog operations (Denali). During
final testing, the order management module of this system failed system
stress tests. In connection with the decision to slow the growth of its
catalog operations, the Company decided to discontinue the development of
this module rather than to invest additional funds to correct the identified
problems. The write-off of this module resulted in a $5.0 million charge.
The Company will continue to use its existing catalog order management
software which is now considered to be adequate given the slower growth
anticipated for the catalog operations.

7
8

GANDER MOUNTAIN, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Aged Inventory Write-Off
In connection with its new catalog strategies, the Company has redefined the
manner in which it determines aged inventory and adopted a more aggressive
approach to reducing inventory buildups. As a result, the Company incurred a
charge of $4.5 million relating primarily to apparel products discontinued in
the Company's regular catalog operations. This charge includes an amount of
$2.6 million representing those costs specifically related to the disposal of
the aged inventory including costs to produce special clearance catalogs,
catalog inserts and fulfillment costs.

Other Catalog Charges
The following charges were incurred as a result of other organization and
process changes made in the Company's catalog operations:

(in millions)
-------------------

Severance costs $ 1.0
EZ pay program 0.5
Other 0.3
Joint ventures 0.2
------
Total $ 2.0
=======

The severance costs result from the termination of three catalog executives,
seven information technology associates and from a reserve for a new
compensation agreement with the Acting Chief Executive Officer. The
severance cost charge includes an amount for fringe benefits.

The $0.5 million EZ pay program charge is to increase the company's consumer
financing program bad debt reserve in light of increasing bad debt experience
and related corporate strategic initiatives.

The Company entered into two catalog joint ventures during fiscal 1994.
Management has decided to terminate these ventures and has written-off the
costs (principally internally generated software costs) associated with the
joint ventures.

NOTE 3 - BORROWING ARRANGEMENTS
On November 23, 1994, the Company entered into an agreement for a new amended
and restated bank credit facility which replaced the previous facility. The
credit facility encompasses a short-term working capital revolving line and a
long-term facility.

Revolving Line of Credit -
The Company's $80 million revolving line of credit is used for working
capital needs and letters of credit. This revolving line of credit includes
an incremental seasonal working capital line of credit; the actual
availability on this facility is $70 million from December 1 until June 30 of
each fiscal year and increases to $80 million from July 1 to November 30 of
each fiscal year. As of April 1, 1995, $54.8 million ($59.9 million
including $5.1 million letters of credit) was outstanding at interest rates
ranging from 7.435% to 9.000%. As of May 15, 1995, use of the revolving line
of credit had increased to $60.3 million ($66.0 million including $5.7
million letters of credit) of the $70.0 million revolver currently available.

8
9

GANDER MOUNTAIN, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Long-term Obligations -
The term loan of $20.0 million from the banks is used for long-term needs.
Beginning March 1, 1996, the loan requires quarterly payments of principal
and interest until maturity on December 31, 2000. At April 1, 1995, $20.0
million was outstanding against the term loan at an interest rate of 7.685%.

The line of credit and term loan facilities are secured by substantially all
assets of the Company. All borrowings are also subject to various covenants.
The most restrictive covenants require minimum levels of tangible net worth
and profitability, a minimum current ratio and a maximum level of total
liabilities to tangible net worth. Due to the special charge of $11.5 million
disclosed above, the Company breached several financial covenants in its
credit agreement. The Company and its lenders signed a waiver agreement
pursuant to which the banks waived these financial covenant defaults until
June 15, 1995. While there can be no assurance with respect to permanently
curing these financial covenant defaults, management believes it will
successfully negotiate an amended credit facility containing revised
financial covenants which will enable the Company to avoid any potential
short-term liquidity problems as a result of these financial defaults (see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations-Liquidity and Capital Resources").

NOTE 4 - EARNINGS PER SHARE
Primary earnings per share amounts are computed based on the weighted average
number of shares outstanding plus the shares that would be outstanding
assuming exercise of dilutive stock options. Net income has been adjusted for
dividends on the Series A Redeemable Preferred Stock. Fully diluted earnings
per share amounts reflect the maximum dilution that would result from
conversion of the Series A Redeemable Preferred Stock and exercise of stock
options.

Thirteen Weeks Ended Thirty-Nine Weeks Ended
-------------------- -------------------------
April 1, April 2, April 1, April 2,
1995 1994 1995 1994
-------- ------- -------- --------

Net income (loss) as reported $(12,122) $( 1,332) $(6,654) $ 3,219
Preferred dividends ( 278) ( 139) ( 831) ( 154)
------- ------- ------ -------
Primary income (loss) (12,400) ( 1,471) (7,485) 3,065

Assumed conversions:
Preferred dividends eliminated 278 139 831 154
------- ------- ------ --------
Fully diluted income (loss) $(12,122) $( 1,332) $(6,654) $ 3,219
======= ======= ====== ========

Average number of common shares:
Primary 3,243 3,192 3,229 3,192
======= ======= ====== ========
Fully diluted 3,243 3,192 3,229 3,491
======= ======= ====== ========

