<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 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 quarterly period ended August 2, 1997
-----------------------------
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 0-19526
Goody's Family Clothing, Inc.
(Exact name of registrant as specified in its charter)
Tennessee 62-0793974
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
400 Goody's Lane, Knoxville, Tennessee 37922
(Address of principal executive offices) (Zip Code)
(423) 966-2000
(Registrant's telephone number, including area code)
(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
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, no par value, 16,295,407 shares outstanding
as of August 12, 1997.
<PAGE> 2
Goody's Family Clothing, Inc.
Index to Form 10-Q
August 2, 1997
Part I - Financial Information:
Item 1 - Consolidated Financial Statements
Consolidated Statements of Operations........................ 3
Consolidated Balance Sheets.................................. 4
Consolidated Statements of Cash Flows........................ 5
Notes to Consolidated Financial Statements................... 6 - 7
Independent Accountants' Review Report....................... 8
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations................................. 9-12
Part II - Other Information........................................... 13
-----------------
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. (a) Exhibits
Item 6. (b) Reports on Form 8-K
Signatures............................................................. 14
<PAGE> 3
PART 1 - FINANCIAL INFORMATION
- ----------------------------------------------------------------------------
Item 1 - Consolidated Financial Statements
Goody's Family Clothing, Inc. and Subsidiaries
Consolidated Statements of Operations - Unaudited
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Thirteen Twenty-six
Weeks Ended Weeks Ended
August 2, August 3, August 2, August 3,
1997 1996 1997 1996
------------- ------------ ------------- ---------
<S> <C> <C> <C> <C>
Sales $ 212,206 $ 183,411 $ 402,263 $ 334,177
Cost of sales and occupancy expenses 154,036 138,174 289,116 246,295
------------ ------------ ------------ ------------
Gross profit 58,170 45,237 113,147 87,882
Selling, general and administrative
expenses 49,800 43,235 97,045 82,510
------------ ------------ ------------ ------------
Earnings from operations 8,370 2,002 16,102 5,372
Interest expense 94 193 219 280
Investment income 392 388 878 660
------------ ------------ ------------ ------------
Earnings before income taxes 8,668 2,197 16,761 5,752
Provision for income taxes 3,250 835 6,285 2,186
------------ ------------ ------------ ------------
Net earnings $ 5,418 $ 1,362 $ 10,476 $ 3,566
============ ============ ============ ============
Earnings per common share $ 0.32 $ 0.08 $ 0.62 $ 0.22
============ ============ ============ ============
Weighted average common
shares outstanding 16,932 16,126 16,895 16,126
============ ============ ============ ============
</TABLE>
See accompanying Notes to Consolidated Financial Statements and Independent
Accountants' Review Report.
<PAGE> 4
Goody's Family Clothing, Inc. and Subsidiaries
Consolidated Balance Sheets
(Dollars in thousands)
<TABLE>
<CAPTION>
August 2, February 1, August 3,
1997 1997 1996
(unaudited) (unaudited)
<S> <C> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 41,667 $ 43,316 $ 19,631
Investments 1,512 1,453 1,410
Inventories 153,653 107,495 141,610
Accounts receivable and other current assets 15,836 9,689 13,606
------------ ------------ ------------
Total current assets 212,668 161,953 176,257
Property and equipment, net 90,355 88,955 90,203
Other assets 3,200 3,439 3,455
------------ ------------ ------------
Total assets $ 306,223 $ 254,347 $ 269,915
============ ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 118,530 $ 75,900 $ 116,220
Accrued expenses 38,136 34,841 32,175
Income taxes payable - 6,957 -
Current portion of long- term debt 239 239 217
------------ ------------- --------------
Total current liabilities 156,905 117,937 148,612
Long-term debt 871 871 1,110
Other long-term liabilities 2,639 2,578 2,211
Deferred income taxes 9,668 9,385 8,515
------------ ------------- --------------
Total liabilities 170,083 130,771 160,448
------------ ------------- -------------
Commitments and Contingencies
Shareholders' Equity
Preferred stock $1.00 par value;
Authorized - 2,000,000 shares; issued
and outstanding - none
Class B Common stock no par value;
Authorized - 50,000,000 shares; issued
and outstanding - none
Common stock no par value;
Authorized - 50,000,000 shares;
Issued - 16,495,107, 16,364,832 and 16,328,012 shares;
Outstanding - 16,295,107, 16,164,832
and 16,128,012 shares 27,662 26,466 26,066
Paid-in capital 4,151 3,259 3,135
Retained earnings 107,429 96,953 83,368
Treasury stock, at cost - 200,000 shares (3,102) (3,102) (3,102)
------------ ------------ ------------
Total shareholders' equity 136,140 123,576 109,467
------------ ------------ ------------
Total liabilities and shareholders' equity $ 306,223 $ 254,347 $ 269,915
============ ============ ============
</TABLE>
See accompanying Notes to Consolidated Financial Statements and Independent
Accountants' Review Report.
