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 November 1, 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, 16,346,958 shares outstanding as of
December 5, 1997.
<PAGE>
Goody's Family Clothing, Inc.
Index to Form 10-Q
Quarterly Period Ended November 1, 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
Independent Accountants' Review Report................... 7
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations..................... 8-11
Part II - Other Information............................................ 12
-----------------
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.............................................................. 13
<PAGE>
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>
Thirteen Weeks Ended Thirty-nine Weeks Ended
November 1, November 2, November 1, November 2,
1997 1996 1997 1996
------------- ------------ ------------- ---------
<S> <C> <C> <C> <C>
Sales $ 234,908 $ 211,380 $ 637,171 $ 545,558
Cost of sales and occupancy expenses 172,874 159,197 461,990 405,493
------------ ------------ ------------ ------------
Gross profit 62,034 52,183 175,181 140,065
Selling, general, and administrative
expenses 53,335 46,800 150,380 129,310
------------ ------------ ------------ ------------
Earnings from operations 8,699 5,383 24,801 10,755
Interest expense 151 233 370 513
Investment income 308 276 1,186 936
------------ ------------ ------------ ------------
Earnings before income taxes 8,856 5,426 25,617 11,178
Provision for income taxes 3,321 2,062 9,606 4,248
------------ ------------ ------------ ------------
Net earnings $ 5,535 $ 3,364 $ 16,011 $ 6,930
============ ============ ============ ============
Earnings per common share $ 0.33 $ 0. 21 $ 0.95 $ 0.43
============ ============ ============ ============
Weighted average common
shares outstanding 16,976 16, 134 16, 776 16,129
============ ============ ============ ============
</TABLE>
See accompanying Notes to Consolidated Financial Statements and Independent
Accountants' Review Report.
<PAGE>
Goody's Family Clothing, Inc. and Subsidiaries
Consolidated Balance Sheets
(Dollars in thousands)
<TABLE>
November 1, February 1, November 2,
1997 1997 1996
(unaudited) (unaudited)
<S> <C> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 28,947 $ 43,316 $ 25,321
Investments 1,518 1,453 1,421
Inventories 215,234 107,495 177,967
Accounts receivable and other current assets 17,153 9,689 12,174
------------ ------------ ------------
Total current assets 262,852 161,953 216,883
Property and equipment, net 96,376 88,955 92,508
Other assets 3,205 3,439 3,442
------------ ------------ ------------
Total assets $ 362,433 $ 254,347 $ 312,833
============ ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 134,845 $ 75,900 $ 124,983
Accrued expenses 46,404 34,841 37,474
Income taxes payable 0 6,957 921
Current portion of long- term debt 239 239 217
------------ ------------- --------------
Total current liabilities 181,488 117,937 163,595
Long-term debt 25,871 871 25,110
Other long-term liabilities 2,757 2,578 2,354
Deferred income taxes 9,659 9,385 8,867
------------ ------------- --------------
Total liabilities 219,775 130,771 199,926
------------ ------------- --------------
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 - 16,545,508, 16,364,832 and 16,336,012 shares;
Outstanding - 16,345,508, 16,164,832 and
16,136,012 shares 28,139 26,466 26,142
Paid-in capital 4,657 3,259 3,135
Retained earnings 112,964 96,953 86,732
Treasury stock, at cost - 200,000 shares (3,102) (3,102) (3,102)
------------ ------------ ------------
Total shareholders' equity 142,658 123,576 112,907
------------ ------------ ------------
Total liabilities and shareholders' equity $ 362,433 $ 254,347 $ 312,833
============ ============ ============
</TABLE>
See accompanying Notes to Consolidated Financial Statements and Independent
Accountants' Review Report.
