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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
(MARK ONE)
For the fiscal year ended December 31, 2006
OR
o Transition Report Pursuant to Section 15(d) of the Securities Exchange Act of 1934 (No Fee Required)
for the Transition Period from ___________ to _____________
Commission file number 1-09100
A. Full title of the plan and the address of the plan, if different from that of the issuer named below:
GOTTSCHALKS Inc. Retirement Savings Plan
B. Name of issuer of the securities held pursuant to the plan and the address of its principal executive office:
Gottschalks Inc.
SIGNATURE The Plan. Pursuant to the requirements of the
Securities Exchange Act of 1934, the trustee (or other persons who administer
the employee benefit plan) has duly caused this annual report to be signed on
its behalf by the undersigned hereunto duly authorized. GOTTSCHALKS Inc. Date: June 28, 2007 By /s/ J. Gregory Ambro
GOTTSCHALKS Inc.
7 River Park Place East
Fresno, CA 93720
(559) 434-4800
Retirement Savings Plan
Chief Administrative Officer
Retirement Savings Plan
December 31, 2006 and 2005
GOTTSCHALKS INC. Financial Statements and Supplemental Schedules Table of Contents
Page
Report of Independent Registered Public Accounting Firm
Financial Statements:
Statements of Net Assets Available for Benefits
Statements of Changes in Net Assets Available for Benefits
Notes to Financial Statements
Supplemental Schedules as of and for the year ended December 31, 2006
Schedule H, Line 4i - Schedule of Assets (Held at End of Year)
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Participants and We have audited the financial statements of the GOTTSCHALKS Inc. Retirement Savings Plan (the Plan) as of December 31, 2006
and 2005, and for the years then ended, as listed in the accompanying table of contents. These financial statements are the responsibility of the
Plan's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of
material misstatement. We were not engaged to perform an audit of the Plan's internal control over financial reporting. Our audits included
consideration over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of the Plan's internal control over financial reporting. Accordingly, we express no such
opinion. 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 the Plan's 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 net assets available for benefits of the
Plan as of December 31, 2006 and 2005, and the changes in net assets available for benefits for the years then ended, in conformity with
accounting principles generally accepted in the United States of America. Our audits were performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental
schedules, as listed in the accompanying table of contents, are presented for the purpose of additional analysis and are not a required part of
the basic financial statements but are supplementary information required by the Department of Labor's Rules and Regulations for Reporting
and Disclosure under the Employee Retirement Income Security Act of 1974. These supplemental schedules are the responsibility of the Plan's
management. The supplemental schedules have been subjected to the auditing procedures applied in the audits of the basic financial
statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole. By /s/ Mohler, Nixon & Williams Campbell, California
GOTTSCHALKS INC. STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS December 31, 2006 2005 Assets: Investments, at fair value
$ 53,136,452 $ 46,658,865 Participant loans
1,688,587
1,621,804
Assets held for investment purposes
54,825,039 48,280,669 Employer's contribution receivable
299,123
302,761
Net assets available for benefits at fair value 55,124,162 48,583,430 Adjustment from fair value to contract value for Net assets available for benefits $ 55,211,274
$ 48,644,605
See notes to financial statements. 2
GOTTSCHALKS INC. STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS Years ended December 31, 2006 2005 Additions to net assets attributed to: Investment income:
Dividends and interest
$ 1,631,842 $ 1,396,441 Net realized and unrealized appreciation 8,432,831
1,382,452
Contributions:
Participants'
3,545,997 3,631,700 Employer's
1,125,549
1,108,390
4,671,546 4,740,090 Total additions
13,104,377
6,122,542
Deductions from net assets attributed to: Withdrawals and distributions
( 6,311,064) ( 3,977,622) Administrative expenses
( 226,644)
( 199,821)
Total deductions
( 6,537,708)
( 4,177,443)
Net increase in net assets
6,566,669 1,945,099 Net assets available for benefits: Beginning of year
48,644,605
46,699,506
End of year
$ 55,211,274
$ 48,644,605
See notes to financial statements. 3
GOTTSCHALKS INC. NOTES TO FINANCIAL STATEMENTS Note 1 - The Plan and its significant accounting policies General - The following description of the GOTTSCHALKS Inc. Retirement Savings Plan (the Plan) provides only general
information. Participants should refer to the Plan document for a more complete description of the Plan's provisions. The Plan is a defined contribution plan that was established in 1986 by Gottschalks Inc. (the Company) to provide benefits to eligible
