-----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, AHuDACRqkkhpZGFhZgWrAJ1fYsCnu0B0WK4uUJvCUJSTs0CnnVwzYsfA5tY+cEbJ Y5mZmsLu/DM0gTeabUlLWQ== 0001019439-02-000011.txt : 20020514 0001019439-02-000011.hdr.sgml : 20020514 ACCESSION NUMBER: 0001019439-02-000011 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020330 FILED AS OF DATE: 20020514 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: 02645557 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 form1q2002.txt 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 March 31, 2002 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 May 1, 2002 was 8,392,648 shares. BIG DOG HOLDINGS, INC INDEX TO FORM 10-Q PAGE NO. PART I. FINANCIAL INFORMATION...........................................3 ITEM 1: FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEETS March 31, 2002 and December 31, 2001............................3 CONSOLIDATED STATEMENTS OF OPERATIONS Three months ended March 31, 2002 and 2001......................4 CONSOLIDATED STATEMENTS OF CASH FLOWS Three months ended March 31, 2002 and 2001......................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......9 PART II. OTHER INFORMATION...............................................9 ITEM 1: LEGAL PROCEEDINGS...............................................9 ITEM 2: CHANGES IN SECURITIES...........................................9 ITEM 3: DEFAULTS UPON SENIOR SECURITIES................................10 ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS............10 ITEM 5: OTHER INFORMATION..............................................10 ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K...............................10 SIGNATURES ...............................................................11 PART 1. .........FINANCIAL INFORMATION ITEM 1: .........FINANCIAL STATEMENTS BIG DOG HOLDINGS, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS
March 31, December 31, 2002 2001 -------------- -------------- (Unaudited) ASSETS (Note 2) CURRENT ASSETS: Cash and cash equivalents........................................ $ 756,000 $ 3,055,000 Accounts receivable, net......................................... 566,000 812,000 Inventories...................................................... 30,444,000 26,777,000 Prepaid expenses and other current assets........................ 757,000 473,000 Deferred income taxes............................................ 3,476,000 1,954,000 ---------------- ---------------- Total current assets........................................... 35,999,000 33,071,000 PROPERTY AND EQUIPMENT, Net......................................... 6,178,000 6,634,000 INTANGIBLE ASSETS, Net.............................................. 157,000 173,000 OTHER ASSETS........................................................ 398,000 429,000 ---------------- ---------------- TOTAL............................................................... $42,732,000 $ 40,307,000 ================ ================ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Short-term borrowings............................................ $10,113,000 $ 1,767,000 Accounts payable................................................. 3,435,000 2,923,000 Income taxes payable............................................. --- 1,983,000 Accrued expenses and other current liabilities................... 2,258,000 4,137,000 ---------------- ---------------- Total current liabilities...................................... 15,806,000 10,810,000 DEFERRED RENT....................................................... 750,000 683,000 DEFERRED GAIN ON SALE-LEASEBACK..................................... 393,000 406,000 ---------------- ---------------- Total liabilities................................................ 16,949,000 11,899,000 ---------------- ---------------- 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, 9,698,284 issued at March 31, 2002 and December 31, 2001....... 97,000 97,000 Additional paid-in capital....................................... 20,510,000 20,510,000 Retained earnings................................................ 12,624,000 15,007,000 Treasury stock, 1,305,636 and 1,233,220 shares at March 31, 2002 and December 31, 2001, respectively............. (7,448,000) (7,206,000) ---------------- ---------------- Total stockholders' equity..................................... 25,783,000 28,408,000 ---------------- ---------------- TOTAL............................................................... $ 42,732,000 $ 40,307,000 ================ ================
See accompanying notes.
BIG DOG HOLDINGS, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended March 31, -------------------------------------- 2002 2001 ----------------- ----------------- NET SALES....................................................... $ 17,546,000 $ 16,986,000 COST OF GOODS SOLD.............................................. 8,280,000 7,880,000 --------------- -------------- GROSS PROFIT.................................................... 9,266,000 9,106,000 --------------- -------------- OPERATING EXPENSES: Selling, marketing and distribution......................... 11,836,000 12,172,000 General and administrative.................................. 1,224,000 1,223,000 --------------- ------------- Total operating expenses................................ 13,060,000 13,395,000 --------------- ------------- LOSS FROM OPERATIONS.......................................... (3,794,000) (4,289,000) INTEREST EXPENSE, NET......................................... 81,000 241,000 --------------- ------------- LOSS BEFORE BENEFIT FROM INCOME TAXES......................... (3,875,000) (4,530,000) BENEFIT FROM INCOME TAXES....................................... (1,492,000) (1,744,000) --------------- ------------- NET LOSS...................................................... $ (2,383,000) $ (2,786,000) =============== ============= NET LOSS PER SHARE BASIC AND DILUTED......................................... $ (0.28) $ (0.33) =============== ============= WEIGHTED AVERAGE SHARES OUTSTANDING BASIC AND DILUTED......................................... 8,460,000 8,459,000 =============== =============
See accompanying notes.