9
10

GANDER MOUNTAIN, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5 - SERIES A REDEEMABLE PREFERRED STOCK
In fiscal year 1994, the Company entered into a Preferred Stock Purchase
Agreement with GS Capital Partners, L.P., and certain other affiliates of the
Goldman Sachs Group, L.P. (the "GS Investors"). Pursuant to this agreement,
the Company issued and sold to GS Investors 200,000 shares of Series A
Redeemable, Cumulative, Convertible, Exchangeable Preferred Stock ("Series A
Redeemable Preferred Stock") at a purchase price of $100 per share. The
Series A Redeemable Preferred Stock bears a 5 1/2% dividend and is
exchangeable at the Company's option for subordinated notes. Either the
Series A Redeemable Preferred Stock or the subordinated notes may be
converted into common stock at an initial conversion price of $13.75 per
share at the option of the GS Investors. Both the Series A Redeemable
Preferred Stock and the subordinated notes carry voting rights on an
as-converted basis with outstanding common stock and have mandatory
redemption in years 2004 and 2005.

NOTE 6 - INCOME TAXES
Effective July 1, 1993, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 109 (FAS 109), "Accounting for Income
Taxes". The Company reported the cumulative effect of that change in the
method of accounting for income taxes in the first quarter of fiscal 1994.
Under the asset and liability approach prescribed by FAS 109, deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts
of existing assets and liabilities and their respective tax bases. The
cumulative effect of adopting FAS 109 resulted in an increase in net income
of $120,000 or $0.04 per common share.

10
11

GANDER MOUNTAIN, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

COMPARISON OF THIRD QUARTER FISCAL 1995 TO THIRD QUARTER FISCAL 1994
Total Company net sales increased $2.8 million or 7% to $43.4 million for the
thirteen weeks ended April 1, 1995 from $40.6 million for the same quarter in
the prior year. Catalog net sales decreased 7% to $27.3 million compared to
$29.5 million during the prior year quarter. The decrease in catalog sales
is due primarily to an unfavorable assortment mix and more competitive
pricing in the Spring General catalog and poor in-stock condition of the
January Sale catalog.

Retail net sales increased 45% to $16.0 million compared to $11.1 million
reported in the third quarter of fiscal 1994. The increase in sales resulted
partially from the addition of new retail stores in Flint and Utica, Michigan
and Merrillville, Indiana. Also, on a comparable basis, Gander Mountain's
retail stores in business more than one year had sales increases of 3.0%
versus 12.2% in the prior period. Sales from all 11 retail stores continue
to reflect strong customer acceptance.

During the quarter, gross profit increased $0.2 million or 2% over the same
period last year. The gross profit increase is attributable to the higher
sales volume, offset by slightly lower gross margin rates. Catalog gross
profit decreased $1.4 million to $7.9 million while retail gross profit
increased $1.6 million to $4.9 million. The Company's gross profit margin
for the thirteen weeks ended April 1, 1995 was 29.4% compared to 30.9% for
the same period last year. Catalog gross profit margins decreased to 28.9%
in the third quarter of fiscal 1995 from 31.6% in the prior year quarter
while retail gross profit margins increased slightly from 29.0% to 30.3% for
the same period.

Operating expenses for the quarter were $19.6 million or 39% greater than in
the third quarter of fiscal 1994. Increases in operating expenses resulted
principally from increased catalog production expenses, higher retail
operating expenses as a result of three additional stores, increased general
and administrative expenses, and store pre-opening expenses increasing $0.6
million to $0.7 million. As a percentage of net sales, operating costs
increased from 35% to 45%.

The Company incurred a non-recurring special charge of $11.5 million during
the third quarter of fiscal 1995. The special charge is comprised of $5.0
million for the Company's abandonment of certain internally developed
software, $4.5 million for the write-off of certain aged inventory and $2.0
million for other catalog charges. (See Note 2 to the Company's Notes to the
Unaudited Consolidated Financial Statements).

Other expense for the quarter was $1.5 million or 133% above prior year
results. The increase is due primarily to higher interest costs associated
with the increased borrowings against the Company's short term line of credit
and term loan. The increase in borrowings is a direct result of increased
inventory levels to service the three additional retail stores and the soft
sales incurred by the spring catalogs.

The effective tax rate for the third quarter of fiscal 1995 decreased to
38.8% from 40.0% in the third quarter of fiscal 1994.

11
12

GANDER MOUNTAIN, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

COMPARISON OF FIRST THIRTY-NINE WEEKS OF FISCAL 1995 TO FIRST THIRTY-NINE
WEEKS OF FISCAL 1994 Total Company net sales increased $46.9 million or 24%
to $243.9 million for the thirty-nine weeks ended April 1, 1995 from $197.0
million for the same period in the prior year. Catalog net sales increased
17% to $173.4 million compared to $148.4 million during the prior year.
Additional catalog pages, promotional activity and higher average orders
contributed to the sales increase, offset by soft sales in the Spring General
and January Sale catalogs.

