SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC. 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 from October 1, 1995 to December 30, 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 0-16930
EGGHEAD, INC.
(Exact name of registrant as specified in its charter)
Washington 91-1296187
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
22705 East Mission
Liberty Lake, Washington 99019
(Address of principal executive offices) (Zip Code)
(509) 922-7031
(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:
Outstanding at
Class January 27, 1996
-------------- ----------------
Common Stock 17,543,072
$.01 par value shares
<PAGE>
PART 1. FINANCIAL INFORMATION
ITEM 1. Financial Statements and Supplementary Data
Refer to Exhibit 28 for the results of the limited review performed by
Arthur Andersen LLP, independent public accountants.
EGGHEAD, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Dollars in thousands)
December 30, April 1,
1995 1995
------------ --------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 16,408 $ 42,592
Accounts receivable, net of allowance
for doubtful accounts of $3,422 and
$4,354, respectively 101,764 84,514
Merchandise inventories 169,581 102,918
Prepaid expenses and other current assets 8,686 4,045
Current deferred income taxes 6,760 6,964
-------- --------
Total current assets 303,199 241,033
-------- --------
Property and equipment, net 30,345 23,365
Non-current deferred income taxes 2,918 3,051
Other assets 1,876 2,692
-------- --------
$338,338 $270,141
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable to banks $ - $ -
Accounts payable 172,975 104,425
Accrued liabilities 21,042 17,303
Income taxes payable - 325
Current portion of capital lease
obligations 262 252
-------- --------
Total current liabilities 194,279 122,305
-------- --------
Capital lease obligations, less current
portion 355 106
Deferred rent 1,267 1,314
-------- --------
Total liabilities 195,901 123,725
-------- --------
<PAGE>
EGGHEAD, INC. AND SUBSIDIARIES
Consolidated Balance Sheets, Continued
(Dollars in thousands)
December 30, April 1,
1995 1995
------------ --------
(unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY,
CONTINUED
Commitments and contingencies
Shareholders' equity:
Common stock, $.01 par value: 50,000,000
shares authorized; 17,543,072 and
17,166,031 shares issued and outstanding,
respectively $ 175 172
Additional paid-in capital 124,082 120,572
-------- --------
Retained earnings 18,180 25,672
-------- --------
Total shareholders' equity 142,437 146,416
-------- --------
$338,338 $270,141
======== ========
See Notes to Consolidated Financial Statements.<PAGE>
EGGHEAD, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(Amounts in thousands, except per share data)
13 Weeks Ended 39 Weeks Ended
------------------ ------------------
(unaudited) (unaudited)
------------------ ------------------
December December December December
30, 31, 30, 31,
1995 1994 1995 1994
-------- -------- -------- --------
Net sales $216,364 $254,283 $582,216 $642,442
Cost of sales, including
certain buying, occupancy,
and distribution costs 193,085 222,444 519,933 566,061
-------- -------- -------- --------
Gross margin 23,279 31,839 62,283 76,381
Selling, general, and
administrative expense 22,808 25,210 69,164 68,461
Depreciation and amortization
expense, net of amounts
included in cost of sales 2,436 2,236 7,228 7,000
-------- -------- -------- --------
Operating income (loss) (1,965) 4,393 (14,109) 920
Theft insurance recovery 0 1,650 0 1,650
Other income (expense):
Interest income 358 168 1,949 506
Interest expense (37) (16) (74) (27)
Other, net 84 55 (253) (206)
-------- -------- -------- --------
Income (loss) before income
taxes (1,560) 6,250 (12,487) 2,843
Income tax (provision) benefit 619 (2,437) 4,870 (1,109)
-------- -------- -------- --------
Net income (loss) $ (941) $ 3,813 $ (7,617) $ 1,734
======== ======== ======== ========
Earnings (loss) per share $ (0.05) $ 0.22 $ (0.44) $ 0.10
======== ======== ======== ========
Weighted average common
shares and common
equivalent shares
outstanding 17,541 17,380 17,401 17,231
======== ======== ======== ========
See Notes to Consolidated Financial Statements.<PAGE>
EGGHEAD, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Dollars in thousands)
39 Weeks Ended
--------------------------
(unaudited)
December 30, December 31,
1995 1994
------------ ------------
Cash flows from operating activities:
Net income (loss) $ (7,617) $ 1,734
---------- ---------
Adjustments to reconcile net income
(loss) to net cash provided (used)
by operating activities:
Depreciation and amortization 8,355 7,806
