-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, N5fQD/bXI3MwCt7wNqMspAu4HXBMAI+lfLVf2dd/75ivrExxBax5x09uYg1hRpxz SA8xMoLUOG+51PauboSfLw== 0001019439-01-500010.txt : 20010815 0001019439-01-500010.hdr.sgml : 20010815 ACCESSION NUMBER: 0001019439-01-500010 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20010814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BIG DOG HOLDINGS INC CENTRAL INDEX KEY: 0001019439 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-FAMILY CLOTHING STORES [5651] IRS NUMBER: 521868665 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-22963 FILM NUMBER: 1710096 BUSINESS ADDRESS: STREET 1: 121 GRAY AVENUE STREET 2: SUITE 300 CITY: SANTA BARBARA STATE: CA ZIP: 93101 BUSINESS PHONE: 8059638727 MAIL ADDRESS: STREET 1: 121 GRAY AVENUE STREET 2: SUITE 300 CITY: SANTA BARBARA STATE: CA ZIP: 93101 10-Q 1 form2q2001.txt 2Q2001 10Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2001 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number: 0-22963 BIG DOG HOLDINGS, INC. (Exact name of registrant as specified in its charter) DELAWARE 52-1868665 (State or jurisdiction of (IRS employer incorporation or organization) identification no.) 121 GRAY AVENUE SANTA BARBARA, CALIFORNIA 93101 (Address of principal executive offices) (zip code) (805) 963-8727 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. -X- Yes ---No The number of shares outstanding of the registrant's common stock, par value $.01 per share, at August 1, 2001 was 8,453,064 shares. BIG DOG HOLDINGS, INC INDEX TO FORM 10-Q PAGE ---- NO. --- PART I. FINANCIAL INFORMATION........................................3 ITEM 1: FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEETS June 30, 2001 and December 31, 2000..........................3 CONSOLIDATED STATEMENTS OF OPERATIONS Three months and six months ended June 30, 2001 and 2000.....4 CONSOLIDATED STATEMENTS OF CASH FLOWS Six months ended June 30, 2001 and 2000......................5 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS...................6 ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS....................................7 ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK..10 PART II. OTHER INFORMATION...........................................10 ITEM 1: LEGAL PROCEEDINGS...........................................10 ITEM 2: CHANGES IN SECURITIES.......................................10 ITEM 3: DEFAULTS UPON SENIOR SECURITIES.............................11 ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.........11 ITEM 5: OTHER INFORMATION...........................................11 ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K............................11 SIGNATURES ............................................................12 PART 1. .........FINANCIAL INFORMATION ITEM 1: .........FINANCIAL STATEMENTS BIG DOG HOLDINGS, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS
June 30, December 31, 2000 2001 ------------------ ------------------ (Unaudited) ASSETS (Note 2) CURRENT ASSETS: Cash and cash equivalents........................................ $ 1,426,000 $ 4,376,000 Accounts receivable, net......................................... 449,000 539,000 Inventories...................................................... 30,445,000 26,759,000 Prepaid expenses and other current assets........................ 758,000 549,000 Deferred income taxes............................................ 3,344,000 1,429,000 ------------------ ------------------ Total current assets........................................... 36,422,000 33,652,000 PROPERTY AND EQUIPMENT, Net......................................... 7,733,000 9,072,000 INTANGIBLE ASSETS, Net.............................................. 170,000 145,000 OTHER ASSETS........................................................ 360,000 411,000 ------------------ ------------------ TOTAL............................................................... $ 44,685,000 $ 43,280,000 ================== ================== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Short-term borrowings............................................ $ 14,500,000 $ 6,000,000 Accounts payable................................................. 3,520,000 4,553,000 Income taxes payable............................................. 99,000 1,826,000 Accrued expenses and other current liabilities................... 2,619,000 3,720,000 ------------------ ------------------ Total current liabilities...................................... 20,738,000 16,099,000 DEFERRED RENT....................................................... 711,000 863,000 DEFERRED GAIN ON SALE-LEASEBACK..................................... 433,000 459,000 ------------------ ------------------ Total liabilities................................................ 21,882,000 17,421,000 ------------------ ------------------ COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Preferred stock, $.01 par value, 3,000,000 shares authorized, none issued and outstanding......................................... $ --- $ --- Common stock, $.01 par value, 30,000,000 shares authorized, 9,686,284 and 13,183,550 issued at June 30, 2001 and December 31, 2000, respectively............................................. 97,000 97,000 Additional paid-in capital....................................... 20,475,000 20,475,000 Retained earnings................................................ 9,437,000 12,367,000 Treasury stock, 1,233,220 and 1,202,200 shares at June 30, 2001 and December 31, 2000, respectively.............. (7,206,000) (7,080,000) ------------------ ------------------ Total stockholders' equity..................................... 22,803,000 25,859,000 ------------------ ------------------ TOTAL............................................................... $ 44,685,000 $ 43,280,000 ================== ==================
