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 OCTOBER 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 0-15194
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
NOVEMBER 27, 1998.
<PAGE>
SOUND ADVICE, INC. AND SUBSIDIARY
INDEX
PAGE
PART I - FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets (Unaudited)
October 31, 1998 and January 31, 1998 3-4
Condensed Consolidated Statements of Operations
(Unaudited) for the Three and Nine Months Ended
October 31, 1998 and 1997 5
Condensed Consolidated Statements of Cash Flows
(Unaudited) for the Nine Months Ended
October 31, 1998 and 1997 6
Notes to Condensed 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 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 15
Page 2
<PAGE>
<TABLE>
<CAPTION>
PART 1 - FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SOUND ADVICE, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
OCTOBER 31, 1998 AND JANUARY 31, 1998
OCTOBER 31, 1998 JANUARY 31, 1998
----------------------- ----------------------
<S> <C> <C>
ASSETS (Unaudited)
CURRENT ASSETS:
Cash $ 1,276,863 $ 1,421,392
Receivables:
Vendors 4,349,482 3,964,078
Trade 1,003,852 883,832
Employees 307,679 215,411
----------------------- ----------------------
5,661,013 5,063,321
Less allowance for doubtful accounts (438,600) (384,100)
----------------------- ----------------------
5,222,413 4,679,221
Inventories 32,558,082 31,027,992
Prepaid and other current assets 352,658 362,078
Income taxes receivable -- 55,000
--------------------- --------------------
Total current assets 39,410,016 37,545,683
Property and equipment, net 14,242,151 13,977,184
Deferred tax assets, net -- --
Other assets 159,485 134,012
Goodwill, net 113,841 132,179
----------------------- ----------------------
$ 53,925,493 $ 51,789,058
======================= ======================
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
Page 3
<PAGE>
<TABLE>
<CAPTION>
SOUND ADVICE, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
OCTOBER 31, 1998 AND JANUARY 31, 1998
OCTOBER 31, 1998 JANUARY 31, 1998
----------------------- ----------------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY (Unaudited)
CURRENT LIABILITIES:
Borrowings under revolving credit facility $ 15,882,552 $ 10,700,152
Accounts payable 12,096,479 13,163,813
Accrued liabilities 6,033,170 7,502,918
Current maturities of long-term debt 518,445 593,020
----------------------- ----------------------
Total current liabilities 34,530,646 31,959,903
Long-term debt, excluding current maturities -- 53,483
Capital lease obligation 799,114 805,113
Other liabilities and deferred credits 3,251,641 3,628,481
----------------------- ----------------------
38,581,401 36,446,980
----------------------- ----------------------
SHAREHOLDERS' EQUITY:
Common stock, $.01 par value; authorized
10,000,000 shares; issued and outstanding
3,728,894 shares at October 31, 1998
and January 31, 1998 37,289 37,289
Additional paid-in capital 11,058,655 11,058,655
Retained earnings 4,248,148 4,246,134
----------------------- ----------------------
Total shareholders' equity 15,344,092 15,342,078
Commitments and contingencies ----------------------- ----------------------
$ 53,925,493 $ 51,789,058
======================= ======================
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
Page 4
<PAGE>
<TABLE>
<CAPTION>
SOUND ADVICE, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE AND NINE MONTHS ENDED OCTOBER 31, 1998 AND 1997
THREE MONTHS ENDED NINE MONTHS ENDED
OCTOBER 31 OCTOBER 31
---------- ----------
1998 1997 1998 1997
----------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C>
Net sales $ 34,422,617 $ 36,281,920 $ 101,589,223 $ 102,835,851
Cost of goods sold 22,571,981 24,965,881 66,496,756 69,270,879
----------------- ---------------- --------------- ----------------
Gross profit 11,850,636 11,316,039 35,092,467 33,564,972
Selling, general and administrative
expenses 11,319,388 11,664,822 33,799,777 34,797,596
----------------- ---------------- --------------- ----------------
Income (loss) from operations 531,248 (348,783) 1,292,690 (1,232,624)
Other income (expense):
Interest expense (309,271) (367,274) (1,066,097) (1,159,247)
Other, net 29,506 19,811 65,421 96,477
----------------- ---------------- --------------- ----------------