BIG DOG HOLDINGS, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Three Months Ended March 31, -------------------------------------- 2002 2001 ---------------- ------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss.......................................................... $ (2,383,000) $ (2,786,000) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization................................. 666,000 867,000 Amortization of deferred financing fees....................... 35,000 11,000 Provision for losses on receivables........................... 8,000 8,000 Deferred income taxes......................................... (1,522,000) (1,744,000) Changes in operating assets and liabilities: Receivables.............................................. 238,000 (429,000) Inventories.............................................. (3,667,000) (7,926,000) Prepaid expenses and other assets........................ (284,000) 168,000 Accounts payable......................................... 512,000 37,000 Income taxes payable..................................... (1,983,000) (1,718,000) Accrued expenses and other current liabilities........... (1,879,000) (1,723,000) Deferred rent............................................ 67,000 (77,000) Deferred gain on sale-leaseback.......................... (13,000) (13,000) ------------- ------------- Net cash used in operating activities................ (10,205,000) (15,325,000) ------------- ------------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures.............................................. (189,000) (227,000) Other............................................................. (9,000) (11,000) ------------- ------------- Net cash used in investing activities................ (198,000) (238,000) ------------- ------------- CASH FLOWS FROM FINANCING ACTIVITIES: Short-term borrowings, net........................................ 8,346,000 12,500,000 Repurchase of common stock........................................ (242,000) (126,000) ------------- ------------- Net cash provided by financing activities............ 8,104,000 12,374,000 ------------- ------------- NET DECREASE IN CASH................................................... (2,299,000) (3,189,000) CASH, BEGINNING OF PERIOD.............................................. 3,055,000 4,376,000 ------------- ------------- CASH, END OF PERIOD.................................................... $ 756,000 $ 1,187,000 ============= ============= SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid for: Interest...................................................... $ 52,000 $ 208,000 Income taxes.................................................. $ 2,013,000 $ 1,717,000
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 three-month period ended March 31, 2002 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 subsidiaries (the "Company") included in the Company's Annual Report on Form 10-K for the year ended December 31, 2001. NOTE 2. Short-term Borrowings In October 2001, the Company entered into a $30.0 million three-year line of credit facility with Wells Fargo Retail Finance. This facility is secured by substantially all of the Company's assets and requires daily, weekly and monthly financial reporting as well as compliance with financial, affirmative and negative covenants. This credit agreement provides for a performance-pricing structured interest charge, ranging up to LIBOR plus 1.75% which is based on excess availability levels. As of March 31, 2002, the Company had $10.1 million outstanding under this Credit Agreement. Additionally, the Company had $0.3 million of letters of credit outstanding as of March 31, 2002. The letters of credit expire through December 2002. 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, 2002 and March 31, 2002, the Company repurchased 72,416 shares of common stock totaling $242,000. 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 July 2001, the FASB issued SFAS No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets". SFAS No. 141 requires that all business combinations be accounted for under the purchase method. The statement further requires separate recognition of intangible assets that meet one of two criteria. The statement applies to all business combinations initiated after June 30, 2001. SFAS No. 142 requires that an intangible asset that is acquired shall be initially recognized and measured based on its fair value. The statement also provides that goodwill should not be amortized, but shall be tested for impairment annually, or more frequently if circumstances indicate potential impairment, through a comparison of fair value to its carrying amount. SFAS No. 142 is effective for fiscal periods beginning after December 15, 2001. The adoption of SFAS Nos. 141 and 142 did not have a material impact on the Company's financial statements. In August 2001, the FASB issued SFAS No.144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No. 144 supercedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of" and Accounting Principles Board Opinion ("APB") No. 30, "Reporting the Results of Operations - Reporting the Effects of the Disposal of a Segment Business and Extraordinary, Unusual and Infrequently Occurring Events and Transactions." SFAS No.144 establishes a single accounting model for assets to be disposed of by sale whether previously held and used or newly acquired. SFAS No. 144 retains the provisions of APB No. 30 for presentation of discontinued operations in the income statement, but broadens the presentation to include a component of an entity. SFAS No. 144 is effective for fiscal years beginning after December 15, 2001. The adoption of SFAS No. 144 did not have a material impact on the Company's financial statements. 