<PAGE> 5
Goody's Family Clothing, Inc. and Subsidiaries
Consolidated Statements of Cash Flows - Unaudited
(In thousands)
<TABLE>
<CAPTION>
Twenty-six Weeks Ended
August 2, August 3,
1997 1996
------------ --------
<S> <C> <C>
Cash Flows from Operating Activities
Net earnings $ 10,476 $ 3,566
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Depreciation and amortization 5,522 4,690
Net loss on asset disposals and write-down 488 659
Changes in assets and liabilities:
Inventories (46,159) (63,343)
Accounts payable 33,634 52,292
Income taxes (7,824) (1,467)
Other assets & liabilities (315) 2,189
------------- -------------
Cash used in operating activities (4,178) (1,414)
------------ ------------
Cash Flows from Investing Activities
Acquisitions of property and equipment (7,414) (9,963)
Proceeds from sale of property and equipment 4 126
------------ ------------
Cash used in investing activities (7,410) (9,837)
------------ -------------
Cash Flows from Financing Activities
Exercise of Stock Options 1,196 24
Changes in cash management accounts 8,743 (2,129)
------------ ------------
Cash provided by (used in) financing activities 9,939 (2,105)
------------ ------------
Cash and cash equivalents
Net decrease for the period (1,649) (13,356)
Balance, beginning of period 43,316 32,987
------------ ------------
Balance, end of period $ 41,667 $ 19,631
============ ============
Supplemental Disclosures
Interest payments $ 151 $ 205
Income tax payments $ 14,163 $ 3,889
</TABLE>
See accompanying Notes to Consolidated Financial Statements and Independent
Accountants' Review Report.
<PAGE> 6
Goody's Family Clothing, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
(1) Unaudited Financial Information
In the opinion of the Company's management, the accompanying unaudited
consolidated financial statements of Goody's Family Clothing, Inc. and
subsidiaries (the "Company") include all adjustments, consisting primarily of
normal and recurring adjustments, necessary for a fair presentation of the
Company's financial position, results of operations and cash flows for the
interim periods presented. Due to the seasonal nature of the Company's
business, the results of operations for the interim periods are not necessarily
indicative of the results that may be achieved for the entire year. These
financial statements should be read in conjunction with the audited
consolidated financial statements and the notes thereto contained in the
Company's 1996 Annual Report on Form 10-K.
(2) Use of estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
(3) Credit Arrangements
The Company has a credit agreement with a consortium of banks for an
unsecured revolving line of credit which provides for cash borrowings
for general corporate purposes as well as for the issuance of letters of
credit of up to $120,000,000 and which expires on May 31, 1999. The Company is
committed to pay (i) interest on the cash borrowings at a fluctuating base
rate or LIBOR plus an applicable margin, as defined, (ii) letter of credit fees
based on the number of days a letter of credit is outstanding times the
applicable fee and (iii) an annual commitment fee payable quarterly in
advance. The terms of this credit agreement require, among other things,
maintenance of minimum levels of shareholders' equity, compliance with
certain financial ratios and Mr. Robert M. Goodfriend remaining as Chairman of
the Board or Chief Executive Officer of the Company, and place restrictions
on additional indebtedness, asset disposals, investments, capital expenditures
and payment of dividends.
(4) Earnings per share
Weighted average common shares outstanding for the thirteen and twenty-six weeks
ended August 2, 1997 include common equivalent shares to account for the
dilutive effect of stock options. Common equivalent shares were not materially
dilutive in the thirteen week and twenty-six weeks ended August 3, 1996 and
therefore were not included in the earnings per share computations for those
periods.
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS No. 128").
This Statement establishes new standards for computing and presenting earnings
per share ("EPS") information. SFAS No. 128 simplifies the computation of
earnings per share currently required by Accounting Principles Board Opinion No.
15, "Earnings per Share" and its related interpretations. The new Statement
replaces the presentation of "primary" and, when required, "fully diluted"
earnings per share with "basic" and "diluted" earnings per share. This new
Statement is effective for financial statements issued for periods ending after
December 15, 1997, including interim periods; earlier application is not
permitted. The Company's computation of basic and diluted EPS under SFAS No. 128
for the thirteen week and twenty-six week periods ended August 2, 1997 and
August 3, 1996 will not be materially different than EPS currently reported for
those periods.
<PAGE> 7
(5) Recent Accounting Pronouncements
In June 1997, SFAS No. 130, "Reporting Comprehensive Income," and SFAS No. 131
"Disclosures about Segments of an Enterprise and Related Information," were
issued and are effective for fiscal periods beginning after December 15, 1997
with early adoption permitted. The Company is evaluating the effects these
statements will have on its financial reporting and disclosures. These
statements will have no effect on the Company's results of operations or
financial position.
