<PAGE> 1
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 December 31, 1994 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 JANUARY 31, 1995
Common Stock, $.001 par value 13,423,553
Page 1 of 12
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THE GOOD GUYS, INC.
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Form 10-Q Cover Page 1
Form 10-Q Index 2
Part I. Financial Information:
Item 1. Financial Statements
Condensed Balance Sheets - 3
December 31, 1994 (Unaudited) and
September 30, 1994 (Unaudited)
Condensed Statements of Income - 4
Three Month Period Ended
December 31, 1994 and 1993 (Unaudited)
Condensed Statement of Changes in Shareholders' 5
Equity - Three-Month Period
Ended December 31, 1994 (Unaudited)
Condensed Statements of Cash Flows - 6
Three Month Period Ended
December 31, 1994 and 1993 (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 12
Earnings per Share
</TABLE>
Page 2 of 12
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE GOOD GUYS, INC.
CONDENSED BALANCE SHEETS
(Unaudited)
(Dollar amounts in thousands)
ASSETS
<TABLE>
<CAPTION>
December 31, Sept. 30,
1994 1994
------------ ---------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 20,302 $ 21,661
Receivables 36,526 11,080
Inventories 179,819 94,928
Prepaid expenses and other assets 4,514 8,995
-------- --------
Total current assets 241,161 136,664
Property and equipment, net 52,302 50,831
Other assets 4,132 1,217
-------- --------
$297,595 $188,712
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $122,169 $ 41,238
Accrued expenses and other liabilities
Payroll 14,330 11,822
Sales Taxes 11,121 5,774
Other 22,389 10,930
-------- --------
Total current liabilities 170,009 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 13,288,681
shares and 13,282,181 shares,
respectively 13 13
Additional paid-in capital 58,963 58,926
Retained earnings 68,610 60,009
-------- --------
Total shareholders' equity 127,586 118,948
-------- --------
$297,595 $188,712
======== ========
</TABLE>
The accompanying notes are an integral part of
these condensed financial statements.
Page 3 of 12
<PAGE> 4
THE GOOD GUYS, INC.
CONDENSED STATEMENTS OF INCOME
(Unaudited)
(Dollar amounts in thousands except per share data)
<TABLE>
<CAPTION>
Three Months
Ended December 31,
------------------
1994 1993
---- ----
<S> <C> <C>
Net sales $281,658 $217,204
Cost of Sales 213,702 159,243
-------- --------
Gross profit 67,956 57,961
Selling, general and administrative expenses 53,724 45,498
-------- --------
Income from operations 14,232 12,463
Interest Income (expense) (132) 42
-------- --------
Income before income taxes 14,100 12,505
Income taxes 5,499 5,127
-------- --------
Net income $ 8,601 $ 7,378
======== ========
Net income per share and common share equivalents $ .65 $ .57
======== ========
Shares used in per share computation 13,286 13,024
======== ========
</TABLE>
The accompanying notes are an integral part of
these condensed financial statements.
Page 4 of 12
<PAGE> 5
THE GOOD GUYS, INC.
CONDENSED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE THREE-MONTH PERIOD ENDED DECEMBER 31, 1994
(Unaudited)
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
Common Stock Additional
----------------- paid-in Retained
Shares Amount capital earnings Total
------ ------ ---------- -------- -----
<S> <C> <C> <C> <C> <C>
Balance at
September 30, 1994 13,282,181 $13 $58,926 $60,009 $118,948
Net income for the
three-month period
ended December 31,
1994 8,601 8,601
Issuance pursuant to
stock options and tax
benefits from sale of
optioned stock by
employees 6,500 37 37
---------- --- ------- ------- --------
Balance at
December 31, 1994 13,288,681 $13 $58,963 $68,610 $127,586
========== === ======= ======= ========
</TABLE>
The accompanying notes are an integral part of
these condensed financial statements.
Page 5 of 12
<PAGE> 6
THE GOOD GUYS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
Three Months Ended December 31,
-------------------------------
1994 1993
---- ----
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 8,601 $ 7,378
-------- --------
Adjustments to reconcile net income to
net cash provided (used) by operating activities:
Depreciation and amortization 2,488 2,024
Change in assets and liabilities:
(Increase) in accounts receivables (25,446) (6,532)
(Increase) in merchandise inventories (84,891) (53,650)
Decrease in prepaid expenses
and other assets 1,566 1,172
Increase in accounts payable 80,931 51,201
Increase in accrued expenses 19,314 17,782
-------- --------
Total adjustments (6,038) 11,997
-------- --------
Net cash provided by operating
activities 2,563 19,375
-------- --------
Cash Flows from Investing Activities:
Purchase of property and equipment (3,959) (1,236)
-------- --------
Net Cash (used) in investing
activities (3,959) (1,236)
-------- --------
Cash Flows from Financing Activities:
Issuance of common stock 37 30
-------- --------
Net cash provided by financing
activities 37 30
-------- --------
Net increase (decrease) in cash and
cash equivalents (1,359) 18,169
Cash and cash equivalents at
September 30, 1994 and 1993 21,661 12,741
-------- --------
Cash and cash equivalents at
December 31, 1994 and 1993 $ 20,302 $ 30,910
======== ========
</TABLE>
The accompanying notes are an integral part of
these condensed financial statements.
Page 6 of 12
<PAGE> 7
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.
Note B - EXTENDED SERVICE CONTRACTS
The Company sells extended service contracts on behalf of an
unrelated company (the "Warrantor") that markets this product to
cover merchandise sold by the Company. 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. If merchandise is
presented to the Company for servicing covered by the extended
service contract the Company is compensated by the Warrantor at
amounts customarily charged by the Company for these services.
