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 April 29, 2000
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)
(865) 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, 32,558,980 shares outstanding as of June 7, 2000.
<PAGE>
Goody's Family Clothing, Inc.
Index to Form 10-Q
April 29, 2000
Part I - Financial Information:
Item 1 - 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
Item 3 - Quantitative and Qualitative Disclosures about Market Risk. 13
Part II - Other Information.......................................... 13
Item 1. Legal Proceedings
Item 2. Changes in Securities and Use of Proceeds
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>
PART 1 - FINANCIAL INFORMATION
Item 1 - Financial Statements
Goody's Family Clothing, Inc. and Subsidiaries
Consolidated Statements of Operations (Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
----------------------------------------
Thirteen Weeks Ended
----------------------------------------
April 29, 2000 May 1, 1999
------------------- ------------------
<S> <C> <C>
Sales $278,283 $250,749
Cost of sales and occupancy expenses 199,079 177,278
-------- --------
Gross profit 79,204 73,471
Selling, general and administrative expenses 72,941 62,154
-------- --------
Earnings from operations 6,263 11,317
Interest expense 56 53
Investment income 642 578
-------- --------
Earnings before income taxes 6,849 11,842
Provision for income taxes 2,568 4,417
-------- --------
Earnings before cumulative effect of accounting change 4,281 7,425
Cumulative effect of accounting change, net of tax
benefit of $124 (207) -
-------- --------
Net earnings $4,074 $7,425
======== ========
Earnings per common share
Basic
Earnings before cumulative effect of accounting change $0.13 $0.22
Cumulative effect of accounting change, net of tax (0.01) -
-------- --------
Basic net earnings per share $0.12 $0.22
======== ========
Diluted
Earnings before cumulative effect of accounting change $0.13 $0.22
Cumulative effect of accounting change, net of tax (0.01) -
-------- --------
Diluted net earnings per share $0.12 $0.22
======== ========
Weighted average common shares outstanding
Basic 32,588 33,333
======== ========
Diluted 32,804 33,918
======== ========
</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>
<CAPTION>
April 29, 2000 January 29, 2000 May 1, 1999
(unaudited) (unaudited)
<S> <C> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $45,944 $97,299 $63,281
Inventories 232,665 182,894 196,601
Accounts receivable and other current assets 16,733 20,352 20,884
-------- -------- ---------
Total current assets 295,342 300,545 280,766
Property and equipment, net 118,731 116,892 111,466
Other assets 5,884 5,856 3,339
-------- -------- ---------
Total assets $419,957 $423,293 $395,571
======== ======== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $134,459 $143,685 $118,014
Accrued expenses 54,152 52,329 54,669
Income taxes payable 1,864 - 4,494
Current portion of long-term debt 318 318 289
-------- -------- ---------
Total current liabilities 190,793 196,332 177,466
Long-term debt - - 318
Other long-term liabilities 4,409 4,345 3,809
Deferred income taxes 11,588 11,610 11,055
-------- -------- ---------
Total liabilities 206,790 212,287 192,648
-------- -------- ---------
Commitments and Contingencies
Shareholders' Equity
Preferred stock, par value $1.00 per share; 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 and outstanding - 32,491,980, 32,799,380
and 33,333,480 shares, respectively 21,911 23,832 28,120
Paid-in capital 9,531 9,523 9,452
Retained earnings 181,725 177,651 165,351
-------- -------- ---------
Total shareholders' equity 213,167 211,006 202,923
-------- -------- ---------
Total liabilities and shareholders' equity $419,957 $423,293 $395,571
======== ======== =========
</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>
<CAPTION>
-----------------------------------------
Thirteen Weeks Ended
-----------------------------------------
April 29, 2000 May 1, 1999
------------------- -------------------
<S> <C> <C>
Cash Flows from Operating Activities
Net earnings $4,074 $7,425
Adjustments to reconcile net earnings to net cash
used in operating activities:
Depreciation and amortization 4,617 3,782
Net loss on asset disposals 49 75
Cumulative effect of accounting change 207 -
Changes in assets and liabilities:
Inventories (49,771) (30,914)
Accounts payable 16,075 12,353
Income taxes 1,116 4,138
Other assets & liabilities 9,022 2,161
-------- -------
Cash used in operating activities (14,611) (980)
-------- -------
Cash Flows from Investing Activities
Acquisitions of property and equipment (6,534) (10,534)
Proceeds from sale of property and equipment 29 -
-------- -------
Cash used in investing activities (6,505) (10,534)
-------- -------
Cash Flows from Financing Activities
Exercise of stock options 91 21
Shares repurchased and retired (2,004) -
Changes in cash management accounts (28,326) (14,518)
-------- -------
Cash used in financing activities (30,239) (14,497)
-------- -------
Net decrease in cash and cash equivalents (51,355) (26,011)
Cash and cash equivalents, beginning of period 97,299 89,292
-------- -------
Cash and cash equivalents, end of period $45,944 $63,281
======== =======
Supplemental Disclosures:
Income tax payments $544 $130
Interest payments 41 38
</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) Basis of presentation
The accompanying condensed consolidated financial statements of Goody's
Family Clothing, Inc. and subsidiaries (the "Company") are unaudited and have
been prepared pursuant to the rules and regulations of the Securities and
Exchange Commission for interim financial statements. In the opinion of the
Company's management, the accompanying unaudited condensed consolidated
financial statements 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. The condensed consolidated financial
statements should be read in conjunction with the audited consolidated financial
statements and the notes thereto contained in the Company's 1999 Annual Report
on Form 10-K for its fiscal year ended January 29, 2000.