(6) Reclassifications
Certain reclassifications have been made to the financial statements of prior
periods to conform to the current period presentation.
<PAGE> 8
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
Board of Directors and Shareholders
Goody's Family Clothing, Inc.
Knoxville, Tennessee:
We have reviewed the accompanying condensed consolidated balance sheets of
Goody's Family Clothing, Inc. and subsidiaries as of August 2, 1997 and August
3, 1996, and the related condensed consolidated statements of operations and
cash flows for the thirteen and twenty-six week periods then ended. These
financial statements are the responsibility of the Company's management.
We conducted our reviews 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 of 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 reviews, we are not aware of any material modifications that should
be made to such financial statements for them to be in conformity with generally
accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Goody's Family Clothing, Inc. and
subsidiaries as of February 1, 1997, and the related consolidated statements of
operations, shareholders' equity, and cash flows for the year then ended (not
presented herein); and in our report dated March 19, 1997, we expressed an
unqualified opinion on those financial statements. In our opinion, the
information set forth in the accompanying condensed consolidated balance sheet
as of February 1, 1997 is fairly stated, in all material respects, in relation
to the consolidated balance sheet from which it has been derived.
Deloitte & Touche LLP
Atlanta, Georgia
August 21, 1997
<PAGE> 9
Item 2. - Management's Discussion and Analysis of Financial Condition and
Results of Operations
This Quarterly Report contains certain forward-looking statements which are
based upon current expectations, plans and estimates and involve material risks
and uncertainties including, but not limited to, customer demand and trends in
the apparel and retail industry and to the acceptance of merchandise acquired
for sale by the Company, the effectiveness of planned advertising and
promotional events, the impact of competitors' pricing, individual store
performance, including new stores, adverse weather conditions, and the general
economic conditions within the Company's markets. The Company does not undertake
to publicly update or revise its forward-looking statements even if experience
or future changes make it clear that any projected results expressed or implied
therein will not be realized. Additional information on factors that could
potentially affect the Company's financial results may be found in the Company's
other filings with the Securities and Exchange Commission.
Results of Operations
The following table sets forth unaudited results of operations, as a percent of
sales, for the periods indicated:
<TABLE>
<CAPTION>
Thirteen Twenty-six
Weeks Ended Weeks Ended
August 2, August 3, August 2, August 3,
1997 1996 1997 1996
------------ ----------- ----------- -------
<S> <C> <C> <C> <C> <C>
Sales 100.0% 100.0% 100.0% 100.0%
Cost of sales and occupancy expenses 72.6 75.3 71.9 73.7
----- ----- ----- -----
Gross profit 27.4 24.7 28.1 26.3
Selling, general and administrative expenses 23.5 23.6 24.1 24.7
----- ----- ----- -----
Earnings from operations 3.9 1.1 4.0 1.6
Interest expense - 0.1 - 0.1
Investment income 0.2 0.2 0.2 0.2
----- ----- ----- -----
Earnings before income taxes 4.1 1.2 4.2 1.7
Provision for income taxes 1.5 0.5 1.6 0.6
----- ----- ----- -----
Net earnings 2.6% 0.7% 2.6% 1.1%
===== ===== ===== =====
</TABLE>
Thirteen Weeks Ended August 2, 1997 Compared with Thirteen Weeks Ended August 3,
1996
Overview - During the second quarter of fiscal 1997, the Company opened four new
stores, relocated two stores and closed one store, bringing the total number of
stores in operation at August 2, 1997 to 212, compared with 194 at August 3,
1996. During the corresponding period of the previous fiscal year, the Company
opened one new store and relocated three stores. Net earnings for the second
quarter of fiscal 1997 were $5,418,000, or 2.6% of sales, compared with
$1,362,000, or 0.7% of sales, for the second quarter of fiscal 1996.
Sales - Sales for the second quarter of fiscal 1997 were $212,206,000, a 15.7%
increase over the $183,411,000 in sales for the second quarter of fiscal 1996.
This increase of $28,795,000 consisted of (i) a 7.3% increase in comparable
store sales of $12,332,000 over the corresponding period of the previous fiscal
year and (ii) additional sales from new and transition stores of $16,463,000.
Sales for the quarter were driven by continuing customer acceptance of certain
brand-name and private label merchandise.
Gross Profit - Gross profit for the second quarter of fiscal 1997 was
$58,170,000, or 27.4% of sales, a $12,933,000 increase over the $45,237,000 in
gross profit, or 24.7% of sales, generated for the second quarter of the
previous fiscal year. The 2.7% increase in gross profit, as a percent of sales,
in the second quarter of fiscal 1997 compared with the second quarter of fiscal
1996 resulted primarily from well-positioned inventories at the beginning of the
quarter, better inventory management and control and customer acceptance of
certain key merchandise items, including private label merchandise.