employees, as defined in the Plan document. The Plan covers all full-time employees of the Company who have a minimum of one year of
service with not less than 1,000 hours of service, are age 21 or older and not otherwise covered by a collective bargaining agreement, or a
leased employee. The Plan administrator believes that the Plan is currently designed and operated in compliance with the applicable
requirements of the Internal Revenue Code, as amended and the provisions of the Employee Retirement Income Security Act of 1974 (ERISA),
as amended. Administration - The Company has appointed the Investment Committee (the Committee) to manage the operation and
administration of the Plan. A third-party administrator, appointed by the Committee, processes and maintains the records of participant data.
The Company has contracted with The Charles Schwab Trust Company (Charles Schwab) to act as the custodian and trustee. All significant
expenses incurred for administering the Plan are paid by the Company, except for loan fees, which are paid by the participants, and an annual
management trustee fee, which is paid by the Plan. Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United
States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and
changes therein, and disclosure of contingent assets and liabilities. Actual results could differ from those estimates. Basis of accounting - The financial statements of the Plan are prepared on the accrual method of accounting in accordance
with accounting principles generally accepted in the United States of America. As described in Financial Accounting Standards Board Staff Position, FSP AAG INV-1 and SOP 94-4-1, Reporting of Fully Benefit
Responsive Investment Contracts Held by Certain Investment Companies Subject to the AICPA Investment Company Guide and Defined-
Contribution Health and Welfare and Pension Plans (the FSP), which is effective for financial statements for annual periods ending after
December 15, 2006, applied retroactively for all periods presented, investment contracts held by a defined-contribution plan are required to be
reported at fair value. However, contract value is the relevant measurement attribute for that portion of the net assets available for benefits of a
defined-contribution plan attributable to fully benefit-responsive 4
GOTTSCHALKS INC. NOTES TO FINANCIAL STATEMENTS investment contracts because contract value is the amount participants would receive if they were to initiate permitted transactions under
the terms of the Plan. As required by the FSP, the Statements of Net Assets Available for Benefits present the fair value of the investment
contracts as well as the adjustment of the fully benefit-responsive investment contracts from fair value to contract value. The Statements of
Changes in Net Assets Available for Benefits are prepared on a contract value basis. Forfeited accounts - Forfeited nonvested accounts at December 31, 2006 and 2005 totaled approximately $2,000 and $600,
respectively, and will be used to reduce future employer contributions. Forfeitures utilized to reduce the employer's contribution for the years
ended December 31, 2006 and 2005 amounted to approximately $20,000 and $47,000, respectively. Investments - Investments of the Plan are held by Charles Schwab, and invested based solely upon instructions received
from participants for participant directed funds. Participants can direct their employee contributions among any of the investment options. No
assurance of actual fund performance can be given. Effective September 16, 2005, employer contributions to the Plan are invested for the
participant pro rata in the same funds as the participant holds their salary deferral contributions. Prior to this, employer contributions to the Plan
were nonparticipant-directed and invested in the Gottschalks Inc. Common Stock Fund. The Gartmore Morley Stable Value Fund is a collective trust fund principally invested in a diversified portfolio of guaranteed investment
contracts. Participation units in the collective trust fund are stated at their quoted redemption value on the last day of the Plan year as reported
by Charles Schwab. This fund is fully benefit responsive and has been reported in the financial statements at fair value. The Plan's investments in strategic portfolio funds, mutual funds and common stock are valued at fair value as of the last day of the Plan
year, as measured by quoted market prices or as reported by Charles Schwab. Participant loans are valued at cost, which approximates fair
value. Cash and cash equivalents - All highly liquid investments purchased with an original maturity of three months or less
(generally money market funds) are considered to be cash equivalents. These investments are usually held for a short period of time, pending
long-term investment. Income taxes - The Plan has been amended since receiving its latest favorable determination letter dated August 20, 2003.