<PAGE>
Goody's Family Clothing, Inc. and Subsidiaries
Consolidated Statements of Cash Flows - Unaudited
(In thousands)
<TABLE>
Thirty-nine Weeks Ended
November 1, November 2,
1997 1996
------------- --------
<S> <C> <C>
Cash Flows from Operating Activities:
Net earnings $ 16,011 $ 6,930
Adjustments to reconcile net earnings to net cash used in
operating activities:
Depreciation and amortization 8,438 7,280
Net loss on asset disposals and write-down 581 734
Changes in assets and liabilities:
Inventories (107,740) (99,701)
Accounts payable 58,609 59,415
Income taxes (7,222) 506
Other assets & liabilities 6,395 9,613
------------- ------------
Cash used in operating activities (24,928) (15,223)
------------ -------------
Cash Flows from Investing Activities:
Acquisitions of property and equipment (16,452) (15,067)
Proceeds from sale of property and equipment 12 260
------------- ------------
Cash used in investing activities (16,440) (14,807)
------------- -------------
Cash Flows from Financing Activities:
Net advances on long-term debt 25,000 24,000
Exercise of stock options 1,649 92
Changes in cash management accounts 350 (1,728)
------------- -------------
Cash provided by financing activities 26,999 22,364
------------- ------------
Cash and cash equivalents:
Net decrease for the period (14,369) (7,666)
Balance, beginning of period 43,316 32,987
------------- ------------
Balance, end of period $ 28,947 $ 25,321
============= ============
Supplemental Disclosures:
Interest payments $ 199 $ 362
Income tax payments 16,857 3,988
</TABLE>
See accompanying Notes to Consolidated Financial Statements and Independent
Accountants' Review Report.
<PAGE>
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 both cash borrowings for
general corporate purposes and the issuance of letters of credit of up to an
aggregate of $120 million 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, (ii) letter of credit fees based on the
number of days a letter of credit is outstanding times an 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 thirty-nine
weeks ended November 1, 1997, include common equivalent shares to account for
the dilutive effect of stock options. Common equivalent shares were not
materially dilutive in the thirteen and thirty-nine weeks ended November 2,
1996, and therefore were not included in the earnings per share computations for
such 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 will be initially applicable to the Company's financial statements for
the thirteen weeks and year ending January 31, 1998; earlier adoption is not
permitted. Once adopted, all previously reported EPS information will be
restated. The Company's computation of basic and diluted EPS under SFAS No. 128
for the thirteen and thirty-nine weeks ended November 1, 1997, and November 2,
1996, will not be materially different than EPS currently reported for those
periods.
(5) Reclassifications
Certain reclassifications have been made to the financial statements of prior
periods to conform to the current period presentation.
<PAGE>
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 November 1, 1997, and
November 2, 1996, and the related condensed consolidated statements of
operations and cash flows for the thirteen and thirty-nine weeks 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.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Atlanta, Georgia
November 18, 1997
<PAGE>
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, new store openings, the
Company's ability to enter into leases for new store locations, individual store
performance, including new stores, adverse weather conditions, employee
relations, 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>
Thirteen Weeks Ended Thirty-nine Weeks Ended
November 1, November 2, November 1, November 2,
1997 1996 1997 1996
------------ ------------ ------------ --------
<S> <C> <C> <C> <C>
Sales 100.0% 100.0% 100.0% 100.0%
Cost of sales and occupancy expenses 73.6 75.3 72.5 74.3
--------- -------- ------- ---------
Gross profit 26.4 24.7 27.5 25.7
Selling, general, and administrative expenses 22.7 22.1 23.6 23.7
--------- -------- ------- ---------
Earnings from operations 3.7 2.6 3.9 2.0
Interest expense - 0.1 0.1 0.1
Investment income 0.1 0.1 0.2 0.2
--------- -------- ------- ---------
Earnings before income taxes 3.8 2.6 4.0 2.1
Provision for income taxes 1.4 1.0 1.5 0.8
--------- -------- ------- ---------
Net earnings 2.4% 1.6% 2.5% 1.3%
========= ======== ======= =========
</TABLE>
Thirteen Weeks Ended November 1, 1997, Compared with Thirteen Weeks Ended
November 2, 1996
Overview - During the third quarter of fiscal 1997, the Company opened
eight new stores, relocated four stores, remodeled two stores and closed two
stores, bringing the total number of stores in operation at November 1, 1997, to
218 compared with 197 at November 2, 1996. During the corresponding period of
the previous fiscal year, the Company opened four new stores, relocated one
store and closed one store. Net earnings for the third quarter of fiscal 1997
were $5,535,000, or 2.4% of sales, compared with $3,364,000, or 1.6% of sales,
for the third quarter of fiscal 1996.
Sales - Sales for the third quarter of fiscal 1997 were $234,908,000, an 11.1%
increase over the $211,380,000 in sales for the third quarter of fiscal 1996.
This increase of $23,528,000 consisted of a 1.6% increase in comparable store
sales of $2,982,000 over the corresponding period of the previous fiscal year
and additional sales from new and transition stores of $20,546,000. Sales for
the quarter were favorably affected by continuing customer acceptance of certain
brand-name and private label merchandise.
