-----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, Or17x15AF1YWxJVLhvWgZKGSrpHFPDJQTdyE9EoRRNDZ2Q/5lx2OVhgz61/BdzSl 6JlUHZQxmmysUL51g1abfw== 0000950149-98-000214.txt : 19980218 0000950149-98-000214.hdr.sgml : 19980218 ACCESSION NUMBER: 0000950149-98-000214 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980213 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: SEC FILE NUMBER: 000-14134 FILM NUMBER: 98537322 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 PERIOD ENDED 12/31/97 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 December 31, 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 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 13,981,069 shares of common stock outstanding as of January 31, 1998. 2 THE GOOD GUYS, INC. AND SUBSIDIARY INDEX
Page Part I. FINANCIAL INFORMATION Item 1 Financial Statements: Consolidated Balance Sheets as of December 31, 1997 (Unaudited) and September 30, 1997 (Unaudited) 3 Consolidated Statements of Operations for the Three Month Periods Ended December 31, 1997 and 1996 (Unaudited) 4 Consolidated Statement of Changes in Shareholders' Equity for the Three Month Period Ended December 31, 1997 (Unaudited) 5 Consolidated Statements of Cash Flows for the Three Month Periods Ended December 31, 1997 and 1996 (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 Financial Data Schedule
2 3 THE GOOD GUYS, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS (In thousands, except share data) (Unaudited) ASSETS
December 31, September 30, 1997 1997 -------- -------- Current assets: Cash and cash equivalents $ 28,414 $ 18,951 Accounts receivable, net 28,845 21,711 Income taxes receivable 5,219 6,176 Merchandise inventories 145,828 117,768 Prepaid expenses 8,002 6,716 -------- -------- Total current assets 216,308 171,322 Property and equipment 124,663 120,121 Less accumulated depreciation and amortization 60,560 57,968 -------- -------- Property and equipment, net 64,103 62,153 Other assets 2,108 2,587 -------- -------- Total assets $282,519 $236,062 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $103,647 $ 75,517 Accrued expenses and other liabilities: Payroll 15,797 13,434 Sales taxes 10,625 5,226 Other 31,876 23,781 -------- -------- Total current liabilities 161,945 117,958 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, 13,810,310 shares at December 31 and September 30 14 14 Additional paid-in capital 62,383 62,316 Retained earnings 58,177 55,774 -------- -------- Total shareholders' equity 120,574 118,104 -------- -------- Total liabilities and shareholders' equity $282,519 $236,062 ======== ========
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 Ended December 31, 1997 1996 -------- -------- Net sales $290,303 $286,565 Cost of sales 218,682 214,870 -------- -------- Gross profit 71,621 71,695 Selling, general and Administrative expenses 67,567 68,176 -------- -------- Income from operations 4,054 3,519 Interest expense, net 253 242 -------- -------- Income before income taxes 3,801 3,277 Income taxes 1,398 1,311 -------- -------- Net income $ 2,403 $ 1,966 ======== ======== Net income per common share Basic: $ .18 $ .15 ======== ======== Diluted: $ .18 $ .15 ======== ======== Weighted average shares Basic: 13,719 13,464 ======== ======== Diluted: 13,736 13,465 ======== ========
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 THREE-MONTH PERIOD ENDED DECEMBER 31, 1997 (In thousands except share data) (Unaudited)
Common Stock Additional ------------------------- Paid-in Retained Shares Amount Capital Earnings Total ----------- ----------- ----------- ----------- ----------- Balance at September 30, 1997 13,810,310 $ 14 $ 62,316 $ 55,774 $ 118,104 Issuance of common stock 196,300 196 1,448 1,644 Repurchase and retirement of common stock (196,300) (196) (1,381) (1,577) Net income for the three-month period Ending December 31, 1997 2,403 2,403 ----------- ----------- ----------- ----------- ----------- Balance at December 31, 1997 13,810,310 $ 14 $ 62,383 $ 58,177 $ 120,574 =========== =========== =========== =========== ===========
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)
Three Months Ended December 31, -------- -------- 1997 1996 -------- -------- Cash Flows from Operating Activities: Net income $ 2,403 $ 1,966 -------- -------- Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 2,592 2,421 Change in assets and liabilities: Accounts receivable (7,134) (11,699) Income taxes receivable 957 2,408 Merchandise inventories (28,060) (31,998) Prepaid expenses and other assets (807) (932) Accounts payable 28,130 24,476 Accrued expenses and other liabilities 15,857 23,632 -------- -------- Total adjustments 11,535 8,308 -------- -------- Net cash provided by operating activities 13,938 10,274 -------- -------- Cash Flows from Investing Activities: Capital expenditures - net of proceeds from sale of assets (4,542) 864 -------- -------- Net cash provided by (used in) investing activities (4,542) 864 -------- -------- Cash Flows from Financing Activities: Repurchase and retirement of common stock (1,381) (1,009) Issuance of common stock 1,448 -------- -------- Net cash provided by (used in) financing activities 67 (1,009) -------- -------- Net increase in cash and cash equivalents 9,463 10,129 Cash and cash equivalents at beginning of period 18,951 21,965 -------- -------- Cash and cash equivalents at end of period $ 28,414 $ 32,094 ======== ========
