-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, MAYaSWG3kUK2TD/ztxuRv3AU385O4REt+Fdt4CiLa2fcqs5MZgvhYNW6Q4KCDhHU zEq2cE4Ozml1I805cFMSHQ== 0000906344-95-000012.txt : 19950516 0000906344-95-000012.hdr.sgml : 19950516 ACCESSION NUMBER: 0000906344-95-000012 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950515 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: GOOD GUYS INC CENTRAL INDEX KEY: 0000785931 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-RADIO TV & CONSUMER ELECTRONICS STORES [5731] IRS NUMBER: 942366177 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-14134 FILM NUMBER: 95539061 BUSINESS ADDRESS: STREET 1: 7000 MARINA BLVD CITY: BRISBANE STATE: CA ZIP: 94005 BUSINESS PHONE: 4156155000 MAIL ADDRESS: STREET 2: 7000 MARINA BLVD CITY: BRISBANE STATE: CA ZIP: 94005 10-Q 1 FORM 10-Q FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 (Mark One) (X) Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended March 31, 1995 or ( ) Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Transition period from ____________ to _____________ Commission File Number 0-14134 THE GOOD GUYS, INC. (Exact name of registrant as specified in its charter) Delaware 94-2366177 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 7000 MARINA BOULEVARD, BRISBANE, CALIFORNIA 94005 (Address of principal executive offices and zip code) (415)615-5000 (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. Yes x No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at April 30, 1995 Common Stock, $.001 13,425,053 par value Page 1 of 12 THE GOOD GUYS, INC. INDEX Page No. ________ Form 10-Q Cover Page 1 Form 10-Q Index 2 Part I. Financial Information: Item 1. Financial Statements Condensed Balance Sheets - March 31, 1995 (Unaudited) and September 30, 1994 (Unaudited) 3 Condensed Statements of Income Three and Six Month Periods Ended March 31, 1995 and 1994 (Unaudited) 4 Condensed Statement of Changes in Shareholders' Equity - Six-Month Period Ended March 31, 1995 (Unaudited) 5 Condensed Statements of Cash Flows Six Month Periods Ended March 31, 1995 and 1994 (Unaudited) 5 Notes to Condensed Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 Part II. Other Information: Item 6. Exhibits 10 Signature Page 10 Exhibit Index 11 Exhibit 11.1 Statement Setting Forth Computation of Earnings per Share 12 Page 2 of 12 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS THE GOOD GUYS, INC. CONDENSED BALANCE SHEETS (Unaudited) (Dollar amounts in thousands) ASSETS March 31, Sept. 30, 1995 1994 ________ ________ Current assets: Cash and cash equivalents $ 2,103 $ 21,661 Receivables 18,807 11,080 Inventories 133,113 94,928 Prepaid expenses and other assets 4,360 8,995 _______ _______ Total current assets 158,383 136,664 Property and equipment, net 53,273 50,831 Other assets 4,095 1,217 _______ _______ $215,751 $188,712 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 56,958 $ 41,238 Accrued expenses and other liabilities Payroll 11,431 11,822 Sales taxes 5,202 5,774 Other 10,909 10,930 _______ _______ Total current liabilities 84,500 69,764 Shareholders' equity: Preferred stock, no par value; authorized 2,000,000 shares; none issued Common stock,$.001 par value; authorized 40,000,000 shares; issued and outstanding 13,424,053 shares and 13,282,181 shares, respectively 13 13 Additional paid-in capital 60,328 58,926 Page 3 of 12 Retained earnings 70,910 60,009 _______ _______ Total shareholders' equity 131,251 118,948 _______ _______ $215,751 $188,712 ======= ======= The accompanying notes are an integral part of these condensed financial statements. Page 4 of 12 THE GOOD GUYS, INC. CONDENSED STATEMENTS OF INCOME (Unaudited) (Dollar amounts in thousands except per share data) Three Months Six Months Ended March 31, Ended March 31, _______________ _______________ 1995 1994 1995 1994 ____ ____ ____ ____ Net sales $195,745 $164,140 $477,403 $381,344 Cost of sales 148,418 119,833 362,120 279,603 _______ _______ _______ _______ Gross profit 47,327 44,307 115,283 101,741 Selling, general and administrative expenses 43,373 39,728 97,097 84,699 _______ _______ _______ _______ Income from operations 3,954 4,579 18,186 17,042 Interest income (expense), net (116) 136 (248) 179 _______ _______ _______ _______ Income before income taxes 3,838 4,715 17,938 17,221 Income taxes 1,538 1,932 7,037 7,059 _______ _______ _______ _______ Net income $ 2,300 $ 2,783 $10,901 $10,162 ======= ======= ======= ======= Net income per share and common share equivalents $ .17 $ .21 $ .82 $ .78 ======= ======= ======= ======= Shares used in per share computation 13,424 13,165 13,354 13,094 ======= ======= ======= ======= The accompanying notes are an integral part of these condensed financial statements. Page 5 of 12 THE GOOD GUYS, INC. CONDENSED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE SIX-MONTH PERIOD ENDED MARCH 31, 1995 (Unaudited) (Dollar amounts in thousands) Additional Common Stock paid-in Retained Shares Amount capital earnings Total ______ ______ __________ ________ _____ Balance at September 30, 1994 13,282,181 $13 $58,926 $50,009 $118.948 Net income for the six-month period ended March 31, 1995 10,901 10,901 Issuance of common 141,872 1,402 1,402 stock __________ ___ _______ _______ ________ Balance at 13,424,053 $13 $60,328 $70,910 $131,251 March 31, 1995 ========== === ======= ======= ======== The accompanying notes are an integral part of these condensed financial statements. Page 6 of 12 THE GOOD GUYS, INC. CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) (Dollar amounts in thousands) Six Months Ended March 31, __________________________ 1995 1994 ---- ---- Cash Flows from Operating Activities: Net income $ 10,901 $ 10,162 ________ ________ Adjustments to reconcile net income to net cash (used in) operating activities: Depreciation and amortization 4,857 4,115 Change in assets and liabilities: Accounts receivable (7,727) (2,767) Merchandise inventories (38,185) (32,902) Prepaid expenses and other assets 1,754 2,211 Accounts payable 15,720 7,344 Accrued expenses (1,177) 9,597 _______ _______ Total adjustments (24,758) (12,402) _______ _______ Net cash (used in) operating activities (13,857) (2,240) _______ _______ Cash Flows from Investing Activities: Purchase of property and equipment (7,103) (3,428) _______ _______ Net cash (used in) investing activities (7,103) (3,428) _______ _______ Cash Flows from Financing Activities: Issuance of common stock 1,402 1,231 _______ _______ Net cash provided by financing activities: 1,402 1,231 _______ _______ Net decrease in cash and cash equivalents (19,558) (4,437) Cash and cash equivalents at September 30, 21,661 12,741 1994 and 1993 _______ _______ Page 7 of 12 Cash and cash equivalents at March 31, 1995 $ 2,103 $ 8,304 and 1994 ======== ======== The accompanying notes are an integral part of these condensed financial statements. Page 8 of 12 THE GOOD GUYS, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS (Unaudited) Note A - BASIS OF PRESENTATION The accompanying unaudited condensed financial statements have been prepared in accordance with generally accepted accounting principles and reflect, in the opinion of management, all adjustments necessary for a fair presentation of the information contained therein, all of which adjustments are of a normal recurring nature. The condensed financial statements should be read in conjunction with the financial statements, notes, supplementary data and financial statement schedules included and incorporated by reference in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1994. The weighted average number of shares outstanding during the quarter has been computed by taking the number of days each share was outstanding and dividing by the number of days in the quarter. Stock options are not included in the calculation of earnings per share for the quarter and six months ended March 31, 1994 or for the quarter and six months ended March 31, 1995 as the dilutive effect of the options was less than 3%. Certain reclassifications have been made to prior period net sales and cost of sales to conform with the classifications used in the current period. Note B - PREMIER PERFORMANCE GUARANTEE CONTRACTS The Company sells extended service contracts ("Premier Performance Guarantee contracts") on behalf of an unrelated company (the "Warrantor") that markets this product to cover merchandise sold by the Company. Commission revenue is recognized at the time of sale. The Company acts solely as an agent for the Warrantor and has no liability to the customer under the extended service contract nor any other material obligation to the customer or the Warrantor. Merchandise presented to the Company for servicing under extended service contracts is repaired by the Company on behalf of the Warrantor. The repairs are billed to the Warrantor at amounts customarily charged by the Company for these services. Page 9 of 12 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations Sales for the quarter ended March 31, 1995 amounted to $195.7 million, an increase of 19% over sales of $164.1 million for the quarter ended March 31, 1994. The increase was due to an increase in the total number of stores in operation from 48 at March 31, 1994 to 60 at March 31, 1995, and a 4% increase in comparable store sales for the quarter. For the first six months of fiscal 1995, net sales increased 25% to $477.4 million compared to $381.3 million for the same period last year. Comparable store sales increased 10% for the six months ended March 31, 1995. Gross profit as a percentage of sales was 24.2% for the quarter ended March 31, 1995, as compared to 27.0% for the quarter ended March 31, 1994. Gross profit as a percentage of sales was 24.1% and 26.7% for the first six months of 1995 and 1994, respectively. These declines were primarily caused by the increased proportion of sales represented by computer products, which typically carry lower gross margins, the cost impact from the enhancements made to the Company's Premier Performance Guarantee program in November 1994 and a promotional consumer electronics market. Selling, general and administrative expenses as a percentage of