Gross Profit - Gross profit for the third quarter of fiscal 1997 was
$62,034,000, or 26.4% of sales, a $9,851,000 increase over the $52,183,000 in
gross profit, or 24.7% of sales, generated for the third quarter of the previous
fiscal year. The 1.7% increase in gross profit, as a percent of sales, in the
third quarter of fiscal 1997 compared with the third quarter of fiscal 1996
resulted primarily from well-positioned inventories at the beginning of the
third quarter of fiscal 1997, better inventory management and control, and a
higher sales mix of certain key merchandise items, including private label
merchandise, which carry higher gross margins.
<PAGE>
Selling, General, and Administrative Expenses - Selling, general, and
administrative expenses for the third quarter of fiscal 1997 were $53,335,000,
or 22.7% of sales, an increase of $6,535,000 from $46,800,000, or 22.1% of
sales, for the third quarter of fiscal 1996. The 0.6% increase in selling,
general, and administrative expenses, as a percent of sales, in the third
quarter of fiscal 1997 compared with the third quarter of fiscal 1996 resulted
from (i) a 0.1% increase in advertising and promotional expenses, (ii) an 0.3%
increase in payroll expenses, and (iii) a 0.2% increase in other selling,
general, and administrative expenses.
Interest Expense - Interest expense for the third quarter of fiscal 1997
decreased by $82,000 compared with the third quarter of the previous fiscal year
primarily as a result of lower borrowings during the third quarter of fiscal
1997 compared with the third quarter of the previous fiscal year.
Investment Income - Investment income for the third quarter of fiscal 1997
increased by $32,000 compared with the third quarter of the previous fiscal year
primarily as a result of an increase in invested funds during the period.
Income Taxes - The provision for income taxes for the third quarter of fiscal
1997 was $3,321,000, an effective tax rate of 37.5% of earnings before income
taxes, compared with $2,062,000, an effective tax rate of 38.0% of earnings
before income taxes, for the third 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.
Thirty-nine Weeks Ended November 1, 1997, Compared with Thirty-nine Weeks
Ended November 2, 1996
Overview - During the thirty-nine weeks ended November 1, 1997, the Company
opened 19 new stores, relocated eight stores, remodeled two stores and closed
four stores, bringing the total number of stores in operation at November 1,
1997, to 218 compared with 197 at November 2, 1996. During the corresponding
period of the previous fiscal year, the Company opened 14 new stores, relocated
five stores, remodeled one store and closed one store. Net earnings for the
thirty-nine weeks ended November 1, 1997, were $16,011,000, or 2.5% as a percent
of sales, compared with $6,930,000, or 1.3% as a percent of sales, for the
thirty-nine weeks ended November 2, 1996.
Sales - Sales for the thirty-nine weeks ended November 1, 1997, were
$637,171,000, a 16.8% increase over the $545,558,000 in sales for the
corresponding period of the previous fiscal year. This increase of $91,613,000
consisted of a 7.3% increase in comparable store sales of $36,863,000 over the
sales for the corresponding period of the previous fiscal year and additional
sales from new and transition stores of $54,750,000. Sales for the thirty-nine
weeks ended November 1, 1997, were favorably affected by continuing customer
acceptance of certain brand-name and private label merchandise.
Gross Profit - Gross profit for the thirty-nine weeks ended November 1,
1997, was $175,181,000, or 27.5% of sales, a $35,116,000 increase over the
$140,065,000 in gross profit, or 25.7% 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 thirty-nine weeks ended November 1, 1997, compared
with the thirty-nine weeks ended November 2, 1996, primarily resulted from an
increase in gross margins as a result of better inventory management and control
and a higher sales mix of certain key merchandise items, including private label
merchandise, which carry higher gross margins.
Selling, General, and Administrative Expenses - Selling, general, and
administrative expenses for the thirty-nine weeks ended November 1, 1997, were
$150,380,000, or 23.6% of sales, an increase of $21,070,000 from $129,310,000,
or 23.7% of sales, for the corresponding period of the previous fiscal year. The
0.1% decrease in selling, general, and administrative expenses, as a percent of
sales, for the thirty-nine weeks ended November 1, 1997, compared with the
thirty-nine weeks ended November 2, 1996, resulted from a 0.2% decrease in
advertising and promotional expenses and a 0.1% 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
thirty-nine weeks ended November 2, 1996, included a provision of $691,000, or
0.1% 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 thirty-nine weeks ended
November 1, 1997, decreased by $143,000 compared with the corresponding period
of the previous fiscal year primarily as a result of lower borrowings during the
thirty-nine weeks ended November 1, 1997, compared with the thirty-nine weeks
ended November 2, 1996.
