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 0-15194
SOUND ADVICE, INC.
(Exact name of registrant as specified in its charter)
FLORIDA 59-1520531
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
1901 TIGERTAIL BOULEVARD, DANIA, FLORIDA 33004
(Address of principal executive offices) (Zip Code)
(954) 922-4434
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
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 PRACTICAL DATE.
Common Stock, par value $.01 per share - 3,728,894 shares outstanding as of
February 9, 1996.
<PAGE>
SOUND ADVICE, INC. AND SUBSIDIARIES
INDEX
PAGE
----
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements.
Consolidated Balance Sheets (Unaudited)
December 31, 1995 and June 30, 1995 3-4
Consolidated Statements of Operations (Unaudited)
for the Three and Six Months Ended December 31,
1995 and 1994 5
Consolidated Statements of Cash Flows (Unaudited)
for the Six Months Ended December 31, 1995
and 1994 6
Notes to Consolidated Financial Statements 7-9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations. 10-13
PART II - OTHER INFORMATION
Item 3. Defaults Upon Senior Securities 14
Item 6. Exhibits and Reports on Form 8-K. 14
SIGNATURES 15
Page 2
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements.
<TABLE>
<CAPTION>
SOUND ADVICE, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1995 and June 30, 1995
DECEMBER 31, 1995 JUNE 30, 1995
----------------- -------------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash $ 47,955 $ 46,950
Receivables:
Vendors 4,456,839 4,232,746
Trade 1,491,507 1,010,135
Employees 350,670 280,755
-------------- --------------
6,299,016 5,523,636
Less allowance for doubtful accounts (543,000) (470,000)
-------------- --------------
5,756,016 5,053,636
Inventories 33,772,852 31,758,744
Prepaid and other current assets 339,227 1,242,569
Deferred tax asset 537,308 537,308
Prepaid/Refundable income taxes 512,983 551,683
-------------- --------------
Total current assets 40,966,341 39,190,890
-------------- --------------
Property and equipment, net 13,984,440 15,063,283
Property under capital lease, net 767,970 795,630
Deferred tax asset, net 1,003,157 1,003,157
Other assets 240,813 453,698
Goodwill, net 183,116 195,341
-------------- --------------
$ 57,145,837 $ 56,701,999
============== ==============
</TABLE>
See accompanying notes to consolidated financial statements.
Page 3
<PAGE>
<TABLE>
<CAPTION>
SOUND ADVICE, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1995 and June 30, 1995
DECEMBER 31, 1995 JUNE 30, 1995
----------------- -------------
(Unaudited)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Borrowings under revolving credit
agreement $ 6,531,037 $ 8,677,413
Accounts payable 12,272,594 11,091,255
Cash overdraft 1,254,500 1,234,066
Accrued liabilities 6,288,721 5,430,521
Current installments of long-term debt 5,993,575 2,673,570
-------------- --------------
Total current liabilities 32,340,427 29,106,825
Long-term debt, excluding current installments 846,586 907,913
Capital lease obligation 819,177 821,277
Other liabilities and deferred credits 4,460,679 4,469,969
-------------- --------------
38,466,869 35,305,984
-------------- --------------
Shareholders' equity:
Common stock, $.01 par value; authorized
10,000,000 shares; issued and outstanding
3,728,894 shares at December 31, 1995
and June 30, 1995 37,289 37,289
Paid-in capital 11,058,655 11,058,655
Retained earnings 7,583,024 10,300,071
-------------- --------------
Total shareholders' equity 18,678,968 21,396,015
Commitments and contingencies
-------------- --------------
$ 57,145,837 $ 56,701,999
============== ==============
</TABLE>
See accompanying notes to consolidated financial statements.
