-----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, SkxJ9Ol0Vcr2fezQbZMEREKnjc+zzzJi21H0u75FcSdWVf5lAIs5cYbn3H22Muvh /rsnzyTaNodWBYGIu+Tg0Q== 0000912953-97-000013.txt : 19970813 0000912953-97-000013.hdr.sgml : 19970813 ACCESSION NUMBER: 0000912953-97-000013 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970812 SROS: NASD SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: REAL GOODS TRADING CORP CENTRAL INDEX KEY: 0000912953 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-CATALOG & MAIL-ORDER HOUSES [5961] IRS NUMBER: 680227324 STATE OF INCORPORATION: CA FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-22524 FILM NUMBER: 97656913 BUSINESS ADDRESS: STREET 1: 555 LESLIE STREET CITY: UKIAH STATE: CA ZIP: 95482 BUSINESS PHONE: 7074689294 MAIL ADDRESS: STREET 1: 555 LESLIE STREET CITY: UKIAH STATE: CA ZIP: 95482 10QSB 1 U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 28, 1997 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 No. 0-22524 REAL GOODS TRADING CORPORATION (Exact name of small business issuer as specified in its charter) California 68-0227324 (State or other jurisdiction of (IRS Employer Identification incorporation or organization) Number) 555 Leslie Street, Ukiah, California 95482 (Address of principal executive office) (Zip Code) Issuer's telephone number, including area code: (707) 468-9292 Former name, former address and former fiscal year, if changed since last report. Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the past 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 As of July 25, 1997, there were issued and outstanding 3,403,804 shares of common stock of the issuer. REAL GOODS TRADING CORPORATION INDEX Page Form 10-QSB Cover Page 1 Index 2 PART I. FINANCIAL INFORMATION Item 1. Financial Statements. Condensed Consolidated Balance Sheet at June 28, 1997 3 Condensed Consolidated Statements of Operations for the three-month period ended June 28, 1997 4 Condensed Consolidated Statements of Cash Flows for the three month period ended June 28, 1997 5 Notes to Condensed Consolidated Financial Statements 6 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 2. Changes in Securities. Item 3. Defaults Upon Senior Securities. Item 4. Submission of Matters to a Vote of Security-Holders. Item 5. Other Information. Item 6. Exhibits and Reports on Form 8-K. Signatures 10 PART I FINANCIAL INFORMATION Item 1. Financial Statements REAL GOODS TRADING CORPORATION CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited) (In thousands except share data)
June 28, 1997 ASSETS Current Assets Cash $ 612 Accounts Receivable, net of allowance of $6 121 Inventories 2,046 Deferred catalog costs, net 230 Prepaid expenses 192 Total current assets 3,201 Property, equipment and improvements, net 3,366 Intangible assets and other assets, net 157 Total assets $ 6,724 LIABILITIES AND SHAREOWNERS' EQUITY Current Liabilities Accounts payable $ 659 Accrued expenses 272 Customer deposits 88 Current maturities of long-term debt 37 Deferred income taxes 13 Income taxes and other taxes payable (20) Total current liabilities 1,049 Long-term debt 1,134 Total liabilities 2,183 Shareowners' equity Common stock, without par value: Authorized 10,000,000 shares; Issued and outstanding 3,403,804 shares 4,252 Retained Earnings 289 Total shareowners' equity $4,541 Total liabilities and shareowners' equity $6,724
See notes to condensed consolidated financial statements REAL GOODS TRADING CORPORATION CONDENSED CONSOLIDATED STATEMENT OF EARNINGS (Unaudited) (In thousands except share data)
Three Months Ended June 28, June 29, 1997 1996 Net Sales $3,219 $4,992 Cost of sales 1,696 2,930 Gross Profit 1,523 2,062 Selling, general and administrative expenses 1,743 1,731 Earnings (loss) from operations (220) 331 Interest income (expense), net (30) 1 Earnings (loss) before income taxes (250) 332 Income tax benefit (expense) 100 (113) Net earnings (Loss) $ (150) $ 219 Net earnings (loss) per share $(0.04) $0.06 Weighted average shares used to compute earnings per share 3,403,804 3,434,666
See notes to condensed consolidated financial statements REAL GOODS TRADING CORPORATION CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited) (In thousands)
Three Months Ended June 28, June 29, 1997 1996 CASH FLOWS FROM OPERATING ACTIVITIES Net Earnings (Loss) $ (150) $ 219 Adjustments to reconcile net earnings (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 74 51 Changes in assets and liabilities: Accounts receivable 48 (284) Inventory 66 91 Deferred catalog costs 153 185 Prepaid expenses (80) 266 Accounts payable 179 239 Accrued expenses 12 136 Income taxes and other taxes payable (111) 113 Customer deposits 3 (542) Net cash provided by operating activities 194 474 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of land, equipment, and construction in progress (85) (493) CASH FLOWS FROM FINANCING ACTIVITIES Borrowings 783 Repayment of debt (10) Purchase of common stock 9 Net cash provided by (used in) financing activities (10) 792 Net increase in cash 99 773 Cash at beginning of period 513 270 Cash at end of period $ 612 $ 1,043