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 all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of the information contained therein. The results of operations for the three months ended December 31, 1997 and 1996 are not necessarily indicative of the results to be expected for the full year. 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, 1997. 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 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 were exercised or converted into common stock. Net income per common share for prior periods have been restated to conform to SFAS 128. 3. New Accounting Pronouncements: SFAF No. 130, "Reporting Comprehensive Income" establishes standards for reporting and display of comprehensive income and its components (revenues, expenses, gains, and losses) in a full set of general-purpose financial statements. This statement requires that all items that are required to be recognized under accounting standards as components of comprehensive income be reported in a financial statement that is displayed with the same prominence as other financial statements. In addition, this statement requires that an enterprise classify items of other comprehensive income by their nature in a financial statement and display the accumulated balance of other comprehensive income separately from the retained earnings and additional paid in capital in the equity section of a statement of financial position. This statement is effective for fiscal years beginning after December 15, 1997. Management believes this will have no impact on the Company's financial position or results of operations. SFAF No. 131, "Disclosures about Segment Reporting of an Enterprise and Related Information" establishes standards for the way that public business enterprises report information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in interim financial reports issued to shareholders. It also establishes standards for related disclosure about products and services, geographic areas, and major customers. This statement is effective for fiscal years beginning after December 15, 1997. 7 8 Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS To the extent forward-looking statements are made in this Form 10-Q, such statements 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, changes in the Company's merchandise sales mix, general economic conditions, and other factors referred to in the Company's 1997 Annual Report on Form 10-K under "Information Regarding Forward Looking Statements". RESULTS OF OPERATIONS Net sales for the quarter ended December 31, 1997 were $290.3 million, an increase of 1% from sales of $286.6 million for the quarter ended December 31, 1996. During the first quarter of fiscal 1997, comparable store sales increased 1%. Gross profit as a percentage of net sales was 24.7% for the quarter ended December 31, 1997, as compared to 25.0% for the comparable fiscal 1997 period. The decrease in gross profit percentage resulted primarily from the increased promotional environment in the Home Office categories. For the quarter ended December 31, 1997, selling, general and administrative expenses were 23.3% of net sales compared to 23.8% for the comparable fiscal 1996 period. The decrease in selling, general and administrative costs as a percentage of sales for the quarter ended December 31, 1997 is primarily due to reductions in general and administrative and advertising expenses and an increase in same store sales. The effective income tax rate for the quarter ended December 31, 1997 was 36.8% compared with 40.0% for the same period in the prior fiscal year. Net income for the quarter ended December 31, 1997 was $2.4 million ($0.18 per share) or 0.8% of net sales for the period. These results compare to net income of $2.0 million ($0.15 per share) or 0.7% of net sales for the same period in fiscal 1997. 8 9 LIQUIDITY AND CAPITAL RESOURCES At December 31, 1997, the Company had working capital of $54.4 million. Net cash provided by operating activities was $13.9 million for the three months ended December 31, 1997, compared to $10.3 million for the three months ended December 31, 1996. The increase in net cash provided by operating activities was primarily due to a combination of increased net income and a year over year reduction in receivables and inventory. Net cash used in investing activities, which primarily consists of expenditures for stores, distribution facilities and administrative property and equipment, was $4.5 million for the three months ended December 31, 1997, as compared to $0.9 million provided during the same period last year. This increase in cash used in investing activities relates to capital expenditures for remodeling stores to the new Audio/Video Exposition format. The Company continues to identify stores for remodeling to the new Audio/Video Exposition format and plans to renovate four to seven existing locations in calendar 1998. In addition, the Company plans to open three new stores in the Exposition format during calendar 1998. The Company maintains a revolving line of credit which provides a maximum borrowing level of $75,000,000. 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 December 31, 1997, the Company was in compliance with all covenants under the credit agreement. There were no borrowings outstanding under the credit agreement at December 31, 1997. The Company expects to fund its working capital requirements and expansion plans with a combination of 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 technological changes in the consumer electronics industry, inflation has not had a material effect on net sales and cost of sales. 9 10 PART II. OTHER INFORMATION Item 1. Legal Proceedings On July 19,1996, McBride-Newall, Inc. dba Carphones, Inc. and numerous other individuals filed a complaint against the Company and 21 other named defendants entitled McBride-Newall, Inc., et al. v Mobilworks, Inc. et al., San Diego Superior Court Case No. 695897. Plaintiffs, who are small agents of the cellular service providers offering cellular telephone products and service in the San Diego area, allege a conspiracy to sell cellular telephone equipment below cost with the intent to drive the plaintiffs out of business. Plaintiffs seek treble damages under the California antitrust laws. A motion by Defendants to dismiss the case as a sanction for abuse of the discovery process has been denied. The Company believes it has meritorious defenses to the claims alleged in the lawsuit and intends to defend the action vigorously. 10 11 PART II. OTHER INFORMATION ITEM 2-5 Not Applicable ITEM 6 Exhibits and Reports on Form 8-K (a) See Exhibit Index included herein on page 2. (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 February 13, 1998 /s/ DENNIS C. CARROLL - -------------------------------- -------------------------------- Date Dennis C. Carroll Chief Financial Officer 12 13 EXHIBIT INDEX
Page Exhibit 27 Financial Data Schedule
13 EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS SEP-30-1998 DEC-31-1997 28,414 0 35,573 1,509 145,828 216,308 124,663 60,560 282,519 161,945 0 0 0 14 120,560 282,519 290,303 290,303 218,682 218,682 67,567 0 253 3,801 1,398 2,403 0 0 0 2,403 .18 .18
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