Selling, General and Administrative Expenses - Selling, general and
administrative expenses for the second quarter of fiscal 1997 were $49,800,000,
or 23.5% of sales, an increase of $6,565,000 from $43,235,000, or 23.6% of
sales, for the second quarter of fiscal 1996. The 0.1% decrease in selling,
general and administrative expenses, as a percent of sales, in the second
quarter of fiscal 1997 compared with the second quarter of fiscal 1996 resulted
from (i) a 0.2% decrease in advertising and promotional expenses and (ii) a 0.5%
decrease in other selling, general and administrative expenses, which were
offset by (a) a 0.5% increase in payroll expenses and (b) a 0.1% increase in
depreciation and amortization expenses. Selling, general and administrative
expenses for the second quarter of fiscal 1996 included a provision of $691,000,
or 0.4% as a percent of sales, in connection with the early termination of a
lease of one of the Company's stores which closed in August 1996.
Interest Expense - Interest expense for the second quarter of fiscal 1997
decreased $99,000 compared with the second quarter of the previous fiscal year
primarily because the Company had no borrowings under its credit agreement
during the second quarter of fiscal 1997.
Investment Income - Investment income for the second quarter of fiscal 1997
was $392,000 compared with $388,000 for the second quarter of the previous
fiscal year.
Income Taxes - The provision for income taxes for the second quarter of fiscal
1997 was $3,250,000, an effective tax rate of 37.5% of earnings before income
taxes, compared with $835,000, an effective tax rate of 38.0% of earnings before
income taxes, for the second quarter of the previous fiscal year. The decrease
in the overall effective tax rate is primarily due to a reduction in the
combined effective state income tax rate.
Twenty-Six Weeks Ended August 2, 1997 Compared with Twenty-Six Weeks Ended
August 3, 1996
Overview - During the twenty-six weeks ended August 2, 1997, the Company opened
11 new stores, relocated four stores and closed two stores, bringing the total
number of stores in operation at August 2, 1997 to 212, compared with 194 at
August 3, 1996. During the corresponding period of the previous fiscal year, the
Company opened 10 new stores, relocated four stores and remodeled one store. Net
earnings for the twenty-six weeks ended August 2, 1997 were $10,476,000, or 2.6%
as a percent of sales, compared with $3,566,000, or 1.1% as a percent of sales,
for the twenty-six weeks ended August 3, 1996.
Sales - Sales for the twenty-six weeks ended August 2, 1997 were $402,263,000, a
20.4% increase over the $334,177,000 in sales for the corresponding period of
the previous fiscal year. This increase of $68,086,000 consisted of (i) a 10.9%
increase in comparable store sales of $33,881,000 over the sales for the
corresponding period of the previous fiscal year and (ii) additional sales from
new and transition stores of $34,205,000. Sales for the twenty-six weeks ended
August 2, 1997 were driven by continuing customer acceptance of certain
brand-name and private label merchandise.
Gross Profit - Gross profit for the twenty-six weeks ended August 2, 1997 was
$113,147,000, or 28.1% of sales, a $25,265,000 increase over the $87,882,000 in
gross profit, or 26.3% of sales, generated for the corresponding period of the
previous fiscal year. The 1.8% increase in gross profit, as a percent of sales,
for the twenty-six weeks ended August 2, 1997 compared with the twenty-six weeks
ended August 3, 1996 resulted from (i) a 1.6% increase in gross margins as a
result of better inventory management and control and continuing customer
acceptance of certain key merchandise items, including private label
merchandise, and (ii) a 0.2% decrease in occupancy costs resulting from leverage
achieved from higher sales.
Selling, General and Administrative Expenses - Selling, general and
administrative expenses for the twenty-six weeks ended August 2, 1997 were
$97,045,000, or 24.1% of sales, an increase of $14,535,000 from $82,510,000, or
24.7% of sales, for the corresponding period of the previous fiscal year. The
0.6% decrease in selling, general and administrative expenses, as a percent of
sales, for the twenty-six weeks ended August 2, 1997 compared with the
twenty-six weeks ended August 3, 1996 resulted from (i) a 0.5% decrease in
advertising and promotional expenses and (ii) a 0.3% decrease in other selling,
general and administrative expenses, which were offset by a 0.2% increase in
payroll expenses. Selling, general and administrative expenses for the
twenty-six weeks ended August 3, 1996 included a provision of $691,000, or 0.2%
as a percent of sales, in connection with the early termination of a lease of
one of the Company's stores which closed in August 1996.