Income (loss) before income taxes 251,483 (696,246) 292,014 (2,295,394)
Income taxes 135,000 160,000 290,000 74,000
----------------- ---------------- --------------- ----------------
Net income (loss) $ 116,483 $ (856,246) $ 2,014 $ (2,369,394)
================= ================ =============== ================
BASIC EARNINGS (LOSS) PER SHARE $ 0.03 $ (0.23) $ 0.00 $ (0.64)
================= ================ =============== ================
DILUTED EARNINGS (LOSS) PER SHARE $ 0.03 $ (0.23) $ 0.00 $ (0.64)
================= ================ =============== ================
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING - BASIC 3,728,894 3,728,894 3,728,894 3,728,894
================= ================ =============== ================
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING - DILUTED 3,931,020 3,728,894 3,948,666 3,728,894
================= ================ =============== ================
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
Page 5
<PAGE>
<TABLE>
<CAPTION>
SOUND ADVICE, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE NINE MONTHS ENDED OCTOBER 31, 1998 AND 1997
1998 1997
----------------------- ----------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 2,014 $ (2,369,394)
Adjustments to reconcile net income (loss) to net cash
(used in) provided by operating activities:
Depreciation and amortization 2,497,828 2,314,636
Gain on disposition of assets (11,568) --
Changes in operating assets and liabilities:
Decrease (increase) in:
Receivables (543,192) (340,784)
Inventories (1,530,090) (2,739,907)
Prepaid and other current assets 9,420 429,315
Deferred tax assets -- 517,000
Income taxes receivable 55,000 945,571
Other assets (38,973) 16,387
Increase (decrease) in:
Accounts payable (1,067,334) (664,393)
Accrued liabilities (1,469,748) 245,470
Other liabilities & deferred credits (376,840) (323,881)
---------------------- ---------------------
NET CASH USED IN OPERATING ACTIVITIES (2,473,483) (1,969,980)
---------------------- ---------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (2,752,653) (1,318,243)
Proceeds from disposition of assets 33,264 --
---------------------- ---------------------
NET CASH USED IN INVESTING ACTIVITIES (2,719,389) (1,318,243)
---------------------- ---------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on revolving credit facility 117,598,403 113,980,060
Repayments on revolving credit facility (112,416,003) (111,738,596)
Net repayments of long-term debt (128,058) (123,720)
Increase in cash overdraft -- 691,224
Reductions in capital lease obligation (5,999) (5,480)
---------------------- ---------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 5,048,343 2,803,488
---------------------- ---------------------
Decrease in cash (144,529) (484,735)
Cash, beginning of period 1,421,392 609,747
---------------------- ---------------------
CASH, END OF PERIOD $ 1,276,863 $ 125,012
====================== =====================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid $ 925,001 $ 1,024,772
======================= ======================
Income taxes paid, net of refunds $ 735,801 $ (1,273,571)
======================= ======================
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
Page 6
<PAGE>
SOUND ADVICE, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1.) BASIS OF PRESENTATION
The accompanying unaudited condensed 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. Certain items
included in these statements are based on management estimates. 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 October 31, 1998 and January 31, 1998 and
the statements of operations for the three and nine month periods ended October
31, 1998 and 1997 and statements of cash flows for the nine month periods ended
October 31, 1998 and 1997. These financial statements reflect the third quarter
results of the new fiscal year beginning on February 1, 1998. The comparable
periods in 1997 have been restated to conform to the Company's new fiscal year.
The results of operations for the three and nine months ended October 31, 1998
are not necessarily indicative of the operating results expected for the fiscal
year ending January 31, 1999. 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 transition period
ended January 31, 1998.
