-----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, S/n6Cf0q0m8+CnLWktOtMqJjV6D6aT9wCCjQsPrjiI9FeZ/70QKSBZW/D1ZKnUh1 zDx6MXbUrrR4J4k74QCD6g== 0000950149-01-000310.txt : 20010223 0000950149-01-000310.hdr.sgml : 20010223 ACCESSION NUMBER: 0000950149-01-000310 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010214 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: 0228 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-14134 FILM NUMBER: 1545917 BUSINESS ADDRESS: STREET 1: 7000 MARINA BLVD CITY: BRISBANE STATE: CA ZIP: 94005 BUSINESS PHONE: 4156155000 MAIL ADDRESS: STREET 1: 7000 MARINA BLVD STREET 2: 7000 MARINA BLVD CITY: BRISBANE STATE: CA ZIP: 94005 10-Q 1 f69713e10-q.txt FORM 10-Q FOR THE PERIOD ENDED 12/31/2000 1 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 December 31, 2000 or [ ] TRANSITION REPORTS 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 Identification No.) incorporation or organization) 7000 MARINA BLVD. BRISBANE, CA 94005-1840 (Address of principal executive offices) (650) 615-5000 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required 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 CLASS OUTSTANDING AS OF January 31, 2000 ----- ---------------------------------- Common Stock 22,867,055 1 2 THE GOOD GUYS, INC. INDEX
PART I: FINANCIAL INFORMATION Page - ------------------------------ ---- Item 1. Financial Statements: Condensed Consolidated Balance Sheets - December 31, 2000 and September 30, 2000 3 Condensed Consolidated Statements of Operations - Three month periods ended December 31, 2000 and 1999 4 Condensed Consolidated Statement of Changes in Shareholders' Equity - Three month period ended December 31, 2000 5 Condensed Consolidated Statements of Cash Flows - Three month periods ended December 31, 2000 and 1999 6 Notes to Condensed Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 PART II: OTHER INFORMATION Item 1. Legal Proceedings 10 Item 6. Exhibits and Reports on Form 8-K 10 SIGNATURES 11
2 3 THE GOOD GUYS, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share data) (Unaudited)
December 31, September 30, 2000 2000 -------------------- -------------------- Assets CURRENT ASSETS: Cash and cash equivalents $ 28,312 $ 7,208 Accounts receivable, net 19,339 15,106 Merchandise inventories 144,030 121,458 Prepaid expenses 9,900 11,088 -------------------- -------------------- Total current assets 201,581 154,860 PROPERTY AND EQUIPMENT, NET Leasehold improvements 73,585 73,629 Furniture, fixtures and equipment 76,150 76,058 Construction in progress 2,253 1,269 -------------------- -------------------- Total property and equipment 151,988 150,956 Less accumulated depreciation and amortization (89,715) (86,148) -------------------- -------------------- Property and equipment, net 62,273 64,808 OTHER ASSETS 448 448 -------------------- -------------------- Total Assets $ 264,302 $ 220,116 ==================== ==================== Liabilities and Shareholders' Equity CURRENT LIABILITIES: Accounts payable $ 74,028 $ 57,395 Accrued expenses and other liabilities: Accrued payroll 12,496 9,542 Sales taxes payable 11,007 5,751 Other 33,949 22,551 -------------------- -------------------- Total current liabilities 131,480 95,239 REVOLVING CREDIT DEBT 35,993 34,358 SHAREHOLDERS' EQUITY: Preferred stock, $.001 par value: Authorized - 2,000,000 shares Issued -none -- -- Common stock, $.001 par value Authorized -40,000,000 shares Issued and outstanding -22,867,055 and 22,763,194 shares, respectively 23 23 Additional paid-in-capital 103,730 103,222 Retained earnings (deficit) (6,924) (12,726) -------------------- -------------------- Total shareholders' equity 96,829 90,519 -------------------- -------------------- Total Liabilities and Shareholders' Equity $ 264,302 $ 220,116 ==================== ====================
The accompanying notes are an integral part of these financial statements. 3 4 THE GOOD GUYS, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands except per share amounts) (Unaudited)
Three Months Ended December 31, ------------ 2000 1999 -------------- ------------- Net sales $ 282,157 $ 260,941 Cost of sales (203,376) (182,163) -------------- ------------- Gross profit 78,781 78,778 Selling, general and administrative expense (67,791) (68,757) Depreciation and amortization (3,559) (3,699) Gain from property transactions - 1,025 -------------- ------------- Income from operations 7,431 7,347 Interest expense, net (1,629) (1,728) -------------- ------------- Net income $ 5,802 $ 5,619 ============== ============= Net income per common share Basic $ 0.25 $ 0.29 ============== ============= Diluted $ 0.25 $ 0.27 ============== ============= Weighted average shares Basic 22,864 19,700 ============== ============= Diluted 23,094 21,024 ============== =============