Page 4
<PAGE>
<TABLE>
<CAPTION>
SOUND ADVICE, INC. AND SUBSIDIARIES
Consolidated Statements of Operations (Unaudited)
For the Three and Six Months Ended December 31, 1995 and 1994
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
1995 1994 1995 1994
--------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Net sales $ 53,260,184 $ 60,853,509 $ 97,425,352 $ 107,574,497
Cost of goods sold 39,293,524 43,137,698 70,818,574 75,349,738
-------------- -------------- -------------- --------------
Gross profit 13,966,660 17,715,811 26,606,778 32,224,759
Selling, general and administrative
expenses 15,698,803 15,855,734 29,063,916 29,412,803
-------------- -------------- -------------- --------------
(Loss) income from operations (1,732,143) 1,860,077 (2,457,138) 2,811,956
Other income (expense):
Interest expense (403,473) (313,905) (724,045) (558,099)
Other, net 782 (58,014) 2,836 (58,014)
-------------- -------------- -------------- --------------
(Loss) income before income taxes (2,134,834) 1,488,158 (3,178,347) 2,195,843
Provision (benefit) for income taxes (175,200) 573,300 (461,300) 845,300
-------------- -------------- -------------- --------------
Net (loss) income $ (1,959,634) $ 914,858 $ (2,717,047) $ 1,350,543
============== ============== ============== ==============
COMMON AND COMMON EQUIVALENT
PER SHARE AMOUNTS:
Net (loss) earnings per share $ (0.53) $ 0.24 $ (0.73) $ 0.36
============== ============== ============== ==============
Weighted average number
of shares outstanding 3,728,894 3,736,925 3,728,894 3,738,593
============== ============== ============== ==============
</TABLE>
See accompanying notes to consolidated financial statements.
Page 5
<PAGE>
<TABLE>
<CAPTION>
SOUND ADVICE, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
For the Six Months Ended December 31, 1995 and 1994
1995 1994
--------------- ---------------
<S> <C> <C>
NET CASH FLOWS FROM OPERATING ACTIVITIES:
Net (Loss) Income $ (2,717,047) $ 1,350,543
Adjustments to reconcile net
(loss) income to net cash provided
by (used in) operating activities:
Depreciation and amortization 1,696,987 1,482,228
Deferred income taxes -- 48,381
Loss on disposition of assets -- 58,014
Changes in operating assets and
liabilities:
Decrease (increase) in:
Receivables (702,380) (3,426,759)
Inventories (2,014,108) (7,549,876)
Prepaid and other current assets 903,342 593,123
Prepaid income taxes 38,700 368,000
Other assets 82,835 (133,313)
Increase (decrease) in:
Accounts payable 1,181,339 10,289,001
Accrued liabilities 858,200 1,467,516
Other liabilities and deferred
credits (9,290) 124,513
-------------- --------------
Net cash (used in) provided by
operating activities (681,422) 4,671,371
-------------- --------------
INVESTING ACTIVITIES:
Capital expenditures (448,209) (3,948,670)
-------------- --------------
Net cash (used in) investing activities (448,209) (3,948,670)
-------------- --------------
FINANCING ACTIVITIES:
Net repayments on revolving credit
agreement (2,146,376) (146,467)
Net borrowings (repayments) on
long-term debt 3,258,678 (570,365)
Increase in cash overdraft 20,434 --
Reductions in capital lease obligation (2,100) --
-------------- --------------
Net cash provided by (used in)
financing activities 1,130,636 (716,832)
-------------- --------------
Increase in cash 1,005 5,869
Cash, beginning of period 46,950 44,992
-------------- --------------
Cash, end of period $ 47,955 $ 50,861
============== ==============
Supplemental disclosures of cash
flow information:
Interest paid $ 626,806 $ 547,087
============== ==============
Income taxes (refundable) paid, net $ (500,000) $ 225,000
============== ==============
</TABLE>
See accompanying notes to consolidated financial statements.
Page 6
<PAGE>
SOUND ADVICE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1.) BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in conformity with instructions to Form 10-Q and, therefore, do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, the accompanying financial statements contain all adjustments,
consisting of normal, recurring accruals, necessary to present fairly the
financial position of the Company at December 31, 1995 and June 30, 1995 and the
statements of operations for the three and six month periods ended December 31,
1995 and 1994 and statements of cash flows for the six month periods ended
December 31, 1995 and 1994. The results of operations for the three and six
months ended December 31, 1995 are not necessarily indicative of the operating
results expected for the fiscal year ending June 30, 1996. These financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto contained in the Company's annual report on Form
10-K for the fiscal year ended June 30, 1995.