The Company believes that the Plan is operated in accordance with, and qualifies under, the applicable requirements of the Internal Revenue
Code and related state statutes, and that the trust, which forms a part of the Plan, is exempt from federal income and state franchise taxes. 5
GOTTSCHALKS INC. NOTES TO FINANCIAL STATEMENTS Reconciliation of financial statements to Form 5500 - The differences between the information reported in the
financial statements and the information reported in the Form 5500 arise primarily from presenting the financial statements on the accrual basis
of accounting. Risks and uncertainties - The Plan provides for various investment options in any combination of investment securities
offered by the Plan, including Company common stock. Investment securities are exposed to various risks, such as interest rate, market
fluctuations and credit risks. Due to the risk associated with certain investment securities, it is at least reasonably possible that changes in
market values, interest rates or other factors in the near term could materially affect participants' account balances and the amounts reported in
the statements of net assets available for benefits and the statements of changes in net assets available for benefits. Note 2 - Related party transactions Certain Plan investments are managed by Charles Schwab, the trustee of the Plan. Any purchases and sales of these funds are
performed in the open market at fair market value. Such transactions, while considered party-in-interest transactions under ERISA regulations,
are permitted under the provisions of the Plan and are specifically exempt from the prohibition of party-in-interest transactions under ERISA.
Prior to September 16, 2005, employer contributions were invested in common stock of the Company. In addition, as allowed by the Plan,
participants may elect to invest a portion of their accounts in the common stock of the Company. Aggregate investment in Company common
stock at December 31, 2006 and 2005 was as follows: Date Number of shares Fair value Cost 2006 1,517,826 $ 17,437,420 $ 7,273,693 2005 1,732,041 $ 14,601,106 $ 8,024,082 The Gottschalks Inc. Common Stock Fund invests primarily in the Company's common stock. The remainder of the fund is invested in the
Schwab Retirement Money Fund to allow for timely handling of exchanges, withdrawals and distributions. Investments in the Retirement Money
Fund were $27,422 and $27,784 at December 31, 2006 and 2005, respectively. Note 3 - Participation and benefits Participant contributions - Participants may elect to have the Company contribute up to 100% of their eligible pre-tax
compensation not to exceed the amount allowable under current income tax regulations. Participants who elect to have the Company contribute
a portion of their compensation to the Plan agree to accept an equivalent reduction in taxable compensation. 6
GOTTSCHALKS INC. NOTES TO FINANCIAL STATEMENTS Contributions withheld are invested in accordance with the participant's direction and are allocated to funds in whole percentage
increments. Participants are also allowed to make rollover contributions of amounts received from other tax-qualified employer-sponsored retirement
plans. Such contributions are deposited in the appropriate investment funds in accordance with the participant's direction and the Plan's
provisions. Employer contributions - The Company is allowed to make matching contributions as defined in the Plan and as approved
by the Board of Directors. The Company's contributions may be made in the form of cash or common stock of the Company (See Note 2). An
employee must be employed on the last day of the calendar quarter and have made a contribution to the Plan during the quarter to receive
matching contributions. During 2006 and 2005, the Company made discretionary matching contributions on a quarterly basis of up to 3% of a
participants' quarterly eligible compensation. The Company's actual contribution is reduced by available forfeitures, if any, during the Plan
year. Vesting - Participants are immediately vested in their contributions. Participants vest ratably and are fully vested in the
employer's discretionary matching contributions allocated to their account after four years of credited service, after age 65 or because of
disability or death. Participant accounts - Each participant's account is credited with the participant's contribution, Plan earnings or losses and
an allocation of the Company's contribution, if any. Allocation of the Company's contribution is based on participant contributions or eligible
compensation, as defined in the Plan. Payment of benefits - Upon termination, the participants or beneficiaries will receive their total benefits in a lump sum
amount in cash, or for any portion of the account that is invested in employer stock only, in cash or employer stock, equal to the value of the
participant's vested interest in their account. The Plan allows for automatic lump sum distribution of participant vested account balances that do
not exceed $1,000. Loans to participants - The Plan allows participants to borrow not less than $500 and up to the lesser of $50,000 or 50% of
their vested account balance. The loans are secured by the participant's vested balance. Such loans bear interest at the available market
financing rates and must be repaid to the Plan within a five-year period, unless the loan is used for the purchase of a principal residence in
which case the maximum repayment period may be longer. The specific terms and conditions of such loans are established by the Committee.