The accompanying notes are an integral part of these financial statements. 4 5 THE GOOD GUYS, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE THREE-MONTH PERIOD ENDED DECEMBER 31, 2000 (In thousands except share data) (Unaudited)
Common Stock Additional Retained ------------------------ Paid-in Earnings Shares Amount Capital (Deficit) Total ------- --------- ----------- ------------- ------------ Balance at September 30, 2000 22,763,194 $ 23 $ 103,222 $ (12,726) $ 90,519 Issuance of common stock under employee stock purchase plan 99,611 - 323 323 Exercise of stock options and warrants 7,250 - 37 37 Restricted stock Amortization 163 163 Cancellation (3,000) - (15) (15) Net income for the three-month period ended December 31, 2000 5,802 5,802 ---------- ------- ----------- ------------- ------------ Balance at December 31, 2000 22,867,055 $ 23 $ 103,730 $ (6,924) $ 96,829 ========== ======= =========== ============= ============
The accompanying notes are an integral part of these financial statements. 5 6 THE GOOD GUYS, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
Three Months Ended December 31, ------------------------------------------- 2000 1999 -------------- -------------- Cash Flows from Operating Activities: Net income $ 5,802 $ 5,619 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 3,559 3,699 Gain on sale of land -- (1,025) Non-cash stock based compensation 70 76 Provision for doubtful accounts 217 (579) Restricted stock amortization 92 23 Changes in assets and liabilities: Accounts receivable (4,450) (7,779) Merchandise inventories (22,572) (18,014) Prepaid expenses and other assets 1,188 (4,651) Accounts payable 16,633 38,207 Accrued expenses and other liabilities 19,588 22,392 -------------- -------------- Net cash provided by (used in) operating activities 20,127 37,968 -------------- -------------- Cash Flows from Investing Activities: Sale of land -- 3,208 Capital expenditures, net (1,024) (41) -------------- -------------- Net cash provided by (used in) investing activities (1,024) 3,167 -------------- ------------- Cash Flows from Financing Activities: Net proceeds from borrowing (repayment) of revolving credit 1,635 (43,158) Proceeds from issuance of common stock 366 821 -------------- -------------- Net cash provided by (used in) financing activities 2,001 (42,337) -------------- -------------- Net increase (decrease) in cash and cash equivalents 21,104 (1,202) Cash and cash equivalents at beginning of period 7,208 2,556 -------------- -------------- Cash and cash equivalents at end of the period $ 28,312 $ 1,354 ============== ==============
The accompanying notes are an integral part of these financial statements. 6 7 THE GOOD GUYS, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. The consolidated balance sheets at December 31, 2000 and September 30, 2000, and the consolidated statements of operations and cash flows for the three-month periods ended December 31, 2000 and 1999 have been prepared by The Good Guys, Inc. (the "Company"), without audit. In the opinion of management, the consolidated financial statements include all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position at December 31, 2000 and September 30, 2000, and the results of operations and cash flows as of December 31, 2000 and 1999, and for the three-month periods then ended. The balance sheet at September 30, 2000, presented herein, has been derived from the audited balance sheet of the Company. Certain information and disclosures normally included in the notes to the annual financial statements prepared in accordance with generally accepted accounting principles have been omitted from these interim financial statements. Accordingly, these interim financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2000. 2. Net income per common share has been computed in accordance with Statement of Financial Accounting Standards No. 128, "Earnings per Share" (SFAS 128). SFAS 128 requires a dual presentation of basic and diluted earnings per share (EPS). Basic EPS excludes dilution and is computed by dividing net income available to common shareholders by the weighted average of common shares outstanding for the period. Diluted EPS reflects the potential dilution that would occur if securities or other contracts to issue common stock had been converted into common stock. The following is a reconciliation of the weighted average number of shares (in thousands) used in the Company's basic and diluted per share computations: Three Months Ended December 31, 2000 1999 ---- ---- Basic shares 22,864 19,700 Effect of dilutive stock warrants 176 975 Effect of dilutive stock options 54 349 ------ ------ Diluted shares 23,094 21,024 ====== ======