Deferred rent (47) (1)
Deferred income taxes 337 702
Loss on disposition of assets (39) 235
Changes in assets and liabilities:
Accounts receivable, net (16,890) (15,774)
Merchandise inventories (66,640) (51,222)
Prepaid expenses and other current
assets (4,638) 288
Other assets 502 257
Accounts payable 68,257 58,805
Accrued liabilities 3,730 5,117
Income taxes payable (325) 111
--------- ---------
Total adjustments (7,398) 6,324
--------- ---------
Net cash provided (used) by
operating activities (15,015) 8,058
--------- ---------
Cash flows from investing activities:
Additions to property and equipment (14,331) (9,491)
Proceeds from sale of equipment 61 34
--------- ---------
Net cash used by investing
activities (14,270) (9,457)
--------- ---------
Cash flows from financing activities:
Borrowings on notes payable to banks 103,600 0
Payments on notes payable to banks (103,600) 0
Payments on capital lease obligations (445) (221)
Proceeds from stock issuances 3,513 286
--------- ---------
Net cash provided by financing
activities 3,068 65
--------- ---------
Effect of exchange rates on cash 33 (20)
--------- ---------
Net decrease in cash (26,184) (1,354)
Cash at beginning of period 42,592 25,677
--------- ---------
Cash at end of period $ 16,408 $ 24,323
========= =========
<PAGE>
EGGHEAD, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows, Continued
(Dollars in thousands)
39 Weeks Ended
--------------------------
(unaudited)
December 30, December 31,
1995 1994
------------ ------------
Supplemental disclosures of cash paid:
Interest $ 74 $ 27
Income taxes $ 334 $ 198
See Notes to Consolidated Financial Statements.
<PAGE>
EGGHEAD, INC. AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity
(Amounts in thousands)
<TABLE>
<CAPTION>
Common Stock Additional
------------------ Paid-in Retained
Shares Amount Capital Earnings Total
-------- -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C>
Balance, April 2, 1995 17,166 $ 172 $120,572 $ 25,672 $146,416
Stock issued for cash, pursuant
to stock option plan 331 3- 3,224 3,227
Stock issued for cash, pursuant to
employee stock purchase plan 46 286 - 286
Stock granted as compensation - -
Translation adjustment - - - 125 125
Net loss - - - (7,617) (7,617)
-------- -------- --------- -------- --------
Balance, December 30, 1995 17,543 $ 175 $124,082 $ 18,180 $142,437
======== ======== ========= ======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
EGGHEAD, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
Note 1 Basis of Presentation
The accompanying unaudited financial statements have been prepared
in accordance with generally accepted accounting principles for
interim financial information and pursuant to the rules and
regulations of the Securities and Exchange Commission. While these
statements reflect the adjustments which are, in the opinion of
management, necessary to fairly state the results of the interim
periods, they do not include all the information and footnotes
required by generally accepted accounting principles for complete
financial statements. These adjustments are of a normal and
recurring nature. For further information, refer to the annual
financial statements and footnotes thereto, for the 52 week period
ended April 1, 1995, contained in the Company's Form 10-K, filed
pursuant to the Securities Exchange Act of 1934. The reader is
further cautioned that operating results for the 13 and 39 week
periods ended December 30, 1995, are not necessarily indicative of
the results that may be expected for the full year.
The Company uses a 52/53 week fiscal year, ending on the Saturday
nearest March 31 of each year. Each fiscal quarter consists of 13
weeks.
Note 2 Merchandise Inventories
Merchandise inventories are accounted for using the moving weighted
average cost method and are stated at the lower of cost or market.
Note 3 Income Taxes
Deferred income taxes result from temporary differences in certain
items for income tax and financial reporting purposes.
Note 4 Earnings (Loss) Per Share
Per share amounts are computed using the weighted average number of
common shares and dilutive common equivalent shares outstanding
during each period using the treasury stock method. Common
equivalent shares result from the assumed exercise of stock options
and from the conversion of cash related to the employee stock
purchase plan into common shares based upon the terms of the plan.
The effect of common equivalent shares was not included in
computation of the per share amount for the 13 and 39 week periods
ended December 30, 1995 and December 31, 1994, because it was anti-
dilutive.