See notes to condensed consolidated financial statements REAL GOODS TRADING CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) FOR THE THREE MONTH PERIOD ENDED JUNE 28, 1997 NOTE 1 - BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements have been prepared from the records of the Company without audit and, in the opinion of management, include all adjustments (consisting of only normal recurring accruals) necessary to present fairly the financial position at June 28, 1997 and June 29, 1996, and the interim results of operations and cash flows for the three months then ended. Certain reclassifications have been made in the June 1996 financial statements to conform to the June 1997 presentation. Accounting policies followed by the Company are described in Note 1 to the audited financial statements for the fiscal year ended March 31, 1997. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted for purposes of the condensed financial statements. The condensed consolidated financial statements should be read in conjunction with the audited financial statements, including notes thereto, for the year ended March 31, 1996. The results of operations for the three month period herein presented are not necessarily indicative of the results to be expected for the full year. NOTE 2 - NEW ACCOUNTING PRONOUNCEMENTS In February 1997 the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, "Earning per Share" (SFAS 128). The Company is required to adopt SFAS 128 in the third quarter of fiscal 1997 and will restate at that time earnings per share (EPS) data for prior periods to conform with SFAS 128. Earlier application is not permitted. SFAS 128 replaces current EPS reporting requirements and requires a dual presentation of basic and diluted EPS. Basic EPS excludes dilution and is computed by dividing net income (available to common shareowners) by the weighted average of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. If SFAS 128 had been in effect during the current and prior periods, basic EPS would have been ($.04) and $.06 for the three months ended June 28, 1997 and June 29, 1996 respectively. Diluted EPS and SFAS 128 would not have been significantly different than primary EPS currently reported for the periods. In June 1997, the Financial Accounting Standards Board issued Statements of Financial Accounting Standards No. 130 ("Reporting Comprehensive Income"), which requires that an enterprise report, by major components and as a single total, the change in its net assets during the period from the nonowner source; and No. 131 ("Disclosures about Segments of an Enterprise and Related Information"), which establishes annual and interim reporting standards for an enterprise's operating segments and related disclosures about its products, services, geographic areas and major customers. Adoption of these statements will not impact the Company's consolidated financial position, results of operations or cash flows, and any effect will be limited to the form and content of its disclosures. Both statements are effective for fiscal years beginning after December 15, 1997, with earlier application permitted. NOTE 3 - LINE OF CREDIT On April 8, 1997 the Company entered into a $1,500,000 line of credit agreement with National Bank of the Redwoods (the "Bank"). Borrowings bear interest at 1% over the prime rate, and interest is payable monthly. The line is personally guaranteed by the Company's majority shareowner. This agreement expires April 8, 1998. On June 28, 1997, no amounts were outstanding on the Company's line of credit. The line of credit agreement contains restrictive covenants including debt to net worth and current ratios, restrictions on capital expenditures, positive cash flow a certain point in the fiscal year and prohibitions on payment of cash dividends without the Bank's approval. The line is collateralized by substantially all of the Company's assets including inventory, accounts receivable and mailing lists as well as a key person life insurance policy on the life of the Company's majority shareowner. The Company was in compliance with all covenants of the extended line of credit agreement as of June 28, 1997. NOTE 4 - STOCK OPTIONS Under the Company's Second Amended and Restated Fiscal 1993 Stock Incentive Plan ( the "Plan") the Company can grant incentive and non-qualified stock options to purchase up to 600,000 shares of common stock. Incentive Stock Options can be granted at prices not less than 100% of the fair market value of the common shares (85% for non-qualified options) on the date the option is granted and normally vest over five years from the date of grant. As of June 28, 1997 25,600 options had been exercised and options to purchase 340,700 shares were outstanding. Under the Company's Amended and Restated Non-Employee Directors' Stock Option plan the Company can grant non-qualified options to purchase up to 100,000 shares of common stock. As of June 28, 1997, no options had been exercises, and options to purchase 35,000 shares were outstanding. In September 1995, the Company announced that its Board of Directors had approved a stock repurchase program. The Company is authorized to repurchase up to $250,000 of common stock. As of June 28,1997, the company repurchased 6,284 shares at an average price of $5.50 per share. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Sales Net sales for the first quarter of fiscal 1998 were $3,219,000, which was flat compared to $3,192,000 in the first quarter of the previous year if the $1.8 million sale in Belize is excluded. First quarter fiscal 1997 net sales were $4,992,000 including the $1.8 million 100 kilowatt photovoltaic renewable energy sale. Catalog net sales for the quarter decreased by 8% to $2,103,000 compared to $2,280,000 in the previous year. Catalog circulation was flat at 1,235,000 compared to 1,243,000 in the previous year. Prospecting lists for the spring book did not respond as well as in the previous year, resulting in the lower response rate. Catalog sales were 65% of total sales in the first quarter of fiscal 1998, compared to 71% in the first quarter of fiscal 1997, excluding the Belize sale. Retail store sales increased 12% to $644,000 for the first quarter, compared to $577,000 for the same period in the previous year. In fiscal 1997 the Solar Living Center came on line in May, and the Eugene store moved in the same month to a larger location. Retail sales were 20% of total sales in the first quarter of fiscal 1998, compared to 18% in the first quarter of fiscal 1997, excluding the Belize sale. Renewable energy sales were $455,000, compared to $2,126,000 which included the $1,800,000 sale to the eco-tourism market, showing a 40% growth if the Belize sale were excluded. The continuing increase in sales is attributed to the Company's strategy to support the specialization of some of its sales staff in renewable energy sales, to increase customer service in this area, and to explore new marketing strategies for the department, including cultivating the international eco-tourism market. Renewable energy sales were 14% of total sales in the first quarter of fiscal 1998, compared to 10% of sales in first quarter of fiscal 1997, excluding the Belize sale. Gross Profit For the first quarter ended June 28, 1997, gross profit was 47.3% of sales, or $1,523,000, compared to gross profit in the prior year period of 41.3% of sales, or $2,062,000. Overall margins increased due to the higher proportion of catalog and retail sales in overall sales, in comparison to the previous year which had included the large renewable energy sale. Additionally, margins increased due to the Company's continued success in improving purchasing efficiencies and improving terms with vendors. Catalog sales had a gross margin of $1,098,000 or 52.2% of sales, compared to $1,182,000 or 51.8% of sales in the previous year. Retail store sales had a gross margin or $263,000 or 40.8% of sales, compared to $248,000 or 43% of sales for the previous year, primarily reflecting retail inventory markdowns due to the planned sale or closing of the SnowBelt store. Renewable energy sales had a gross margin of $146,000, or 32.1% of sales, compared to $622,000 or 29.3% of sales in the previous year including the Belize sale. Operating Expenses Selling, general and administrative expenses remained flat at $1,743,000 compared to $1,731,000 for the previous year. Due to lower paper prices, catalog marketing costs were lowered to 27% of catalog sales, compared to 29% in the previous year. These gains were offset by higher depreciation and general expenses including insurance. Interest The Company had $30,000 of net interest expense in the first quarter, compared to $2,000 of interest income in the previous year. The interest expense increase is due to the loans required to finance the Solar Living Center. Earnings The Company incurred a loss for the first three months of fiscal 1998 of $250,000 before tax, and a loss of $150,000 net of tax, or $ .04 per share, compared to earnings in the first quarter of fiscal 1997 of $332,000, and $219,000 net of tax or $ .06 per share. The Company's first fiscal quarter, which ends at the end of June, is usually a weak quarter for the Company and historically has not been a profitable quarter. With the exception of the first quarter of fiscal 1997 due to the Belize sale, the Company generally experiences seasonal effects, with sales and earnings increasing in the first two quarters, and the largest gains in the Company's third quarter, which is the holiday season. Income Tax Provision The provision for income taxes was 40%, compared to the previous year's comparable period of 34%. The Company believes that the applied tax rate accurately reflects its projected rate for the year. Liquidity and Capital Resources During the three months ended June 28, 1997, cash generated from operations was $194,000, despite a net loss of $150,000, primarily due to a decrease in deferred catalog costs of $153,000 and an increase in accounts payable of $179,000. The Company used $85,000 largely to upgrade some computer and phone systems. The net effect of all of the Company's activities was to increase cash to $612,000 at the end of the first quarter from $513,000 at the end of the fiscal year. The Company has commenced an offering of 1,000,000 shares of common stock. The net proceeds of such offering are expected to provide the Company with resources primarily to expand the Company's retail presence, to build additional infrastructure and to retire indebtedness. If the offering is not successful, the Company will revise its retail expansion plans. In the absence of proceeds from the offering, the Company believes that cash flow from operations together with bank debt financing and existing cash reserves will be sufficient to fund the Company's operations for the next twelve months. Effects of Inflation The overall effects of inflation on the Company's business during the periods discussed were not believed to be material. ***** PART II OTHER INFORMATION Item 1. Legal Proceedings. Not Applicable. 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. Not Applicable SIGNATURES In accordance with the requirements of the Securities Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. REAL GOODS TRADING CORPORATION (Registrant) DATED: August 12, 1997 by:[S]DONNA MONTAG Donna Montag Chief Financial Officer EX-27 2
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