<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter period ended December 31, 1998
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 of jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7000 Marina Boulevard, Brisbane, California 94005
- --------------------------------------------------------------------------------
(Address of principal executive offices) (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 [ ]
The registrant had 14,483,201 shares of common stock, outstanding as of
January 31, 1999.
<PAGE> 2
THE GOOD GUYS, INC. AND SUBSIDIARY
INDEX
<TABLE>
<CAPTION>
Page
<S> <C> <C>
Part I. FINANCIAL INFORMATION
Item 1 Financial Statements:
Consolidated Balance Sheets as of
December 31, 1998 and
September 30, 1998 (Unaudited) 3
Consolidated Statements of Operations
for the Three Month Period Ended
December 31, 1998 and 1997 (Unaudited) 4
Consolidated Statement of Changes in
Shareholders' Equity for the Three Month
Period Ended December 31, 1998 (Unaudited) 5
Consolidated Statements of Cash Flows
for the Three Month Period Ended
December 31, 1998 and 1997 (Unaudited) 6
Notes to Consolidated Financial Statements 7
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations 7-10
Part II. OTHER INFORMATION 10-11
SIGNATURE PAGE 11
</TABLE>
2
<PAGE> 3
THE GOOD GUYS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)
ASSETS
<TABLE>
<CAPTION>
December 31, September 30,
1998 1998
------------ -------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 13,228 $ 3,051
Accounts receivable, net 34,282 26,653
Merchandise inventories 148,295 135,072
Prepaid expenses 6,379 6,445
-------- --------
Total current assets 202,184 171,221
-------- --------
Property and equipment 139,135 135,786
Less accumulated depreciation and amortization 66,538 63,570
-------- --------
Property and equipment, net 72,597 72,216
Other assets 6,376 7,421
-------- --------
Total assets $281,157 $250,858
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $111,448 $ 96,517
Accrued expenses and other liabilities:
Payroll 14,379 10,630
Sales taxes 10,890 5,940
Other 30,781 25,764
-------- --------
Total current liabilities 167,498 138,851
-------- --------
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,14,250,218 shares
at December 31 and September 30 14 14
Additional paid-in capital 65,152 65,152
Retained earnings 48,493 46,841
-------- --------
Total shareholders' equity 113,659 112,007
-------- --------
Total liabilities and shareholders' equity $281,157 $250,858
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE> 4
THE GOOD GUYS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months
Ended December 31,
---------------------------
1998 1997
-------- --------
<S> <C> <C>
Net sales $294,098 $290,303
Cost of sales 222,648 218,682
-------- --------
Gross profit 71,450 71,621
Selling, general and
Administrative expenses 68,258 67,567
-------- --------
Income from operations 3,192 4,054
Interest expense, net 588 253
-------- --------
Income before income taxes 2,604 3,801
Income taxes 952 1,398
-------- --------
Net income $ 1,652 $ 2,403
======== ========
Net income per common share
Basic: $ .12 $ .18
======== ========
Diluted: $ .12 $ .18
======== ========
Weighted average shares
Basic: 14,250 13,719
======== ========
Diluted: 14,250 13,736
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE> 5
THE GOOD GUYS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE THREE-MONTH PERIOD ENDED DECEMBER 31, 1998
(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, 1998 14,250,218 $ 14 $65,152 $46,841 $112,007
Net income for the three-month
period ending December 31, 1998 1,652 1,652
---------- ------ ------- ------- --------
Balance at
December 31, 1998 14,250,218 $ 14 $65,152 $48,493 $113,659
========== ====== ======= ======= ========
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE> 6
THE GOOD GUYS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
December 31,
-----------------------
1998 1997
-------- --------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 1,652 $ 2,403
-------- --------
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 2,968 2,592
Change in assets and liabilities:
Accounts receivable (7,629) (7,134)
Income taxes receivable -- 957
Merchandise inventories (13,223) (28,060)
Prepaid expenses and other assets 1,111 (807)
Accounts payable 14,931 28,130
Accrued expenses and other liabilities 13,716 15,857
-------- --------
Total adjustments 11,874 11,535
-------- --------
Net cash provided by operating activities 13,526 13,938
-------- --------
Cash Flows from Financing Activities:
Capital expenditures (3,349) (4,542)
Net cash used in investing activities (3,349) (4,542)
-------- --------
Cash Flows from Financing Activities:
Repurchase and retirement of common stock -- (1,381)
Issuance of common stock -- 1,448
-------- --------
Net cash provided by financing activities -- 67
-------- --------
Net increase in cash and
cash equivalents 10,177 9,463
Cash and cash equivalents at
beginning of period 3,051 18,951
-------- --------
Cash and cash equivalents at
end of period $ 13,228 $ 28,414
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
6
<PAGE> 7
THE GOOD GUYS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles and
reflect all adjustments (consisting only of normal recurring accruals)
necessary for a fair presentation of the information contained therein. The
results of operations for the three months ended December 31, 1998 and 1997
are not necessarily indicative of the results to be expected for the full
year. The consolidated financial statements should be read in conjunction
with the financial statements, notes and supplementary data included and
incorporated by reference in the Company's Annual Report on Form 10-K for
the fiscal year ended September 30, 1998.