<PAGE>
EGGHEAD, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, (continued)
(Unaudited)
Note 5 Notes Payable to Banks
Effective December 8, 1995, the Company entered into a revolving
loan agreement with two banks providing for secured borrowings of up
to $35.0 million through April 30, 1996. Each bank provides a $17.5
million line of credit and one bank serves as agent for the
agreement. The Company may elect interest rates on the notes based
on the participating banks rate on certificates of deposit, LIBOR,
or prime rate. The borrowings are secured by an interest in the
Company s accounts receivable and contract rights. The agreement
contains a number of covenants, including a restriction on the
payment of dividends and compliance with certain financial ratios.
The Company was in compliance with all financial covenants as of
December 30, 1995.
Note 6 Leases
The Company leases all its retail stores, its corporate, government,
and education sales offices, it's distribution facilities in
Lancaster, Pennsylvania, Wilmington, Ohio and Sacramento,
California, and a portion of the former headquarter facilities in
Issaquah, Washington, under operating leases with remaining terms
ranging from one to five years. As of December 30, 1995, the
future minimum rental payments under these operating leases were as
follows (in thousands):
Fiscal Year
----------------------
1996 (remainder) $ 3,136
1997 11,847
1998 8,666
1999 4,813
2000 1,931
Thereafter 842
-------
Total minimum payments $31,235
=======
Note 7 Theft Insurance Recovery
A theft insurance recovery of $1.65 million in the third quarter of
fiscal 1995 represents settlement of an insurance claim, net of
expense, for inventory stolen by members of a multistate shoplifting
ring from numerous retail stores during fiscal years 1991, 1992, and
1993.
<PAGE>
ITEM 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition
GENERAL
Egghead, Inc. (Egghead or the Company) a personal computer (PC)
software and hardware reseller, serves a diverse customer base
consisting of businesses, government agencies, educational
institutions and individuals. As of December 30, 1995, the Company
operated 169 retail stores, an Enterprise Solutions Group
(previously, Corporate, Government, Education group) service center
for direct sales to corporations, government and educational
institutions, and a direct response group.
Egghead s retail stores offer a broad in-store selection of products
at competitive prices, as well as special order capabilities for
additional products. On December 30, 1995, the Company operated 169
stores located throughout the United States and Western Canada. The
Company employs a knowledgeable sales force to assist customers in
selecting software, hardware and related products. The Company is
currently operating 12 of its retail stores under a new
merchandising format which is approximately twice the size of
predecessor stores and are arranged in a more user-friendly format.
Egghead's Enterprise Solutions Group targets three main types of
accounts: corporations, educational institutions, and federal, state
and local government agencies. These customers are served by
outside sales representatives and inside sales support staff who
provide them with competitive prices and individualized service.
During the quarters ended December 30, 1995 and December 31, 1994,
sales to individuals and small business generated by the Company s
retail stores and direct response group, accounted for approximately
56% and 54%, respectively, of the Company's total net sales. The
remaining net sales were generated by its Enterprise Solutions Group
service center.
Egghead continues to implement changes to turn around the Company
and position it for growth in the future. Among these changes are
an increase in the number of retail stores operating under the new
merchandising format. The customer response to the new format has
been positive.
To remain competitive in new computer and software service areas, in
December 1995, Egghead formed ELEKOM, a new subsidiary. ELEKOM, was
formed to develop and market electronic commerce applications and
services, which link customers and their suppliers. The current
product, EleTrade, uses AT&T Network Notes and Lotus Notes to give
large organizations an easy-to-use, cost-effective, secure and
reliable product ordering and order management system for non-
production goods and services. EleTrade allows companies to create
customized electronic catalogs with multi-media product information
and customer-specific pricing. In January, ELEKOM announced
additional enhancements which will automate the internal requisition
and approval process. ELEKOM is pursuing further enhancements which
may create better asset/inventory management and allow electronic
software distribution.
<PAGE>
Over the past twelve months, as part of a long-term growth strategy,
Egghead consolidated various operations into its customer service
center in Spokane, Washington. During year-to-date fiscal 1996, the
Company has relocated its direct response operation, formerly in
Kalispell, Montana, and the remainder of its ESG customer service
operations and its administrative operations, both previously
located in Issaquah, Washington. The relocation, severance and
related costs are included as incurred in the fiscal 1996 results.
Total consolidation costs year-to-date through the third quarter of
fiscal 1996 were approximately $4.3 million ($2.6 million or $0.15
per share, after tax) or 0.4% of net sales. The Company implemented
these changes to improve customer service and reduce future
operating costs. Management expects these changes will results in
net expense in fiscal 1996 and net savings in future years due to
lower labor rate and occupancy costs.