(2)......Changes in accounting methodology
As more fully discussed in the Company's Current Report on Form 8-K filed
on March 2, 2000, the Company changed its accounting methodology, effective
January 30, 2000 (the first day of the first quarter of fiscal 2000), to
recognize the sale and related gross profit from layaways upon delivery of the
merchandise to the customer. This new accounting methodology for layaways
reduced earnings (before the cumulative effect of the accounting change) by
approximately $400,000 or $0.01 per diluted share for the thirteen weeks ended
April 29, 2000. As also disclosed in this Current Report, the Company
retroactively restated its balance sheet and statement of operations as of and
for the thirteen weeks ended May 1, 1999 to accrue for sales returns and adopt a
change in accounting methodology related to leased departments in response to
the Securities and Exchange Commission's Staff Accounting Bulletin No. 101,
"Revenue Recognition in Financial Statements."
(3) Credit arrangements
The Company has a credit agreement 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 an aggregate of $130,000,000
and which expires in May 2001. 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 and capital
expenditures.
(4) Earnings per common share
Basic earnings per common share is computed by dividing net earnings by the
weighted average number of common shares outstanding. Diluted earnings per
common share is computed by dividing net earnings by the weighted average number
of common shares outstanding and potentially dilutive common shares. Weighted
average diluted shares outstanding differs from weighted average basic shares
outstanding solely from the effect of stock options.
(5) Recent accounting pronouncements
Accounting for derivative instruments and hedging activities
The American Institute of Certified Public Accountants has issued Statement
of Financial Accounting Standards No. 133 "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS No.133") which, as amended, is effective for the
Company in fiscal 2001. This standard requires that an entity recognize all
derivatives as either assets or liabilities in its statement of financial
position and measure those instruments at fair value. The Company has not yet
completed its analysis of the effect of SFAS No. 133 on its financial
statements.
(6) Contingencies
In February 1999, a lawsuit was filed in the United States District Court
for the Middle District of Georgia and was served on the Company and Robert M.
Goodfriend, its Chairman and Chief Executive Officer, by 20 named plaintiffs,
generally alleging that the Company discriminated against a class of
African-American employees at its retail stores through the use of
discriminatory selection and compensation procedures and by maintaining unequal
terms and conditions of employment. The plaintiffs further allege that the
Company maintained a racially hostile working environment. The plaintiffs'
claims are being brought under Title VII of the Civil Rights Act of 1964, as
amended, and under the Civil Rights Act of 1866. The plaintiffs are seeking to
have this action certified as a class action. By way of damages, the plaintiffs
are seeking, among other things, injunctive relief (including restructuring of
the Company's selection and compensation procedures) as well as back pay, an
award of attorneys' fees and costs, and other monetary relief. The Company
disputes these claims and intends to defend this matter vigorously. It is too
early to estimate the effect, if any, the above lawsuit may have on the
Company's financial position or results of operations.
In addition, the Company is a party to various other legal proceedings
arising in the ordinary course of its business. While the costs and other
effects of pending proceedings could have a material adverse effect on the
Company's business, financial condition and operating results, management
currently believes that the ultimate outcome of all pending legal proceedings
(other than the matter noted in the paragraph above), individually and in the
aggregate, should not have a material adverse effect on the Company's financial
position and results of operations.