2. Net income per common share has been computed in accordance with Statement
of Financial Accounting Standards No. 128, "Earnings per Share" (SFAS 128).
SFAS 128 requires a dual presentation of basic and diluted EPS. Basic EPS
excludes dilution and is computed by dividing net income available to
common shareholders by the weighted average of common shares outstanding
for the period. Diluted EPS reflects the potential dilution that would
occur if securities or other contracts to issue common stock were exercised
or converted into common stock. As of December 31, 1998 and 1997, there
were certain stock options outstanding that were excluded from the
computation of earnings per share, because their exercise prices exceeded
the average market price for the periods presented.
3. On November 12, 1998, the Company re-priced all employee stock options to
$5.0938, the closing market price at that date.
Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
To the extent forward-looking statements are made in this Form 10-Q, such
statements are subject to certain risks and uncertainties, including but not
limited to increases in promotional activities of the Company's competitors,
changes in consumer buying attitudes, the presence or absence of new products or
product features in the Company's merchandise categories, changes in vendor
support for advertising and promotional programs, changes in the Company's
merchandise sales mix, general economic conditions, and other factors referred
to in the Company's 1998 Annual Report on Form 10-K under "Information Regarding
Forward Looking Statements".
7
<PAGE> 8
RESULTS OF OPERATIONS
Net sales for the quarter ended December 31, 1998 were $294.1 million, an
increase of 1% from sales of $290.3 million for the quarter ended December 31,
1997. During the first quarter of fiscal 1999, comparable store sales decreased
2%. Sales of new digital technologies, such as DVD, camcorders, audio components
and digital television were strong, but these sales gains were more than offset
by sluggish sales in the more commodity oriented categories of home office,
small screen television, portable audio and stereo systems. The 1% increase in
overall sales was primarily attributable to three new stores, which generated
approximately $7.8 million in sales for the quarter ended December 31, 1998. As
a percent of net sales, Premier Performance Guarantee contracts were 4.4% for
the quarter ended December 31, 1998, compared to 5.0% for the same period last
year.
Gross profit as a percentage of net sales was 24.3% for the quarter ended
December 31, 1998, as compared to 24.7% for the comparable fiscal 1998 period.
The decrease in gross profit percentage resulted primarily from the reduction in
the sales mix of the higher margin Premier Performance Guarantee contracts.
For the quarter ended December 31, 1998, selling, general and administrative
expenses were 23.2% of net sales compared to 23.3% for the comparable fiscal
1998 period. The decrease in selling, general and administrative costs as a
percentage of sales for the quarter ended December 31, 1998 is primarily due to
reductions in general and administrative and advertising expenses as a
percentage of sales.
The effective income tax rate for the quarter ended December 31, 1998 was 36.6%
compared with 36.8% for the same period in the prior fiscal year.
Net income for the quarter ended December 31, 1998 was $1.7 million ($0.12 per
share) or 0.6% of net sales for the period. These results compare to net income
of $2.4 million ($0.18 per share) or 0.8% of net sales for the same period in
fiscal 1998.
The Company continues to focus on quality execution to enhance customer
satisfaction, incorporation of the Audio/Video Exposition format in all new and
many existing stores, and the introduction of new technologies. By focusing on
these three areas, the Company expects to return to profitability and earnings
per share growth. However, the return to profitability is contingent on many
factors, including, but not limited to the development of consumer acceptance of
new technologies, consumer demand for existing technologies, the presence or
absence of new features on existing Merchandise, and economic conditions in the
regions in which our stores are located.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1998, the Company had working capital of $34.7 million. Net cash
provided by operating activities was $13.5 million for the three months ended
December 31, 1998, compared to $13.9 million for the three months ended December
31, 1997. The decrease in net cash provided by operating activities was
primarily due to a decreased net income.