2.) (LOSS) EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
(Loss) earnings per common and common equivalent share has been
determined by dividing net (loss) income by the weighted average number of
shares of common stock and common stock equivalents outstanding during the
respective period unless their effect was antidilutive.
3.) SEASONALITY
Historically, the Company's net sales are greater during the holiday
season than during other periods of the year. Net sales by fiscal quarters and
their related percentages for the trailing four quarters ended December 31, 1995
and 1994 are as follows:
<TABLE>
<CAPTION>
TRAILING FOUR QUARTERS ENDED DECEMBER 31,
-----------------------------------------
(Dollars in Thousands)
QUARTERLY SALES
1995 1994
---- ----
AMOUNT % AMOUNT %
--------- --- -------- ---
<S> <C> <C> <C> <C>
Second Quarter $ 53,260 29.5% $ 60,854 32.8%
(October - December)
First Quarter 44,165 24.5 46,721 25.1
(July - September)
Fourth Quarter 39,148 21.7 37,442 20.2
(April - June)
Third Quarter 43,781 24.3 40,779 21.9
(January - March)
--------- ---- --------- ----
SALES FOR TRAILING TWELVE $ 180,354 100% $ 185,796 100%
MONTHS ENDED DECEMBER 31, ========= ==== ========= ====
1995 AND 1994, RESPECTIVELY
</TABLE>
Page 7
<PAGE>
4.) PROPERTY AND EQUIPMENT, NET
Property and equipment, net, consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, 1995 JUNE 30, 1995
----------------- -------------
<S> <C> <C>
Land $ 521,465 $ 521,465
Building 434,605 434,605
Furniture and equipment 7,955,128 7,814,945
Leasehold improvements 14,381,168 14,236,432
Display fixtures 4,912,705 4,799,236
Vehicles 948,796 964,323
------------ ------------
Total 29,153,867 28,771,006
Less accumulated depreciation (15,169,427) (13,707,723)
------------ ------------
Property and equipment, net $ 13,984,440 $ 15,063,283
============ ============
</TABLE>
5.) DEBT - BANK LOAN AGREEMENT
On October 13, 1995 the Company replaced its existing revolving credit
agreement and term loan facility. The new $20,000,000 credit facility is
comprised of a term loan of $6,680,000 and, prior to the waiver described below,
was comprised of a revolving credit facility of $13,320,000 under which the
Company was able to borrow, repay and reborrow based on the lesser of a
borrowing base equal to 65% of eligible inventory in excess of $6,680,000 or
$13,320,000. The availability is reduced by outstanding letters of credit which
are limited to $1,200,000. The term loan facility bears interest at prime plus
1.5% and is payable in monthly principal installments of approximately $56,000,
and additional principal reduction of $723,000 which was paid by the due date of
November 27, 1995 and a balloon payment of the outstanding balance at December
31, 1996. The revolving credit facility matures on December 31, 1996, and bears
interest on the outstanding balance at prime plus 1%. The Company paid a 1.375%
commitment fee in connection with the new facility and is obligated to pay
additional fees of .75% on February 28, 1996, 1% on July 1, 1996 and 1% on
September 30, 1996, based on the original committed amount of the term loan and
revolving credit facility, plus certain additional amounts on such dates in
connection with the waiver described below.
At December 31, 1995, the Company was unable to comply with certain
financial covenants concerning interest coverage, fixed charge coverage, total
liabilities to tangible net worth and tangible net worth as required under the
terms of the new revolving credit agreement and term loan facility. The Company
has obtained from its lender a waiver with respect to non-compliance with these
financial covenants at December 31, 1995 and the suspension of the calculation
of these covenants until May 15, 1996, at which time such covenants will be
calculated based on the financial statements for the period ended March 31,
1996. In connection with the issuance of the waiver, the availability under the
revolving credit portion of the facility has been reduced from a maximum of
$13,320,000 to $9,320,000 and the commitment fees due February 28, 1996, July 1,
1996 and September 30, 1996, have been increased by an additional $10,000,
$25,000 and $50,000, respectively. Upon expiration of the waiver period, the
Company expects to remain in non-compliance with certain of these financial
covenants and will need to
Page 8
<PAGE>
request an additional extension of the waiver, or a modification of such
financial covenants as to which it remains in non-compliance, from its lender.