2.) EARNINGS PER SHARE
In December 1997, the Company adopted the provisions of Statement of
Financial Accounting Standards No.128, "Earnings per Share" ("Statement 128")
which establishes new standards for computing and presenting earnings per share
("EPS"). Earnings per share for all prior periods have been restated to reflect
the provisions of this statement.
Basic earnings per share is computed by dividing net income (loss) by
the weighted average number of shares outstanding during the period. Diluted
earnings per share is computed assuming the exercise of stock options, as well
as their related income tax effects, unless their effect was antidilutive. For
loss periods, weighted average common share equivalents are excluded from the
calculation as their effect would be antidilutive.
Options to purchase 651,000 shares of common stock at a range from
$1.69 to $1.89 per share and warrants to purchase 15,000 shares of common stock
at $1.89 per share were included in the diluted EPS calculation for the three
and nine month periods ended October 31, 1998 because the average market price
of the common shares for the periods exceeded the exercise price of the options
and warrants. Options to purchase 10,000 shares of common stock at $2.86 per
share and shareholder warrants to purchase 306,335 shares of common stock at
$8.70 per share for the nine month period ended October 31, 1998 were excluded
from the diluted EPS calculation for the periods because the exercise price of
the options and warrants was greater than the average market price of the common
shares during the three and nine month periods ended October 31, 1998. All of
the stock options and the 15,000 warrants expire between February 21, 2001 and
May 18, 2003 and the 306,335 shareholder warrants expire June 14, 1999.
Outstanding options and warrants to purchase shares of common stock
that were outstanding for the three and nine months ended October 31, 1997 were
not included in the
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<PAGE>
computation of diluted earnings per share due to the net loss reported by the
Company for these periods.
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 October 31, 1998
and 1997 are as follows:
TRAILING FOUR QUARTERS ENDED OCTOBER 31,
(Dollars in Thousands)
<TABLE>
<CAPTION>
QUARTERLY SALES
1998 1997
---- ----
AMOUNT % AMOUNT %
------- ---- ------ ----
<S> <C> <C> <C> <C>
Third Quarter
(August - October) $34,423 22.9% $36,282 24.0%
Second Quarter
(May - July) 33,518 22.3 33,347 22.1
First Quarter
(February - April) 33,648 22.4 33,206 21.9
Fourth Quarter
(November - January) 48,808 32.4 48,324 32.0
-------- ---- ------- ----
SALES FOR TRAILING TWELVE
MONTHS ENDED OCTOBER 31, 1998
AND 1997, RESPECTIVELY $150,397 100% $151,159 100%
======== ==== ======== ====
</TABLE>
4.) PROPERTY AND EQUIPMENT, NET
Property and equipment, net, consists of the following:
<TABLE>
<CAPTION>
OCTOBER 31, 1998 JANUARY 31, 1998
---------------- -----------------
<S> <C> <C>
Land $ 521,465 $ 521,465
Building 1,119,605 1,119,605
Furniture and equipment 9,418,266 8,708,705
Leasehold improvements 17,209,046 16,345,129
Display fixtures 6,883,154 5,999,650
Vehicles 1,020,469 959,768
---------------- -----------------
Total 36,172,005 33,654,322
Less accumulated depreciation (21,929,854) (19,677,138)
---------------- -----------------
Property and equipment, net $ 14,242,151 $ 13,977,184
================ =================
</TABLE>
5.) STOCK OPTIONS
During the quarter ended July 31, 1998, non-qualified stock options
were issued covering 10,000 shares of common stock having an exercise price of
$2.86 per share.
Page 8
<PAGE>
6.) PROVISION FOR INCOME TAXES
The provision for income taxes includes an amount for taxes payable
based on pretax operating income and an increase in the valuation reserve on
deferred tax assets. The adjustment of the valuation reserve results from
taxable income in excess of pretax operating income. As a result, the provision
for income taxes totals $290,000 or 99.3% of the pretax income for the nine
months ended October 31, 1998.
