<PAGE> 1
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 December 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 January 31, 1996
- ------------------------------ -------------------------------
Common Stock, $.001 par value 13,756,605
Page 1 of 14
<PAGE> 2
THE GOOD GUYS, INC.
INDEX
<TABLE>
<CAPTION>
Page
<S> <C>
Part I. FINANCIAL INFORMATION:
Item 1 Financial Statements:
- ------
Consolidated Balance Sheets as of 3
December 31, 1995 (Unaudited) and
September 30, 1995 (Unaudited)
Consolidated Statements of Income for the 4
Three Month Periods Ended
December 31, 1995 and 1994 (Unaudited)
Consolidated Statement of Changes in Shareholders' 5
Equity for the Three Month Period
Ended December 31, 1995 (Unaudited)
Consolidated Statements of Cash Flows for the 6
Three Month Periods Ended
December 31, 1995 and 1994 (Unaudited)
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
SIGNATURE PAGE 11
EXHIBIT INDEX 12
EXHIBIT 11.1 Statement Setting Forth Computation of
Earnings per Share 13
Exhibit 27.1 Financial Data Schedule 14
</TABLE>
Page 2 of 14
<PAGE> 3
THE GOOD GUYS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(In thousands except share data)
(Unaudited)
ASSETS
<TABLE>
<CAPTION>
December 31, September 30,
1995 1995
-------- --------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 23,819 $ 18,434
Accounts receivable, net 42,467 21,209
Merchandise inventories 168,825 115,806
Prepaid expenses 8,999 10,300
-------- --------
Total current assets 244,110 165,749
Property and equipment 101,674 101,825
Less accumulated depreciation and amortization 44,625 42,584
-------- --------
Property and equipment, net 57,049 59,241
Other assets 2,384 2,739
-------- --------
Total assets $303,543 $227,729
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $104,627 $ 53,504
Accrued expenses and other liabilities:
Payroll 13,685 12,435
Sales taxes 10,968 6,025
Other 31,513 19,743
-------- --------
Total current liabilities 160,793 91,707
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, 13,581,416
at December 31 and September 30 14 14
Additional paid-in capital 61,833 61,833
Retained earnings 80,903 74,175
-------- --------
Total shareholders' equity 142,750 136,022
-------- --------
Total liabilities and shareholders' equity $303,543 $227,729
======== ========
</TABLE>
The accompanying notes are an integral part of
these statements.
Page 3 of 14
<PAGE> 4
THE GOOD GUYS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(In thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months
Ended December 31,
------------------
1995 1994
---- ----
<S> <C> <C>
Net sales $ 306,715 $ 281,658
Cost of sales 236,955 213,702
--------- ---------
Gross profit 69,760 67,956
Selling, general and
administrative
expenses 58,439 53,724
--------- ---------
Income from operations 11,321 14,232
Interest income
(expense), net (45) (132)
--------- ---------
Income before income
taxes 11,276 14,100
Income taxes 4,548 5,499
--------- ---------
Net income $ 6,728 $ 8,601
========= =========
Net income per common share $ .50 $ .65
========= =========
Shares used in per share
computation 13,581 13,286
========= =========
</TABLE>
The accompanying notes are an integral part of
these statements.
Page 4 of 14
<PAGE> 5
THE GOOD GUYS, INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE THREE-MONTH PERIOD ENDED DECEMBER 31, 1995
(In thousands except share data)
(Unaudited)
<TABLE>
<CAPTION>
Common Stock Additional
------------ paid-in Retained
Shares Amount capital earnings Total
------ ------ ------- -------- -----
<S> <C> <C> <C> <C> <C>
Balance at
September 30, 1995 13,581,416 $ 14 $ 61,833 $ 74,175 $ 136,022
Net income for the
three-month period
ended December 31, 1995 -- -- -- 6,728 6,728
Issuance of common
stock -- -- -- -- --
---------- ---------- ---------- ---------- ----------
Balance at
December 31, 1995 13,581,416 $ 14 $ 61,833 $ 80,903 $ 142,750
========== ========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of
these statements.