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, 2001. 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, 2001 filed with the Securities and Exchange Commission. RESULTS OF OPERATIONS Three Months Ended March 31, 2002 and 2001 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 increased to $17.5 million for the three months ended March 31, 2002 from $17.0 million for the same period in 2001, an increase of $0.5 million, or 2.9%. Of the increase, $0.3 million was attributable to a 1.8% comparable stores sales increase and $0.5 million was attributable to stores not yet qualifying as comparable stores. This was offset by a $0.2 million decrease in the Company's wholesale business. GROSS PROFIT. Gross profit increased to $9.3 million for the three months ended March 31, 2002 from $9.1 million for the same period in 2001, an increase of $0.2 million, or 2.2%. As a percentage of net sales, gross profit decreased to 52.8% in the three months ended March 31, 2002 from 53.6% in the same period in 2001. This 0.8% decrease was primarily due to increased sales promotions during the first quarter of 2002. 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 decreased to $11.8 million in the three months ended March 31, 2002 from $12.2 million in the same period for 2001, a decrease of $0.4 million, or 3.3%. As a percentage of net sales, these expenses decreased to 67.5% in the three months ended March 31, 2002 from 71.7% in the same period in 2001, a decrease of 4.2%. The decrease in selling, marketing and distribution expenses is attributable to retail cost expense reductions, particularly lease occupancy expenses, which were partially offset by an increase in store operating expenses due to adding 8 net new stores. GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses consist of administrative salaries, corporate occupancy costs and other corporate expenses. General and administrative expenses for the three months ended March 31, 2002 and 2001 remained constant at $1.2 million. As a percentage of net sales, these expenses decreased to 7.0% in the three months ended March 31, 2002 from 7.2% in the same period in 2001. INTEREST EXPENSE. Interest expense decreased to $0.1 million in the three months ended March 31, 2002 from $0.2 million in the same period in 2001, principally due to interest on the lower average outstanding short-term borrowings during the period. LIQUIDITY AND CAPITAL RESOURCES During the first quarter of 2002, the Company's primary uses of cash were for merchandise inventories and income taxes. The Company satisfied its cash requirements from existing cash balances and short-term borrowings under its credit agreement. Cash used in operating activities was $10.2 million and $15.3 million for the three months ended March 31, 2002 and 2001, respectively. The reduction in cash used in operating activities is principally due to reduced inventory purchases. Cash used in investing activities for the three months ended March 31, 2002 and 2001 remained constant at $0.2 million. Cash flows used in investing activities in the first quarter of 2002 and 2001 primarily related to capital additions to the Company's existing stores. Cash provided by financing activities decreased to $8.1 million in the three months ended March 31, 2002 from $12.4 million in the same period in 2001. In the three months ended March 31, 2002, the Company had net borrowings of $8.3 million under its borrowing agreement and used $0.2 million to repurchase common stock. In the three months ended March 31, 2001, the Company borrowed $12.5 million under its revolving credit facility and used $0.1 million to repurchase common stock. In October 2001, the Company entered into a $30.0 million three-year line of credit facility with Wells Fargo Retail Finance. This facility is secured by substantially all of the Company's assets and requires daily, weekly and monthly financial reporting as well as compliance with financial, affirmative and negative covenants. This credit agreement provides for a performance-pricing structured interest charge, ranging up to LIBOR plus 1.75% which is based on excess availability levels. As of March 31, 2002, the Company had $10.1 million outstanding under this Credit Agreement. Additionally, the Company had $0.3 million of letters of credit outstanding as of March 31, 2002. The letters of credit expire through December 2002. 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. 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 facility with a performance- pricing structured interest charge, ranging up to LIBOR plus 1.75% based on excess availability levels. See "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources." PART II. OTHER INFORMATION ITEM 1: LEGAL PROCEEDINGS The Company is involved from time to time in litigation incidental to its business. The Company believes that the outcome of such litigation will not have a material adverse effect on its operation or financial condition. 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 Not applicable ITEM 5: OTHER INFORMATION Not applicable ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibit None (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. May 14, 2002 /s/ ANDREW D. FESHBACH ---------------------- Andrew D. Feshbach President and Chief Executive Officer (Principal Executive Officer) May 14, 2002 /s/ ROBERTA J. MORRIS --------------------- Roberta J. Morris Chief Financial Officer and Treasurer (Principal Financial Officer) -----END PRIVACY-ENHANCED MESSAGE-----