Interest Expense - Interest expense for the twenty-six weeks ended August 2,
1997 decreased by $61,000 compared with the corresponding period of the previous
fiscal year primarily because the Company had no borrowings under its credit
agreement during the twenty-six weeks ended August 2, 1997.
Investment Income - Investment income for the twenty-six weeks ended August 2,
1997 was $878,000 compared with $660,000 for the corresponding period of the
previous fiscal year. The increase in investment income is primarily due to an
increase in invested funds during the period.
Income Taxes - The provision for income taxes for the twenty-six weeks ended
August 2, 1997 was $6,285,000, an effective tax rate of 37.5% of earnings
before income taxes, compared with $2,186,000, an effective tax rate of
38.0% of earnings before income taxes, for the corresponding period of the
previous fiscal year. The decrease in the overall effective tax rate is
primarily due to a reduction in the combined effective state income tax rate.
Liquidity and Capital Resources
Financial Position - The Company's primary sources of liquidity are cash flows
from operations, including credit terms from vendors and borrowings under its
credit agreement. At August 2, 1997, the Company's working capital was
$55,763,000 compared with $27,645,000 at August 3, 1996. At the end of the
twenty-six week period ended August 2, 1997 compared with the corresponding
period of the previous year, (i) cash, cash equivalents and investment
securities increased $22,138,000, (ii) net property and equipment increased
$152,000, (iii) inventories increased $12,043,000 relating primarily to new
stores and (iv) accounts payable increased $2,310,000. Trade payables, as a
percent of inventories, decreased to 77.1% at August 2, 1997 as compared
with 82.1% at August 3, 1996.
At August 2, 1997, the Company had an unsecured revolving line of credit from
a consortium of banks, which provides for cash borrowings for general
corporate purposes as well as for the issuance of letters of credit of up to
$120,000,000 and which expires on May 31, 1999. The terms of this credit
agreement require, among other things, maintenance of minimum levels of
shareholders' equity, compliance with certain financial ratios and Mr. Robert
M. Goodfriend remaining as Chairman of the Board or Chief Executive Officer of
the Company, and place restrictions on additional indebtedness, asset
disposals, investments, capital expenditures and payment of dividends. See
Note 3 to the Notes to Consolidated Financial Statements. At August 2, 1997,
the Company had no cash borrowings under this credit agreement and
$64,466,000 was in use for outstanding letters of credit, compared with no
cash borrowings and $36,804,000 utilized for outstanding letters of
credit at August 3, 1996. In addition, there were no cash borrowings during
the twenty-six weeks ended August 2, 1997 compared with maximum
borrowings of $8,000,000 during the twenty-six weeks ended August 3, 1996,
which amount was repaid prior to August 3, 1996. Letters of credit
outstanding averaged $53,984,000 during the twenty-six weeks ended August 2,
1997 compared with $25,269,000 during the twenty-six weeks ended August 3,
1996. The highest balance of letters of credit outstanding during the
twenty-six weeks ended August 2, 1997 was $71,900,000 (in June 1997) compared
with $38,783,000 (in July 1996) during the twenty-six weeks ended August 3,
1996.
Cash Flows - Operating activities used cash of $4,178,000 in the twenty-six
weeks ended August 2, 1997 compared with $1,414,000 used in the corresponding
period of the previous fiscal year. Cash used for increases in inventory during
the twenty-six weeks ended August 2, 1997 and August 3, 1996 were $46,159,000
and $63,343,000, respectively. Accounts payable provided cash of $33,634,000 and
$52,292,000 in the twenty-six weeks ended August 2, 1997 and August 3, 1996,
respectively. Depreciation and amortization expenses were $5,522,000 and
$4,690,000 for the twenty-six weeks ended August 2, 1997 and August 3, 1996,
respectively.
Cash flows from investing activities reflected a $7,410,000 and $9,837,000
net use of cash for the twenty-six weeks ended August 2, 1997 and August 3,
1996, respectively. Cash was used primarily to fund capital expenditures for new
and relocated stores opened during the first twenty-six weeks of fiscal 1997 and
1996.
Cash provided by financing activities for the twenty-six weeks ended August 2,
1997 was $9,939,000 compared with cash used of $2,105,000 for the corresponding
period of the previous fiscal year. Cash management programs maintained by the
Company provided cash of $8,743,000 in the twenty-six weeks ended August 2, 1997
compared with cash used of $2,129,000 for the corresponding period of the
previous fiscal year. During the twenty-six weeks ended August 2, 1997, the
Company received $1,196,000 from the issuance of common stock on the exercise of
stock options compared with $24,000 received during the corresponding period of
the previous year.
Outlook - The Company plans to open 20 to 24 new stores (including 12 stores
opened to date during fiscal 1997), relocate approximately nine stores and
expand or remodel approximately seven stores during fiscal 1997. Management
estimates that capital expenditures will total approximately $23,000,000 in
fiscal 1997 for opening new stores, upgrading existing stores, purchasing
computer systems and equipment and for other capital expenditure requirements.
