FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
(X) Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the quarterly period
ended March 31, 1995 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 or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7000 MARINA BOULEVARD, BRISBANE, CALIFORNIA 94005
(Address of principal executive offices and 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
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest
practicable date.
Class Outstanding at April 30, 1995
Common Stock, $.001 13,425,053
par value
Page 1 of 12<PAGE>
THE GOOD GUYS, INC.
INDEX
Page No.
________
Form 10-Q Cover Page 1
Form 10-Q Index 2
Part I. Financial Information:
Item 1. Financial Statements
Condensed Balance Sheets - March 31, 1995
(Unaudited) and September 30, 1994
(Unaudited) 3
Condensed Statements of Income Three and
Six Month Periods Ended March 31, 1995
and 1994 (Unaudited) 4
Condensed Statement of Changes in
Shareholders' Equity - Six-Month Period
Ended March 31, 1995 (Unaudited) 5
Condensed Statements of Cash Flows Six
Month Periods Ended March 31, 1995 and
1994 (Unaudited) 5
Notes to Condensed Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 7
Part II. Other Information:
Item 6. Exhibits 10
Signature Page 10
Exhibit Index 11
Exhibit 11.1 Statement Setting Forth Computation of
Earnings per Share 12
Page 2 of 12<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE GOOD GUYS, INC.
CONDENSED BALANCE SHEETS
(Unaudited)
(Dollar amounts in thousands)
ASSETS
March 31, Sept. 30,
1995 1994
________ ________
Current assets:
Cash and cash equivalents $ 2,103 $ 21,661
Receivables 18,807 11,080
Inventories 133,113 94,928
Prepaid expenses and other assets 4,360 8,995
_______ _______
Total current assets 158,383 136,664
Property and equipment, net 53,273 50,831
Other assets 4,095 1,217
_______ _______
$215,751 $188,712
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 56,958 $ 41,238
Accrued expenses and other liabilities
Payroll 11,431 11,822
Sales taxes 5,202 5,774
Other 10,909 10,930
_______ _______
Total current liabilities 84,500 69,764
Shareholders' equity:
Preferred stock, no par value;
authorized 2,000,000 shares;
none issued
Common stock,$.001 par value;
authorized 40,000,000 shares;
issued and outstanding 13,424,053
shares and 13,282,181 shares,
respectively 13 13
Additional paid-in capital 60,328 58,926
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Retained earnings 70,910 60,009
_______ _______
Total shareholders' equity 131,251 118,948
_______ _______
$215,751 $188,712
======= =======
The accompanying notes are an integral part of
these condensed financial statements.
Page 4 of 12<PAGE>
THE GOOD GUYS, INC.
CONDENSED STATEMENTS OF INCOME
(Unaudited)
(Dollar amounts in thousands except per share data)
Three Months Six Months
Ended March 31, Ended March 31,
_______________ _______________
1995 1994 1995 1994
____ ____ ____ ____
Net sales $195,745 $164,140 $477,403 $381,344
Cost of sales 148,418 119,833 362,120 279,603
_______ _______ _______ _______
Gross profit 47,327 44,307 115,283 101,741
Selling, general and
administrative expenses 43,373 39,728 97,097 84,699
_______ _______ _______ _______
Income from operations 3,954 4,579 18,186 17,042
Interest income (expense),
net (116) 136 (248) 179
_______ _______ _______ _______
Income before income taxes 3,838 4,715 17,938 17,221
Income taxes 1,538 1,932 7,037 7,059
_______ _______ _______ _______
Net income $ 2,300 $ 2,783 $10,901 $10,162
======= ======= ======= =======
Net income per share and
common share equivalents $ .17 $ .21 $ .82 $ .78
======= ======= ======= =======
Shares used in per share
computation 13,424 13,165 13,354 13,094
======= ======= ======= =======
The accompanying notes are an integral part of
these condensed financial statements.
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THE GOOD GUYS, INC.
CONDENSED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE SIX-MONTH PERIOD ENDED MARCH 31, 1995
(Unaudited)
(Dollar amounts in thousands)
Additional
Common Stock paid-in Retained
Shares Amount capital earnings Total
______ ______ __________ ________ _____
Balance at
September 30, 1994 13,282,181 $13 $58,926 $50,009 $118.948
Net income for the
six-month period
ended March 31,
1995 10,901 10,901
Issuance of common 141,872 1,402 1,402
stock __________ ___ _______ _______ ________
Balance at 13,424,053 $13 $60,328 $70,910 $131,251
March 31, 1995 ========== === ======= ======= ========
The accompanying notes are an integral part of
these condensed financial statements.
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THE GOOD GUYS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollar amounts in thousands)
Six Months Ended March 31,
__________________________
1995 1994
---- ----
Cash Flows from Operating Activities:
Net income $ 10,901 $ 10,162
________ ________
Adjustments to reconcile net income to
net cash (used in) operating activities:
Depreciation and amortization 4,857 4,115
Change in assets and liabilities:
Accounts receivable (7,727) (2,767)
Merchandise inventories (38,185) (32,902)
Prepaid expenses and other assets 1,754 2,211
Accounts payable 15,720 7,344
Accrued expenses (1,177) 9,597
_______ _______
Total adjustments (24,758) (12,402)
_______ _______
Net cash (used in) operating activities (13,857) (2,240)
_______ _______
Cash Flows from Investing Activities:
Purchase of property and equipment (7,103) (3,428)
_______ _______
Net cash (used in) investing activities (7,103) (3,428)
_______ _______
Cash Flows from Financing Activities:
Issuance of common stock 1,402 1,231
_______ _______
Net cash provided by financing activities: 1,402 1,231
_______ _______
Net decrease in cash and cash equivalents (19,558) (4,437)
Cash and cash equivalents at September 30, 21,661 12,741
1994 and 1993 _______ _______
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Cash and cash equivalents at March 31, 1995 $ 2,103 $ 8,304
and 1994 ======== ========
The accompanying notes are an integral part of
these condensed financial statements.
Page 8 of 12<PAGE>
THE GOOD GUYS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note A - BASIS OF PRESENTATION
The accompanying unaudited condensed 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 condensed financial statements
should be read in conjunction with the
financial statements, notes, supplementary data
and financial statement schedules included and
incorporated by reference in the Company's
Annual Report on Form 10-K for the fiscal year
ended September 30, 1994.
The weighted average number of shares
outstanding during the quarter has been
computed by taking the number of days each
share was 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 six months ended
March 31, 1994 or for the quarter and six
months ended March 31, 1995 as the dilutive
effect of the options was less than 3%.
Certain reclassifications have been made to
prior period net sales and cost of sales to
conform with the classifications used in the
current period.
Note B - PREMIER PERFORMANCE GUARANTEE CONTRACTS
The Company sells extended service contracts
("Premier Performance Guarantee contracts") on
behalf of an unrelated company (the
"Warrantor") that markets this product to cover
merchandise sold by the Company. Commission
revenue is recognized at the time of sale. The
Company acts solely as an agent for the
Warrantor and has no liability to the customer
under the extended service contract nor any
other material obligation to the customer or
the Warrantor. Merchandise presented to the
Company for servicing under extended service
contracts is repaired by the Company on behalf
of the Warrantor. The repairs are billed to
the Warrantor at amounts customarily charged by
the Company for these services.
Page 9 of 12<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Sales for the quarter ended March 31, 1995 amounted to $195.7
million, an increase of 19% over sales of $164.1 million for
the quarter ended March 31, 1994. The increase was due to an
increase in the total number of stores in operation from 48
at March 31, 1994 to 60 at March 31, 1995, and a 4% increase
in comparable store sales for the quarter. For the first six
months of fiscal 1995, net sales increased 25% to $477.4
million compared to $381.3 million for the same period last
year. Comparable store sales increased 10% for the six
months ended March 31, 1995.
Gross profit as a percentage of sales was 24.2% for the
quarter ended March 31, 1995, as compared to 27.0% for the
quarter ended March 31, 1994. Gross profit as a percentage
of sales was 24.1% and 26.7% for the first six months of 1995
and 1994, respectively. These declines were primarily caused
by the increased proportion of sales represented by computer
products, which typically carry lower gross margins, the cost
impact from the enhancements made to the Company's Premier
Performance Guarantee program in November 1994 and a
promotional consumer electronics market.