7 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations BUSINESS OUTLOOK AND RISK FACTORS The trend analyses and other non-historical information contained in Management's Discussion and Analysis of Financial Condition and Results of Operations are "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, and are subject to the safe harbor provisions of those Sections. Such forward-looking statements include, without limitation, statements concerning the Company's future net sales, net earnings and other operating results. The Company's actual results could differ materially from those discussed in the forward looking statements due to a number of factors, including but not limited to increases in promotional activities of the Company's competitors, changes in consumer buying attitudes, changes in vendor support, changes in the Company's merchandise sales mix including discontinued product categories, general economic conditions and other factors referred to in the Company's fiscal 2000 Annual Report on Form 10-K under "Information Regarding Forward Looking Statements". RESULTS OF OPERATIONS Net sales for the three months ended December 31, 2000 were $282.1 million, compared to $260.9 million for the same period last year. This represented an 8.1% increase in sales for the quarter, primarily attributable to strong sales growth from the prosperous economic regions in Northern and Southern California and Washington. Each of these regions continued to post strong growth in product sales, led by the demand for televisions, camcorders, and digital technologies, such as DVD, DSS, digital cameras and internet devices. The growth rate for our Extended Service Plan ("ESP" formerly, Premier Performance Guarantee) was 3.9%. The lower ESP growth rate during the holiday buying season reflects customer reluctance to purchase extended warranties on gift purchases. The Company's gross profit as a percentage of net sales decreased to 27.9% in the three months ended December 31, 2000, compared to 30.2% for the same period last year. The decrease in the gross profit percentage reflects a shift in product mix from higher margin audio components to relatively lower-margin video products. The shift in product mix is attributed to improved availability and in-stock position of video products compared to the previous year. The current mix is expected to be representative for the immediate future. Selling, general and administrative expense, including depreciation and amortization, decreased by $1.1 million in the three months ended December 31, 2000, compared to the corresponding period in the prior year. These expenses represented 25.3% of net sales in the three months ended December 31, 2000 compared to 27.7% for the prior year. The decrease in selling, general and administrative expenses, including depreciation and amortization, for the first quarter is primarily due to improved management of advertising expenditures and an increase in vendor reimbursements for shared advertising expenses, partially offset by store expenses which vary with sales volume. Interest expense decreased $99,000 in the three months ended December 31, 2000 compared to the corresponding period last year. The decrease was primarily due to a minor decrease in the average loan balance for the three months ended December 31, 2000. 