-----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, Iv3C66PhcPfNT7D02hcoMLHe+sPIsVEplXt8XCajVyXThmnuArhVEvloV22XgGKF RMjKVP8VDwUQ/cUJ0Hczsw== 0000950149-96-001241.txt : 19960814 0000950149-96-001241.hdr.sgml : 19960814 ACCESSION NUMBER: 0000950149-96-001241 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960813 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: 96610226 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 FOR THE QUARTER ENDED JUNE 30, 1996/ 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter period ended June 30, 1996 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 of jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 7000 Marina Boulevard, Brisbane, California 94005 (Address of principal executive offices) (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 --- --- The registrant had 13,621,612 shares of common stock, outstanding as of July 31, 1996. 2 THE GOOD GUYS, INC. AND SUBSIDIARY INDEX Page Part I. FINANCIAL INFORMATION Item 1 Financial Statements: Consolidated Balance Sheets as of June 30, 1996 (Unaudited) and September 30, 1995 (Unaudited) 3 Consolidated Statements of Operations for the Three and Nine Month Periods Ended June 30, 1996 and 1995 (Unaudited) 4 Consolidated Statement of Changes in Shareholders' Equity for the Nine Month Period Ended June 30, 1996 (Unaudited) 5 Consolidated Statements of Cash Flows for the Nine Month Periods Ended June 30, 1996 and 1995 (Unaudited) 6 Notes to Consolidated Financial Statements 7 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations 8-9 Part II. OTHER INFORMATION 10-11 SIGNATURE PAGE 12 EXHIBIT INDEX 13 EXHIBIT 11.1 Statement Setting Forth Computation of Earnings (Loss) per Share 14 EXHIBIT 27.1 Financial Data Schedule 15 2 3 THE GOOD GUYS, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS (In thousands, except share data) (Unaudited) ASSETS
June 30, September 30, 1996 1995 -------- -=----------- Current assets: Cash and cash equivalents $ 10,386 $ 18,434 Accounts receivable, net 26,839 21,209 Merchandise inventories 145,460 115,806 Prepaid expenses 8,911 10,300 -------- -------- Total current assets 191,596 165,749 Property and equipment 107,252 101,825 Less accumulated depreciation and amortization 49,319 42,584 -------- -------- Property and equipment, net 57,933 59,241 Other assets 1,905 2,739 -------- -------- Total assets $251,434 $227,729 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 82,406 $ 53,504 Accrued expenses and other liabilities: Payroll 9,954 12,435 Sales taxes 3,057 6,025 Other 17,448 19,743 -------- -------- Total current liabilities 112,865 91,707 Shareholders' equity: Preferred stock, $.001 par value; authorized 2,000,000 shares; none issued Common stock, $.001 par value; authorized 40,000,000 shares; issued and outstanding, 13,479,105 shares and 13,581,416 shares, respectively 13 14 Additional paid-in capital 60,798 61,833 Retained earnings 77,758 74,175 -------- -------- Total shareholders' equity 138,569 136,022 -------- -------- Total liabilities and shareholders' equity $251,434 $227,729 ======== ========
The accompanying notes are an integral part of these statements. 3 4 THE GOOD GUYS, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands except per share data) (Unaudited)
Three Months Nine Months Ended June 30, Ended June 30, --------------------------- -------------------------- 1996 1995 1996 1995 --------- --------- --------- --------- Net sales $ 196,553 $ 198,315 $ 713,683 $ 675,718 Cost of sales 148,898 149,056 548,519 511,176 --------- --------- --------- --------- Gross profit 47,655 49,259 165,164 164,542 Selling, general and administrative expenses 53,105 45,301 158,752 142,398 --------- --------- --------- --------- Income (loss) from operations (5,450) 3,958 6,412 22,144 Interest expense, net 302 163 407 411 --------- --------- --------- --------- Income (loss) before income taxes (5,752) 3,795 6,005 21,733 Income taxes (benefits) (2,318) 1,573 2,422 8,610 --------- --------- --------- --------- Net income (loss) $ (3,434) $ 2,222 $ 3,583 $ 13,123 ========= ========= ========= ========= Net income (loss) per common share $ (.25) $ .17 $ .26 $ .98 ========= ========= ========= ========= Shares used in per share computation 13,476 13,426 13,569 13,378 ========= ========= ========= =========
The accompanying notes are an integral part of these statements. 4 5 THE GOOD GUYS, INC. AND SUBSIDIARY CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE NINE-MONTH PERIOD ENDED JUNE 30, 1996 (In thousands except share data) (Unaudited)
Common Stock Additional ------------------------- paid-in Retained Shares Amount capital earnings Total ------ ------ ------- -------- ----- Balance at September 30, 1995 13,581,416 $ 14 $ 61,833 $ 74,175 $ 136,022 Net income for the nine-month period ended June 30, 1996 -- -- -- 3,583 3,583 Issuance of common stock 185,189 -- 1,369 -- 1,369 Retirement of common stock (287,500) (1) (2,404) -- (2,405) ---------- ----------- ----------- ----------- ----------- Balance at June 30, 1996 13,479,105 $ 13 $ 60,798 $ 77,758 $ 138,569 =========== =========== =========== =========== ===========
The accompanying notes are an integral part of these statements. 5 6 THE GOOD GUYS, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