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 October 31, 1998
decreased $1,859,000 or 5.1% to $34,423,000 compared to $36,282,000 in the
corresponding period in the prior fiscal year. The decrease in sales is
primarily attributable to the categories of cellular phones, video cassette
recorders (VCRs) and lower-margin products. Decreases in these categories were
partially offset by increased sales of DVD players (digital video disc) and DSS
systems. Comparable store net sales decreased 10.5% in the quarter ended October
31, 1998 over the corresponding quarter in the prior year. The comparable store
sales were adjusted to exclude the new stores opened in November 1997 and
February 1998. The Company's operations, in common with other retailers in
general, are subject to seasonal influences. Historically, the Company has
realized greater sales and profits during the holiday selling season.
Net sales for the nine months ended October 31, 1998 decreased by
$1,247,000 or 1.2% to $101,589,000 over the corresponding period in the prior
fiscal year. The decrease in sales relates primarily to decreased sales in the
categories of cellular phones, VCRs, and lower-margin products. Decreases in
these categories were substantially offset by increased sales of DVD players
(digital video disc), audio products and DSS systems. Comparable store net sales
as adjusted for the new stores decreased 4.8% in the nine months ended October
31, 1998 compared to the corresponding nine month period in the prior fiscal
year.
Gross profit increased by $535,000 or 4.7% in the quarter ended October
31, 1998 compared to the corresponding quarter in the prior fiscal year. The
gross profit percentage was 34.4% in the quarter ended October 31, 1998 as
compared to 31.2% in the quarter ended October 31, 1997. The increase in gross
profit and gross profit percentage is directly related to the Company's sales
mix of higher margin categories.
Gross profit increased by $1,527,000 or 4.6% in the nine months ended
October 31, 1998 compared to the corresponding period in the prior year. The
gross profit percentage was 34.5% in the nine months ended October 31, 1998 as
compared to 32.6% in the nine months ended October 31, 1997. As stated above,
the increase in gross profit and gross profit percentage is directly related to
the Company's sales mix of higher margin categories.
Selling, general and administrative expenses ("SG&A") decreased by
$345,000 or 3.0% in the quarter ended October 31, 1998 over the corresponding
period in the prior year. SG&A decreased by $998,000 or 2.9% in the nine months
ended October 31, 1998 over the corresponding period in the prior year. The
decrease in both periods is primarily a result of reduced advertising expenses.
SG&A as a percentage of net sales increased slightly to 32.9% in the quarter
ended October 31, 1998 as compared to 32.2% in the corresponding period in the
prior year. This increase is directly related to the reduction in net sales for
the period. SG&A as a percentage of net sales for the nine months ended October
31, 1998 decreased slightly to 33.3% from 33.8% in the previous comparable
period. The percentage decrease is primarily due to the reduction in advertising
expenses from the previous comparable period.
Page 10
<PAGE>
Interest expense decreased by $58,000 and $93,000, respectively, for
the quarter and nine months ended October 31, 1998 from the corresponding
periods in the prior fiscal year. The decreases were primarily reflective of a
lower effective interest rate under the Company's revolving credit facility on
an increased level of borrowing as compared to the comparable periods in the
prior fiscal year.
The Company recorded an income tax provision of $135,000 for the
quarter and $290,000 for the nine months ended October 31, 1998. As a result,
the Company had an effective income tax rate of approximately 53.7% for the
quarter and 99.3% for the nine months ended October 31, 1998. The provision in
the 1998 period includes an amount for taxes payable on pretax operating income
and an increase in the valuation reserve for deferred tax assets. The Company
recorded an income tax provision of $160,000 for the quarter and $74,000 for the
nine months ended October 31, 1997.