Investment Income - Investment income for the thirty-nine weeks ended
November 1, 1997, increased by $250,000 compared with the corresponding period
of the previous fiscal year primarily as a result of an increase in invested
funds during the period.
Income Taxes - The provision for income taxes for the thirty-nine weeks ended
November 1, 1997, was $9,606,000, an effective tax rate of 37.5% of earnings
before income taxes, compared with $4,248,000, 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. The Company's working capital was $81,364,000 at November
1, 1997, compared with $53,288,000 at November 2, 1996. At November 1, 1997,
compared with November 2, 1996, (i) cash, cash equivalents and investment
securities increased $3,723,000, (ii) net property and equipment increased
$3,868,000, (iii) inventories increased $37,267,000, and (iv) accounts payable
increased $9,862,000. The increase in inventories primarily consists of (i)
additional inventories needed for new and transition stores, (ii) the Company's
strategic build-up of inventories in various departments and certain other new
lines, including Dockers, gifts and decorative home accessories for the upcoming
holiday season, (iii) the early receipt of imported holiday merchandise, and
(iv) the advantageous special purchase of spring 1998 merchandise, primarily
denim shorts. Trade payables, as a percent of inventories, decreased to 62.7% at
November 1, 1997, compared with 70.2% at November 2, 1996.
At November 1, 1997, the Company had an unsecured revolving line of credit
from a consortium of banks, which provides for both cash borrowings for general
corporate purposes and the issuance of letters of credit of up to an aggregate
of $120 million 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. At November 1,
1997, the Company had $25,000,000 outstanding for cash borrowings and
$48,812,000 outstanding for letters of credit under this credit agreement
compared with $24,000,000 outstanding for cash borrowings and $35,774,000
outstanding for letters of credit at November 2, 1996. Cash borrowings averaged
$1,484,000 during the thirty-nine weeks ended November 1, 1997, compared with
$4,171,000 during the thirty-nine weeks ended November 2, 1996, with the highest
balance of $25,000,000 in October 1997 compared with $24,000,000 in October
1996. Letters of credit outstanding averaged $56,075,000 during the thirty-nine
weeks ended November 1, 1997, compared with $28,888,000 during the thirty-nine
weeks ended November 2, 1996. The highest balance of letters of credit
outstanding during the thirty-nine weeks ended November 1, 1997, was $71,937,000
(in June 1997) compared with $39,929,000 (in August 1996) during the thirty-nine
weeks ended November 2, 1996.
Cash Flows - Operating activities used cash of $24,928,000 in the
thirty-nine weeks ended November 1, 1997, compared with $15,223,000 used in the
corresponding period of the previous fiscal year. Cash used for increases in
inventory during the thirty-nine weeks ended November 1, 1997, and November 2,
1996, were $107,740,000 and $99,701,000, respectively. Accounts payable provided
cash of $58,609,000 and $59,415,000 in the thirty-nine weeks ended November 1,
1997, and November 2, 1996, respectively. Depreciation and amortization expenses
were $8,438,000 and $7,280,000 for the thirty-nine weeks ended November 1, 1997,
and November 2, 1996, respectively.
Cash flows from investing activities reflected a $16,440,000 and
$14,807,000 net use of cash for the thirty-nine weeks ended November 1, 1997,
and November 2, 1996, respectively. Cash was used primarily to fund capital
expenditures for new and relocated stores opened during the first thirty-nine
weeks of fiscal 1997 and 1996 as well as those planned for opening in the fourth
quarter of fiscal 1997 and 1996.
Cash provided by financing activities for the thirty-nine weeks ended
November 1, 1997, was $26,999,000 compared with cash provided of $22,364,000 for
the corresponding period of the previous fiscal year. Cash management programs
maintained by the Company provided cash of $350,000 in the thirty-nine weeks
ended November 1, 1997, compared with cash used of $1,728,000 for the
corresponding period of the previous fiscal year. During the thirty-nine weeks
ended November 1, 1997, the Company received $1,649,000 from the issuance of
common stock on the exercise of stock options compared with $92,000 received
during the corresponding period of the previous year.
Outlook - During November 1997, the Company opened five new stores (including a
temporary store in Sumter, South Carolina), relocated one store and expanded or
remodeled five stores, bringing the total number of new stores opened in fiscal
1997 to 24 and the total number of stores currently operating to 223 (including
the temporary store). Depending on the performance of the temporary store, the
Company may open a permanent store in Sumter during fiscal 1998. Management
estimates that capital expenditures will total approximately $23,000,000 in
fiscal 1997 primarily for opening new stores, upgrading existing stores, and
purchasing computer systems and equipment as well as 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 fiscal
1998.