Nine Months Ended June 30, -------------------------- 1996 1995 -------- -------- Cash Flows from Operating Activities: Net income $ 3,583 $ 13,123 -------- -------- Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 6,981 7,118 Change in assets and liabilities: Accounts receivable (5,630) (6,454) Merchandise inventories (29,654) (46,632) Prepaid expenses and other assets 2,203 2,228 Accounts payable 28,902 30,341 Accrued expenses and other liabilities (7,744) (1,744) -------- -------- Total adjustments (4,942) (15,143) -------- -------- Net cash used in operating activities (1,359) (2,020) -------- -------- Cash Flows from Investing Activities: Purchase of property and equipment - net (5,653) (13,235) -------- -------- Net cash used in investing activities (5,653) (13,235) -------- -------- Cash Flows from Financing Activities: Issuance of common stock 1,369 1,426 Retirement of common stock (2,405) -- Net cash provided by (used in) financing activities (1,036) 1,426 -------- -------- Net decrease in cash and cash equivalents (8,048) (13,829) Cash and cash equivalents at September 30, 1995 and 1994 18,434 21,661 -------- -------- Cash and cash equivalents at June 30, 1996 and 1995 $ 10,386 $ 7,832 ======== ========
The accompanying notes are an integral part of these statements. 6 7 THE GOOD GUYS, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. The accompanying unaudited consolidated 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 consolidated financial statements should be read in conjunction with the financial statements, notes and supplementary data included and incorporated by reference in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1995. 2. The weighted average number of shares outstanding during the quarter has been computed by taking the number of days each share is 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 year to date ended June 30, 1996 and 1995 as the dilutive effect of the options was less than 3%. 7 8 Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This Form 10-Q includes forward-looking statements, which are subject to certain risks and uncertainties, including but not limited to, increases in promotional activities of the Company's competitors, changes in consumer buying attitudes, the presence or absence of new products or product features in the Company's merchandise categories, changes in vendor support for advertising and promotional programs, and changes in the Company's merchandise sales mix, and general economic conditions. RESULTS OF OPERATIONS Net sales for the quarter ended June 30, 1996 were $196.6 million, a decrease of 1% from sales of $198.3 million for the quarter ended June 30, 1995. This decrease was due to a 13% decrease in comparable store sales, partially offset by sales resulting from an increase in the total number of stores in operation from 60 at June 30, 1995 to 74 at June 30, 1996. On a year-to-date basis, net sales for the period ended June 30, 1996 increased 6% to $713.7 million, compared to $675.7 million during the same period in 1995. Comparable store sales decreased 8% for the nine months ended June 30, 1996. Gross profit as a percentage of net sales was 24.2% and 23.1% for the quarter and nine months ended June 30, 1996, respectively, as compared to 24.8% and 24.4% for the comparable 1995 periods. The decreases in gross profit percentage were primarily due to the increased proportion of sales represented by computer products, which typically carry lower gross margins, and a highly promotional consumer electronics market during each period. For the quarter and nine months ended June 30, 1996, selling, general and administrative expenses were 27.0% and 22.2% of net sales, respectively, compared to 22.8% and 21.1% for the comparable 1995 periods. The quarter and year to date increase in selling, general and administrative costs as a percentage of sales is primarily due to the decrease in sales for the quarter ended June 30, 1996 and the fixed cost associated with the nine stores opened and one store closed during the year. The effective income tax rate for the quarter and nine month period ended June 30, 1996 was 40.3% compared with 41.4% and 39.6% respectively, for such periods in the prior fiscal year. The 1995 effective tax rate was positively impacted by the utilization of job tax credits during the first half of 1995. 8 9 The loss for the quarter ended June 30, 1996 was $3.4 million ($0.25 per share) or 1.7% of net sales for the period. These results compare to net income of $2.2 million ($0.17 per share) or 1.1% of net sales for the same period last year. For the nine month period ended June 30, 1996 net income was $3.6 million or $0.26 per share, compared to $13.1 million or $0.98 per share for the same period last year. LIQUIDITY AND CAPITAL RESOURCES At June 30, 1996, the Company had working capital of $78.7 million. Net cash used in operating activities was $1.4 million for the nine months ended June 30, 1996, compared to $2.0 million for the nine months ended June 30, 1995. The decrease in net cash used in operating activities was primarily due to improved leveraging on merchandise inventory. Net cash used in investing activities, which primarily consists of expenditures for stores, distribution facilities and administrative property and equipment, was $5.7 million for the nine months ended June 30, 1996 as compared to $13.2 million during the same period last year. This decrease was attributable to a more effective use of lease financing during the first nine months of fiscal 1996. The Company maintains a revolving line of credit of up to $75 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. For the quarter ending June 30, 1996 the Company was in compliance with or had received waivers for each of these covenants. There were no borrowings outstanding under the credit agreement at June 30, 1996. The Company expects to be able to fund its working capital requirements and expansion plans with a combination of anticipated cash flows 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. 