8 9 As a result of the factors discussed above, the net profit for the three months ended December 31, 2000 was $5.8 million compared to net profit of $5.6 million for the three months ended December 31, 1999. The prior year net profit included a one-time gain of $1.0 million from the sale of real estate. The net profit per diluted share for the three months ended December 31, 2000 was $0.25 per share, compared to net profit of $0.27 per diluted share for the prior year. The change in net earnings per diluted share primarily reflects approximately 2.0 million shares issued under a private placement in August 2000. Liquidity and Capital Resources At December 31, 2000, the Company had cash and cash equivalents of $28.3 million. The Company's working capital was $70.1 million at December 31, 2000 compared to $59.6 million at September 30, 2000. Net cash provided by operating activities was $20.1 million for the three months ended December 31, 2000 compared to $38.0 million for the prior year. The company reported net income of $5.8 million for the three months ended December 31, 2000 and generated cash from increases in accounts payable and accrued expense balances primarily for accrued payroll, sales tax and advertising as it ended the holiday selling season. These cash increases were partially offset by increases in inventories. Net cash used in investing activities was $1.0 million for the three months ended December 31, 2000, as compared to $3.2 million provided by investing activities for the prior year. In the prior year, the Company sold a parcel of land for $3.2 million. Cash used for increases in fixed assets was limited to approximately $1.0 million due to the Company's decision not to open or significantly remodel stores. The Company maintains a three-year $100 million revolving credit facility with no operating covenants. The amount of borrowing allowed under the credit agreement is based on a formula related to the Company's inventory balances. At December 31, 2000, the Company had borrowings of $36.0 million outstanding under the revolving credit agreement and $32.0 million of the credit line was reserved under a vendor financing agreement, leaving an availability of $32.0 million based on current inventory levels. The Company expects to fund its working capital requirements for the next twelve months with a combination of cash flows from operations, normal trade credit, the revolving credit facility, and lease financing arrangements. Quantitative and Qualitative Disclosures About Market Risk The Company believes that there has be minimal impact from inflation within the consumer electronics industry because of competition among manufacturers and technological changes, and therefore, inflation has not had a material effect on the Company's net sales or cost of sales. The Company is exposed to market risks, which include changes in U.S. interest rates. The Company does not engage in financial transactions for trading or speculative purposes. The interest due on the Company's line of credit is based on variable interest rates and therefore affected by changes in market interest rates. If interest rates on existing variable rate debt rose 98 basis points (a 10% change from the bank's reference rate as of December 31, 2000), the Company's results from operations and cash flows would not be materially affected. 9 10 THE GOOD GUYS, INC. PART II: OTHER INFORMATION Item 1. Legal Proceedings The Company is involved in various legal proceedings arising during the normal course of business. Management believes that the ultimate outcome of these proceedings, individually and in the aggregate, will not have a material impact on the financial position or results of operations of the Company. Item 6. Exhibits and Reports on Form 8-K a) Exhibits 27.1 Financial Data Schedule b) Reports on Form 8-K filed during the quarter. On November 15, 2000, the Company announced a change in its fiscal year for fiscal years ending after September 30, 2000 to a fiscal year ending on February 28 of each year (or February 29 in leap years). The form on which the report covering the transition period will be filed will be on Form 10-K for the five-month transition period ending on February 28, 2001. On December 7, 2000 the Registrant announced financial results for the fourth quarter and fiscal year ended September 30, 2000 and restated results of operations for fiscal 1998 and 1999. The restatement of the results of operations for fiscal 1999 did not effect the three-month period ended December 31, 1999. 10 11 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. THE GOOD GUYS, INC. Date: February 14, 2001 By: /S/ ROBERT A. STOFFREGEN -------------------- --------------------------- Robert A. Stoffregen Chief Financial Officer 11 EX-27.1 2 f69713ex27-1.txt FINANCIAL DATA SCHEDULE
5 1,000 U.S. DOLLARS 3-MOS MAR-01-2001 SEP-30-2000 DEC-31-2000 1 28,312 0 19,339 1,700 144,030 201,581 151,988 89,715 264,302 131,480 35,993 0 0 23 96,806 264,302 282,157 282,157 203,376 203,376 71,350 217 1,629 5,802 0 5,802 0 0 0 5,802 (.25) (.25)
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