The Company uses a 52/53 week fiscal year, ending on the Saturday
nearest March 31st of each year. Each fiscal quarter consists of 13
weeks. All references herein to fiscal year 1996 and 1995 relate to
fiscal years ended March 30, 1996 and April 1, 1995, respectively.
RESULTS OF OPERATIONS
Overview
Egghead reported a net loss of $941,000 for the quarter ended
December 30, 1995 compared to net income of $3.8 million for the
quarter ended December 31, 1994. The decrease in net income is
primarily due to a decrease in sales and a decline in the gross
margin as a percentage of sales. The prior year third quarter net
income also included a one-time theft insurance recovery of $1.65
million, pre-tax, related to inventory stolen from retail stores in
prior years. Earnings (loss) per share for the third quarters of
fiscal 1996 and 1995 were $(0.05) and $0.22, respectively.
Year-to-date, Egghead incurred a net loss of $7.6 million for the 39
weeks ended December 30, 1995 compared to net income of $1.7 million
for the 39 weeks ended December 31, 1994. Earnings (loss) per share
for year-to-date fiscal 1996 and 1995 were $(0.44) and $0.10,
respectively. The decrease in year-to-date fiscal 1996 net income
was primarily due to a decrease in sales and a decline in the gross
margin as a percentage of sales. In addition, relocation, severance
and related costs associated with consolidating the Company s
administrative operations formerly located in Issaquah, the direct
response operations, formerly located in Kalispell and the remainder
of its ESG customer service operations to its customer service
center in Spokane are included in selling, general and
administrative (SG&A) expense. Total consolidation costs year-to-
date as of December 30, 1995 were approximately $4.3 million ($2.6
million or $0.15 per share, after tax) or 0.4% of net sales.
Management expects these changes will improve customer service and
reduce future operating costs. See "Management s Discussion and
Analysis - General."
<PAGE>
Percentage of Sales Data
The following table shows the relationship of certain items included
in the Company's Consolidated Statements of Operations expressed as
a percentage of net sales:
Percentage of Net Sales
--------------------------------------
Third Quarter Year to Date
13 Weeks Ended 39 Weeks Ended
------------------ ------------------
Dec. 30, Dec. 31, Dec. 30, Dec. 31,
1995 1994 1995 1994
-------- -------- -------- --------
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales, including
certain buying, occupancy,
and distribution costs 89.2 87.5 89.3 88.1
Gross margin 10.8 12.5 10.7 11.9
Selling, general, and
administrative expense 10.5 9.9 11.9 10.7
Depreciation and amortization
expense, net of amounts
included in cost of sales 1.1 0.9 1.2 1.1
Operating income (loss) (0.9) 1.7 (2.4) 0.1
Income (loss) before income
taxes (0.7) 2.5 (2.1) 0.5
Income tax (provision)
benefit 0.3 (1.0) 0.8 (0.2)
Net income (loss) (0.4) 1.5 (1.3) 0.3
NET SALES
General
Net sales of $216.4 million for the 13 week period ended December
30, 1995, were $37.9 million, or 14.9% less than net sales of $254.3
million for the 13 week period ended December 31, 1994.
Year-to-date sales of $582.2 million for the 39 week period ended
December 30, 1995, decreased $60.2 million, or 9.4%, from net sales
of $642.4 million for the comparable period ended December 31, 1994.
The retail operations generated 56% of total net sales during the
third quarter of fiscal 1996, with the remaining 44% generated by
the ESG group. This compares to 54% generated by retail operations
and 46% by the ESG group in the third quarter of fiscal 1995.
Fiscal year 1996 year-to-date total net sales were comprised of
approximately 53% from retail operations and 47% from the ESG group.
Year-to-date fiscal 1995, retail and ESG operations each generated
50% of the total net sales.
<PAGE>
RETAIL SALES
Retail sales of $121.7 million for the third quarter of fiscal 1996
reflects a decrease of 11.7% over third quarter fiscal 1995 retail
sales of $137.9 million. Comparable retail store sales decreased
6.6% from last year s third quarter. The decline in comparable
store sales was attributable to a poor holiday season for retail and
significant disruptions as a result of relocating the Company s
merchandising and advertising departments, as well as its Sacramento
distribution center.
Retail sales for the 39 week periods ended December 30, 1995 and
December 31, 1994, were $307.0 million and $321.8 million,
respectively. Year-to-date comparable retail store sales increased
2.9%.