See accompanying notes. BIG DOG HOLDINGS, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended Six Months Ended June 30, June 30, ------------------------------------- -------------------------------------- 2001 2000 2001 2000 ---------------- ---------------- ----------------- ------------------ NET SALES................................... $ 25,194,000 $ 26,205,000 $ 42,180,000 $ 42,791,000 COST OF GOODS SOLD.......................... 10,763,000 10,682,000 18,722,000 18,112,000 ---------------- ---------------- ----------------- ------------------ GROSS PROFIT................................ 14,431,000 15,523,000 23,458,000 24,679,000 ---------------- ---------------- ----------------- ------------------ OPERATING EXPENSES: Selling, marketing and distribution..... 13,185,000 12,537,000 25,278,000 24,323,000 General and administrative.............. 1,549,000 1,342,000 2,772,000 2,671,000 ---------------- ---------------- ----------------- --------------- Total operating expenses............ 14,734,000 13,879,000 28,050,000 26,994,000 ---------------- ---------------- ----------------- --------------- (LOSS) INCOME FROM OPERATIONS................. (303,000) 1,644,000 (4,592,000) (2,315,000) OTHER INCOME.................................. 334,000 --- 334,000 --- INTEREST (EXPENSE) INCOME, NET................ (346,000) 44,000 (587,000) (215,000) ---------------- ---------------- ----------------- ------------------ (LOSS) INCOME BEFORE (BENEFIT FROM) PROVISION FOR INCOME TAXES.................. (315,000) 1,688,000 (4,845,000) (2,100,000) BENEFIT FROM (PROVISION FOR) INCOME TAXES..... 171,000 (650,000) 1,915,000 808,000 ---------------- ---------------- ----------------- ------------------ NET (LOSS) INCOME............................. $ (144,000) $ 1,038,000 $ (2,930,000) $ (1,292,000) ================ ================ ================= ================== NET (LOSS) INCOME PER SHARE BASIC AND DILUTED........................ $ (0.02) $ 0.09 $ (0.35) $ (0.11) ================ ================ ================= ================== WEIGHTED AVERAGE SHARES OUTSTANDING: BASIC.................................... 8,453,000 11,986,000 8,456,000 12,064,000 ================ ================ ================= ================== DILUTED.................................. 8,453,000 12,070,000 8,456,000 12,064,000 ================ ================ ================= ==================
See accompanying notes. BIG DOG HOLDINGS, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Six Months Ended June 30, -------------------------------------- 2001 2000 ---------------- --------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss........................................................ $ (2,930,000) $ (1,292,000) Adjustments to reconcile net loss to net cash Used in operating activities: Depreciation and amortization............................... 1,793,000 1,997,000 Provision for losses on receivables......................... 411,000 22,000 (Gain) Loss on disposition of property and equipment........ (63,000) 2,000 Gain on sale of investment.................................. (334,000) --- Deferred income taxes....................................... (1,915,000) (808,000) Changes in operating assets and liabilities: Receivables.............................................. (321,000) (177,000) Inventories.............................................. (3,686,000) (9,929,000) Prepaid expenses and other assets........................ (209,000) (744,000) Accounts payable......................................... (1,033,000) 2,395,000 Income taxes payable..................................... (1,727,000) (1,761,000) Accrued expenses and other current liabilities........... (1,101,000) (890,000) Deferred rent............................................ (152,000) 9,000 Deferred gain on sale-leaseback.......................... (26,000) (27,000) --------------- --------------- Net cash used in operating activities.................... (11,293,000) (11,203,000) --------------- --------------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures............................................ (509,000) (979,000) Proceeds from sale of investment................................ 334,000 Proceeds from sale of property and equipment.................... 130,000 --- Principal repayments of notes receivable........................ 32,000 (81,000) Other........................................................... (18,000) (33,000) --------------- --------------- Net cash used in investing activities.............. (31,000) (1,093,000) --------------- --------------- CASH FLOWS FROM FINANCING ACTIVITIES: Dividend payment................................................ --- (1,200,000) Repurchase of common stock...................................... (126,000) (107,000) Short-term borrowings, net...................................... 8,500,000 --- --------------- --------------- Net cash provided by (used in) financing activities.. 8,374,000 (1,307,000) --------------- --------------- NET DECREASE IN CASH................................................. (2,950,000) (13,603,000) CASH, BEGINNING OF PERIOD............................................ 4,376,000 17,925,000 --------------- --------------- CASH, END OF PERIOD.................................................. $ 1,426,000 $ 4,322,000 =============== =============== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid for: Interest..................................................... $ 592,000 $ --- Income taxes................................................. $ 1,727,000 $ 1,761,000
See accompanying notes. BIG DOG HOLDINGS, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 1. Basis of Presentation: The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulations S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments, consisting only of normal recurring entries necessary for a fair presentation have been included. Operating results for the six-month period ended June 30, 2001 are not necessarily indicative of the results that may be expected for the year ending December 31, 2001. For further information, refer to the financial statements and footnotes thereto for Big Dog Holdings, Inc. and its wholly owned subsidiary, Big Dog USA, Inc. (the "Company") included in the Company's Annual Report on Form 10-K for the year ended December 31, 2000. NOTE 2. Short-term Borrowings The Company has a $25.0 million revolving credit facility ("Credit Agreement") with Bank of America and other lenders. The Credit Agreement has a three-year term and has scheduled annual commitment reductions. The maximum commitment balance is $25.0 million, $20.0 million and $15.0 million on December 31, 2001, June 30, 2002 and December 31, 2002, respectively. The Credit Agreement is secured by substantially all assets of the Company, requires the compliance of various financial affirmative and negative covenants and prohibits the payment of dividends. This Credit Agreement provides for a performance-pricing structured interest charge, ranging from LIBOR plus 1.75% to 2.75%, based on the results of certain financial ratios. As of June 30, 2001, the Company had $14.5 million outstanding under this Credit Agreement. Additionally, the Company had $2.0 million of letters of credit outstanding as of June 30, 2001. The letters of credit expire through August 2001. NOTE 3. Stockholder's Equity In March 1998, the Company announced that its Board authorized the repurchase of up to $10,000,000 of its common stock. Between January 1, 2001 and June 30, 2001, the Company repurchased 31,020 shares of common stock. NOTE 4. Recently Issued Accounting Standards In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133 establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities. The statement requires that the Company recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value. The Company adopted SFAS No. 133 effective January 1, 2001. The adoption of SFAS No. 133 did not have an impact on the Company's financial statements. In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin ("SAB") No. 101 which summarizes certain of the staff's views in applying accounting principals generally accepted in the United States of America to revenue recognition in financial statements. The application of SAB No. 101 did not have a material impact on the Company's financial position or results of operations. ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management's discussion and analysis should be read in conjunction with the Company's financial statements and notes related thereto. Certain minor differences in the amounts below result from rounding of the amounts shown in the consolidated financial statements. This quarterly report on Form 10-Q contains forward-looking statements within the meaning of federal securities laws, which are intended to be covered by the safe harbors created thereby. Those statements include, but may not be limited to, the discussions of the Company's operating and growth strategy. Investors are cautioned that all forward-looking statements involve risks and uncertainties including, without limitation, those set forth under the caption "risk factors" in the business section of the Company's annual report on Form 10-K for the year ended December 31, 2000. Although the Company believes that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could prove to be inaccurate, and therefore, there can be no assurance that the forward-looking statements included in this quarterly report on Form 10-Q will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Company or any other person that the objectives and plans of the company will be achieved. The Company undertakes no obligation to publicly release any revisions to any forward-looking statements