The Company's primary needs for capital resources are for the purchase of store
inventories, capital expenditures and for normal operating expenses. Management
believes that cash flows from operations, including credit terms from vendors
and the borrowings available under the credit agreement, will be sufficient to
meet the Company's operating and capital expenditure requirements through at
least the remainder of fiscal 1997.
<PAGE> 10
Seasonality and Inflation
The Company's business is seasonal by nature. The Christmas season (beginning
the Sunday before Thanksgiving and ending the second Saturday after Christmas),
the back-to-school season (beginning approximately the second week of August and
continuing through the second week of September) and the Easter season
(beginning approximately two weeks before Easter Sunday and ending the Saturday
preceding Easter) collectively accounted for approximately 36% of the Company's
annual sales, based on the Company's last three fiscal years ended February 1,
1997. In general, sales volume varies directly with customer traffic, which is
heaviest during the third and fourth quarters of a fiscal year. Because of the
seasonality of the Company's business, results for any quarter are not
necessarily indicative of the results that may be achieved for the full year.
Inflation can affect the costs incurred by the Company in the purchase of its
merchandise, the leasing of its stores and certain components of its selling,
general and administrative expenses. To date, inflation has not adversely
affected the Company's business, although there can be no assurance that
inflation will not have a material adverse effect in the future.
<PAGE> 11
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings - None
- ----------------------------
Item 2. - Changes in Securities - None
Item 3. - Defaults Upon Senior Securities - None
Item 4. - Submission of Matters to a Vote of Security Holders
The Company held its Annual Meeting of Shareholders (the "Meeting") on June 18,
1997 at which the following matters were submitted to a vote of shareholders.
(a) Election of Directors
At the Meeting, the following persons were elected as directors of the Company
for three year terms expiring at the 2000 Annual Meeting of Shareholders:
Harry M. Call - 14,762,019 shares of common stock were voted in favor of his
election; 5,129 shares of common stock were withheld; and 1,423,734 shares of
common stock were not voted.
Samuel J. Furrow - 14,761,569 shares of common stock were voted in favor of his
election; 5,579 shares of common stock were withheld; and 1,423,734 shares of
common stock were not voted.
The other directors of the Company include Robert M. Goodfriend and Robert F.
Koppel, whose terms expire at the 1998 Annual Meeting, and Irwin L. Lowenstein
and Cheryl L. Turnbull, whose terms expire at the 1999 Annual Meeting.
(b) Approval of the Goody's Family Clothing, Inc. 1997 Stock Option Plan
("1997 Plan")
At the Meeting, the shareholders approved the adoption of the 1997 Plan;
11,612,557 shares of common stock were voted in favor; 1,282,767 shares of
common stock were voted against; 18,311 shares of common stock were withheld;
1,853,513 shares of common stock were not voted by brokers; and 1,423,734 shares
of common stock were not voted. The adoption of the 1997 Plan allows the Company
to reserve 1,000,000 shares of Common Stock for issuance to directors and
employees.
(c) Approval of the Goody's Family Clothing, Inc. Short Term Incentive Plan
("Short Term Incentive Plan")
At the Meeting, the shareholders approved the adoption of the Short Term
Incentive Plan; 14,713,805 shares of Common Stock were voted in favor; 37,118
shares of Common Stock were voted against; 16,225 shares of Common Stock were
withheld; and 1,423,734 shares of common stock were not voted. The adoption of
the Short Term Incentive Plan allows the Company to reward its eligible key
employees with performance-based compensation.
Item 5. - Other Information - None
Item 6. - Exhibits and Reports on Form 8-K
a) Exhibits -
10.46 - Deferred Compensation Agreement between the
Registrant and Robert M. Goodfriend
10.47 - Employment letter from the Registrant to Stanley B.
Latacha
15 - Accountants' Awareness Letter
27 - Financial Data Schedule
b) Reports on Form 8-K - None
GOODY'S FAMILY CLOTHING, INC.
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.
GOODY'S FAMILY CLOTHING, INC.
(Registrant)
Date: August 21, 1997 /s/ Harry M. Call
------------------------ -----------------
Harry M. Call
Director, President and
Chief Operating Officer
Date: August 21, 1997 /s/ Edward R. Carlin
------------------------ --------------------
Edward R. Carlin
Executive Vice President,
Chief Financial Officer
and Secretary
(Principal Financial Officer)
Date: August 21, 1997 /s/ David G. Peek
------------------------ -----------------
David G. Peek
Vice President, Corporate
Controller and
Chief Accounting Officer
(Principal Accounting Officer)
<PAGE> 1
Exhibit 10.46
DEFERRED COMPENSATION AGREEMENT
AGREEMENT made as of the 15th day of June, 1997 between GOODY'S FAMILY CLOTHING,
INC. a for-profit corporation organized under the laws of the State of Tennessee
(the "Employer") and ROBERT M. GOODFRIEND (the "Executive").