sales were 22.2% for the quarter ended March 31, 1995, compared to 24.2% for the quarter ended March 31, 1994. For the six month period ended March 31, 1995, selling, general and administrative expenses dropped to 20.3% from 22.2% for the six months ended March 31, 1994. These decreases were a result of greater sales leverage on fixed costs combined with the Company's ongoing commitment to cost control. The effective income tax rates for the quarter and six months ended March 31, 1995 were 40.1% and 39.2%, compared with 41.0% and 41.0%, respectively for such periods in the prior fiscal year. Net income for the quarter ended March 31, 1995, was $2.3 million ($0.17 per share), compared to $2.8 million ($0.21 per share) for the same quarter last year. This is 1.2% of net sales, down from 1.7% for the same quarter last year. For the six month period ended March 31, 1995 net income was $10.9 million ($0.82 per share) compared to $10.2 million ($0.78 per share) for the same period last year. These changes were attributable to the factors discussed above. Page 10 of 12 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Liquidity and Capital Resources At March 31, 1995, the Company had working capital of $73.9 million compared with $68.1 million at March 31, 1994. Net cash used in operating activities was $13.9 million for the six months ended March 31, 1995, as compared with net cash used in operating activities of $2.2 million for the six months ended March 31, 1994. The increase in net cash used in operating activities was attributable to an increase in merchandise inventories and accounts receivable that were partially offset by an increase in accounts payable. The increases in inventories and accounts payable were due to higher sales in the first six months of 1995 on a larger store base. Accounts receivable increased as the Company is awaiting the receipt of funds from store equipment leasing transactions. Net cash used in investing activities, which primarily consisted of expenditures for store and administrative property and equipment, was $7.1 million for the six months ended March 31, 1995 as compared to $3.4 million during the same period last year. This increase was primarily due to the increase in the number of stores opened during the six months ended March 31, 1995. The Company maintains a revolving line of credit of up to $65 million, the availability of which fluctuates seasonally. The credit agreement contains restrictive loan covenants which if violated could be used as a basis for termination of the agreement. The Company was in compliance with all covenants under the credit agreement as of March 31, 1995. There were no borrowings outstanding under the credit agreement as of March 31, 1995. The Company expects to be able to fund its working capital requirements and expansion plans with a combination of anticipated cash flow from operations, normal trade credit, financing arrangements, and continued use of lease financing. The Company believes that because of competition among manufacturers and the technological changes in the consumer electronics industry, inflation has not had an effect on net sales and cost of sales. Page 11 of 12 PART II OTHER INFORMATION ITEM 6. Exhibits and Reports on Form 8-K (b) No reports on Form 8-K were filed during the quarter for which this report is filed. 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. THE GOOD GUYS, INC. Registrant May 10, 1995 /s/ JOHN P. GOLDSBERRY, III Date John P. Goldsberry, III Chief Financial Officer and Vice President of Finance Page 12 of 12 EXHIBIT INDEX NUMBER DESCRIPTION PAGE 11.1 Statement Setting Forth Computation of Earnings Per Share 12 Page 13 of 12 THE GOOD GUYS, INC. STATEMENT SETTING FORTH COMPUTATION OF EARNINGS PER SHARE (Amounts in Thousands Except Per Share Data) March 31, March 31, 1995 1994 ________ ________ Net Income $ 2,300 $ 2,783 1. As presented in the 10-Q Shares used in per share computation 13,424 13,165 Net income per common share and common share equivalents $ .17 $ .21 ======== ======== 2. Computation of primary and fully diluted earnings per share including common stock equivalents a) Primary earnings per common share Weighted average number of shares: Common stock (A) 13,424 13,165 Stock options (B) 200 321 ________ ________ Total 13,624 13,486 Primary earnings per share $ .17 $ .21 ======== ======== b) Fully diluted earnings per share Weighted average number of shares: Common stock (A) 13,424 13,165 Stock options (B) 200 356 ________ ________ Total 13,624 13,521 Fully diluted earnings per share $ .17 $ .21 ======== ======== (A) The weighted average number of common shares outstanding during the quarter has been computed by taking the number of days each share was outstanding and dividing by the number of days in the quarter. (B) Stock Options in primary earnings per share are calculated using the average market price. Stock options in fully diluted earnings per share are calculated using the higher of the ending market price or the average market price. 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