8
<PAGE> 9
Net cash used in investing activities, which primarily consists of expenditures
for stores, distribution facilities and administrative property and equipment,
was $3.3 million for the three months ended December 31, 1998, as compared to
$4.5 million provided during the same period last year. During the first quarter
ending December 31, 1998, the Company opened its fourth and fifth WOW! concept
stores as Audio/Video Exposition-Enhanced WOW! stores, one of which replaced an
existing store. The Company also opened two new stores in the Audio/Video
Exposition format. In fiscal 1999, the Company intends to renovate at least six
existing stores to the Audio/Video Exposition format at a net cost estimated at
approximately $7.8 million.
The Company maintains a revolving credit agreement, which allows borrowings of
up to $75,000,000. The agreement requires maintenance of certain financial loan
covenants, including minimum tangible net worth, restrictions on capital
expenditures and prohibits payment of cash dividends, which, if violated, could
be used as a basis for termination of the agreement. The line of credit is
secured by the Company's assets. For the quarter ending December 31, 1998, the
Company was in compliance with all covenants under the credit agreement. The
credit line also includes a standby letter of credit facility. There were no
borrowings outstanding under the line of credit and $1,000,000 of the commitment
was reserved under the letter of credit facility at December 31, 1998.
The Company expects to fund its working capital requirements and expansion
plans, including remodels and relocations, with a combination of cash flows 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 a material effect on net sales and cost of sales.
YEAR 2000 COMPLIANCE
As used by the Company, "Year 2000 compliance" means that the Operating Systems
(OS), Data Base Systems, Application or Business Systems have been reviewed to
confirm that they store, process (including sorting and performing mathematical
operations), input, and output data containing date information correctly,
regardless of whether the data contains dates before, on or after January 1,
2000.
The Company has identified all significant applications that will require
modification to ensure Year 2000 Compliance. Internal and external resources are
being used to make the required modifications and test Year 2000 Compliance. The
Company anticipates that all testing will be concluded on or about September 30,
1999.
In addition, the Company is seeking assurances from vendors, suppliers and other
third parties with whom it does significant business to determine their Year
2000 Compliance readiness and the extent to which the Company is vulnerable to
any
9
<PAGE> 10
third party Year 2000 issues. Currently, the Company is unable to assess the
likelihood that it will experience significant operational problems due to
unresolved Year 2000 issues of third parties who do business with the Company.
There can be no assurance that other entities will achieve timely Year 2000
compliance. If they do not, Year 2000 problems could have a material impact on
the Company's operations. Similarly, there can be no assurance that the Company
can timely mitigate its risks related to a supplier's failure to resolve its
Year 2000 issues. If such mitigation is not achievable, Year 2000 problems could
have a material impact on the Company's operations.
The Company estimates that the total cost of achieving Year 2000 Compliance will
be in the range of $2,500,000 to $3,500,000 of which $1,963,000 was spent
through Sept. 30, 1998. These costs and the date on which the Company plans to
complete the Year 2000 modification and testing processes are based on
management's best estimates, which were derived utilizing numerous assumptions
of future events including the continued availability of certain resources,
third party modification plans and other factors. However, there can be no
guarantees that these estimates will be achieved and actual results could differ
from those plans. The Company, however, does not anticipate that these costs
will be material to its financial position or results of operations in any given
year.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
On July 19, 1996, McBride-Newell, Inc. dba Carphones, Inc. and numerous other
individuals and entitled McBride-Newell, Inc., et al. v. Mobilworks, Inc., et
al., San Diego Superior Court Case No. 695897. Plaintiffs, who are small agents
of the cellular service providers offering cellular telephone products and
service in the San Diego area, alleged a conspiracy to sell cellular telephone
equipment below cost with the intent to drive the plaintiffs out of business.
This case was settled in November 1998 for an amount that is not material to the
financial condition, results of operations or liquidity of the Company.
On or about July 22, 1996, Jo Quattrini dba Sand Canyon Cellular and numerous
other individuals and entities filed a complaint against the Company and 20
other named defendants entitled Quattrini, et al. v. Pana-Pacific Corp., et al.,
Orange County Superior Court Case No. 766649. Plaintiffs, who are small agents
or subagents of the cellular service providers offering cellular telephone
products and service in the Orange County area, allege a conspiracy to sell
cellular telephone equipment below cost with the intent to drive plaintiffs out
of business. Plaintiffs seek treble damages under the California antitrust laws.
The Company believes it has meritorious defenses to the claims alleged in the
lawsuit and intends to defend the action vigorously and does not believe that
the outcome will be material to the financial condition, results of operation or
liquidity of the Company.