The Company introduced its new prototype store in Beaverton, Oregon
in the beginning of the second quarter of fiscal 1996. The new
store is approximately twice the size of its predecessor and
represents a new merchandising approach for the Company. During the
third quarter, Egghead rolled out 11 new format stores on
replacement or new sites, for a total of 12 new format stores in
operation to date.
Year-to-date in fiscal 1996, the Company opened eight new stores,
relocated or significantly remodeled six stores, closed eight
stores, and operated a total of 169 stores at December 30, 1995.
This compares to 177 at the end of the third quarter a year ago.
Management evaluates, as an ordinary course of business, the
performance of individual stores and makes changes in store format,
location and status accordingly. Management is encouraged by the
public s response to the recently implemented new store format and
will continue to evaluate the potential to modify additional stores
to this arrangement.
ENTERPRISE SOLUTIONS GROUP SALES
Enterprise Solutions Group sales of $94.7 million in the third
quarter of fiscal 1996 decreased $21.7 million, or 18.6%, compared
to $116.4 million in the third quarter of fiscal 1995. Year-to-date
ESG sales for the 39 weeks ended December 30, 1995, were $275.2
million, a $45.4 million or a 14.1% decrease compared to $320.6
million for the same period a year ago.
These decreases were primarily due to price reductions as prices for
many software products have continued to decline due to industry-
wide pricing pressure related to both competitors and vendors
pricing.
The Company serves as a designated reseller for volume licensing and
maintenance (VLAM) agreements between certain of its customers and
major publishers of microcomputer software. VLAM agreements
typically are used by large customers seeking to standardize desktop
software applications. For each of the 13 and 39 week periods ended
December 30, 1995, sales of software through VLAM agreements
represented approximately 30% and 31% , respectively, of total
Enterprise Solutions Group sales, compared to approximately 22% and
17%, respectively, for the same periods last year.
<PAGE>
During the first quarter of fiscal year 1996, the Company
consolidated the operations of its Enterprise Solutions Group
customer service centers in Issaquah and Canada to one customer
service center in Spokane. Inside sales representatives and support
personnel work out of the customer service center. Outside sales
representatives continue to work throughout the U.S. and Canada.
Gross Margin
Gross margin as a percentage of net sales was 10.8% in the third
quarter of fiscal year 1996, compared to 12.5% in the third quarter
last year. Gross margin as a percentage of sales was 10.7% for
year-to-date fiscal 1996, compared to 11.9% for year-to-date fiscal
1995. During fiscal 1996, gross margin as a percentage of sales has
continued to be affected by industry-wide pricing pressure related
to both competitors pricing and vendors pricing. The Company s
promotion of Microsoft Windows 95 negatively impacted gross margin
as a percentage of sales for year-to-date fiscal 1996.
Selling, General and Administrative Expense
SG&A expense was $22.8 million or 10.5% of total net sales in the
third quarter of fiscal year 1996, compared to $25.2 million or 9.9%
in the third quarter of fiscal year 1995.
Year-to-date fiscal 1996 SG&A expense was $69.2 million or 11.9% of
total net sales compared to $68.5 million or 10.7% for year-to-date
fiscal year 1995. Included in the year-to-date SG&A expenses are
relocation, severance and related costs associated with
consolidating the Company s administrative operations formerly
located in Issaquah, the direct response operations, formerly
located in Kalispell and the remainder of its ESG customer service
operations to its customer service center in Spokane. Total
consolidation costs year-to-date as of December 30, 1995 were
approximately $4.3 million ($2.6 million or $0.15 per share, after
tax) or 0.4% of net sales. Management expects these changes will
improve customer service and reduce future operating costs. See
"Management s Discussion and Analysis - General."
FINANCIAL CONDITION
-------------------
Cash and short-term investments were $16.4 million at December 30,
1995 compared to $42.6 million at April 1, 1995. The $26.2 million
decrease was due to the net loss from operations of $7.6 million, as
well as an increase in merchandise inventories of $66.7 million and
an increase in accounts receivable of $17.3 million. These
increases were partially offset by an increase in accounts payable
of $68.6 million. The changes in merchandise inventories and
accounts payable reflect expected increases related to the holiday
season.
Accounts receivable, net increased from $84.5 million at April 1,
1995 to $101.8 million at December 30, 1995. The increase relates
to increased holiday season sales.