Page 5 of 14
<PAGE> 6
THE GOOD GUYS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months
Ended December 31,
------------------------
1995 1994
-------- --------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 6,728 $ 8,601
-------- --------
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Depreciation and amortization 2,264 2,488
Change in assets and liabilities:
Accounts receivable (21,258) (25,446)
Merchandise inventories (53,019) (84,891)
Prepaid expenses and other assets 1,656 1,566
Accounts payable 51,123 80,931
Accrued expenses and other liabilities 17,963 19,314
-------- --------
Total adjustments (1,271) (6,038)
-------- --------
Net cash provided by operating
activities 5,457 2,563
-------- --------
Cash Flows from Investing Activities:
Purchase of property and equipment - net (72) (3,959)
-------- --------
Net cash used in investing
activities (72) (3,959)
-------- --------
Cash Flows from Financing Activities:
Issuance of common stock -- 37
-------- --------
Net cash provided by financing
activities -- 37
-------- --------
Net increase (decrease) in cash and
cash equivalents 5,385 (1,359)
Cash and cash equivalents at
September 30, 1995 and 1994 18,434 21,661
-------- --------
Cash and cash equivalents at
December 31, 1995 and 1994 $ 23,819 $ 20,302
======== ========
</TABLE>
The accompanying notes are an integral part of
these statements.
Page 6 of 14
<PAGE> 7
THE GOOD GUYS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited 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 consolidated 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, 1995.
The weighted average number of shares outstanding during the quarter has been
computed by taking the number of days each share is 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 ended December 31, 1995 as the
dilutive effect of the options was less than 3%.
Page 7 of 14
<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, 1995 reached $306.7 million, an
increase of 9% over sales of $281.7 million for the quarter ended December 31,
1994. This increase was due to an increase in the total number of stores in
operation from 59 at December 31, 1994 to 70 at December 31, 1995, partially
offset by a 6% decrease in comparable store sales.
Gross profit as a percentage of sales was 22.7% for the quarter ended December
31, 1995, as compared to 24.1% for the quarter ended December 31, 1994. This
decrease was primarily caused by the increased proportion of sales represented
by computer products, which typically carry lower gross margins, and by a highly
promotional consumer electronics market.
During the first quarter of fiscal 1996, the Company continued to control its
selling, general and administrative costs, maintaining the same percentage of
sales, 19.1%, as the first quarter of fiscal 1995.
The effective income tax rate for the quarter ended December 31, 1995 was 40.3%,
compared to 39.0% for the quarter ended December 31, 1994 which included the
benefit of the utilization of job tax credits.
Net income for the quarter ended December 31, 1995 was $6.7 million ($0.50 per
share) or 2.2% of sales for the period. These results compare to income of $8.6
million ($0.65 per share) or 3.1% of sales for the quarter ended December 31,
1994.
Liquidity and Capital Resources
At December 31, 1995, the Company had working capital of $83.3 million. Net cash
provided by operating activities was $5.5 million for the quarter ended December
31, 1995 as compared to $2.6 million for the quarter ended December 31, 1994.
This increase in net cash from operating activities was primarily attributable
to a decrease in merchandise inventories offset by a corresponding decrease in
accounts payable. The decrease in merchandise inventories and accounts payable
was due to effective management of holiday season inventories.
Net cash used in investing activities, which primarily consists of expenditures
for stores, distribution facilities and administrative property and equipment,
was less than $100,000 for the three months ended December 31, 1995 as compared
to $4.0 million during the same period in fiscal 1995. This decrease was
attributable to the decrease in the number of new stores opened, 4 stores opened
in the first quarter of 1996 versus 7 stores opened during the first quarter of
1995, and a more effective use of lease financing during the first quarter of
1996.
The Company maintains 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.
Page 8 of 14
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONT'D.)
The Company was in compliance with all covenants under the credit agreement as
of December 31, 1995. There were no borrowings outstanding under the credit
agreement at December 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.