(See "Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations - Financial Condition.")
6.) PROVISION FOR DISPOSAL OF INVENTORY
The Company recorded an estimated provision for loss totalling
$1,500,000 which is included in Cost of Goods Sold to reduce the market value of
its inventory of personal computers and related accessories which are being
eliminated from the Company's product mix. Included in the loss provision are
the estimated writedown of inventory to net realizable value and expenses
associated with the sale and disposal of the inventory. (See "Item 2.
Management's Discussion and Analysis of Financial Condition and Results of
Operations - Results of Operations.")
7.) PROVISION (BENEFIT) FOR INCOME TAXES
During the quarter ended December 31, 1995, the Company has recorded
all tax benefits available for accounting recognition. As a result, the tax
benefit does not reflect the expected percentage relationship to the losses
incurred. In future periods, no tax benefit or provision will be recognized
until the Company has recorded pre-tax income.
8.) EMPLOYMENT AGREEMENTS
Effective as of July 1, 1995, the employment agreements for two of the
Company's executive officers were extended to June 30, 1996 on substantially the
same terms and conditions as in effect under their respective employment
agreements during fiscal year 1995.
Page 9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
RESULTS OF OPERATIONS
The Company's net sales for the quarter ended December 31,1995,
decreased to $53,260,000 compared to $60,854,000 in the prior year resulting in
a decrease of $7,594,000 or 12.5% over the second quarter of fiscal 1995. The
decrease is primarily attributable to reduced sales in December due to increased
competition on widely available lower end electronic products and softness in
consumer demand for electronics as compared to prior years. The Company believes
that part of the reduction is also attributed to consumer concerns over the
general economy and increased levels of consumer debt. Comparable store net
sales decreased 15.4% in the quarter ended December 31, 1995 over the
corresponding quarter in the prior year. The comparable store sales were
adjusted to exclude the new store opened in November 1994 and another relocated
to a larger showroom in December 1994. The Company's operations, in common with
other retailers in general, are subject to seasonal influences. Historically,
the Company has realized more of its net sales and operating income in the
second quarter ending in December.
Net sales of $97,425,000 for the six months ended December 31, 1995,
decreased by $10,149,000 or 9.4% over the corresponding period in the prior
fiscal year. The decrease in net sales during the first three months of the 1996
six month period is primarily attributable to weather related effects of
Hurricane Erin during the August annual scratch and dent sale and increased
competition on lower end electronic products. The decrease in net sales during
the second three months of the 1996 six month period is attributable, as stated
above, to increased competition on widely available lower end electronic
products, softness in consumer demand for electronic products which the Company
believes is partially attributable to consumer concerns over the general economy
and increased levels of consumer debt. Comparable store sales decreased 13.4% in
the six months ended December 31, 1995 compared to the corresponding six month
period in the prior year.
Gross profit decreased by $3,749,000 or 21.2% in the quarter ended
December 31, 1995, compared to the corresponding quarter of the prior year which
is related to the corresponding reduction in net sales and includes a $1,500,000
provision for loss on personal computer inventory and related accessories in
connection with such product category's elimination from the Company's product
mix through subsequent sale and disposal. See note 6 to Notes to Consolidated
Financial Statements. Exclusive of this provision, the gross profit percentage
was 29.0% as compared to the 29.1% in the comparable quarter of the prior year.
Gross profit decreased by $5,618,000 or 16.2% in the six months ended
December 31, 1995 compared to the corresponding period in the prior year. The
reduction in gross profit is related to the corresponding reduction in net
sales, the $1,500,000 provision for loss on personal computers and inclusion of
personal computers in the product mix for the full six months of fiscal 1996 as
compared to only
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<PAGE>
six weeks in the first six months of fiscal 1995. Exclusive of the provision for
loss on the sale and disposal of personal computers, the gross margin for the
six month period was 28.8% as compared to 30.0% in the comparable six months in
the prior year.