contained herein to reflect events and circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. The following discussion should be read in conjunction with the Company's unaudited financial statements and notes thereto included elsewhere in this quarterly report on form 10-Q, and the annual audited financial statements and notes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 2000 filed with the Securities and Exchange Commission. RESULTS OF OPERATIONS Three Months Ended June 30, 2001 and 2000 NET SALES. Net sales consist of sales from the Company's stores, catalog, internet website, and wholesale accounts, all net of returns and allowances. Net sales decreased to $25.2 million for the three months ended June 30, 2001 from $26.2 million for the same period in 2000, a decrease of $1.0 million, or 3.8%. Of the decrease, $1.3 million was attributable to a 5.4% comparable stores sales decrease and $0.5 million from a decrease in the Company's wholesale business. This was offset by $0.6 million from new stores (not yet qualifying as comparable stores) and a $0.2 million increase in catalog and internet sales. The decrease in comparable store sales reflects a continual softening in the retail environment and resulting decreased customer traffic at the Company's retail store locations. GROSS PROFIT. Gross profit decreased to $14.4 million for the three months ended June 30, 2001 from $15.5 million for the same period in 2000, a decrease of $1.1 million, or 7.1%. This decrease was primarily attributable to lower product sales. As a percentage of net sales, gross profit decreased to 57.3% in the three months ended June 30, 2001 from 59.2% in the same period in 2000. This 1.9% decrease was primarily due to increased sales promotions during the second quarter of 2001. SELLING, MARKETING AND DISTRIBUTION EXPENSES. Selling, marketing and distribution expenses consist of expenses associated with creating, distributing and selling products through all channels of distribution, including occupancy, payroll and catalog costs. Selling, marketing and distribution expenses increased to $13.2 million in the three months ended June 30, 2001 from $12.5 million in the same period for 2000, an increase of $0.7 million, or 5.6%. As a percentage of net sales, these expenses increased to 52.3% in the three months ended June 30, 2001 from 47.8% in the same period in 2000, an increase of 4.5%. The increase in selling, marketing and distribution expenses is attributable to additional store operating costs of $0.2 million, a $0.4 million provision for losses on wholesale receivables due to the bankruptcy filing of a significant wholesale account, Casual Male, and $0.1 increase in general marketing expenses. GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses consist of administrative salaries, corporate occupancy costs and other corporate expenses. General and administrative expenses increased to $1.5 million for the three months ended June 30, 2001 from $1.3 million for the same period 2000, an increase of $0.2 million, or 15.4%. As a percentage of net sales, these expenses increased to 6.1% in the three months ended June 30, 2001 from 5.1% in the same period in 2000. The increase in general and administrative expenses is primarily attributable to charitable donations of inventory given during the second quarter of 2001. OTHER INCOME. In the three months ended June 30, 2001, other income resulted from a $0.3 million gain on the sale of PETsMART.com stock. After careful consideration of the internet and capital markets, the Company wrote-off its entire $3,000,000 investment in PETsMART.com stock at December 31, 2000. Subsequently, in June 2001, a proposal and acceptance occurred whereby the Company sold this stock for $334,000. INTEREST EXPENSE. Interest expense increased to $0.3 million in the three months ended June 30, 2001 from $44,000 interest income in the same period in 2000, principally due to interest on the outstanding short-term borrowings. Six Months Ended June 30, 2001 and 2000 NET SALES. Net sales decreased to $42.2 million for the six months ended June 30, 2001 from $42.8 million for the same period in 2000, a decrease of $0.6 million or 1.4%. Of the decrease, $1.5 million was attributable to a 4.0% comparable stores sales decrease and $0.9 million from a decrease in the Company's wholesale business. This was offset by $1.3 million from new stores (not yet qualifying as comparable stores) and a $0.5 million increase in catalog and internet sales. The decrease in comparable store sales reflects a continual softening in the retail environment and resulting decreased customer traffic at the Company's retail store locations. GROSS PROFIT. Gross profit decreased to $23.5 million for the six months ended June 30, 2001 from $24.7 million for the same period in 2000, a decrease of $1.2 million or 4.9%. The decrease is primarily attributable to lower product sales. As a percentage of net sales, gross profit decreased to 55.6% in the six months ended June 30, 2001 from 57.7% in the same period in 2000. This 2.1% decrease was primarily due to increased sales promotions during the first half of 2001. SELLING, MARKETING AND DISTRIBUTION EXPENSES. Selling, marketing