<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 April 29, 2000 and May 1,
1999 and the related consolidated statements of operations and cash flows for
the thirteen-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 condensed consolidated financial statements for them to
be in conformity with accounting principles generally accepted in the United
States of America.
We have previously audited, in accordance with auditing standards generally
accepted in the United States of America, the consolidated balance sheet of
Goody's Family Clothing, Inc. and subsidiaries as of January 29, 2000 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 14, 2000, we expressed an unqualified opinion on those consolidated
financial statements. In our opinion, the information set forth in the
accompanying condensed consolidated balance sheet as of January 29, 2000 is
fairly stated, in all material respects, in relation to the consolidated balance
sheet from which it has been derived.
/s/
Deloitte & Touche LLP
Atlanta, Georgia
May 16, 2000
<PAGE>
Item 2. - Management's Discussion and Analysis of Financial Condition
and Results of Operations
Forward-Looking Statements
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: (i) weather conditions; (ii)
the timely availability of branded and private label merchandise in sufficient
quantities to satisfy customer demand; (iii) customer demand and trends in the
apparel and retail industry and to the acceptance of merchandise acquired for
sale by the Company; (iv) the effectiveness of advertising and promotional
events; (v) the impact of competitors' pricing and store expansion; (vi) the
ability to enter into acceptable leases for new store locations; (vii) the
timing, magnitude and costs of opening new stores; (viii) individual store
performance, including new stores; (ix) employee relations; (x) the general
economic conditions within the Company's markets; (xi) the Company's financing
plans; (xii) trends affecting the Company's financial condition or results of
operations; (xiii) the success of the new credit card program; (xiv) the impact
of the stores' new presentation strategy; (xv) the ability to achieve
improvements in efficiency in merchandise distribution through the second
distribution center, without material start-up problems; and (xvi) the Company's
ability to successfully execute its business plans and strategies. Any
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended, which generally can be identified by the use of forward-looking
terminology such as "may," "will," "expect," "estimate," "anticipate,"
"believe," "target," "plan," "project" or "continue" or the negatives thereof or
other variations thereon or similar terminology, are made on the basis of
management's plans and current analysis of the Company, its business and the
industry as a whole. Readers are cautioned that any such forward-looking
statement is not a guarantee of future performance and involves risks and
uncertainties, and that actual results may differ materially from those
projected in the forward-looking statement as a result of various factors. 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 risk factors that could potentially affect the Company's
financial results may be found in the Company's public filings with the
Securities and Exchange Commission. Certain of such filings may be accessed
through the Securities and Exchange Commission's web site, http://www.sec.gov.
<PAGE>
Results of Operations
The following table sets forth unaudited results of operations as a percent
of sales for the periods indicated:
<TABLE>
<CAPTION>
Thirteen Weeks Ended
April 29, 2000 May 1, 1999
<S> <C> <C>
Sales 100.0% 100.0%
Cost of sales and occupancy expenses 71.5 70.7
----- -----
Gross profit 28.5 29.3
Selling, general and administrative expenses 26.3 24.8
----- -----
Earnings from operations 2.2 4.5
Interest expense - -
Investment income 0.2 0.2
----- -----
Earnings before income taxes 2.4 4.7
Provision for income taxes 0.9 1.7
----- -----
Net earnings 1.5% 3.0%
===== =====
</TABLE>
Overview - During the first quarter of fiscal 2000, the Company opened
eight new stores and closed two stores, bringing the total number of stores in
operation at quarter end to 293, compared with 267 at the end of the first
quarter of fiscal 1999. In the corresponding period of the previous fiscal year,
ten new stores were opened, seven stores were relocated and two stores were
remodeled. Net earnings for the first quarter of fiscal 2000 were $4,074,000, or
1.5% of sales, compared with $7,425,000, or 3.0% of sales, for the first quarter
of fiscal 1999.
Sales - Sales for the first quarter of fiscal 2000 were $278,283,000, an
11.0% increase over the $250,749,000 for the first quarter of fiscal 1999. This
increase of $27,534,000 consisted of additional sales from new and transition
stores partially offset by a 1.4% decrease in comparable store sales from the
corresponding period of the previous fiscal year. The cool weather during April
2000 in most of the Company's markets adversely affected sales of the Company's
spring season apparel offerings, particularly shorts.