Selling, general and administrative expenses (SG&A) decreased by
$157,000 and $349,000 in the quarter and six months ended December 31, 1995 over
the corresponding periods in the prior year. Decreases in SG&A expenses in both
periods were attributable to cost cutting programs initiated by the Company
which were largely offset by increased selling expenses. The increased selling
expenses reflected the net effect of increased advertising expenditures over
reduced salesmen's commissions on lower sales volume. As a percentage of sales,
SG&A expenses increased to 29.5% and 29.8% in the quarter and six months ended
December 31, 1995 from 26.1% and 27.3% respectively, in the comparable periods
of the previous fiscal year. These percentage increases are directly
attributable to the reduction in net sales from the previous comparable period.
Interest expense increased by $90,000 for the quarter and $166,000 for
the six months ended December 31, 1995 compared to the same periods of the prior
year. The increase was primarily reflective of the increased borrowing under the
Company's revolving credit facility at higher interest rates during fiscal 1996.
The Company had an effective income tax benefit of approximately 8.2%
for the quarter and 14.5% for the six months ended December 31, 1995 compared to
an effective income tax provision of 38.5% in the same periods of the prior
fiscal year. The recorded tax benefit in fiscal 1996 does not reflect the
expected percentage relationship to the losses incurred as tax benefits
available for recognition have been fully realized. See note 7 to Notes to
Consolidated Financial Statements.
Net loss for the quarter ended December 31, 1995 was $1,960,000 or $.53
per share compared to net income of $915,000 or $.24 per share for the same
quarter in the previous year. Net loss for the six months ended December 31,
1995 was $2,717,000 or $.73 per share compared to net income of $1,351,000 or
$.36 per share in the same period of the prior fiscal year. The net loss in the
1996 fiscal year was primarily attributable to the reduction in net sales, the
reduction in gross profit percentage (of which $1,500,000 is attributable to the
provision for loss on personal computers) and increased interest expense.
FINANCIAL CONDITION
Net cash used in operating activities was approximately $681,000 for
the six months ended December 31, 1995. The Company had working capital of
approximately $8,626,000 at December 31, 1995, as compared to the $10,084,000 in
working capital at June 30, 1995 for an overall decrease of $1,458,000. The
increase in current assets of $1,775,000 during the six month period was
primarily related to the $2,014,000 increase in inventory. The increase in
current assets of $1,775,000 was partially offset by a net increase of
$3,234,000 in current liabilities primarily resulting from an increase in trade
payables of $1,181,000 and a $3,320,000 increase in current
Page 11
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portion of long-term debt, which were partially offset by the decrease in
borrowings under the revolving credit agreement of $2,146,000.
The Company's revolving credit facility was replaced on October 13,
1995 with a $20,000,000 credit facility comprised of a term loan facility in the
amount of $6,680,000 and a revolving credit facility which, prior to the waiver
described below, had enabled the Company to borrow, repay and reborrow up to
$13,320,000 limited to a borrowing base equal to 65% of eligible inventory (as
defined) in excess of $6,680,000. The borrowing availability under the revolving
credit facility is reduced by the outstanding standby letters of credit issued
pursuant to a letter of credit subfacility of up to $1,200,000. The term loan
facility bears interest at the prime rate plus 1.5% per annum and is repayable
as follows: (i) monthly installments of principal in the approximate amount of
$56,000 plus accrued interest payable on the first day of each month commencing
November 1, 1995, through December 31, 1996 (the "Maturity Date"), (ii) a
principal reduction payment of $723,000 which was paid by the due date of
November 27, 1995, and (iii) a balloon principal payment of approximately
$5,178,000 plus accrued and unpaid interest due on the Maturity Date. The
revolving credit facility bears interest at the prime rate plus 1% per annum
with monthly interest only installments payable until the Maturity Date, at
which time the entire unpaid principal balance and accrued and unpaid interest
thereon is due in full. The Company paid at closing a structuring and facility
fee equal to 1.375% of the committed amount of the new credit facility, and is
obligated to pay so long as the credit facility is outstanding the following
additional fees: (a) 3/4% on February 28, 1996, (b) 1% on July 1, 1996, and (c)
1% on September 30, 1996, of the original committed amount of the term loan and
revolving credit facility, plus certain additional amounts on such dates in
connection with the waiver described below. The financing arrangements under the
new credit facility are collaterized by, among other assets, the Company's
accounts receivable, inventory, fixed assets, general intangibles, tax refund
receivable and depository accounts.
At December 31, 1995, the Company was unable to comply with certain
financial covenants concerning interest coverage, fixed charge coverage, total
liabilities to tangible net worth and tangible net worth as required under the
terms of the new revolving credit agreement and term loan facility. The Company
has obtained from its lender a waiver with respect to non-compliance with these
financial covenants at December 31, 1995 and the suspension of the calculation
of these covenants until May 15, 1996, at which time such covenants will be
calculated based on the financial statements for the period ended March 31,
1996. In connection with the issuance of the waiver, the availability under the
revolving credit portion of the facility has been reduced from a maximum of
$13,320,000 to $9,320,000 and the commitment fees due February 28, 1996, July 1,
1996 and September 30, 1996, have been increased by $10,000, $25,000 and
$50,000, respectively. See note 5 to Notes to Consolidated Financial Statements.
The Company currently believes funds from the Company's operations
combined with borrowings available under the new credit facility, as revised in
connection with the
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<PAGE>
issuance of the waiver from the lender, and vendor financing arrangements will
be sufficient to satisfy its currently projected operating cash requirements
through the waiver expiration on May 15, 1996. However, an extension of the
lender's waiver under terms satisfactory to the Company or replacement of the
facility under less restrictive terms will be required for the Company to have
adequate financing sources beyond that date. The Company anticipates improvement
in its operating performance as a result of the elimination of personal
computers from its product mix and renewed focus on value added retailing in its
core categories of high end audio, video and mobile electronics. The Company is
currently seeking to replace the present credit facility under more favorable
terms, but no assurances can be given that this can be accomplished prior to the
expiration of the waiver or if at all. Prior to expiration of the waiver and if
no replacement financing has been obtained, the Company intends to negotiate
with the lender for an extension of the waiver or the necessary modifications to
the financial covenants. The Company currently expects to obtain an extension or
such necessary modifications if operations have improved, although no assurances
of a potential waiver extension or granting of such necessary modifications, or
regarding the terms thereof, have been received from the lender.
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<PAGE>
PART II - OTHER INFORMATION
Item 3. Defaults Upon Senior Securities
Reference is made to the information set forth in note 5 to Notes to
the Consolidated Financial Statements in Item 1 of Part I of this report and
"Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations" in Part I of this report for a discussion of the Company's
non-compliance with certain financial covenants under the terms of its new
revolving credit agreement and term loan facility and the lender's waiver
thereof and the terms of such waiver, which information is incorporated by
reference into this Item 3 of Part II of this report as if fully set forth
herein.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits. The following exhibits are filed with this report:
EXHIBIT NO. DESCRIPTION
----------- --------------------------------------------
27. Financial Data Schedule (included herewith).
(b) Reports on Form 8-K. No reports on Form 8-K have been filed
during the quarter ended December 31, 1995
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<PAGE>
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.
SOUND ADVICE, INC.
------------------------------------
(Registrant)
Date FEBRUARY 14, 1996 /s/ PETER BESHOURI
------------------------------------
Peter Beshouri, Chairman of the
Board, President and Chief
Executive Officer
Date FEBRUARY 14, 1996 /s/ KENNETH L. DANIELSON
------------------------------------
Kenneth L. Danielson, Chief
Financial and Accounting Officer
Page 15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM THE REGISTRANT'S
FINANCIAL STATEMENTS AS OF AND FOR THE SIX MONTH PERIOD ENDED
DECEMBER 31, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> DEC-31-1995
<CASH> 47,955
<SECURITIES> 0
<RECEIVABLES> 6,299,016
<ALLOWANCES> 543,000
<INVENTORY> 33,772,852
<CURRENT-ASSETS> 40,966,341
<PP&E> 29,153,867
<DEPRECIATION> 15,169,427
<TOTAL-ASSETS> 57,145,837
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0
0
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</TABLE>