and distribution expenses increased to $25.3 million in the six months ended June 30, 2001 from $24.3 million in the same period for 2000, an increase of $1.0 million, or 4.1%. As a percentage of net sales, these expenses increased to 59.9% in the six months ended June 30, 2001 from 56.8% in the same period in 2000, a increase of 3.1%. During the six months ended June 30, 2001, the Company had an average of 198 stores in operation, compared to an average of 192 stores open in the same period in 2000. The increase in selling, marketing and distribution expenses is primarily attributable to $0.4 of additional store operating costs and a $0.4 million provision for losses on wholesale receivables due to the bankruptcy filing of a significant wholesale account, Casual Male. For the six months ended June 30, 2000, selling, marketing and distribution expenses were offset by insurance proceeds of approximately $0.3 million. GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses increased to $2.8 million for the six months ended June 30, 2001 from $2.7 million for the same period 2000, an increase of $0.1 million, or 3.7%. As a percentage of net sales, these expenses increased to 6.6% in the six months ended June 30, 2001 from 6.2% in the same period in 2000. OTHER INCOME. In the six months ended June 30, 2001, other income resulted from a $0.3 million gain on the sale of PETsMART.com stock. After careful consideration of the internet and capital markets, the Company wrote-off its entire $3,000,000 investment in PETsMART.com stock at December 31, 2000. Subsequently, in June 2001, a proposal and acceptance occurred whereby the Company sold this stock for $334,000. INTEREST EXPENSE. Interest expense increased to $0.6 million in the six months ended June 30, 2001 from $0.2 million interest income in the same period in 2000, principally due to interest on the outstanding short-term borrowings. LIQUIDITY AND CAPITAL RESOURCES During the second quarter of 2001, the Company's primary uses of cash were for merchandise inventories and income taxes. The Company satisfied its cash requirements primarily from existing cash balances and short-term borrowings under its credit agreement. Cash used in operating activities was $11.3 million and $11.2 million for the six months ended June 30, 2001 and 2000, respectively. Cash used in investment activities for the six months ended June 30, 2001 and 2000 were $31,000 and $1.1 million, respectively. Cash flows used in investment activities in the first six months of 2001 primarily related to 4 new store openings and capital additions to the Company's existing stores, offset by proceeds received from the sale of investments, property, and equipment. Cash flows used in investment activities in the first six months of 2000 primarily related to 11 new store openings and capital additions to the Company's existing stores. Cash provided by financing activities in the six months ended June 30, 2001 were $8.4 million compared to $1.3 million of cash used in the same period in 2000. In the six months ended June 30, 2001, the Company had net borrowings of $8.5 million under its revolving credit facility and used $0.1 million to repurchase common stock. In the six months ended June 30, 2000, the Company paid an annual dividend of $0.10 per share to stockholders for a total dividend payment of $1.2 million. The Company has a $25.0 million revolving credit facility ("Credit Agreement") with Bank of America and other lenders. The Credit Agreement has a three-year term and has scheduled annual commitment reductions. The maximum commitment balance is $25.0 million, $20.0 million and $15.0 million on December 31, 2001, June 30, 2002 and December 31, 2002, respectively. The Credit Agreement is secured by substantially all assets of the Company, requires the compliance of various financial affirmative and negative covenants and prohibits the payment of dividends. This Credit Agreement provides for a performance-pricing structured interest charge, ranging from LIBOR plus 1.75% to 2.75%, based on the results of certain financial ratios. As of June 30, 2001, the Company had $14.5 million outstanding under this Credit Agreement. Additionally, the Company had $2.0 million of letters of credit outstanding as of June 30, 2001. The letters of credit expire through August 2001. SEASONALITY The Company believes its seasonality is somewhat different than many apparel retailers since a significant number of the Company's stores are located in tourist areas and outdoor malls that have different visitation patterns than urban and suburban retail centers. The third and fourth quarters (consisting of the summer vacation, back-to-school and Christmas seasons) have historically accounted for the largest percentage of the Company's annual sales and profits. The Company has historically incurred operating losses in its first quarter and may be expected to do so in the foreseeable future. STATEMENT REGARDING FORWARD LOOKING DISCLOSURE Certain sections of this Quarterly Report on Form 10-Q, including the preceding "Management's Discussion and Analysis of Financial Condition and Results of Operations," contain various forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended, which represents the Company's expectations or beliefs concerning future events. These forward looking statements involve risk and uncertainties, and the Company cautions that these statements are further qualified by important factors that could cause actual results to differ materially from those in the forward looking statements. Primary factors that could cause actual results to differ include those listed in the Company's Form 10-K for the year ended December 31, 2000 filed with the Securities and Exchange Commission. ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company does not believe it has material exposure to losses from market-rate sensitive instruments. The Company has not invested in derivative financial instruments. The Company has a Credit Agreement with a performance-pricing structured interest charge, ranging from LIBOR plus 1.75% to 2.75%, based on the results of certain financial ratios. See "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources." The Company had $14.5 million borrowings under this arrangement as of June 30, 2001. PART II. .........OTHER INFORMATION ITEM 1: LEGAL PROCEEDINGS The Company is involved in various legal proceedings arising in the normal course of its business. In the opinion of management, any ultimate liability arising out of such proceedings will not have a material adverse effect on the Company's financial position or results of operations. ITEM 2: CHANGES IN SECURITIES Not applicable ITEM 3: DEFAULTS UPON SENIOR SECURITIES Not applicable ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Registrant's Annual Meeting of Stockholders was held on June 1, 2001. Proxies for the Annual Meeting were solicited pursuant to Regulation 14 under the Securities Exchange Act of 1934, as amended. There was no solicitation in opposition to management's nominees as listed in the Proxy Statement. Such nominees were elected. The matters voted upon at the Annual Meeting and the results thereof were as follows: 1. To elect Class I Directors, each to hold office for a three-year term and until each of their successors are elected and qualified. FOR AGAINST ABSTAINED Skip Coomber III 7,475,510 0 7,922 Steven C. Good 7,475,510 0 7,922 2. To ratify the election of Deloitte & Touche LLP as independent certified public accountants for the year ending December 31, 2001. FOR AGAINST ABSTAINED 7,475,203 6,299 1,930 ITEM 5: OTHER INFORMATION Not applicable ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibit Exhibit No. Document Description ----------- -------------------- 10.2 First Amendment to Credit Agreement among the Company, Big Dog USA, Inc., Bank of America, N.A., Israel Discount Bank and Santa Barbara Bank & Trust dated June 29, 2001 (b) Reports on Form 8-K Not applicable SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. BIG DOG HOLDINGS, INC. August 14, 2001 /s/ ANDREW D. FESHBACH ---------------------- Andrew D. Feshbach President and Chief Executive Officer (Principal Executive Officer) August 14, 2001 /s/ ROBERTA J. MORRIS --------------------- Roberta J. Morris Chief Financial Officer and Treasurer (Principal Financial Officer) EX-10 2 ex102.txt EXHIBIT 10.2 FIRST AMENDMENT TO CREDIT AGREEMENT Dated as of June 29, 2001 This FIRST AMENDMENT (this "Amendment") is entered into among BIG DOG HOLDINGS, INC., a Delaware corporation ("Holdings"), BIG DOG USA, INC., a California corporation ("BDUSA"; and together with Holdings, the "Borrower"), the several financial institutions party to the Credit Agreement (the "Lenders"), BANK OF AMERICA, N.A., as letter of credit issuing lender and BANK OF AMERICA, N.A., as administrative agent for the Lenders ("Agent"). PRELIMINARY STATEMENTS: (1) The Borrowers, the Lenders and the Agent have entered into that certain Credit Agreement dated as of July 28, 2000 (the "Credit Agreement"; capitalized terms used and not otherwise defined herein have the meanings assigned to such terms in the Credit Agreement). (2) The Borrowers have requested that the Agent and the Lenders make certain amendments to the Credit Agreement. (3) The Agent and the Lenders are, on the terms and conditions stated below, willing to grant the request of the Borrowers. NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: SECTION 1. Amendments to Credit Agreement. Effective as of the date hereof and subject to the satisfaction of the conditions precedent set forth in Section 2 hereof, the Credit Agreement is hereby amended as follows: (1) The minimum Fixed Charge Coverage Ratio for each of the following dates in clause (b) of Section 7.12 of the Credit Agreement is hereby amended and restated as follows: Fiscal Quarters Ending Minimum Fixed Charged Coverage Ratio June 30, 2001 1.00:1 September 30, 2001 1.00:1 December 31, 2001 1.10:1 March 31, 2002 and thereafter 1:25:1 (2) The maximum Leverage Ratio for each of the following three dates in clause (c) of Section 7.12 of the Credit Agreement is hereby amended and restated as follows: Fiscal Quarters Ending Maximum Leverage Ratio ---------------------- ---------------------- June 30, 2001 2.80:1.00 September 30, 2001 3.40:1.00 December 31, 2001 0.70:1.00 The maximum Leverage Ratio for March 