10
<PAGE> 11
The Company was named in July of this year as defendant in an action entitled
Cavnar, et al. v. National Semiconductor Corp., et al., No. 996297, San
Francisco Superior Court, along with many other defendants. Plaintiffs'
Complaint is styled as a class action and the primary allegation involving the
Company is that the Company's advertisements have misrepresented the amount of
random access memory in certain computers that is available for programming and
processing applications. The Company, along with several of the other retailer
defendants, filed demurrers to several of the Plaintiffs' causes of action,
which were granted without leave to amend. Two claims remain. The Company
believes it has claims for meritorious indemnification from the computer
manufacturers from which it has purchased personal computers. The Company
intends to defend the action and pursue its indemnification claims vigorously
and does not believe that the outcome will be material to the financial
condition, results of operations or liquidity of the Company.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 10.10 Amendment to Loan Agreement, dated as of
January 1, 1999, between Wells Fargo and the Company.
Exhibit 27 Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter 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
February 12, 1999 /s/ DENNIS C. CARROLL
------------------ -------------------------
Date Dennis C. Carroll
Chief Financial Officer
11
<PAGE> 12
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
Exhibit 10.16 Amendment to Loan Agreement, dated as of
January 1, 1999, between Wells Fargo and the Company.
Exhibit 27 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 10.16
SECOND AMENDMENT TO LOAN AGREEMENT
THIS SECOND AMENDMENT TO LOAN AGREEMENT (this "Second Amendment") is
entered into as of January 1, 1999, by and among THE GOOD GUYS - CALIFORNIA,
INC., a California corporation ("Borrower"), each of the financial institutions
from time to time listed on Schedule I attached to the Loan Agreement defined
below, as amended from time to time (collectively, the "Lenders"), and WELLS
FARGO BANK, NATIONAL ASSOCIATION ("Wells Fargo") as agent for the Lenders (in
such capacity, the "Agent").
RECITALS
WHEREAS, Borrower is currently indebted to the Lenders pursuant to the
terms and conditions of that certain Loan Agreement among Borrower, the Lenders
and the Agent dated as of September 29, 1997, as amended from time to time (the
"Loan Agreement").
WHEREAS, the Lenders, the Agent and Borrower have agreed to certain changes
in the terms and conditions set forth in the Loan Agreement and have agreed to
amend the Loan Agreement to reflect such changes.
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree that the Loan Agreement
shall be amended as follows:
1. Section 1.8. The definition of "Applicable Maximum Amount" set forth
in Section 1.8 of the Loan Agreement is amended in its entirety to read as
follows:
"Applicable Maximum Amount" means Seventy-Five Million Dollars
($75,000,000).
2. Section 1.68. The following definition of "Year 2000 Compliant" is
added to and made a part of the Loan Agreement as Section 1.68 thereto:
1.68 "Year 2000 Compliant" means, with regard to any Person, that
all software utilized by and material to the business operations
or financial condition of such entity are able to interpret and
manipulate data on and involving all calendar dates correctly and
without causing any abnormal ending scenario, including in
relation to dates in and after the year 2000.
3. Section 2.5(e). Section 2.5(e) of the Loan Agreement is amended by
deleting the reference to "one-eighth percent (.125%) as the unused line fee
rate, and by substituting for such words and figures "three-eighths percent
(.375%).
-1-
<PAGE> 2
4. Section 7.16. The following new Section 7.16 is added to and made a
part of the Loan Agreement:
7.16. Year 2000 Compliant. As of October 1, 1999, Borrower shall
be Year 2000 Compliant.
5. Conditions Precedent. The effectiveness of this Second Amendment
and the Agent's and Lenders' agreements set forth herein are subject to the
satisfaction of each of the following conditions precedent on or before January
15, 1999:
a. Documentation. Borrower shall have delivered or caused to be
delivered to the Agent, at Borrower's sole cost and expense the
following, each of which shall be in form and substance
satisfactory to the Agent
(i) Two (2) executed original counterparts of this
Second Amendment;
(ii) executed counterparts of the Consent and Reaffirmation of
Guarantor attached hereto in the form of Annex I; and
(iii) such additional agreements, certificates, reports,
approvals, instruments, documents, consents and/or
reaffirmation as the Agent or any Lender may reasonably
request.
b. Amendment Fee. Borrower shall have paid to the Agent, for the
benefit of the Lenders, as non-refundable, fully earned
amendment fee of $25,000.
6. Miscellaneous. Except as specifically provided herein, all terms and
conditions of the Loan Agreement remain in full force and effect, without waiver
or modification. All terms defined in the Loan Agreement shall have the same
meaning when used in this Second Amendment. This Second Amendment and the Loan
Agreement shall be read together, as one document.