Seasonality and Inflation
The Company's business is seasonal by nature. The Christmas season (beginning
the Sunday before Thanksgiving and ending on the first Saturday after
Christmas), the back-to-school season (beginning approximately the first week of
August and continuing through the first 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>
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 - None
- ---------------------------------------------------------------
Item 5. - Other Information - None
Item 6. - Exhibits and Reports on Form 8-K
a) Exhibits -
10.49 Underwriting Agreement dated September 3, 1997, among
The Robinson-Humphrey Company, Inc., and J.C.
Bradford & Co., as representatives of the several
underwriters named in Schedule I thereto, Goody's
Family Clothing, Inc. and the selling shareholders
named in Schedule II thereto. (Incorporated by
reference to Exhibit 9 to Amendment No. 6 to the
Schedule 13D filed by Robert M. Goodfriend on
December 2, 1997 in respect of Goody's Family
Clothing, Inc.)
10.50 Amendment to the Goody's Family Clothing, Inc.
Employee Payroll Investment Plan
15 Accountants' Awareness Letter
27 Financial Data Schedule
b) Reports on Form 8-K - None
<PAGE>
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: December 10, 1997 /s/ Harry M. Call
------------------------ -----------------
Harry M. Call
Director, President and
Chief Operating Officer
Date: December 10, 1997 /s/ Edward R. Carlin
------------------------ --------------------
Edward R. Carlin
Executive Vice President,
Chief Financial Officer and
Secretary
(Principal Financial Officer)
Date: December 10, 1997 /s/ David G. Peek
------------------------ -----------------
David G. Peek
Vice President, Corporate
Controller and Chief
Accounting Officer
(Principal Accounting Officer)
<PAGE>
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 November 1, 1997, and November 2, 1996, as indicated in our report
dated November 18, 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 November 1, 1997, and
November 2, 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 & Touche LLP
Atlanta, Georgia
December 10, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information extracted from the
consolidated balance sheet as of November 1, 1997 and the related consolidated
statements of operations for the thirty-nine weeks ended on November 1, 1997 and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000879123
<NAME> Goody's Family Clothing, Inc.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> Jan-31-1998
<PERIOD-START> Feb-02-1997
<PERIOD-END> Nov-01-1997
<CASH> 28,947
<SECURITIES> 1,518
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 215,234
<CURRENT-ASSETS> 262,852
<PP&E> 147,700
<DEPRECIATION> 51,324
<TOTAL-ASSETS> 362,433
<CURRENT-LIABILITIES> 181,488
<BONDS> 25,871
0
0
<COMMON> 28,139
<OTHER-SE> 114,519
<TOTAL-LIABILITY-AND-EQUITY> 142,658
<SALES> 637,171
<TOTAL-REVENUES> 637,171
<CGS> 461,990
<TOTAL-COSTS> 150,380
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 370
<INCOME-PRETAX> 25,617
<INCOME-TAX> 9,606
<INCOME-CONTINUING> 16,011
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,011
<EPS-PRIMARY> 0.95
<EPS-DILUTED> 0
</TABLE>
Exhibit 10.50
AMENDMENT TO THE EMPLOYEE PAYROLL INVESTMENT
PLAN OF GOODY'S FAMILY CLOTHING, INC.
Goody's Family Clothing, Inc. (the "Company") adopted an Employee Payroll
Investment Plan (the "Plan"), effective January 1, 1996. The Plan is intended to
encourage eligible employees of the Company and its Subsidiaries, if any, to
acquire or increase their ownership of common stock, no par value, of the
Company on reasonable terms. The Board of Directors of the Company has
determined that "officers" (as such term is determined in accordance with
Section 16 of the Securities Exchange Act of 1934 and the rules and regulations
promulgated thereunder) of the Company should be prohibited from participating
in the Plan.
1. Amendment to the Plan. The first paragraph of Section 6. of the Plan is
hereby deleted in its entirety and
the following paragraph is substituted in lieu thereof:
"Any Employee who shall have completed at least six (6) months of
continuous employment with the Company or any of its Subsidiaries on
the Effective Date or thereafter during the term of this Plan and shall
be employed by the Company on the date of his enrollment in this Plan
may participate in this Plan, provided, that in no event shall any
Employee who is also an officer of the Company, as determined in
accordance with the provisions of Section 16 of the Securities Exchange
Act of 1934, participate in the Plan."
2. Effective Date of Amendment. This Amendment is effective August 26, 1997.