Page 9 of 14
<PAGE> 10
PART II. OTHER INFORMATION
ITEMS 1-3 Not applicable
ITEM 4 Submission of Matters to a Vote of Security Holders
At the Annual Meeting of Shareholders of The Good Guys, Inc.
held on January 24, 1996, 12,191,351 shares were present in
person or by proxy out of 13,581,416 outstanding shares. The
shareholders voted on the following matters:
1. The nominees for election as Directors of the
Corporation were elected without opposition.
A vote of the common stock with respect to this
election was:
Number of Shares
<TABLE>
<CAPTION>
Nominees For Withheld
-------- --- ---------
<S> <C> <C>
Stanley R. Baker 11,992,218 199,133
Robert A. Gunst 11,989,521 201,830
Russell Solomon 12,094,160 97,191
W. Howard Lester 12,096,082 95,269
John Martin 12,098,756 92,595
Ron Unkefer was withdrawn from nomination due to his
resignation from the Board of Directors on January 22,
1996.
</TABLE>
2. Ratification of the appointment of Deloitte & Touche
LLP as independent public accountants.
<TABLE>
<S> <C>
For the proposal: 12,160,356
Against the proposal: 14,250
Withheld: 16,745
</TABLE>
ITEM 5 Not applicable
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) Forms 8-K
On February 7, 1996 the Company filed a current report
on Form 8-K, to report the following events:
1. The resignation of Ronald A. Unkefer, as
Chairman of the Board of Directors and as a
Director, effective January 22, 1996.
2. On January 29, 1996 the Board of Directors
authorized the purchase of up to 500,000
shares of its common stock in open-market
purchases or in private transactions.
Page 10 of 14
<PAGE> 11
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
February 13, 1996 /s/ROBERT A. GUNST
- ----------------- -------------------------------------
Date Robert A. Gunst
President and Chief Executive Officer
(Principal Financial Officer)
Page 11 of 14
<PAGE> 12
EXHIBIT INDEX
<TABLE>
<CAPTION>
NUMBER DESCRIPTION PAGE
<S> <C> <C>
11.1 Statement of Computation of Per Share 13
Earnings
27.1 Financial Data Schedule 14
</TABLE>
Page 12 of 14
<PAGE> 1
THE GOOD GUYS, INC. Exhibit 11.1
STATEMENT SETTING FORTH COMPUTATION
OF EARNINGS PER SHARE
(In thousands except per share data)
<TABLE>
<CAPTION>
December 31, December 31,
1995 1994
------- -------
<S> <C> <C>
Net Income $ 6,728 $ 8,601
1. As presented in the 10-Q
Shares used in per share
computation 13,581 13,286
Net income per common share
and common share equivalents $ .50 $ .65
======= =======
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) 13,581 13,286
Stock options (B) 126 188
------- -------
Total 13,707 13,474
Primary earnings
per share $ .49 $ .64
======= =======
b) Fully diluted earnings per share
Weighted average number of shares:
Common stock (A) 13,581 13,286
Stock options (B) 126 188
------- -------
Total 13,707 13,474
Fully diluted earnings
per share $ .49 $ .64
======= =======
</TABLE>
(A) The weighted average number of common shares outstanding during the
quarter has been computed by taking the number of days each share is
outstanding and dividing by the number of days in the quarter.
(B) Stock options used in the 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 13 of 14
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> DEC-31-1995
<CASH> 23819
<SECURITIES> 0
<RECEIVABLES> 43081
<ALLOWANCES> 614
<INVENTORY> 148825
<CURRENT-ASSETS> 244110
<PP&E> 101674
<DEPRECIATION> 44625
<TOTAL-ASSETS> 303543
<CURRENT-LIABILITIES> 160793
<BONDS> 0
0
0
<COMMON> 14
<OTHER-SE> 142736
<TOTAL-LIABILITY-AND-EQUITY> 303543
<SALES> 306715
<TOTAL-REVENUES> 306715
<CGS> 236955
<TOTAL-COSTS> 236955
<OTHER-EXPENSES> 58439
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 45
<INCOME-PRETAX> 11276
<INCOME-TAX> 4548
<INCOME-CONTINUING> 6728
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6728
<EPS-PRIMARY> .49
<EPS-DILUTED> .49
</TABLE>