Page 7 of 12
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Sales for the quarter ended December 31, 1994 amounted to $281.7 million, an
increase of 30% over sales of $217.2 million for the quarter ended December 31,
1993. This increase was due to the total number of stores in operation
increasing from 48 at December 31, 1993 to 59 at December 31, 1994 and
comparable store sales increasing 15% for the quarter.
Gross profit as a percentage of sales was 24.1% for the quarter ended December
31, 1994 as compared to 26.7% for the quarter ended December 31, 1993. This
decline was primarily the result of the increased proportion of sales
represented by computer products, which typically carry lower gross margins,
the impact of the introduction during the quarter of lower pricing and improved
features in our extending service products, and a promotional consumer
electronics market.
Selling, general and administrative expenses, as a percentage of sales, for the
quarter ended December 31, 1994 were 19.1%, which was 180 basis points lower
than the 20.9% for the quarter ended December 31, 1993. This improvement was the
result of sales leverage on fixed costs combined with the Company's ongoing
commitment to cost control.
The effective income tax rate for the quarter ended December 31, 1994 was 39.0%
compared to 41.0% last year.
Net income for the quarter increased to $8.6 million ($0.65 per share) or 3.1%
of sales. These results compare to net income of $7.4 million ($0.57 per share),
or 3.4% of sales for the quarter last year.
Liquidity and Capital Resources
At December 31, 1994, the Company had working capital of $71.2 million, which is
an increase of $4.3 million from September 30, 1994. Net cash provided by
operating activities was $2.6 million for the quarter, as compared to net cash
provided by operating activities of $19.4 million for the same period last year.
This decrease was attributable to higher accounts receivable generated through
normal business activities, a major portion of which was collected in January of
1995.
Net cash used in investing activities, which primarily consists of expenditures
for store and administrative property and equipment, was $4.0 million in the
first quarter of fiscal 1995 as compared to $1.2 million in the first quarter of
fiscal 1994. This variance is attributable to opening more stores in the 1995
quarter.
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 December 31, 1994. There were no borrowings
outstanding under the credit agreement as of December 31, 1994.
Page 8 of 12
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
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 12
<PAGE> 10
PART II. OTHER INFORMATION
ITEM 4. Submission of Matters to a Vote of Securityholders
At the Annual Meeting of Shareholders of registrant held on January 25, 1994,
12,163,475 shares were present in person or by proxy out of 13,286,806
outstanding shares. The shareholders voted on the following matters.
1. Each of the following nominees of the Board of Directors received
in excess of 11.7 million shares in favor and less than 375
thousand withheld: Ronald A. Unkefer, Robert A. Gunst, Stanley R.
Baker, W. Howard Lester, John Martin and Russell Solomon.
2. Approval of the 1994 Stock Incentive Plan. The vote was 6,365,648
in favor, 2,919,451 opposed and 209,474 withheld and 2,668,902
broker non-votes.
3. Approval to increase the Employee Stock Purchase Plan by 500,000
shares. The vote was 9,304,811 in favor, 305,387 opposed, 208,145
withheld and 2,345,132 broker non-votes.
4. Ratify the selection of Deloitte & Touche as independent auditors.
The vote was 12,075,741 in favor, 50,839 opposed and 36,895
withheld.
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.
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
February 13, 1995
- - ---------------- /s/ John P. Goldsberry, III
Date --------------------------------
John P. Goldsberry, III
Chief Financial Officer
and Vice President of Finance
Page 10 of 12
<PAGE> 11
- - -
EXHIBIT INDEX
<TABLE>
<CAPTION>
NUMBER DESCRIPTION PAGE
<S> <C> <C>
11.1 Statement of Computation of Per Share 12
Earnings
27 Financial Data Schedule
</TABLE>
Page 11 of 12
<PAGE> 1
Exhibit 11.1
THE GOOD GUYS, INC.
STATEMENT SETTING FORTH COMPUTATION
OF EARNINGS PER SHARE
(Thousands Except Per Share Data)
<TABLE>
<CAPTION>
December 31 December 31
1994 1993
----------- -----------
<S> <C> <C>
Net Income $ 8,601 $ 7,378
1. As presented in the 10-Q Shares used in per share
computation 13,286 13,024
Net income per common share and common share equivalents $ .65 $ .57
======= =======
</TABLE>
2. Computation of primary and fully diluted earnings per share
including common stock equivalents
<TABLE>
<S> <C> <C>
a) Primary earnings per common share
Weighted average number of shares:
Common stock (A) 13,286 13,024
Stock Options (B) 188 251
------- -------
Total 13,474 13,275
Primary earnings
per share $ .64 $ .57
======= =======
b) Fully diluted earnings per share
Weighted average number of shares:
Common stock (A) 13,286 13,024
Stock Options (B) 188 266
------- -------
Total 13,474 13,290
Fully diluted earnings
per share $ .64 $ .56
======= =======
</TABLE>
(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 12
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> DEC-31-1994
<CASH> 20,302
<SECURITIES> 0
<RECEIVABLES> 37,126
<ALLOWANCES> 600
<INVENTORY> 179,819
<CURRENT-ASSETS> 241,161
<PP&E> 88,273
<DEPRECIATION> 35,971
<TOTAL-ASSETS> 297,595
<CURRENT-LIABILITIES> 170,009
<BONDS> 0
<COMMON> 13
0
0
<OTHER-SE> 127,573
<TOTAL-LIABILITY-AND-EQUITY> 297,595
<SALES> 281,658
<TOTAL-REVENUES> 281,658
<CGS> 213,702
<TOTAL-COSTS> 213,702
<OTHER-EXPENSES> 53,724
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 132
<INCOME-PRETAX> 14,100
<INCOME-TAX> 5,499
<INCOME-CONTINUING> 8,601
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,601
<EPS-PRIMARY> .65
<EPS-DILUTED> .65
</TABLE>