9 10 PART II. OTHER INFORMATION Item 1. Legal Proceedings The Company has been named as a defendant in two purported class actions, entitled LONG V. PACKARD BELL ELECTRONICS, ET AL., Case No. 7515706, filed in Orange County Superior Court on August 21, 1995, and SUTTER V. ACER AMERICA CORPORATION, ET AL., Case No. 95A505027, filed in Sacramento County Superior Court on September 7, 1995. In both cases, plaintiffs have named a large number of computer manufacturers, wholesalers and retailers, alleging that since 1986 the defendants have misrepresented to the public the screen size of certain computer monitors. In addition to these two cases, there are numerous other cases pending around the State of California (and in other parts of the country) making essentially the same allegations against a variety of computer manufacturers, wholesalers and retailers. All of the California cases have now been coordinated in a single court in San Francisco. At the end of June 1996, the Court granted the Company's demurrers on the grounds (a) that a prior settlement of an action brought by the California Attorney General precludes relitigation of the same issues in this case; and (b) that plaintiffs lack standing to bring class claims against the Company because none of the named plaintiffs claim to have purchased any computer monitors from the Company. The cases are at an early stage, discovery has not yet commenced, and it is too early to be able to express any opinion as to the likely outcome of the matter. The Company believes it has meritorious defenses to the claims alleged in the lawsuit and intends to defend the action vigorously. The Company also believes it has meritorious claims for indemnification from certain computer manufacturers from which it has purchased computer equipment. The Company has been named as a defendant in an action known as LEVY V. CIRCUIT CITY STORES, INC., ET AL., Case No. 971872, filed in San Francisco Superior Court on August 18, 1995. The plaintiff is an individual named Carol Levy, who claims to be suing on her own behalf and on behalf of the general public. The defendants, in addition to the Company, are Circuit City Stores, Inc., Wireless Depot, Inc., Tandy Corporation, Cellular Warehouse, Bay Area Cellular Telephone Company, and GTE Mobilnet of California. The First Amended Complaint alleges various violations of the California Unfair Practices Act and the Unfair Competition Statute, including failure to post certain signs in connection with the sale of cellular telephones, bundling of cellular telephone equipment and service, unlawful loss leader sales of cellular telephone equipment, and unfair and deceptive advertising of cellular telephone equipment and service. The plaintiff seeks injunctive relief and restitution. On February 2, 1996, the Court issued an order granting the Company's demurrer to the Complaint as to four of the five causes of action alleged. In May 1996, the Company entered into an agreement with the plaintiff settling the action as to the Company for the payment of a nominal sum, and the action has been dismissed as to the Company. 10 11 ITEM 2-5 Not Applicable ITEM 6 Exhibits and Reports on Form 8-K (a) Exhibit Description 11.1 Statement of Computation of Per Share Earnings (Loss) 27.1 Financial Data Schedule (b) No reports on Form 8-K were filed during the quarter for which this report is filed. 11 12 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 August 13, 1996 /s/ DENNIS C. CARROLL --------------- ------------------------------ Date Dennis C. Carroll Chief Financial Officer 12 13 EXHIBIT INDEX NUMBER DESCRIPTION PAGE 11.1 Statement of Computation of 14 earnings (loss) per share 27.1 Financial Data Schedule 15 13 EX-11.1 2 STATEMENT OF COMPUTATION OF EARNINGS. 1 THE GOOD GUYS, INC. AND SUBSIDIARY Exhibit 11.1 STATEMENT SETTING FORTH COMPUTATION OF EARNINGS (LOSS) PER SHARE (In thousands except per share data)
June 30, June 30, 1996 1995 -------- ------- Net income (loss) $(3,434) $ 2,222 1. As presented in the 10-Q shares used in per share computation 13,476 13,426 Net income (loss) per common share and common share equivalents $(0.25) $ 0.17 ====== ======= 2. Computation of primary and fully diluted earnings (loss) per share including common stock equivalents a) Primary earnings (loss) per common share Weighted average number of shares: Common stock (A) 13,476 13,426 Stock options (B) 81 135 ------ ------- Total 13,557 13,561 Primary earnings (loss) per share $(0.25) $ 0.16 ====== ======= b) Fully diluted earnings (loss) per share Weighted average number of shares: Common stock (A) 13,476 13,426 Stock options (B) 81 150 ------ ------- Total 13,557 13,576 Fully diluted earnings (loss) per share $(0.25) $ 0.16 ====== =======
(A) The weighted average number of common shares outstanding during the quarter has been computed by taking the number of days each share is outstanding and dividing by the number of days in the quarter. (B) Stock options used in the primary earnings (loss) per share are calculated using the average market price. Stock options in fully diluted earnings (loss) per share are calculated using the higher of the ending market price or the average market price. 14 EX-27.1 3 FINANCIAL DATA SCHEDULE
5 1,000 9-MOS SEP-30-1996 JUN-30-1996 10,386 0 28,074 1,235 145,460 191,596 107,252 49,319 251,434 112,865 0 0 0 13 138,556 138,569 713,683 713,683 548,519 548,519 158,752 0 407 6,005 2,422 3,583 0 0 0 3,583 .26 .26
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