Net income for the quarter ended October 31, 1998 was $116,000 or $.03
per share compared to net loss of $856,000 or $.23 per share for the same
quarter in the previous fiscal year. Net income for the nine months ended
October 31, 1998 was $2,000 or $.00 per share compared to net loss of $2,369,000
or $.64 per share in the same period of the prior fiscal year. The improvement
in the quarter and nine months ended October 31, 1998 over the comparable
periods in the prior fiscal year is primarily a result of increased gross profit
due to the Company's sales mix of higher margin categories, combined with the
reduction in advertising expenses.
FINANCIAL CONDITION
Net cash used in operating activities was approximately $2,473,000 for
the nine months ended October 31, 1998 primarily due to the increase in the
Company's inventory and decreases in the Company's accrued liabilities and
accounts payable since January 31, 1998. The Company had working capital of
approximately $4,879,000 at October 31, 1998, as compared to the $5,585,000 in
working capital at January 31, 1998 for an overall decrease of $706,000. The
decrease in working capital is primarily related to funds utilized in the
Company's expansion program. The increase in current assets of $1,864,000 during
the nine month period was primarily related to the $1,530,000 increase in
inventory. The net increase in current assets was offset by an overall increase
of $2,571,000 in current liabilities. The net increase in current liabilities
resulted primarily from an increase in borrowings under the revolving credit
facility of $5,182,000, which was substantially offset by the decreases in the
Company's accrued liabilities and accounts payable of $1,470,000 and $1,067,000,
respectively.
The Company currently believes that funds from the Company's operations
combined with borrowings available under its revolving credit facility and
vendor credit programs will be sufficient to satisfy its currently projected
operating cash requirements during fiscal 1999. However, in order to fully
complete the store expansion program currently planned in fiscal 1999, the
Company may need to seek additional financing sources. In that regard, the
Company is exploring additional financing sources in connection with the
expansion program. The Company has leased two additional showrooms located in
Palm Beach County, Florida and Tallahassee, Florida, as well as an additional
B&O concept store in Boca Raton, Florida. In November 1998, the Company opened
its new showrooms in Palm Beach County and Tallahassee. The B&O concept store is
scheduled to open in December 1998. The Company
Page 11
<PAGE>
may also need to seek additional sources of financing (debt and/or equity or a
combination thereof) in order to proceed with any expansion program beyond
fiscal 1999.
The Company's ownership of its former Fort Lauderdale store is
encumbered by a first mortgage loan from a bank in the amount of $640,000, with
a balance of approximately $426,000 at July 31, 1998. This loan was extended and
modified for a two year period ending in August 2000. Such loan bears interest
at the rate of 1% above the prime rate of the lender (such lender's prime rate
was 8.5% at July 31, 1998). The Company currently has listed this property for
sale.
The "Year 2000 Issue" exists because many computer systems and
applications use only the last two digits to refer to a year. Because of this
"Year 2000 Issue," these computer programs do not properly recognize a year that
begins with "20" instead of the familiar "19." If not corrected, many computer
programs could fail or create erroneous results.
The majority of the Company's internal systems are purchased from
outside vendors. The Company has performed an initial assessment of the impact
of the "Year 2000 Issue" on its reporting systems and operations and will be
required to modify or replace a portion of its software/hardware so that its
computer systems will properly utilize dates beyond December 31, 1999. Those
installed systems which are not currently able to fully function in the Year
2000 either have new versions available which are Year 2000 compliant, or the
vendor has committed to a Year 2000 compliant release in sufficient time to
allow installation and testing prior to critical cutover dates. The Company is
also in the process of completing its inventory of computer information
technology and non-information technology hardware systems to assess Year 2000
compliance. In addition to the Company's internal systems and hardware, the
Company is preparing to assess the Year 2000 readiness of its vendors. As part
of this assessment, the Company will ask each major vendor to inform the Company
of its (the vendor's) Year 2000 readiness and initiatives. To the extent that
the Company's vendors do not provide the Company with satisfactory evidence of
their readiness for the "Year 2000 Issue," contingency plans will be developed.