Retail net sales increased 45% to $70.5 million compared to $48.6 million
reported in the first thirty-nine weeks of fiscal 1994. The increase in
sales resulted predominantly from the addition of new retail stores in Flint
and Utica, Michigan and Merrillville, Indiana. Also, on a comparable basis,
Gander Mountain's retail stores in business more than one year had sales
increases of 6.5% versus 9.8% in the prior period. The increase is
attributable to higher average customer purchases and continued strong
customer acceptance.

During the first thirty-nine weeks of fiscal 1995, gross profit increased
$15.0 million or 23% over the same period last year. The gross profit
increase is attributable to the higher sales volume. Catalog gross profit
increased $7.6 million to $56.9 million while retail gross profit increased
$7.3 million to $22.4 million. The Company's gross profit margin for the
thirty-nine weeks ended April 1, 1995 and April 2, 1994 was 32.5% and 32.7%,
respectively. Catalog gross profit margins decreased from 33.2% in fiscal
1994 to 32.8% in fiscal 1995, while retail gross profit margins increased
from 31.1% in the first three quarters of fiscal 1994 to 31.8% in fiscal
1995.

Operating expenses for the first three quarters of fiscal 1995 were $75.0
million or 31% greater than in the same period of fiscal 1994. Increases in
operating expenses resulted principally from increased catalog production and
labor expenses needed to service the higher sales volume and store
pre-opening expenses increasing $0.7 million to $1.0 million. As a
percentage of net sales, operating costs increased from 29.1% to 30.8%.

Other expense was $3.4 million or 83% above prior year results. The increase
is due to higher interest costs associated with the increased borrowings
against the Company's short term line of credit and term loan and higher
interest rates. The increase in borrowings is a direct result of increased
inventory levels.

The effective tax rate for the first three quarters of fiscal 1995 decreased
to 37.2% from 39.9%.

12
13

GANDER MOUNTAIN, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

LIQUIDITY AND CAPITAL RESOURCES

The Company's primary on-going cash requirements are for inventory purchases,
catalog expenses and capital expenditures in connection with the Company's
retail expansion program. The Company meets these cash requirements through
retention of funds generated from operations and borrowings against a
short-term revolver which has $70 million of available capital from December
1 until June 30 of each fiscal year and $80 million of available capital from
July 1 to November 30 of each fiscal year. The Company also has a term loan
of $20 million and utilizes vendor financing through trade payables to
service ongoing financial obligations. At April 1, 1995, $54.8 million
($59.9 million including $5.1 million outstanding letters of credit) was
outstanding on the revolving line of credit and $20 million was outstanding
on the term loan. As of May 15, 1995, use of the revolving line of credit had
increased to $60.3 million ($66.0 million including $5.7 million letters of
credit) of the $70.0 million revolver currently available. The Company
currently believes that cash flow from operations and borrowings under the
current credit line are sufficient to meet projected cash needs for the
remainder of the calendar year. In addition, the Company is currently
evaluating its financial alternatives to provide for additional long-term
capital. While the Company's current financial projections indicate it will
be able to meet its short-term financial obligations in a timely manner, an
unexpected contingency in the business could create a need for additional
short-term capital.

Due to the special charge of $11.5 million disclosed above, the Company
breached several financial covenants in its credit agreement. The Company
and its lenders signed a waiver agreement pursuant to which the banks waived
these financial covenant defaults until June 15, 1995. While there can be no
assurance with respect to permanently curing these financial covenant
defaults, management believes it will successfully negotiate an amended
credit facility containing revised financial covenants which will enable the
Company to avoid any potential short-term liquidity problems as a result of
these financial defaults (See "Notes to Unaudited Consolidated Financial
Statements-Note 3-Borrowing Arrangements").

The Company's accounts receivable rose from $5.1 million at April 2, 1994 to
$8.9 million at April 1, 1995, due to continued acceptance of the Company's
deferred payment plan and increased sales volume. The plan generally allows
customers to purchase and pay for merchandise in equal installments over a 3
to 5 month period, interest free.

The Company's inventories rose from $62.2 million at April 2, 1994 to $85.9
million at April 1, 1995 to support the increased sales volume including
stocking of three new retail stores opened in fiscal 1995, Company efforts to
improve serviceability and the stocking of four additional retail stores
scheduled to be opened in the fourth quarter of fiscal 1995.

The Company's accounts payable increased from $17.5 million at April 2, 1994
to $19.0 million at April 1, 1995 due to the increase in inventory levels and
increased vendor financing.

Capital expenditures for the thirty-nine weeks ended April 1, 1995 were $7.5
million compared with $8.0 million for the thirty-nine weeks ended April 2,
1994. The decrease is a result of higher infrastructure expenditures in the
first three quarters of fiscal 1994. The current year expenditures are
primarily the result of leasehold improvements associated with the openings
of three retail stores in the Company's third quarter and the anticipated
opening of four retail stores in the Company's fourth quarter.

13
14

SEASONALITY

The Company's business is seasonal with greater revenues historically being
generated during the first half of the fiscal year. As a result, revenues
for the thirty-nine week period ending April 1, 1995 should not be considered
to be indicative of results to be reported for the balance of the fiscal
year.

14
15

PART II OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS