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 June 30, 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 July 31, 1995
_____________________________ ____________________________
Common Stock, $.001 par value 13,566,166
Page 1 of 13<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 - 3
June 30, 1995 (Unaudited) and
September 30, 1994 (Unaudited)
Condensed Statements of Income - 4
Three and Nine-Month Periods Ended
June 30, 1995 and 1994 (Unaudited)
Condensed Statement of Changes in Shareholders' 5
Equity - Nine-Month Period
Ended June 30, 1995 (Unaudited)
Condensed Statements of Cash Flows - 6
Nine Month Periods Ended
June 30, 1995 and 1994 (Unaudited)
Notes to Condensed Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-9
Part II. Other Information
Signature Page 10
Exhibit Index 11
Exhibit 11.1 Statement Setting Forth Computation of
Earnings per share 12
Exhibit 27.1 Financial Data Schedule 13
Page 2 of 13<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE GOOD GUYS, INC.
CONDENSED BALANCE SHEETS
(Unaudited)
(Dollar amounts in thousands)
ASSETS
June 30, Sept. 30,
1995 1994
________ _________
Current assets:
Cash and cash equivalents $ 7,832 $ 21,661
Receivables 17,534 11,080
Inventories 141,560 94,928
Prepaid expenses and other assets 3,875 8,995
_______ _______
Total current assets 170,801 136,664
Property and equipment, net 57,146 50,831
Other assets 4,109 1,217
_______ _______
$232,056 $188,712
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 71,579 $ 41,238
Accrued expenses and other liabilities
Payroll 11,607 11,822
Sales taxes 3,248 5,774
Other 12,125 10,930
_______ _______
Total current liabilities 98,559 69,764
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 13,428,578
shares and 13,282,181 shares,
respectively 13 13
Additional paid-in capital 60,352 58,926
Retained earnings 73,132 60,009
_______ _______
Total shareholders' equity 133,497 118,948
_______ _______
$232,056 $188,712
======= =======
Page 3a of 13<PAGE>
The accompanying notes are an integral part of
these condensed financial statements.
Page 3b of 13<PAGE>
THE GOOD GUYS, INC.
CONDENSED STATEMENTS OF INCOME
(Unaudited)
(Dollar amounts in thousands except per share data)
Three Months Nine Months
Ended June 30, Ended June 30,
______________ ______________
1995 1994 1995 1994
Net sales $198,315 $164,431 $675,718 $545,776
Cost of sales 149,056 121,146 511,176 400,746
_______ _______ _______ _______
Gross profit 49,259 43,285 164,542 145,030
Selling, general and
administrative
expenses 45,301 40,195 142,398 124,896
_______ _______ _______ _______
Income from operations 3,958 3,090 22,144 20,134
Interest income
(expense), net (163) 171 (411) 348
_______ _______ _______ _______
Income before income
taxes 3,795 3,261 21,733 20,482
Income taxes 1,573 1,338 8,610 8,397
_______ _______ _______ _______
Net income $ 2,222 $ 1,923 $ 13,123 $ 12,085
======= ======= ======= =======
Net income per share and
common share
equivalents $ .17 $ .15 $ .98 $ .92
======= ======= ======= =======
Shares used in per share
computation 13,426 13,185 13,378 13,124
======= ======= ======= =======
The accompanying notes are an integral part of
these condensed financial statements.
Page 4 of 13<PAGE>
THE GOOD GUYS, INC.
CONDENSED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE NINE-MONTH PERIOD ENDED JUNE 30, 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 $60,009 $118,948
Net income for the
nine-month period
ended June 30, 1995 - - - 13,123 13,123
Issuance of common
stock 146,397 - 1,426 - 1,426
__________ ___ ______ _______ _______
Balance at
June 30, 1995 13,428,578 $13 $60,352 $73,132 $133,497
========== == ====== ======= =======
The accompanying notes are an integral part of
these condensed financial statements.
Page 5 of 13<PAGE>
THE GOOD GUYS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollar amounts in thousands)
Nine Months Ended June 30,
1995 1994
Cash Flows from Operating Activities:
Net income $ 13,123 $ 12,085
_______ _______
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Depreciation and amortization 7,118 6,188
Change in assets and liabilities:
Accounts receivables (6,454) (1,871)
Merchandise inventories (46,632) (41,484)
Prepaid expenses and other assets 2,228 2,531
Accounts payable 30,341 20,188
Accrued expenses (1,744) 9,101
_______ _______
Total adjustments (15,143) (5,347)
_______ _______
Net cash provided by (used in) operating
activities (2,020) 6,738
_______ _______
Cash Flows from Investing Activities:
Purchase of property and equipment (13,235) (7,831)
_______ _______
Net Cash used in investing
activities (13,235) (7,831)
_______ _______
Cash Flows from Financing Activities:
Issuance of common stock 1,426 1,356
_______ _______
Net cash provided by financing
activities 1,426 1,356
_______ _______
Net increase (decrease) in cash and
cash equivalents (13,829) 263
Cash and cash equivalents at
September 30, 1994 and 1993 21,661 12,741
_______ _______
Cash and cash equivalents at
June 30, 1995 and 1994 $ 7,832 $ 13,004
======= =======
Page 6a of 13<PAGE>
The accompanying notes are an integral part of
these condensed financial statements.
Page 6b of 13<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 nine months ended June 30,
1995 as the dilutive effect of the options was less than 3%.