The cost of modifying or replacing portions of its software has been expensed as
incurred and primarily consists of software version upgrades.
There can be no assurance, however, that the Company's systems are
"Year 2000" compliant or that the systems of other companies on which the
Company's systems and operations rely, or companies with whom the Company
conducts business, will be timely converted to address the "Year 2000 Issue," or
that a failure to convert by another company, or a conversion that is
incompatible with the Company's systems, would not have a material adverse
effect on the Company's business, operations, results and financial position.
For this reason, the Company continues to work towards ensuring that all systems
associated with the processes of the Company are Year 2000 compliant by the end
of 1999.
Effective February 1, 1998, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income" and Statement of Financial Accounting Standards No. 131, "Disclosures
about Segments of an Enterprise and Related Information". Effective August 1,
1998, the Company adopted the provisions of Statement of Financial Accounting
Standards No. 133, "Accounting for Derivative Instruments
Page 12
<PAGE>
and Hedging Activity". The adoption of these statements did not have a material
impact on the Company's operating results, financial position or cash flows.
FORWARD-LOOKING STATEMENTS
This Form 10-Q contains forward-looking statements (within the meaning
of Section 21E. of the Securities Exchange Act of 1934, as amended) representing
the Company's current expectations, beliefs, estimates or intentions concerning
the Company's future performance and operating results, its products, services,
markets and industry, and/or future events relating to or effecting the Company
and its business and operations. When used in this Form 10-Q, the words
"believes," "estimates," "plans," "expects," "intends," "anticipates," "Year
2000" and similar expressions as they relate to the Company or its management
are intended to identify forward-looking statements. The actual results or
achievements of the Company could differ materially from those indicated by the
forward-looking statements because of various risks and uncertainties related to
and including, without limitation, the effectiveness of the Company's business
and marketing strategies, the product mix sold by the Company, customer demand,
availability of existing and new merchandise from and the establishment and
maintenance of relationships with suppliers, price competition for products and
services sold by the Company, management of expenses, gross profit margins, the
opening of additional stores, availability and terms of financing to refinance
or repay existing financings or to fund capital and expansion needs, the
continued and anticipated growth of the retail home entertainment and consumer
electronics industry, a change in interest rates, exchange rate fluctuations,
the seasonality of the Company's business and the other risks and factors
detailed in this Form 10-Q and in the Company's other filings with the
Securities and Exchange Commission. These risks and uncertainties are beyond the
ability of the Company to control. In many cases, the Company cannot predict the
risks and uncertainties that could cause actual results to differ materially
from those indicated by the forward-looking statements.
Page 13
<PAGE>
PART II - OTHER INFORMATION
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 (filed herewith).
(b) Reports on Form 8-K. No reports on Form 8-K were filed by the
Company.
Page 14
<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 DECEMBER 10, 1998 /s PETER BESHOURI
------------------ -----------------------------------
Peter Beshouri, Chairman of the
Board, President and Chief
Executive Officer
Date DECEMBER 10, 1998 /KENNETH L. DANIELSON
------------------ -----------------------------------
Kenneth L. Danielson, Chief
Financial and Accounting Officer
Page 15
<PAGE>
EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION
- ------- -----------
27. Financial Data Schedule (filed herewith).
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM THE REGISTRANT'S
FINANCIAL STATEMENTS AS OF AND FOR THE NINE MONTH PERIOD ENDED OCTOBER 31, 1998,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> OCT-31-1998
<CASH> 1,276,863
<SECURITIES> 0
<RECEIVABLES> 5,661,013
<ALLOWANCES> 438,600
<INVENTORY> 32,558,082
<CURRENT-ASSETS> 39,410,016
<PP&E> 36,172,005
<DEPRECIATION> 21,929,854
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0
0
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</TABLE>