<PAGE>
Merchandise inventories of $169.6 million at December 30, 1995,
increased $66.7 million, or 65%, compared to $102.9 million at April
1, 1995, due primarily to an increase in inventory levels for the
holiday selling season.
Accounts payable increased to $173.0 million at December 30, 1995,
from $104.4 million at April 1, 1995. The increase in accounts
payable was primarily due to an increase in inventory levels in
anticipation of the holiday sales season. The increase was also due
to an increase in sales of VLAM agreements during the third quarter
this year compared to the second quarter last year. See "-Net
Sales - Enterprise Solutions Group Sales." Increased VLAM sales
result in an increase in accounts payable without a corresponding
increase in merchandise inventory, as VLAM agreements are not
inventoried product.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
Net cash used by operating activities was $15.0 million for the 39
weeks ended December 30, 1995, compared net cash provided of $8.1
million during the same period a year ago. During the third quarter
of fiscal 1996, there was a $68.3 million increase in accounts
payable, partially offset by a $66.6 million increase in merchandise
inventories and a $4.6 million increase in prepaid expenses. For
further information, see the Consolidated Statement of Cash Flows
for the 39 week periods ended December 30, 1995 and December 31,
1994.
Effective December 8, 1995, the Company entered into a revolving
loan agreement with two banks providing for secured borrowings of up
to $35.0 million through April 30, 1996. Each bank provides a $17.5
million line of credit and one bank serves as agent for the
agreement. The Company may elect interest rates on the notes based
on the participating banks rate on certificates of deposit, LIBOR,
or prime rate. The borrowings are secured by an interest in the
Company s accounts receivable and contract rights. The agreement
contains a number of covenants, including a restriction on the
payment of dividends and compliance with certain financial ratios.
The Company was in compliance with all financial covenants as of
December 30, 1995. There were no borrowings outstanding on these
lines of credit at December 30, 1995.
The Company expects that working capital requirements in the
foreseeable future will be satisfied by cash flow from operations
and borrowings under these lines of credit. Depending on its rate
of growth, the Company may require additional financing, including
bank borrowings and further issuances of debt and/or equity.
<PAGE>
Part II. OTHER INFORMATION
ITEM 1. Legal Proceedings
None.
ITEM 4. Submission of Matters to a Vote of Security Holders
None.
ITEM 6. Exhibits and Reports On Form 8-K
a. Exhibits
23 Report of Independent Public Accountants.
27 Financial Data Schedule.
b. Reports on Form 8-K
None.
<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.
EGGHEAD, INC.
(Registrant)
Date: February 8, 1996 /s/ Brian W. Bender
-------------------------------
Brian W. Bender
Vice President, Chief Financial
Officer (Principal Financial
and Accounting Officer)
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-30-1996
<PERIOD-END> DEC-30-1995
<CASH> 16408
<SECURITIES> 0
<RECEIVABLES> 105186
<ALLOWANCES> 3422
<INVENTORY> 169581
<CURRENT-ASSETS> 303199
<PP&E> 70900
<DEPRECIATION> 40555
<TOTAL-ASSETS> 338338
<CURRENT-LIABILITIES> 194279
<BONDS> 0
0
0
<COMMON> 175
<OTHER-SE> 142262
<TOTAL-LIABILITY-AND-EQUITY> 338338
<SALES> 582216
<TOTAL-REVENUES> 582216
<CGS> 519933
<TOTAL-COSTS> 519933
<OTHER-EXPENSES> 74696
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 74
<INCOME-PRETAX> (12487)
<INCOME-TAX> 4870
<INCOME-CONTINUING> (7617)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7617)
<EPS-PRIMARY> (0.44)
<EPS-DILUTED> (0.44)
</TABLE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Egghead, Inc.:
We have reviewed the accompanying condensed balance sheet of Egghead,
Inc. (a Washington corporation) and subsidiaries as of December 30,
1995 and the related condensed consolidated statements of operations
for the 13-week and 39-week periods ended December 30, 1995, and the
statements of cash flows for the 39-week period ended December 30,
1995. These financial statements are the responsibility of the
Company's management. We conducted our review in accordance with
standards established by the American Institute of Certified Public
Accountants. A review of interim financial information consists
principally of applying analytical procedures to financial data and
making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective
of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an
opinion.
Based on our review, we are not aware of any material modification
that should be made to the financial statements referred to above for
them to be in conformity with generally accepted accounting
principles.
Arthur Andersen LLP
Seattle, Washington
January 26, 1996
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