Certain reclassifications have been made to prior year amounts 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 7 of 13<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Net sales for the quarter ended June 30, 1995 reached $198.3
million, an increase of 21% over net sales of $164.4 million
for the quarter ended June 30, 1994. This increase was due to
a 5% comparable store sales increase, and an increase in the
total number of stores in operation from 49 at June 30, 1994
to 60 at June 30, 1995. On a year-to-date basis, net sales
for the period ended June 30, 1995 increased 24% to $675.7
million, compared to $545.8 million during the same period in
1994. Comparable store sales increased 8% for the nine months
ended June 30, 1995.
Gross profit as a percentage of net sales was 24.8% and 24.4%
for the quarter and nine months ended June 30, 1995,
respectively, as compared to 26.3% and 26.6% for the quarter
and nine months ended June 30, 1994, respectively. These
decreases were primarily caused by the increased proportion
of sales represented by computer products, which typically
carry lower gross margins, the cost impact from enhancements
made to the Company's Premier Performance Guarantee program
in November 1994, and a promotional consumer electronics
market.
For the quarter and nine months ended June 30, 1995, selling,
general and administrative expenses were 22.8% and 21.1% of
net sales, respectively, compared to the 24.4% and 22.9%
recorded for the comparable 1994 periods. These decreases
were the result of leveraging fixed expenses against the
increased sales volume and a continued focus on cost control.
The effective income tax rate for the quarter ended June 30,
1995 was 41.4%, compared to 41.0% for the quarter ended June
30, 1994. For the nine months ended June 30, 1995, the
effective rate was 39.6%, compared to 41.0% for the
comparable 1994 period.
Net income for the quarter ended June 30, 1995 was $2.2
million ($0.17 per share) or 1.1% of net sales for the
period. These results compare to net income of $1.9 million
($0.15 per share), or 1.2% of net sales for the quarter ended
June 30, 1994. For the nine month period ended June 30, 1995,
net income reached $13.1 million or $.98 per share, compared
to $12.1 million or $.92 per share for the same period last
year.
Page 8 of 13<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONT'D.)
Liquidity and Capital Resources
At June 30, 1995, the Company had working capital of $72.2
million. Net cash used in operating activities was $2.0
million for the quarter ended June 30, 1995 as compared to
net cash provided by operating activities of $6.7 million for
the quarter ended June 30, 1994. This decrease in net cash
from operating activities was primarily attributable to an
increase in merchandise inventories and accounts receivable
that were partially offset by an increase in accounts
payable. The increases in merchandise inventories and
accounts payable were due to preparing for and supporting a
larger store base during the first nine months of 1995 than
for the same period in the prior year. The increase in
accounts receivable resulted from an increase in sales over
the comparable period in the prior year and the proceeds due
from store equipment leasing transactions which had not been
received at June 30, 1995.
Net cash used in investing activities, which primarily
consists of expenditures for stores, distribution facilities
and administrative property and equipment, was $13.2 million
for the nine months ended June 30, 1995 as compared to $7.8
million during the same period last year. This increase was
primarily attributable to the increase in the number of new
stores opened during the nine months ended June 30, 1995.
On June 28, 1995, the Company entered into a new credit
agreement, expiring February 28, 1997, providing 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. The Company was in
compliance with all covenants under the credit agreement as
of June 30, 1995. There were no borrowings outstanding
under the credit agreement at June 30, 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 9 of 13<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit Description
11.1 Statement of Computation of
Per Share Earnings
27.1 Financial Data Schedule
(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 and 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 10, 1995 /s/ Robert A. Gunst
_______________ ______________________________
Date Robert A. Gunst
President and
Acting Chief Financial Officer
Page 10 of 13<PAGE>
EXHIBIT INDEX
NUMBER DESCRIPTION
PAGE
11.1 Statement of Computation of Per Share 12
Earnings
27.1 Financial Data Schedule 13
Page 11 of 13<PAGE>
THE GOOD GUYS, INC. Exhibit 11.1
STATEMENT SETTING FORTH COMPUTATION
OF EARNINGS PER SHARE
(Thousands Except Per Share Data)
June 30 June 30
1995 1994
________ ________
Net Income $ 2,222 $ 1,923
1. As presented in the 10-Q
Shares used in per share
computation 13,426 13,185
Net income per common share
and common share equivalents $ .17 $ .15
======== ========
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) 13,426 13,185
Stock Options (B) 135 248
________ ________
Total 13,561 13,433
Primary earnings
per share $ .16 $ .14
======== ========
b) Fully diluted earnings per share
Weighted average number of
shares:
Common stock (A) 13,426 13,185
Stock Options (B) 150 248
________ ________
Total 13,576 13,433
Fully diluted earnings
per share $ .16 $ .14
======== ========
(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 12 of 13<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> JUN-30-1995
<CASH> 7,832
<SECURITIES> 0
<RECEIVABLES> 17,534
<ALLOWANCES> 0
<INVENTORY> 141,560
<CURRENT-ASSETS> 170,801
<PP&E> 97,462
<DEPRECIATION> 40,316
<TOTAL-ASSETS> 232,056
<CURRENT-LIABILITIES> 98,559
<BONDS> 0
<COMMON> 13
0
0
<OTHER-SE> 133,484
<TOTAL-LIABILITY-AND-EQUITY> 232,056
<SALES> 675,718
<TOTAL-REVENUES> 675,718
<CGS> 511,176
<TOTAL-COSTS> 511,176
<OTHER-EXPENSES> 142,398
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 411
<INCOME-PRETAX> 21,733
<INCOME-TAX> 8,610
<INCOME-CONTINUING> 13,123
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,123
<EPS-PRIMARY> .98
<EPS-DILUTED> .98
</TABLE>
