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 March 31, 2000
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 0-22963
BIG DOG HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 52-1868665
(State or jurisdiction of (IRS employer
incorporation or organization) identification no.)
121 GRAY AVENUE
SANTA BARBARA, CALIFORNIA 93101
(Address of principal executive offices) (zip code)
(805) 963-8727
(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.
X Yes No
--- ----
The number of shares outstanding of the registrant's common stock, par value
$.01 per share, at May 12, 2000 was 11,981,350 shares.
<PAGE>
BIG DOG HOLDINGS, INC
INDEX TO FORM 10-Q
PAGE
----
NO.
---
PART I. FINANCIAL INFORMATION.........................................3
ITEM 1: FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
March 31, 2000 and December 31, 1999..........................3
CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended March 31, 2000 and 1999....................4
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended March 31, 2000 and 1999....................5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS....................6
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.....................................7
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK....9
PART II. OTHER INFORMATION.............................................9
ITEM 1: LEGAL PROCEEDINGS.............................................9
ITEM 2: CHANGES IN SECURITIES.........................................9
ITEM 3: DEFAULTS UPON SENIOR SECURITIES...............................9
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...........9
ITEM 5: OTHER INFORMATION............................................10
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K.............................10
SIGNATURES .............................................................10
<PAGE>
PART 1. FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
BIG DOG HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
March 31, December 31,
2000 1999
------------------ ----------------
(Unaudited)
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents........................................ $ 991,000 $17,925,000
Accounts receivable, net......................................... 1,378,000 968,000
Inventories...................................................... 27,241,000 19,950,000
Prepaid expenses and other current assets........................ 1,126,000 1,107,000
Deferred income taxes............................................ 2,333,000 875,000
------------ -----------
Total current assets........................................... 33,069,000 40,825,000
PROPERTY AND EQUIPMENT, Net......................................... 11,465,000 12,037,000
INTANGIBLE ASSETS, Net.............................................. 116,000 117,000
OTHER ASSETS........................................................ 3,422,000 3,434,000
------------ -----------
TOTAL............................................................... $48,072,000 $56,413,000
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable................................................. $ 1,999,000 $ 3,411,000
Income taxes payable............................................. 36,000 1,768,000
Accrued expenses and other current liabilities................... 1,550,000 3,184,000
------------ -----------
Total current liabilities...................................... 3,585,000 8,363,000
DEFERRED RENT....................................................... 869,000 878,000
DEFERRED GAIN ON SALE-LEASEBACK..................................... 499,000 512,000
------------ -----------
Total liabilities................................................ 4,953,000 9,753,000
------------ -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value, 3,000,000 shares $ --- $ ---
Authorized, none issued and outstanding
Common stock, $.01 par value, 30,000,000 shares
Authorized, 13,183,550 issued at March 31, 2000 and
December 31, 1999.............................................. 132,000 132,000
Additional paid-in capital....................................... 42,417,000 42,417,000
Retained earnings................................................ 8,220,000 11,750,000
Treasury stock, 1,183,200 shares at March 31, 2000 and
December 31, 1999.............................................. (7,006,000) (7,006,000)
Notes receivable from common stockholders........................ (644,000) (633,000)
------------- -----------
Total stockholders' equity..................................... 43,119,000 46,660,000
------------- -----------
TOTAL............................................................... $48,072,000 $56,413,000
============= ===========
</TABLE>
See accompanying notes.
<PAGE>
BIG DOG HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
<TABLE>
Three Months Ended
March 31,
---------------------------------
2000 1999
------------ ------------
<S> <C> <C>
NET SALES........................................................... $ 16,586,000 $ 16,743,000
COST OF GOODS SOLD.................................................. 7,430,000 7,856,000
------------ ------------
GROSS PROFIT........................................................ 9,156,000 8,887,000
------------ ------------
OPERATING EXPENSES:
Selling, marketing and distribution.............................. 11,786,000 11,323,000
General and administrative....................................... 1,329,000 1,215,000
------------ ------------
Total operating expenses....................................... 13,115,000 12,538,000
------------ ------------
LOSS FROM OPERATIONS................................................ (3,959,000) (3,651,000)
INTEREST INCOME, Net................................................ (171,000) (94,000)
------------ ------------
LOSS BEFORE BENEFIT FROM INCOME TAXES............................... (3,788,000) (3,557,000)
BENEFIT FROM INCOME TAXES........................................... (1,458,000) (1,387,000)
------------ ------------
NET LOSS............................................................ $ (2,330,000) $ (2,170,000)
============ ============
NET LOSS PER SHARE
BASIC AND DILUTED................................................ $ (0.19) $ (0.18)
============ ============
WEIGHTED AVERAGE SHARES OUTSTANDING
BASIC AND DILUTED................................................ 12,000,000 12,100,000
============ ============
</TABLE>
See accompanying notes.
<PAGE>
BIG DOG HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
<TABLE>
Three Months Ended
March 31,
------------------------------------
2000 1999
--------------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net loss..................................................................... $(2,330,000) $(2,170,000)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization.............................................. 993,000 993,000
Provision for losses on receivables........................................ 11,000 17,000
Loss on disposition of property and equipment.............................. --- 5,000
Deferred income taxes...................................................... (1,458,000) (1,385,000)
Changes in operating assets and liabilities:
Receivables.............................................................. (421,000) (482,000)
Inventories.............................................................. (7,291,000) (3,103,000)
Prepaid expenses and other assets........................................ (19,000) (14,000)
Accounts payable......................................................... (1,412,000) 700,000
Income taxes payable..................................................... (1,732,000) (2,477,000)
Accrued expenses and other current liabilities........................... (1,634,000) (816,000)
Deferred rent............................................................ (9,000) 65,000
Deferred gain on sale-leaseback.......................................... (13,000) ---
----------- ------------
Net cash used in operating activities.................................. (15,315,000) (8,667,000)
----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures......................................................... (415,000) (825,000)
Other ....................................................................... (4,000) (16,000)
----------- ------------
Net cash used in investing activities.................................. (419,000) (841,000)
----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividend payment............................................................. (1,200,000) (1,210,000)
----------- ------------
Net cash used in financing activities.................................. (1,200,000) (1,210,000)
----------- ------------
NET DECREASE IN CASH............................................................ (16,934,000) (10,718,000)
CASH, BEGINNING OF PERIOD....................................................... 17,925,000 13,458,000
------------ ------------
CASH, END OF PERIOD............................................................. $ 991,000 $ 2,740,000
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for:
Interest................................................................... --- ---
Income taxes............................................................... $1,732,000 $2,474,000
</TABLE>
See accompanying notes.
<PAGE>
BIG DOG HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
NOTE 1. Basis of Presentation:
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Rule 10-01 of Regulations
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements.
In the opinion of management, all adjustments, consisting only of
normal recurring entries necessary for a fair presentation have been included.
Operating results for the three month period ended March 31, 2000 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 2000. For further information, refer to the financial statements
and footnotes thereto for Big Dog Holdings, Inc. and its wholly owned
subsidiary, Big Dog USA, Inc. (the "Company") included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1999.
NOTE 2. Short-term Borrowings
The Company has a borrowing arrangement with a bank whereby the Company
may, from time to time and upon approval from the bank, borrow up to $8 million.
Such borrowings may be used for cash advances and letters of credit. The
borrowing arrangement provides for interest at the bank's prime rate less 3/8%
or 250 basis points over the LIBOR rate and is collateralized by substantially
all the assets of the Company. As of March 31, 2000, the Company had no advances
and $976,000 of letters of credit outstanding. The letters of credit expire
through December 31, 2000.
NOTE 3. Dividend Paid
On March 27, 2000, the Company paid an annual dividend to stockholders
of record at the close of business on March 11, 2000, in the amount of $0.10 per
share, totaling $1,200,000.
NOTE 4. Stockholder's Equity
In March 1998, the Company announced that its Board authorized the
repurchase of up to $10,000,000 of its common stock. Between April 1, 2000 and
May 12, 2000, the Company repurchased 19,000 shares of common stock.