31, 2002 and thereafter shall remain unchanged. SECTION 2. Conditions to Effectiveness. The effectiveness of the amendments in Section 1 of this Amendment is conditioned upon the occurrence of each of the following: (a) the Agent has executed this Amendment and has received counterparts of this Amendment executed by the Borrowers and the Requisite Lenders; and (b) the Agent has received counterparts of the Consent appended hereto (the "Consent") executed by Big Dog International, Inc. ("BDI"; and together with the Borrowers, collectively the "Loan Parties"). SECTION 3. Representations and Warranties. The Loan Parties represent and warrant as follows: (a) Authority: Enforceability. Each Loan Party has the requisite corporate power and authority to execute, deliver and perform this Amendment or the Consent, as applicable, and to perform its obligations under the Loan Documents as amended hereby. The execution, delivery and performance by the Borrowers of this Amendment and by BDI of the Consent and the consummation of the transactions contemplated hereby, have been duly approved by the Board of Directors of such Loan Party and no other corporate proceedings on the part of such Loan Party are necessary to consummate such transactions. Each of this Amendment and the Consent has been duly executed and delivered by each Loan Party thereto. Each of this Amendment, the Consent and each Loan Document as amended hereby constitutes the legal, valid and binding obligation of each Loan Party thereto, enforceable against such Loan Party in accordance with its terms. (b) Loan Document Representations and Warranties. The representations and warranties contained in each Loan Document are true and correct on and as of the date hereof, before and after giving effect to this Amendment, as though made on and as of such date (except to the extent such representations and warranties expressly refer to an earlier date, in which case they shall be true and correct as of such earlier date). (c) Absence of Default. No Default or Event of Default has occurred and is continuing, or would result from the effectiveness of this Amendment. SECTION 4. Reference to and Effect on the Loan Documents. Upon and after the effectiveness of this Amendment, each reference in the Credit Agreement to "this Agreement", "hereunder", "hereof" or words of like import referring to the Credit Agreement, and each reference in the other Loan Documents to "the Credit Agreement", "thereunder", "thereof" or words of like import referring to the Credit Agreement, shall mean and be a reference to the Credit Agreement as modified and amended hereby. (a) Except as specifically amended above, the Credit Agreement and all other Loan Documents are and shall continue to be in full force and effect and are hereby in all respects ratified and confirmed. (b) The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of any Lender or the Agent under any of the Loan Documents, nor constitute a waiver of any provision of any of the Loan Documents. SECTION 5. Execution in Counterparts. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which taken together shall constitute but one and the same agreement. Delivery of an executed counterpart of a signature page to this Amendment or the Consent hereto by telefacsimile shall be effective as delivery of a manually executed counterpart of this Amendment or such Consent. SECTION 6. Governing Law. This Amendment shall be governed by, and construed in accordance with, the laws of the State of California. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized, as of the date first above written. BIG DOG USA, INC., a California corporation By:---------------------------------------- Name: Title: BIG DOG HOLDINGS, INC., a Delaware corporation By:---------------------------------------- Name: Title: BANK OF AMERICA, N.A., as Agent By:---------------------------------------- Name: Title: Lenders: BANK OF AMERICA, N.A., as a Lender By:--------------------------------------- Name: Title: BANK OF AMERICA, N.A., as Issuing Lender By:--------------------------------------- Name: Title: ISRAEL DISCOUNT BANK, LTD., as a Lender By:--------------------------------------- Name: Title: SANTA BARBARA BANK & TRUST, as a Lender By:--------------------------------------- Name: Title: CONSENT Dated as of June 29, 2001 The undersigned, as guarantor under the Subsidiary Guaranty (as such term is defined in the Credit Agreement referred to in the foregoing Amendment) delivered pursuant to the Credit Agreement, hereby consents and agrees to the said Amendment and hereby confirms and agrees that the Subsidiary Guaranty is, and shall continue to be, in full force and effect and is hereby ratified and confirmed in all respects except that, upon the effectiveness of, and on and after the date of, the said Amendment, each reference in the Subsidiary Guaranty to the Credit Agreement, "thereunder", "thereof" or words of like import referring to the Credit Agreement, shall mean and be a reference to the Credit Agreement as amended by the said Amendment. BIG DOG INTERNATIONAL, INC., a California corporation By:------------------------------------------ Name: Title: -----END PRIVACY-ENHANCED MESSAGE-----