Selling, general and administrative expenses as a percentage
of sales were 22.2% for the quarter ended March 31, 1995,
compared to 24.2% for the quarter ended March 31, 1994. For
the six month period ended March 31, 1995, selling, general
and administrative expenses dropped to 20.3% from 22.2% for
the six months ended March 31, 1994. These decreases were a
result of greater sales leverage on fixed costs combined with
the Company's ongoing commitment to cost control.
The effective income tax rates for the quarter and six months
ended March 31, 1995 were 40.1% and 39.2%, compared with
41.0% and 41.0%, respectively for such periods in the prior
fiscal year.
Net income for the quarter ended March 31, 1995, was $2.3
million ($0.17 per share), compared to $2.8 million ($0.21
per share) for the same quarter last year. This is 1.2% of
net sales, down from 1.7% for the same quarter last year.
For the six month period ended March 31, 1995 net income was
$10.9 million ($0.82 per share) compared to $10.2 million
($0.78 per share) for the same period last year. These
changes were attributable to the factors discussed above.
Page 10 of 12<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Liquidity and Capital Resources
At March 31, 1995, the Company had working capital of $73.9
million compared with $68.1 million at March 31, 1994. Net
cash used in operating activities was $13.9 million for the
six months ended March 31, 1995, as compared with net cash
used in operating activities of $2.2 million for the six
months ended March 31, 1994. The increase in net cash used in
operating activities was attributable to an increase in
merchandise inventories and accounts receivable that were
partially offset by an increase in accounts payable. The
increases in inventories and accounts payable were due to
higher sales in the first six months of 1995 on a larger
store base. Accounts receivable increased as the Company is
awaiting the receipt of funds from store equipment leasing
transactions.
Net cash used in investing activities, which primarily
consisted of expenditures for store and administrative
property and equipment, was $7.1 million for the six months
ended March 31, 1995 as compared to $3.4 million during the
same period last year. This increase was primarily due to
the increase in the number of stores opened during the six
months ended March 31, 1995.
The Company maintains a revolving line of credit of up to $65
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. The Company was in compliance with all
covenants under the credit agreement as of March 31, 1995.
There were no borrowings outstanding under the credit
agreement as of March 31, 1995.
The Company expects to be able to fund its working capital
requirements and expansion plans with a combination of
anticipated cash flow 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.
Page 11 of 12<PAGE>
PART II
OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
(b) No reports on Form 8-K were filed during the
quarter for which this report is filed.
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
May 10, 1995 /s/ JOHN P. GOLDSBERRY, III
Date John P. Goldsberry, III
Chief Financial Officer
and Vice President of Finance
Page 12 of 12<PAGE>
EXHIBIT INDEX
NUMBER DESCRIPTION PAGE
11.1 Statement Setting Forth Computation
of Earnings Per Share 12
Page 13 of 12<PAGE>
THE GOOD GUYS, INC.
STATEMENT SETTING FORTH COMPUTATION
OF EARNINGS PER SHARE
(Amounts in Thousands Except Per Share Data)
March 31, March 31,
1995 1994
________ ________
Net Income $ 2,300 $ 2,783
1. As presented in the 10-Q
Shares used in per share
computation 13,424 13,165
Net income per common share
and common share equivalents $ .17 $ .21
======== ========
2. Computation of primary and fully diluted earnings per share
including common stock equivalents
a) Primary earnings per common share
Weighted average number of
shares:
Common stock (A) 13,424 13,165
Stock options (B) 200 321
________ ________
Total 13,624 13,486
Primary earnings
per share $ .17 $ .21
======== ========
b) Fully diluted earnings per share
Weighted average number of
shares:
Common stock (A) 13,424 13,165
Stock options (B) 200 356
________ ________
Total 13,624 13,521
Fully diluted earnings
per share $ .17 $ .21
======== ========
(A) The weighted average number of common shares outstanding during the
quarter has been computed by taking the number of days each share was
outstanding and dividing by the number of days in the quarter.
(B) Stock Options in primary earnings per share are calculated using the
average market price. Stock options in fully diluted earnings per
share are calculated using the higher of the ending market price or
the average market price.
Page 14 of 12<PAGE>