7. Representations and Warranties. Borrower hereby remakes all
representations and warranties contained in the Loan Agreement and reaffirms
all covenants set forth therein. Borrower further certifies that as of the date
of this Second Amendment there exists no Default or Event of Default as defined
in the Loan Agreement.
-2-
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment
to be executed as of the day and year first written above.
THE GOOD GUYS - CALIFORNIA, INC. WELLS FARGO BANK,
a California corporation NATIONAL ASSOCIATION,
as Agent and Lender
By: /s/ DENNIS C. CARROLL By: /s/ DALE FOSTER
---------------------------- -----------------------------
Dale Foster
Title: Senior Vice President and Vice President
Chief Financial Officer
-3-
<PAGE> 4
ANNEX I
CONSENT AND REAFFIRMATION OF GUARANTOR
Reference is hereby made to the foregoing Second Amendment to Loan
Agreement ("Second Amendment") dated as of January 1, 1999, by and among The
Good Guys - California, Inc., a California corporation ("Borrower"), each of
the financial institutions from time to time listed on Schedule I attached to
the Loan Agreement described therein, as amended from time to time
(collectively, the "Lenders"), and Wells Fargo Bank, National Association
("Wells Fargo"), as agent for the Lenders (in such capacity, the "Agent").
In order to induce the Agent and the Lenders to enter into the Second
Amendment, the undersigned hereby consents to the execution, delivery and
performance by Borrower, the Agent and the Lenders of the Second Amendment and
all other documents, instruments and agreements now or hereafter executed in
connection therewith (collectively, together with the Second Amendment, the
"Second Amendment Documents"). In connection therewith, the undersigned (a)
expressly and knowingly reaffirms its liability under the Continuing Guaranty
dated as of September 29, 1997 (the "Guaranty") and any and all security
agreements, pledge agreements, deeds of trust, mortgages and other collateral
documents (collectively, together with the Guaranty, the "Third Party
Documents") heretofore executed and delivered by the undersigned from time to
time in favor of the Agent, for the benefit of the Lenders, (b) expressly
agrees to be and remain liable under the terms of such Third Party Documents
for the obligations of Borrower to the Agent and the Lenders and (c)
acknowledges that it has no defense, offset or counterclaim whatsoever against
the Agent or the Lenders with respect to the Third Party Documents to which it
is a party.
The undersigned further agrees that the Third Party Documents to which
it is a party shall remain in full force and effect and are hereby ratified and
confirmed and shall guarantee payment and performance of, or continue to
constitute collateral security for, as the case may be, of all of Borrower's
obligations under the Loan Agreement and related Loan Documents, as any one or
more of the same may be amended by the Second Amendment Documents. The
undersigned acknowledges that (a) none of the Agent or the Lenders has any
obligation to inform it of the particulars of any modification or amendment to
the Loan Agreement or any other Loan Document executed in connection therewith,
and (b) it has established satisfactory means by which Borrower keeps it
informed with respect to any modification of or amendment to the Loan Agreement
and related Loan Documents.
The undersigned further agrees that the execution of this Consent and
Reaffirmation is not necessary for the continued validity and enforceability of
the Third Party Documents to which it is a party, but is executed to induce the
Agent and the Lenders to enter into the Second Amendment Documents. The
undersigned further agrees that none of the Agent or the Lenders shall have any
obligation to notify it of any actions or omissions to act with respect to its
dealings with Borrower.
-4-
<PAGE> 5
IN WITNESS WHEREOF, the undersigned, intending to be legally bound hereby,
has caused this Consent and Reaffirmation to be executed as of January 1, 1999.
THE GOOD GUYS, INC.,
a Delaware corporation
By: /s/ Name to Come
---------------------------------
Title: Senior Vice President and
Chief Financial Officer
--------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 13,228
<SECURITIES> 0
<RECEIVABLES> 35,669
<ALLOWANCES> 1,388
<INVENTORY> 148,295
<CURRENT-ASSETS> 202,184
<PP&E> 139,135
<DEPRECIATION> 66,538
<TOTAL-ASSETS> 281,157
<CURRENT-LIABILITIES> 167,152
<BONDS> 0
0
0
<COMMON> 14
<OTHER-SE> 113,659
<TOTAL-LIABILITY-AND-EQUITY> 281,157
<SALES> 294,098
<TOTAL-REVENUES> 294,098
<CGS> 222,648
<TOTAL-COSTS> 222,648
<OTHER-EXPENSES> 68,258
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 588
<INCOME-PRETAX> 2,604
<INCOME-TAX> 952
<INCOME-CONTINUING> 1,652
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,652
<EPS-PRIMARY> 0.12
<EPS-DILUTED> 0.12
</TABLE>