Outstanding loans at December 31, 2006 carry interest rates ranging from 5% to 10.5%. 7
GOTTSCHALKS INC. NOTES TO FINANCIAL STATEMENTS Note 4 - Investments The following table presents the fair values of investments and investment funds that include 5% or more of the Plan's net assets at
December 31: 2006
2005
Schwab S&P 500 Fund $ 5,210,581 $ 6,557,229 Gottschalks Inc. Common Stock Fund 3,095,487 2,435,787 Gottschalks Inc. Common Stock Fund 14,369,355* 12,193,103* JPMorgan Core Bond Fund 4,363,499 3,982,050 Capital World Growth & Income Fund 3,316,210 2,990,728 Gartmore Morley Stable Value 4,520,922 2,977,119 Other funds individually less than 5% of net assets 19,948,985
17,144,653
Assets held for investment purposes $ 54,825,039
$ 48,280,669
*Nonparticipant-directed The Plan's investments (including gains and losses on investments bought and sold, as well as held during the year) appreciated
(depreciated) in value as follows for the years ended December 31: 2006
2005
Strategy Portfolio Funds $ 551,556 $ 207,440 Mutual Funds 1,413,504 399,045 Gottschalks Inc. Common Stock Fund 4,690,965 ( 719,900) Common Collective Trust 144,964
99,426
$ 6,800,989
$( 13,989)
8
GOTTSCHALKS INC. NOTES TO FINANCIAL STATEMENTS Note 5 - Nonparticipant-directed investments Information about the net assets and the significant components of the changes in net assets relating to nonparticipant-directed
matching accounts is as follows for the years ended December 31: 2006
2005
Net assets: $ 14,369,355
$ 12,193,103
Years ended December 31, 2006
2005
Changes in net assets: Contributions $ - $ 451,835 Transfers to participant-directed investments ( 163,277) - Net (depreciation) appreciation 3,860,262 ( 492,779) Benefits paid to participants ( 1,520,733)
( 1,287,989)
$ 2,176,252
$( 1,328,933)
Note 6 - Plan termination OR MODIFICATION The Company intends to continue the Plan indefinitely for the benefit of its participants; however, it reserves the right to terminate or
modify the Plan at any time by resolution of its Board of Directors and subject to the provisions of ERISA. In the event the Plan is terminated in
the future, participants would become fully vested in their accounts. Note 7 - subsequent event Effective January 1, 2007, the Company now allows any participant with three or more years of service the option to diversify their
company match out of the Gottschalks Inc. Common Stock Fund and into other funds. For those participants under the age of 55, this
diversification will be phased in over a three-year period, where participants can diversify up to a total of 33% of their Company Match Stock the
first year, 66% by the second year, and 100% by the third year. 9
SUPPLEMENTAL SCHEDULES 10