NOTE 5. Recently Issued Accounting Standards
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts (collectively referred to as
derivatives), and for hedging activities. It requires that an entity recognize
all derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. The Company will adopt
SFAS No. 133 in the year ending December 31, 2000. The Company anticipates that
the adoption of SFAS No. 133 will not have a material impact on the Company's
financial statements.
ITEM 2:
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management's discussion and analysis should be read in conjunction with
the Company's financial statements and notes related thereto. Certain minor
differences in the amounts below result from rounding of the amounts shown in
the consolidated financial statements.
RESULTS OF OPERATIONS
Three Months Ended March 31, 2000 and 1999
NET SALES. Net sales consist of sales from the Company's stores,
catalog, internet website, and wholesale accounts, all net of returns and
allowances. Net sales decreased to $16.6 million for the three months ended
March 31, 2000 from $16.7 million for the same period in 1999, a decrease of
$0.1 million or 0.6%. Of the decrease, $0.5 million was attributable to a 3.4%
comparable stores sales decrease and $0.5 million from a decrease in the
Company's wholesale business, net of $0.9 million from stores not yet qualifying
as comparable stores.
GROSS PROFIT. Gross profit increased to $9.2 million for the three
months ended March 31, 2000 from $8.9 million for the same period in 1999, an
increase of $0.3 million or 3.4%. As a percentage of net sales, gross profit
increased to 55.2% in the three months ended March 31, 2000 from 53.1% in the
same period in 1999. This 2.1% increase was primarily due in part to improved
sourcing and purchasing of products.
SELLING, MARKETING AND DISTRIBUTION EXPENSES. Selling, marketing and
distribution expenses consist of expenses associated with creating, distributing
and selling products through all channels of distribution, including occupancy,
payroll and catalog costs. Selling, marketing and distribution expenses
increased to $11.8 million in the three months ended March 31, 2000 from $11.3
million in the same period for 1999, an increase of $0.5 million, or 4.4%. As a
percentage of net sales, these expenses increased to 71.1% in the three months
ended March 31, 2000 from 67.6% in the same period in 1999, an increase of 3.5%.
The increase in selling, marketing and distribution expenses is primarily
attributable to additional operating costs of $0.8 million related to the 15 new
stores open in the first quarter 2000, offset by insurance proceeds of
approximately $0.3 million.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative
expenses consist of administrative salaries, corporate occupancy costs and other
corporate expenses. General and administrative expenses increased to $1.3
million for the three months ended March 31, 2000 from $1.2 million for the same
period 1999, an increase of $0.1 million, or 8.3%. As a percentage of net sales,
these expenses increased to 8.0% in the three months ended March 31, 2000 from
7.3% in the same period in 1999. The percentage increase in general and
administrative expenses is primarily attributable of spreading these expenses
over a smaller revenue base.
INTEREST INCOME. Interest income increased to $0.2 million in the three
months ended March 31, 2000 from $0.1 million in the same period in 1999,
principally due to higher average cash balances in 2000.
LIQUIDITY AND CAPITAL RESOURCES
During the first quarter of 2000, the Company's primary uses of cash
were for merchandise inventories, income taxes and dividends paid to
stockholders. The Company satisfied its cash requirements primarily from cash
flow from operations and excess cash.
Cash used in operating activities was $15.3 million and $8.7 million
for the first three months ended March 31, 2000 and 1999, respectively. The $6.6
million increase was primarily due to an earlier purchasing of inventory for the
first three months in 2000.
Cash used in investment activities for the three months ended March 31,
2000 and 1999 were $0.4 million and $0.8 million, respectively. Cash flows used
in investment activities in the first quarter of 2000 primarily related to
capital additions to the Company's existing stores. Cash flows used in
investment activities in the first quarter of 1999 related primarily to the
build-out of the second floor mezzanine at the Company's distribution facility
and capital additions to the Company's existing stores.