Gross profit - Gross profit for the first quarter of fiscal 2000 was
$79,204,000, or 28.5% of sales, a $5,733,000 increase over the $73,471,000, or
29.3% of sales, in gross profit for the first quarter of the previous fiscal
year. The 0.8% decrease in gross profit, as a percent of sales, resulted from
(i) a 0.5% increase in cost of sales primarily from increased promotional
pricing introduced in an effort to overcome the sluggish sales noted above and
(ii) a 0.3% increase in occupancy costs which were not leveraged due to a
shortfall in comparable store sales and higher occupancy costs for new and
relocated stores.
Selling, general and administrative expenses - Selling, general and
administrative expenses for the first quarter of fiscal 2000 were $72,941,000,
or 26.3% of sales, an increase of $10,787,000 from $62,154,000, or 24.8% of
sales, for the first quarter of the previous fiscal year. Selling, general and
administrative expenses increased by 1.5%, as a percent of sales, for the first
quarter of fiscal 2000 compared with the first quarter of the previous fiscal
year and is comprised of (i) a 0.7% increase in store salaries primarily due to
the new internally operated shoe departments and (ii) a 0.9% increase in
advertising and promotional expenses, which were partially offset by (iii) a net
0.1% decrease in all other selling, general and administrative expenses.
Interest expense - Interest expense for the first quarter of fiscal 2000
increased by $3,000 compared with the first quarter of the previous fiscal year.
Investment income - Investment income for the first quarter of fiscal 2000
increased by $64,000 compared with the first 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 first quarter of
fiscal 2000 was $2,568,000, for an effective tax rate of 37.5% of earnings
before income taxes, compared with $4,417,000, for an effective tax rate of
37.3% of earnings before income taxes, for the first quarter of the previous
fiscal year. The increase in the effective tax rate over the first quarter of
the previous fiscal year resulted from state tax law changes.
Cumulative effect of accounting change - The Company changed its accounting
methodology, effective January 30, 2000 (the first day of the first quarter of
fiscal 2000), to recognize the sale and related gross profit from layaways upon
delivery of the merchandise to the customer. The cumulative effect of this new
accounting methodology for layaways was recorded in the first quarter of fiscal
2000 and reduced earnings by $207,000, net of a tax benefit of $124,000. In
addition, this new accounting methodology for layaways reduced earnings (before
cumulative effect of accounting change) by approximately $400,000 or $0.01 per
diluted share for the thirteen weeks ended April 29, 2000.
<PAGE>
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 April 29, 2000, the Company's working capital was
$104,549,000 compared with $103,300,000 at May 1, 1999. At the end of the first
quarter of fiscal 2000 compared with the first quarter of the previous fiscal
year, (i) cash and cash equivalents decreased by $17,337,000, (ii) net property
and equipment increased by $7,265,000, (iii) inventories increased by
$36,064,000 primarily due to new stores and the addition of internally operated
shoe departments, and (iv) accounts payable increased by $16,445,000. Trade
payables, as a percent of inventories, were 57.8% at April 29, 2000 compared
with 60.0% at May 1, 1999.
The Company has a credit agreement 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 an aggregate of $130,000,000 and
which expires in May 2001. 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 and capital expenditures.
At April 29, 2000, the Company had no cash borrowings and $62,003,000
outstanding for letters of credit compared with no cash borrowings and
$43,055,000 outstanding for letters of credit at May 1, 1999. Cash borrowings
averaged $38,000 (with the highest balance of $2,000,000 in March 1999) in the
first quarter of fiscal 1999 compared with no cash borrowings for the first
quarter of fiscal 2000. Letters of credit outstanding averaged $60,000,000
during the first quarter of fiscal 2000 compared with $44,695,000 during the
first quarter of fiscal 1999. The highest balance of letters of credit
outstanding during the first quarter of fiscal 2000 and 1999 was $67,182,000 (in
April 2000) and $49,454,000 (in February 1999), respectively.
Cash flows - Operating activities used cash of $14,611,000 in the first
quarter of fiscal 2000 compared with $980,000 in the first quarter of the
previous fiscal year. Cash used in operating activities during the first quarter
of fiscal 2000 for seasonal inventory increases and new stores was $49,771,000
compared with $30,914,000 for the first quarter of the previous fiscal year.