Identity of issue, borrower, lessor or similar party Description of investment including maturity date, rate of interest, collateral, par or
maturity value Cost Current value Cash $ 172,005 * ** Schwab Retirement Money Fund Mutual Fund $ 27,422 27,422 * Gottschalks Inc. Common Stock 3,095,487 * ** Gottschalks Inc. Common Stock 5,981,522 14,341,933 American Beacon Small Cap Value Inst Fund Mutual Fund 788,751 Capital World Growth & Income Fund Mutual Fund 3,316,210 Davis New York Venture Fund Class A Mutual Fund 2,016,339 Dodge & Cox Stock Fund Mutual Fund 2,027,598 Dreyfus Midcap Index Fund Mutual Fund 2,114,098 JPMorgan Core Bond Fund Mutual Fund 4,363,499 Laudus U.S. Small Cap Institutional Fund Mutual Fund 894,389 Loomis Sayles Bond Fund Mutual Fund 1,393,095 * Managers Special Equity Fund Mutual Fund 1,427,431 Masters' Select International Fund Mutual Fund 1,822,690 Oppenheimer Real Asset Fund Mutual Fund 649,266 PIMCO Foreign Bond Fund Mutual Fund 1,193,733 PIMCO High-Yield Fund Mutual Fund 625,293 * Schwab S&P 500 Fund Mutual Fund 5,210,581 Tweedy, Browne Global Value Fund Mutual Fund 1,163,416 Wilshire Target Large Co. Growth Investment Fund Mutual Fund 1,972,294 Gartmore Morley Stable Value Common Collective Trust 4,608,034 * Participant loans Interest rates ranging from 5% to 10.5% 1,688,587 $ 54,912,151 * Parties-in-interest ** Nonparticipant-directed
Identity of party involved Description Purchase Selling Lease Expense Cost Current Net gain Gottschalks Inc. Common Stock Stock $ 304,134 $ 304,134 $ 304,134 Gottschalks Inc. Common Stock Stock $ 2,325,476 $ ,240,391 $ 2,325,476 $ 85,085
RETIREMENT SAVINGS PLAN
December 31, 2006 and 2005
Schedule H, Line 4j - Schedule of Reportable Transactions
Plan Administrator of the
GOTTSCHALKS Inc.
Retirement Savings Plan
MOHLER, NIXON & WILLIAMS
Accountancy Corporation
June 26, 2007
RETIREMENT SAVINGS PLAN
fully benefit-responsive investment contracts
87,112
61,175
RETIREMENT SAVINGS PLAN
(depreciation) in fair value of investments
6,800,989
( 13,989)
RETIREMENT SAVINGS PLAN
DECEMBER 31, 2006 AND 2005
RETIREMENT SAVINGS PLAN
DECEMBER 31, 2006 AND 2005
RETIREMENT SAVINGS PLAN
DECEMBER 31, 2006 AND 2005
RETIREMENT SAVINGS PLAN
DECEMBER 31, 2006 AND 2005
RETIREMENT SAVINGS PLAN
DECEMBER 31, 2006 AND 2005
RETIREMENT SAVINGS PLAN
DECEMBER 31, 2006 AND 2005
GOTTSCHALKS INC.
RETIREMENT SAVINGS PLAN
EIN: 77-0159791
PLAN #001
SCHEDULE H, LINE 4i -SCHEDULE OF ASSETS (HELD AT END OF YEAR)
December 31, 2006
GOTTSCHALKS INC.
RETIREMENT SAVINGS PLAN
EIN: 77-0159791
PLAN #001
SCHEDULE H, LINE 4j - SCHEDULE OF REPORTABLE TRANSACTIONS
YEAR ENDED December 31, 2006
of assets
(include rate
of interest
and maturity
in case of
a loan)
price
price
Rental
Incurred
With
Transaction
of
asset
value of
asset on
transaction
date
or (loss)