WITNESSETH:
WHEREAS, the Executive has performed services for the Employer since
October 20, 1971;
WHEREAS, it is intended that the Executive continue to perform services
for the Employer on the same basis;
WHEREAS, the Executive is paid on a bi-weekly basis;
WHEREAS, the Employer wishes to provide the Executive with an
opportunity to defer compensation for work performed with respect to pay periods
beginning June 15, 1997.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants contained herein, the parties hereby agree as follows:
1. Deferred compensation for services. The Executive agrees to a
reduction in his compensation ("Deferred Compensation") commencing June 15, 1997
and the Employer agrees to credit him with Deferred Compensation under this
Plan. Specifically, the Executive will defer $26,250 per full pay period for a
term of 16-1/2 pay periods for a total Deferred Compensation amount of $433,125
(the "Account Balance"). The Deferred Compensation will be deferred until the
time specified in Section 2, and interest will accrue from the date of crediting
until the date of payment in accordance with Section 3. Such agreement relates
only to the deferral of compensation for future services and does not obligate
the Employer to retain the Executive or derogate from its right to alter his
compensation or other terms of employment.
2. Time and manner of payment. The Executive will have no current right
to receive or to accelerate the receipt of the payments described in Section 1
or the interest earnings thereon. Instead, 60 percent of the Executive's Account
Balance plus accrued interest thereon will be paid to him on the first business
day of the Employer's fiscal year beginning after January 31, 1998. The
remaining 40 percent of the Executive's Account Balance plus accrued interest
thereon will be paid to him on the first business day of the Employer's fiscal
year beginning after January 30, 1999.
3. Interest on deferred compensation. Deferred Compensation accrued
under Section 2 will bear interest at a rate equal to 9.5 percent (the prime
rate as listed on June 13, 1997 in the Wall Street Journal plus one percentage
point), compounded daily.
4. Vesting. The Executive will be immediately vested in all Deferred
Compensation.
5. Designation of beneficiary. The Executive may designate a
beneficiary to receive any amounts that become payable to him under this
Agreement after his death. If he fails to designate a beneficiary, or if his
designated beneficiary predeceases him, his beneficiary will be deemed to be his
spouse or, if he has no surviving spouse, his estate.
6. Status of deferred compensation. The amounts due to the Executive
under this Agreement will not be funded in any way, and the Executive will have
no claim superior to that of general creditors of the Employer for any payments
to which he is entitled.
7. Assignment or alienation. Subject to Section 5, the Executive's
rights under this Agreement are personal to him and may not be assigned or
alienated, whether voluntarily or involuntarily, and any such purported
assignment or alienation shall be void and unenforceable.
8. Successors and assigns. This Agreement is binding upon the heirs,
executors and administrators of the Executive and on the successors
and assigns of the Employer.
9. Governing law. This Agreement is governed by the laws of the State
of Tennessee.
IN WITNESS WHEREOF, the Executive has hereunto set his hand and seal, and the
Employer's duly authorized officer has executed this Agreement and affixed the
corporate seal of the Employer as of the date set forth above.
___ /s/ Robert M. Goodfriend______________________________
Robert M. Goodfriend
[Seal] GOODY'S FAMILY CLOTHING, INC.
By__/s/ Harry M. Call____________________________________________
Harry M. Call
President and Chief Operating Officer
<PAGE> 1
Exhibit 10.47
June 9, 1997
Mr. Stan Latacha
16511 Marcy Street
Omaha, NE 68118
Dear Stan:
It is with pleasure that I extend an offer of employment to join
Goody's Family Clothing, Inc. as Senior Vice President, Marketing & Advertising.
As discussed, your base salary will be $200,000, expressed annually and
paid on a bi-weekly basis. Your next financial review consideration will be in
July, 1998 and will be subject to the approval of the Compensation Committee of
the Board of Directors.
Upon reporting to work, you will receive a $25,000 signing bonus.
As an officer of the Company, you will be eligible to participate in
the fiscal 1997 Executive Bonus Plan. Your targeted bonus will be 40% of your
base pay earned in fiscal 1997. We will guarantee you a minimum bonus for fiscal
1997 of $50,000. Distribution of fiscal 1997 bonus awards will be in late March,
1998 and you must be actively employed by Goody's on that date for award
consideration.