Accounts payable provided cash of $16,075,000 in the first quarter of fiscal
2000 compared with $12,353,000 for the first quarter of the previous fiscal
year. Other assets and liabilities provided cash of $9,353,000 compared with
$2,161,000 for the first quarter of the previous fiscal year. Depreciation and
amortization amounted to $4,617,000 in the first quarter of fiscal 2000 compared
with $3,782,000 for the first quarter of the previous fiscal year.
Cash flows from investing activities for the first quarter of fiscal 2000
reflected a net use of cash amounting to $6,505,000 compared with $10,534,000
for the first quarter of the previous fiscal year. Cash was used primarily to
fund capital expenditures for new, relocated and remodeled stores and for
general corporate purposes.
Cash used by financing activities for the first quarter of fiscal 2000 was
$30,239,000 compared with $14,497,000 for the first quarter of the previous
fiscal year. The Company's cash management program used cash of $28,326,000 in
the first quarter of fiscal 2000 compared with $14,518,000 for the first quarter
of the previous fiscal year. The Company received $83,000 in cash and realized a
tax benefit of $8,000 in the first quarter of fiscal 2000 compared with $18,000
in cash and a tax benefit of $3,000 for the first quarter of the previous fiscal
year from the issuance of common stock on exercise of stock options. In
addition, during the first quarter of fiscal 2000, the Company purchased 323,000
shares of its common stock for an aggregate of $2,004,000 under a stock
repurchase plan authorized by the Company's Board of Directors in June 1999.
(Since inception of the plan, the Company purchased 908,300 shares of its common
stock for an aggregate of $6,511,000.)
Outlook - The Company plans to open approximately 23 new stores and
relocate or remodel approximately 17 stores during the last three quarters of
fiscal 2000. Management estimates that capital expenditures of approximately
$48,500,000 will be required for (i) opening new stores, (ii) upgrading existing
stores, (iii) opening a new distribution center and upgrading the existing
distribution center, (iv) upgrading computer systems and equipment and (v) for
general corporate purposes during the remainder of fiscal 2000. The Company also
plans to continue purchasing shares of its common stock, from time to time, in
the open market or in privately negotiated transactions, depending on price,
prevailing market conditions and other factors.
The Company's primary needs for capital resources are for the purchase of
store inventories, capital expenditures and for normal operating purposes.
Management believes that its existing working capital, together with 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. However, an adverse outcome of
pending litigation (as described in "Note (6) Contingencies" in the Notes to
Consolidated Financial Statements) could negatively affect working capital.
Inventories at the end of the first quarter of fiscal 2000 were higher than
the Company's business plan. In an effort to increase unit sales and reduce
merchandise inventories to acceptable levels, the Company increased its
promotional activities during the first quarter of fiscal 2000 and has continued
such promotional activities into the second quarter of fiscal 2000.
Consequently, financial results for the second quarter and the first half of
fiscal 2000 are expected to be weaker than those reported for the second quarter
and first half of fiscal 1999.
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 on the Saturday preceding Easter) collectively
accounted for approximately 33.2% of the Company's annual sales based on the
Company's last three fiscal years ended January 29, 2000. 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. During the last three fiscal years
ended January 29, 2000, inflation has not materially affected the Company's
business, although there can be no assurance that inflation will not have a
material adverse effect on the Company in the future.
Item 3 - Quantitative and Qualitative Disclosures about Market Risk
The Company has no material investments or risks in market risk sensitive
instruments.
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings - None
Item 2. - Changes in Securities and Use of Proceeds - 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 -
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: June 13, 2000 /s/ Robert M. Goodfriend
Robert M. Goodfriend
Chairman of the Board and Chief
Executive Officer
Date: June 13, 2000 /s/ Harry M. Call
Harry M. Call
Director, President and
Chief Operating Officer
Date: June 13, 2000 /s/ Lana Cain Krauter
Lana Cain Krauter
President and
Special Assistant to the Chairman
Date: June 13, 2000 /s/ Edward R. Carlin
Edward R. Carlin
Executive Vice President,
Chief Financial Officer and
Secretary (Principal Financial
Officer)
Date: June 13, 2000 /s/ David G. Peek
David G. Peek
Vice President, Corporate
Controller and Chief Accounting
Officer (Principal Accounting
Officer)
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