Cash used in financing activities in the three months ended March 31,
2000 and 1999 were constant at $1.2 million. In the three months ended March 31,
2000 and 1999, the Company paid an annual dividend of $0.10 per share to
stockholders.
The Company has a borrowing arrangement with a bank whereby the Company
may, from time to time and upon approval from the bank, borrow up to $8 million.
Such borrowings may be used for cash advances and letters of credit. The
borrowing arrangement provides for interest at the bank's prime rate less 3/8%
or 250 basis points over the LIBOR rate and is collateralized by substantially
all the assets of the Company. As of March 31, 2000, the Company had no advances
and $976,000 of letters of credit outstanding. The letters of credit expire
through December 31, 2000.
SEASONALITY
The Company believes its seasonality is somewhat different than many
apparel retailers since a significant number of the Company's stores are located
in tourist areas and outdoor malls that have different visitation patterns than
urban and suburban retail centers. The third and fourth quarters (consisting of
the summer vacation, back-to-school and Christmas seasons) have historically
accounted for the largest percentage of the Company's annual sales and profits.
The Company has historically incurred operating losses in its first quarter and
may be expected to do so in the foreseeable future.
YEAR 2000
The Year 2000 issue is the result of computer programs being written to
use two digits to define year dates. Computer programs running date-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000. This could result in systems failure or miscalculations causing
disruptions of operations.
In March 1999, the Company completed the upgrade of its major software
systems to a new release which has been certified as Year 2000 compliant.
Additionally during 1999, the Company completed the internal testing of its
information technology systems and addressed its non-information technology
related systems. The Company has requested all significant third-party vendors
to certify Year 2000 compliance. The costs of the Company's Year 2000 compliance
project were not material to the Company's financial position.
The Company has not experienced significant Year 2000-related issues
over the Year 2000 transition. Although the Company believes it has taken the
appropriate steps to address Year 2000 readiness, there is no guarantee that the
Company's efforts will prevent a material adverse impact on the results of
operations and financial condition.
STATEMENT REGARDING FORWARD LOOKING DISCLOSURE
Certain sections of this Quarterly Report on Form 10-Q, including the
preceding "Management's Discussion and Analysis of Financial Condition and
Results of Operations," contain various 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, which represents the
Company's expectations or beliefs concerning future events. These forward
looking statements involve risk and uncertainties, and the Company cautions that
these statements are further qualified by important factors that could cause
actual results to differ materially from those in the forward looking
statements. Primary factors that could cause actual results to differ include
those listed in the Company's Form 10-K for the year ended December 31, 1999
filed with the Securities and Exchange Commission.
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable
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
(a) Exhibits
Exhibit No. Document Description
----------- --------------------
27.1 Financial Data Schedule
(b) Reports on Form 8-K
Not applicable
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.
BIG DOG HOLDINGS, INC.
May 12, 2000 /s/ ANDREW D. FESHBACH
----------------------
Andrew D. Feshbach
President and Chief Executive Officer
(Principal Executive Officer)
May 12, 2000 /s/ ROBERTA J. MORRIS
---------------------
Roberta J. Morris
Chief Financial Officer and Treasurer
(Principal Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BIG
DOG HOLDINGS, INC.'S FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-1-2000
<PERIOD-END> MAR-31-2000
<CASH> 991
<SECURITIES> 0
<RECEIVABLES> 1479
<ALLOWANCES> (101)
<INVENTORY> 27241
<CURRENT-ASSETS> 33069
<PP&E> 25177
<DEPRECIATION> (13712)
<TOTAL-ASSETS> 48072
<CURRENT-LIABILITIES> 3585
<BONDS> 0
0
0
<COMMON> 132
<OTHER-SE> 42987
<TOTAL-LIABILITY-AND-EQUITY> 48072
<SALES> 16586
<TOTAL-REVENUES> 16586
<CGS> 7430
<TOTAL-COSTS> 13115
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (171)
<INCOME-PRETAX> (3788)
<INCOME-TAX> (1458)
<INCOME-CONTINUING> (2330)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2330)
<EPS-BASIC> (0.19)
<EPS-DILUTED> (0.19)
</TABLE>