You will be awarded 30,000 option shares of Goody's Family Clothing,
Inc. stock. All awards of stock options must be approved by the Compensation
Committee of the Board of Directors, which generally is a formality in new
employee situations. The effective date of the stock options will be the latter
of the day the Compensation Committee approves the award or your hire date. The
strike price shall equal the share price of the last trade on the NASDAQ
Exchange at the close of business on the last day of trading prior to the
effective date of the award. Vesting of the option shares shall be 20% per year
on the anniversary of the effective date.
Eligibility for insurance coverage - medical, dental, life and
disability; begins on the thirty first day of employment. The cost to you
depends on the programs you select. An overview of the benefit coverage is
enclosed.
During your first year of service, you will have available three weeks
of unearned vacation. After your first anniversary of employment you will have
three weeks of vacation per year.
Goody's Family Clothing will provide you with a Company automobile for
business use. Goody's will credit your W-2 earnings for personal use in
accordance with Internal Revenue Service regulations.
Goody's will reimburse usual and customary closing costs on the sale of
your home in Nebraska, including up to 6% Realtor fee. We will also reimburse
usual and customary closing costs for the purchase of a home in the Knoxville
area, including up to one point for origination fee. We do not cover discount
points for purposes of reducing mortgage interest rates.
We will make all arrangements for the movement of your household goods
from Nebraska to Knoxville. Goody's will pay the cost of packing, insuring,
transporting and unpacking (unpacking is only for furniture set up and items
needed for the first nights stay). The total cost of your home sale and movement
of your household goods cannot exceed $40,000.
Goody's will arrange for and pay the cost of temporary lodging for a
period of up to six months. We will reimburse you a maximum of three round trips
from Knoxville to Nebraska for purposes of arranging and finalizing your
relocation to the Knoxville area.
In the event your employment with Goody's Family Clothing, Inc. is
terminated for reasons other than poor performance, as determined by the
non-employee members of the Board of Directors, or cause during your first three
years of employment, Goody's Family Clothing, Inc. will provide you with six
months salary continuation as severance pay.
Stan, this offer is contingent upon your formal acceptance on or before
Monday, June 16, 1997 and your availability for work no later than July 14,
1997. As acknowledgment of your acceptance, please return one signed copy of
this letter in the enclosed envelope as soon as possible.
On a personal note, Stan, I am very excited about you becoming part of
the executive team here at Goody's. I feel strongly that your contribution will
be a significant factor in the development and achievement of our strategic
plans. Please call me if you have any questions.
With kind regards,
/s/ Harry M. Call
----------------------------------
Harry M. Call
President and Chief Operating Officer
Accepted by:
/s/ Stanley B. Latacha
- ----------------------
Stan Latacha
June 14, 1997
- ----------------------
Date
Enclosures
<PAGE> 1
Exhibit 15
Goody's Family Clothing, Inc.
Knoxville, Tennessee
We have made a review, in accordance with standards established by the American
Institute of Certified Public Accountants, of the unaudited interim consolidated
financial information of Goody's Family Clothing, Inc. and subsidiaries for the
periods ended August 2, 1997 and August 3, 1996, as indicated in our report
dated August 21, 1997; because we did not perform an audit, we expressed no
opinion on that information.
We are aware that our report referred to above, which was included in your
Quarterly Reports on Form 10-Q for the quarters ended August 2, 1997 and August
3, 1996, is incorporated by reference in Registration Statements Nos. 33-32357,
33-51210, 33-68520, 333-00052 and 333-09595 on Form S-8 and 333-32409 on Form
S-3.
We also are aware that the aforementioned report, pursuant to Rule 436(c) under
the Securities Act of 1933, is not considered a part of the Registration
Statement prepared or certified by an accountant or a report prepared or
certified by an accountant within the meaning of Sections 7 and 11 of that Act.
/s/ Deloitte & Touche LLP
Deloitte & Touch LLP
Atlanta, Georgia
August 21, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS AT AUGUST 2, 1997 AND THE RELATED STATEMENT OF
OPERATIONS FOR THE TWENTY-SIX WEEKS ENDED ON AUGUST 2, 1997 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-START> FEB-02-1997
<PERIOD-END> AUG-02-1997
<CASH> 41,667
<SECURITIES> 1,512
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 153,653
<CURRENT-ASSETS> 212,668
<PP&E> 138,810
<DEPRECIATION> 48,455
<TOTAL-ASSETS> 306,223
<CURRENT-LIABILITIES> 156,905
<BONDS> 871
0
0
<COMMON> 27,662
<OTHER-SE> 108,478
<TOTAL-LIABILITY-AND-EQUITY> 136,140
<SALES> 402,263
<TOTAL-REVENUES> 402,263
<CGS> 289,116
<TOTAL-COSTS> 97,045
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 219
<INCOME-PRETAX> 16,761
<INCOME-TAX> 6,285
<INCOME-CONTINUING> 10,476
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,476
<EPS-PRIMARY> 0.62
<EPS-DILUTED> 0
</TABLE>
